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When Will Real Estate Bubble Burst?

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When Will Real Estate Bubble Burst?

Last updated: April 28 2018
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  • When Will Real Estate Bubble Burst?

    its 2013 and recession have hurted the real estate bubble very hard. Most important thing i want to know is when will this recession end. When we will see the good times.
  • #2

    #2

    Re : When Will Real Estate Bubble Burst?

    Originally posted by praval View Post
    its 2013 and recession have hurted the real estate bubble very hard. Most important thing i want to know is when will this recession end. When we will see the good times.
    What is your definition of good times ? Most of the investors are not even ready to accept that there is any recession. So, where is the recession ? A RE recession can as well extend for 10 years.

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    • #3

      #3

      Re : When Will Real Estate Bubble Burst?

      The recession is over in US and job nos. are picking up, Europe is also improving.
      India there was never a recession, SENSEX is above 20000.
      Khangress has come back to power in Karnataka and looks like Modi magic in not working in spite of massive corruptions and scams all over the country.
      Mango people are still voting for Khangress so expect them to come back to power in the next elections and now with economy improving and RBI easing policy expect RE prices to move further North in the near future.
      Last edited May 9 2013, 03:15 PM.

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      • #4

        #4

        Re : When Will Real Estate Bubble Burst?

        There is technically no recession in india... There is only a slowdown in growth but even that hurts quite a bit. The important thing is that inflation has moderated now which leave more scope for interest rate cuts by the RBI - this usually fuels growth as funding becomes cheaper for businesses. My view is 2013 will be a moderate year and we might have 5.5% GDP growth. 2014 could see the recovery taking momentum and we could see 6.5-7% GDP growth if we have a stable government in place. However, if there is political instability, 2014 may also be challenging and we may have to wait for 2015 for growth momentum to return.

        My view on mumbai real estate prices is that we will see moderate price increases in 2014 and 2015 (7-10% per year) as volumes slowly start picking up over this period. I dont expect any major price correction to happen except in navi mumbai and thane belt where a 10-15% correction is possible.

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        • #5

          #5

          Re : When Will Real Estate Bubble Burst?

          Originally posted by SOUR GRAPES View Post
          The recession is over in US and job nos. are picking up, Europe is also improving.
          India there was never a recession, SENSEX is above 20000.
          Khangress has come back to power in Karnataka and looks like Modi magic in not working in spite of massive corruptions and scams all over the country.
          Mango people are still voting for Khangress so expect them to come back to power in the next elections and now with economy improving and RBI easing policy expect RE prices to move further North in the near future.
          Well..Congress Karnataka is just state elections...I believe Congress will face a very tough time during national elections...I along with u and many wud be surprised if congress comes to power at the center... That wud only spell doom for India even if RE is spared....However how wud Mumbai RE react if Third Front or NDA comes to power wud be a topic worthy of discussion...
          ALso does Mumbai RE more a function of State govt or central govt.???

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          • #6

            #6

            Re : When Will Real Estate Bubble Burst?

            well, i don't know what a bubble is - but if one were to go by sales figures, it seems we are getting there.


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            • #7

              #7

              Re : When Will Real Estate Bubble Burst?

              Originally posted by GlobeSon
              well, i don't know what a bubble is - but if one were to go by sales figures, it seems we are getting there.

              Seems like prices of good projects with OC or Expected OC from good builders are holding or increasinng their prices claiming OC. Under construction projects by new builders are ready to give at ready reckoner rates. Great disparity in RE market in mumbai right now. Any view on where the prices will go?

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              • #8

                #8

                Re : When Will Real Estate Bubble Burst?

                Prices are moving south. Oberoi is trying to hold on to his price by giving 25:25:25:25 offer. Shows that even Oberoi is under stress.

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                • #9

                  #9

                  Re : When Will Real Estate Bubble Burst?

                  Originally posted by GlobeSon View Post
                  well, i don't know what a bubble is - but if one were to go by sales figures, it seems we are getting there.

                  Definitely southwards until demand-supply curve of buyers vs unsold inventory meets midway.

                  Greedy goons aka builder lobby was supposed to move towards building affordable homes instead of building everything for higher income groups. Seems they did not take their lesson till now, and situation will continue. Jaypee, Amrapali are well known cases, others to follow.
                  Lot other small scale builders are turning away from profession - if you look around. These people are too small to be noticed and mostly run by money pulled from non-banking lenders on much higher interest rates (No one is filing bankruptcy for them, nothing in news).

                  Most likely, this will end up in some news channel shouting on a fine day 'bubble is burst'. Congress had planted time bombs of NPAs and ever growing real estate prices long back. Its just clock ticking for now. Looking at current anti-bjp campaign launched, most likely time for the same would be 2019 elections season, blaming it on strict laws like RERA, care not taken by govt, etc, and not on greed, past misdeeds.

                  Govt is trying to boost affordable housing, however, they cant force builders to loose their greed. RERA put much necessary break in price inflation. Ready Recknor rates were held same for year in many cities. If affordable housing does not pick up pace, bubble would burst bigger.

                  The point is, it is not bubble burst yet, but gradually happening. Buyers waiting, investors moving to Share Markets, real estate is no longer money magnet it was once. Prices can be held for certain time only. Eventually, even big builders have started to give discounts/schemes. With govt pointing towards tax on unsold inventory as notional income, right push is given to get rid of unsold inventory, and clear the books.

                  Sources and
                  https://realty.economictimes.indiati...ws/detail/2697

                  Things to watch for -
                  National Company Law Tribunal
                  https://nclt.gov.in/

                  National Company Law Appellate Tribunal
                  http://nclat.nic.in/

                  National Company Law Appellate Tribunal - Judgments
                  http://nclat.nic.in/final_orders.htm...pal_bench&id=1
                  http://nclat.nic.in/final_orders.htm...=Ciurt_II&id=2
                  http://nclat.nic.in/final_orders.htm...=Ciurt_II&id=3

                  Insolvency and Bankruptcy Board of India
                  http://ibbi.gov.in/

                  Public Announcement By Insolvency Professionals
                  http://ibbi.gov.in/webfront/public_announcement.php

                  Invitation of Resolution Plans By Insolvency Professionals
                  http://ibbi.gov.in/webfront/resolution_process.php

                  Reports
                  http://ibbi.gov.in/Reports.html

                  JANUARY 2018, CHAPTER 3 OF ECONOMIC SURVEY OF 2017-18
                  http://ibbi.gov.in/044_055_Chapter_0...ey_2017_18.pdf
                  Refer page 50
                  Box 3.1 The New Insolvency and Bankruptcy Regime - Table 2 : Sector-wise Analysis of Admitted Cases under IBC
                  Construction sector is 3rd highest with 4004 Crs of underlying default.

                  MARCH 2018, REPORT OF THE INSOLVENCY LAW COMMITTEE
                  http://ibbi.gov.in/ILRReport2603_03042018.pdf
                  Refer -
                  1.3 To completely understand the issue, it is imperative that the peculiarity of the Indian real estate sector is highlighted. Delay in completion of underconstruction apartments has become a common phenomenon and the records indicate that out of 782 construction projects in India monitored by the Ministry of Statistics and Programme Implementation, Government of India, a total of 215 projects are delayed with the time over-run ranging from 1 to 261 months.(7) Another study released by the Associated Chambers of Commerce and Industry of India, revealed that 826 housing projects are running behind schedule across 14 states as of December 2016.(8) Further, the Committee agreed that it is well understood that amounts raised under home buyer contracts is a significant amount, which contributes to the financing of construction of an asset in the future.

                  Note: It is always better to look at numbers instead of waiting for news broadcast.

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                  • GlobeSon
                    GlobeSon commented
                    Editing a comment
                    very good analysis and useful links
                • #10

                  #10

                  Re : When Will Real Estate Bubble Burst?

                  I think much of the bubble has burst resulting in significant loss investors. The loss is realized by those who are forced to liquidiate their inventory whereas for others, it just has not yet shown up.

                  I know of a person who invested in a UC project 3.5 years ago and was forced to resell it back recently. Although the registration amount was almost the same, he suffered a 60% loss.

                  Here is the calculation. 3 years ago, registration value ~2.75cr, all in cost, 3.1cr bank loan 1.75 cr, investment 1.35 cr.

                  Current details: loan present value 2.1 cr, brokerage / transfer fee 0.1cr. Net received: 0.55 cr. Overall loss: 59.3%

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                  • GlobeSon
                    GlobeSon commented
                    Editing a comment
                    only those who have money stashed in cupboards and beds can survive such a massive loss.
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