Request to the to-be buyers & consumers - its festival time again for the next 3 months and builders/developers are hoping to clear their inventories at HIGH PRICES - this means the price will remain high for the next year to come - as even if they sell 25% in a project - they recover their costs....

So, my humble advice - to all - PLEASE DONT get sucked in by :

1. New offers such as agreement,car,parking FREE etc
2. New launches and pre-EMI by builers etc
3. Some Festive discount valid for first 20 buyers and for 15 days etc

All of these - AND similar are marketting GIMMICKS - if the BUYERS stay put now - for the next 3 months - they might get the SAME property at 10-20% less than whats available now ...

So, PLEASE DONT GET SUCKED IN --- AND GO AHEAD AND RENT !
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  • I am amazed by the number of launches in the last 2 months in Pune, thats really good news, we want more ready possessions !
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  • Originally Posted by rsatitkar
    Mahesh's point is valid. Infaltion applies to money that you have in your hand. There is a concept called Opportunity Cost. So if you already have Rs 100 then whether you invest that money in a property or invest that money in FDs etc, you can do a comparison and check which one is giving better results to beat 7-8% inflation. So if you get 15% from property in 1 yr with infaltion at 8% then your return is 7% & similarrly if you get 10% from FD with inflation at 8% your return is 2%. This is fine.

    But the case is that you do not have Rs 100 with you. So there can not be a case that to beat inflation this 100 Rs should be 108 after 1 yr. You are borrowing it from bank. So let us say you invested that money in property and got 15% returns in 1 yrs & interest that you are paying is 10% then your return is 5%. To put itin numbers you earned Rs 15 from property & you spend Rs 10 as interest so at the end of 1 yr you have Rs 5 as a profit. No question of inclation here becasue 1 yr back you did not have Rs 100 with you and now also you do not have it as you have pais up the principal. So in short you earned Rs 5 in one year on a borrowed capital of Rs 100. This is how I think RE investment should be looked upon when it is done by taking loan

    Well, I just have to ask you one question, why do people go in for FDs if they know they are earning ZERO % on it per year - inflation adjusted - the reason is simple - the ZERO percent is guaranteed by our financial system - you can also buy in AAA rated bonds which provide 7%, infact most corporates park their money in debt/bonds than in Real Estate.

    The assumption that RE always gives 15% return every year - is definately flawed. And, the money which you leverage - and maybe profit or loss from it - are both affected by inflation since, NO institution gives 100% free credit, they always take in "margins" which is 10-20-30% , in property case, it is 10-20% of agreement value - the bank would keep that amount if you fail to pay up and also take ownershipm of your property.

    Infact in US, the situation in 2007-2008,was something called as bottom down mortgage -

    The apt in Indian terms - say costed 50 lacs in 2005, in 2007 - it costed 25 lacs, now -- if you had paid say 15 lacs downpayment+ 5 lacs interest in 2 years, still the amount paid to the bank is only 20 lacs.

    In this case, its better for you to stop payments, and buy a new similar apartment.Some of the US banks and institutions declared bankruptcy bcos of this.Now,this is a classic case of "bad levereging" in RE, most think it cannot happen in India :).
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  • Ad today by KUL, Kumar builders; on their properties and celebration
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  • What a coincidence!!!

    Originally Posted by pcpune
    Agree with you, but that sweet little home today, is coming at a bitter price ! Our parents & grandparents use to purchase a home in their 40s and 50s, we are doing it in 30s, IT people want to do it in 20s.

    The problem is - if you get you timing wrong - you will be the same middle class man (penny consious ) for all your life - you will DONATE all your earnings to banks/builders....

    And, if in the process, the RE market comes down, you have really had it....

    So, as advised earlier - the TIME now is to WAIT -- specially in Pune, save the money - and try to earn a good 15-20% by investing it wisely - let the RE euphoria end, and then decide.



    Pcpune,

    If you go through many of my earlier posts many months ago, almost all the things you are saying, like

    When your loan amount is 85% of the house you pay around double the price over the loan period (15-20 years) to the builder and bank

    I have said, but people seem to have a hard time understanding or accepting it. Ask the "oldies" in the forum like Real ... :)

    So, we are very much in agreement on the basics of debt, leverage and the general rules of taking on debt like interest-cover, debt cover, free cash flow and so on.

    I believe that the builders had one slim chance in late 2009 around festival time to CUT prices and move inventory. They completely goofed it by actually raising prices (how stupid can you get!). With the next move down in stock and eventually in RE markets, this time around many builders will go into liquidation as they will be buried under a huge amount of illiquid debt locked into empty depreciating buildings. I suspect that this time around the job-loss situation will get much more serious and longer term (as stimulus will not help this time around as massive global deflation will pull down demand sharply in all sectors and many oversold sectors like Auto and RE will see a lot of distressed, repossessed assets come to market at great bargains by the Financial Institutions who lent money against them) and a lot of property bought at high prices and leverage will come to market at distress prices. Simultaneously demand should also drop as people will be chasing higher commodity prices with lower disposable incomes and tight loan market.

    This will be a deflationary depression with demand declines and collapse in most asset classes except bullion and Agriculture. So, cash and cash equivalents (safe fixed income securities) is probably the safe way to ride this out (and also making it a habit to eat Dal Chawal and Curdrice! :) And also watch movies on cheap Cable/DTH rather than pay 300 bucks to get the "experience" of the theaters!

    Let us see.


    cheers
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  • Despite the low interest rates and all the special offers for home buyers from Fannie, Freddie and Ginnie - ppl in the US dont seem keen on buying homes. Last few years the US economy was a "housing economy" what with all the flipping, speculation, re-financing. Looks like ppl there have now stopped viewing houses as ATM machines and reality is dawning. Houses no longer "appreciating", jobs being offshored, rising unemployment - means the world biggest consumer market wont be consuming any more. Which inevitably means that Indian exporters wont have a market to sell into. It would be much better for the whole world if goverments/central banks across the world simply accept that we have had too much of debt and stop their stimulus programs (financing by printing currency or taking on more debt) - and let the economy take its deep dive and then start recovering from there.

    Why America stopped buying homes
    by Felix Salmon - Reuters
    Earlier this month, talking about a housing market unsupported by Uncle Sam’s billions, I said that “the entire housing-finance business in the U.S. would come to a screeching halt. No one could buy, no one could sell, and home values would be entirely hypothetical.” What I didn’t realize was that we were plunging towards that state of affairs even with the vigorous and active involvement of Fannie Mae and Freddie Mac.

    The National Association of Realtors said sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995. This number is the lowest that the NAR has ever reported, and I can see why it spooked the markets, sending 10-year Treasuries breaking through the 2.5% level: we’re seeing less housing market activity now than we were even during the depths of the crisis. According to the NAR, there were 4.94 million existing homes sold in 2007, 4.34 million sold in 2008, and 4.57 million sold in 2009. The latest annualized number in that series, for July 2010, is just 3.37 million. That’s a 26% fall from last year’s rate.

    The number is so low that it looks like a statistical aberration: let’s hope it is. Because if it isn’t, the news is gruesome. It means that despite record-low mortgage rates, people aren’t able to buy houses: essentially all the benefit from those low rates is going to people who already own their homes and are taking the opportunity to refinance.

    The news also means that there’s a big gap between buyers and sellers: the market isn’t clearing. Sellers are convinced that their homes are worth lots of money, or will rise in price if they just hold out a bit longer; buyers are happily renting, waiting for prices to come down. And entrepreneurial types, whom one would expect to arbitrage the two by buying houses with super-cheap mortgages and renting them out at a profit, don’t seem to have found those opportunities yet.

    Houses are rarely a liquid asset; they were, briefly, during the housing boom, but now they’re more illiquid than ever. America is a country where two generations of homeowners have learned to consider their houses an asset; they’re rapidly learning that at times like these, a house can look much more like a liability. (And refinancing your mortgage is just liability management.) The enormous repercussions of that change in mindset are only just beginning to be felt.
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  • More and more ads this saturday and sunday - infact I saw Treasure Park ad - this society is 5 years old, and yet the builder - Amit Enterprises has not handed over the Conveyance - the people are struggling to form a Society.
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  • Originally Posted by pcpune
    More and more ads this saturday and sunday - infact I saw Treasure Park ad - this society is 5 years old, and yet the builder - Amit Enterprises has not handed over the Conveyance - the people are struggling to form a Society.


    pcpune - which ads are you talking about?

    Murtaza
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  • Well, the ones I saw near MG road for 9 Treasure Park, Santnagar, Amit Enterprises - have you seen this one.

    Same with Pride Panorama - 6 year old society - builder enchroacjed I think the club house area and built 4 bhk apts, and selling now on SB road.

    These guys are trying the move the inventory at high prices now.
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  • Originally Posted by pcpune
    Well, the ones I saw near MG road for 9 Treasure Park, Santnagar, Amit Enterprises - have you seen this one.

    Same with Pride Panorama - 6 year old society - builder enchroacjed I think the club house area and built 4 bhk apts, and selling now on SB road.

    These guys are trying the move the inventory at high prices now.

    It is high time to create the Real Estate Regulatory Authority by the government or else these crook and shameless builders will keep doing all these manipulations.
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  • Originally Posted by pnb_2k
    It is high time to create the Real Estate Regulatory Authority by the government or else these crook and shameless builders will keep doing all these manipulations.


    Builders can afford to be crook due to political backings.

    But what has happened to educated(?) middle-class/ITG. Why they aren't troubling their brains questioning rates, agreement-terms, quality, amenities, delays before surrendering money?
    They're queuing to be sucked in as if there is NO Tomorrow :D
    God save them if ghosts of USA and Japan comes to haunt India in near future.
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  • Well, to most of them, they say - they wont be able to buy anything bcos all the builders are crooks, but they dont really economics, any industry with HUGE mal-practices cannot run for long.
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  • Will the property rates fall after Diwali or during diwali 2010? :bab (6):
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  • No, they will go up

    Koolhomes, Kondhwa (earlier they called it NIBM) - rates hiked by 400 Rs from 3800 to 4200 psft :bab (36):
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  • Originally Posted by dreamhouse
    Will the property rates fall after Diwali or during diwali 2010? :bab (6):


    It will depend on how many ITGs, pune-builders are able to suck :D

    Rates are proportional to: How may desperate ITGs ready to be sucked in RE / How much RE available in Pune.
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  • Originally Posted by hitmady
    It will depend on how many ITGs, pune-builders are able to suck :D

    Rates are proportional to: How may desperate ITGs ready to be sucked in RE / How much RE available in Pune.


    Are you ITG yourself :bab (35):?
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