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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    RE gone up everywhere

    Hello Members,

    While I like and wish and think that the prices will come down a lot, one
    thing perplexes me, can anybody answer that.

    We are thinking that Indian, particularly Pune builders are holding onto
    the prices irrationally and they have jacked it up to irrational level
    themselves in first place.

    However, RE going up irrationally (200% to 300%) has happened world over
    in last 4 years. This cannot be done by a cartel (there cannot be such
    a wide spread cartel that is). It probably means it went up due to
    the economic principles (demand-supply-affordability-stability).

    So why blame Pune builders only (or why hold them responsible).

    Even in US, the prices have not gone down too much (please check R2I
    forum blog discussing RE prices in bay area). The prices do need to come
    down, but how and when god only knows.

    I am just seeking answers from members who have better data, analysis or
    thoughts on this.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      I don’t think Economic Principles is correct in the first place better to use artificial economic principle.

      If it would have followed economic principles than why the BUST..!!!! and that too to the CRAZY extent that we have seen.

      The reason being artificial demand….fueled excessively by Greed from all players.

      1. Builders who built and increased the prices….
      2. Banks who gave loans on easy terms since they made relatively lower risk returns (Since Prices of RE went on going up.. no one was defaulting.. and the ones that did not like the loan sold of the houses and paid off the loans and kept the remaining profit)
      3. Common man who seeing the prices multiplying like crazy did not want to miss the BUS. And so more and more people lured by making a quick buck and leading a lavish life started to get into RE even if they could not afford it… (Banks were willing to give them loans cause Banks want to make money as well).

      Add to this the following.
      • More greed by the Bankers who wanted to earn more and more money to own fleets of Audis, Porches etc.… after all GREED is the driver right..
      • Builders who again wanted to make huge amounts of money.. so they kept on increasing the prices..after all they too like to have a fleet of Beemers and Mercs in their garages.
      • More and More people who wanted to make quick money and atleast own one Beemer or Merc.
      This was an artificial demand so I would not say it was artificial economic principle that was in place.

      The problem now is… if the prices were up due to higher Demand…. The builders are not reducing the prices… when the demand is lower… THAT IS THE PROBLEM WITH BUILDERS…
      Using ECONOMY as the BHRAMA Aastra to increase prices in times of BOOM and giving it a cold shoulder and being too reluctant in reducing prices in times of BUST.



      SORRY for the large post but please consider the below example
      • Rice, Jowar, Dal etc. when hoarded in Gowdowns to increase scarcity and so to increase prices and then selling these commodities is regarded as BLACKMARKETING and is an offence.
      • Holding Flats not selling them and claiming no supply so prices will not reduce and infact increase prices and then sell…. What should that be called?
      VK
      Last edited by veeemkay; August 26 2009, 01:40 PM.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        As per the market analyst CNBC:

        After recent fall of real estate price, people started showing some interest and some of them was buying as the Real Estate price came to some Realty. But as soon as the Greedy Builder see some money they are again Increased the price for Higher Margin. This leads to fall in demand again.
        Either land or AIR and FOOD. Choice is yours.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by rahulbhagwat View Post
          Hello Members,

          While I like and wish and think that the prices will come down a lot, one
          thing perplexes me, can anybody answer that.

          We are thinking that Indian, particularly Pune builders are holding onto
          the prices irrationally and they have jacked it up to irrational level
          themselves in first place.

          However, RE going up irrationally (200% to 300%) has happened world over
          in last 4 years. This cannot be done by a cartel (there cannot be such
          a wide spread cartel that is). It probably means it went up due to
          the economic principles (demand-supply-affordability-stability).

          So why blame Pune builders only (or why hold them responsible).

          Even in US, the prices have not gone down too much (please check R2I
          forum blog discussing RE prices in bay area). The prices do need to come
          down, but how and when god only knows.

          I am just seeking answers from members who have better data, analysis or
          thoughts on this.
          It is true that prices rose everywhere; but look at the following facts:-

          Japan RE prices are 30 year low,

          Dubai RE prices have fallen by 60%+. Now, Qatar is offering Dubai assistance & is giving soft loans,

          In US, prices have fallen more than 50%, in some areas of Las Vegas, prices have dipped by over 70% from it's peak yet isn't finding any buyers,

          In NYC, RE prices dipped, so did the rentals, both in residential as well as commercial areas. Have a look at Staten Islands & Queens (many Indians stay here);

          In UK the prices have dipped. HSBC housing arm, HSBC Direct (if I am not wrong) exited the RE segment.

          In terms of economics; the avg. personal per capita income in New Jersey is $40,500 as per 2003 census. Compared to the earnings, the RE prices have not zipped the way they did in Pune or India as a whole.

          Why the sub-prime crisis at first place?

          The banks lent heavily to even those people who income was not sufficient to buy a house. People took huge loan based on the theory that they would continue to get increment of atleast 12-15%/annum for next 10 years with ease, similar to what IT guys in India did; ICICI leading the pack.

          Due to down turn, banks put attachment on these houses reduced the prices & kept on sale, yet no one was buying eventually making several banks go bankrupt. Same would have happened here if PSU banks wouldn't have existed!!

          In US, there is social security which we don't have in India which aggravates the problem here further. You need to fend yourself, no Govt. help buddy, nor any 401(k). 5.5 million people's unemployment benefits from US Govt. is expiring in Dec 09. The fiscal deficit is heading towards $ 2 trn in coming year which will go to $20 trillion by 2019. China heading downwards & it's inflated books means no further purchase of US treasury bonds by China, which makes US economy more worrisome (Japan already being in coma). The Fed is simply printing more & more notes, similar to what RBI is doing to some extent. This puts pressure on inflation making adverse impact on the already hit economy. If it continues, the situation would be like WW2 scenario of Japan where people used to carry sackful of yens to get a loaf of bread.

          Have a look at this news:-

          http://www.nationalpost.com/news/story.html?id=1929632

          India's fiscal deficit is heading towards 7%, poor monsoons means another loss of 0.5-1% in GDP growth rate. Last but not the least, forget about RE of other nations; prices have fallen by 40-55% in Mumbai, Delhi-NCR, Bangalore, Chennai & Hyderabad. So, RE prices dipped across metros & tier-1/2 cities except for Pune where we are seeing gradual price reduction than a bust like other cities. The basic reason is that the Pune RE is dominated not by corporate/professional builders but Pawar & Co. of NCP. Nowhere you would find entire realty sector driven by politicians which makes Pune case special. The good news though remain that state elections are approaching & NCP is now feeling heat of economic recession & loss in Lok sabha polls; as I came to know that they are finding it hard to raise funds. The only good news for them (& bad for us) is rising sugar prices.
          Lavasa has stopped taking new bookings, Nanded City internal problems are pending etc etc. Several builders have started FD schemes indicating severe cash crunch. Simply observe the pace of work on construction site near you & you will see the true picture.

          No money, No RE. It is as simple as that.

          Btw, well said VK. Liked that.
          Last edited by realacres; August 26 2009, 02:05 PM. Reason: typo.
          If you are happy, you are successful.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by realacres View Post
            It is true that prices rose everywhere; but look at the following facts:-

            Japan RE prices are 30 year low,

            Dubai RE prices have fallen by 60%+. Now, Qatar is offering Dubai assistance & is giving soft loans,

            In US, prices have fallen more than 50%, in some areas of Las Vegas, prices have dipped by over 70% from it's peak yet isn't finding any buyers,
            Though I agree with you on most points comparing India or Pune with developed countries like US or Japan is not correct. For that metter comparing Pune with Mumbai is also not correct as mumbai is more developed than Pune. We have huge population and better home is everyone's need. people are migrating to pune from all over the place for job and need house to stay. I think people who are buying now are first time buyer and investors are away from RE.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Dont rule out the black money buying as well...In India what I think politician & builder use their black money in RE to make it white & govt official & businessman also invest their black money in RE buying ...so in nutshell in india Black money dominate in RE & for a person investing black money in RE it doesn't matter rate is up by 200-300 per sq ft....

              In NCR almost 50% RE buying was due to black money only...

              Originally posted by mahesh pune View Post
              Though I agree with you on most points comparing India or Pune with developed countries like US or Japan is not correct. For that metter comparing Pune with Mumbai is also not correct as mumbai is more developed than Pune. We have huge population and better home is everyone's need. people are migrating to pune from all over the place for job and need house to stay. I think people who are buying now are first time buyer and investors are away from RE.
              Cheers,
              -Ashish

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Thats why

                Vk & mahesh u r right on spot.

                Thats why RE is the holy cow to change white to black and vice versa.
                And its totally unregulated, a good source of unofficial funding to all diverse activities including elections. So none wants to change the equation.

                Black mkt & investors have been hand in hand to pump the RE to astro levels. Bldrs had to also use the huge margins somewhere.

                But the scenario is changing slowly.

                Property Headlines
                White Deals Gain Momentum In The Property Market
                Good news for all those who are looking to buy property. The obnoxious black money, or the unaccounted cash component, for buying a flat is slowly fading out with buyers. Across all Indian metros, one can purchase more and more properties through the accounted money or white, thanks to the changed profile of the buyers and the government’s base price policy. According to industry experts, today as much as 80% of the buyers in top cities such as Mumbai, New Delhi NCR, Bangalore, Chennai and Ahmedabad are salaried, whereas businessmen and speculative investors dominated the market when the real estate boom was at its pinnacle. This growing market of the salaried class has forced sellers to accept white money in a market where demand still trails supply.
                18 Aug 2009 indianrealtynews.com


                So, actual buyers will finally come to mkt , demand real prices and drive the mkt.
                The Blacks & investors can sell to each other, and continue to profit.

                PS: VK the eco principle seems to elude Bldrs, who shamelessly hoard peoples money to buy more properties, launch new schemes, instead of completing the ongoing projects.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  To put it in perspective ...

                  Realacres,

                  It is important to reduce these terms to real numbers so people get a feel of it ...

                  I hear a lot of rates being quoted in Pune, say Rs.4000 per SFt. And a reduction from 4k to Rs.3200 seems to be a BIG reduction.

                  To put it in perspective, California is already seeing a median decline of nearly 70%. That would put the Rs.4000 price down to Rs.1200 per SFt. So, a 1200 SFt home at 4k priced at roughly 48 lakhs would have come down to 14.40 lakhs.

                  So, Rahul, it is not true to say that world over prices have not come down. Not only that. Prices are slated to come down at least another 20% to 30% from these levels before they bottom out.

                  So, it would be safe to assume that final bottoms in most US and EU countries hit badly would be priced at the Rs.9.60 lakh mark down from 48 lakh mark - an incredible 38.40 lakh loss on a 48 lakh house.

                  So, our Indian homes have quite a way to go before the bottom is in. It will take another few months for the builders to start giving up. When that happens you will see the rush to the exit by builders and you will also see how quickly prices come down if you are a buyer with cash!

                  Patience.

                  cheers

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Wiseman,

                    Do you think that story of one country can be applied as it is in other country as well????

                    Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments, so what I see price what we see can at the max go down further 20% not more than that...Still, in india so, many ppls are ready with cash waiting for another 10% drop & once that happen you will see ppls will buy RE again, like it was a year ago...

                    Many ppls here say that prices will go down, buy not give any time frame,what you think that price can go down till ridiculous level like 1200 sq ft anywhere in pune(under PMC or PCMC limit)...if yes then please give us a time frame as well....coz nobody can wait for lifelong to get those dream rate like 1200 rs /sq ft..

                    Originally posted by wiseman View Post
                    Realacres,

                    It is important to reduce these terms to real numbers so people get a feel of it ...

                    I hear a lot of rates being quoted in Pune, say Rs.4000 per SFt. And a reduction from 4k to Rs.3200 seems to be a BIG reduction.

                    To put it in perspective, California is already seeing a median decline of nearly 70%. That would put the Rs.4000 price down to Rs.1200 per SFt. So, a 1200 SFt home at 4k priced at roughly 48 lakhs would have come down to 14.40 lakhs.

                    So, Rahul, it is not true to say that world over prices have not come down. Not only that. Prices are slated to come down at least another 20% to 30% from these levels before they bottom out.

                    So, it would be safe to assume that final bottoms in most US and EU countries hit badly would be priced at the Rs.9.60 lakh mark down from 48 lakh mark - an incredible 38.40 lakh loss on a 48 lakh house.

                    So, our Indian homes have quite a way to go before the bottom is in. It will take another few months for the builders to start giving up. When that happens you will see the rush to the exit by builders and you will also see how quickly prices come down if you are a buyer with cash!

                    Patience.

                    cheers
                    Cheers,
                    -Ashish

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by ash7979 View Post
                      Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments

                      I second that

                      RE is very complex in India than in States. Here we have no transparency in deals. Agreement is always builder-sided. They have top-notch property lawyers with them. And even govt is with them
                      Eat, Pray and Love

                      Comment

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