Hey,

Do you think the current global crisis will influence the Indian real estate market?
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  • I am not sure but may be little bit influence in the Indian real estate market.
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  • What do you mean, "do you think"? its will happen!

    Elsewhere in Chennai related posts I have spent a considerable amount of text explaining why, by the end of this "Credit Crisis" (actually its a "Solvency Crisis" by now), Real Estate prices in prime bubble areas like Bangalore, etc will fall by anywhere from 50% to 80% from peak prices in 2007.

    I also argued that this will be preceded by Real Estate company Stocks crashing by similar amounts (since Stocks react much faster than the underlying industries. This will happen to even the top companies in the RE space. And the stock price crash normally is a very reliable indicator of the underlying industry behavior 6 - 9 months down the line.

    As of last week here is the stock market performance:
    Sobha from 1248 to 170 (86% fall)
    Parsvnath from 598 to 94 (84% fall)
    Omaxe from 612 to 100 (84% fall)
    DLF itself has fallen around 72% from its peak.

    The World is in very real danger of a systemic failure in the financial markets which will affect every industry in every country in the world quite badly. We may be within weeks if not days of such a crisis. And - while it may be a "surprise" to most, many informed people saw this coming as early as 3 years ago.

    And the most important indicator in India would be job losses as well as salary reductions in the most important of industries (which drive the RE bubble). Probably from IT? Expect this price fall to be slow and stealthy - in such a manner that you will not notice unless you track it for many months. Cushman and Wakefield admitted as much today when they reported that certain bubbly areas may see as much as 50% fall in prices. Since they are part of the industry expect them to not be so bearish. I still stick with 50% to 80% probably by 2010 - 2012.

    Around that timeframe you will get fantastic bargains - if you have the cash to buy. But by then most people will be having a cash/liquidity crisis and be unable to buy. You could be different if you sell now or hoard cash, live in a frugal manner and be able to buy property at rock bottom prices.

    cheers
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