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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

    Originally posted by realacres View Post
    Pethkar builders are offering free stamp duty + registration + service tax + VAT for Samrajya, Kothrud. This means a discount of 9% officially. Post nego, I am sure the discounts will be more than 10%.

    Note that this project is in Kothrud, if prices can dip in central areas, then fringes won't be an exception. Infact, other builders are also in nego mode.
    In Baner where builders quote over 5k, it is being sold far below this.

    And this is just the start man, major correction is on its way .

    i hope so...but i feel otherwise and prices would remain unaffordable for long time to come

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by shahkushan View Post
      In most bizarre news I have read in a long time, the MH govt has now proposed 20% reservation for the 'weaker' sections of the society in all 'big' projects.
      Needs to be done. If there are enclaves only for rich people, the poor will storm them one day like in the French revolution.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by amitjj View Post
        Needs to be done. If there are enclaves only for rich people, the poor will storm them one day like in the French revolution.
        Rich won't mind any increase in price but what abt middle class people like us? We'll have to pay more for already unaffordable RE.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by amitjj View Post
          Needs to be done. If there are enclaves only for rich people, the poor will storm them one day like in the French revolution.
          I agree..The rich only enclaves are a recipe for social instability. Anyway all rich people do need lots of different kinds of labor like gardeners, electricians, cooks ..Those people would be able to afford something.. I actually see scenarios like people buying benami property in their servants names...May be not such a good thing..

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            If buyers show little patience ( say 3 months) in writing a cheque, the properties will become affordable. The prices are falling, sales are down, inventory is very high, builders do not have funds,interest rates are high, RBI has directed banks to reduce their exposure in real estate, and the prices are on way to become affordable. I would not be surprised to see a big slump in real estate.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by Jawhar View Post
              If buyers show little patience ( say 3 months) in writing a cheque, the properties will become affordable. The prices are falling, sales are down, inventory is very high, builders do not have funds,interest rates are high, RBI has directed banks to reduce their exposure in real estate, and the prices are on way to become affordable. I would not be surprised to see a big slump in real estate.
              Indian RE industry will not crash in 3 months. If it does, expect a financial tsunami that will render even the lower priced housing unaffordable.
              It takes Rs 1000 per sq ft to build a flat. Land prices are also around Rs 1000. A project needs good 2 years to finish (from land acquisition to completion). So the reasonable price of the flat is Rs 4000 per/sqft.

              Its a risky business and so 100% returns are not too much (and builders naturally will want to make as much profit as they can...they are humans kust like you and me and into the business for making money). Even the clothes that we buy are marked up by more than 100% and building houses is far more difficult and risky than selling clothes.

              Having said all this, I am still lookimg for answers to how RE prices went up 5 folds in last 7 years. What has contributed to such growth. To me, it seems, that construction cost is four to five folds, land cost is five to ten folds, builders finance has become difficult, government taxation has increased tremendously. I am not sure if builders can sell flats for rs 2000 per sqft and still remain profitable in cities like Pune.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Writing on the forum after a long time as had a long trip....

                Interestingly, I met some of the NRIs recently and also some economic experts and just jotting down the view points about Real Estate in India, not sure if you agree.
                All of them seem to have this view of general society getting more and more divided, slums increasing day on day, and Indian cities expanding without real growth and general lack of infrastructure. Also, one of them said a very interesting point - the "value" of real estate in India is valued only by the outright price - on which the volumes are very low - about 2000-3000 per month transaction per city, hence you really don't know the real price of a property. Hence, what we are valuing 1 crore today, with the volumes increasing may just be worth 50 lacs or even 25 lacs - commensurate with the average income of the population then. So, they said the real estate market is kind of hoarded by "vested interests" currently we all know, and once it is out of the clutches, which may take its own time - maybe a decade - market will decide the price which will then be comparable to a global real estate price. And they said - one decade or more , because what the vested interests are doing is using funds of the state (Indian fiscal deficit) to pump this money, and they will keep on doing this until India has a revolution.

                Contrary to this,they said, the rent has much lesser value and much more volume, and are still in the very affordable category to even the middle class, upper middle class and higher class - which is the price decided by the market and consumer. The more and more RE space is added - the rentals will keep affordable for the next 10-20 years.

                So, guys, I feel there is some really good logic there, those waiting for a major correction - I fear it wouldn't happen, and political & vested interests will not let that happen. At the same time - you have rents that are affordable, so they all advised me to do what I have been doing - rent (and build a good corpus - PPF + Equity)until you see good volumes in Sales and which are affordable to common man. THAT IS THE REAL PRICE.
                Last edited by pcpune; January 9 2012, 12:21 AM.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by ManFromPune View Post
                  Indian RE industry will not crash in 3 months. If it does, expect a financial tsunami that will render even the lower priced housing unaffordable.
                  It takes Rs 1000 per sq ft to build a flat. Land prices are also around Rs 1000. A project needs good 2 years to finish (from land acquisition to completion). So the reasonable price of the flat is Rs 4000 per/sqft.

                  Its a risky business and so 100% returns are not too much (and builders naturally will want to make as much profit as they can...they are humans kust like you and me and into the business for making money). Even the clothes that we buy are marked up by more than 100% and building houses is far more difficult and risky than selling clothes.

                  Having said all this, I am still lookimg for answers to how RE prices went up 5 folds in last 7 years. What has contributed to such growth. To me, it seems, that construction cost is four to five folds, land cost is five to ten folds, builders finance has become difficult, government taxation has increased tremendously. I am not sure if builders can sell flats for rs 2000 per sqft and still remain profitable in cities like Pune.
                  yes i agree with MANFROM PUNE....infact i think it should be sold for 8000 or why not 15000..why should the poor builders only get 100% profit they should atleast get 300% for the social service my friend...and look at these rich common men...i dont understand why they have problems shelling out more money for their box like dram house...i dnt understand why they dnt sell themselves off now for the poor builders

                  Sir..construction costs have not increased 5 fold as u stated...also we also need to look in to the ratio of income to EMI which has gone up considerable....and even after paying five fold you get a match box size apartment in some village which is 20 KM away from city....

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Welcome back!

                    Originally posted by pcpune View Post
                    Writing on the forum after a long time as had a long trip....

                    Interestingly, I met some of the NRIs recently and also some economic experts and just jotting down the view points about Real Estate in India, not sure if you agree.
                    All of them seem to have this view of general society getting more and more divided, slums increasing day on day, and Indian cities expanding without real growth and general lack of infrastructure. Also, one of them said a very interesting point - the "value" of real estate in India is valued only by the outright price - on which the volumes are very low - about 2000-3000 per month transaction per city, hence you really don't know the real price of a property. Hence, what we are valuing 1 crore today, with the volumes increasing may just be worth 50 lacs or even 25 lacs - commensurate with the average income of the population then. So, they said the real estate market is kind of hoarded by "vested interests" currently we all know, and once it is out of the clutches, which may take its own time - maybe a decade - market will decide the price which will then be comparable to a global real estate price. And they said - one decade or more , because what the vested interests are doing is using funds of the state (Indian fiscal deficit) to pump this money, and they will keep on doing this until India has a revolution.

                    Contrary to this,they said, the rent has much lesser value and much more volume, and are still in the very affordable category to even the middle class, upper middle class and higher class - which is the price decided by the market and consumer. The more and more RE space is added - the rentals will keep affordable for the next 10-20 years.

                    So, guys, I feel there is some really good logic there, those waiting for a major correction - I fear it wouldn't happen, and political & vested interests will not let that happen. At the same time - you have rents that are affordable, so they all advised me to do what I have been doing - rent (and build a good corpus - PPF + Equity)until you see good volumes in Sales and which are affordable to common man. THAT IS THE REAL PRICE.

                    Welcome back pcp!

                    What you have said is exactly what I am doing. But to a majority of people, waiting for years is almost impossible to do. Therefore they take risks you & I don't.

                    cheers

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      The answer to your question.

                      Originally posted by ManFromPune View Post
                      Indian RE industry will not crash in 3 months. If it does, expect a financial tsunami that will render even the lower priced housing unaffordable.
                      It takes Rs 1000 per sq ft to build a flat. Land prices are also around Rs 1000. A project needs good 2 years to finish (from land acquisition to completion). So the reasonable price of the flat is Rs 4000 per/sqft.

                      Its a risky business and so 100% returns are not too much (and builders naturally will want to make as much profit as they can...they are humans kust like you and me and into the business for making money). Even the clothes that we buy are marked up by more than 100% and building houses is far more difficult and risky than selling clothes.

                      Having said all this, I am still lookimg for answers to how RE prices went up 5 folds in last 7 years. What has contributed to such growth. To me, it seems, that construction cost is four to five folds, land cost is five to ten folds, builders finance has become difficult, government taxation has increased tremendously. I am not sure if builders can sell flats for rs 2000 per sqft and still remain profitable in cities like Pune.

                      The answer to your central question is easily put ... Easy Money Policy!

                      Back in the 1980s and 90s I made a lot of money in stocks. And in those times I thought I was the genius for this success.

                      Turns out it was easy money that pumped up the market. And, having bought at very low prices in the late 80s, I just went along for the ride.Today, I'm actually wiser!

                      Easy money has many garbs in which it comes. Mainly it is the availability of increasingly large loans made out by banks to people based on increasingly larger salaries that goads builders to keep on increasing prices.

                      Thus, a lot of "value" is artificially created and locked into properties by way of this inflation.

                      But when the boomtimes come to an end for the long term, the sh** hits the fan and prices initially go down and also stagnate for good lengths of time (which is also a way to decline real prices).

                      I believe the 30-year "growth" story is coming to an end largely because the main reason for India's "growth" (foreign money which is mainly the generation of highly leveraged assets in the form of debt) is coming to an end for some time to come.

                      With this will come a stagnation of prices (hopefully also a decline in prices) should follow for some time to come.

                      The next boom cycle in RE will take off when all this excess debt is removed from the system, which will not come without a lot of pain!

                      cheers

                      Comment

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