It seems like this gentleman has a vested interest in some Mumbai real estate companies. If you look around Mumbai there are hundreds of towers under construction with most of them not being sold. These hired guns are responsible for hyping the market without any fundamentals. As for Chennai and other cities prices are still around 3-5k per sq/ft. In Mumbai we are taking of 8k+ on average. If other cities dont have purchasing power, how come Mumbai is different. Apart from the business community Mumbai is full of lower income neighborhoods. All you need to do is take the train and look at the mass number of people 10-15% of whom can afford the high prices. For the rest its life as usual in lower quality homes and shanties. Its high time these hype creating analysts are bought down to earth
Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.
Excerpts from the exclusive interview with Nalin Kumar:
Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?
A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.
Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?
A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.
Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?
A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.
Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?
A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.
The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.
Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?
A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.
Q: Do you think real estate prices in Bombay will stabilize or inch up?
A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.
Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.
Excerpts from the exclusive interview with Nalin Kumar:
Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?
A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.
Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?
A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.
Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?
A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.
Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?
A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.
The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.
Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?
A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.
Q: Do you think real estate prices in Bombay will stabilize or inch up?
A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.
