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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

    Something I read from an investment newsletter...

    --
    The property market has always caught the fancy of not just genuine buyers, but also individual investors, financial institutions and banks. But just how safe is property? Quite dangerous if one goes by the evidence. For starters, the current financial crisis had its seeds sown in the collapse of the housing market in the US. What is more, as pointed out by the Economist the five big banking fiascos in the rich world before this latest crisis (Spain in the 1970s, Norway in the 1980s and Sweden, Finland and Japan in the 1990s) had property at their heart.

    Further, the size of the asset class is massive. For instance, the current values of just residential property, even after the bust, would be around 126% of the rich countries' combined GDP in 2010. Because of its sheer size, the moment credit policies loosen, money just flows into this asset to a point where prices reach unjustifiable levels and set the backdrop for a large plunge.

    Property is also risky because of the leverage that this sector involves. For companies, this means borrowing heavily for setting up various projects. Which becomes a huge concern during adverse conditions. The same is the case for individuals as well. Many buyers take on loans worth 90% or more of the value of the property. Thus, during times of crisis, selling the whole house becomes the only option to bring this debt down.

    The big problem really is the speculative tendencies that investors have with respect to this asset. Ideally, simple economics should play out in that higher prices will automatically dampen demand which will compel companies to lower prices. But property (let's say residential houses in this case) is not just bought because a buyer genuinely requires a home. Many a time it is purchased as an investible asset. And in countries like India, nexus of builders with politicians, murky disclosure norms and red tape only heightens the riskiness of this asset. Little wonder then that from a purely investment perspective, property market is fraught with considerable risks.

    --

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Metro home prices take a dip on tighter liquidity

      The vision of owning a house is slowly getting clearer for buyers as residential real estate prices are beginning to see the promised correction on the back of hardening interest rates and poor transaction volumes......

      With sales volumes of residential units for the first two months of this year down by at least 40%, developers are resorting to discounts to lure customers in other top markets where the dip is not reflected in per square feet prices......

      Read complete story here:-

      Metro home prices take a dip on tighter liquidity

      And man, this is just the start, the real fun will start post 31st March 2011.
      If you are happy, you are successful.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        I keep getting calls from builders and brokers about the availability of flats.

        I tell them I need a flat but I am not ready to pay beyond a certain rate for a particular location.
        If they say no the current rate is XXX for this location then fine ...the builder keep it with him.I am happy renting .......

        Guys there is no point in buying at an inflated price.....we burn our pockets and will be going no where........

        The message should be set out clearly.......

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Cancellation Charges

          From last month onwards Mumbai based builders have started taking heavy cancellation charges of INR 3000-4500+/sq ft .

          Due to credit crunch & lack of buyers, builders have stalled the project. This has led to several existing buyers to cancel the bookings. Builders like Lodha are taking atleast 1+ Cr as cancellation charges for their project Lodha Bellissimo .

          So, beware man, tomorrow if Pune chaps do this, one will get badly stuck. We already have e.g here like that of Rama Group.
          If you are happy, you are successful.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            IT Salaries

            This news says Party Is Over for IT employees

            IT bids adieu to big hikes - CNBC-TV18 -

            Who is going to party then...builders???

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by realacres View Post
              From last month onwards Mumbai based builders have started taking heavy cancellation charges of INR 3000-4500+/sq ft .

              Due to credit crunch & lack of buyers, builders have stalled the project. This has led to several existing buyers to cancel the bookings. Builders like Lodha are taking atleast 1+ Cr as cancellation charges for their project Lodha Bellissimo .

              So, beware man, tomorrow if Pune chaps do this, one will get badly stuck. We already have e.g here like that of Rama Group.
              so some folks are paying 1 cr+ and still not getting homes.. it sounds pathetic!

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                RE REgulator Finally Here

                I just got some insider updates from one of my chap in Delhi that Govt is planning to present the RE Regulator Bill in coming monsoon session of parliament. One thing which has been confirmed is to make builders sell on CARPET AREA only.

                So, if the bill gets passed this monsoon session, we will be having a RE regulator by this year end .

                * PS:- This news has created rift between the builders themselves as some are welcoming this move (like Tata Housing, Godrej Props & even to large extent Hiranandani) while builders like DLF, Unitech & Maharashtra's scorpio chaps are opposing it.

                Maybe this time CREDAI, BAI (Builder Asso of India), ASSOCHAM & CII backed RE lobby (forgot the name) will all be sitting on different benches . But personally, I am hopeful that RE regulator will be in place which is good for buyers & professional builders .
                If you are happy, you are successful.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Govt for setting property rates on carpet area

                  Ever felt why as a home buyer should you pay for the staircase, garden and the lobby area when you buy an apartment. If the government has its way, homebuyers may soon get some relief.

                  The government may soon make it mandatory for real estate companies to calculate the price of housing units on the basis of carpet area, as against the current practice of selling on a super built up area basis which means you pay only for the area within the four walls of your apartment and not the surrounding infrastructure.

                  The policy change is part of the government's proposed real estate regulatory bill which is expected to be tabled in the monsoon session of the parliament.

                  Clearly, homebuyers in cities like Mumbai are the worst hit where loading on carpet area is nearly 30-40 per cent.

                  “Confederation of Real Estate Developers' Association of India (CREDAI) is already discussing the issue with our members to adopt this formula but it will make any meaningful difference, only when a formal policy is made. We expect this to be effective in the next 6-8 months,” said Geetambar Anand, vice-president - CREDAI and MD at ATS.

                  The government's idea for proposing such a policy change, is to make housing units cheaper for the consumer, apart from of course, bringing more transparency in property transactions. However, it is unlikely that the move will ease any price burden for the consumers.

                  “As a developer, we sell a unit based on the total cost that we incur, so if we have to base our calculation on carpet area, the per sq ft price will go up,” said Anand.

                  Maharashtra has already made it mandatory for developers to sell apartments on carpet area. But homebuyers are still to benefit from it as developers argue that the local planning authority charge stamp duty and registration on the super built up area thus making it difficutl to pass on the benefit to the consumers.

                  Govt for setting property rates on carpet area - NDTV Profit
                  A fine is a tax for doing wrong and a tax is a fine for doing well.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by lucky_123 View Post
                    However, it is unlikely that the move will ease any price burden for the consumers.

                    “As a developer, we sell a unit based on the total cost that we incur, so if we have to base our calculation on carpet area, the per sq ft price will go up,” said Anand.
                    This is exactly what I thought after reading the title.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      i am hearing direct tax code since 2010, now latest is the code MAY get enforced in 2012

                      so hoping real estate regulator by year end is day dreaming only keeping view of past record of our parliament

                      Originally posted by realacres View Post
                      I just got some insider updates from one of my chap in Delhi that Govt is planning to present the RE Regulator Bill in coming monsoon session of parliament. One thing which has been confirmed is to make builders sell on CARPET AREA only.

                      So, if the bill gets passed this monsoon session, we will be having a RE regulator by this year end .

                      * PS:- This news has created rift between the builders themselves as some are welcoming this move (like Tata Housing, Godrej Props & even to large extent Hiranandani) while builders like DLF, Unitech & Maharashtra's scorpio chaps are opposing it.

                      Maybe this time CREDAI, BAI (Builder Asso of India), ASSOCHAM & CII backed RE lobby (forgot the name) will all be sitting on different benches . But personally, I am hopeful that RE regulator will be in place which is good for buyers & professional builders .

                      Comment

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