ITS OFFICIAL - Slump in realty sales hits brokers really hard

Correction is official in IREF at least. Pune, Mumbai and NOIDA are facing the heat.

But GGN seems to have escaped the slump? Or is it waiting to happen.

Vote your opinion on the link as to how long and how deep the correction would be. My bet was 18 months and 15% downturn for NOIDA.

Has to be more for Pune and Mumbai because of more excess - maybe 25-30% correction and last 18 months.

It can only get worse tomorrow after the RBI meeting. Since RBI has to keep its credibility in international fora, after 9% plus inflation, 25 bps rate hike is inevitable.

What about GGN? What is going to happen in DEway? and GCX/SPR? And NH8?

What is the ground scenario?
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  • Venky - do you have any facts supporting correction in Noida..

    are projects available in 10-15% less than what they were few months back??
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  • Correction....

    My feeling is that the projects on DEway will suffer the most...unless it becomes operational...prices of 3200-3300 K ++ does not seems to be justifiable ....
    then it would be NH8 projects with pricing 3500+...

    Its huge land bank(DEway projects )...certainly the builders will face the heat in selling at higher rate....

    May be we see 5-10% price correction in next 3-6 months...or as it has happened in the last one month or so....the prices will be stangnant...for some more time..if the rates are not dropping...

    again....just my PoV....
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  • Hi everyone,

    I recolelct there was an article in TOI (delhi) nearly 7-10 days before on reality peak & lean season. Interestingly, apart from Inflation, Interest rate, property price etc factors, seasonlity also has a role to play. During this time in the year, activities are always low as against sep to dec.
    Again it could be that sep to dec has got many festivals Vs summer holidays now. from investment point of views, most of the the NRI come to india during Diwali / Dec holidays.
    This infact holds true to most of the business.
    My view is that activities may be less during this time but i do not see correction of 15% in GGN. It will be stagnation only (which in practical may be called as correction).

    Thanks
    Prasoon
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  • I dont know what slump are we talking about in gurgaon!!!!
    inflation at 10% const cost up 30% market not unduely leveraged. new FSI getting sold at 1200-1500/ sq ft( a sec 113 fsi sold at 1700)
    so i wonder where is the margin for slump.
    yes new sales slow.. buyers not jumping/lapping all and sundry..
    expect slow returns/difficulty of exit but excpet for marginal correction here and there... REAL slump is still some time away in GURGAON.
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  • Correction or corrective action

    Hi
    Greetings

    Perceive 10%-50% pa ROI depending upon area/developer/budget/format/entry price for residential projects over the next 5 years. Might have blips but not drastic drop in prices and long term stagnation
    Such blips might provide ample opportunities to reenter and enter enabling to take corrective action.

    Also 1% increase in housing loan will cause all leveraged to pay 15-20% extra installments depending upon size and tenure of loan.


    Cheers!!!
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  • My own estimate is that Gurgaon might not correct at all. Prices might remain static during this period though - maybe 1.5-2 years period.

    GGN builders played a good hand this last 2 years. They should hold out for the slow down period.

    Only exception might be DLF and Unitech - heavy leverage - cannot survive with zero sales. They might release some cheap plots or sales of RTM flats, which might be a good thing to pick up in the slow down period.

    What say Janta here?
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  • venky do you feel that in case of slow sales the only way developer can book more revenue is to complete projects and get money by way of CLP?

    when a developr launch a project he gets only 20%, rest of the revenues it will get only when it constructs....

    it can slow the projects after completing the shell.....when over 60-70% of payment has been taken....

    do you think in case of slow sales projects launched in the last 1 year will be constructed and prijects which are 60% complete will be slowed down??
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  • Healthy Resale, Possession and Infra Key

    Hi
    Greetings

    Key to the growth would be hinged on healthy resale to provide exit and entry, timely possession and Development of key infra. Key infra include Metro/dway/Sector Roads.
    Given the current climate and feelers received from various quaters ranging from local MCG elections, T&CP, Min of Urban Devlp.. political powers have huge stakes in varied colours.
    Simple indicators are bulk purchases in groups by bureaucrats in various projects..
    Other members might have similar tips/indicators which need to be followed to ensure better returns in the long to medium turn..
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  • Originally Posted by amit001
    venky do you feel that in case of slow sales the only way developer can book more revenue is to complete projects and get money by way of CLP?

    when a developr launch a project he gets only 20%, rest of the revenues it will get only when it constructs....

    it can slow the projects after completing the shell.....when over 60-70% of payment has been taken....

    do you think in case of slow sales projects launched in the last 1 year will be constructed and prijects which are 60% complete will be slowed down??


    Depends on how the builder operates. Both DLF and Unitech are likely to speed up deliveries I feel.

    Its all a revenue and expenditure balancing act - nobody can predict. But builders had 2 years to prepare for this, especially DLF and Uniteck.

    BlessU, you have hit the nail on the head. ?I will post a poll for GGN and let us see how resales are happening
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  • Its a Game of Musical Chairs

    Real Estate is nothing but a game of leveraging + an avenue to dump the black money......
    Since the premium always comes in coloured money, there is no avenue but to reinvest in property.. This coloured money is the reason for astronomical appreciation in real estate market across India.
    Most of the new launches in past 2 years were sold on the leveraged money ie. just ensure one has 20% money in bank account and go ahead and buy the appt in pre launch.....
    1 year back it was easy to sell the pre launch appt with a premium of 300-600 Rs and reinvest the gains again in another property. Hence it lured many salaried class professionals to bet in real estate on borrowed money. Those who had planned their investment based on their propensity to pay the entire debt, will temporarily get worried but will definitely sail through as the investment was done with a long term view. Those who jumped in the fray to make a quick money, will feel the heat as the EMI burden is increasing every month now and resale is not easy in the current market.

    This game is always fun to play when the nice music is playing (Ample Liquidity/Enough buyers/And every one is playing it on borrowed chair and music)
    The moment the liquidity starts to get tightened and the interest rates go up...music starts to fade and it goes on till the time the music comes to halt...
    I guess the current state is a state of slow down due to interest rates etc...

    But there are still deals happening in the market. But the end result is same...the coloured money is getting reinvested in the property only hence providing a strong cushion to the existing real estate market....

    According to me reason for Pune and Noida to see correction (Though Still I dont say its a correction) is due to over supply in the market...

    Specially Noida and its Famed Noida extension, there is a lesser off take happening. Also since not much premium has come in the properties that were launched in last two years, there is no incentive to sell at current rates and since not much resale is happening, there isn't enough colored money available to get reinvested.

    Coming back to Gurgaon and if I take the same logic there is a point to be noticed...
    Gurgaon in last 7 years has given the highest return in India, both in residential and commercial real estate.. There has been enough demand for appt in all shapes and sizes in all these years. Everything that was launched was getting bought and resale was also happening in a big time....

    Now why is there a slow down....Well the answer is due to oversupply that got created by flurry of launches in last 2 years. There are more than 100 projects to choose from Vs just few 3 years back...

    So are prices going to drop further???

    Well the answer is yes and Now....

    One needs to see this again from demand and supply paradigm.

    If one looks into the kind of project that were launched 5-6 years back, one finds that most of them were with basic specifications (the ones now being launched in far away sectors and D -eway.... But what about those who bought the appt 5 years back and are sitting anywhere btw 80% -160% premium...
    There is enough incentive for the investors to exit out of these projects and enter the ones which are future ready. Hence most of the good projects launched on GCX got sold and they are still getting sold currently....

    To conclude, my estimate is that in the basic entry level projects prices are going to stagnate or marginally drop due to distress sale and the prices of premium and luxury projects will remain stable in short term and definitely go up in medium to long terms...

    Strength of coloured money is too strong to be breached due to temp disturbances caused by interest rates fluctuations...

    Musical chair still remains the favorite game of Investors might be down temporarily but for sure will come alive in kicking....very soon.
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  • Originally Posted by Venkytalks
    My own estimate is that Gurgaon might not correct at all. Prices might remain static during this period though - maybe 1.5-2 years period.

    GGN builders played a good hand this last 2 years. They should hold out for the slow down period.

    Only exception might be DLF and Unitech - heavy leverage - cannot survive with zero sales. They might release some cheap plots or sales of RTM flats, which might be a good thing to pick up in the slow down period.

    What say Janta here?


    My view is mirror image of what you said -
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  • Well i am of a completely different view here , correction in gurgaon is still very far away ... although there might be dead resale for some projects and some locations which is always there (exceptions are always there) . There should be a decent growth rate for apartments !!

    And as someone said and i completely agree, RE market is always slow during may-july and december-jan and march (because of fiscal year ending) and relly gets heated up in septemebr- november .

    Ready to move in is/always has been a safer bet ...
    i have heard that there is a huge chance of permissible FAR getting increased for builder floors by 30 % , if this happens , expect gurgaon plots to increase by at least 20-30 % minimum , the increase can even be 50 % ......

    So just watch out for that .. plot holders hold on to your plots in gurgaon for at least an year , year and a half more !!!

    Plots are still the best options in gurgaon , there is a lot of upside still i feel when compared to apartments . there are many cards yet to be opened in the gurgaon plot market like increase in FAR , allowing of stilt parking , allowing third floor to be built which definitely will happen but when is the big question , just remember when the builder floor registries were opened in gurgaon , plot market took a jump of 40-60 % instantly and around 100 % in 1 yrs time !!
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