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Who the hell is buying in Gurgaon

Last updated: December 31 2012
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  • Re : Who the hell is buying in Gurgaon

    Originally posted by abc111 View Post
    The category of people what you have mentioned already hold multiple properties in Gurgaon.The game of musical chairs where one investor sells to another can't go on forever. In-spite of so many rich people present in NCR;
    there are no buyers of builder floors in Delhi.

    Moreover there are a lot of over-leveraged guys in the Gurgaon market who hold multiple under-construction properties but can't pay in full for them.The crash would come when these guys come to the market in a herd to sell.And my guess it would be in 2014 when political uncertainty and liquidation pressure would make people extremely jittery.

    Now coming to the rental scenario.
    There is stiff resistance for rentals above 20-25K for a common project.
    Even in Mumbai people aren't ready to pay more than 30K inspite of higher income levels there.
    A person who can afford to pay 30-40K as rent as well would have some property in Gurgaon.A small section of floating population of ex-pats and corporate honchos can't sustain high rental levels for long.
    Moreover if someone is ready to pay 40K as rent means that his take home should be at-least 1.5 lakh which means a CTC of 25-30 lakhs.
    Do you think that salaries would grow at such a pace that these figures becomes the median.

    If you look at main gurgaon; most of it is plotted development with apartment complexes concentrated along NH 8, Golf Course road and Sohna Road.This has created an artificial scarcity for good quality apartment spaces in main Gurgaon. On the contrary all the new developments have
    all good apartment complexes.

    Golf course properties would face competition from GCX; Sohna Roa from SPR.
    And I doubt there would be any significant rental income from NH8 and deway properties in the near future.

    Gurgaon emerged as IT-BPO hub but now no big new companies is coming because of high cost structures.
    And some top management people in the corporate headquarters can't sustain
    the rental market for long.And most of them would have anyway bought something or else in Gurgaon.
    Please get some of your facts right

    In Mumbai 30k is the norm for 1 BHK, that too in places like Andheri which are 2 hours drive from Nariman point, 1.5 from Lower Parel and 1 hour from BKC (all major commercial areas). Even these are in not so well maintained buildings. If you want a 3 BHK in a reputed builder at Andheri, you have to shell out 75-80K, and still its difficult to find flats. Rates reach a new level, as you start coming closer to the town with Bandra and Worli being almost 2X of Andheri rates (please feel free to check Mumbai forum on IREF).

    All these are purely driven by demand - supply mismatch, coz irrespective of our GDP growth rate, more and more people come each year to Mumbai and settle there. And the same is going to happen to NCR. You don't need new companies keep coming in, the existing ones grow as well

    Regarding salaries, they are going at pretty fast pace my friend. From most b-school campuses, people now join at at least 12-15 lacs. Assuming 12-15% yoy increase, they would easily end up making 20-25 in 3-4 years time. And usually people get married by then, and so their income virtually doubles and so are very much in position to buy a property. Also, smarter ones realize that they have to pay full EMI only in 3-4 yrs time (by when construction is done), so they invest much before assuming their salaries will reach the desired level in 3-4 years

    Lastly, I have been hearing this point of builder floors in Delhi not getting sold
    multiple times. Why would they sell ? First, they are not close to working place of our working middle class (a large chunk of current buyers), who want to live near their offices. Second, none of these floors provide any type of security. In these times everyone wants a gated society. Third, all the basic amenities like pool, clubhouse, sports are missing, again an essential for younger buyers. Thirdly, cash component is so high in these houses that it is out of reach of any salaried employee, no matter what position he/she is in. So of course builder floors in Delhi won't sell like hot cakes !

    Comment


    • Re : Who the hell is buying in Gurgaon

      Originally posted by chirag09 View Post
      Please get some of your facts right

      In Mumbai 30k is the norm for 1 BHK, that too in places like Andheri which are 2 hours drive from Nariman point, 1.5 from Lower Parel and 1 hour from BKC (all major commercial areas). Even these are in not so well maintained buildings. If you want a 3 BHK in a reputed builder at Andheri, you have to shell out 75-80K, and still its difficult to find flats. Rates reach a new level, as you start coming closer to the town with Bandra and Worli being almost 2X of Andheri rates (please feel free to check Mumbai forum on IREF).

      All these are purely driven by demand - supply mismatch, coz irrespective of our GDP growth rate, more and more people come each year to Mumbai and settle there. And the same is going to happen to NCR. You don't need new companies keep coming in, the existing ones grow as well

      Regarding salaries, they are going at pretty fast pace my friend. From most b-school campuses, people now join at at least 12-15 lacs. Assuming 12-15% yoy increase, they would easily end up making 20-25 in 3-4 years time. And usually people get married by then, and so their income virtually doubles and so are very much in position to buy a property. Also, smarter ones realize that they have to pay full EMI only in 3-4 yrs time (by when construction is done), so they invest much before assuming their salaries will reach the desired level in 3-4 years

      Lastly, I have been hearing this point of builder floors in Delhi not getting sold
      multiple times. Why would they sell ? First, they are not close to working place of our working middle class (a large chunk of current buyers), who want to live near their offices. Second, none of these floors provide any type of security. In these times everyone wants a gated society. Third, all the basic amenities like pool, clubhouse, sports are missing, again an essential for younger buyers. Thirdly, cash component is so high in these houses that it is out of reach of any salaried employee, no matter what position he/she is in. So of course builder floors in Delhi won't sell like hot cakes !


      Had u been through an good b-school at the least( which i doubt ) ,u would have known the mood . salary rise of 12-15% , no sorry sir this is not happening anymore , may be in a class 5% get a salary hike of 12-15% but the bulk of junta is going stagnant.
      so get your facts right before butting in.

      Comment


      • Re : Who the hell is buying in Gurgaon

        Originally posted by cookie View Post
        Bro
        even in NCR I know many small to average builders who are ready to take cash.
        got to know that in a project like ansal highland there was a Rs 500 cash component asked by the builder

        Comment


        • Re : Who the hell is buying in Gurgaon

          Originally posted by chirag09 View Post
          Regarding salaries, they are going at pretty fast pace my friend. From most b-school campuses, people now join at at least 12-15 lacs. Assuming 12-15% yoy increase, they would easily end up making 20-25 in 3-4 years time.
          Whoever told you this is so wrong. As Amit said above, its probably close to 5% on average. Regardless of what school, maybe the cream is seeing growth of 10-20%, but remember that is so rare you only get to hear about these cases and hardly get to witness. Rest is our mentality to generalize. Even the starting salary you have mentioned is off. Its like like 6-10 lacs than 12-15.

          Originally posted by chirag09 View Post
          Lastly, I have been hearing this point of builder floors in Delhi not getting sold multiple times. Why would they sell?
          I agree, but this is relative as always. I do not see salaried professionals such as myself as the target demographic for these. You right mentioned the issues with these but the business class are buying them left and right in my area (South Delhi). My relatives who have lived abroad for 20 years had been searching for a floor here and no luck, nothing available. They had to settle 4 KMs out of our place, still in South Delhi, but on the 3rd floor. A relief for them after searching for several months.
          Last edited December 28 2012, 01:22 PM.

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          • Re : Who the hell is buying in Gurgaon

            My apologies to the forum members, I just read the original question from the person who started the thread. Who is buying higher than 1-2 CR properties.

            and my thoughts are

            1. The supply of such units in fresh is not very large when you compare it to the total supply in the market. Right now it seems like that's the only supply in the market because those are being heavily advertised as the builders are trying to attract buyers for them

            2. A plain vanilla NRI, High Salary earning Indian is still not buying these 5-7cr + houses. That is a fact. Theses in the end if being bought are being bought by speculators, politicians and industrialists (20 cr+ turnover).




            Originally posted by abc111 View Post
            The category of people what you have mentioned already hold multiple properties in Gurgaon.The game of musical chairs where one investor sells to another can't go on forever. In-spite of so many rich people present in NCR;
            there are no buyers of builder floors in Delhi.

            Moreover there are a lot of over-leveraged guys in the Gurgaon market who hold multiple under-construction properties but can't pay in full for them.The crash would come when these guys come to the market in a herd to sell.And my guess it would be in 2014 when political uncertainty and liquidation pressure would make people extremely jittery.

            Now coming to the rental scenario.
            There is stiff resistance for rentals above 20-25K for a common project.
            Even in Mumbai people aren't ready to pay more than 30K inspite of higher income levels there.
            A person who can afford to pay 30-40K as rent as well would have some property in Gurgaon.A small section of floating population of ex-pats and corporate honchos can't sustain high rental levels for long.
            Moreover if someone is ready to pay 40K as rent means that his take home should be at-least 1.5 lakh which means a CTC of 25-30 lakhs.
            Do you think that salaries would grow at such a pace that these figures becomes the median.

            If you look at main gurgaon; most of it is plotted development with apartment complexes concentrated along NH 8, Golf Course road and Sohna Road.This has created an artificial scarcity for good quality apartment spaces in main Gurgaon. On the contrary all the new developments have
            all good apartment complexes.

            Golf course properties would face competition from GCX; Sohna Roa from SPR.
            And I doubt there would be any significant rental income from NH8 and deway properties in the near future.

            Gurgaon emerged as IT-BPO hub but now no big new companies is coming because of high cost structures.
            And some top management people in the corporate headquarters can't sustain
            the rental market for long.And most of them would have anyway bought something or else in Gurgaon.
            ABC111, very very insightful and I agree with almost everything you have said about people being over leveraged.

            But here is the other perspective:

            1. What percentage of people who I conservatively estimated have multiple properties and even if they do, they would still have enough cash due to their earnings from primary source remaining the same.

            I'd say 40-50% have multiple properties and 90% of the total investors will be able to foot the demands that are coming for UC properties over the next 3-5 years. Yes, their is probably 10% of the punters as the forum members call them who are over leveraged and will be unable to hold on to the properties they have invested in. Will that result in a major slump in the market I doubt it. Their is still 50-60% of the people in the target buyer market who still have capacity to buy at-least 1 or 2 more properties.

            the worse case scenario is that these over-leveraged buyers will sell one and keep one OR surrender one and the builder will put them back in teh market at prevailing prices.

            2. On the rental front, I believe Mumbai rentals are much higher for comparable houses. But I don't live in Mumbai. 25-30k is usually for a smaller (1bhk) builder floor equivalent house. Bigger, 2BHK, 3BHK are going at much higher rentals.

            "expat101 Guys,

            Here is my argument to onceagain. Gurgaon is a new city and it's on the Periphery of the Capital. The Capital has more cities on the Periphery Greater Noida, Faridabad, Ghaziabad. Now the city has been driven by BPO's and already the commercial space rentals are reaching the Rs40/50 per sq feet (IT space) different than exclusive buildings and due to this and lack of space a number of large BPO's/IT campuses have been started elsewhere. Now, the reason, I bring this up is this, predominantly the folks who live in Gurgaon are professionals and they are and they will go where the jobs move. You will be surprised at the never large office slabs and floor area building coming up all over the Periphery. Now, this has a direct impact on Rentals; The rental yields are atrociously low starting from Delhi to the Periphery(The periphery is better by a few basis points) The rents will not go up with the huge supply coming up, if rents on Sohna Road go up beyond affordability, move to New Gurgaon/Manesar - There is so much space and before you move the employers will move. Now, there is enough land and its not constrained - Its not London, It's not NY, Tokyo and even Delhi(Some might not like this) Anyway wait for the yields to increase across Delhi/NCR i.e. Capital values to correct- I am not hopeful on Delhi either...."

            Expat111 - Agreed their are many peripheries in the NCR region and it is not like NYC or Mumbai where space is a constraint.

            But one I am a firm believer that Gurgaon will still keep attracting corporate to set-up shop their not because of the government infrastructure but because of the private infrastructure and the eco-system that has been created in Gurgaon by big players like the GE, IBM etc (DG set/UPS vendors, Diesel Supply, Electricians, Office Boys, CAB vendors, Technology providers, Private Water supply vendors, Hiring Consultants the list goes on.... ) all needed to run a seamless operation.

            Noida is not an option from my personal experience of setting up operation. The infrastructure one needs to create to make up for the govt. infrastructure deficiencies is not easily available in Noida albeit the rentals maybe 5-10% cheaper.

            Faridabad, Gazhiabad - Once again no eco system available for one to really build a successful business there. Will that change in a 10 year time frame probably, but in the medium term things still look bright from GGN.

            Realize this, you can change your office and keep going farther from city centers to reduce your rental cost as a business but you will have to increase you transportation cost. That usually does not justify the move in the short term for smaller companies. The larger behmouths will add new seats to these new locations but will keep their existing buildings and seats here until the transportation cost vs. saving in rentals equation becomes favorable.


            Now let's talk about another scenario. Their is a very good argument to draw a comparison between what happens in the commercial RE in gugraon -

            Oversupply resulted and market hype resulted in making space unaffordable to buy in GGN. What happened many many office complexes went empty for long periods of time. Their were no buyers in the market. But did the rentals come down?

            Not by that much... Asking for Global Foyer/Time Tower/Vipul Agora when it was just RTM were about 120-140 PSF, DLF Cybercity asking was 55 PSF....

            Sohna Road IT Parks (Well Done IT etc ) - 40-45 PSF

            I personally negged down Vipul Agora to 100 PSF, Global Foyer converted to a mall type space where the rentals are higher... DLF stuck to it's guns and charged 55psf + but increased maintenance charged.

            I didn't even want to look at Sohna Road IT parks at that point because the savings in rent vs. the cost to move people from their homes to sohna road did not justify the lower rental and going that far.

            The fact is, their will always be demand for people to live in city centers. Gurgaon is a city on it's own at this point. Offices moved from Delhi to GGN when Delhi bad office space started costing 100-150 PSF and GGN was at 30 PSF. But people still were willing to live in Delhi and pay higher rentals and come to work to Gurgaon.

            So now UNLESS new GGN and GGN rate difference is so substantial companies may not move to New GGN... even if companies do, people will follow 5-9 years later to invert the GGN RE price equation.

            Again, these are all personal opinions and my thoughts on how I see the market moving. Nobody can aptly predict what will happen. I still believe their is money to be made..... Yes some direct builder bookings are going at exorbitant rates and they have fundamentally priced the future appreciation in their price....
            The resale rates being spoken about are in most cases are not at what deals get done at.
            Last edited December 28 2012, 05:11 PM.

            Comment


            • Re : Who the hell is buying in Gurgaon

              Originally posted by amitgupta00 View Post
              Had u been through an good b-school at the least( which i doubt ) ,u would have known the mood . salary rise of 12-15% , no sorry sir this is not happening anymore , may be in a class 5% get a salary hike of 12-15% but the bulk of junta is going stagnant.
              so get your facts right before butting in.
              amitgupta00

              The quality of school that you are from reflects from the grammar you have used, and the mistakes in it ! PM me and I will tell which school I come from, and I promise me you will fall off your seat

              While I agree, that 12-15% sounds aggressive, but that is what I have been seeing all around me. In fact I have been conservative, trust me. Except for some investment banking, trading and equity research jobs, all my friends and colleagues have got handsome increments

              Comment


              • Re : Who the hell is buying in Gurgaon

                Originally posted by ansh09 View Post
                Whoever told you this is so wrong. As Amit said above, its probably close to 5% on average. Regardless of what school, maybe the cream is seeing growth of 10-20%, but remember that is so rare you only get to hear about these cases and hardly get to witness. Rest is our mentality to generalize. Even the starting salary you have mentioned is off. Its like like 6-10 lacs than 12-15.
                Yaar Ansh,

                What type of schools are you referring to when you quote 6-10 lacs? Are these similar to ones promoted by the famous man with pony tail ?!

                Comment


                • Re : Who the hell is buying in Gurgaon

                  Originally posted by chirag09 View Post
                  Yaar Ansh,

                  What type of schools are you referring to when you quote 6-10 lacs? Are these similar to ones promoted by the famous man with pony tail ?!
                  hahaha.. good one !

                  Comment


                  • Re : Who the hell is buying in Gurgaon

                    Originally posted by chirag09 View Post
                    Yaar Ansh,

                    What type of schools are you referring to when you quote 6-10 lacs? Are these similar to ones promoted by the famous man with pony tail ?!
                    hahaha ... bad one ... need to read it again

                    Comment


                    • Re : Who the hell is buying in Gurgaon

                      Originally posted by chirag09 View Post
                      While I agree, that 12-15% sounds aggressive, but that is what I have been seeing all around me. In fact I have been conservative, trust me. Except for some investment banking, trading and equity research jobs, all my friends and colleagues have got handsome increments
                      LOL. Saying "that's what I see all around me" to the rest of the world makes it true, doesn't it?

                      Originally posted by chirag09
                      What type of schools are you referring to when you quote 6-10 lacs? Are these similar to ones promoted by the famous man with pony tail ?!
                      I am not here to put any school to shame or otherwise. I have been in the industry far too long to know that good talent can come from anywhere. Every team I have managed so far, its only a fraction that matches those numbers year after year. But of course, what do I know?

                      Comment

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