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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 FenceSitter View Post
    If politicians fight elections with black money and RE being perfect place to park that ill-gotten wealth, with elections just 1 month away, shouldn't we be seeing lots of unwinding happening?

    Should this or should this not affect the overall RE market?
    I now tend to think that the money required to contest general elections for 2-3 major candidates in a constituency like Pune is a tiny fraction of the money made by the builders and black marketers. this won't have any impact on the prices whatsoever.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      FINANCIAL EXPRESS

      The Competition Commission of India has ordered a fresh probe against realty major DLF for allegedly imposing unfair and unreasonable conditions on apartment buyers at one of its projects in Gurgaon.
      DLF is already under the scanner of the fair trade watchdog in other cases of anti-competitive practices.
      Finding prima facie evidence of violating fair trade norms, the Competition Commission of India (CCI) has now ordered probe into DLF's New Town Heights residential project, (located at Sector 86) in Gurgaon, Haryana.
      The allegations relate to certain anti-competitive clauses in the apartment buyer's agreement.
      According to the Commission, clauses of the agreement referred to in the current matter are identical to ones entered into by DLF in other abuse of dominance cases that are already being probed. The earlier cases are at different stages of investigation by CCI's Director General (DG).
      The latest probe has been ordered against DLF, DLF Home Developers and DLF New Gurgaon Homes Developers as well as on role of persons, who were in-charge of these entities.
      "As such, the Commission is prima facie of the view that the present case requires to be investigated into by the Director General," CCI said in an order dated February 27.
      "Considering the facts of the case, the relevant market in the present case, prima facie, appears to be same as determined in earlier three cases ie the market of provision of services for development of residential apartments in the geographical area of Gurgaon," it noted.
      An individual has alleged that the practices followed by DLF group were abusive of its dominant position since it imposed highly arbitrary, unfair and unreasonable conditions through 'Apartment Buyer's Agreement'.
      It has also been alleged that terms of the agreement were heavily loaded in favour of DLF.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        @Compuwallah - If that all is true then why prices are rising consistently for past few years ?
        Not true atleast in Delhi - Housing rates fall by avg 8% during 2013 in Delhi-NCR | Business Standard

        Rents too are falling.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Thanks southsea. But still that does not explain why prices rose between 2009 to 2012 for 3 continuous years . Bearish predictions were at their peak during this time.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by compuwalah View Post
            Thanks southsea. But still that does not explain why prices rose between 2009 to 2012 for 3 continuous years . Bearish predictions were at their peak during this time.
            Are you sure ?? In 2011-12, there would not be even 10 bears on this board.
            And can you please compute the ARR on your RE investment of last 3-4 years ? Is it beating FD as of today ?

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by ashish18 View Post
              Are you sure ?? In 2011-12, there would not be even 10 bears on this board.
              And can you please compute the ARR on your RE investment of last 3-4 years ? Is it beating FD as of today ?
              I think RE has given good returns from 2009 thru 2012. However, from 2012 thru today, the returns are not so good. Would this mean that one is better off waiting until 2015-16 to invest in RE? I think so.

              I think its very difficult to predict the course of the future as number of parameters that affect the prices are way too many.

              Here is my take:
              Rs 1500 cost of construction per sqft. Yes, one can argue and debate, but this is what I am told based on prices of raw material and labor. This may not come down anytime soon as inflation has deeply entrenched in Indian system. I would say keep adding 10% rise here

              Rs 1500 cost of NA land.

              Rs 500 other costs (bribes, wastage, losses, legal issues, marketing expenses etc)

              Now, it takes 3 years for a project to complete and so assuming 25% each year profit, the cost of the project becomes 6000+ per sqft
              --------------------

              Let me put it differently.
              You have 8 cr and would like to be an honest builder.

              So you purchase land for 4 cr to buy 26,000 sqft land. So you can build 26 flats.
              You spend another 4 cr to build it and it takes you 3 years to complete it.

              Now, how much will you sell it for??? If one is undertaking a high risk business such as building houses, you should get minimum double in 3 years...or why would you even invest it???
              So you will have to sell the entire project for 16 crores. And so the price will go up to 6133 Rs sqft.

              Yes, builders save money by doing pre-launches, JVs, selling parking lots, confusing buyers with salable and carpet area, using landbanks bought 15 years ago and all that...but even if you do this business will all honesty, the prices still cannot go down by much.

              Now the market can crash. Cement, iron companies can sell their wares cheap. Sand and bricks can become cheap if govt allows more of them. Labor can become cheap if food becomes scarce and not charge Rs 500 per day as today. Already built flats can become cheaper if builders run into deep losses and take up selling underwears than building houses...however, I am not sure if that will happen. AT least not anytime soon.

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              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Rs 1500 cost of NA land ....at least not in city limits

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by ashish18 View Post
                  In 2011-12, there would not be even 10 bears on this board.
                  ?
                  First of all are you sure
                  At the same time its not the numbers of bears but the amount of post that counts.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Now that snail storm has hit pune and nearby areas. Builders will increase the prices now. Since no need to go to Kashmir and Switzerland you can enjoy the same temperature and snow in aaple pune itself.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by compuwalah View Post
                      This is based on your opinion but the market trend shows that its not true.
                      Seems you are not looking at RE discounts in Pune thread. In Mumbai, several builders are offering discounts which run as high as 30%.
                      It will be naive if you feel that RE price correction means only when prices on price sheet at builders office reduce. You need to see the price at which agreements are being executed, if any.
                      If you are happy, you are successful.

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