One persons loss is another persons gain.

Sellers:
If you have any property for sale, sell it now. Dont be greedy. Else you are in for a big loss.

Buyers:
Dont buy property now. Wait for 6 months. If things are going down, wait another 6 months. The property rates are going to crash.

Here are the reasons:
1.) Builder/Politician nexus has caused the hype.
2.) The prices of real estate has increased by 3-5 times.
3.) Supply is more than demand for such premium prices properties.
4.) Salaries/Cost of material/Labour has not increased in the same ratio.
5.) There has hardly any improvement in infrastructure.
6.) No value added. Same traffic jams and trash once you get outside the community.
7.) Interest rates have gone up. Monthly instalments are becoming impossible for even profesionals. Not everyone is IT-Project leader.
8.) Stockmarkets have collapsed. DLF stocks has gone down significantly.
9.) There is liquidity crunch. FIIs have taken the money out to compensate for their losses in US due to sub-prime crisis.
10.) If you buy a property now, be prepared to stay in it for 5-10 years. You will be lucky if you can find a tenant who can pay 75% of your monthly mortgage. So you will loose 25% every month on interest costs and even more if the property prices go further down!
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  • Originally Posted by arin_12
    Indian RE estate in over hyped and priced by the Broker.agent and media. And many stupid people followed the wave and bought at the Pick time 2007-2008.
    The NRI's should please stay away buying home/house in place like Bangalore/Hyd/Chennai with this over hyped priced. We Indian know that you have earned money in $$$. Dont screw up more and show the JALWA of you $$$.

    Suppose the house prices shoot up again in 2009-10 will those who followed your advice not turn stupid! Real estate is for owning and investing not for speculating! So your advice to the NRIs seems to be a vested interest of yours where in you are wanting prices to fall even though they havent especially in Chennai and Bangalore. Ofcourse NRIs can be foolish to follow your advice and I might read another post in a year or two from today telling the converse of what you wrote mentioning "Stupid NRIs who did not buy in 2009".
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  • Dear friend,

    Welcome to the forum. Please do contribute to the benefit of the members and guests.

    ks2071746
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  • speculative investment has dried up

    We witnessed lot of speculative investments /PE invt/fdi in indian re space which was the prime reason for artificially jacking up prices to the sky and out of reach of the middle class.
    They invested (speculators) at a pre-determined rate of return and got their abnormal returns and they left India.
    We poor middle class indians are going to work like slaves and repay for 20 to 30 years. who is bothered?
    because of those FDI/ PE INVT we are suffering .
    we are asked to cough 10 times actual cost?
    when 1 lakh invested in bank becomes max 2 or 2.5 lahks
    RE appreciated by 1000% in 10 years time?
    and all middle class are trapped in debt?
    is this not due to speculative invt by a few handful persons from foreign countries, for whose profit , the Government of india has made all the indian middle class as slaves?
    think! do wewant FDI in india?
    first know why FDI is coming to india?
    here manipulation is possible with the help of politicians and quick abnormal return is possible for them
    they are not coming to india for developing INDIA or giving job opportunities to indians
    their sole aim is profit profit & nothing else
    we indians should drive all FDI out of india to save india and indians.
    let india grow slowly and steadily
    JAI HIND
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  • Property market crushed I

    Thanks ssumili – a very important and relevant topic for this day. Your thread started on Jan 2008 and still live today. The basic reason what I think is, the topic holds interests of a common middle class man. The debate Mr prat12 started is good but myopic comparing to current scenario of real estate sector, otherwise the overall conversation was healthy. I am a person in real-estate sector for last five years only. My clients are big developers. But a few months back I use to sit on the other side.

    Well friends, for my business I have been meeting CEOs/Directors and other big bosses in different real-estate companies. One of my observations is Big bosses in smaller real-estate organisations (keeping they public cell - unreachable) as well as the lower hierarchy of BIG groups tend to give picture as if they are not so much affected by recession, while BOSSES in larger company clearly acknowledge that business is pretty bad and they are worried. I would like to quote a line from a meeting few days back with one of the stalwarts of real-estate – “Market aisa hai ki hum to nanga ho chuke hai. Ab sharma na kya, hamam main sob ka hal ek hai, thorai na koi sharma ta hai. Ek dusre ko dekh ke musku raha hai”.

    Now to add a bit of spice to the thread as well as to address some recent updates, I would like to discuss a few points on today’s perspective -

    1) Is the name “coming property crash” suitable anymore?
    2) What should a seller do now?
    3) What should a buyer do now?
    4) Will the home loan interest rate fuel real-estate growth?
    5) What should a NRI do now?
    6) How long will this continue or how long should one wait?


    From 739 (NSE/BSE quotes) in May 2008, DLF is now on 174 (24/03/2009). From 338 in May 2008, Unitech is now at 29. From 297 in last May Jaiprakash Associates is at 81. Ansal Buildwell from 64 to 24, Ansal API from 191 to 25, Ansal Housing from 171 to 21. Omaxe from 252 to 46, Eldeco 165 to 48, Mahindra Life space from 665 to 115, Sobha Developers from 650 to 76, Akruti City from 2364 to 1730, Parsvnath from 245 to 34. These are some of statistics from the 30 developers listed in NSE/BSE. Now don’t you feel these numbers are saying something?

    These numbers are mere indices, I (and many people) call it, of human mind, the ability to take risk or in simple words people’s belief on the organisation. The belief with a builder that started a few years back has now ruined. Commonwealth Games are yet to come guys (IPL has been outsourced). Experts speculate that market will remain like this for almost a year or so. Some of them are also positive about the time.

    Now what about the real-estate market – how will this react? Obvious today the white collar job holders who played the most vital role in heating the real – estate market are shy. Actually they have a heavy amount of stake in stock market, the value of which has now deflated. Thank GOD, that RBI/IRDA/SEBI i.e. the Govt. doesn’t allow 100% Foreign investment in India. Otherwise the American economic downfall may have entered and infected out economy as a whole. ( Ref - http:// www .indianrealestateforum.com/real-estate-discussions/t-are-we-next-to-us-4125.html)

    According to me now the title/name of the topic can be “Property market crushed”. People like Mr prat12 can argue that some real-estate companies have hold their prices and sustaining in these turbulent waters. These happened actually to real-estate companies who are big and had prices as high as Rs 4000 / sq ft or Rs 43000/ sq mt in Group Housing segment and Flats or villas of price more than 3 crores and above. As home is a constant necessity, till date the sales had not stopped but the propensity of sales have been reduced for the time being. Also customer in the premium section has diverted their concentration to lower level, while customer in the lowest level has stopped and waiting for the suitable time. Therefore the big builders, favouring the market trend, has shifted their focus to lower levels – DLF Capital Greens, JP Wish Town Klassic, Omaxe Hills Faridabad, and so on. If this goes on than it’s obvious that small fish in real estate are in soup.

    A seller, in these days should hold his property, if he has no other compulsions. Otherwise you should bring down your price or give out freebies for selling your product. But one should remember, this is buyer’s market today.

    A buyer should always look out for opportunity. I wouldn’t advice anyone to wait for a better market. Now is the time. Keep looking because big reputed groups are in your grip. You can now get good residence in moderate prices. Don’t go for unknown builders at this point of time. If you go, don’t forget to see all legal (specially NOC for land use from the authority) and technical documents (specially final map approval from authority). You can get both the papers from the authority itself, but with a price. Always remember, a cheap house may not be a good asset.

    Now every builder advocates being the best. Any builder who without much pursuance shows the legal and technical documents to a prospective client is a good builder according to me (Ref - http:// www .indianrealestateforum.com/real-estate-discussions/t-buying-a-house-beware-of-builders-tricks-2237.html). You can request any people who understand these land documents to verify whether those are true or not, and what is the area, FAR, loading etc. I am sure, in these turbulent days, most of the builders will honour your request. If they don’t, mark these builders as petty/3rd grade builders. What do say Mr prat12?

    I do believe that the govt is trying its best to solve this economic crisis, as fast as possible. Real estate, being one of the most promising sector, has the power to bear this economic burden and take the economy out of the vicious circle. But for this, the real estate sector needs to be more prudent and transparent. It’s although obvious that this continuation of economic crisis would automatically weed out the fraud builders. But for the greater benefit of the society, I personally don’t want the crisis to continue further. But it’s the time, that govt should take something major action to eliminate unqualified builders. Thus with lowering of interest rate, the govt should also address this issue sincerely and immidiately. (See the -http://www.indianrealestateforum.com/real-estate-ethics/t-why-dont-we-have-any-regulatory-body-for-real-estate-4156.html).

    From the NRI’s perspective, I have the same suggestion as above (Slow and steady, wins the race). You shouldn’t wait for some wonder to happen in some indefinite time. The big companies like DLF, Omaxe , Unitech, and others have reduced their price at a subsistence level. They are also ready to negotiate, you have the dollar/euro power now and the banks are very now lenient to the customers. So start looking for opportunities, if it suits your budget, buy it. Before buying, weigh your financial strength and make a proper budget for your future living.

    continued .......
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  • Property market crushed II

    continued from ..............

    “How long will this continue?” is what everybody is thinking all about. If we try to understand, why our economy did grew so fast, I think we can get an answer. The year 1991 was a real starting point for new Economic Era for India, under the leadership of Sri P V Narasimha Rao. The Globalisation, Liberalisation and Privatisation were a step to boost India’s crippled economy. Later Sri Vajpayee’s financial reforms commensurate with time made India one of most favoured business destination of the world. With this the IT & ITES sectors became the centre of attraction. Indian engineers especially in Electronics, Electrical, Computer and Mechanical section spread throughout the world, while BPO sector flourished here. Thus for the first time since then, foreign money started coming to India.

    That was the time people started to invest money to have a house or property. Its not only “Builder/Politician nexus that has caused the hype”.Banks also came forward to give easy home finance. Tax laws were changed such that people became attracted to real – estate, either in form of taking loan or investing in reality funds and bonds. That was the time real-estate business gained pace. With addition to that the Information Act of Swiss Bank led our most respected politicians and other high profile citizens to divert their (so called) hard earned (black) money to put into this sector.

    Now, with the fall of US economy, the IT & ITES sector went down and the “trickle down” effect of that, is the coldness, what we are feeling now. The middle-class people (whom the trikaldarshi Swami Vivekananda ji foretold to be the India’s backbone), who lost the money power now (as most of them invested it in money market) became cautious, so did the government. Thus the normalisations of the IT & ITES sectors are one of most important factor for the economic stabilisation, which in turn would bring back the lost balance in reality sector also. The time required is obviously understandable by anybody and everybody.

    My suggestion would be to take steps cautiously but steadily whether you are a buyer and seller in this “property crushed market”.
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  • Dear friend,

    Good and detailed analysis. I liked it due to its reasonableness.

    ks2071746
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  • Originally Posted by udayan.giri
    You can now get good residence in moderate prices. Don’t go for unknown builders at this point of time. If you go, don’t forget to see all legal (specially NOC for land use from the authority) and technical documents (specially final map approval from authority). You can get both the papers from the authority itself, but with a price. Always remember, a cheap house may not be a good asset.

    Now every builder advocates being the best. Any builder who without much pursuance shows the legal and technical documents to a prospective client is a good builder according to me (Ref - http:// www .indianrealestateforum.com/real-estate-discussions/t-buying-a-house-beware-of-builders-tricks-2237.html). You can request any people who understand these land documents to verify whether those are true or not, and what is the area, FAR, loading etc. I am sure, in these turbulent days, most of the builders will honour your request. If they don’t, mark these builders as petty/3rd grade builders. What do say Mr prat12?


    Big builders or small doesnt make a diff. the big started as small only.
    actually the big projects by big builders are prone to indefinite delays of delivery. and many cases of gym and club open to outsiders.swimming pools reasonably sized cannot accomodate more than 100 persons at a time else you will be getting a dash every few seconds(some actually like it ).
    coming back to legal issues.builders big or small never book a flat without getting legal opinion from 'your' lawyer . I prefer the smaller builders who definitely are not overleveraged(most of them) and will deliver on time.
    anyways big builders have projects only in distant places. I would anyday prefer to be in estb localities,and join health clubs in hotels the cost of which would be offset by your travelling expenses to your distant homes.
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  • udayan.giri, very well written analysis.keep up your good work.

    Even a small builder without big credentials fixes the price with minimum 25% profit.

    The bigger the builder and brand name, larger is this profit margin.

    cost of a flat = land cost + construction cost on builtup + min 25% builders profit + other expenses.

    The reason they say, the amount of money they invest for the land, the labour and interest outing for the project time, other expenses to get approvals etc.

    Despite the pre-launch, the huge interest free money they recieve from customers and investors.We are seeing huge resistance from the builders to reduce price.The ones who are doing now are just reducing their profit margin.

    They are scared it will have a spill over effect which will have greater implications.

    This opportunity should be used to create awareness among end users, The more informed the consumer is the less fooled they will be.

    Buying a property from a builder without paying extra "Builders Profit" doesnt and wont happen in India.
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  • Dear friend,

    I liked your last lines as this is true in India.

    ks2071746
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  • So much ignorance

    Sorry this got double posted.
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  • test message

    Hello Guys,

    I see a lot of ignorance and lack of understanding regarding basic economics. Here are few things I have to say.

    1. Price of the house has nothing to do with how much it cost the builder in the first place. It has to do with what a buyer is willing to pay for it (in economic terms it called market forces). So forget about 25% profit as a baseline. If the profit is not there for the builders, we will simply have less number of builders. Simple math.

    2. What a buyer should be willing to pay has to do with buy/rent argument as I stated numerous times earlier along with the need for owning and availability of rental property.

    3. NRI's are not dumb people. If they can go to foreign countries with minimal capital and make good living (& save), they are smart enough for make the decisions for themselves. Again, I am an NRI living in USA. I understand my economics very well. NRI's won't be investing simply because someone (expert ?) says the market has bottomed and now is the time.

    4. FDI is not all that bad for a country. It has to do with where the FDI is invested. If it gets invested in sectors that promote growth to the country and increase employment then it is good (see China for example). It is bad if it comes as a short term cash in the stock market investment. That is why the government of India is clamping down on it.

    5. Even if the RE market hits bottom, it doesn't mean it will rebound from there and go on the same price trajectory as before. Remember the DotCom boom of the 1990s. When the bubble burst and market came back, the new money went in to creating RE bubble. Many DotCom companies never recovered. See Sun MicroSystems as an example (yes i got burnt in that and yes it's stock went from $60 to $2.47. It is being sold to IBM for about $5 now... So no recovery for many dotcoms).

    6. Smart money is to locate what is the next area of opportunity. RE investment is a dead horse. It may recover but only to reasonable levels. Multi-Cr flats are history. Look for the next area of making money. My money is on commodities and PMs in short/medium term.

    Chao
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  • Have seen the prices come down

    I was in the market to buy a flat to stay in - I'm in Gurgaon.

    I started asking around in November when I got transferred here.
    Prices were too high for me and I kept looking around. I wasn't sure about how much prices would fall.
    But they did fall, and what I've seen in March has been an acceleration in the drop - I get the feeling that we're at the edge of a cliff and the worst is to come.
    Since I was on the ground, going around speaking to brokers and dealers (and even went cheque in hand twice) I have a fair idea of asking prices, so am stating them here. Of course, you are free to disagree with me, but if you do disagree, please at least post your version of the prices.

    DLF Ph. IV and V: Were 6000 to 7500 psf. Now are 4500-6000 psf.
    Golf Course Road: Was 5500-6500psf. Now 4500-5500psf.
    Sohna Road: Was 3600-4500psf. Now is 2700-3600psf
    Anything by Unitech is diving (Close, Uniworld, Fresco, Nirvana)

    Some examples - Richmond Park has fallen from 1.5cr for a 2000sqft flat to 1.2cr.
    Wellington 4br apts. have fallen from 1cr to 85L
    Icon 4br luxury apts have fallen from 1.6cr to 1.2cr for the 2600 sqft option.
    Sohna Road Parkview II has fallen from 3800psf asking to 3300psf asking.
    Sohna Road Vatika City Iris has fallen from 4100psf to 3400psf (what I was offered)
    Sohna Road Vatika City Aster has fallen from 3300psf to 2700psf (last transacted prices as quoted by a broker, who was offering to get me a similar deal).
    Sohna Road Omaxe Nile has fallen from 3800psf to 2800psf.

    All numbers are rough guides, please do your own homework. Examples given are actual quoted prices offered to me (both earlier and now).

    I've now moved to a rented place and taken a two year lease. I'm quite confident of getting any of these properties at much lower rates.
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  • ************...... I can not give more than this.

    Asif Khan
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  • Dear friend,

    You have done th right thing. Opting for a rented house now. Watch the price movements on continuous basis and strike a deal for your dream flat at the correct moment. Upto 10 % higher rate for a locality of your best choice and good construction may not be a bad proposition.

    ks2071746
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  • Originally Posted by ks2071746
    Dear friend,

    Upto 10 % higher rate for a locality of your best choice and good construction may not be a bad proposition.

    ks2071746


    There is no reason to pay 10% more from todays prices when the same thing will be available next year for 50% less.

    We are at the edge of a cliff. The price drop has just started. There is no concrete reason for prices to rise or even hold stable.

    One year ago - Jan 2008 - the stock market crashed and people thought that was enough. Then Lehman fell and everyone came out with bad news, layoffs and missed targets. Anyone in charge and anyone who is knowledgeable about economics speaks of a recovery only in 2010-2011.

    Real estate is trailing the stock market by about a year, and because its less liquid and less transparent, it moves more slowly. We have seen the beginning of the crash. The real estate version of Lehman is going to happen by the middle of the year (after all, how long will DLF and Unitech keep selling off 300cr in assets to service 5000cr in loans - eventually they will run out of things to sell).
    And when that happens will we see the actual crash in real estate.

    The Sen fell from 20K to 15K - thats where we are in real estate today. The Sen then fell from 15K to 7K - thats where we are headed in real estate tomorrow. It will not happen overnight - the downturn will persist for several years.
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