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- Originally Posted by andyserdCome on people! You fear a crash of the property market in Indias booming economy. A crash or "downward correction" is prone to come but probably not within the next few years.
Just look at the predictions from 2004 and compare them with the actual figures for this year!
Talk about crash... ridiculous.
Don't be over smart my dear friend. If you have invested money in India then its time to sell off. Else you may regret your self. I think you are aware of the US HOUSING MARKET. 13 yrs Low. Correct ?CommentQuote0Flag
- Nice reply chin2
Thanks for unbiased analysis...CommentQuote0Flag
- Thank you everyone...
I am glad to see finally some sensible people coming and participating in a healthy debate.
I am not rigid on my viewpoints and believe that forums like this are made to tell you the actual.
Anyways, I would still like to correct my point. When I say property crash, I am not saying that prices have touched the sea level but I refer to the drop in sales figures.
I think most of the replies in various forums are nothing but copied and pasted stuff from sites like Wikipedia. People need to understand that Wikipedia is not an updated source and should not be trusted.
And as far as stats and figures are concerned, plz tell me which industry can look for a promising future based upon what happened in 2004. It is very easy to copy and paste stuff but as the old saying goes “nakal ke liye bhi akal chahiye” (you need brains even to copy:) )CommentQuote0Flag
- Property prices have already been taken to the roof now correction is inevitable @Prat and Andyserd I work with Top Stock brokerage of this country as a manager , One of our clients based in Aberdeen Hong Kong who is a leading financial institution .They sold there entire Property Stocks Holding in November 07 , They say they were very very negative on not real estate but Interest rates going forward in India which will have a serious effect on real estate and economy
I dont blame any one for being bullish or bearish because it over shoots both ways now people are stuck badly in expensive Pre-launches ,commercial properties, falling rentals unable to pay Borrowed loans Still after listing to there misery some people will not expect a fall same is the case when Mkts bottoms out people dont buy ,This is the classic example of difference between an average Joe And big financial institution
@ Prat i would appreciate you having 20 years experience in real estate Market but tell me whom should we listen to The fund manager at this Institution buys and sells share in 30 minutes which are probably more than all the money u would have made in 20 years in your real estate business, Then countries top bankers Mr KV kamath of ICICI and Deepak Parek of HDFC say that correction of 20 -30 % is expected in real estate ,and then we have others like you and Andyserd Who say fall is not word in real estate dictionary .
Please pick up news papers go to real estate section then again get a two month, three month or even a four month old paper and my Friends you can see the same listing unable to sell weather Delhi or NCR , Now after this has been done check the impact of a rise of 300
BPS of interest rate hike from any loan calculator 44986 is the installment for 50 lacks loan for 20 years and the way inflation is with already one hike at 12 % this installments becomes 55054
I have worked for 2 years with Capital one bank USA ,and my friends from all my experience i am convinced that there is a same set of people funds banks which move the prices of asset classes up or down ,they moved the stocks markets up ,and down now they moved the property markets up ,coming down now ,they are now moving metals gold silver and crude and then those guys expecting crude to go to 250 $ will be in the shoes Of the property speculators and stock market traders of Today
I dont mean to offend any body but the problem is no one in trade or some one having interests in that Field likes to listen anything negative
But the truth is in front of you look at any real estate sector stocks it has not fallen it has been butchered ,Unitech results are as bad as one expected and other will be even worst
I have no interest in property markets and came to this site when i was searching for interest rate scenario i have 3 flats and one house in Delhi and i dont intend to sell or buy them weather the market falls or goes up ,But i will analyze what the situation is Higher interest rates Higher inflation == lower markets
Death and crash are Two certainties of Life and markets ,and only fools deny both and i am not one of those foolsCommentQuote0Flag
- SP Tulsian of sptulsian.com sees real estate prices softening by about 30-40%. "Volumes have fallen. I don't think even 20% of CY07 volumes have been met. So, once players start releasing property into the market, prices cannot be held beyond a point. Maybe during Diwali or Dassera, which is around September or October, prices will correct further by about 15-20%. If they keep pace with the volumes that they have targeted, prices could soften by about 30-40%. Ultimately, the consensus is that there would be a fall."CommentQuote0Flag
- Kick em where it hurts
This is a very correct observation .. "We have a product.. We know what the price could be (or atleast have some idea) .. but.. where is the buyer??" .. builders have become greedy and developed a lot of charbi .. fuelled by speculators / PE investors and the general euphoria triggered by the rising (now falling) stock markets .. they have become blind towards the plight of their real customers ... have ditched the real people who make the 4 walls their home .. now its time for the real customers to give them a kick where it hurts ...
The builders feel that there are a lot of people with crores of rupees lying around for investment .. one important fact they seem to be missing out is that these money bags aren't living on the streets .. they would already have their own homes .. why would they put the money in overpriceed property
here is a story Suresh Krishna, chairman of Sundaram Fasteners, which is part of the TVS Group, tells about his father, T.S. Krishna.
His father had told him this anecdote during the 1960s. The TVS Group, like other traders in Southern India, imported diesel engines during the 1940s. The
engines were imported from London for about Rs. 1,100 ($220 at the prevailing exchange rate) and were sold in the local market at a 25% to 30% markup for about Rs. 1,400 ($280).
But during the mid-1940s, supply was disrupted because of World War II, and this led to an extreme shortage of engines. Anyone who had an import license could easily sell the engines for Rs. 5,000 ($1,000) -- many customers were
willing to pay such prices. At one level, you could call this market pricing since the demand-supply situation was so skewed. It was a seller's market. But, at another level, you could also view this as a defection of sorts because the sellers were exploiting the wartime shortage to force buyers to pay a higher price.
Krishna decided that the TVS Group would not follow that approach. Despite the shortage and the prevailing high prices, he insisted on charging the normal markup of 25% and kept selling engines for Rs. 1,400 throughout the war. At that time, the local business community thought he was either naïve or downright daft for missing out on the opportunity to make as much money as possible.
When the war ended, however, the traders who had profiteered from the shortage went out of business one after another; today no one remembers those companies. But the TVS Group survived, and it continues to be
recognized as a valuable company.
In today's terms, we might say that TVS had better corporate governance, and its strategy paid off because it delivered long-term shareholder value. Back in 1945, though, it was just one decent man trying to do the right thing for his customers. Krishna refused to defect just because the timing was
against his customers. The consequence is that even today, TVS is regarded as a name to be trusted. If the company lists its shares for sale, people subscribe to them. If products carry the TVS brand, people buy them. Krishna probably did not stop to think about the "brand value" of his behavior; still, his
actions helped build the TVS brand.Originally Posted by chin2_2muchHi Friends...
I guess the root cause of the problem lies in the fact that "We have a product.. We know what the price could be (or atleast have some idea) .. but.. where is the buyer??
The "property crash" being discussed in the topic, I believe has already started to come and infact is being witnessed since last 1 - 1.5 yrs.
Fixed commercial rate of returns or the renowned term assured return, has now come down to 8 - 9 %. The statement is a phrase until we add that the norm only 1 - 1.5 yrs back was somewhere around 15 - 16%. The fact holds good for both retail and office complexes. The reason is simple... We have a product... we have its price.. but we do not have takers.
The same stands good for Residential sector as well. My CEO in one of award ceremony quoted "It is very easy to construct houses.. but very difficult to make them homes". Empty towers, waiting for residents is a perfect example for this. The reason is the same.
Residential will still find its way out of the cyclone but my real worries are for the commercial ship. Despite of retail growing at blah blah % and demand for office increasing like increase in gasoline prices, I feel developers will find tough times ahead.
But still I feel that one should not wait to buy / invest in the property. I follow and suggest a simple rule to my investors, “whenever you think you can afford a particular property, go ahead”, but of course that doesn’t mean that one should not do a proper scrutiny of the market and available options. A carefully made investment will always fetch good results.CommentQuote0Flag
- way 2 go
- Folks .. talk about 20-30 % correction is kind of moot .. over the last year or so .. each time there has ben talk abt a correction .. builders have gone ahead and increased the priced incrementally .. hence the real 20-30% correction point is actually near half of what the current prices are ..
Now many will say that is unreasonable blah blah etc .. however as customers we need to come together and choke the prices else we won't get anywhere and end up taking huge home loans andl liabilities and the bulders will still be laughing all the way to the bankOriginally Posted by arin_12SP Tulsian of sptulsian.com sees real estate prices softening by about 30-40%. "Volumes have fallen. I don't think even 20% of CY07 volumes have been met. So, once players start releasing property into the market, prices cannot be held beyond a point. Maybe during Diwali or Dassera, which is around September or October, prices will correct further by about 15-20%. If they keep pace with the volumes that they have targeted, prices could soften by about 30-40%. Ultimately, the consensus is that there would be a fall."CommentQuote0Flag
- Hello Everyone
Hello Friends, i read MR CHIN2 2Much's thread on this discussion, and must add that it was a really impressive addition to the thread, even The additions of Rubin and Pinnacle were good as well, I am sorry to add but Mr PRAT speaks and shows off like typical Delhi guy, so i excuse him, no offense man, i am sure u did'nt mean to offend anyone, i don't either.
I have been waiting to buy a house in the Delhi, and was prefering to stay in Dwarka as i had many friends staying there, and used to commute a lot towards that part of Delhi, but to my surprise i find most of the socities empty or, with buyers doubtful about the legality of the societies made up in Dwarka, i don,t know much about properties, but atleast i understand the simple Maths of Higher EMI's lead to fewer buyers, and with those fewer buyers, the prices of the property should not stay where they are (i would say above the roof), this is a best way to discuss, as if one goes to buy a property in any locality, there are few novice property delaers, who always try to misguide public by saying rates that are appreciating every month by atleast a couple of lakhs irrespective of the inflation status, rising cost of living etc, so one wonders if there is actually a way to find out if these rates actually exist, are there people buying and selling at those rates, or is it just a word that travels across the mouth of many speakers, Please people your feedbacks are very valuable, and are helpful for ppl like us in deciding our course of action with our hard earned money, regards to all,
- Todays Economic Times, on front page, has reported that real estate trascations are down by 90% and price 15-20%.
I have been searching property in Noida/Greater Noida for quite some time now. I feel, at current level I do not get my money's worth. So I am holding my decision to purchase.
During this period I have found that most completed projects have 10-15% occupancy. It has been like this for 6-9 months, if not for 1-year. In very few completed project, I found 20-30% occupancy.
I visited a project by one of the big name in real estate industry 6-7 months ago. This project was already delayed for an year. I was told that they have begin giving possession now. Searching through property sites, I found that, they are yet to give possession. Also, in resale, many were selling their apartment, for 20-30% less than builders advertised price.
I strongly feel that Indian real estate prices are much much over priced and does not offer good value of any body's hard earned money.CommentQuote0Flag
- Hello all. No offence to anyone intended in this post. Apologies in advance in case you take offence :)
I have another posting under "Real Estate Prices in Chennai crashing".
Don't want to repeat this but its always good to study history of the markets - longer the period, better your understanding!
Prat12 - whats your "understanding" of the market that is greater than the sum of all our understanding? Does you memory go back say, 20-30 years? Or is it only restricted to this very short totally artificial, easy-credit driven boom period of last 6 years? Only arrogant (and foolish) people claim expertise in any markets. I personally know the Chairman of Sobha for last 8 years (my luck). Even he is not as cock-sure as you about this market! The wise ones study it carefully, take profits quickly, do not borrow/extend themselves too much and run like hell when crashes begin. You mentioned that land prices only go up. In our grandfather's days, yes. But in those days they only went up gradually, assimilating value over time. Not like this 100s of % in few years in locations only fit for pigs to live in (apologies to pigs!). And just in case you didn't know, the most prime property on MG Road in Bangalore (which was the ONLY boom IT city in 1995) crashed from around Rs.12,500 per SFt at the peak in 1995 to around Rs.2,500 at the bottom in 1998. At that time you couldn't find a buyer for love or money. MG Road regained the original peak only in early-2005, a FULL 10 YEARS LATER. Whitefield (in those days outside Bangalore) crashed from 60 lakhs to 10 lakhs an acre in the same period and no buyers at the bottom. So, don't be so cock-sure about land prices not coming down ever - what goes up too fast WILL come down even faster! :). Like our stock market in recent months. And I'm NOT BULLSHITTING here. Go back and check.
Remember, like in the US and other countries in the last 1-2 years, people who have the most to lose (like builders, bankers and realtors) are in TOTAL DENIAL about the coming crash (they are clueless about it). Stock prices are a very reliable indicator of whats going to happen in the real market in next 6-9 months. DLF, Sobha, etc are down over 70% from their peak ONLY 6 months ago. Ansal over 80%. IMAGINE only 6 short months! Check out RE company Balance Sheets. They have bought land at highest bubble prices, built ridiculous contraptions in the shortest possible time with material and labor at highest input costs - and all of these with loans whose interest rates are shooting up and will remain high for some time to come. They are running out of cash rapidly and they are not telling brokers about their desperation - which makes brokers think that alls well :)
Prat12, even if someone is fool enough to buy now (and there are some of those around believing what builders and brokers say), where are they getting loans (leave 7.5%, even for 12%?). I'm a 23-year veteran of the IT business with a fat salary as well as being a 22-year veteran of the stock markets having seen 4 bear markets. Can you point me to a Bank which will give me a loan without making much of a fuss today? I'm having a hard time doing so! Even if you know a lot about the current RE market, how about knowing a little more about customer psychology. Simple question. Will YOU buy something today as easily as you reccomend to others? I doubt it.
I repeat. RE boom of 90s very similar to current boom - only, this one is much bigger. Both triggered by India's "shining" export-led boom as well as hot-FII-money seeking better returns boosting up our Foreign Exchange reserves and giving us a false sense of being an economic superpower. Last week, both China and India had a HUGE negative rating and this hot-money is flowing out rapidly ($6 Billion in last 2 weeks). Today's eco-times talks of upto 90% fall in RE volumes in some places. Coming months will show us HOW WEAK our economy really is/was!!! Brace yourselves and don't do foolish things like taking on big loans and buying RE now (or big cars for that matter). After all your builder is not guaranteeing you a buy-back in case things go wrong!!!
Study the US market. This is ALWAYS the way RE markets fall - unlike Stock Markets. FIRST volumes crash - as people continue to be in denial and hold back sales for a better price - Home buying/selling has vastly different psychology from Stock buying/selling. During this time builders continue to build (hoping for a quick bottom at 15% lower) as demand crashes and supply/demand ratio takes off. SECOND prices start to decline by around 10% - 20% range as the weaker builders start the sell-offs as they can no longer hold out (and deperate banks start recalling loans on property not sold for months together). Economic conditions worsen and people losing salaries and jobs also start early distress sales (these are the luckier ones). A false bottom of 20% is touted by builders as LIFETIME OPPORTUNITY TO BUY. Believe it at your own peril. THIRD when economic crisis worsens and panic sets in, the REAL decline in prices start. This could bring down prices in boom areas by as much as 50% to 75%. I have seen it before in much smaller Bear Markets. This Bear is the BIG ONE which happens once in 60-70 years - which is why we don't remember it since those who lived then are mostly gone with their wisdom! And is expected to last till 2010 - 2012 at least (effects could go on for a decade).
Megha said, waiting for the bottom is stupidity. I Agree! Only I request all of you to wait till the sellers are BEGGING you to take property off their hands AT ANY PRICE/TERMS. That is the bottom +/- 10% !!!
Once again, this post is only for people to learn from my experience and no offence intended :)
- I think property prices(specially residential) are in for a huge correction in the weeks & months to come, all over India. The reasons are many, but most importantly, (1) Incomes rising not as much as the greediness of builder/politicians who keep on jacking up prices, (2) Investors not being able to hold their properties for long will flood the markets with their properties....(Unlocking of locked supplies)(3) No real infrastructure improvement except in some pockets of the metros...(3)There is a limit to everything....how long will anything continue to defy gravity...(4) When everyone will be in his/her own house, who will rent...(5) Tight money supply conditions...CommentQuote0Flag
- Great !!!
Great survey... People should understand this logic. Becos of the greddiness every Builder will say No for Value Crashing. Today this Builder Ride in Audi/Merc Car, and we are still in M800. Always in debt from Banker.
And our future is also not secure. Hope people will realise this soon.CommentQuote0Flag
Really appricate you analysis
- Just wanted to correct you on one thing ...Originally Posted by YuvarajIndian Real Estate-The Rabbit Hole Goes All The Way Down
Sell Anantraj, Ganesh Housing, Ansal trio, Bombay Dyeing, Century, DLF, HDIL, Mahindra Life, Omaxe, Parsvnath, Purvankara, Sobha and Unitech
Indian real estate stocks have corrected sharply since January 2008, and most stocks are now trading at deep discounts to NAVs. This scenario is no surprise, given the severe headwinds that the sector is facing at present. Anecdotal evidence points to a slowdown in Indian real estate. Developers are totally responsible for the current state of affairs-for three years they kept buying agricultural land at astronomical prices making cost of acquisition unthinkable for Individual investors. Across most of North India average selling rates range from Rs 8000 to Rs 15000 per sq feet, and Commercial Rentals at Rs 200 to Rs 300 per sq feet. Money raised through IPOs has been used to build land bank, while REITs were planned for parceling off developed projects. With the Singapore REIT market all but collapsing, both IPO and REIT route is effectively closed. On top of that Indian stocks listed on the UK AIM market have under-performed so signifcantly that even that route of
funding is closed now such stalwarts like Hirco and Ishaan Real Estate. Finally, and most importantly, lending rates especially for Real Estate could rise so substantially over the next 6 months that it will put most apartments out of reach of middle class financing. The Result will be distress sale of land assets held by concerns such as Ansal trio, MGF Emaar and so on, which are poorly capitalised entities competing in a already soft market. Stocks from Real Estate sector were a fad, and fad's do not last Discounts to NAV do not necessarily imply a buying opportunity -regional peers have historically traded below their NAVs, and the current situation is not restricted to India. Look at the Hong Kong market for clues as to where Indian property stocks may bottom out. In Hong Kong discount to NAVs have historically increased in times of weak property prices, with maximum discounts for developers ranging between ~34-77%. Discount to NAV for Indian realty stocks
are likely to increase further, and persist until demand recovers. Why so? A severe liquidity crunch has emerged, with channel checks indicating that developers have raised bridge finance at 18 to 25 per cent interest rates until October. The expectation is that the lull in activity during the monsoon months will end with the festive season in October 2008. Given the interest rate scenario, there is a higher than 50 per cent probability that the recovery in sales volume will be weaker than expected. This would lead to under-cutting on product prices by the developers facing a capital crunch. Asset sales will be done hence at distress levels and equity injections at much lower entry points. In six months time most stocks from DLF, Unitech, Ansal and Anantraj should begin trading at liquidation valuations. This is how the three scenarios work out: A. Liquidation case scenario: -The company cannot raise any capital and shuts down business. -The company shuts down
business and sells of land at current estimated market price and pays of the debt and outstanding land costs. B.Pessimistic case scenario: -The company cannot raise any capital and constructs using available cash and equivalents. -Development margins fall to 30 per cent, implying a further 20 per cent correction in Real Estate prices. -The company re-invests from the construction and after two years shuts down business and sells off land at current depressed market prices and pays off the outstanding land costs and debt. C. Two year slow down scenario: -A two year slowdown will comprise volumes dropping to 50 per cent of what has been seen in FY08 accompanied by a 20 per cent correction in prices and rent across all markets. -Further 6-12 month delay in new project launches. This is over and above the already envisaged 6 to 18 month delay in new project launches depending upon how far out the project is. SEZ property-Uncertainty Reigns Politically sensitive SEZs
in Sonepat, Rai, Manesar, Gurgaon and Noida may not be set up at all given the political uncertainties and closeness to the General Elections approaching possibly in December 2008. Give a "Zero" value to all concerns which have put money into SEZ development.
Very well put and I agree with you entirely, only differing with you on one count. You mentioned a fall of 20% in prices. Thats too low!!!
In the last crash 1995-'98 the decline even in prime locations was closer to 75-80%. And there was no Global Crisis in sight! This time the Global Crisis will be so severe that the 75% to 80% decline in bubbly markets is practically guranteed.