Reality Talk

As I took a quick evening walk around DLF phase V this evening, I could see a lot of flats under construction. I also saw a lot of new flats that are ready to get occupied but still vacant and quite a few unoccupied shopping complexes. I had started noticing such huge construction activities which I felt was definitely an oversupply ( @ the prices quoted) a couple of months ago in many parts of Bangalore too. Almost everything around the world including commodity prices, stock markets, real estate have fallen sharply. But still I feel the Real estate sector in India is still being kept afloat. The no: of transactions of buying/ selling has come down in reality sector but the reduction in prices is not very visible yet. ( Although some 20% correction is seen / reported in some places)
I am not sure about the reasons as to how the prices have'nt fallen sharply. Is that because of Indians sentiment towards owning a home? or because of the political and black money nexus with real estate or because of a lack of transparent pricing visible to the public.
Even in premium areas the return from house in terms of rentals is just 4%. I am not sure who likes to own all these houses. These things still remain a mystery for me.
The stock prices of most of the real estate companies have corrected by almost 90%, but an equivalent correction has not happened in the real prices. The real estate companies may manage to survive by the killing profits that they have made over the last 3-4 years , but how long can they continue to hold these prices is the question.
But one thing is for sure, that the prices may remain flat for 4-5 years from now unless a dramatic boom revives the Indian economy. But till the time we have the salaried class who are ready to shell out 50% or more of their salary as EMI for 15-20 years, the developers would try to take an advantage.
I think the match between developers and buyers is in a tie breaker situation now. (My thought that prices would fall in India like a pack of cards hasn't come true yet.) I am keen to see who wins the match from hereon!!


ramani said...

The politicians and babus have heavily invested in real estate. They won't allow the prices to come down. They are pressuring the govt and PSU banks to come out with stimulus packages.

workhard said...

Hi, we are eagerly waiting for the prices of houses to come down since the recession as we were planning to invest in one but like you mentioned there has been no marked difference yet. Like Mr ramani has mentioned, that have been backed by politians and big fishes in the cities


Anonymous said...

Hiranandani Builders commented today that the prices were unlikely to go down.

The builders are not accepting market reality, because the have the capacity to hold out. Until pressure builds on them financially, they will not acceot the truth.

The smaller builders are already capitulating, and the time is not far off when the larger ones will be in CIBIL defaulter list too!


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