Rewiding almost 3 years into the past, I found my original post. Most of the observations made then have been vindicated by the turn of events. Three years later, the stock market is up 10% and looks very likely to go below 9k in the following weeks, thereby wiping gains for 3 years. The FII's have taken the Indian investor for a ride down a a tunnel of hell. As everyone reads the bad news, I'm thinking of what could be good prices to pay for apts in the year ahead ? Anything over 3000 is steep by any standards. Black money can chase other black money, however loans are in short supply so they cannot chase other loans. If a black money operator buys an apt paying 1cr, immediately the Income Tax folks will get alerted and will be on his case. The only place where they can hide money is to buy land/plots where there is a substantial portion in black. As state governments keep raising gudiance value, this avenue is closing as well. In Chennai the guidance of OMR road is up 10 times over the past 3 years. Hence speculation here attracts the Income tax bugs. The only avenue black money folks have is to fund builders, however given the state of the loan market, they will be unwilling to do so. The goal of every black money operator is to convert the black to white, but as avenues for the conversion evaporate due to increasing risk, storing black money under the matteress or in hidden cabinets seems to the only way. Any builder who is looking for money is paying 30% interest, this used to be the case in 2003. So the market is dull, people have lost money in the market upto 80% in many cases. How long can 10000 per sq/ft hold ?
and I just got this in the mail and couldn't come at a better time. A drop of 40% from the existing rates, However to take the risk of execution during a time of financial crisis is foolhardy. We will see these prices for ready to occupy apts soon.
and I just got this in the mail and couldn't come at a better time. A drop of 40% from the existing rates, However to take the risk of execution during a time of financial crisis is foolhardy. We will see these prices for ready to occupy apts soon.
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Phased payment schedule over the next 2.5 years
Current prices within 3 kilometers of township: Rs.5,000 – Rs.6,000 per sq foot
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Exclusive Pre-Launch offer for TimesofMoney customers ONLY! - Rs.3,600 per square foot. Booking Amount- Rs. 54,000/- only!
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World Class amenities like Split AC in all rooms/ Laminated wooden flooring in Bedrooms/ Vaastu compliant layout/Hilltop clubhouse with majestic views/ Internal transport facility are just to name a few
Wide range of apartments- 2 Bedroom, 2 Bedroom + Study, 3 Bedroom and 3 Bedroom Large (Exclusive Tower)
2.5 Kms from Hiranandani Estates; approximate selling price Rs.6, 000 per sq
Friday, December 09, 2005
Asset Bubble or not ?
As the Indian economy grew by 8% as stated by the finance minster(12/9/2005), the sensex hit an all time high of 9057 and housing prices have continued to skyrocket in major metro areas.
One of the worrisome aspects of this growth is that low interest rates have helped companies in BIFR(chapter 11 for India) to come back with healthy balance sheets specifically due to debt-refinancing. (18% to 11%). The productivity growth or job growth is not wholly responsible for the growth. Also many of these restructured companies might pay themselves dividends or buy back shares thereby increasing the wealth of the directors, and owners and thus balloning the stock market beyond fundamental basis.
The white collar worker has to deal with the consequences of this semi-illusionary growth in the form of increasing property prices (10-20% year-over-year) and is borrowing heavily thanks to low interest rates.
As property prices push higher, the risk of default of these small apt buyers increases as global interest rates rise, energy prices push higher , inflation increases and the rupee devalues as the external debt mounts rapidly
Most Indians in the market for a apartment now have never experienced a downturn in the economy so they might find themselves highly shafted if they over-leverage themselves on the loans as well as the floating interest rates.
Unfortunately unlike the developed west , India has no reliable source of data available for real estate prices and transactions and most prices are rigged by a cartel of builders. I'm also skeptical of the media in reporting the truth since they too dont have any reliable data to go from and finally real estate agents, the less said about them the better.
This blog attempts to understand area development and price movements and if people contribute uncover hidden unsold inventory. I'll post information about Mumbai/Pune/Bangalore over which I can get anecdotal evidence or as I browse the news papers and talk to real-estate agents and builders. All articles and comments are welcome. I'll be the moderator of the comments so that the spammers dont take over.
This blog is inspired from a similar blog http://thehousingbubbleblog.com/ which is now a reliable source of data for various US housing markets.
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