Dear Forum Members, following post is only my opinion!! Feel free to comment.

Well, every knowledgeable person in this forum is trying his / her best to explain the current situation in Pune real estate market. They are trying to explain the past and predict the future. Few of them have their thought based on immense knowledge due to the experience in real estate market, whereas others who has expertise in finance and market conditions of India. Few are victims of the boom, whereas few are just shrewd guys explaining and predicting things based on analytical skills they have ……

Don’t forget there are some marketing guys among us too.

But there are large numbers of people who are planning to buy their first home soon…. May be This Diwali… This post is for these people. Please read through this and if you feel that it makes sense then WAIT till next year. Here is what I have learned in last few years -


    In last two year infrastructure is not significantly improved around suburbs of Pune, but the rates have. Water problem, Transportation, DP roads, MSEB Meters issues everything has remained as it is since last two years. The only thing improved in Existing Main Roads and May be at some locations - BRT. Both have their own reasons why they are being implemented so rapidly.
    In last 1 year (after the slowdown hit), the whole focus of the builder community was to sell what is available in their inventory. The 50% builders were able to sell their 75-80% inventory (Good Projects Only) (Don’t get surprised - there was large number of people who do not read this forum or don’t know it exists, but who needed homes urgently and took advantages of stable or reduced prices). These builders have at least recovered their cost if not found profits.
    Bigger projects, such as townships and high end projects were flops. It seems that exception is Nanded City. But not sure about it. Whatever they had launched, most of it, they were able to sell with 2500 rate. But there are buildings they have not yet launched in Phase 1 (I think 2BHK ones) and then Phase 2 is still there. Secondly, most of these projects haven’t even taken off which means minimum loss to builders (may be only cost of land if purchased, cost of plan sanctioning, foundation if planted and Marketing).
    Various surveys have been made prior to slowdown (and after the slowdown and in recent months) regarding requirement of homes in Pune or all over India. These surveys are showing the numbers that have made builders more excited during the boom time and now more hopeful in not so recent slowdown. Most of us don’t know these surveys and its data. But what I can tell you that, builders know more than most of us in this forum about it and future prospects of real estate. If Indian Market is going to improve in future they would be the first to know it. One of the surveys made public recently was the need to “Budget housing Projects”.
    Elections are going to add another dimension to Maharashtra real estate market. Change or not change in “Sarkar” will change the RE market drastically.
    IT industry which was the root cause of the real estate boom has itself suffered enormously due to American market turmoil. But real estate market of Pune had already moved away from IT. Indian businesses, industries and services improved in last couple of years in Retail, Auto, Oil, Steel, Pharma, Exports, Food, Medical etc. including government income improved which made real estate market to flourish without IT. Real estate has moved on. One example is where Ford, Toyota and GM suffered due to American slowdown; domestic auto market was relatively unharmed. Who is buying all these cars? People who can afford to buy cars can certainly afford to buy a home right?
    Basically Income has improved in Cities. not same thing for Rural. There are a large number of people traveling towards cities now. Ask, your daily Cab driver, where is he from and if he has a home yet in Pune or not…
    And finally, global market is in recovery mode.
    Unfortunately, most of the members in this forum are IT people or related. If you don’t believe me, let’s take a poll!!

    Let’s come back to Real Estate. Here are some categories of the Projects that I would like to make based on current situation of real estate market.





        Builders with good Projects – While we are talking about these projects in length in this forum for last one year, builders were able to sell around 80% of the inventory they had. Naturally, they have increased the rates as they now know that these projects are popular ones or they don’t have major inventory left.
        Builders with flop Projects – Well, they have not increased the rates of their project. Mithila, Bloomfield, Amonara, Swiss County to name a few. Most of them would be available for negotiations too. But as I said earlier, most of these projects haven’t even taken off which means minimum loss to builders.
        Builders who are yet to launch new projects – Type 1. There are few builders who do not have existing inventory or is already recovered cost and but have some new projects they want to launch.
        Builders who are yet to launch new projects – Type 2. There are few builders who are stills struggling with their existing inventory and but to add to their misery they still have some new projects they want to launch. They are in immense pressure to sell their existing inventory. You will start seeing ads in paper from these builders. Mostly these ads will be for the projects which are know since last one or two years.
        Builders who are in loss - Well, I don’t know yet how to identify these builders but as far as I can tell, only small scale builders would be in this category for now. They will have less than 3 projects at their hand at this time.

        Now, let’s talk about price hike – I think its driven by an organization or an association

        a. Builders with good Projects – Of course they have done it. They were successful to sell most of their flats. Now they can increase their prices the way they want.
        b. Builders with flop Projects – No increase in price seen here.Most of them would be available for negotiations too.
        c. Builders who are yet to launch new projects – Type 1 – Of course, they are waiting for Diwali or even New Years Eve. They don’t really bother about current price hike and discounts. But, if price increases for existing projects, launching rate of new projects will go up too.
        d. Builders who are yet to launch new projects – Type 2 – They will be OK to increase the price now, and will provide huge discount in Diwali. People who don’t closely follow this will fall for it. And flats would be sold at the same rate that of 6 months back. Builders will come close to closing their inventory. Secondly, they would be launching new projects with attractive rates in Diwali, hoping that people will rush to buy. Increasing cash at their hand.
        e. Builders who are in loss – These guys are screwed anyways. Whether to increase the price or decrease it a lot. Builders association would be forcing these builders to keep quite too.

        Now, why not to buy a House in this Diwali?

        You will be buying a house from one of these explained categories. I can not predict that your decision will be right or wrong, but I can certainly say that you would end up paying the amount that you could have paid in last one year or in worst case you would end up paying much more.

        But if you wait till next year, you could end up making a resale purchase or a making better decision just by analyzing market situation at that time. If real estate is still booming, your jobs conditions might have already improved too (salaries, promotions etc.) and you would be able to afford the flats anyways.

        For Projects that will be launched between 2009 OCT to 2010 April, the launching rate will be around 2100 to 2550. This will look attractive to most of us, because of the recent hike in prices of existing projects. And we will end up paying hell lot more than these projects and their locations deserves. But again, you can buy flats in these new projects in 2010 as well. So why hurry in this Diwali?
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  • Originally Posted by wiseman
    Space,

    I too am in IT for the last nearly 25 years! :D No kidding!!!

    As you might have guessed, I am what one calls a "senior" IT guy (whatever that means).

    And you are right. Outsourcing is here to stay. But there are a couple of small problems ... especially with salaries being hiked as though its an God-given entitlement every year irrespective of circumstances ...

    1. Soon the cheap destination becomes costly without an equivalent improvement in efficiency, thereby making the overall cost increase in real terms, and

    2. The kind of deflation and work disappearing in the US (and the West in general, which still gives you most of the work you do) the pie is getting smaller, while the hungry masses who can do some syntax is getting larger in numbers - this leads to competition which puts pressure on prices (and customers who are also in serious financial situation are constrained to increase the pressure to unimaginable levels)

    Today, its a dicey tightrope walk amongst the CEOs and managements of IT companies - even the kind you are in. I know because I have many of my colleagues in leadership positions in these very same companies and talk to them regularly, and they tell me things they don't normally say in public! :D

    So, keep fingers crossed. And if my predictions of the next leg down comes even half true, that hike may not be so sure as there will be a downturn in absolute volumes and some serious bench and serious price pressures.

    cheers


    Well, your opinion is much more valuable because I am just a fresher when I compare my experience with yours. I will keep my fingers crossed and hope that IT stays and delivers.
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  • From the posts in this forum it is obvious that there is great demand for living space in Pune. It is possible that the prices will not go down further but remain at the same level for years to come. It is clear though that the prices are not affordable for majority of people living in Pune.
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  • Agree with you 100% wiseman. Coming quarter will see many central banks from developed countries sqeeze liquidity. Australia has already increased their prime lending rate & this would be followed by another one soon. This would hamper the FIIs which are giving false picture in India.

    RBI policy will be disclosed tomorrow. Lets see what happens.

    At the end of the day, steroids based growth will be short lived. As the effect of steroids will end, the next quarter results for most of the companies won't be that attractive. Problem is there is lot's & lot's of thin air money in the market.
    Originally Posted by ttt43
    From the posts in this forum it is obvious that there is great demand for living space in Pune. It is possible that the prices will not go down further but remain at the same level for years to come. It is clear though that the prices are not affordable for majority of people living in Pune.

    *>>Prices will not go down;
    *>>Prices are not affordable

    Man, isn't this an oxymoron statement?
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  • Originally Posted by ttt43
    there is great demand for living space in Pune.


    Originally Posted by ttt43
    It is clear though that the prices are not affordable for majority of people living in Pune.


    If one tries and analyses the Demand Curve, it is not a straight line in case of RE. The Demand is Huge at lower rates and as the rates increase the Demand falls exponentially. This is due to the high difference in worth of the rich and middle class. So higher rates might mean a little more to spend for the rich but it means 2 years of extra work for the Middle class.

    There a lot of articles these days mentioning that due to increase in RE prices in the last 3 months buyers are again not buying. Again proof of the non linear nature of the Demand curve.

    Not sure how many Builders understand these dynamics.

    VK
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  • Originally Posted by veeemkay
    There a lot of articles these days mentioning that due to increase in RE prices in the last 3 months buyers are again not buying. Again proof of the non linear nature of the Demand curve.

    Not sure how many Builders understand these dynamics.

    VK

    Right said VK. Here are 2 news for the same:-

    ]http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=5520&cat_id=8

    ]http://economictimes.indiatimes.com/markets/real-estate/news-/Home-buyers-stay-off-as-builders-hike-rates/articleshow/5129329.cms
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  • Originally Posted by ttt43
    From the posts in this forum it is obvious that there is great demand for living space in Pune. It is possible that the prices will not go down further but remain at the same level for years to come. It is clear though that the prices are not affordable for majority of people living in Pune.



    RE is taken on Use basis, you need one house to live in so why the demand will increase ??
    Are more jobs being created?
    When every company is trying to reduce headcount by increasing efficiency and no new hiring spree?
    From where will new consumers will come ... consider both Rental and sale.
    The one who is buying is not staying in tent or camp RIGHT ??
    So when they have house, by buying they will move to new house leaving the vacancies ....
    So if the buying keeps happening rentals will come down....
    I am not talking about Auto industry in PCMC its IT hiring which in turn creates more jobs in field.
    Other then that what are the growth engines where you have thousands of families moving to Pune??
    And had that been the case Property prices in Banglore may have been at average rate of 4k to 10k
    But all know that currently Banglore is cheaper then Pune.
    So whats the logic ?
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  • Originally Posted by s_rathore
    But all know that currently Banglore is cheaper then Pune.


    Very True... One can find a flat in good areas in Bangalore for 3200 while in Pune the same type of area will be rated at 4500.

    So are you saying that the rates in Pune are artificial and that it can come down. If so when approximately do you think it can come down. 2010 or 2011?
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  • you yourself have given the reply :)
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  • Originally Posted by Navina
    Very True... One can find a flat in good areas in Bangalore for 3200 while in Pune the same type of area will be rated at 4500.

    So are you saying that the rates in Pune are artificial and that it can come down. If so when approximately do you think it can come down. 2010 or 2011?


    Today afternoon I have visited Ajmera Infinity in an Electronics City, Bangalore. Rates are going for 2250 Sq ft for all 19 floors. Also all 19 floors are completed. Where we will get same rate in Wakad for 19 storey building?
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  • Originally Posted by Navina
    Very True... One can find a flat in good areas in Bangalore for 3200 while in Pune the same type of area will be rated at 4500.

    So are you saying that the rates in Pune are artificial and that it can come down. If so when approximately do you think it can come down. 2010 or 2011?


    The comparison is not justified.
    How far aret the good places in Bangalore from City Center, Malls, Railway Station, etc where u get 3200?
    Now try to find the same for Pune where u get 3200/-?

    They will be atleast 50% less closer in Pune compare to Bangalore.
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  • ^I agree that distance between different places in terms of kilometer in Bangalore is more than Pune as Blore is a much bigger city than Pune. But Bangalore has many areas which have developed in self sufficient way and hence do not any longer need proximity to the MG road for entertainment or shopping etc. There are major plans to construct flyovers to reduce travelling time and for better connectivity but I dont know how long that will take. Areas like Banashankari, JP Nagar, Marathalli, kasturi nagar and many other areas along old madras road have developed in a big way and we can easily get rate of 3200 here. I heard even the Bannerghatta road where we used to stay earlier is emerging as a sought after residential location now. In 2001 when we were staying there, there used to be nothing beyond Bilakahalli after the IIM. The flats in Blore are also very spacious. On the average the flats are 1200 to 1300 for 2bhk, something which is diminishing in Pune.
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  • Thanks wiseman, MY replies in line in Bold

    Originally Posted by wiseman
    Techocrat and Space,

    Imagine you have 10 years work experience. Imagine that the fair market salary for you, even in bad times, is Rs.50k pm (say 40k net of taxes) and a monthly spend of 20k. Imagine you have a saving of 25L (how? a rich uncle?:D). Then, if you can put down 20L for a home and have an EMI of around 15k (and also that home prices are at a real bargain at that time so that, going forward into the future you will only see a higher value for your home), then you are in a good position to buy the house!!!

    If this was the case I would not be asking questions here :p

    This gives you a 5L cash cushion for any eventualities. It keeps your EMI at 37.5% of normal take home salary and 30% of gross! When you spend 15k+20k, you still have 5k extra cash for small onetime expenses or emergencies. When you have a little extra cash, you can always pre-pay and reduce your burden as you go along!

    Also, with around 10 years experience, you are probably in the 30-35 age bracket and can easily get that 20 year loan as you have good earning potential till 55. And with gradually increasing salaries, your EMI burden will soon cease to be a burden (probably your fuel bill will become bigger than that, with the coming oil crisis!:D)

    Most importantly, you have the peace-of-mind that you get when you can count the cash in the bank after all monthly expenses!!!

    cheers


    So basically you mean to say with current prices & state of IT, I can only imagine to buy a property & not really buy one :(

    Originally Posted by realacres

    At the end of the day, steroids based growth will be short lived. As the effect of steroids will end, the next quarter results for most of the companies won't be that attractive. Problem is there is lot's & lot's of thin air money in the market.

    *>>Prices will not go down;
    *>>Prices are not affordable

    Man, isn't this an oxymoron statement?


    Yes I too am of similar opinion but while I didnt expect prices to come down I did expect Builders to offer more value(Semi furnished like fans lights, POP, Club house etc etc) for same price which is still not happening(baring a few cases)

    IMHO currently at almost any salary, unless you have a big amount to give from pocket(i.e. like 30-50%) its really difficult to buy a house.
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  • guys 1 thing which brings the cost up here is the demand from bombay. there is a lot of investor money in pune real estate from bby which bglore does not have that and will probably never have.
    Originally Posted by shirishtiwari01
    The comparison is not justified.
    How far aret the good places in Bangalore from City Center, Malls, Railway Station, etc where u get 3200?
    Now try to find the same for Pune where u get 3200/-?

    They will be atleast 50% less closer in Pune compare to Bangalore.
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  • When I saw many of the floor plans of bangalore, I don't know how the superbuildup area is calculated here.. It is at least 30% (or in fact more) than the carpet area. Also, they don't consider terrace as 'half' area.

    So, overall it costs around 15% more there..

    Calculation is simple:
    Pune: (considering 25% more than carpet, which is general)
    Consider 700sqft carpet and 200sqft terrace, Then buildup 800. (700+200/2)
    Then, superbuildup 1000sqft.

    Bangalore: (considering atleasr 30% more than carpet)
    So, 700+200=900*1.3 = 1170sqft.

    Hence, 17% more.
    Always, consider this fact while comparing between Bangalore and Pune.

    Yes, bangalore dosen't have bigger terraces, so you may add some to carpet area..
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  • You might have to imagine for a while longer!

    Originally Posted by Technocrat
    Thanks wiseman, MY replies in line in Bold

    So basically you mean to say with current prices & state of IT, I can only imagine to buy a property & not really buy one :(

    Yes I too am of similar opinion but while I didnt expect prices to come down I did expect Builders to offer more value(Semi furnished like fans lights, POP, Club house etc etc) for same price which is still not happening(baring a few cases)

    IMHO currently at almost any salary, unless you have a big amount to give from pocket(i.e. like 30-50%) its really difficult to buy a house.



    Technocrat,

    Obviously there is a disconnect between me (and maybe people like Real) who have bought property in a different era (1980s maybe?) and most people buying property in the 2000s.

    In those days, the pressure to buy RE in the 20s was not so high. Our father's generation typically bought homes only in their 40s and above and therefore, our aspiring to buy in the 40s gave us a lot of leeway to accumulate savings, while keeping prices growng steadily, but slowly!

    Today, I can't comprehend the panic-stricken mentality of people wanting to buy RE as though its going to run out tomorrow!!!

    As you might have noticed, mothing goes up only one way. And if things go far out away from the mean, they not only revert back to the mean but also swing the other way for a while. These are the most opportune moments to buy big assets like RE.

    Ultimately, there are a couple of rules which always apply in the long run.

    1. Buying within your means is the only way to ensure you are getting something at a reasonable price and will see growth in that asset - besides having peace of mind.

    2. No big assets can forever be priced at levels that are mostly unaffordable to a large proportion of the population - they will correct till it becomes affordable, or businesses holding prices at thos levels will go bust!

    There is absolutely no shame in renting and I know of many people who have rented most of their lives and have built up sizeable fortunes - to such an extent that buying more than one house fully in cash was not a stretch for them finally.

    The one thing I will not do under any circumstance is to buy beyond my capability to pay and live a life of just-making-ends-meet for a good part of my life, especially the years when I can really get out, see places and experience things!!!

    If I have to imagine a little longer while I build up a cash balance and pay down for a decent house when prices are much more reasonable, its rwo birds with one stone!

    cheers
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