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2014 A BOOM or DOOM

Last updated: February 9 2014
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  • 2014 A BOOM or DOOM

    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)

    ---------------------------------------------------------------------------------------

    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.
    49
    BOOM
    40.82%
    20
    DOOM
    59.18%
    29
  • #2

    #2

    Re : 2014 A BOOM or DOOM

    I keep it short as usual.

    2014 is DOOM time specially for new and under developed areas be it Gurgaon or any other area in NCR.
    nothing happened in last 9 years in Gurgaon when everything was congenial, why to expect now when there is everything turmoiled.
    Last edited February 1 2014, 12:10 AM.
    Thanks

    Comment

    • #3

      #3

      Re : 2014 A BOOM or DOOM

      I believe that 2nd half of 2014 is going to see a lot of appreciation, around 15%....
      Various factors going to factor are :-
      i) National elections going to see a stable government of BJP,....any stable government in Delhi is going to see a major appreciation booster for property rates, just make sure that the properties are not involved in any kind of conflict..
      ii) Indian economy is recovering and policies of RBI governor Raghuram Rajan is going to have an positive impact
      iii) Loan rates have come down
      iv) Major infrastructural projects in gurgaon will be pushed during this year

      Now comes the area where the maximum appreciation will happen,...and the area is "SOHNA ROAD" in gurgaon.
      Next 5 years, sohna road will turn to MG road...
      SO to multiply your money ,invest it now in Sohna..

      Comment

      • #4

        #4

        Re : 2014 A BOOM or DOOM

        It's easy to understand

        It is the history of real estate 4-5 year cycle more or less related to election cycle, as we had witnessed that real estate market was slow in 2013. As the matter of fact the due to election and global clue of recession many big investor has vacuumed the money from the project.

        There were news that almost all companies have their expansion plan and project plan and other documentation is ready to process go get approval but because of due election, all companies has kept their project on hold as the fact they know that if they process now, they need to oblige current government and new government after election which will be expensive.

        After election many project will be executed and as the result generation of new jobs and hence boost in the real estate market.

        After election big giant investor will again push their money in real estate and will result the real estate market boost.

        After election, pending policies may get clear and which will attract FDI and other institution to come to India and will surely boost the property market.

        After election some pending approval on infrastructure may be executed and development of infrastructure will boost the reality growth.

        Surely, RBI is in action, will boost Indian Economy - will result the growth.

        In nutshell, 2014 post election may see some surprisingly growth, as u agree, people follow people and go with sentiments.

        When one person is selling the property, everyone will start selling. When one start buying, everyone start buying. Only seasoned investor, risk taker goes opposite to them and gets all benefit.

        The meaning of F-E-A-R --> is different for two group of people.

        F-E-A-R --> Forget Every Aspect & Runaway --> These type people go with sentiments.

        F-E-A-R --> Face Every Aspect & Rise --> These type people are Risk Taker

        Need to analyse ourselves, individual falls in which group. Genuinely both groups are RIGHT
        Last edited February 1 2014, 09:42 AM.

        Comment

        • #5

          #5

          Re : 2014 A BOOM or DOOM

          Originally posted by cscbansal08 View Post
          I believe that 2nd half of 2014 is going to see a lot of appreciation, around 15%....
          Various factors going to factor are :-
          i) National elections going to see a stable government of BJP,....any stable government in Delhi is going to see a major appreciation booster for property rates, just make sure that the properties are not involved in any kind of conflict..
          What if the elections result in a hung mandate? or if the Communists/3rd Front come to power? Expect property to lose 30%-40% of their values.

          Or if Subsidy Kings like Congress/Kejriwal come to power?
          the entire infrastructure and growth story would come to an end and expect the core engine of growth to come to an end. Every single dollar and every single rupee will flee the markets. Investors are not dumb.

          So i would recommend a wait-and-watch approach. too risky to place your bets on the real estate market till july/august 2014.

          Comment

          • #6

            #6

            Re : 2014 A BOOM or DOOM

            Agreed what humble_guy said although there are fair chances of Modi to come in but in India everything is expected in politics even Mulayam Singh can become PM

            We also need to consider one thing here that nothing appreciates overnight so we will have a fair amount of time to invest. It is not that BJP comes in power and property prices going to jump by 1000 PSF overnight. It won't happen ever so before putting all your hard earned money in abrupt property prices do your due diligence. I always follow value for money deals so suggest you the same. In addition never bet on property market for short term gains. When you invest in you have to goal for long term gains atleast 5-7 years in any area of Gurgaon (especially if you are investing in under construction properties).
            Last edited February 1 2014, 10:19 AM.

            Comment

            • #7

              #7

              Re : 2014 A BOOM or DOOM

              Originally posted by cscbansal08 View Post
              I believe that 2nd half of 2014 is going to see a lot of appreciation, around 15%....
              Various factors going to factor are :-
              i) National elections going to see a stable government of BJP,....any stable government in Delhi is going to see a major appreciation booster for property rates, just make sure that the properties are not involved in any kind of conflict.. --> iF UPA comes back to power then? UPA has been very stable over the past 2 terms but screwed the country pretty hard..Except for NDA every other party is going to take this country down (my personal political view)
              ii) Indian economy is recovering and policies of RBI governor Raghuram Rajan is going to have an positive impact --> RR has clearly stated that in the short term his primary goal is to contain inflation. So he is not even bothered abt giving freebies to our businessmen..and also don't expect any rate cuts in near future so how does an already struggling economy recover??
              iii) Loan rates have come down --> i dont think so..some of my loans have gone up by 75 basis points in past 1 year. And if i switch them to some other bank then i can save some money. But with no rate cuts in sight i am not sure for how long rates will be stable.
              iv) Major infrastructural projects in gurgaon will be pushed during this year --> agree with you..and this is my point -- How much we can rely on these developments alone for price appreciation??..

              Now comes the area where the maximum appreciation will happen,...and the area is "SOHNA ROAD" in gurgaon.
              Next 5 years, sohna road will turn to MG road...can you support this argument?? what will turn sohna road into mg road?? it has got everything - commercials/malls/residentials. what else is gonna happen

              SO to multiply your money ,invest it now in Sohna..
              Last edited April 29 2015, 08:09 PM. Reason: Coloured Fonts

              Comment

              • #8

                #8

                Re : 2014 A BOOM or DOOM

                When every hope shattered, when every aspiration finished, it is the time to make an entry of any asset class like Real estate, commodity, share market, art market etc etc.

                Comment

                • #9

                  #9

                  Re : 2014 A BOOM or DOOM

                  Originally posted by tyler_durden View Post
                  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

                  Anyways the govt doesnt do much on policy for years so 4-5 months with low action doesnt hurt. On the Black money theory, even if its true then the same reqd for elections would have been liquidated by now and anyways most of it is in land parcels/agriculture and not typical flats/villas type..

                  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

                  Impact on Stocks - possible to some extend (more sentimental) & RE - Please explain

                  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

                  Agree - it will keep investors / end-users on their toes and pressure will increase on builders to complete the work and offer possessions.

                  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..

                  Please note that EMIs are not going up despite RBI rate increases - infact banks did reduce ROI to 10.1% couple of months back.. also the rate cycle is about to peak and hence it can only go down. Only over-leveraged people are stretched.. Jobs are not aplenty but no big cuts either..


                  5. No end users but all investors -- reminds me of a story -

                  Again true to a limited extent.. also the monkeys story of stock market doesnt hold much relevance in modern world of information, scrutiny and investor prudence..


                  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??

                  Sorting out of pending issues + Infra development will only have positive effects.. ofcourse the overall tone of market is going to determine the final result..

                  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??

                  Not really..

                  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)
                  This is true to some extent..

                  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)

                  Yes it does, inflation does increase price of everything YOY..
                  ---------------------------------------------------------------------------------------

                  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.
                  All these might bring overall cheer and if economy does well, the RE bull run will be reinstated though with caution..

                  Comment

                  • #10

                    #10

                    Re : 2014 A BOOM or DOOM

                    Economic uptrend and downtrend is a cyclic in nature, it only depends at which position a person or an entity enters into any asset class.

                    Comment

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