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Is it Recession in Indian R E ?

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Is it Recession in Indian R E ?

Last updated: January 16 2010
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  • Is it Recession in Indian R E ?

    If it's recession in indian real estate sector, as every one is saying so, then how come DLF's high rise residential project (1400 flats) at shivaji marg, new delhi was over sold within 3 days from the date of launch.
  • #2

    #2

    Re : Is it Recession in Indian R E ?

    A little more analysis ...

    Originally posted by Indianil View Post
    If it's recession in indian real estate sector, as every one is saying so, then how come DLF's high rise residential project (1400 flats) at shivaji marg, new delhi was over sold within 3 days from the date of launch.
    Indianil,

    Let us analyse this a little more.

    Firstly a recession means many things. A drop in volumes as well as price. Therefore, just because 1400 flats got sold out in 3 days flat does not in itself mean anything. What is the overall sales Vs last year. Thats whats important.

    Second, this 1400 sold was at what price? If this was lower than previous prices, then its in line with the trend that volumes as well as price falls in recessionary times. If I'm right, isn't this the project where DLF is selling at 50% of similar projects? Well then, our target of 50% lower prices has already been reached, right? So, we are truly in recession.

    Third and finally. This is a very old trick and its unfortunate that lots of people keep falling for this one. Builders routinely do fake/benami sales to show strong sales. This could be to pump up volumes as well as price. In stressful times such as this, its even more attractive to show strong sales. Please can you verify that a majority (if not 100%) of these sales are genuine? I'm sure you can't, but these are warning signs of builder desperation and you must be careful.

    cheers

    Comment

    • #3

      #3

      Re : Is it Recession in Indian R E ?

      yup, I do agree sir, its recession time in Indian R E. And why Indian R E alone, its recession world-wide.

      And as far as sales volume are concerned, this is dropped from 1.16 lacs cr in the 1st qtr of 2008 to mere 28 k cr. in the 3rd qtr.

      There are many reasons for it. But some where I had it in my mind that " A right product at a right price always sells well, even in adverse marketing conditions".

      As far as this particular project is concerned, DLF received an overwhelmed response. Pricing - I can say it was rightly priced.

      And there's no gimmick involved in nos of booking because I too applied for an appt on the 4th day from the launch and havent received the allotment.

      My only message is that there is a strong demand of housing in India still and if a product is rightly placed, it will get success even in the present recession.

      Thanks for your valuable feedback.

      Regards.

      Comment

      • #4

        #4

        Re : Is it Recession in Indian R E ?

        Dear friend,

        You have explained it nicely.

        ks2071746

        Comment

        • #5

          #5

          Re : Is it Recession in Indian R E ?

          Originally posted by wiseman View Post
          Indianil,

          Let us analyse this a little more.


          Second, this 1400 sold was at what price? If this was lower than previous prices, then its in line with the trend that volumes as well as price falls in recessionary times. If I'm right, isn't this the project where DLF is selling at 50% of similar projects? Well then, our target of 50% lower prices has already been reached, right? So, we are truly in recession.


          cheers
          STEEL WAS SELLING AT 55/KG NOW IT IS 33/KG AND IF sales increase will you call it recession. selling of 1400 flats in 3 days in such times at even a discount is a sign of recovery without doubt. doubting the data is definitely sensible. the same thing applies to data of corporates and banks which are indulging in writing off their bad decisions now, as nobody will question and blame it on recession. and many are siphoning off money and showing losses and conveniently blame it on recession.off course it is not true of all companies but definitely possible.
          companies are trimming their nonperformers now as it will not cause labour backlash.many are cashing on the sentiments and using 'recession' as a tool to their advantage.the point is all may not be as bad as being painted.

          the bookings even 50%(assuming data is false) of a just launch projects even at a discount atleast shows the 'demand' just waiting for an oppurtunity .
          Last edited by abk; April 20 2009, 11:15 AM.

          Comment

          • #6

            #6

            Re : Is it Recession in Indian R E ?

            What I think that the root cause of this problem is the brokers / consultants who are the bridge between the Developer and the Investor / Buyer.

            It's they who lure the buyers with the rosy pictures for their interest of getting higher pay-outs to the tune of 15 - 20% some times even from the fly-by-night operators. At the end of the day, the investors looses his hard earned money on one hand the broker / consultants too don't get their commission on the other hand.

            When the duped investor approaches the broker for help, the broker shows merely the sympathy and tells him to forget his money as the broker himself couldn't extract his commission from the developer although being in the trade. I do agree that the broker didn't advised to the buyer intentionally but is it not his fault / liability to look after the buyer's interest from whom he is charging a good amount for his services.

            The people are advocating of a separate central Regulatory Body for R E and it's on the way also but is it really going to help and if yes then up to what extent. I don't think so if it will entirely remove the shortcomings of R E but if our government can frame a law wherein the broker / consultant shall be held liable for any kind of misrepresentation in the sale transaction like other noble professions such as doctors, c.a. etc. In my opinion, a minimum of 50% of the problems will be solved if the brokers starts working like any other professional.

            When ever I heard any thing negative from any one and after long - long discussion, scrutnising and analysing of the subject, I came on the conclusion that if the broker would have worked professionally, the same would not have happened.

            Looking forward for your valuable feedback.

            Regards.

            Comment

            • #7

              #7

              Re : Is it Recession in Indian R E ?

              Originally posted by Indianil View Post
              yup, I do agree sir, its recession time in Indian R E. And why Indian R E alone, its recession world-wide.

              And as far as sales volume are concerned, this is dropped from 1.16 lacs cr in the 1st qtr of 2008 to mere 28 k cr. in the 3rd qtr.

              There are many reasons for it. But some where I had it in my mind that " A right product at a right price always sells well, even in adverse marketing conditions".

              As far as this particular project is concerned, DLF received an overwhelmed response. Pricing - I can say it was rightly priced.

              And there's no gimmick involved in nos of booking because I too applied for an appt on the 4th day from the launch and havent received the allotment.

              My only message is that there is a strong demand of housing in India still and if a product is rightly placed, it will get success even in the present recession.

              Thanks for your valuable feedback.

              Regards.
              Well said.

              However some caution and conservatism helps, as apartments are not Rs.100 movie tickets to be sold out in 3 days. There is some wisdom in what wiseman posted above (though I am not bearish myself but prefer caution and never believe media and marketing people).

              Comment

              • #8

                #8

                Re : Is it Recession in Indian R E ?

                A little wisdom from each post!

                Originally posted by contra View Post
                Well said.

                However some caution and conservatism helps, as apartments are not Rs.100 movie tickets to be sold out in 3 days. There is some wisdom in what wiseman posted above (though I am not bearish myself but prefer caution and never believe media and marketing people).

                I agree with every one of these posts above.

                - Recession is here and is gradually taking hold
                - At the right price demand exists and is strong
                - Would like to caution you that just because you tried to buy on the 4th day and did not get an allotment, that in itself does not mean genuine 100% sales. Even if 99 out of 100 flats are blocked / sold benami, you will still get a sold-out message after that. Just think of the movie theater where you end up at the counter just as it turns "sold-out" and you look around and see management selling available tickets in black to gullible buyers!

                And here are my words of caution:

                - Be financially sound and use conservative financial norms to buy property assets with high debt leverage (not more than 40% of your secure income to be used to service debt). If you don't have financial security or adequate money, do not weaken your already weak position by getting into too much debt in these deflationary and subsequently inflationary times. You can get wiped out.

                - This recession/depression may not seem to have hit us hard so far. But that is probably because the Govt has thrown 4 lakh crores into fiscal sops. Also because we have eaten substantially into our savings to prop up the economy. And also to a substantial extent because the US and other G20 Govts have been pumping insane amounts of money (with no underlying value) to keep the world propped up. Now the effects are starting to be felt. MAny large companies will start going bankrupt (GM, General Growth Properties, etc). MAny banks will go Kaput (remember, if CITI, etc go bust, many IT majors will suffer upto 25% of their revenues in one shot!!! ).
                Out corporate performance will show continuing poor performance and many companies will start going into the red, especially the RE companies. As seem in ICICI Bank's NPAs it has gone up significantly by around 2000 crores. Also protectionism is coming in strongly by way of H1B restrictions and so on and all of these will have significant effect on IT and other downstream companies. In addition, many of the reputed analyst firms are already calling 60% declines from the peak.

                So, the true effects of actions of the recent past will only happen in 2009/10/11. Be extra careful calling the bottom too soon. While everyone is calling bottom and good times in 2009 itself, no one has the experience of this kind of recession to be able to call them accurately. Most of the statements use the word "hope" in them when calling bottom.

                As I said before, stay with cash for at least another year or even three! After bottoming, you will get ample time to buy at near-bottom prices as prices will not rise for quite a while yet.

                Patience is the key. And so is conservatism. Forget the aggressive tactics of pre-2008 times. I know its hard, but change with the times and the mood.

                cheers

                Comment

                • #9

                  #9

                  Re : Is it Recession in Indian R E ?

                  Let me clearly explain the thought process a buyer should have now in 2009

                  • If you don't have cash and want to borrow huge debt (85% of property cost like in recent years)to buy a property just quit. Do not dare to buy or you will be suckers. Don't assume the interest rates will reduce forever, Crude oil at $50 is grossly undervalued. OPEC, the oil cartel has annouced massive production cuts. In the last 25 years no new major oil reserve has been discovered anywhere. Unlike what many think; US/Europe cannot and does not control OPEC. Russia with world's largest oil reserves does not want Crude oil to be below $100 at any cost. Dubai property market and Russian Rubble have fallen after Crude fell to $50, so stakes are high. US & Japan on the other side has kept interest rates at 0.2% only which means a lot of liquidity is getting released into the economic system now. All this signals high inflation sometime in near future as Crude oil will rise again to $150. Then what will happen to interest rates? they will again increase. Home Loans will again be charged 14% interest rate...even your dear SBI is offering 8%, only for a year. So don't risk a 20 year home loan with just 15% downpayment if you cannot afford a home. When high inflation begins as the signals are clearly visible, it will last for a long time. Then your other expences will increase and so will loan repayment amount.....putting more pressure (just ask some IT/BPO/US middle aged professionals with 50L-2C home loans how are they feeling now even in a deflationary times just imagine how would they feel in inflationary times ).
                  • If you have cash (and debt free) and can afford; wonderful times have just started . I am not asking you to buy tomorrow itself. Do research for another 9 months taking your own generous time no need to feel urgent. IT/BPO/US people will not enter the market for another 5 years.......the Herd will not return until 2014 or even later. This is all human psychology, when the Herd gets frightened it loses so much faith like some IT/BPO/US people that they start thinking even to buy a cup of coffee in a nice restaurant. This is the time for a genuine cash party to start his/her research process and good locations and good properties will be available. This is the time when
                    • When you can totally avoid brokers...Directly approach premium builders/resale owners through Internet, Newspapers. Avoid paying any broker commission which is national waste.
                    • No need to feel urgent. Nobody can frisk you by putting Ad in yellow pages in morning and claiming that sale happened by 10 AM itself & you were late disappointing you. I know in Chennai even for rentals of 3 bed apartments owners are waiting for more then 3 weeks ..some even more as there are no tenants coming forward. In 2007, tenants/buyers were frisked, forced, urgency forced upon them. Now the world will wait for you...take your own generous and luxurious time to do research friend.
                    • If you want to buy a beach front apartment facing the Bay of Bengal in Besant Nagar beach road Chennai that too from a premium builder, you can sit across the table and negotiate...its your day now...you are the star.
                  Both myself and some people are talking the same.....cash is king....high debt is demon.

                  Where we differ is price corrections back to 2004 levels. I feel that even without the Herd (currently IT/BPO/US people) not returning to market again for a long time, still the prices atleast for premium land, apartments in premium locations in city limits or nearer outskirts will not correct.

                  Comment

                  • #10

                    #10

                    Re : Is it Recession in Indian R E ?

                    Dear friend,

                    Really thought provoking views.

                    ks2071746

                    Comment

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