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There are many posts on this topic whether to invest in RE during 2014 or not. People who advise to hold, believing that RE bubble in India is set to burst support their argument by saying:
1. Elections are due in May and because of that expect a policy logjam for next few months. Since no new policies will be implemented by govt. dont expect any rise in RE prices. Or, black money from the market may be drained out to support election campaigns/ buy MPs etc. Sounds valid
2. US Fed bond buying tapering - The money from emerging economies will start flowing outwards (as if it was not happening already). Expect a pain in stocks and RE. again sounds valid
3. Supply overhang and no possessions - gurgaon seem like a playground where kids are building their own sand castles...some are complete while majority are work in progress..and the same applies to Noida/Fdb/Bhiwadi/Panchkula/Mohali/Bangalore etc. -- its simple economics that when supply exceeds demand then prices fall. Sounds valid but in Indian scenario this might not be a very sound logic
4. RBI increasing Interest Rates -- interest rates are going up, EMIs are increasing. No new jobs..job cuts -- all these factors might lead to a lot of defaults in home loans - where people are stretched..
5. No end users but all investors -- reminds me of a story -
How the stock market works.
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms.
The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; “Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each.”
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Now there are many optimists who argue that:
i am on the side of optimists but i am still not clear whether the factors shared by some eminent members here have already been baked into pricing or once the issues listed below gets resolved we will see a small spike in short term??
1. NPR/SPR issues are going to be resolved sooner or later -- AGREE -- and this shud set the price upwards-- but mere completion of NPR and SPR will support prices?? What if economy slows down..we are in a situation like brazil/argentina or turkey??
2. Hero Honda flyover to be completed by dec-2014 -- though highly unlikely but even if it happens will it lead to higher RE prices in new ggn??
3. India's population is rising and influx to metro is at all time high -- with this there is an all time high demand for self owned property (but we dont have affordable houses so how realistic this demand is i dont know)
4. raw material and labor costs are going up. interest rates are going up so construction cost will go up leading to higher property prices (though this is not directly related to ROI but still accounts for higher property prices)
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We can go on and on but there is no end to arguments. My question, since a lot of members are asking for advice on buying their own flats. And some of us are telling them to wait while others tell them to make best use of current times and buy the dream home:
Will resolution of NPR/SPR issues/ hero honda flyover/ stable NDA govt at center lead to 20-30% jump in property prices in New GGN/DEW/GCX/Sohna?? am sure people wont mind 5-10% increase if they can get a chance to invest when there is a lot more clarity on macro factors.
1. Elections are due in May and because of that expect a policy logjam for next few months. Since no new policies will be implemented by govt. dont expect any rise in RE prices. Or, black money from the market may be drained out to support election campaigns/ buy MPs etc. Sounds valid
2. US Fed bond buying tapering - The money from emerging economies will start flowing outwards (as if it was not happening already). Expect a pain in stocks and RE. again sounds valid
3. Supply overhang and no possessions - gurgaon seem like a playground where kids are building their own sand castles...some are complete while majority are work in progress..and the same applies to Noida/Fdb/Bhiwadi/Panchkula/Mohali/Bangalore etc. -- its simple economics that when supply exceeds demand then prices fall. Sounds valid but in Indian scenario this might not be a very sound logic
4. RBI increasing Interest Rates -- interest rates are going up, EMIs are increasing. No new jobs..job cuts -- all these factors might lead to a lot of defaults in home loans - where people are stretched..
5. No end users but all investors -- reminds me of a story -
How the stock market works.
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms.
The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; “Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each.”
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Now there are many optimists who argue that:
i am on the side of optimists but i am still not clear whether the factors shared by some eminent members here have already been baked into pricing or once the issues listed below gets resolved we will see a small spike in short term??
1. NPR/SPR issues are going to be resolved sooner or later -- AGREE -- and this shud set the price upwards-- but mere completion of NPR and SPR will support prices?? What if economy slows down..we are in a situation like brazil/argentina or turkey??
2. Hero Honda flyover to be completed by dec-2014 -- though highly unlikely but even if it happens will it lead to higher RE prices in new ggn??
3. India's population is rising and influx to metro is at all time high -- with this there is an all time high demand for self owned property (but we dont have affordable houses so how realistic this demand is i dont know)
4. raw material and labor costs are going up. interest rates are going up so construction cost will go up leading to higher property prices (though this is not directly related to ROI but still accounts for higher property prices)
---------------------------------------------------------------------------------------
We can go on and on but there is no end to arguments. My question, since a lot of members are asking for advice on buying their own flats. And some of us are telling them to wait while others tell them to make best use of current times and buy the dream home:
Will resolution of NPR/SPR issues/ hero honda flyover/ stable NDA govt at center lead to 20-30% jump in property prices in New GGN/DEW/GCX/Sohna?? am sure people wont mind 5-10% increase if they can get a chance to invest when there is a lot more clarity on macro factors.
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