Thursday, February 07, 2008

India, Real Estate and Some Numbers

I just returned after spending a few weeks in New Delhi, India. The incredible pace of growth in India inspired me to see if I can participate in the growth by investing. India does not allow direct investment in equity markets for non-resident Indian citizens (and definitely not not foreigners). I do invest in US-listed ADR (like Infosys) and exchange traded funds (or ETFs like IFN) but I wanted to invest directly. One option available is real-estate.

The numbers when it comes to real-estate just don't add up though. Real-estate in India is incredibly expensive and not just by Indian standards (with per capita GDP of US$ 700 per annum). Here are some numbers:
  • Condos in New Delhi, India: 2-bedroom, 1000 sq ft apartment for $200,000. [$200 per sq ft] (Source:
  • Condos in Chicago, USA: 2-bedroom, 1000 sq ft apartment for $400,000 [$400 per sq ft] (Source: Google Housing)
Now, remember that the median income in Chicago is 50 times more than that of New Delhi. Why Chicago? Because New Delhi can grow in all 4 directions much like Vegas can (and Chicago can in 2 directions) as compared to Manhattan and San Francisco that are geographically restricted.

Next, look at agricultural land prices.
  • Agricultural land in Faridabad, Haryana (adjacent to New Delhi much like New Jersey is to New York): $250,000 per acre (source:
  • Agricultural land in New Jersey: $12,000 per acre (source: USDA, and for comparison its $6,000 per acre in California and $8,000 per acre in Florida)
One may argue that Haryana is too close to Delhi. Land in Dehradun is available at only $100,000 per acre while its much cheaper at only $20,000 per acre in villages in Himachal Pradesh. All at prices way higher than Florida or California. Commercial land is even more expensive.

The issue of population density pops up every time I discuss this. Let me be clear, the population density of India is much higher than USA. But, when you compare New Jersey and India - New Jersey is actually slightly more densely populated. And New Jersey is much more densely populated than Haryana, India.

The next issue that comes up is one of regulation and availability. Yes, real-estate is regulated in India with laws that prevent easy buying and selling and land records that are poorly maintained. This simply means that the prices can be artificially inflated in the near term (that could last several years) but in the long-term must return to rational values.

Will someone please explain this to me? How can farmers that make less than $1000 per annum continue to own land that is valued (notionally) at several $100K? Are the low rental yields (2-5%) indicative of the bubble?

Update: Today, Wall Street Journal writes about a trader that made billions betting against the real-estate bubble.

"Most people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond," Mr. Paulson says. "Mortgage experts were too caught up" in the housing boom.

In several interviews, Mr. Paulson made his first comments on how he made his historic coup. Merely holding a different opinion from the blundering herd wasn't enough to produce huge profits. He also had to think up a technical way to bet against the housing and mortgage markets, given that, as he notes, "you can't short houses."

I heard the same arguments repeatedly in India - house prices never go down etc. We shall see!

Update (Oct, 2008): Time reports Mirroring the US, India's Real Estate Sector Melts Down - here is excerpt:
Over the past few years, increasing demand had pushed up prices, with speculators jumping in to further inflate the market. Eventually, inventory piled up when buyers refused to pay unrealistically high prices. "So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able to pay," Shukla says.
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Mukund Mohan said...

Similar story but much more inflated in Bangalore.
1. Rental occupancies are low, rates for "executive apartments" are high, but many are available.

2. There is a tremendous push to SEZ agricultural land in India as you know. Since 80% of India's economy is apparently agriculturally driven, moving outside it to manufacturing, retail, etc has created this inflation for even farm land.

Unknown said...

The SEZ argument is being used by several people but the truth is that there is a lot of agricultural land in India and when land prices are 10x higher than in California or Australia, it is not economically efficient to use it plant wheat anyways.

Yes, the story is not limited to Delhi and is true for Bangalore and other Tier 1 and even Tier 2 cities.

Anonymous said...

Can it be explained by supply and demand? I don't have the numbers, but there might be too much supply of land in california and florida compared to the supply in india. The recent rise in real-estate in India is also due to the growth in demand, right?

Unknown said...

Demand is clearly higher than supply currently. But, demand (as Econ 101 taught us) is sensitive to price. In plain English, everyone wants a palace, how many can afford one? And if you are talking of total supply of land in India - I point in my post that there is as much land available as in New Jersey per person. In fact, land is not as constrained a resource as one might be led to believe. There is plenty of land in India and you can always 'create' space by building high rises - effectively creating more built up area. (Yes, that does not translate into more land but it does bring down apartment/condo prices.)

I saw the arguments you brought up being used by Indian real-estate companies and gurus but without backing them up with numbers or comparables.

Nitin Goyal said...

1. You are comparing post sub-prime crisis rates (US) to booming market rates (India).
2. There is a scarcity in India for Apartments. I have a strong feeling that the builder lobby in India constricts supply in metros to keep prices artificially high. In the long run yes it will balance out, but remember that in India we have seen a boom in the market for the last 4-5 years only.

Unknown said...

The apartment prices in Chicago (that I quote here) and New York have only gone up in last 1 year even with the subprime crisis. The builder lobby in India definitely benefits from the restricted supply in the short term but in the medium to long-term they are hurt because high prices mean that the volumes will be low and any bursting of bubble could hurt sentiment for a long time. And with the entry of new players (who don't own land banks at pre-boom prices), the lobbying of existing leaders could be countered by the lobbying of new players. For instance, Mumbai seems to be moving closer to liberalising urban land laws.

In all, I agree that with you that the picture is far from clear. Which to me, means that there could be high volatility.

Anonymous said...

There is a huge amount of foreign investment in India to start IT & manufacturing companies. These MNCs can definitely afford high prices of real estate to build their offices or plants when they are going to save 10s of millions on labor. Much agricultural land
is being converted into manufacturing (by some officials who take some under-the-table money and issue a license).

Now we come to residential properties. Indian consumer is suddenly feeling very free due to the plethora of financing schemes available. In the days of our parents, no one used to take a loan to buy a house. People used to save and buy the house cash-down.

Add to that the huge demand. Every IT guy in India talks as if he is the second richest person after Bill Gates. In the extremely status and brand conscious society like India, a huge demand has been created.

I have a hiuse here in US but going back and owning a house in India gives me jitters.

Anil Gaur said...

I think when you quoted price for a 2 B/R apartment as 200K USD, you must be talking about very central and traditionally high priced areas of N. Delhi. Those areas were never cheaper, even before the housing boom started in 2001 and after.
I have just bought a 3 bed room flat for Rs 34.5 lakhs (88K USD approx)in Faridabad's sector 82, very close to not only Delhi but Noida. The price you quoted is not what you would have to pay for a 2 bed room flat in now hot Gurgaon's prime apartments.
Regarding Agricultral land, well that is also being driven by the real estate boom itself, no one, who buys land for $250K USD per acre is going to use it for agriculture, its only an investment till the city expands further and then such land will make way for either a industrial site or apartments.
So there is still opportunity for investing, though, its not that lucrative as it was untill last year.

Hatim said...

Interesting debate...

Recently read an article about asset price bubbles - it seems they occur if three criteria are met:
1. Sudden large displacement in the economy (in India this could be the rapid rise of Income levels in the last few years)
2. Availability of cheap credit (which we can argue also holds true for India with the recent proliferation of home loans)
3. Investor activity becomes euphoric, driving valuations to unsustainable levels (again seems to be the case, with all the hype about investing in India)

So, all in all, I do feel it is a bubble - but then again maybe land is of more 'value' to the Indian consumer than those in the west... (?)

Anonymous said...

As the more number of high rise buildings are coming up in big cities, the cost of land is expected to grow by leap and bounds.

Unknown said...

By this logic, price of (urban) land should go up and price of rural land should go down - you need less of it when you can build more space in urban areas. And the price of condos should fall as now you can build more of them vertically.

This has yet to happen - all prices are high.

Anonymous said...


you are late to the party. But I guess in Real Estate - you are never late to the party. One just has to wait it out.

Some folks invested in multiple properties, reaped their 2-fold or 3-fold profits and have also transferred their money from India to US, to buy real-estate in US.

Average software engineer finds it very hard to buy property in Bay Area. Some folks have used the India option to buy their homes in US.

Anonymous said...


After living in Bangalore for an year and returning back to bay area I am amazed how over priced real estate is in India. The sad thing is that the construction quality and amenities are not even comparable to condos in the US.

I think the reason is primarily high speculative demand. There are supply side constraints on land due to poor infrastructure and regulatory hurdles.

A lot of demand in real estate is for investment purposes and does not constitute real demand (i.e. high proportion of vacant units). The rent/cost of ownership is totally skewed e.g. I was paying rent of INR 15K for a property with a price tag of 45 lakhs (INR 4.5 Million). This works out to rental yield of a mere 4%. Considering that a risk free interest in India is around 9%, the rental yield is very poor and implies that a continued price appreciation expectation is assumed into the prices. This is a classic bubble sign.

So when is the party going to end?

Unless an economic shock occurs (i.e. growth recession, USD depreciation to INR30=$1, etc), the demand will continue to be fairly healthy.

Things may not be as pleasant on the supply side. I have noticed that Indian cities are noticeably smaller than their US counterparts. Currently a city like Bangalore has not grown radially because of poor road connectivity and public transport. In Bay Area, commuting from San Jose to San Francisco (80 KM) is totally feasible. Not so in Bangalore. Sooner or later as the radial and peripheral road networks improve allowing people to commute from afar, the supply of land will increase and I suspect we will see massive corrections to real estate prices.


Anonymous said...

I think we can't compare USA and Indian real sector because in US its very much regulated. However in India its regulated only on paper (I hope you know what I mean). NRI can't buy land /property in India directly but there are ways to do that, plus there are so much unaccounted fund available so I don't think prices will come down in near future.

Anonymous said...

I agree real estate in India is a
bubble created by easy credit and monetary inflation caused by US current account deficit and yen carry trade. Asset class inflation has to be supported by the income that asset
generates (fundamentals) or a accelerating monetary inflation. 1 % of the transactions determine the price of 100% of the asset class and during asset hyperinflation, that asset acts as a money substitute. Eventually, when the money supply no longer grows at an accelerating pace, more and more people want to transact on an arbitrage by selling the hyperinflated asset. A crash ensues and that asset goes back to its fundamentals (that is supported by the income it generates). Population density is a
spurious argument because you do not exchange people for land but rather money for land. Only thing that matters is the supply of money
(and not people) and demand for land. Anshu, I believe that you have called the bubble correctly.

Anonymous said...

Real estate prices in India are
too much blown out of proportion
in cities like bangalore, hyderabad
and even in coimbatore, nilgiris (ooty). When the bubble totally bursts the pries will be less then one fourth of what they are now.
Do not put/bet your money now! There are builders in mysore, ooty who promote illegally and there are couple of incidents where they were
told to stop. Beware!



Unknown said...

Aditya, Murali, Shyam:
It appears we all agree that their appears to be a bubble when we compare Indian real-estate with global markets (currently and historically). To those who say property prices "never go down", I would recommend to see Tokyo 1990s, San Diego 1990s, Florida and Vegas 2007, and so on.
India is expensive even when compared to the emerging markets (BRIC) - I checked prices for condos in Brazil (Sao Paulo) and they are much cheaper by a factor of 5. And remember that Brazilian per capita income is much higher that of India.
The premium properties in certain towns/colonies may not come down that much (rich people don't have to sell!) but when a 3 bedroom flat in Chandigarh's outskirts starts at $250,000 - I get worried.

Anonymous said...


I second your thought about bubble in Indian Real Estate.

Unfortunately, the prices are driven by the dreams about future and not by the facts in present. It was very difficult for me to digest a rate of Rs. 2400/- per sqft in a remote area of Pune in May-2006. See the features of this area:
- No garden / Playground in 5 KM radius
- No hospital in 5 KM radius
- No police station in 5 KM radius
- No bank in 5 KM radius
- No school in 5KM radius
- No fire-brigade in 5KM radius
- No tar-roads

Even today, this area does not have any of these features, but the rate psqft is Rs. 3200/- !!???

The Rent-to-Cost theory is a real indicator of the bubble being developed in Indian Housing sector.

Anonymous said...

if the infrastructure exists, then i dont mind paying the extra moneys, but you dont even get 24 hours water, 24 hour electricity, bad roads, pollution, and the value keeps going up. Instead of value going down, it keeps going up. My only explanation is that lots of outside moneys, non indian institutions buying land at these crazy prices. When you see donald trump coming on Tv and saying that real estate in india is cheap, you know it is time to get out.

Anonymous said...

Another thing to consider is all these ipo's, especially the property related ipo's that come into the market. They raise few hunder millions, and buy land with the proceedings. They can afford to pay double the price, since they just raised 100 million. The ceo dont mind paying 100k or 200k for 1 acre, since he already cashed in at the ipo, and he will be unloading shares every 3 months for atleast 1-2 years.

Majority of these stocks will crash, but the insiders will all cash in and buy land. They will keep diluting shares, until they go bankrupt. 90% of the companies that went ipo between 1998-2000 in the US went bankrupt. Insiders cashed in, but lots of avg joe's who bought shares got screwd.

Institiuions who bring these companies into the market, will support the stock until they get rid of their alloted shares, then these stocks will crash.

Anonymous said...

Hello, Not sure about here in US but INDIA, all political leaders and big money groups inflate prices artificially. Do you think it's all sustainable in the long run. If non IT people have to buy at these rates, then corruption will increase carzyly ultimately going downward path. But I don't know the short term losing all opputunities in making money is not thinkable.
With all indian concepts ethics and rich histrory where we all going? Where it will be in next 100 years...

Anonymous said...

Even IT companies from India slowly moving operations to mexico. Labor is about the same or lower, Land is cheap and it is the same time zone.

Anonymous said...

I've been tracking the bubble on

There are excesses in Mumbai and other cities which need to removed for the benefit of end-users who have been priced out of the market

SwamiNathan said...

I do not own any real estate in India but I can see why this 'housing bubble' in India may not collapse suddenly like the Dot Com bubble. Another factor which can diffuse the demand in cities from outsourced employees is a trend I hear about multi-nationals setting up centers in smaller towns and rural areas since the culture encourages children staying close to parents.

Anonymous said...

This certainly is a very sensible discussion, to say the least. Many of you are talking about $250K. Not to mention names, my builder in Bangalore now promotes flats not in the heart but in Whitefield area 6000sqft etc for about 4Crores which is 1M USD. I am talking of apartment, plain vanilla apartment, maybe it looks like a 5star. Lo and behold he is aiming at 400 odd folks to buy such stuff. I bet he will/or has already sold them off. I dont know who are those 400. One argument is folks who sold their ancient acres of land for super prices by their standards. However if I trace Anshu's arguments and those of others, simple points to note are
a. It is not just Realestate boom. SW managers I am told are paid 250K USD in India. And the person who told me is my old boss in one of the SW multinationals (I no long belong to SW industry!) and I know he does not get those salaries in Canada!
b. ROads in India are bad. THough I am more an Indian I have drifted across the world. So if I have heard of folks drive 100km to the bay area every day even a driver driven guy trying it out from Mysore to Bangalore will grow insane and will lose his driver, leave alone the high probability he will be hit and killed very soon in an accident. So central district prices will distinctly be high. I can say that in 1994 our property in Malleswaram was costlier than similar ones in California at around 250K USD.
3. Well this bubble will burst in India. FOr the first time Indians are seeing growth, so soon they will know what is recession.
4. Finally for folks like me, we will want to dispose off our grand properties in Madras/Bangalore to gullible NRIs like you for say a few crores and buy mansions in Atlanta or San Francisco. Let me know how to do the latter (buying in US).

Ramesh said...


I stumbled upon this blog and Venky's blog ( only today.

I enjoyed reading all the comments and the views, and I am glad I am not the only one who is scratching his head trying to rationalize this.

I plan to track and follow this further through my new blog

As an investor in Indian real-estate who is based in the US, I share the angst of many others who are trying to figure out what to do. My short take, as I noted in my recent blog, is that this bubble has room to run due to one thing: poor infrastructure.

Poor infrastructure (highways/roads) means that people have to crowd around in cities. Others have noted this. But I think this is the key issue. I doubt if infrastructure will improve any time soon. So, the only other solution is creation of self-sufficient satellite towns, like the US suburbs. Self-sufficient means these are de-facto new towns/cities, and people don't have to commute to the main city for basic needs (schools, hospitals, jobs etc.).

So, for example, like Naperville is to Chicago. However, people still commute for jobs from Naperville to Chicago. So, India will need not just Napervilles, but actually a mini-Chicago in Naperville, so people don't have to commute.

Hope that makes sense. More on my blog down the line.

Anonymous said...

No shortage of new money in India. IT millionaires from Cognizant, Infy etc abound. Salaries match the US, $50-60k/yr for an average 30 year old programmer/team lead, and for the seasoned manager in his late thirties or forties exceed 60 lakhs which is $150k. Starting salaries for 22 year old MBAs even from tier-B business schools are in the 6-10 lakh rupee range, and go up by 20-40% a year after that. Unstoppable juggernaut. Sour grapes for those crying on these forums. What is Rs 4500/sf today will be Rs 6500/sf in two years time as more such 22 year olds join the "want-to-buy-a-house" queue, and even if there is any letup in the meantime, there are enough NRIs who were caught out by this unexpected rise and are waiting to buy on the first dip.

Anonymous said...

One always finds a reason to buy in
a bubble. In bubble many rational
guys become irrational as they catch
the fear of loosing the ride.

Its hard to tell others its a bubble
as most others are in that fear. They
would never accept. I see the same
from all the posts here.

Few rational minds like Buffet
not easily sucked in irrationality
by emotions. They are few. Not
many around them agree with them.
They won't look for agreement by

Anonymous said...

Something really wrong with the way the builders are playing the price card. There is a fortnightly rise in prices in Mumbai. Even a distance developing area in Navi Mumbai - called Kharghar has quotes of 4.5k Rupees psf, for quality of construction and terrible amenities. There are lot of players who make money in this, the Builder lobby of course, the Broker lobby (who are part financed in some cases by the builders to jack up the prices), the Real Estate advisories like Jones LaSalle Meghraj and its ilk. To top this off the business media just cheerleads this crap. I cant believe how anti people the media is. Screw the software bloke - what about us hardworking citizens and small business men.

Anonymous said...

Hi Anshu,

I am a lawyer and have advised on many real estate transactions across various jurisdctions in India involving investors, developers and even retail customers. I must say that being a real estate lawyer is a good thing at this point in time.

However, when I look at investments from a personal angle, I have a few thoughts which is dependent on the following criterion.

Firstly, the growth of Indian economy - we are growing at the rate of 8-9% when states like Maharashtra, West Bengal and Gujarat are contributing 25-30% year on year to states like Bihar and UP growing at 1-1.5% in order to bring the national average at 8-9%. Secondly, the growth of income at both urban, semi-urban and rural centres is not constant. Thirdly, the purchasing power parity across all centres have gone up only 12-15% in the last few years, while the costs have gone up by 20-24%. Fourthly, demand has risen considerably leading to expansion of cities without the requisite supply of modern day infrastructure leading to connectivity and accessibilty issues. Fifthly, the bank rates and repayment capacity of an individual versus his commitment to social and family life. Finally, need based investors versus punters.

Now my thoughts, given this situaton, I agree with you, that real estate at the current level will not be able to sustain at this levels in the long term. However, in the short to medium term, I am very bullish and punters are here to ake money. The long term investors, read need based investors, will suffer in the long run as they will not make money as the price that they will exit at will not get them more thn 10-12% returns, which is much lower than returns in a post office scheme, which gives the lowest safe return for long term investors.

Anonymous said...

Growth is great, IT pros making 200k is great, but why is it a small apartment that was 8 lakhs,that has no 100% electricity, 100% water, no parking spaces, surrounded by bad roads, traffic problems just out of control, more pollution etc etc quads in value?? that apartment should have less value.

Comparing San Fran or San Diego to Indian cities is just crazy. If i am driving a yugo, and making 15k inr and all of a sudden my salary goes tup 60k inr, i am not going to pay 4 times the moneys to buy the same yugo. I will buy the mercedes at 10 times the price, but not the yugo.

If the aparment all of a sudden has 24 hour electricy, 24 hour water, and roads all of a sudden become highways, the pollution goes away, i will pay the 40 lakhs for the same apartment.

you overpay for comfort and luxury.

Kiran said...

If you can rent a car for 5rs do you buy it for 500 rs?? same applies for house too... why to buy if you get it for very cheap rent?

Anonymous said...

There is no simple analysis. A few factors will definitely influence things in next 10 years.
1. A sizeable amount of Indian population (> 300 Million) will be moving into the middle class. As more people gain access to education and get integrated into domestic demand/supply, it with create demand for single family homes and apartments (all the chunu/munus passing out of college and picking up starting level jobs would want to stay separate from their cousins and daddy/mommy), and therefore put pressure on prices to go up.

2. People will have access to other investment vehicles. Historically real estate has been the main source of investment. This may reduce the excess money in the housing market.

3. Some of the areas have really gone up because of growth in IT income and investment. There will most likely be a correction in this space.

My opinion: There may be a correction in near term (1-3 years), but if one is investing for 10-20 years the Delhi market is clearly not overpriced as compared to the New York or any other US city

A decent apartment in Dwarka (suburb of New Delhi) can be bought for close to $100,000. This is not that high given that a similar suburb of New York (New Brunswick or Stamford), will cost three to four times more. An apartment owner in Dwarka is likely to face more demand for his/her place in next 10-15 years than one in NY suburb. And believe me the people living in suburbs of Delhi are likely to be same or more productive for the city economy as the people living in NY suburbs.

Anonymous said...

It is about enjoying the wealth, if your house goes up from 10 lakhs to 50 lakhs, you cant enjoy your wealth. It would be great, if you are making 1 lakh a month, and your house still cost 10 lakhs. this way you can spend moneys to enjoy life, take your family to vacation, buy your family members stuff. IN US, lets say in texas, you can make $100k and still get a big house for 200k.
If you work for any IT company, you dont have much moneys left after you pay your taxes, your house payment, you repairs, your gas bill for your vehicle and somesuch. Top level guys may keep their jobs, but mid level guys get replaced by younger workers. IF you lose your job at age 35, good luck in getting a job. I got friends in delhi, who are just stressed out. They have been working with companies for 4-5 years, but not much chance to move up in the rankings. They can quit, but they will not get any new jobs at the advanced age of 35. :)

Anonymous said...

I think most of those investments are hidden place for black money (that means no tax paid on that amount). Here are some more causes, almost 99.99% people never pay the tax they are suppose to pay (congress chief Sonia never had a car/house on her name, she declared in tax docs, according to finance minister INDIA have only 140000 people who have above Rs.1M income per year. it is a national shame, but works), Also, they can’t hold this huge sum of liquid money like 100kg bags due to security reasons and fake currency fears. If they buy property they will pay huge liquid cash and register for very minimum amount to escape registration fees and also convert black money into a property. Also, according to some study 4-7% of circulating cash is fake in INDIA? So no wonder why it is hyped so much? After working 10 years in US with six figures salary, I can buy house here but not in Bangalore? I hope our country will not become another Argentina?

Anonymous said...

most of the indians dont pay taxes, but if you work for IT company, you pay taxes( you cant hide your income). That is why India has bad roads, bad hospitals bad everything. People dont want to pay any taxes to improve the infrastructure. The hard working people who pay taxes, they get stressed out and get screwd.
One of my freinds said that property value went up because MCdonalds might come into his neighborhood. Ok, so mcdonadls come, so why the jump in price. you get to eat fatty foods and get high blood pressure, become diabetic and die. so you are paying more money to die early. :)
( That big mac is still great)

krishna said...

Someone said Managers in India IT gets 250K$. I can bet he has gone insane. Even google won't pay this much and Indian brands pay 10-12L for maangers. I perosnally am manger in a good IT company but still getting 18L. And I have expericne of 9 years product of IIT level college in CS.
But still avg salary won't be moer than 12 in my exp and we are old when we talk of IT industry of India.. Masses are still with 3-4 years of exp.

Its surely a bubble. Sooner or later it will burst. I am waiting for IT recession in US and than we will talk who can pay EMI of 50K/month. I had seen last recession and people were begging to work for free in front of me but still were kicked out..And that time IT industry was very very small than what we are now. Results would be disastrous for IT as well as every other sector that expects million $ is everyone game..

Anonymous said...

Dear Anshu,

I have invested in Noida, Gr. Noida and I also invest in properties within Delhi.

I see that everyone has a mixed opinion regarding Indian Real Estate, mostly leaning towards the bubble. However my feel is that bubble exists in geographic locations lacking demand / population. New job opportunities and increasing income level is frequently giving birth to new home-buyers, which in turn is preventing a bubble. I feel that India is experiencing, and will continue to experience a healthy correction versus a Florida & Vegas 2007.

Another things is.....indian buildings have never looked this good ever, and the price we are paying today is for the modern look and feel in general. It would be hard to compare it to historical prices because Indian neighborhood, and lifestyle in these neighborhoods have significantly changed.

Anonymous said...

Who says Supply of Apartments/Condos is less in Bangalore. I live in bangalore for the past 6 years and can show you many ready to occupy/but not occupied apts in and around bangalore. But the prices have not gone down because the real estate developers and some local newspapers still lying about prices going high. This is just hype. Prices may not go down in the near term since land developers don't want to show a different picture to public. But the fact is that in bangalore and rest of india, the demand of real estate is slowing down because of artificially increased prices. Earlier whereever you go, you can hear discussions about comparing & booking Apts, but nowadays no one talks about it. May be people started thinking about how to pay their EMIs if there's a slowdown.


Anonymous said...

I see people comparing Apartments in India with US and that is just plain crazy! So when we compare New jersey or New york with Delhi or Gurgoan or Bangalore, the comparison should be all-encompassing. How about comparing the Roads, Highways, Traffic Jams, Water, Medical Facilities, and most importantly Security! Gone are the days when people considered India as more "secure" than US. Security nowadays is as scarce as water in many parts of our country! Atleast you people in US can be sure someone will arrive at your doorstep if you call 911, but here we are not sure even if someone will pickup the phone if we call 100! So why paying through the nose for something which is of no quality?

Shyam said...

See a comparison as to what it takes to buy vs rent in Bangalore. It indicates that a huge price correction is in the offing

Unknown said...

Srikanth, Krishna, Paul & others that have commented - I see a broad consensus here on the high probability of this being a bubble. There are only 2 long term solutions to a bubble like this - prices stall while economy catches up over years; or, the prices correct.

I have so far stayed away from investing in Indian real-estate although I love the over all growth story. I continue to invest in ICICI Bank and others that are linked to the broader India growth story.

Thanks for your informative comments. This seems to be a popular topic and I am glad my post provided an additional forum for some good discussion.

Anonymous said...

Have been trying to read a lot about who actually is buying these houses? I think I am one of those oft quoted middle class (an annual income of about 5 Lacs) that is supposedly driving this boom. But fact is I haven’t bought a house yet. Some hard facts which steeled my decision were:-

1. Upto mid 2007 - I had stayed for 5 years in Delhi in a centrally located place (Vikas Puri), paid a rent of Rs 5,500/- per month for a 2 BHK with abudant parking space and facing a big park. The house owner proudly claimed its market value was about 1.5 Crores (must be 3.5 Crores now!) Surely a very poor return for money he got. But then this man had bought it way back in 1980 for less then 10 Lacs.

2. I booked a “builder floor” in Delhi around early 2006. The builder was into buying houses, demolishing them and rebuilding into floors. I booked the first floor of a 4 storey construction (90 Sq Yd) for 16.5 Lacs in Uttam Nagar. This was in mid 2006. Then the boom accelerated by end 2006…they said it was now worth 25 Lacs. The builder got greedy, slowed construction and all the related tricks. I finally took his offer to take double my deposit and quit. The house still isn’t sold. Its mid 2008. The builder is bankrupt and has fled. The story is repeating in the entire area.

3. I came to Pune. The traffic was horrible, the pollution worser, the cost of everything was three times what it was in Delhi starting from fruits to furniture. The houses were also as expensive! Far flung outskirts, no electricity or water….but lot of nice morphed photos and glossy brochures…and the usual promise of once in a lifetime investment opportunity. Everyone said it was the IT.

4. Then I met an IT graduate (the city is called the Oxford of the East)…this guy told me that offer letters handed out after Campus interviews had joining dates six months later and very few got actual confirmations. Half the guys didn’t even get interviewed. Some smaller institutes didn’t even get visited by the industry. Also, this was in sharp contrast to last year when almost everyone got a job. So it isn’t the IT anymore!

5. Lastly, I went to a small town in MP. This one was untouched by builders. An empty 200 Sq Mtr plot with a tube well (at least ground water supply assured), stable electricity supply and in a well developed area on the outskirts was quoting for Rs 75,000/-. The airport at Bhopal was 20 Kms away, the railway station the same. That was what I used to travel in Delhi or Pune too! The vegetables and fruits were half the price in Delhi and one quarter the price in Pune. Full time domestic help was available in plenty at as low as Rs 1000/- pm. The schools were roughly the same standard but charged one tenth what similar schools charged in Delhi and Pune.

What did I conclude? Stay on rent in a big city while you work (remember Delhi @ Rs 5,500/- ….and dropping). Build yourself a nice palatial bungalow in a small town and relax there once you retire. The amentities (hospitals etc) are still as closeby as in a metro or worst case you can fly down to Delhi for Rs 3,000/-.

Compare that with buying a 1 Crore designer flat adjacent to a slum (or a suburb 60 Kms away from city centre) and paying all your salary as EMI all your life.

Bottomline is…..either it crashes, else I am not buying!!

Unknown said...

Anonymous from Delhi/Pune/Bhopal: That is a great story. I am sure this "inconvenient truth" is being ignored by many today only to come bite back in future.

Please come back and let me know if and when you buy something.


krishna said...

well i feel sooner or later things will either crash or will stable out... Not many people can buy such expensive flats and if growth occurs like this than outsourcing will stop since main reason is still low cost and if that is lost than oursorucing will happen to China, Pjhilipines, Brazil and what not..

so I feel govt. should do sth to make things cheap so that overall cost remain low as we will lose on this front also like we had lost in every other industry to China..

Lets make IT industry, It products rather than hyrping real estate and killing the IT industry..

Shyam said...

Real estate falling across India

Anonymous said...

Love this thread, great posts and opinions by everyone. I would like to add something I found insane when I was in India recently.

I met with a high profile CEO of a global firm who said "we just bought some property in Manhattan because Gurgaon is too expensive"

I'll let that settle in for a second or two or as long as it takes. THINK ABOUT IT property is more expensive to (LEASE, BUY) in Gurgaon as compared to the financial hub of the global markets.

I was taken back and asked again well why get property in Manhattan when all your developers are in India. To which he stated "Indian programmers want too much money and they are constantly jumping ships, we have decided to get architects in states who work with programmers in ROMANIA" thats right eastern Europe is fast turning into the hot destination....


Great thread again....

Ani said...

Good one dude and lot of good arguments out on this one. Finding your blog wasn't tought at all u rightly said...

But..Anshu ..isnt this what demand/supply and their correlation obviously to price is all about. Its a bubble all right ...but rightly fueled by the boom in probably all sectors in India ...IT to start with and now everyone else seems to have joined the party ...Share market ...hospitals ....theres money everywhere.
There is no dearth of people who want to buy houses ...I have a 2BHK in bangalore which probably is priced at around 50L now(I invested at the right time ...4 years back) there a dearth of people though who want to buy my apartment ...guess not.

But then I would disagree with people who say the prices wont go down. At least in Bangalore they have gone down (not from their original prices obviously but from their peak levels)...though still India (and Indians) are booming ...

On a different and a slightly pessimistic note though - India's crumbling infrastructure and peoples attitudes towards each other and society in general - if not anything else ...these 2 factors are what I feel have the greatest chances of stopping India from what it could and what it should have been.


Eclectic Investor said...

Anshu and friends:
I have been pointing out the bubble burst in February 2008 through my blog. This was post the fall in the stock market. We need one rise and more baby speculators to get in - and this will happen once the stock markets retrace in India - this has started - the next fall will cause distress and the crack of the Indian real estate market. This is how I anticipate it will pan out.

Eclectic Investor said...

just to add:

Unknown said...

This seems to interesting discussion on real estate bubble in India. However I tend to think in terms of India growth story and its affect on real estate market. I found online magazine INFRASTRUCTURE TODAY at and wanted to share with members of this blog.
This website provides information on infrastructure development and amazing growth happening in India. It has articles on various development, problems and happenings in India in industry like Aviation, Roads/expressways, Electricity, Logistics, Ports, Oil, Retail and so on. It seems there is so much growth happening that there will lot jobs and money making opportunities for common people of India. There are airports, expressways coming in shorter period of time which we never saw 10 years back. It explains how cities in India are growing, also problems in cities. It also explains how $350 billion required for this investment will come from and sources behind it.

I seem to think that due to this increase in purchasing power of people, the real estate will continue to grow further. We may try to compare cities of USA with cities in India, but the main difference is, there is no growth in USA in industry compare to GROWTH happening in India. Investments from private companies by buying land for new building companies, malls, create economic prosperity. This will drive real estate higher. Real estate in India will not burst like USA. Yes, prices correction will happen but it will not burst like USA or UK.

krishna said...

I agree most people say India is fastest growing economy and I do agree to some extent. But still main questions remains to be unanswered.

a) Which industry in India will create people where a fresher can earn say 30K/months and a experience person earn say 10L in 3-4 years except IT/ITes. I am talking of common engineer or MBA not from IIMs as there count is very very less to impact the basic demand.

b) I am from village. The land is decreasing/head day by day. A farmer has to live with his family anyway and consequently the prices of food will increase as he also needs to pay for mobile or other stuff.

c) What will happen to landless masses, poor people, private workers etc. Surely it would create unrest and govt. will take action to curb prices through all means.

d) About prices of flats, I do wonder who can buy a flat of 50L-1crore except a minuscule section of Indian and NRIs?. We are three brothers and we all are from BITS Pilani (at par with IIT) we earn good but still we togetehr only can afford a decent house in Bangalore or Delhi.. Think about how a single person will afford that..

e) Once recession strikes the IT industry as hirings are delayed, joining postponed as of today and that indicates its going slow if not recession how many people would ahve guts to go for such heavy loans?.

As all data from govt. indicates, the number of sales has decreased considerably in all metros due to exorbitant prices and surely price correction has already happen and will continue till they can create enough customers to jump in...

Above all, u are not correctly saying US economy is not growing. US economic growth is very less as comapred to India but in absolute terms its much bigger than India..
Its like if i make 10Rs from 100Rs its 10% but if i had 100000Rs and i make 100 than still its .0001% India is former and US is latter.


Unknown said...

One attribute I do not see in your analysis is the amount of 'black money' that goes into real estate. When you compare New Jersey to Haryana, the biggest difference I see right away is the 'black money'. Real estate is the safest bet for all those that have loads of 'black money'. When a real estate transaction happens (eg. agricultural land), the official price of the transaction would be very low compared to the actual price of the transaction. This I think is the biggest factor contributing to the high real estate price. I wouldn't call this a bubble, because as long the 'black money' is there in India, the bubble will be there - in which case it would not be a bubble.


Anonymous said...

This is anonymous from Delhi/Pune/Bhopal again!

I have been following the real estate forums intently.

Few collated truths in point form below……………

1. Prices are artificial (never thought Gurgaon/Pune will be as expensive as US/UK)

2. Only a miniscule 1 or 2% of the population can afford these houses.

3. Those who get caught in this trap and buy a 50 Lac pigeonhole on the city fringes are consigned to a life of endless EMIs. Maybe we’ll soon have the Japanese model wherein you can pass it on to the kids coz the extended repayment periods (courtesy rising interests) will outlive you.

4. Appreciation is over if you buy now. If you think your 50 Lac thing on the outskirts with no proper road and water/sevage/security is going to become more expensive then a mediterranean villa in 5 years….it will be a miracle. Yes….anything can happen in India. When you have a large population, you also have a proportionatly large number of fools.

5. You can’t get a loan / tax rebate for paying rent. You got to pay it out of your salary. So rents will continue to be a paltry few thousand, even if your 2BHK is of half a crore or two crore or ten crore.

And a few truthful fantasies in continuation……………

6. How many houses will an NRI / Businessman / IT Professional Buy want to buy? Two, Three, Five….maybe Seven?? When all those many houses are constructed and sold (and these many are being built all around us)….but what then? Will we have ghost towns? Empty townships with no residents but empty 1.5 BHKs worth 1 crore each?

7. Has anyone thought about socio-economic fallouts? Middle class salaried families turning naxalites? When you can’t even buy a decent house when the economy is booming, would you not want social justice?

8. A long term cycle like Nepal? A revolution?

Anonymous said...

IT city man, tired of city, goes to forest, to become holy man.
He walks for 5 weeks, then hears a noise, it is the noise of another city man, but he is running round and round with his hands attached to a tigers tail, while the tiger is circling the tree. New city man asks the old city man, why do you have your hands attached to the tigers tail. Old city man, still circling the tree says, man you dont know how great it feels to have your hands attached to the tigers tail. It feels like orgasm. why dont you try this one time, and you will know how i feel. City man 2, puts his blue tooth phone to the side, drops his faded jeans, and tells the old city man, ok let me try it one time. City man 2 gets to the same speed as city man 1, and clutches the tigers tail. city man 1 let go of the tail, and asks city man 2, does it feel good. MR. blue tooth man say, yes, it does feel good. old city man says bye bye, make sure tiger doesnt eat you while you are having your orgasm.

Good luck buying 3 crore houses.

Anonymous said...

The "Black Money" factor is definitely important. As we all know, the actual price paid for a house is 50% (or more) underhand and paid in cash.

This firstly makes the banks secure. Unlike the US, people can't just walk away from their home loans regardless of how high the interest rate or how worthless the property coz for a 50 Lac loan they've got their own 50 Lac of black money stuck.

Secondly, this will slow down the bubble's bursting. Obviously people will hold on to the straws till they absolutely drown.

Thirdly, I think gradually as demand plummets and the appreciation vanishes - we will have many people drowning due to an increasing loan repayment burden, higher costs of living (courtesy inflation, oil) plus a lack of buyers on whom they can offload this (non performing) asset.

For those who will be a life's savings lost. Much worser then the US considering you lose all your black money too and nobody cares about that coz its not there to be seen!

For those who survive...still negative or zero returns on the 1 Crore 3 BHK.

Anonymous said...

Dlf stock 52 week high about 1225( jan 08)
Todays price 609.75

If all these properties going to be at a higher price in 2 years, then dlf should be at 2500 today.Dlf owns land, so this stock should be ahead of the market. Me thinkie, DLF not going to sniff 2500 in the near future. Them guys who bought at 1200 probably have to wait a while to get even.

Shiv Desai, CFA said...

Dear rte,

The price of DLF you are quoting is its life time high price, where SENSEX was also at its high. So, when you evaluate real estate market with this price it implies that you are assuming that the share price of DLF is fairly priced. Which might not be the case. Indian infrastructure stocks were overvalued because of over optimistic future expectations and sector specific new fund launches. So the bottom line is how to measure that price of 1225 was correct or price of 609.75??? There might be the case that even 609.75 is already ahead of the market which means that it factors in the expectations of higher real estate pricees in Future.

More Over, Economic theory says that house prices can not grow more than that the growth of income level. So real estate appreciating at the rate of whopping more than 25.0% will have to regress in future to the mean level. But the other possibility can be that prices will grow at that level in future but have experienced a paradigm shift in valuation whic hmight not reverse.

Anonymous said...

Very good thread.

I recently bought property in Gujarat.

After stating in USA for 1 & 1/2 years with my all saving of 10Lac(mostly invested in equity), though buying of some land in outskirt of Ahmedabad. When I went to India in end of 2007, Real Estate is so overvalued, all the builder then started selling their land in super builtup area, that too for far away from city area, they will ask Rs 300/- for sq Meter with minimum area of 400 sq.meter area, actually you will get only 350 sq.meter(builtup) area as you will end-up paying for front road, your fence wall etc, etc. that did not fit in my mind, I diverted my mind to buy some bungalow in G'nagar rather then buying land far away from the city.

Bungalow price in Gandhinagar starts with 40Lac to 1 corer depending on the location & size of area. My biggest problem was Money(Guess, it's everybody problem). I had only 10Lac, I decided to apply for home loan to buy bunglow, then another problem. Most of the builder want 70-80% of their money in black payment, to avoid 12% Gaining tax. and I will get home loan based of Bill of sale of the property. :-( Hence I need to avoid idea of buying property from builder, finally I got the property from individual seller through the so called Agent(As you all know, in India to become agent you don't need any certificate or degree), The Sell price of property was 67Lac, finally I got the property in 71Lac with Registration etc. I am paying Rs 60K/Month installment for my 55Lac home loan.

As I am currently living in USA, I am trying to rent out my bungalow around Rs. 15000/-, I have not got any one yet.

However, at age of 31 I am proud to be owner of property in very good locality where I grown-up. I would like to live my retired life in this city. :-)..

We still hold some agriculture land in Gujarat, but now scenario for agriculture land has alos changed as big company like RNRL, and other Natural resources company started setting up big big vegetable/Frozen market, these company wants to buy big chunk of agriculture lands to grow thier vegetables...and hence prices of agriculture land in rural area has also increased dramatically.

Anonymous said...

I am from Mumbai. Back in the late 80's and early 90's there was a bubble in Mumbai. My father purchased a flat in Mumbai back in 1984 for 2 lacs... By 1991 the "perceived" price of our flat had reached 20 lacs... Then the bubble burst and real estate was down for years... In 2002 I purchased a bigger flat for 20 lacs and sold the old one for 10 lacs (lost 50% of the peak 1991 value). Today the cost of my flat is over 1 crore... I have lived in bay area for over 12 years... My wife and I both work in hitech and we cannot afford a flat in Mumbai today...

Anonymous said...

I am hearing this bubble story only on blogs or forums. It seems Indian media is private property of politicians and profit-earning businesses. It is only concerned about Cricket to mis-direct public and keep it in illusion.
Question is who creates this bubble?
I think ultimately public is responsible who lets the bubble occur in first place and it is the only one which suffers. Will there a burst like sub-prime burst in USA.
Can we do something to burst this bubble, it seems to be taking everyone of us into it and if it ever bursts that burst will be useless for us.

BTW nice blog

ashish said...

Hi Anshu, This is a very interesting discussion you have there a bubble in Indian property or not? I have been an active investor in the NCR-Delhi, Gurgaon & Faridabad for over 5 years. I live in Ny and travel to India a few times a year. I also write a RE blog-pl see Based on the discussion on your blog, I would like to point out a few things:
1. Generalizations based on prices seen on 99acres or any other website is not a good enough basis for discussion. To explain, if prices indeed were $250K/acre in F'bad and $20K/acre in NJ it should reflect in the price of apartments. NJ (as u and everybody on this blog knows) is v.large and so is F'bad. In F'bad, aptts are available at Rs.1500 psf (less than 20 mts from Delhi border) where as in NJ (Newport/Exchange Place-20 mts from NY) the cheapest price is in the vicinity of $450 psf. Therefore, either the developers in NJ are making a much larger gross profit or the developers in F'bad are selling at minimal margin. Economics teaches us that neither of those situations is sustainable. Therefore, it brings me back to the initial premise of the discussion -F'bad is at $250K/acre and NJ is at $20K. This is incorrect.
2. I must however agree that prices in several pockets in India are way out of proportion. I would however resist describing the market to be caught in a bubble. Again, pl read

We can continue this discussion in more detail later.


krishna said...

I feel its a bubble. And it will burst sooner or later on its own thats why its called bubble..

I don;t know NY but how can a economy sustain such prices when nobody can afford such flats..

If price grow like this, something or other will happen to control that even by govt. (whcih lacks will as their own money is at stake in form of black money)..

anyway i wish house to be available for everyone from a teacher or primary school in Delhi to CEO of XYZ Corp.. If the benefits are not reaching masses, there is NO use of such development and such divide will give rise to crime and more serious Naxal kind of problems that will bring everything to halt..

So inclusvie growth is need of hour not the growth of a small section..

Anonymous said...

Well I guess while comparing down town Jersey city & Faridabad the profit margin of realtors is not a good measure. It's more of a affodability. Can you have a sufficient income while staying in Faridabad to support that price level ? If the property is for commercial purpose is it going to generate break even revenue ? What kind of crop is going to give you such a return to sustain $200K/ acre price ? While comparing with US housing prices also compare the income level & infrastructure.

Anonymous said...

Foreclosure has already started in India since 2007 but the nature of foreclosure is hidden. Large banks, who had exposure to housing loan segment have started a real-estate service arm, who are selling the defaulting property to another home buyers under the pretext of helping property selection. One can check the various ads by ICICI Property Services Group.
These banks took a position on both side & created the bubble. For an example bank A gave a loan to builder B then they gave housing loan to apartment buyers as home loan. [Pre approved scheme] That’s how bank made a risk less huge profit with arbitrage. This is the big hole in Indian Banking law, which does not have chinees wall policy for financial institutions. There is a high co-relation between bank’s growth & real estate price surge.
For further details one can asses the balance sheet of top 10 banks.
I do agree there was a huge inflow of foreign funds which also heat up the segment but this fund sponsored only large projects. Local bank & black money is the sole contributor for 60% market.

ashish said...

That's an interesting observation.

I do want to take the opportunity to address a commonly held belief about the adverse effect of foreign funds into Indian realty. Foreign funds investing in RE in India obviously are investing in India since they find the market attractive for them to make healthy returns. Therefore, if the markets are mispriced (ie.if developers are asking for unrealistic valuations), the likelihood is these investors will not invest (this is not to say these investors cannot make mistakes but they are likely to be the first group to know when markets are mispriced) and over time markets will correct. This is what has happened over the past 12 months. Whilst end user prices have not fallen substantially, there has been a significant drop in valuations that investors are willing to pay to developers to partner with them. It would therefore be premature to characterize the entire market to be mispriced or to be in a bubble. For more specific details, please read

If markets continued to be mispriced, investors would flee since they would not be able to sell the produc and make money. Eventually, as their flight of capital, markets would correct. In summary, i think foreign funds are good for the markets since they help in the process of price discovery.


Anonymous said...

current situation:

Anonymous said...

this is an interesting blog. Why are all the posts(comments) here showing only time and no date when they were posted. It would be helpful in the long run.

ashish said...
This comment has been removed by a blog administrator.
Saurabh Kumar said...

V interesting discussion...i was in India recently and saw a lot of 'promotions' from various builders in NCR...clearly having difficulty in clearing inventory.
With 3.5 times more people and 3 times less land ..the overall availability of land is 10 times less in India than US....which of course pales in comparison to 50 times difference in Income. Mostly the inability to commute due to poor infrastructure adds to the challenges. Delhi and Mumbai have been in top 10 most expensive places for real estate (in absolute terms) almost a decade. Short term correction..long term growth would be my vote

krishna said...

Well I agree with people and India growth story. But unable to understand why DLF the pioneer is tradind now 20% below its issue price.. And belive me, this is just the start :)

Now one will see the bubble burst which everyone was waiting for in next 5-6 months. See tomorrow the Indian Stock market and real estate can't remain aloof from that:)..

Happy INVESTING in real state now:).. Its best time to get out of shares or real states if ur view is short term or you can't sustain the same in case of layoff.

This is global crisis i feel.. US all bad news be it floods, war, economy, home crisis.. India again same story 14 years high inflation, unstable govt., election next year and thus govt. will take tough steps to please public and what not...

so in next one year, people like us surely would loose money if we invest or remain invested anywhere..

krishna said...

One thing missed when comparing areas... Large area of Texas, Arizona is desert where no one can live.. And they are biggest states of US..

So with that the land ratio/head is US will further come close to that in India..

Anonymous said...

As we have always said that heavy correction is on its way.Dlf issue is no surprise.But flow of funds and NRI intrest in India reality companies are bound to hit back.This will infuse organised players to create a mark.We are taking care of Prject liasions and managments for developers and are in close touch for growth and developing methods they are gaining.Reachers at our Portal have completed the study ffor NRI inventments in indian growth and will be released in July in UK.

Anonymous said...

Many folks mentioned here India has more population and less land , so the price is justified.

Did you ever think the entire Indian population is living less than 2% of entire Indian land.

If the 2% goes up to 3% then what will happen?. We can build homes for another 50 crore people.

Anonymous said...

Hi Anshu

I am also from valey and following indian real estate prices closely. Let me tell you people are sitting on real estate bubble which is going to burst anytime now.
I follow Mumbai prices and they are at ridiculous levels. The market is speculative. I see the market getting crashed similar to 1991 when Stock markets crashed, real estate crashed too.

Its only matter of time, some people are in India are not buying this idea and will get hard hit when their Cr worth flats would sell around 50% of value, Imagine with Intrest rates close to 14% lot of ppl are going to get TRAPPED in properties braught at VERY HIGH VALUE and paying VERY HIGH EMI, and loosing the opportunity to invest in Stocks at same time.....

Anonymous said...

India does not allow direct investment in equity markets for non-resident Indian citizens (and definitely not not foreigners). I do invest in US-listed ADR (like Infosys) and exchange traded funds (or ETFs like IFN) but I wanted to invest directly. One option available is real-estate.


hypeemcee said...

A large number of foreign investors are aggressively entering the real estate investment space, with close to $7 billion to $8 billion of venture capital expected to flow into Indian real estate over the next 18 to 30 months.

A T Kearney has studied real estate investment trends across 50 countries and their relationship with the GDP of their respective countries. There is a strong correlation that exists between the two, and based on this, A.T. Kearney developed a ‘global industry curve’ for real estate with best-fit line between real estate investments and the GDPs of respective countries.

Historically, the Indian real estate market has been highly fragmented and unorganised. Real estate investments were very limited, representing only 2% of the total GDP in 1995.

A.T. Kearney's analysis of the Indian real estate market using the 'global industry curve' indicates that this ratio for India can potentially go to 4.2% in 2010, at a compounded annual growth rate of 14.3%.

The real estate sector is driven by strong and consistent economic fundamentals and growth. India's economy has been amongst the fastest growing global economies in the last 15 years with a compounded real growth rate of 6.4%.

ashish said...
This comment has been removed by a blog administrator.
Anonymous said...

So you feel a 3bed which now cost 70lacs in outskirts of Delhi will costs 1.2 crores in 2012 and thus do you feel our salaries will also grow in that proportion to buy that?...

GDP will grow iff the Agricultural sector will grow with that speed as that has been laggard.. Most of top notch companies will strive for this rate and lots of them will miss i guess..

anyway welcome to "imaginary" scenario when a outskirts flat of 1.2 crores. :))

Lets wait for Economy crash and will see the real fun:)).. Sooner of later it has to happen once teh Oil kicks the Indian economy of the roll..

Sumedh said...
This comment has been removed by the author.
Anonymous said...

Hi Anshu...

I totally agree...speculation is much more in a market that is immature...

But as far as I know, good quality agricultural land, which is not very near a city, costs about INR 2-4 lac in Maharashtra (my state)...$2,50,000 sounds a little too stretched...

- Sumedh

ashish said...

As investors, blog writers and the educated elite in India it is our obligation to go beyond the headlines and rhetoric. Over the last one month, across multiple blogs, I have noticed the following reasons for an imminent crash in the Indian markets (amongst many others):
1. Japan RE crash of 80's.
2. US sub prime crisis
3. India's RE markets falling or stagnant between 1996-2001.
4. Crash of US banking stocks
5. Crash of Indian stock markets.

In writing their comments and blogs, people have invoked their favorite demon depending on the magnitude of the doom they wanted to communicate. Unfortunately, it is not working. It's time these prophets of doom had a relook at their analogies and accepted the fact that there is little or no correlation between some of the events I have pointed out above and the current state of the Indian RE markets.

Ponder on this:

1. I feel it will be incorrect to characterize the entire Indian market to be caught in a bubble. Some of you who are sock market investors have probably seen the carnage unfold in the US markets (not to mention the Indian market meltdown) over the last several months. Over the last 3 months, the Dow is down by approx. 10%, Merill Lynch is down by 35%, Morgan Stanley is down by 28%. However, even in a market unable to find a bottom there have been winners such as Apple which is up about 18% and Research in Motion (manufacturers of Blackberry) is up about 6%. The point I’m making is that it is possible to find gems even in a downward moving market. Infact, to extend this analogy further, I would say the prices in Tier I cities are by and large within fair price range. The real problems are with Tier II and Tier III towns (Just about two years ago Tier II and Tier III were the new hope for RE investors who missed the Tier I bandwagon!).

2. To all those appalled at Rs.1 cr aptts, this is what I have to say. Rs.1 cr certainly should not be the median or even average price of an apt in India-especially in cities like Pune (which at best can be decribed as Tier II aspiring to Tier I).

Having said that, I would encourage all potential investors with a real desire to make good investment decisions to take a relook at the market. Stop classifying the entire market as one big bubble. There are unscrupolous elements in every market and RE in India is no exception. If your intention is to crucify them, you are doing a good job. If your intention is to make money, you are on the wrong road.I have written about this on my blog under post of 9th June.

Over the next several years, I predict the following trends in the Indian RE markets:

1.On average, apartment sizes will get smaller (see my very first post on apartment sizes at This means the total cost of ownership (TCO) will fall. However, do not confuse that with falling prices since psf rates will continue to rise. Infact, smaller apt. sizes will fetch a premium (again I have explained this on my very first blog post).
2. "No frills" apartments will become a reality rather than a rarity. This will again reduce TCO but don't confuse this with falling psf prices either. Make sure you make an apples to apples comparison. Cheaper doesn't necessarily mean prices have fallen-see if you are getting same facilities, specifications and build quality.
3. Regulation will force builders to quote prices on carpet area rather than super built up area. Read my post dated 28th May,08 on this topic at my blog

Ashish Abrol

Anonymous said...


As a NRI you can still invest in Indian equities through a NRE account. i did invest in mutual funds directly in india via this route.

I agree that everything that goes up comes down, and in the future with inflation, mortgage rates things may cool down in RE market in India. However, historically if you see a trend of prices over last 30 years, every downturn broght down prices but not to the original level, it always has created a new higher baseline. If you invest with an eye on 2020 say, you will definitely not lose money, because god has stopped creating new land long back.



Unknown said...


First, thanks for reading my blog and commenting.

I am unable to invest as I am a US-based NRI and I was repeatedly told by 2 bankers in India that I cannot invest directly in equity markets. I was told this is due to SEC regulations.

I do own ETFs and ADRs though here in US.

I don't buy the God-Land argument. I think 20+ years from now we may be asking why people cared so much about land when we can build 100+ floor towers. Also, only 2-3% of useful land in India is urbanized so there is plenty of land left, even if it were important.

I do wish luck on everyone that's buying now. I just don't think that if $250K condos cannot be supported by $35K median wages, how can they supported in a $3K median wage environment?

ashish said...

Anshu, I want to point out two things with reference to your comment.

1. In the US, median household wage for 2006 is approx. $48K and median home price was approx.$220K. That translates to approx. 4.58 times annual household income. That is certainly a good measure for determining affordability and that measure should be applicable in India as well. Infact, in India that number should be lower than 4.58 since home loans are more expensive and tenures of loans are shorter making it even more unaffordable.

2. Having said that, your analogy about $3K supporting $250K aptts is not an accurate observation. $3K (or I think probably $2K) is the median income in India. However, $250K is not the median home prce in India! If you count the villages (which you should for this comparison considering 60% of India still lives there), the median home price should be anybody's guess-Rs.50,000, Rs.1 lac? Don't know. However, it is obviously not $250K.

There could be other reasons you may fel the market is overheated in India but this argument doesn't support that view.

More later,
Ashish Abro.l

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Awesome article Anshu. Whenever i visited the US i always marveled at the fact that i could afford a lot better house (more area/better ameneties/better locality) in the States if i relocated there.

Indeed the situation in India is crazy at this moment. You made the smart choice.

ashish said...

Contrary to mass opinion, I believe there are some great buys available in the market which have become even more attractive because of a slowdown in sales. I have written about opportunities in the resale markets including how to identify them. You can read the post at

Happy investing!

Ashish Abrol

Anonymous said...

Funny, Ashish Abrol sounds like a perma bull such as David Learah. Any one remember him?

All the so called great opportunities in real estate of today will look like the worst investments in a few months. Never try to catch a falling knife, unless the money is illgotten (in which case you deserve to lose it)

Also have you noticed the shift in the reasons for the increasing prices of real estate (anyway now I believe its coming down) first it was the IT, then BPO its black money.... please people, black money etc was always there, is there and will be there. One would be foolish to invest in real estate to convert black to white. The IT people are closely watching the real estate investments.

Anonymous said...

This is a nice posting. I really like this post.

Anonymous said...

I live in the caribeean. My cousin in India is planning a condo construction project whereby he gets into a joint venture with a land owner and then builds 4-5 duplex condos in one year period. The project is for about Rs. 1 crore and the returns expected at this point is 36% from sale of condos. I am thinking of investinng just a bit in this project. Does it sound good. Do you think the real estate market will fetch the same high yield after one year as it is yielding presently. Thanks for responding.


ashish said...

Hi SM,
Is your cousin going to bring in the capital required to construct the condos? The info you have provided is very sketchy and therefore it is difficult to determine the profitability. Just to give you an idea -the construction costs in metros ranges between Rs.1100-1300 psf of super built up space. Ofcourse, one needs to know the city to determine the selling price. If you are able to share more deta ils, I may be able to help.

To get a general sense of the RE markets in India, you may also read my blog at

Ashish Abrol

Hard Money Lenders Direct in California said...

Investors From Europe Buy Real Estate In United States

Many investor from europe and the uk are buying real estate in the united states.
I've interviewed a real estate agent in california a week ago and he was telling me how much the market was bad until he started to work with investors from europe and the uk.
"They just have a lot of money" he said.
"I met them during a spring brake in europe. I said to my self there is no work anyway so I will go and travel a little bit.
I think it's the best vacation I ever had and it's still continuing , the only difference is that now I'm actually making money".

Investors don't need any green card, good credit, bad credit or visa.
They only need to put a least 35% of the purchase price as a down payment.
These investors will get a higher interest rate and if they will put 50% as a down payment they will probably get a much lower interest rate.

Today the euro is much higher then the dollar.
So if the american investors are excited about the foreclosures can you imagine the europeans?
For the europeans everything is much cheaper than for americans, because the value of the euro as oppose to the dollar.
Can a foreigner really get a loan in america?
Sure they can get a loan, just like an american investor can get a hard money loan without showing any credit information, they just need to show interest. interest for a mortgage lender is measured with money. banks or hard money lenders will loan you the money but you will have to put as a down payment a big chunk of your money. Than you will not going to loose the property you've purchased and get the banks in trouble.

Also there are many banks out there that are selling their Loans or notes to foreigners just because they need to take some loans off of their shelves, just the way you're trying to avoid foreclosure or trying just to sell the house.
Banks today have to deal with so many issues like foreclosures, bankruptcies, notes and money in general.
Most banks that have loaned money to borrowers in the past 3 years are not protected or insured.
Three years ago the bank started to loan 1st and 2nd mortgages, 2nd mortgages are the cause of them not having mortgage insurance. So because they don't have mortgage insurance they will loose their money if a foreclosure is placed.

So why did the banks offered borrowers 2nd mortgages?
Because it was easy to qualify and a lot of borrowers tried to avoid refinancing their 1st mortgage.
Banks just wanted to make money and more money and that's what they did.
Now the banks are not willing to Loan 2nd mortgages anymore.
Read other articles I wrote to learn more about mortgage insurance.

Niteen said...

I wanted to find out if there is a RE bubble in India and google pointed me to your blog. Interesting analysis, and I agree with some points being made. But I would not compare aggregate national numbers (per capita etc), but look at growing higher middle class as a segment. So I think the market should correct by probably not by 80-90% as your data indicates, but by 20-30%. Here're pluses and minuses:

- growing job market that's creating higher middle class
- lack of housing for this segment (requiring modern gated communities with all the "filmy" ammenities)
- growing population, the older generation is not migrating anywhere due to lack of facilities in non major areas. So youngsters have to bid up prices in the metro areas or opt for outskirts.
- If I have to compare median house prices and salaries for silicon valley the ratio is about 9 ($720K/80K). If you compare professional job oriented cities in India, say Banglore or Pune the ratio actually lower about 4-5 ($120K/30K). If you add to this even faster growing business class you can see why prices grew faster.
- What's raining on this parade is inflation and interest rates; all the new middle class is buying flats and cars based on what they can affort per month. The EMIs are going up substantially that should bring prices to equillibrium. THis is going to be the key, I know many folks speculated on real estate, if the stock market stays stagnamt and inflation goes up then folks will have to turn in their flats, thats where we will start to see bubble bursting effects.
- Real estate is more "stickier" than stocks, even the most speculative areas in the US (Miami, Las Vegas) saw real estate prices drop by 40% ish over the last year. This is lower than 60% drop suffered by NASAQ as a whole, or 80% drop suffered by CSCO or SUNW.

Unknown said...

Niteen - Thanks for the excellent commentary. I don't think we will have a 80% drop in real-estate prices but remember that real-estate is a game of leverage. This means most people put down only 20% of the house value when they buy it - so when house prices drop say 40%, they effectively loose not 40% but 200% of their investment. Buying a home with 20% down is more akin to buying stock options or buying stock on margin. Very dangerous game when things move down.

But you make some good points over all.

krishna said...,curpg-2.cms

with inflation touching 13% and Interest touching again 13%, do you feel one would see his flat cost rise from 1 crore to 1.25 crore to 1.5 crore to 2 crore in 3-4 years. If yes than still u just recover ur money. If no, u lose ur money..
if lost, u will lose ur lifetime savings to pay back the 1 crore flat and if layoffs u will be kicked from ur so called 1 crore flat...

I feel in last years rise in IT salaries are not what it used to be. Hirings is freezed in lots of companies and layoffs in 6-9 companies in heard off. If IT shrinks, who wil buy 1 crore flat in white only God knows

Anonymous said...

There is a corcle of 8 yrs and the game of flats costing 1 cr or 1.25 acr is coming to an end.RE markets are all set for corections and alot of deals are coming into the drains.Loss cutting and desperate sales are there in North India,and this is going to be there till desperate buyers are over with money.As we are in touch with major developers for there project liasions each and every developer is in cash crunch because of heavy costs,and are desperate for sales,which are nlt happening.Projects are looking for money and there are no funders.
Bubble is just right in the corner and 25%is going to blow.

ashish said...

All very interesting comments though I'll probably stand alone defending the prices in NCR. I write a blog on NCR at and that's the market I understand very well. Except for flats that are priced above Rs.1.5 cr (or Rs.5500 psf and 12 months away from possesssion), do not see much of a correction in RE prices in NCR. I have given specific examples of projects I feel are overpriced. However, to characterize the entire market as such would be foolhardy. Prices in city centre properties in Delhi I think are not overpriced although prices are as high as Rs.26,000 psf in certain parts of the city. There are detailed posts on my blog covering micro markets I think are overpriced, underpriced and fairly priced.

Pl visit

Ashish Abrol

Unknown said...

Remember in Japan during the last real estate crash:
The residential real estate were selling at 10% of their peak and commercial real estate were selling at 1% of their peak. Though the decline was prolong 15 years because of Japanese Govt low interest rate ( 0 % ) but even the 0% interest rate could not save japanese real estate though it prolonged the pain.
Mind it: Japan is considered to be one of the most densest/expensive place as the land itself is very limited..

Anonymous said...

keep buying those 70 lakh crappy apts lol
per business standard

DLF, the country’s largest real estate developer, plans to enter housing development projects in the overseas markets to overcome a slump in the domestic property market, a television channel reported today, citing Chairman K P Singh.

The property developer may build houses in Singapore and Malaysia, which have a large Indian population, the television channel reported, citing sources it did not identify.

Meanwhile, DLF will use cost-effective resources and work at higher levels of efficiency to beat the slump, Singh said in the company’s annual general report of 2007-08.

“The financial year 2008-09 will be a challenging year for the company. The global liquidity and credit crises and inflationary pressures within the domestic economy would impact the business scenario,’’ said Singh on the country’s current property market situation.

The company’s comments on the sector come at a time when most of the property developers are reeling under a cash crunch because of a drastic fall in property sales, a hike in lending rates, a crash in property stocks, curbs on lending to developers, among others.

Property sales have fallen more than 35 per cent this year in many cities and regions such as the National Capital Region (NCR) and Mumbai, mainly due to a rise in home loan rates and unaffordable realty prices, thereby limiting execution capabilities of developers. Reflecting this downturn, property stocks have fallen up to 50 per cent from their peak in January this year, eroding the wealth of investors and promoters

Anonymous said...

per sify news
The real estate market across India is witnessing a downturn and the situation is no different in Pune either, where there has been at least 15% to 20% slowdown, a figure equivalent to the all India statistics,” Mavani said.

Though a nationwide phenomenon, but several reasons have resulted in the Pune-specific slowdown. “In Pune, as compared to other cities, a large number of bookings that take place are from investors. That has slowed down and cancellations too increased from the investors’ side, thereby making it one of the cities with highest number of cancellations,” Mavani explained.

He said Pune has also surpassed Bangalore in terms of property cancellations. “It cannot be quantified, but a lot of cancellations took place not only in the investors but also material side,” he said. A one-third of the total bookings in Pune are investor bookings, said KMPG officials.

“Several Pune-based builders have however already started taking steps by not selling properties to investors,” said KMPG executive director Prafull Jain.

Other reasons accounting for the slump are however overestimation and perception. “Lots of announcements of new properties were made with the IT and ITES boom, but that has not resulted in the equal number of homes being built. Moreover, many people are playing it safe and waiting for the market to change before they invest,” added Mavani. The move would also see a 15-20% correction of prices across the board.

“If the situation improves within 18-24 months, it is good otherwise it could go worse. Unlike the earlier slowdown in the 90s, the banking system does not have the ability to bail out the industry,” the report said.

On a positive side, however, the Pune-specific survey has revealed that an estimated supply of 16 million square feet of commercial space would be available in the city over the next few years.

Anonymous said...

MUMBAI (Reuters) - Most Indian developers have hit the brakes on fresh land acquisitions as a slide in the stock market, rise in interest rates and aggressive demands of the private equity investors have limited funding options.

After five years of boom, real estate firms in India are grappling with tepid sales and cash crunches as inflated property prices and interest rates at near-decade highs scare away buyers.

"The aggression for acquiring land has disappeared. Deal volumes are down 35-40 percent, though prices still haven't moved significantly," said Anuj Puri, who heads property consultant Jones Lang LaSalle Meghraj. "My land division guys are crying."

This is a sharp turnaround from as recent as a year ago, when property firms, flush with funds from public offers or advance bookings, rushed to bid for land parcels, even at distant locations in metros, and in second-tier towns.

Even mid-size developers in India say they hold land reserves of 60-100 million sq ft, sufficient for projects planned in the next 3-4 years. But slumping demand could drive down land prices soon, leading to some distress sales, officials say.

"We have not acquired an inch of land in nine months. I think by December-January, land prices should soften," Vyomesh Shah, Managing Director of Akruti City told Reuters late last month.

Analysts say shortage of cash has also forced developers to put off new project launches and delay work on current projects. Some planned projects may not even materialise.

"Developers normally did construction through booking advances for planned projects. Sales are down, so obviously there are delays," said an analyst at a Mumbai-based brokerage that has revised downward target price on sector stocks by 15-25 percent

1 of 1Full SizeRising inflation and an expected slowing of the economy will only worsen the situation, say analysts, who are now reviewing their target prices on these stocks.

An analyst at a domestic brokerage said it had recently changed valuation methodology to net-asset-value basis, which had led to some downward revision in target prices. The new method values companies based on current assets rather than future cash flows, he added.

CLSA lowered its net asset value estimate for HDIL by 29 percent, citing higher costs on account of rising interest rates.


Real estate stocks have been among the worst performers in the Indian stock market, as funding concerns and the sub-prime crisis drove away investors.

Shares of the four largest real estate firms in the country by market capitalisation, DLF, Unitech, Housing Development & Infrastructure and Indiabulls Real Estate, are down by 50-65 percent so far in 2008.

In comparison, the benchmark stock index BSE Sensex has lost 27 percent.

While most real estate firms are still getting by with advance bookings done 18-24 months ago, a sustained lack of demand in the coming quarters may worsen the situation
Right now, it is only depletion of paper profits," said Nayan Bavishi of U.K.-based investor Baron Group International, which invests in real estate projects in India and Dubai.

"Wait till after Diwali. Their pockets will get eroded further."

Anonymous said...

Ashish and others who are a little hazy about median price/median wage ratio. In the west the bell curve around the median is very narrow where as in India it is very wide. Hence the median wages in the west is near true reflector of the actual income. Whereas in India the median wage is highly influenced by the 50% extremely poor people.

Anonymous said...

True that real estate prices have gone way up in India and one can say that due to population and economic growth price may not come down.
But there is limit up to what level price can go up, people should be able to afford and pay back mortgage. Real estate in India has slowed down if not declined yet. There are fewer buyers in market now what used to be few months back when apartments (like in Delhi) were selling like cakes.

Anonymous said...

interesting discussion. though I hope RE meltsdown, (so that I can buy a Idecent house) I doesn;t see it happening. am hearing these crash theory for past one yeae, but the pricess are not coming down at all. max the pricess are stayed at the same level probably. my guess is that the pricess comes down only if IT sees a crash. as long as IT payes good salary and banks are ready to give loan, pricess wont come down.

another point i observed is my small home town has also seeing RE pricess gone up 200%. surprisingly tyhere is no IT there and not even big industries. but a plot is costing 1+ lakh, while it was only 30K 2 years back. my understanding is that all govt employees (like teachers, postmen, BSNL etc) who serve in small villages are moving to these small towns and hence the pricees are also going up here. again, the reason is good infrastrcute, children eductiona etc.

Anonymous said...

Remember real estate prices are stickier down the road and it takes time for the prices to come down unlike stock market..

Infact, real estate boom is a world wide phenomenon and India is not immune to this
Now real estate correction is a world wide phenomenon and India won't be immbune to this.

IT Salary: If US and other big countries are in recession then slaries are bound to go down..

Many of my friends in I cannt afford a decent home in INdia right now...
So, anyone saying I salaries are the one hiking up the prices, I don't agree with it..

Prices are up because of speculation only...

Anonymous said...

Hi, I dont agree for those who are into Real estate and salary is a problem.In US salaries might be getting a cut but in Indian real estate companies are looking for performers and huge pacakages are online for them.working with brand like I and many of my fellow collegues have been on a hike.Sales is biggest challenge and when a person targets this Salaries are no problem.In IT there might be some reccesion but in RE its a booming time for Performers only.

krishna said...

I guess real estate prices are governed by IT and allied professionals and not th RE professionals on their own.. If IT goes down, who those talented RE profs will sell their 70L flats to??

ashish said...

From the last few comments on this blog, it is clear that the bias of this group is towards falling prices in India. However, a few have pointed out that prices have infact not fallen despite no shortage of doomsayers. Well, prices may have corrected already without most people noticing it. The reason is prices have actually not risen over the last 12 months and inflation has averaged over 8% during this period. Therefore, nominal prices (without accounting for effect of inflation) may not have fallen but real prices already have by the factor of inflation (ie.8%). I write a blog at (recently redesigned) and have been supporting the view of stability in prices rather than a fall. Over the next 12 months it'll be very clear whether prices will actually fall or not. However, suffice to say the correction everyone is waiting for may actually have happened already.

Read more including video interviews at


Anonymous said...

Check this link, especially people who say that property prices are not going to come down ...


Anonymous said...

why should nri's buy house in india anymore??? you can buy a foreclosed houses for 40-75k in Dallas right now.Lets say you buy two for 120k and get rental income of 2000 dollars a month= close to 90000 rupees/month.

You buy two houses/ apartments back home for 1 crore=$250k, you get a rental income of 25,000 rps.

Invest $120k and make 90000 rps=20% return a year
Invest $250k and make 25,000 rps= 3% return a year.

Sayaji Hande said...

I live in NCR region and have worked in Hyderabad, Bangalore. I am invested in India RE (bought 4 apartments till now, cashed out of two).. Here is my opinion..

1. 1-Cr apartment is an exception / outliers. A few speculators (limited gang of rich..) may be looping in those properties.
2. Last 6 months, definitely most of the markets have fallen by 15-20%
3. There are still good pockets where you can buy at reasonable rates.. of course, you need to search and be ready with your money. Among three cities, I found Hyderabad most speculative.. Corrections may be higher out there.
4. In my view, it may not be a great idea to compare western markets (US, Japan) – there is lot more possible growth in India. In short term, there are risks to extend of another 20%.

So – instead of waiting for big crash, which may not happen, try to search for good deal in next 6 months or so and ride!!

Sayaji Hande

ashish said...

Rte, If you can get 20% ROI in Dallas property, you shouldn't think of investing in India. As per the latest report in The Economist (published last week August,08), Chisinau in Moldova has the highest residential yield in the world of 14.17% p.a. Therefore, 20% p.a. is certainly a good bet.

Sayaji, I completely agree with you regarding available buying opportunities in the NCR. I have some specific recommendations for the NCR on my website at You may read posts under the heading -Investment Ideas.


Anonymous said...

3 years ago, you put a house in the market, it was sold in 45 days. Now, so many foreclosed homes, that you cant sell them now.
so many people defaulting on loans now that you can buy foreclosed homes and rent to these people who have bad credit( no desis i know yet to default, since all save moneys). invest 60k and make 1k a month. Invest 30k, pay 300 bucks a month on mtg payment, and still pocket 7oo bucks a month.Desi's have so much cash here, that they are buying houses and renting it out.

Indian housing market is like the 1998-2000 nasdaq. I thought that oracle of omaha was a fool since you only make 10% on BRK per year, and i was making $100-200k a month on stocks with no pe/ no cash. :)

Sayaji Hande said...

1k per month for 30k? WOW..

Unknown said...

New York Times covers how China is suffering from real estate problems now - "Although the last national statistics showed single-digit growth from July 2007 to July 2008 in the average price of commercial and residential real estate, real estate brokers say prices are down from peaks reached earlier this year, while the number of transactions has plunged."

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Anonymous said...

infy warns, it will touch high 20ish. TTM at 9ish.
Another bomb, this time in delhi( how many is that ??? 8 or 9 in 4 years??). what happens when they blow out a IT center????

I just want to pump up 1 stock, do your dd, stock symbol HLIT.

Unknown said...

Very few software managers get paid $250k in India (and a lot of that is variable pay anyways). Also, there are many Indians (yours truly) who've been around and seen the Stock and RE markets for last 25 years (specifically Bangalore). So we are not wet behind the ears. Here is my prediction based on past experience:

RE market in IT cities - specially Bangalore - will hit bottom after a 50% - 80% decline from 2007/08 peak in the 2010 - 2012 time period. This will depend on how long the US catastrophe continues (latest talk is about this one rivalling the Great Depression, out there).

Bangalore itself (like many others) may stabilize or even decline as an IT magnet long-term. As Tele-commuting and other innovations evolve who the heck wants to travel 3 hours a day and end up too tired to work mentally :).

As other geographies become more competent and attractive, seasoned developers will get hired and work out of wherever they are - Russia, China, India, US, ... all within the same team as is already widespread in the Open Source movement.

Conclusion - Do not expect this RE decline to end up as a V-shaped recovery. IT would probably be a L-shaped one with a 10+ year recovery to 2007 levels.

Corrolary - Long term, RE is just like any other investment. It grows around 12% - 15% compounded annually in the best of locations over the long term. This reversal to the mean will be pretty painful.

Unknown said...

If someone says that software company managers are being paid $250K in India annually then this is utterly a false statement.
Very very few software company managers are getting paid $250K salaries in India and if someone is trying to justify the real estate prices on this salary then this is the craziest idea I ever heard...

Anonymous said...

per TTB

The global economic slowdown is finally hitting the industry and more so the IT industry. Indian IT major Satyam is reportedly considering axing upto 4500 employees a fall out of the slow down in business.

This is roughly 9 percent of the company’s work force. Reports quote company sources say that 1500 employees have been put under performance improvement plan (PIP) while 3000 others have not been given increment in their respective appraisal. Company says the bottom 5 percent based on performance have been given the PIP where in such employees will be given dummy projects to prove their worth.

To add to the employees’ woes, reports say that on Friday all the employees where issued an email notification from company chief Ramalinga Raju warning the ones especially on the bench to not bunk office and be in their best dress code failing which disciplinary action will be taken.

Anonymous said...

Deutsche Bank predicts sharp fall in property prices

Tight financial markets will likely aggravate the downcycle in the real estate sector and lead to a sharp fall in property prices and defaults by few developers, Deutsche Bank said. Reiterating its underweight rating on the sector, the investment bank forecast further downside in realty shares which have declined roughly 33% so far this year.

“We are yet to see a sharp fall in fundamentals for the sector in terms of a sharp fall in property prices, defaults by developers to banks, and a sharp decline in revenues and profits,” Deutsche said in a recent client note.

The investment bank opines that a severe downcycle in the sector now seems inevitable with the reversal in economic growth, low property prices, slump in mortgage rates and under-supply of units.

“We forecast major shortfalls in net cashflow, with asset-liability mismatches in a tight financial market environment and a currently cautious central bank. Most developers will not acknowledge a significant downcycle, but their financials (slowing growth, falling margins, rising debtors and gearing) and actions indicate otherwise,” Deutsche said.

The sharp rise in banks’ lending rates in the last couple of years has driven up the cost of acquiring property significantly, deterring prospective buyers to defer purchases. Sharp jump in land and raw material prices have made it all the more difficult for developers to make property more affordable.

“Despite the large equity raising and the sharp increase in sector profits, aggressive land chasing and the sharp increase in debtors have resulted in absolute debt levels increasing sharply in the last 18 months. Thus most developers have high gearing ratios,” Deutsche said, while assigning Indiabulls Realty and DLF ‘hold’ rating and Puravankara and Sobha Developers ‘sell’.

Drawing parallels to the state of Tata Motors, which recorded strong growth in the mid 90s until an economic slowdown with high debtors forced write-offs, resulting in a huge loss in 2000-01, the investment bank said India’s realty sector is reflecting trends similar to those experienced by the auto major in 1996-97.

The Tata Motors stock, according to the investment bank, climbed from a base of Rs101 in 1992-93 to peak at Rs564 in 1996-97 before falling to Rs40 in 2000-01. Deutsche notes, “ Despite weak demand and slow sales, developers have not yet been willing to reduce their property prices. It seems that they are prepared to hold properties rather than reducing their property prices since they have made significant profits during the last 2-3 years. However, the same is not true for the secondary market.”

Anonymous said...

The impending doom for Indian property market has been so obvious for oh so long...Below is an example article recently published..

Property investors in India forced to sell at a loss by global downturn
Thursday, 25 September 2008

Indian properties being sold at a lossYoung property investors in India are selling at a loss because they can no longer afford to pay the interest and costs associated with owning multiple properties.

The global downturn has set off a panic reaction, inducing investors to close deals at losses. It has become almost impossible for those who invested in real estate last year to exit the scene as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.

Typical is 35-year-old Rahul Verma, who works with a Noida-based IT company. He bought a flat in Greater Noida early last year purely as an investment with a bank loan to finance 85% of the cost.

Since then his EMIs have continuously gone up thanks to a series of rate hikes by the RBI. However, the prices haven't climbed as expected and the outgoings have made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.

'Several investors are stuck simply because there hasn't been enough price appreciation in the past one year,' said Raheja Developers Chairman of Navin Raheja.

He said that young investors bought at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation as they bought at a higher market rate and are compelled to service two EMIs.

Some investors have started defaulting. Others are approaching developers to cancel their bookings and return the money.

Meanwhile developers are finding it hard to finance projects and banks have started taking proactive measures to prevent defaults in their real estate portfolio by cutting exposure to loans against property.

State lender Punjab National Bank (PNB) has taken a lead and has stopped giving such loans, while Bank of India, Bank of Baroda and Indian Overseas Bank have decided to go slow on such loans.

'We are discouraging loan against property by refusing to provide overdraft facilities and charging higher margins,' said a spokesman for Bank of India. Other banks are discouraging such loans by valuing the property at distress level or by valuing the property at the price it was purchased.

Anonymous said...

It took me two hrs to read all the comments from top to bottom. People have expressed their candid opinion about the real estate scene in India. After reading this I wonder if people only from IT are able to invest?

I think besides IT there are lot of small businessmen,professionals from oil and gas field, construction, banking, manufacturing,consultancy,shipping,film industry,fashion... I can go on and on.

The fact is there is a big segment of people who have better income than it was 10-15 years ago. So the boom/bubble is not just because of IT although IT is a significant cause for it.

I doubt if this boom/bubble will ever burst but the prices will be stagnant for a while. People have so much money that they can hold on to their properties till they get good returns. This is the scene in the resale market.

For new appartments I see that there are fewer projects coming up. This means the builders are already playing safe. They have made enough money in the past 3-4 years and they too can hold on to their unsold flats till the situation improves.

I suggest that this is the right time to buy small plots in small towns and wait for a few years. But there is no wisdom in investing money in appartments in big cities.

It was a pleasure reading all the comments.

Unknown said...

Thanks for your comments. Yes, its been a great forum for people to share their thoughts/views and the situation is evolving every day. This could get worse a whole lot sooner than one would think.

I hope the downturn is manageable and small and does not ruin the entire economic growth story of last several years.

Anonymous said...

Hi All,
Its been a while since i participated on this blog. I have come back as i have always enjoyed the comments on this blog and the active participation. I was out of commission since i was involved with redesigning my website. Pl visit and you can see the daily RE headlines besides views of and interviews with leading RE personalities.

Despite the continued downturn in the economic conditions over the last 10 days, I believe that property investors in India should not panic. Most importantly, as a smart investor never paint the entire market with one brush. Some micro markets might be overpriced but as a whole the Indian RE market offers some attractive investment options.

Look at what the smartest investor in the world did again-he invested $5Billion into Goldman right in the centre of the storm. That's what smart investors do.

It's time to stop quoting the greatness of Warren Buffet and start following his principles. When everyone runs one way, you should run the other!

Time to invest? Pl check out for more investment ideas and tools to analyse investment options.

More later,
Ashish Abrol

Anonymous said...

Warren Buffet got shares at fire sale price thats why he pocketed out $5 Billion

I would invest in property in India when there is a fire sale and I hope things are becoming clearer to all with all these economic unrivalings

Anonymous said...

The numbers tell another story. GS was probably not bought in a fire sale and here is why.

1. I'm sharing 6 mth, 1 yr and 2 year stock performance of GS, Citi, Merill And Morgan

GS- 27%, 45% and 29% (ie. down 27% in 6 mths, 45% in 1 y and 29% in 2 years).

Merill-51%, 69% and 72%

MS-57%, 68% and 71%

Citi-27%, 62% and 65%

From the above, it is clear that GS has suffered the least during all three periods of measurement. Warren Buffet still decided to buy the stock which has fallen the least compared to its peers. The point I am making is that even in a crashing market there are opportunities. Indian property market is far from crashing and there are enough opportunities.

Anyone, who is looking for a fire sale may have to wait a mighty long time.

Ashish Abrol

Anonymous said...


You missed the whole point here.
What I intend to say is that Warrent Buffet got a super good deal on GS for the price he paid.
Otherwise, he would have bought GS quite sometime back, not at this time in particular.

Remember, Buffet's track record on stocks: he is not an emotional buyer.

Anyway, for me, the real estate prices in India in general are way bubblicious and simply detached from fundamentals. If history is any evidence, it is poised to come down a lot, not a matter of if but a matter of when
People who got in at right time and out at good time made money. This is not the time to buy any property

Abhijit Barua said...

Folks, on hindsight, do anyone of you want to take back any of your words?

The US is heading towards the stone age economy ;0 and we can see mad max become a reality!

oh India ! oh America!


Anonymous said...

infy touches 29ish again today, 2nd time in few weeks. next 2 quarters will not show much growth and more warnings. About 2bill cash in hand + 4 bill in rev( flat for next 2 quarters)= i say valuation wise it should be at mid to low 20ish before i jump in full blast.

Anonymous said...

DLF touches 320 ish today. If you are buying houses for 75 laksh, shouldnt you buy dlf at 320ish, since the stock was at 1225 when you bought your house for 75 lakhs??
DLF might need to go private if crap hits the fan.

Anonymous said...

The Indian share market started becoming bullish from 2003 onwards. But real estate prices in India doubled, tripled or in many cases quadrapled in 2006 and 2007. Same will be the story when the market has turned bearish. It may take another year or so to see the real estate bubble burst. The effect of bearish market will have to trickle down to the consumers and developers for the bubble to really burst. Just wait for and see the chain reaction. The show has already begun with low demand, high interest rate and fewer new projects. Imagine a flat worth Rs. 12 lakhs in 2003 going upto Rs. 40 lakhs in 2007 at an area like Indirapuram in the suburb of Delhi!! Let the market crash to 9000 level and see what happens. Dow is already below 10000 level.

Anonymous said...

Also read the follwoing article by economist M.S. Swaminathan how the Indian economy will be shrinking in the coming 18 months and how pain will be widespread and sometimes deep:

Anonymous said...

Pl read the article below in ET about rising prices in City centre locations. This article is from 5th Oct,08. On, I had written an article about NCR in which I had predicted continued strength in Delhi market and relative weakness in suburban markets of Gurgaon & Noida. I had written this article on June 10th, 08. In the foreseeeable future, I see relative strength in downtown locations in Delhi & Mumbai (especially) and Bangalore downtown as well. However, suburban markets are likely to remain strained over the next 12-18 months.


Anonymous said...

About the strength of real estate in Delhi or Mumbai it is true only for HIGH END LUXURY properties which is a small fraction of the whole real estate and if someone is bringing up this matter to generalize to whole real estate market's downward spiral issue then it is very misleading.

Anonymous said...

Just before a few days ago I was told that Hiranandani in Powai are coming up with three new buildings. The rate is 18000Rs/Sqft. Powai is a subarb of Mumbai.

Although prices are sky high and there are very few takers, still there is no sign of prices coming down.

Ghatkopar,Mulund,Bhandup these are all suburbs of Mumbai and the rate is 7500-6500 Rs/sqft in these areas. It seems only rich people can buy a house in Mumbai. Not even middle class can afford these kind of rates.

The situation is quite alarming and can create social unrest. We already see increasing numbers of hate crimes against "outsiders".


Anonymous said...

I must thank BubbleBurst for sharing the HTML link to the nice article by the noted economist Swaminathan Aiyar. As per Mr. Aiyar GDP growth will come down to 6%-7% range. This is way above than the avearge growth rate of 3.5% which India had in the thrity years post independence. But this 6%-7% GDP growth is lower than the 9% rate which India had in 2004 through 2007. The deceleration of this growth rate is going to cause pain and in his words:

"pain will be widespread and sometimes deep. Income and job opportunities will slacken, sometimes dramatically. Many companies will suffer shrinkage or bankruptcy, especially small ones. Boom sectors like transport, restaurants, trade, real estate and exports will go into reverse gear. Credit will tighten, for consumers as well as companies. Corporate profits will slump. The revenues of central and state governments will fall, curbing their ability to alleviate distress. The stock markets will fall further, and the Sensex may fall below 10,000. Tighten your seat belts: we are running into rough weather. "

Bipin Agarwal said...

What you said is correct. However real estate development in India is getting more planned. Real Estate developers in India are more forward looking then what 95% of the people are able to see.

You want to get some insight, real my blog @

Anonymous said...

I feel real estate boom is bubble. most of the areas politicians funds are playing in the market. most of realestate operators are the by nominees for politicians. Most of the politicians are think that land property is the safest place to their black money.

I feel no politician is not ready to think about tomorrow. their plans and ampition is earn as much as today.

So this kind of real estate boom is there. it will not stand, surely it will go down.

Most of the politicians are buying waste land and getting loan against them from bank. Then cheat the bank or getting relief through subsady loan waiver schemes.

Anonymous said...

Someone must be dreaming when he says that real estate in India is coming to a planned stage. Forget about real estate, even the share market is not well oragnized. Think about this. Just because 17 billion dollars went into Indian shares in 2007 the sensex jumped to 21000 level and in 2008 when 8 billion dollars have moved out of the market the sensex has fallen to 11000 level. People are taking loans using the same property as mortagage several times and lenders are not checking credit history. ICICI has fallen to 350 from 1500. Same is the story with HDFC and other such banks.

krishna said...

See its like this.. BIG people will always make money no matter since they purchased plot in Gurgaon in 2000 when it costs 3000Rs/yard. Even if market crashes the current rate of 25K might come down to say 12-15K. But still they gain and their black money is safe and clean...

Than there is middle class people who will cling to shares or real estate just hoping this will turn good soon even when the bad hasn't come yet.. Do u feel this share fall is end ??.. ITs not we haven't see layoffs we haven't seen lending issues, we haven't seen losses.. Its just precursor of whats going to come next..

Few people would come out of greed and sell the shares or real estate even with say 10-20% loss but would be able to survive..

Rest greedy people will have heart attacks, their familiy will break down due to loans and financial instability and job losses when slowdown comes..
I have seen 2000 when IT industry was small even may be 10% of what its now. Now just imagine if layoffs start in IT industry what would be its scale and its impact on all other industries...

So my advice is to play safe and come over your greed for sake of ur families if u are middle classs...
If u are rich, u can always play safe long term game as u can sustain for > 5 years without job and with all liabilities..

Anyway enjoy investing and lets pray for peace for everybody...

Anonymous said...
This comment has been removed by a blog administrator.
Unknown said...

Right now, all the properties are in bubble.
Guys, here is the bottomline for properties prices:

1) These appreciation in property prices are not at all sustainable

2) If the property prices are not reflective of fundamentals then prices are bound to come down to fundamentals means generally affordable to median income family.

Someone made a statement while back saying the indian economy is decoupled with US economy/subprime mess: Now look whats happening.

The was a asset and credit bubble all over the world and it is bursting now

India won't be immune from this for sure.

Let me give you one example of people's mentality in the place where I am now in USA:

Three years back in San Diego people were crazy buying houses and house prices were appreciating at 20%/year. They had their own logic to justify these prices and appreication of prices: Few of them are:
1) San Diego is the best place/weather in whole of USA
2)Everybody wants to live in San Diego
3) Land is in scarce supply here because we have ocean in one side and desert on another side
4) Lots of rich people if sanDiego/Vacation Homes

Hence prices in San Diego can never go down/decoupled from rest of the USA house prices for the above reasons
Now, look whats happening in San Diego: Prices are 40/50% down from peak for a hell lot of properties in San Diego.

Now, you guys are telling me India is immune from real estate bust.....

Anonymous said...

Indian Stocks Record Worst Week in 18 Years on Credit Crisis

By Pooja Thakur

Oct. 10 (Bloomberg) -- Indian stocks fell, with the benchmark Sensitive Index recording its worst week in almost 18 years on concern the deepening credit crisis will push the global economy into recession.

ICICI Bank Ltd. plunged the most since its trading debut in September 1997 after the government said industrial output grew at the weakest pace in at least 14 years. Reliance Industries Ltd., the nation's most valuable company, dropped 7.3 percent, its lowest in almost 18 months. Infosys Technologies Ltd., India's second-largest software exporter, slid 2.3 percent after cutting its full-year profit forecast, citing a deteriorating economic outlook.

``Extreme pessimism and panic is setting in,'' said Jayesh Shroff, who helps manage about $3.5 billion at SBI Mutual Fund in Mumbai.

The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 800.51, or 7.1 percent, to 10,527.85, its biggest weekly drop since Dec. 21, 1990. Earlier, the index slumped as much as 9.6 percent and came within 186.4 points of a trading halt.

The S&P CNX Nifty Index on the National Stock Exchange declined 233.70, or 6.7 percent, to 3,279.95. The BSE 200 Index slid 7.4 percent to 1,253.50. Nifty futures for October delivery fell 6.6 percent to 3,303.30. The markets were closed for a holiday yesterday.

Output at factories, utilities and mines rose 1.3 percent in August from a year earlier after a revised 7.4 percent gain in July, the Central Statistical Organization said in New Delhi today. Economists surveyed estimated an increase of 6 percent.

Central Bank Measures

The Reserve Bank of India cut the amount of cash lenders need to set aside as reserves to cushion Asia's third-largest economy from a global slowdown. The central bank cut the cash reserve ratio to 7.5 percent from 9 percent, it said in a statement.

State Bank of India, the nation's largest lender, added 2.6 percent to 1,352.50 rupees.

``The central bank has to address the liquidity concerns and that's the reason for the move today,'' Shroff at SBI said. ``Inflation concerns will have to take a backseat for now.''

India's rupee fell to an all-time low against the dollar as tumbling stock markets prompted investors to take money out. Overseas investors have sold a record $9.84 billion of shares this year. The rupee fell as much as 2.6 percent to 49.26 per dollar in Mumbai trading. It recently traded at 48.3750 rupees against the dollar, according to data compiled by Bloomberg.

Asian stocks tumbled, driving Japan's Nikkei 225 Stock Average to its worst weekly drop in history and triggering a suspension of futures trading.


ICICI dropped 90.10 rupees, or 20 percent, to 363.65, the most since listing on Sept. 24, 1997. The Indian lender with the biggest losses on overseas investments was the worst performer among financial stocks in Asia today. A large Indian bank borrowed 10 billion rupees ($208 million) from another bank at an interest rate of more than 20 percent this week, the highest rate charged for a 45-day loan between Indian banks since the mid-1990s, Mint reported, without saying where it got the information.

The Reserve Bank of India and Finance Minister Palaniappan Chidambaram last week issued statements reassuring investors that India's second-largest bank has enough capital.

Reliance dropped 120.95 rupees, or 7.3 percent, to 1,527.60, its lowest since April 19, 2007. Reliance Communications Ltd., India's second-biggest mobile phone service provider, dropped 20 percent to 238.50, lowest since it started trading in March 2006.

Infosys fell 29.05 rupees, or 2.3 percent, to 1,225.20, its lowest since Oct. 28, 2005. Infosys said earnings will climb 10.3 percent to $2.24 a share for the year ending March 31. On July 11, it forecast earnings would climb at least 14.3 percent to $2.32.

Anonymous said...

Anyone who knows a little bit of Vedic astrology knows what was coming for the irrational exuberance of the Indian economy and the share market. As per India's independence chart India is now passing through the last bhukti of Ketu in the Mahadasa of Shukra. This Shukra-Ketu started in 11-7-2008 and is going to last upto 10-9-2009. The last bhukti of a Mahadasa is called Dasa-Chidra and is not known for giving auspicious results. It is time for a change for India in many respects such as government, economy, real estate etc. The only word here is CAUTION guys until this Shukra-Ketu dasa is over. After Shukra-Ketu the new mahadasa of Sun starts. Let's see what this new mahadasa brings for India. This is what I used to prepare India's horoscope: 1947-08-15 00:00:01 at Delhi, India.

Anonymous said...

2008 Nobel winner Krugman says world recession likely:

PRINCETON: The world is likely headed for a deep recession despite the European-led plan to bail out banks hit by the credit meltdown, the US econom
ist who won the 2008 Nobel prize for economics said on Monday. Krugman praised the European-led plan that sparked huge rallies in world stock markets on Monday as having a good chance of fixing the credit crisis. But he said the market's euphoric reaction was not necessarily a signal it would work. For details please follow the link given below:

Anonymous said...


Jet Air lays off 850 flight attendants and many such lay-offs are coming. These are the precursors of deceleration in the real estate market. Can you imagine someone earning Rs. 20000 per month and taking loan of Rs. 45 lakhs to pay for a house? The madness is going to come to an end, I think, sooner than later.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

The current crop of tactics of real estate developers to attract buyers sounds like an amateur implemention of Principles of Marketing by Philip Kotler .. looks like some jack ass fresh MBA passout is consulting them .. and is concentrating only on the Promotion part of the 3Ps of Marketing .. Price is the first of the 3 Ps of Marketing .. They should realize that they have priced themselves out of the market .. get that right .. give up your greed and customers will flock back again..

Home prices in India today rival those US and UK for equivalent neighbourhoods with a far lower quality of infrastructure and comfort. I think todau customers are tired of these stupid builders .. they need to stop playing games ..

I have never seen so many anguished people wishing that an entire industry crashes and is brought to its knees.

Anonymous said...

MUMBAI: Real estate developers will need to cut prices sharply in the second half of the financial year to convert demand into actual sales, as potential buyers continue to wait on the sidelines, industry watchers say. Go to the following link to read the whole story:

Anonymous said...

per cnbctv 18

Chetan Ahya, Managing Director of Morgan Stanley, feels economies will take more time to come out of the global recession. The recession, he said, will take long to get over, and can last for as much as two years. As real economy comes under pressure, we will see rise in non-performing loans, he said, adding that credit markets will recover only once the recession is closer to an end. Ahya added the current account deficit and strong credit growth compounds problems.

Ahya also said the issue of exchange rates remains a key challenge to emerging markets, adding that he sees rupee depreciating to lows of Rs 54-55 per dollar in five or six months.

Here is a verbatim transcript of the exclusive interview with Chetan Ahya on CNBC-TV18. Also watch the accompanying video.

Q: The first signs of recession are coming out from the West––it is there in United Kingdom, Singapore, etc. How much more painful do you expect the global economic data to be over the next few quarters?

A: We are now stuck in a vicious loop where the credit markets are weighing on the real economy. As the real economy goes through stress, one will probably see further rise in the NPLs (non-performing loans) making the lending standards even tighter for the banking system. So unfortunately, we are in a cycle which as IMF (International Monetary Fund) has highlighted, in one of its papers, that whenever there is recession in the global economy driven by either the credit problems or the property market, it tends to be longer. Thus, we have to keep in mind that this global recession is going to take longer to come out and the credit markets will settle only once a recession is closer to the end.

Q: The other problem is that many of these problems are hitting homes, that is in Asia now as well many other countries are at the IMF’s door asking for loans. There is an Asian economy that is also on the brink of, if not already in, recession. What is your view of the whole Asian picture?

A: Financial markets are integrated and they had made a one-way bet towards emerging market and the biggest problem we are facing now is towards the currencies. Even some of the longer-term oriented funds like pension funds and large institution funds are facing challenge in appreciating the fact that while the long-term story is intact they are suffering such a huge loss on exchange rate. So, the big problem now for emerging market is that exchange rate issue, which is blowing up a lot of balance sheet in corporate in the emerging market economies and also what we are facing is the countries with current account deficit and having had a credit cycle are going through much severe challenges particularly in the region––we have Korea and Australia right in the front. We are seeing that now it is spreading to India and Indonesia as well.

What is common in these four countries is that they have had a strong credit growth, which can be measured by the fact that the credit growth was significantly higher than the nominal GDP (gross domestic product) growth and at the same time they are suffering from current account deficit. That only compounds the problem for some of the emerging markets in Asia as well.

Q: How many quarters of global recession or US recession are you looking at now because some people have started extending the duration of this painful period from a couple of quarters to even as many as 5–7 quarters?

A: Whether you call it recession or not––technically qualified––it seems very clear that we are in at least a two-year global slowdown and we are just in the beginning of the first year. So, we have a lot more to go in the global economy and I do not think that emerging markets will be left out and be kept away from this pain. They will be sharing the pain equally pretty much in the cycle.

Q: How much more damage do you think currencies like ours will have to take?

A: We are looking at rupee to go to 54–55 a dollar in over five-six months time. When the rupee is depreciating, it is not as if it is depreciating on a trade-weighted basis. It is depreciating against the dollar much more because the dollar is appreciating against all the other currencies. So, one has to take it in that context. It is unavoidable for us to not to depreciate because the dollar is coming back in a big way globally.

Q: What about India? Do you think that these expectations of 7–6.5% kind of growth will hold out even as we are far more domestic consumer focused at a situation where most global markets are going into a recession?

A: The way India story panned out is that everybody appreciated the fact that the trade linkages are low but the most important linkage factor was capital inflows. If one looks at the state of capital inflows, we were getting roughly about USD 10–12 billion in 2002 which rose to about USD 110 billion in twelve months ended March 2008. I think that was a big driver to India’s domestic demand.

So, the virtuous cycle was capital inflows come in, keep the real interest rates low and then we have a very strong credit cycle. The credit growth or a credit stock in India has gone from close to USD 150 million in March 2003 to about USD 575 billion right now. That is a massive increase in credit stocks, which we have been able to do because of the support of capital inflows.

Thus, India story has been linked to the capital inflows and to the extent to which we have seen a disruptive fall in the capital inflows over the last four months by our math, the capital inflows into India have literally come down to close to USD 5 billion or so. This is an extremely low number from USD 110 billion number that we had seen in March 2008.

Hence, this is the single-most factor which is causing a lot of impact on the economy. Firstly, the currency is depreciating because we were running current account deficit and certainly capital inflows have stopped. Secondly, we have seen a side effect of this on domestic liquidity in terms of the tightening of cost of capital. While the RBI is cutting the policy rate what we should watch is the cost of borrowing and also that the banks are tightening their lending standards, the cost of borrowing is going up. This will have an impact on that domestic demand, which seemed to be insulated in the face of global trade slowdown but it is not insulated in the face of a global capital market disruption that we have seen in the last three-four months.

Q: Just to drill this down to one facet of earnings or growth, there is big fear of companies that are highly leveraged, of course, the quantum is much lower than companies aboard but what is your sense of how much damaged to the companies that are several times overleveraged?

A: I think leverage is only one aspect of it. In today’s market we are not just leveraged in rupee but we are leveraged in external dollar debt form as well. If company is not adequately hedged the external liability, it has seen a straight 25% rise in its liability over the last nine months and that is a dramatic rise in liability.

The leverage is showing up not because of just rupee-debt but also because of dollar-debt. The other aspect is, I don’t know whether or not one calls it leverage but people are exposed to different contracts whether in commodities or in exchange rate for exports or for hedging of external liabilities. There has been a massive change in currencies in the global markets and that has also meant that a lot of the assumptions that one would have had in his calculation would have gone awry.

So, leverage is a very simple barometer of what’s going on in the global markets. It is a complex set of factors which are now affecting the balance sheet. Hence, corporate balance sheets are going through massive disruption globally, particularly, the SME sector. Firstly, the leverage aspect on the external debt, and secondly, they are going through problems on trade credit. In many cases we have heard that counterparties are not honouring letters of credit and at the same time we are seeing commodity prices falling dramatically. So, if one is an exporter of commodity then he must have also seen his P&L affected big time.

So, I think the disruption in the corporate balance sheet is just massive beyond that small rupee-debt leverage which we have been looking at traditionally.

Q: Do you think it is a matter of time before all this starts affecting the Indian consumer in a major way because if that were to happen then one can see far deeper ramifications for growth out here? Are you seeing the first signs of that happening?

A: We have seen some bit of slowdown in the mortgage sector as well as in the consumer durables and cars. We really haven’t seen much dramatic slowdown. But my sense is that with the way the cost of capital has spiked up in the last two months in India and the way the banks are tightening the lending standards, one will see a major correction in the consumer spending particularly the leverage consumer spending.

Hopefully, the non-durable segment and the fast moving consumer good segment should be doing okay. However, the leverage segment will be going through a major correction over the next three-four months itself; we should have the data proving that point.

Hence, the consumer sector will be definitely taking the pain. It is going to be unavoidable for the consumer to walk out of this without taking the pain.

Anonymous said...

Hi, I started and finished all comments in a stretch. Yes, I am also one of them who is perplexed about Indian realty. I feel the RE market is one of the biggest asset bubble created in India.
Reasons for property Rise
1 Political backed, black money infused, real estate- broker nexus with unregulated market gives enough space to spike up the price for long term.
2 Nobody knows who sets the prices it changes per second. Even share market is shame in front of it.

The biggest chunk of Indian money of all strata of people is parked in real estate. Imagine what will happen if this unregulated market crashes. The most regulated Capital markets have melted like Ice in the turmoil($56 trillion is struck as CD Its once a life time crisis) .

Its the money and leverage(easy credit) which is pushing the price. Now both of them are hard to find and people are realizing their foolishness of paying 30-40% of salary as EMIs which is changing frequently.
Banks and system has to reduce their exposure to this if they are sane. Then market might find the price of land on earth.
I am staying of RE till some saneness comes to market. Land 60 kms away from New airport in devanahalli raises 20 times as if everyone flies regularly. No roads , ground water is contaminated and 350 ft deep nothing is available. But still rates are sky rocketing.
At this rate people might start selling land on moon also once chadrayaan1 becomes successful. be careful you might get new year discount with bank loan for a piece of land on moon with pleasant earth view. GOD save these crazy people ha ha ha

Anonymous said...

The Indian real estate market is simply in the middle of a gigantic bubble. The prices can not be rationalised by economic fundamentals. Recently I watched a friend purchase a second home in Mumbai for a price that is slightly lower than what he would pay for an apartment in NY city which still leads Mumbai by far in urban infrastructure. If location justifies price in real estate then surely the infrastructural support of the location comprises a fair fraction of that value!


Anonymous said...


I have been trying to figure out what the real price of real estate in India is and I get really frustrated by the lack of transparency in the system.

Recently, I tried to find out what the going price for the land I bought in Bangalore in 2004.

The layout has an email list. I ended up emailing about 2 dozen people who sold / tried to sell land in the past 6 months and guess what, prices were 40% apart and there are NO buyers right now.

Buyers have a right for this information and my hope is they would be willing to provide it as well.

In the US, one can quickly find out the current, past prices of any location and make your judgments accordingly. In India, it is impossible to do that.

I am a geek and I wrote a website to try to achieve this. It is non commercial in nature. All I want to do is to crowd-source this information and see if we can generate trends from the data.

The site is running at Please check it out.

For now, I seed the data from various realty sites, based on the sellers listed price.

Ideally I need this information from users [they can be anonymous and don't have to give specific details]. In an ideal world, there must be a Government entity that has all the records of real estate transactions, but given how black money works in the Indian Real Estate system, that data would be useless.

Anonymous said...

It is all speculation and greed which is driving the prices. I remember one of my friends casually enquiring about the price of a piece of land on the outskirts of Chennai. A broker quoted the price at 60 lacs.The broker claimed that the landowner had delegated the task of getting a prospective buyer to him. Incidentally the land is next to a municipal garbage dump. A week later the same broker quoted a price of 90 lacs. When asked why the sudden increase, he said he had heard that some IT company would be coming up in that area soon and so the hike in the price.
Look at the pathetic situation. Illiterate fools and unscrupulous brokers deciding the prices as per their whims and fancies. Unless the Govt. steps in to do something nothing wil change.

Anonymous said...

Unaffordability of indian real estate is caused by NRIs only. They save by buying all the items on sale and spend those savings in buying real estate in india.
Higher real estate price means higher price for every thing, retail,schools, food. Nobody are happy.

Anonymous said...

Unaffordability of indian real estate is caused by NRIs only. They save by buying all the items on sale and spend those savings in buying real estate in india.
Higher real estate price means higher price for every thing, retail,schools, food. Nobody are happy.

Anonymous said...

there is definate slack in housing but builders are resisting because they were so far able ask for whatever came to their mind.



the message is:

1. do not go to a builder for the next 6 months asking for offer.

2. if you really want to go to check the market, ask the builder straightaway to give at 50% of whatever he is quoting. (you must have read from Mumbai Mirror that this is what the buyers are doing now).

3. even if you are not looking for a house, you can make inquiries and again offer 50% of the quotation.

the builders are aware that the situation has changed overnight and they will have to reduce prices. but they need pressure from people to help them make up their minds.


banat-house said...
This comment has been removed by a blog administrator.
Anonymous said...

They said Tokyo is an island. No body is making land anymore. Look tokyo prices have not reached bubble level of 1980's after 20+ years of trying to inflate.

If idiots can create Tulip mania, anything is possible.

I came from US to Bangalore, looked at shitty neighbourhood and said, i am not paying 300k for this shit and came back to US bought a 3000sq ft house with 1/2 acre for $196500 !!!

House price bangalore $300k.
Rental return $6000/annum
Interest in 1st year $36000
LIC i can buy $50000 (whos gonna pay if I die?)
House afford, salary x 3 = $150000
If i loose engineer job, next best job in BPO pays $10000-house afford 3 X $10000

Hope India runs out of fools to inflate housing so common people can live decent lives. Look at police, doctors etc who maintain civility. How are they going to live?

Anonymous said...
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Anonymous said...

unfair supply and demand you guys say but why do not you consider global demand as cause. secondly in india savings rate among buyers is much higher than in USA. plus from private equity perspective there are many investors are ready to invest much large capital injections to get proper return since there is expected growth so then u have a bubble. Moreover, information is not transparent and I do not belive avarage indian is knows what is capital market cares on the invetment growth through bloomberg!

Anonymous said...

In last 4 months indian rupee has gone from 39 to 51, What do you think would be the mindset of the NRI and other Foreign investors. The growth is going to be there in india, but Mark my words, "In $ terms, you are never going to get same prices as you found them in this april". We are almost 80% down from peak in stock market in $ terms, and still the builder lobby wants to sell us crap at price of gold.. Forget about it.. I am not buying it.
Consider this, In January DLF was quoting at 1200, now it is at 170, 90% drop form peak, Stocks don't go in that kind of freefall if there is no bubble. The fact is that there was a real estate bubble, and now it has burst, the sooner you accept it, it would be wiser.

Anonymous said...

Hey guys, It seems that a lot of smart money had already left India. As previous commenter said, the rupee gone from 39 to 51 shows that a lot of smart investors have sold stocks, properties and left india. Now perhaps you would see the 1992 scenario. At that time the house prices suddenly gone up and then stayed there for next 8 years.

Anonymous said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.



why bad governments are better than good governance
hopeless government hopeful people

this is very special theme that shows its proof in India and Mexico. because of hopeless goverments, reckless market where love and liitigation are bought and sold can not grow. people busy for livelihood, food and security in small insecure groups and cosy life of frugality and detachment. bad laws are a boon because it strenghtens the non voilence and non litigious in people.
USA is in termoil because of its good governments. mexioc and india are heaven of free life and highest in happiness index.

goodness is bad - this theme is better understood by indian rulers.
as theory, cows get killed after extraacting milk. employee gets fired after it becomes unperforming. the one who is neither useful nor useless stays always. pet dog is better than cow because it neither useful, nor useless.


Market is necessity of buyer or seller? In india, it is a necessity of buyers, and in usa, it is for sellers. low income -high price = high desparity in class. this means, money supply in india is unfairly regulated, and therefore foreign direct investments help forigner or high class indians in poition of advantage. new high price india is good for nri and high income people than for 80% of masses.
this concludes like a connection between two pressure vessels with diffrent steam presures and valves. indians can not use option of money and so high population and competition makes low prices, and high income people get arbitage of low priced goods sold for high prices, and get more rich. poor gets poorer because he has no money to buy things, and labor price he cannot fix because of popuation and competition.

Anonymous said...

dont forget that indian IT worker buying a house in india, will get huge tax break

Anonymous said...
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Anonymous said...

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.

Anonymous said...

Hi Anshu, Good attempt to write on an issue close to most non-resident Indian's heart but your analysis is flawed due to the following reasons:

1. Unreliable Source of data - 99 acres is certainly not the legitimate source for property prices.

2. You are not taking cultural differences between Indian and US into account. An average American likes to spend on all aspects of life like House, Car, travel, other luxury items whereas Indians inherently tend to be safe spenders. Given that spending in house is seen as an investment not for a short time but the generations to come.

3. You can not compare Median salary of Delhi to Chicago because there is vast divide between the rich and the poor in India. There is still a very small number of people who have the most money in cities like Delhi.

Real estate rules in India are more complicated than what can be accounted for by mere salary comparison.

Hope it makes sense.

Anonymous said...

Aah what a response Anonymous. None of your points make any sense:
1. 99 Acres may be unreliable but can u show me the source of reliable information. The prices are fixed in India by word of mouth. You know that's bad when you don't know what the real estate prices in your neighborhood are.
2. USA has the social security system in place. Don't even go about mentality. We had a mentality in India to save but now a days, its all EMI (Easy Monthly Installment).
3. Keep the comparison of apples to apples. There are rich people in USA also. Those guys rake in millions of dollars just like Indian rich. We are comparing average Joe/Ramesh.

Real estate rules in India could also be a problem. Indian banks give out loan worth 85% of the house value. So if you are buying a 1 crore house, you put 15L down and 85L loan. If the house price goes down 20%, you have to give the bank the 12.75L to keep their liabilities to 85%.

Good luck.

Anonymous said...
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Anonymous said...

Stock market is a volatile market. Where people invest with the intention of making money but many traders and investors end’s up as a looser. Must be wondering what makes one trader a winner in the stock market and another one as a looser in the market.

Apart from this result season is also going on. Though not that favorable results are expected this time. But INFOSYS came up with very good results now we need to wait till giants like RELIANCE, SBI and other declares there numbers. As they will be responsible for further market movement.
For now we strongly suggest everyone not to take too many deliveries in there portfolio. Just wait for some more time for quality value buying.

In Indian stock market many people have many doubts but they don’t want to clear them by consulting professionals nor they want to raise there questions where other traders and investors can help them out. But now many portals are coming up with QNA sections where investors and traders can exchange there views about stock and stock market. Indeed it’s a great help for everyone who are related to stock market.


Anonymous said...

Property sites are becoming a major market in India and this market is currently ruled by many online portals. Because, the brokers can be kept away and people can do direct selling or renting over the site. is a flagship product of elysian creations, llc allowing different Indian stakeholders to buy / let / rent / sell their residential / commercial real estate assets. We cover every pincode in the country and aim to make every thing in the Indian real estate market a possibility from your location.
Welcome to Way2Rental. Your Real Estate Search ends here. Be part of the discussions regarding Indian Real Estate issues and see the market’s ongoing trend.

Anonymous said...

can some one stop
he is too irritating...

otherwise the blog is wonderful..

Unknown said...

Yes, meridharti and other bloggers have used this forum to promote their sites. I have removed all comments that are blantantly for self-promotion and left the ones that make good points but still advertise the commenter's site - as long as its only mentioned once in a reasonable manner.

sharetipsinfo said...
This comment has been removed by a blog administrator.
Anonymous said...

Hi Nick_Alan,

Probably the word of mouth about the property prices in India is more reliable than Sorry I don't mean to make fun of you. But that is the reality. Probably to find out the most current prices in your area you need to meet the local property dealers. If i want to buy something i won't go and look it up at 99acres:). I am sure you wouldn't either.

2. As we all know social security is not something that will go on for ever.

3. I am not talking about "The Rich" people. I am talking about the divide and about the people who fall in the middle of these two extremes which no matter what you say is still huge in India. And very few of these, who probably you can classify as upper middle class only can afford the crazy prices. Others are still playing safe.

Let me know if does not make sense. Will try again. Never say die :)

Srikanth said...

All the $200,000 apartments are constructed for NRIs who earn $200,000/an year or two.

Anonymous said...

Its a great Information you gave. Thank you

Anonymous said...

hi dear,
im suman new to blogger world i havce also started writing about real estate, this is a nice article, but now the real estate developers have started developing houses for medium class.. that ranges from 19lack and ownwards.. but still these offers have lots of loop holes im into home loans banking so see all these fraud and cheatings happening daily.....
visit my blog you ill get good stuff to read

Anonymous said...

DLF chief says house prices in India to come down to inflation adjusted 1998 levels. so what is this price. nice article at showing the present value of a property which was 1 lakh in 1998

srinath said...

Real estate market is very slow in hyderabad. around 35,000 flats are for resale by banks dueto non payment of emi by the customers. by march 2009 few more thousand flats will come for resale. prices are down by 30%- 40% . it is the right time to by a flat in hyderabad.
Hyderabad Real estate

Unknown said...

First a request to the administrator - can you please change the time stamp to include date in addition to just the time of the day?

Also, does anyone have the latest information on real estate prices in India. I hear that DLF cut by 30-35% in some areas. That still does not make it affordable.

I was going thro the posts and here are my thoughts after reading them.

The fact that India's per capita GDP is around 1000 dollars is irrelevant. You have to treat each major city as a separate economy with allowance for growth of the city and influx of people and businesses to those cities.

Some of the factors that led to the price boom are:

1. Increasing income levels - this is at risk now. Even though India's GDP is growing at around 5%, per capita income would not grow that much. The labor pool is growing at a significant rate. That is exactly why the economies India and China will not contract even under the current scenario. All said, per capita income is not the right measure here. You have to take the family income. There was a huge growth in the number of dual income families and that rate will definitley slow down.

2 credit - there are two factors here. First, banks were getting active in issuing mortgages. Second, credit was freely available to the banks. Money supply was increasing partly because of foreign investment. I believe in the medium term, banks will continue to issue mortgages, while the money supply may go down a little bit.

3. Risk mentality - Lots of idiots assumed that just because they made money in one year that they were intelligent in taking risks. People were underpricing risk before and now there is a backlash and people are overpricing risk. This means far lowere leverage and less speculative money. In fact as this deleveraging gathers momentum, the prices will go down below the equilibrium level. Even if the prices approach 2002 level after adjusting for inflation, I would wait further.

That said I still believe the long term prospects of real estate in Inda are still good. Most people would say that real estate just keeps up with inflation. I, for one, would think that land prices would keep up with nominal per capita/family income groth rate. If a family spends 40% of its income on housing, you can expect that rate to continue.

The million dollar question is "what is a reasonable entry point?"

These are just my ramblings, but comments welcome

Anonymous said...

howdie folks, i am back. Hopefully now of you guys bought properties for 75 lakhs. This making money is very simple. Do the opposite. They all said, oil is going to 200, every guys you know all of a sudden is a Gas expert, i say short it.
They all said, property is going up, everybody is a realtor, i say short Builders.
. Everybody is a gold expert. I say, sell Gold.

Now they say, stay away from the stock market:( i am doing the opposite, i am buying at these levels( not at one time).
Couple of my cousins in Bangalore got the pink slip :(

Anonymous said...

Builders are like middle aged women. It takes a woman courageous effort, to come to terms with the harsh reality of aging. You can continue to live in a make believe world for months or even couple of years?but natural aging just can't be stopped.

Those who read the signals and adjust their lifestyle, carry on with minimal impact, on their lives. Those who refuse to read signals and adjust lifestyle, end up in medical care.

90% of women are smart enough to admirably adjust and are prepared well in advance. (Salutes to women on Women's Day!!). However, more than 90% of the builders react sluggishly to realities of the market which could affect, if not personal but definitely their financial health.

In a booming market, builders were quick to react by resetting prices upward, every week. The possibility of making larger profits drove them to be extra alert! When market trend shows negativity, it is rightly expected that the same builders would be quick to act, to cut losses. After all, cutting losses is MORE IMPORTANT than making quicker profit. (In boom, whether one reacts quickly or not, there is profit, always. Its only the quantity of profit that varies. But in a sliding market, money gets burned. And that could be deadly)

And this is exactly where builders have gone, dreadfully wrong. Even now, many are in a "make believe world". Comforting themselves, with grandiose vision of early boom! Unfortunately, they are unaware that they are shooting themselves in the leg. And soon, the self inflicted injuries may aggravate.

Cutting losses by aggressive pricing in anticipation of worsening market, should have been the mantra 9 to 12 months ago. But the opportunity was lost due to the blind belief that boom is perpetual and negative trend, a flash in the pan. Builders offered small cuts from August 08 onwards which had absolutely no impact.

There were opportunities as late as September 08 to offer aggressive pricing and convert leads to Sales. But once the negative trend firmed into solid slide, NOTHING could work. Its only in December 08, after a whole year and a half of negativity, that few builders started to react with larger cuts. But the horses had bolted in September 08 itself. And builders who reacted late, know that the stable is empty.

For the smarter builders, the market has indeed given an opportunity to prepare itself for the future. Those who have learned the lesson that procrastination will cause misery, may be quick to act during a slide, after the next boom!

David at

Anonymous said...

A bubble is brewing. Based in bangalore, when i drive to the outskirts, I see several, several (typing twice was intentional) completed layouts with not a single house. Every site neatly labelled with owner name, compound wall and that's it. Yet in the vicinity, one can see many more layouts coming up and targetting at obnoxious prices.
I am working in a very good IT company, am doing very good and am having lot of experience. Prices are beyond my who's bying?

Anonymous said...

If I can do it ... you can do it ..

If I can't buy it ... no one can buy it ..

Anonymous said...


I see DLF west End at Rs 1800/sqft.

Is it right price Rs 1200/sq ft around CV Raman nagar from other builders?.

Readers pls share your views .. tks.

Anonymous said...

There are lot of web portal on Real Estate but if we see with facilities and full of features like mark the properties on google maps with walk through videos and featured snaps of the projects and properties live with free of cost then it will be say good to advertise property.I have also posted lot of properties on . I have sold 4 properties in Delhi & NCR.

India Property said...
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Unknown said...
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prashant said...

I think you should explain about the supply and demand...

Boise real estate

Sayaji Hande said...

Hey Guys

I think the residential prices have now stabilized in some of the pockets. I do foresee lot more correction commercial shops etc and want to get into. Any one has some idea what would be ideal rate and what yield one should expect?


sasi said...

here is a huge amount of foreign investment in India to start IT & manufacturing companies. These MNCs can definitely afford high prices of real estate...........
Boise real estate

TJ's BLISS said...

Thanks for this post Anshu,

you mentioned in one comment that people have been able to sell property in India and get money in USA..appreciate inputs from everyone on that.

Gprofessionals said...
This comment has been removed by a blog administrator.
Anonymous said...

Forget realistic valuations. Every firm in US who can put money into Indian assets (Stocks, realty, gold), is hopping in and investing (speculating). Reason, too much liquidity, as Ben Bernanke printed too much US dollars. This hot capital has gone into funding real estate and we have seen old companies like Unitech, DLF, come back from the brink of bankruptcy. I still wonder how they still stick to their premium housing projects and totally ignore common business fundamentals of getting cash through sales. I think they want bailouts to last forever. And thanks to Bernanke, this is happening world over. Good for US, but extremely bad for an Indian.

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