Dear Members,

trying to understand the reasons - what drives the increase in the BSP of affordable appts along e-way. for example the BSP was 2805 on 20/11/2010 for 12th floor for karnam greens and now it was 4310 (on 20/11/12) for same floor. A increase of 1505 in just 2 years :bab (45):

Pl let us know the potential reasons for such steep increase.
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  • Originally Posted by akumarggn
    Dear Members,

    trying to understand the reasons - what drives the increase in the BSP of affordable appts along e-way. for example the BSP was 2805 on 20/11/2010 for 12th floor for karnam greens and now it was 4310 (on 20/11/12) for same floor. A increase of 1505 in just 2 years :bab (45):

    Pl let us know the potential reasons for such steep increase.


    Phd + MBA yehin pe karoge?

    Agar kisi ko yeh pata hota to woh yehi pe gappe thodi na marta!!
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  • Originally Posted by gharondabhai
    Phd + MBA yehin pe karoge?

    Agar kisi ko yeh pata hota to woh yehi pe gappe thodi na marta!!


    MBA & PhD main kya rakha hai.......jo kuch hain yahin RE main hain........sir ji 2000+ post ke baad to appko idea hoga hi ki aisa kyu hota hai....;)
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  • Originally Posted by akumarggn
    Dear Members,

    trying to understand the reasons - what drives the increase in the BSP of affordable appts along e-way. for example the BSP was 2805 on 20/11/2010 for 12th floor for karnam greens and now it was 4310 (on 20/11/12) for same floor. A increase of 1505 in just 2 years :bab (45):

    Pl let us know the potential reasons for such steep increase.


    Like G'Bhai said its difficult to say, but let me try nonetheless:

    There are fundamental and speculative reasons for price increases:

    The main fundamental reasons are as below:

    1. Inflation Related: The cost of all building materials, land, advertising, staff salaries of builders, moneys paid to politicians are all going up. So new launches are priced progressively higher. Since new launches are higher, in progress and RTM and established apartments also catch the wave to balance the equation. (You cant have a new launch at Rs 5/- and existing ones at same/similar location/specs to be at Rs. 2/-)
    2. Increasing Spending Power: If you think about it most commodities - shampoo, computer, car etc have not really appreciated in the last few years. Salaries/Income has increased substantially on a relative basis. A lot of people are willing to buy/invest in RE.
    3. Urbanization: A little related to 2. but rapid urbanization means more and more demand. NCR for example has doubled in population in an unprecedented fashion
    4. Better facilities around: Similar to a stock re-rating. Consider a property A - it has a, b, c facilities around. All of a sudden, Metro comes up, or a nice park, or an expressway, or a hotel, or commercials etc. The facilities around the property increase/improve - then the property is re-rated
    5. Construction progress, fit, finish: When a property is launched - it is just an idea on paper, with promises by the builder. It is fraught with risks - does the builder have all approvals, does he have the cash flow, how is the political situation, will the builder run away with my money, will he provide the specs, will he add a tower where he promised green space initially, will he add 'super area' at the end etc etc. As we progress towards RTM, a lot of risks are mitigated (either positively or negatively) i.e. we 'know' what is in front of us. Now if things have come up well - property price will go up (sharply in cases), if not - the price may not shoot up at all
    6. Easy debt availability: Unlike earlier when a property was bought AFTER you had the money, thus limiting the price of the property, with easy, long term debt - it is suddenly easier to get property which you otherwise could not have afforded

    Then there are speculative reasons:
    1. The builder increases the prices just as a feel good factor - to ward off the buyers sentiments due to lack of construction. Brokers feed off that and all of a sudden the prices have increased
    2. Holding power - a lot of investors are powerful - they dont 'allow' prices to fall - viz they will much rather hold and have very few deals than believing in a high volume game.
    3. Builder/Politician/Investor nexus - again similar to 2. - even if the number of resale/direct transactions are not happening - these guys dont let the prices fall
    4. Emotional significance - what is the REAL price of an asset - well apart from the cost of bricks and paint used to make it - it is the emotive value that you hold that drives the price. Indians have this MASSIVE significance to property - a man is valued by the number of properties he owns - not his values and not his job. Fortunately / Un-fortunately - this is again on the rise.
    5. Herd Mentallity / Fashion - its almost a fashion to own / invest in property - meri neighbour ke bete ne to Lotus mein liya hai ji - aapke bete ne??
    6. Massive sales push - these days property propaganda is all around you - it is in you, every few minutes you hear ads in radio, TV, print and social media - from Shahrukh Khan to Rishi Kapoor to Sushmita Sen - everyone is driving this speculative frenzy
    7. Missed the boat mentality - you know I bought LB 3 years back - only paid 20% and got an appreciation of 75% of WHOLE property in 20% payment - MAN - this is he easiest way to make a LOT of money. Lets do this again before we miss the boat

    ---

    I'm sure there are others - but you probably get the picture with this
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  • in india 90% reason black money. rest all reasons combined.

    just take a look at percentage of flats sold at each price band. surely there wud be very few buying at this rates. almost 60 lakhs for 2 bhk in which a family of 4 can't live properly is not right.
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  • also putting 60 lacs now and then imagine what kind of returns one can expect.
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  • Cheap land that to in 10 year installment plan was given to not so established builders. This was the main reason why their launch price was lower.

    However, after the extension episode builders realized that no more easy land will be forthcoming in future. Moreover, these new builders after seeing the response gained in confidence and have realized the demand potential in the region. This has resulted in increase in prices by builders.

    In future flats will be launched on Yamuna expressway. So to make those area attractive prices in Noida should be much higher which will what will happen.
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  • in short, the following nexus is the reason -

    politician+bureaucrat+businessmen+black money+consumer mentality+builder&broker cartel
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  • Builders+Underwriters+Brokers having a strong cartel where as the end user being a diffused mass is weak.

    Look at the condition of large commercial spaces. Even there Black Money and politicians are present; But prices are reasonable because end user is strong and smart
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  • Originally Posted by abc111
    Builders+Underwriters+Brokers having a strong cartel where as the end user being a diffused mass is weak.

    Look at the condition of large commercial spaces. Even there Black Money and politicians are present; But prices are reasonable because end user is strong and smart


    good point. i added it in my list above also.
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  • Originally Posted by akumarggn
    Dear Members,

    trying to understand the reasons - what drives the increase in the BSP of affordable appts along e-way. for example the BSP was 2805 on 20/11/2010 for 12th floor for karnam greens and now it was 4310 (on 20/11/12) for same floor. A increase of 1505 in just 2 years :bab (45):

    Pl let us know the potential reasons for such steep increase.


    Prices have increased drastically all over the NCR in last 2-3 years... Its not only 1 project but all the people who have invested 2-3 years back have really enjoyed the handsome appreciation..

    As you quoted that is the best example Sikka Karnam, I think Sikka is the worst of the lot who have launched its project 3 years back at 2600/sqft and as of date construction status is still around ground or 2nd floor... and resale rates are still above 4000/sqft..

    so sikka buyers are also enjoying good appreciation with little investment...

    Possible Reasons could be:

    1. Builders and Politicians are working together to make the RE sector as hottest sector
    2. Land Issues with villagers
    3. Last lot of the prime/posh location
    4. Future Prospects
    5. Many people buying 2nd, 3rd and 4th home now as they dont know what to do with that money and they need to park it somewhere instead of homes
    6. Mutual Funds and Share Market not doing very good, hence people are losing trust in that market
    7. Many people are buying just to save capital gain tax, and sometimes they are not willing but they are forced to do the investment to save the tax.
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  • LOAN is driving the RE market.

    LOAN limit is a funny thing.

    Committing 20 years of savings when Job itself is not certain is a foolish thing to do.

    Bankers are giving LOAN to builders,brokers,speculators and every TOM,DICK and HARRY.
    And they are going to take a lot of people down with them.

    BANKERS is the most hated species as of now in West.

    And then there is cartel of Builders-financiers and Brokers in each micro-market which decided the prices.
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  • Belive me please
    I am not driving the RE Market.

    But my Mother In-Law Says,

    1, We investors are responsible for driving the RE Price.
    2. Increasing prices of Authorities.
    3. Demand of house......
    4. Increased Salaries.
    5. MNCs
    6. All people looking for future security ,,,,,
    7. RE is the best investment in long Run.
    8. Where else should we invest????/
    9. Last but not least but very very Important ---- Bhend Chaaaaaaal
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  • Originally Posted by planner
    Belive me please
    I am not driving the RE Market.

    But my Mother In-Law Says,

    1, We investors are responsible for driving the RE Price.
    2. Increasing prices of Authorities.
    3. Demand of house......
    4. Increased Salaries.
    5. MNCs
    6. All people looking for future security ,,,,,
    7. RE is the best investment in long Run.
    8. Where else should we invest????/
    9. Last but not least but very very Important ---- Bhend Chaaaaaaal


    I believe Black Money is one of primary reasons real estate market flourishes.
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  • Originally Posted by abc111
    LOAN is driving the RE market.

    LOAN limit is a funny thing.

    Committing 20 years of savings when Job itself is not certain is a foolish thing to do.

    Bankers are giving LOAN to builders,brokers,speculators and every TOM,DICK and HARRY.
    And they are going to take a lot of people down with them.

    BANKERS is the most hated species as of now in West.

    And then there is cartel of Builders-financiers and Brokers in each micro-market which decided the prices.


    I personally respect your Posts.

    Regarding Loan - I have different view.
    My understanding is everyone should take the home loan .....Whoever can afford.

    It is useful / Profitable.

    In case we loose the job we will surrender the loan (I mean sale the house).
    But not taking the home loan thinking that job is npot sure for 20 years is not correct.
    My father had taken the home loan of 50thousands and construction one & half flat on first floor.
    Still Paying only 2100Rs (Small part of the rental income from that flat).

    Means the value of money is decreasing.
    The EMI looking very high today will be really small after some time.
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