The housing market: Pop goes the bubble

[JillMill]

Friends,

An interest article in Mint today, on the real estate 'bubble' in India. Do you think it is true for Bangalore ? It looks like .... from the price of apartments / plots have held on in the past 2 years ??

http://www.livemint.com/Opinion/dNavKUl ... ubble.html

Your views ?

[msn1270]

These kind of articles I have read several times in the last 10 years. So far not experienced any such drastic/Bubble....etc.

Firstly, Indian Real Estate Prices doesn't have any co-relation w.r.to the Growth or Earnings of Individuals. Its controlled by Dirty Politicians, unethical Beaurocracy, Banks & greedy developers. Black money is playing a major role. Transparency has no meaning here. Central & State Governments just encouraging the side which lobbies & provides huge party fund for them. Hence they don't make any stringent laws like in developed countries. So an ordinary man cannot expect much good things in Indian Real Estate at least in the near future.

Occassionally price got moderated say during 2003-04 or 2009-10 by 10-20% in select areas, But never dipped as speculated. Whereas, the prices which were quoted around Rs. 300-500/sq.ft 10 years ago are commanding Rs. 8,000/sq.ft as of now.

This is my experience.

[JillMill]

Yes you could be right. But if you see what happened in US/UK in 2006-2008, when the home prices fell by as much as 50% due to oversupply. Though the unique factors that you mentioned about India like black money, bribe etc play a significant role in our country, when the basics go wrong (when people can not afford or the demand does not keep up with the supply etc), a reduction in price or even a crash can not be ruled out here.

Even in US/UK they thought that the house prices can not fall, but not only it fell, but caused a major crisis in those countries (and the entire world eventually).

Note: I am not on the lookout to buy a home/plot

[abhishekabhi12]

I really agree with your forum politicians becomes major point of creating this type of situation in real estate of India.

[pyaretaj]

There is a huge difference in properties that are categorised between building apartments and independent lands or houses. People are made to choose their comfort zones pertaining to their capital strength. Developers errecting massive landscapes will get budged out if prices collapse. Whereas independent plots and houses with centralised location zones will be always in demand. I am dead against apartment buildings and I always prefer plots for investment purpose or to build a house in future. These plots will never depreciate, depending upon the demand they fetch from individuals. I do not agree with the point that RE demand is evaded without the mere consent and attributed participation of individuals w.r.t their per capital income. If you consider the growth prospects and the expansion of corporates in India, individuals with high caliber payscale and the role of NRI's will always prevail RE demand to be unprejudiced for long time to come.

[JillMill]

Inventory levels in Mumbai around 65% i.e. 'total unsold/getting ready' and the developer expects a 20-25% fall in prices of houses/apartments. I guess the inventory levels in Bangalore are not very different as there are many unsold/under-development apartments that we can see in all parts of Bangalore. A 20-25% reduction in prices would translate to a sizable reduction, for example.... an apartment quoting Rs 4000 currently will be Rs 3000 after the fall !! - Will this happen in Bangalore ? Also, does this apply to the plots as well ??

Link to news item related to inventory levels: http://www.moneycontrol.com/news/busine ... 59801.html

[prabhu422p]

I don't see price fall of apartments and plots/houses in bangalore in near future.
Last year around same time(sep/oct 2012) plot prices quoted in and around banneraghatta road are:

Vijaya bank colony - 7000/sqft
Anjanapura 10 & 11th Block - 2300-2700/sqft
Incity Layout - 1600/sqft
Nobel residency - 2500/sqft
Ramanasree Layout - 3300/sqft etc.

Now every layout prices are inceased by atleast Rs.1000 and in some layouts even Rs.1500 also

Thanks
Prabhakar

[msn1270]

Even i'm of the same opinion. Inspite of slow down or so as people say from the last one year, increase in inventory levels, deteriorating financial conditions of
the develoopers....etc every agent and developer is hiking their pricies at regular intervals by quoting many reasons. I have not come across any project which has reduced its prices. After the revision of the State Govt Guidance Value revision, already one more round of hike in real estate prices happened.

Even in the attached article, Orbit developer says there is a huge inventory and lesser transaction. he hasn't said, he will reduce the prices of his properties. He is just giving a very vague statement, there will be 20-25% price reduction, which no one believes.

[Ganesha]

@msn1270
"Firstly, Indian Real Estate Prices doesn't have any co-relation w.r.to the Growth or Earnings of Individuals. Its controlled by Dirty Politicians, unethical Beaurocracy, Banks & greedy developers. Black money is playing a major role "

You summarized the response with 100% accuracy. There is nothing more to debate

According to theory, price of any commodity is proportional to demand and supply.
More demand & less supply will make the prices higher is what theory says.
But in indian real estate market, this theory does not work, because:

i) Most of the demand is artificially created.
For ex: 35 out of 100 apartments in SNN Serenity opposite JPMorgan-ORR, are bought by just one person.
ii) Prices are hyped
For ex: In Kanaka shree layout-hennur road brokers influence the site owners to sell their site at 30% more price
immediately after 1-year of purchase. Brokers want to make sure that they get their percentage year-on-year.
Because this layout is BDA-approved and due to few other reasons, this 30% hike was working out very well from last 2/3 years.
(Of course, not only this layout in every other place brokers try their best to hike the prices with too much of hype.)

But today I got this mail from Makaan.com, on the property price trends in Bangalore.
3 Months : -6.56%
6 Months : -9.07%
12 Months : +3.95%

Despite the total grip of black-money on real-estate sector, we see some correction in prices.
(9% reduction in 6-months is not ignorable I guess)
And I hope black-money effect will only reduce, given the political cleansing which has started with Lalu&Masood.

What do you say, will there be a day when you and me can have a house, while Mr.Krishnappa find it difficult to make new layouts?

[JillMill]

Saw an ad today from Brigade group. This is for Brigade Cosmopolis ... their new property in Whitefield, opp to Forum Value Mall. The price quoted (pre-launch) is around 6500 per sqft. I have seen this area ... even 2-3 years back the rate was around 3-4K per sqft for similar apartments. Not sure how it is becoming almost double.... eventhough it from a tier-1 builder and a luxury property

does anyone in this fourm feel this is a good price for an apt in this area? This trend does not definitely show any 'decline' as such ....