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Indian real estate – boom or a bubble?

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Indian real estate – boom or a bubble?

Last updated: January 13 2009
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  • #11

    #11

    Re : Indian real estate – boom or a bubble?

    Indian real estate is on boom, not on bubble. All major cities along with emerging cities are developing.

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    • #12

      #12

      Re : Indian real estate – boom or a bubble?

      This is not bubble

      In real estate you will never get loss on the invested property, by the time passing your property value will increase and you will definitly get some profit on your invested property. Of course at this time this is rising phase but never thinks that this is bubble.

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      • #13

        #13

        Re : Indian real estate – boom or a bubble?

        it's bouble but can be boom

        Originally posted by vardaan View Post
        Indian real estate – boom or a bubble?

        Property prices in India are rising fast, and as the tech boom spreads across the country, and more Indians buy homes,with the growing economy at the rate faster than 8% a year, real estate is attracting more investors, even from overseas

        Though India is one of the major countries in Asia with an improving market there are concerns about an asset-price bubble raising questions as to whether the speculation of the past year and a half, which has driven land prices up by 30% to 100% and real estate stocks up as much as 2,000%, may be coming to an end.

        Its the boom or bubble question in Indian real estate that has been a cause of worry lately.

        no doubht investers has great chance to invest in real estate in India & Indian Real Estate is booming but due to builders & Govt. policies it turns into bouble. there r no laws & no any Ethics upon price so it goes high rapidly.basicaly a large number of users r lower middle class, or middle class, their pockets not allow to buy his own house & so more. if govt. don't take any further step this booming is become complete boubling.

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        • #14

          #14

          Re : Indian real estate – boom or a bubble?

          Definately,Real estate will be on boom level because the price are increasing day by day. The culture also going on changing process.

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          • #15

            #15

            Re : Indian real estate – boom or a bubble?

            Since, the realty sector in India continues to be so hard to navigate, property players doubt the possibilities to get involved here. Adding to woes of foreign investors is a compulsion to obtain necessary approval from the RBI prior to purchasing real estate in India. Along with being an entirely new construction, the location involved should fetch an area more than 50,000 square feet, or 4,650 square meters.

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            • #16

              #16

              Re : Indian real estate – boom or a bubble?

              Indian market can still go higer if

              If the government steps in and formulates certain policies towards this sector, the prices can still go higher.
              If proper infrastrucutre support is provided for old and upcomming cities, people will not mind paying a premium.
              Look at developed markets like Dubai. Prices are much higher than what is in Delhi NCR because government is backing up with more than adequate infrastructure.

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              • #17

                #17

                Re : Indian real estate – boom or a bubble?

                Thank you for sharing useful information.We want you to come up with more information so that will be helpful to everyone.

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                • #18

                  #18

                  Re : Indian real estate – boom or a bubble?

                  Indian real estate sector has been sluggish in most of the part of the countries since late '07. Though the people at large did not feel the heat of it at early stage but it's clearly visible and the heat of the same is being felt by one and all today.


                  Is it the impact of sub prime crisis in U.S.A / global recession alone or there are other factors too? No, some of the other factors which adversely affected the Indian real estate industry are Decreased GDP, Increased inflation, Increase in home loan rates, FDI outflow, Liquidity crunch, job uncertainness, High interest rates in bank deposit and Negative mind set of people at large.



                  Though all of the above said factors have adversely affected the real estate industry to a large extent but what I feel that beside the above said factors the Indian real estate industry has been overheated since last 4 years. If one looks at the price appreciation, be it residential or commercial, it has been to the tune of almost 300% to 400% in most of the urban cities.



                  If we consider the robust growth in the Indian economy in the last 4 years, then the growth in the real estate sector should have been at the rate of 30% maximum and the appreciation in property prices should have been to the tune of 120% or at the upper side to 150%. Therefore I am of firm opinion that the Indian real estate sector was overheated and a correction was due which has happened.



                  The Indian economy has been on a fast track growth after the globolisation of our country since 2000 – 01 and it has been seen that once the economy growth of a country starts, it remains for around next 25 years. Therefore the Indian real estate sector will continue to grow at least for the next 15 years. The slow down of real estate sector at present is not recession but correction. Once again it will bounce back after 1 – 2 years.


                  Indianil

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                  • #19

                    #19

                    Re : Indian real estate – boom or a bubble?

                    Real estate bubble?

                    Originally posted by Indianil View Post
                    Indian real estate sector has been sluggish in most of the part of the countries since late '07. Though the people at large did not feel the heat of it at early stage but it's clearly visible and the heat of the same is being felt by one and all today.


                    Is it the impact of sub prime crisis in U.S.A / global recession alone or there are other factors too? No, some of the other factors which adversely affected the Indian real estate industry are Decreased GDP, Increased inflation, Increase in home loan rates, FDI outflow, Liquidity crunch, job uncertainness, High interest rates in bank deposit and Negative mind set of people at large.



                    Though all of the above said factors have adversely affected the real estate industry to a large extent but what I feel that beside the above said factors the Indian real estate industry has been overheated since last 4 years. If one looks at the price appreciation, be it residential or commercial, it has been to the tune of almost 300% to 400% in most of the urban cities.



                    If we consider the robust growth in the Indian economy in the last 4 years, then the growth in the real estate sector should have been at the rate of 30% maximum and the appreciation in property prices should have been to the tune of 120% or at the upper side to 150%. Therefore I am of firm opinion that the Indian real estate sector was overheated and a correction was due which has happened.



                    The Indian economy has been on a fast track growth after the globolisation of our country since 2000 – 01 and it has been seen that once the economy growth of a country starts, it remains for around next 25 years. Therefore the Indian real estate sector will continue to grow at least for the next 15 years. The slow down of real estate sector at present is not recession but correction. Once again it will bounce back after 1 – 2 years.


                    Indianil
                    Dear indianil,

                    I wish you and all other members, guests of the forum, a very happy and prosperous New Year 2009.
                    Your views are interesting to read. As long as the RE in India is in the hands of black money, politicians and biggies patronising the field, any downtrend seen now or in the coming 6 to 12 months, can be a temporary phase, which will become normal ( normal here, I mean is - increase of about atleast 15 to 20% plus every year ). What is happening outside India, cannot be expected to happen here. That is why, I say, no investment made now or any time, is a bad invesment in the long run, seen in a longer, say, 5 year or more perspective. One, will sure, end up with a minimum average return of atleast 12% per annum cumulative in the long run, though not higher.

                    ks2071746

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                    • #20

                      #20

                      Re : Indian real estate – boom or a bubble?

                      The real estate segment from Americas to Europe is going under. The real estate prices in USA are down 18% from last year. In some key markets where the home prices went up just like India (upward of 40%/year) such as Las Vegas, San Francisco, Miami, the prices have actually gone down by 30%+. The trend is still pointing downward even when the mortgage rates are at 4.5%. Comparing these, the rates in India are still considerably higher. Spain has worst real estate bubble in Europe and its property prices still did not rise as fast as India’s. Spanish real estate is expected to start stabilizing (not recovering) in 12 to 18 months.
                      Before you invest in real estate, consider the following facts:
                      1.Job Losses: Job losses are still happening and will only accelerate in 2009 with projected 1 million job losses/month only in United States. Indian industries such as IT, BPO, Textile are still 60%+ dependant on USA.
                      2.Europe is still struggling with several of its large economies (France, Germany, Italy, UK etc) have negative growth projections for 2009. If you think it’s not bad, know it that they had positive growth in 2008. They think it will be bad for them; we are dependent on them, what makes us deferent?
                      3.Japan went into slowdown in 1990s and till date it hasn’t gotten out of it. It’s the second largest economy in the world. Toyota (one of the world’s strongest companies) has posted first loss in 71 years.
                      4.Economists are not simply calling it a recession but a depression. Do a brief read up on what happened during depression of 1930s and 1970s. It’s not pretty.
                      5.If you are investing in real estate for purely investment purposes and not to live, put yourself in the shoes of real estate speculators in Las Vegas and Miami. See if you can sit on the house seeing its value depreciate when you could have invested in more productive assets.
                      6.We had a brief primer in real estate fall in Mumbai in the 1990s. Learn from the people who got burnt.
                      7.Fall in Commodity prices including the price of Crude Oil (Major and probably the only source of income in Gulf countries) is having an adverse impact on the boom that was there. So there would be job losses in Gulf countries as well. Remember OPEC has been meeting consistently and talking about reducing the oil production.
                      8.China with its vast foreign exchange reserve is still not able to maintain its growth rate. Its projected growth rate for 2009 is 6%. Some time back Chinese officials claimed that growth rate below 8% is devastating for China’s internal peace. This is even after the fact China has offered the stimulus package worth $586 billion (compare that to India’s $4 Billion).
                      9.Satyam-Maytag Deal: Remember how wholeheartedly investors dumped the Satyam stock? They wouldn’t have down that if they saw value in the real estate segment.
                      10.Remittances from NRIs: Remittance from NRIs would certainly be down because NRIs just don’t print money. They still have to have a job and a sense of security to keep sending money home. If I was keeping $15,000 with me before, I would be at least saving $10,000 + cost of living for 6 months before sending a dime to invest in speculative real estate.

                      I am consistently getting emails from real estate companies/agents/dealers saying that now is time to buy and we have reached the bottom. My response to them is rest of the world’s economist with 100+ years of financial data analyzed are still not in a position to call the bottom.

                      The 3 biggest buyers of real estate in India were:
                      1.Well to do professionals such as IT people, BPO people, people with higher salaries (above 10-15 lacks/year) specifically employees of multinationals.
                      2.Business owners and people with black money investing in the real estate to hide the income.
                      3.NRIs who intend to either live (some day) in India and NRIs who thought that real estate in India would earn them more returns than in their countries of residence.

                      The banks which were lending to buy the real estate are suffering themselves from the tightened

                      The banks which were lending for the real estate purchase are themselves suffering from the credit crunch. The banks will soon be too reluctant to lend (even though the interest rates are down, where is the money to lend?) and will be lot stricter in their lending.

                      Now coming back to the 3 types of borrowers:
                      1.IT/BPO/MNC employees: Their jobs are on the line in 2009/2010. Those with job are not guaranteed that job when the sheet hit the fan in 2009/2010. Even if they have cash at hand, they will be reluctant to make the move. The laid off people will find it difficult to make payments and houses will be repossessed. These people once burnt, will be very slow to come back to real estate market.
                      2.Business owners will find their lines of credit affected due to credit crunch and/or their sales down. How long will they just sit on the property if the value keeps dropping? They still need to capital to keep the business running.
                      3.NRIs: NRIs have already lost 20% of their investment even if the house prices didn’t drop. This is because Indian Rupee has dropped 20% compared to US$. Remember, NRIs realize their gains in their country of residence. It’s worst for NRIs than the other 2 groups combined.

                      If you think about it, worst has not even started yet. You will see it start when builders who borrowed from the banks are not able to make good on their payments, large number of houses and businesses will be repossessed, builders will start selling under the cost just to get rid of the inventory and speculative investors will rid themselves of the un-needed properties.
                      I am not trying to discourage everyone from the real estate. I am one of the people still holding the house and few other properties in India. I was lucky to offload a few of them in August but I am still left holding the bag on few others. The only people who should be buying right now are those who can justify rent vs. buy equation and have guarantee of source of income. If you do not understand that equation, read up on it.

                      Real Estate is an investment of life time, don’t fall for the hype.

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