Comments on AnshuBlog: India, Real Estate and Some Numbers

I like your article and it really gives an outstan...

2010-12-28T00:06:01.002-08:00

I like your article and it really gives an outstanding idea that is very helpful for all the people on web.

Aah what a response Anonymous. None of your points...

2010-10-15T03:44:13.169-07:00

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.

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%.

My Observation 1. Indians are big savers. 2. Real ...

2010-07-26T11:10:47.669-07:00

My Observation
1. Indians are big savers.
2. Real estate makes the largiest pie of investment for indians.
3. Own home is a must have for Indians. This is counter-argument about real estate being unaffordable for people -- In India if a person cannot buy a house for him at age 25 (even after taking 85% home loan) then he will save every penny and will try to buy at age 30. If he cannot buy at age 30, then he will keep saving and buy at age 35. Indians are not used to concept of staying on rent for whole life.

So it is most probably about thinking of Indians on which builders and agents are making their bets. Until it changes, this bubble keep becoming even larger.

well, when u go to buy property, it is always expe...

2010-06-26T13:48:20.753-07:00

well, when u go to buy property, it is always expensive.. but what you should keep in mind is that you are buying it for ages to come and not for a small time period. moreover if u plan to live there then u are not going to be checking its worth everyday so bubble or no bubble.. u will live in it..

Anshu, Interesting post and very interesting to ...

2010-06-23T02:56:25.140-07:00

Anshu,

Interesting post and very interesting to see the comments that followed. I'll share a bit about my perspective as the founder of India's only website for the rental of holiday homes (homestaysDOS.com). I get asked this question a large number of times by fellow NRIs as well as my friends in the software industry- Is it worth it to buy property at the costs they are presently going at?

My view is that there is definitely a bubble. Do developers or properties merit the prices that are being charged? definitely no. But why is there a bubble? In the urban areas these are some of my thoughts:
1. Lack of quality completed supply. In some cities like Mumbai large contiguous plots are a rarity and so it is difficult to acquire a large plot on which a nice building can be built with various amenities. In other cities, litigation and permissions are tough to come by.
2. There is a significant cost of corruption and paperwork. Given that this pyramid scheme has blown out of proportion, getting permissions have meant greasing palms which ends up in huge costs that boil down to a meaningful surcharge per square foot which the retail customer has to bear.
3. Longer construction time and higher interest rates. Interest rates are higher in India as compared to the west and all developers are leveraged. Most to unorganized sources. As construction stretches for years, the interest burden keeps increasing leading to them having to keep increasing prices in order to service debt.
4. Lack of a redevelopment strategy. Redeveloping a building or demolishing an old society and rebuilding a nice one in it's place takes inordinately long in India and is a tedious process. As such, it is very difficult to free up supply in better locations pushing up prices in the few projects in those areas. These prices then have a domino effect as radius goes away from these areas.

Coming to the touristy destinations (you've mentioned Dehradun), I would look very carefully at places before buying and trade off plot size with the quality of life associated with being in a more vibrant place (more details on our owner community). Some strategies I have found to work well:-
1. Negotiate for the smallest plot size you can be content with.
2. Watch the calendar and weather. Schedule your negotiations when the time of the year has worst weather and preferably the same weather for another 2 months (summer for e.g.)
3. Buy in areas where zoning does not permit higher value end use - e.g. hotels, resorts, schools etc.

Hope this information is useful to your readers !!

I think the reason is primarily high speculative d...

2010-04-10T04:53:26.363-07:00

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

Hi Anshu, This is really a good article and am ver...

2010-04-05T04:02:27.087-07:00

Hi Anshu,
This is really a good article and am very happy to know that you did such a good research on real estate sector in India.Cities like Gurgaon and Noida has really inflated value of properties, the main reason for this is I think the FDI in real estate.Today many NRI are tempted to invest huge amount in Indian real estate like IT Park, Malls etc because this simply give huge return on investment.Now it has become second to impossible to check such inflation in property value in these cities.

definitely a bubble. But this bubble wont burst. R...

2010-02-11T17:00:35.816-08:00

definitely a bubble.
But this bubble wont burst. Reason being that the economics of every place is hugely influenced by people's thinking, attitude , perceptions, trust in markets and counterparties...etc and other cultural factors.
Due to absence of proper recording mechanisms, no one except the buyer and seller knows at what price a particular transaction happens. For.e.g in far north Mumbai, in an old colony of 900 flats, the price of all the flats is 2 lacs more than the last transaction. Fair market takes in price + volume at that price. In INdia it is only the price..
Now all this definitely leads to bubble. But this bubble wont burst, because no one will sell at any lower price. The demand is so strong that the builders who own tracts of land, will still be able to find buyers as they release their properties slowly...
Economics will dictate the prices go down..but for the next 5-10 years prices will actually stay artificially stable instead of going down.
US/NJ/Chicago and India cannot be compared because the correct comparision cannot be population density per city..it has to be per country. If NJ prices soar, people who cannot afford will move elsewhere in US where population density is low and still have access to good water, energy, roads etc... In India anywhere you go pop density is high. Also there is cultural resistance to uprooting and moving to a different city.

this is very informative site thanks work

2010-01-05T00:21:44.090-08:00

This comment has been removed by a blog administrator.

Forget realistic valuations. Every firm in US who ...

2009-12-11T09:16:32.282-08:00

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.

2009-10-18T12:05:45.408-07:00

This comment has been removed by a blog administrator.

Thanks for this post Anshu, you mentioned in one ...

2009-08-11T10:07:28.113-07:00

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.

here is a huge amount of foreign investment in Ind...

2009-07-17T08:30:23.808-07:00

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

Hey Guys I think the residential prices have now ...

2009-07-17T02:56:57.625-07:00

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?

Thx
Sayaji

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

2009-07-15T08:53:50.081-07:00

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

Boise real estate

2009-06-22T00:40:06.810-07:00

This comment has been removed by a blog administrator.

2009-05-19T22:16:03.129-07:00

This comment has been removed by a blog administrator.

There are lot of web portal on Real Estate but if ...

2009-05-04T04:43:00.000-07:00

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 www.propertywala.com . I have sold 4 properties in Delhi & NCR.

Bangalore.. I see DLF west End at Rs 1800/sqft. ...

2009-04-21T12:53:00.000-07:00

Bangalore..

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.

If I can do it ... you can do it .. If I can't b...

2009-04-21T12:50:00.000-07:00

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

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

A bubble is brewing. Based in bangalore, when i dr...

2009-04-13T01:57:00.000-07:00

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 reach...so who's bying?

Builders are like middle aged women. It takes a wo...

2009-03-15T11:57:00.000-07:00

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 www.exclventures.com

howdie folks, i am back. Hopefully now of you guys...

2009-03-08T16:57:00.000-07:00

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 :(

First a request to the administrator - can you ple...

2009-03-01T09:19:00.000-08:00

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