A valid question, and one being asked by almost everyone looking for property in Mumbai, Delhi or any of the other cities where real estate prices have spun out of control. Still, speculating about real estate bubbles on the Indian property market without looking at the facts is the work of a doomsayer, not an analyst.
First, a much-required definition. What is a real estate bubble? How does it happen?
A real estate bubble occurs happens when the cost of homes climb unrealistically fast. In a normal market scenario, prices do rise, but only in gradual tandem with the rate of inflation or a rise in middle-class incomes. When a real estate bubble goes critical and finally bursts, the prices of the same homes come crashing down and the real estate market takes a nosedive.
In nature, a bubble is the most energy-efficient configuration for something as fragile as a stretched sheet of soap water. As long as it is not acted on by an external force, it can stay that way for a long time. In a way, that is true for a real estate bubble, as well – unless something happens to disrupt the status quo, it will prevail. Fortunately, it is not the nature of the property market to leave a real estate bubble alone for too long. The artificial pressures that form it are always defeated by the pressure of demand for rationality. Once demand for irrationally priced properties drops sufficiently, the bubble bursts.
Is There a Bubble Forming?
So, are we looking at the formation of a bubble in Indian real estate? It’s possible, but only in the cities where prices have actually skyrocketed beyond affordability. It can be argued that they have done so almost everywhere in the country, but the fact is that local people are still buying homes on a as-needed basis in most Tier II and Tier III cities. Nor is the supply in most of those cities either overly constrained or curtailed. So, when we talk of the possibility of a bubble, we’re actually only talking of property in Mumbai and Delhi right now.
Delhi’s was the real estate market that led the correction, and Mumbai was the last in line. Both bounced back after the introduction of stimulus packages and the Government’s direct actions in restructuring debt, which staved off further fallout on the Indian sector. Also, both these markets had in any case reached the bottom.
During the revival phase, the large volumes of capital sitting on the fence immediately saw an opportunity. This was first seen in the equity markets, and then later in the real estate and gold commodity markets – all three classes bounced back convincingly, and Mumbai and Delhi’s real estate markets made very decisive comebacks.
Current Status
There is now a concern that these two markets have demonstrated higher than expected enthusiasm, especially in the central parts in the case of Mumbai, and Gurgaon and Noida for Delhi. A lot of investors have plugged in considerable amounts of capital in these regions, and the values have, on an average, now gone 30% higher than the last peak. Some of the residential developments in central Mumbai in the year 2008 had peaked at Rs. 30,000/sq.ft. Today, they stand at 38,000/sq.ft.
The kind of volumes that we have witnessed in the first half of 2010 have come down dramatically. However, the liquidity situation on the market has not dropped, and neither has the appetite for investment. In fact, the same enthusiasm, which had previously contracted to the central parts of Mumbai, is now spreading towards the other parts of the city.
There is yet another reason for the concern over a bubble building on the market. All developers who had ventured to buy land overseas or across India are now buying only in their primary cities. In other words, Mumbai developers are concentrating on acquiring land solely in Mumbai, and the same is happening in Gurgaon. Investments are now chasing these Tier 1 markets – and if this continues there is certainly the probability of a bubble in residential property by the end of the year.
Banks and BRFIs are also eager to exit from their non-performing assets and convert them into liquidity. At the same time, there is a considerable amount of lending towards investors who have an unrelenting focus on high-end projects. If this continues, we may see a number of high-value NPAs on the market in a couple of years.
However, we must remember that some of the larger high-value residential projects in Mumbai will undergo at least two property cycles before completion, and that evaluations of their viability will change accordingly.
To Sum Up
Because many of these projects are looking at longer periods of completion, there will be many opportunities for developers to change their final use according to where the market potential leans. After all, strategically located projects that were originally planned for office use saw an intended transformation to residential use because that was where the greatest market potential lay at a certain point in time. These may still be put to their original use by developers who, in light of the many market fluctuations, may wish to de-risk these projects.
In short, the more established and forward-looking developers will be studying the market gaps over the next two or three years. They will secure their land and take a studied view of how this land would best be put to use for optimal returns. Those that do so would find themselves safe against the negative fallout of a bubble situation.
Sanjay Dutt is CEO – Business, Jones Lang LaSalle India
Copyright secured by Digiprove © 2010 Jones Lang LaSalle
Hi Sanjay,
whats your quick assessment of resi props in premium suburbs such as Juhu and Bandra – is it a good time to buy or should one wait for a correction?
Manoj Saha
There may be a correction, but it would be minimal from an HNI perspective . Also, with such constrained supply and a seemingly ready corpus of buyers, the effects of a correction wouldn’t last very long. As long as one isn’t buying for quick-gain speculative purposes, the present time is as good as any.
Hello,
Where do you see the Real Estate stock heading.
Regards
M Tony
Depends on which segment you’re talking about. If you mean mid-income residential, there may eventually be an oversupply situation in the parts of certain cities – not because of lack of demand, but because of the recently emerging trend of unrealistic pricing in those areas. These areas will correct and the supply will be absorbed, since the demand-supply disparity is gigantic in India.
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Nice intriguing article. It provides informative insights to the blog readers.
Good article. Really interesting,Keep posting.
Thank you – we intend to do just that
i really agree to you points. the massive supply can seen in Noida as compared to demand. In future we can witness more NPAs in Noida region as well. Very nice & informative blog keep writing.
Thanks for your feedback, Nazia. Yes, the Noida space bears watching. Stay tuned for further updates on this and other sectors
Hi Sanjay. Nice article.. I live in the US, originally from Hyderabad. The Mumbai market reminds me of the bubble in the US and in Hyderabad. Interested in investing in Kandivali, but the prices are just crazy. It costs as much to buy in Kandivali as it does in downtown Chicago. My gut says, Mumbai is in a bubble and to wait. But my relatives in Mumbai all seem to think it’s the right decision long term.
Your thoughts..recommendations?
Your relatives are right – in the long term, a residence in an area like Kandivali can only appreciate. If you have found a suitable property in exactly the right location, you need to figure out whether waiting to see if prices come down is worth the risk of losing the opportunity. However, if you are still only at the notional stage of decision-making and have no particular property in mind , you can certainly sit back a few months and see which way the wind blows. Don’t get your hopes too high, however – good properties in Kandivali will always be in restricted supply. If you intend to wait, I wouldn’t suggest that you do so for more than three to four months.
Hi Sanjay.Can you comment on Hiranandani Heritage in Kandivali West.
Hi, Sanjay,
We do not comment on individual projects, but the location is excellent. What Mulund is to central suburbs, Kandivali is to the western suburbs. It is perhaps the fastest developing suburb of Mumbai. Scenic natural surroundings, good accessibility by road as well as rail and good transportation facilities are the reasons for its development.
What are the probable reasons for overpricing in certain tier II cities viz Pune?
The rates are constantly incresing since 2008 mid-year. Though the statistics show that around 80000 ready possesioned houses are still there without a buyer. Still builders are in no mood to diminish the pricing.
In spite of that hefty amount to be paid, buyer has no assessment criteria in terms of construction quality, location etc.
Please guide me whether or not buying at such high rate?
This phenomenon – a key concept behind real estate investment – is called appreciation, which is nothing but the enhancement of a property’s market value over time. Real estate appreciation takes place because of various factors, including:
• The supply and demand dynamics of a particular location
• Inflationary pressures
• Home loan interest rates (cost of borrowing)
• Arrival of new real estate market drivers in a location
• Population growth
Thanks for a really informative post. I intend to invest in res property in Kalyan or Dombivli. Can you give your views about the prospects in these areas. Do let me know if it will benefit in long run
Kalyan and Dombivili are increasingly becoming connected to the rest of Mumbai and will figure high on the radar before too long. Kalyan may have slight;ly inflated prices in certain projects due to the insubstantial rumour that the new international airport would come up there. The airport is, in fact, coming up at the originally intended location near Panvel. Choose your project carefully if you’re buying there.
How about Ahmadabad and Surat for investing in property. Specifically in Surat where certain projects are within 1300 to 2000 per Sqft.
The annual rent income is also around 4% of the property prices. Is it a good option for investing?
In Surat, city developers have started looking beyond the city limits for setting up residential and commercial projects. The accent now is on the suburban locations like Bamroli, Khajod, Palsana and Puna Kumbharia Road. Infrastructure is currently weak in these areas. However, the government is now gearing up to strengthen the links and civic amenities there and property prices are expected to appreciate in the long term. In the recent past, the highest appreciation in real estate prices was in areas like Vesu, Piplod, Pal, Adajan and Varachha Road. However, the appreciation there has now been tamed by the fact that many builders are now offering residential projects at affordable rates at Mota Varachha and Sarthana Road, Vesu, Piplod and Pal. The Kamrej Kadodara crossroad is another emerging residential destination that bears watching.
Hi Sanjay,
Excellent insights ! I reside in Dadar West (Shivaji Park). I am looking for a second home within the same area or with a radius of 2-3 kms (on western side). As you know the property prices have sky rocketed, they have become beyond reach for a normal individual. I am looking for 1RK (convertible to 1BHK) in a good housing society.
Would you recommend wait and how long (for my requirement ?)
(I personally feel the market will fall upto 30% minimum till end of 2011 (bubble burst). This is based on reading various articles on internet. I am in no hurry to buy property.)
If you have found something suitable, I suggest that you go ahead. There is no significant new supply coming in at Dadar, and therefore next to no real estate churn. In a worst-case scenario, residential prices Dadar will correct by maximum 5% – if at all.
Hi Sanjay,
Thanks for the blog. Can you please give your opinion about property market in Noida and Noida extension as well as the area known as Greater Noida (near to Pari chowk). Will any of these areas see any correction in 2011?
I’d say the chances of correction there are minimal. Due to scarcity of affordable land in Noida, there is a gradual momentum towards Noida Extension, which is adjacent to Sec 121, Noida. Besides residential, certain integrated township projects there will also have commercial and institutional areas. With ample land available and its proximity to Noida , Noida Extension is now a growth corridor with lots of long-term investment potential for small investors and end–users.
Hi Sanjay -
This is a great blog. I live in US and we were looking to buy a 2BHK or a 3BHK in Chembur, Vashi or Nerul. The prices in Chembur have gone up too much in the past 3-4 years. The builders are demanding Rs.10,500 – 11000 per sq.foot. We were looking to buy in the next 3 months. Do you think this is an ideal time or do you see a fall happening? Our building in Mumbai is old and it might go for a reconstruction and hence looking to buy a flat. We looked at a Vashi flat Sec 29 and a 3BHK was listed at 1.25 crores. Do these seem realsitic prices?
I would appreciate your insights.
Thanks
Rashmi
Hi, Rashmi,
Are your buying objectives purely self-use, or are you also looking at potential appreciation? The rates quotes for the Chembur flat are in line with the prevailing property prices there, but much depends on the exact location and the amenities offered. If you’re happy with what the location offers, and there’s a reserved parking space included in the deal, I see no harm in going ahead and buying the flat. The 3BHK in Vashi’s sector 29 is definitely priced adventurously – what exactly is the builder offering?
Hi Sanjay,
Thank you for your reply. We are also looking at potential appreciation. We are hearing that the real estate bubble will burst in 2011 and certainly dont want to be in a loss. The flat in Chembur is in Sindhi society, near Swami Vivekanand Engg college. It is a 2BHK. We have dropped our plans on the Vashi house. It was a duplex which was priced outrageously. Do you think there is a chance that the prices can go down in Mumbai in Chembur this year? Other question was where do you think would be the best place to buy a house in Mumbai with current real estate market conditions? We have looked at flats in Chembur, Mulund, Vashi & Nerul.
Thanks
Rashmi
What’s ur outlook on Bangalore, especially the whitefield,sarjapur,outer ring road and electronics city zone.
Prices are hovering between 3500 to 5000 per sq ft. are there any chances of that going down or up in the near future?
Bangalore East, which comprises the Outer Ring Road from Sarjapur – K.R.Puram and Whitefield, is currently the most preferred destination because of the proximity to the employee catchment areas, accessibility and availability of ready-to-occupy/under construction Grade A space with large, efficient floor plates and large land parcels that offer built-to–suit options. The outlook for residential space investments is very positive
Hi, Sanjay !
I live in Toronto and originally from Ahmedabad,Gujarat. Recently i checked price for house in Ahmedabad and surprisingly, it is more that what we have in Toronto. Unbelievable!! If i compare infrastructure, public facilities-school,hospital,mall, municipality services-garbage collection, road cleaning/maintenance, gardening, water supply; I cannot convince myself to pay such a high price for similar size house in Ahmedabad,India
Secondly, if i think of 70% of population income scale in India, they cannot afford this kind of price for house or flat for such a high interest rates.
I am very sceptical about current price of real estate in India and return of investment.
Please provide your insight and analysis.
You are not alone in your skepticism, Dev. However, the best I can say in response to your comment is – if we factor in every point you have raised, the existing demand for housing in India’s growth corridors probably defies logic, but its existence cannot be denied either. The price escalations you refer to are doubtlessly speculator-driven, and we expect rates to correct in overheated locations to the extent that they have risen irrationally. Meanwhile, genuine end users will continue to buy homes that they can afford, or do so as soon as they become affordable. For the baseline Indian, home ownership is a paramount priority.
There is no rocket science in it.It is deliberately speculated/manipulated, everybody has stake in it so nobody will regulate or control this sector. There are some questions need to be asked.
1. Why the property prices of those area where there is no development or no industry are rising?
2. Why even one room janta flat is so expensive and beyond the reach of common man for shelter while the mafia occupies hundreds of weaker sections flats?
3.Why the prices or demand for properties only skyrocketed after 2004 when the scam tainted Govt took over?
4.where the black money or money from scam is invested?
5.how many flats are owned by wealthy and corrupt people?
6.Income level of common man may not have risen more then 20% during last decade but the prices for properties even the small one room flat has risen up to 3000%.
with zero quality of life, horrendous law and order,pathetic system we have prices of properties which can be well matched with any advanced country mind boggling isn’t it.
One will amazed to see how in just 6-7 years people
who used to be a poor peasants are now drive BMW or merc like any other cars and gifts choppers at their wedding.
There is nothing but unholy nexus,collusion cahoots working overtime.
this is the most logical comment i have seen
very well thoughtout and probably will come true
Hi Sanjay,
I’m looking for buying an apartment in West Pune to be closer to the work location (IT parks). Can you advise which locations in West Pune are promising from self stay purposes.
Regards,
Rohit
rohitrkhanna@yahoo.com
In terms of residential space close to IT workplace catchments, Kharadi is fast outdistancing Hinjewadi, Baner and similar locations. There are massive upgradation efforts going on in terms of water supply, roads such as that between Kharadi and Mundhwa, and infrastructure. Kharadi’s proximity to Koregaon Park, Viman Nagar and Kalyani Nagar makes it a very advantageous residential location both for self-use and investment, especially since it offers more amenable property rates than those prevailing in these locations. It is also close to the airport and the industrial hub of Ranjangaon. Moreover, it has been designated as a slum free zone, and development is being done in a systematic manner.
Hi Sanjay,
At the cost of repeating others, great blog! What is amazing is that the article written in Sept 2010 is getting responses in Mar 2011!
What is your sense of prices in Upper Parel/ Sewri area. There is a new project looking at Rs. 16000 psf. Do you think that is a fair price considering the dynamics of the area and potential appreciation?
Also what is your sense of commercial office space outlook in Lower Parel? Are prices in the micro market headed for a correction?
Thanks
Rohan
Nice article …
Talking of Bangalore, i see a wide difference in pricing of the new apartments & the old once. For example in JP Nagar my friend bought a resale apt for 40 lakhs, but just 100 mts away on the same road, the price of the new apt (similar to the old one) is 60 lakhs … could this also mean a bubble ?
Hi, Prabhu – my area of expertise is human resources, so this question would ideally be addressed to our Bangalore head Mr. Karun Varma. However, the situation you describe does not seem to have anything to do with an asset bubble but rather the divergent values of micro-locations, which is not at all unusual.
Hi Sanjay,
Great blog with extremely logical replies.
Would love to know your take on reputed builders(Tata) with projects on Southern Peripheral Road and Sohna Road intersection at Gurgaon. Rates already above 6000psft. Do you feel they have further scope for appreciation?
Hi Sanjay,
I have often heard that apartment prices will correct, but prices for plots (bungalow plots) will be insulated from any correction – any comments?
The reason I ask is because: I am looking at an investment with a 2-3 year horizon for a residential plot in Nyati Highlands, NIBM road in Pune. Any advise on this will be appreciated.
Regards,
Sameer.
Hi, Sameer,
That is unfortunately not the case. If apartment sales in a particular locality take a nosedive for any reason, so do the values of plots.
I recently bought a 2bhk modern apartment in London for £200,000 (equal to about 1.5crore in Indian money). It has a CARPET AREA of 700sq ft (equiv to 1000sqft superbuilt-up). My mortgage comes to £1000 a month which is only 25% of my monthly take home salary. The flat is 30 mins commute (door to door) to my office and most other places in Central London (ie Mumbai’s equiv of CST/Churchgate). There is 24x7x365 water and electricity supply. The roads are clean & without potholes. Public transport runs on time and is comfortable even during rush hours.
Comparing this to buying a property in my hometown in Vashi, Navi Mumbai; a 2 BHK property would cost about Rs. 1crore; whic means an EMI of about Rs 1 lac a month? Now, if I take a transfer from my company to their Indian operations with the same role, my annual salary would be about 20 lakhs inclusive of bonus (about 1.25 lakhs per annum take home?). After paying my mortgage, I’ll struggle to pay my bills or put food on the table. All this while suffering the usual power cuts, water supply problems, monsoon flooding, travelling in inhumane conditions in the public transport. who in the right mind would buy such a property? What percentage of Mumbaikars earn 20 lacs per annum to be able to afford just the mortgage?
If this is not a bubble, what is? Do you really need the complex example of energy efficiency of a bubble to prove explain this?
Absolutely right Sammy. Everybody is indulging in a conjecture on property prices. Nobody talks about the builder-politician nexus which keeps the prices artificially high. the politicians also park their black money from corruption in properties pricing out other legitimate buyers.
No Thanks… Is it a secret that it cannot be put on a blog.
This is my last blog on your site.
If you change your mind, do share facts (correlation- sales, GDP, per capita income, population, income segment etc) than some fictitious and random prices coming from nowhere.
May god give justice to all.
Byeeeee
India is a developing country ( That’s what I read and hear) but I totally failed to understand, what is the factor which keep inflating the so called pricing bubble. How long it is going to sustain the exponential inflation.
I don’t find any logical factor which keep the prices exuberantly high. Almost double every year and still is going up. Sky is the limit … in real true sense. The prices are so high that it is simply beyond the reach of average middle class and irony is, the middle class constitute chunk of the population. If you quantify the quality of life on very basic amenities such as good road, 24X7X365 water, electricity, gas supply, all these are simply not there. Forget about local school, hospital, shopping centre, transportation etc. and still the prices are going out of control. I have heard of plenty of unsold flats with no buyers but still prices not ready to buzz .
I wonder, how these builder sustain on their payment to the lenders.
I simply feel, the black money simply lands into real estate. I’m not talking about small time black money, I’m talking about big players. Where all the money of Common Wealth Game OC, 2G scam money, Adasrah land scam etc. gone. I have mentioned these names because they are fresh into my memory but never the less, all other scams, defence deal commissions, past scams, present scams and scams in happening money gets invested into real-estate only. Does government bother and try to investigate it. Why they would, after all its their vested interest. Why they would worry if owning a own “House” is beyond the reach of common Indians now. Have they tried to find out who is investing and their source. The time is not far when people will revolt against it. The frustration will vent out in its own manifestation like crime. Currently, its simply open loot. The disparity in widening in the society. One side you have people with nothing to wear , eat, place to cover their head, sleep on footpath and other side people like Ambani owning $1bn house. Who said God created humans. Even if they created, they left us long long time ago
It’s a mad race and it has to stop somewhere. It’s like car cursing on the freeway with total break failure. Only two thing will happen, either it will run out of gas and slowdown in middle of no where or will crash with sudden bang
Hi Sanjay,
Great insight and I enjoyed reading your many replies as well.
My father has a background in real estate development and had developed various projects in 90′s until we moved to the States. Given the outstanding rate of returns, we are considering buying undeveloped land in Surat. I read your reply to another reader’s question from December 2010 where you suggested certain areas within Surat to look into. My question is, what are you thoughts about the idea of “bubble” specifically in Surat?
It is clear that Surat as a city has made a considerable progress in the last decade, and I am sure that some of the price increase is supported fundamentally. However, it still seems out of reach for a middle class family looking to have a home ownership. How much correction (if any) would predict for Surat when it does come?
Thanks a bunch in advance. Looking forward to your comment!
- Parth
Dear Parth,
Residential real estate prices in major cities of Gujarat like Ahmedabad and Surat have been stagnant for the last 3-4 months. The most noticeable lack of price movement is in the 2/3BHK category. However, one must keep in mind that there is a lot of money floating around on Gujarat’s real estate market. This means that property owners and investors have the ability to hold on to their pricing much longer than in some of the other cities. The Diwali season will doubtlessly bring with it the usual slew of freebies, which could be considered a value-addition for intending home buyers. However, a true-blue correction still seems a ways off in Surat, so don’t hold your breath. The interest in corporate profile developers from Mumbai such as Godrej Properties and Tata Housing has been excellent and they continue to see sales.
Hi Sanjay …
I am NRI from USA and want to invest in real estate 2-3 BHK mainly near to New Airport in Navi Mumbai, panvel as there are many new development with p-rice tag of 4500/sft. I am looking
for 5 yr investment.
Given the presence of price bubble, should I wait till prices come down …
I am watching the prices for past 6 months but they are showing increase trend….
Thank You in advance
Hi Sanjay,
A very well researched and informative article, thank you for that. I just want to get your view on one factor which I think is important but doesn’t seem to get much important in analysis of the real estate bubble: The growth that India has experienced in the last 10 years or so that is primarily driven by the IT sector. I beleive that a bulk of India’s development in the last 10 years has been due to the hugh number of IT professionals being drafted into existance by the IT companies.
If you see the news, they say TCS, Infosys, HCL all are hiring hundreds of thousands of employees with a starting salary of around 30,000 a month. When IT/ITES company hires, these indirectly generates revenues for many industries, one of them being real estate.
Real estate sees demand directly and indirectly from IT companies. Directly through demand for office spaces and residences from the employees. Indirectly through demand from other industries which are benefitted by IT, such as 1.)health care, whose standards have increased dramatically due to millions of IT employees with health insurance. 2.) demand from education institutions due to demand for education for IT employees kids 3.) demand from hotels and hospitality sector also due to IT, the list is endless.
Basically this current growth in India can arguably be correlated to growth of IT in India. IT sector suffers, whole Indian growth story suffers. So 10 years down the line when Indian IT loses its shine, (already I know TCS is starting to employee staff in China for some projects instead of India), all the other growth will stagnate, that is when we will see the bubble really explode!
Would appreciate if you could let me know your thoughts on the theory that the real estate bubble will burst in the longterm due to the inevitable decline in India’s IT/Software services revenue down the line in around 10 years or so.
Thank you,
John
I disagree with the implication that the India real estate growth story hinges in IT / ITeS. There is extremely strong domestic demand as well. A huge chunk of commercial real estate demand comes from the financial services and manufacturing sectors, with a directly correlated spin-off demand on retail and residential. The IT sector contributes approximately 20% of the services sector, which in turn accounts for approximately 52-55% of the country’s GDP / Economy. Moreover, the India IT real estate scenario is on an ascendant, with Bangalore, Pune and Hyderabad once again back in strength. Though much has been said about India Vs. China, these countries are actually not in a neck-to-neck race for ‘real’ market share. Each country has its own opportunities and challenges, and there is visibly enough business to be spread over a pretty large canvas. India is gaining in transparency and therefore investor appetite with every passing year. Our of transaction figures for 2011 are extremely encouraging
Hello Mr. Dutt,
It was great to read your article and few replies as well
There is one question I would also like to ask you, i live with my parents in Borivali where the rate of our flat (Raheja Builders)is around INR 10,500 which i believe is exorbitant and has given a CAGR of around 26.45% in the past 6 years. However, if I leave aside the discussion of 1. Property Bubble 2. Prices are good for long term and 3. Steady prices, just the case if we sell the property and invest in NHAI/REC bonds which gives a paltry return of 6% and helps to save capital gains tax and stay on rent for couple of years (Rent being affordable because of interest from NHAI and income uptick in our family). Is it worth doing this kind of transaction. The rent for 2.5/3 BHK in Kandivali is around 25K/30K ,the reason I’m asking you this is because we ultimately plan to move in a 3BHK from 2BHK. And if and that is a BIG IF, the real estate prices goes down significantly, we go ahead and buy a 3BHK.
Although my question will make you believe that I’m bearish on real estate prices in Mumbai particularly because of many reasons known to everyone. But still would like to know your take on it
Thanking you in anticipation
Regards,
Ritesh G
Dear Mr. Dutt,
Greetings to you.
Your article on the Indian Real Estate has provided lot of valuable information.
Would like to read more.Keep posting.
Thanks&Regards,
Christina
Dear Mr. Dutt,
Greetings to you.
Your article on the Indian Real Estate has provided lot of valuable information.
Would like to read more.Keep posting.
Thanks&Regards,
Christina
It is a fantastic post on the great blog site. I’m impressed using your expertise. Appreciate this kind of comprehensive article. It had been really useful regarding the real estate market. Firstly many thanks — an extremely helpful report. Continue!
How about Gurgaon, off Golf Course extension road for investing in property? Specifically in IREO’s project.Is it a good option for investing with/without IREO builder?
Hi Sanjay,
Is it a right time to buy a CIDCO resale property at Kharghar this time or should I wait for correction in next few months time?
You could wait till Diwali to see which way the market goes. Nevertheless, you are taking a chance. Kharghar is seeing a lot of demand due to the many market drivers there, and the same flat might not be available by then.
Malaika,
The biggest driver in Kharghar is the airport. Iam hearing about it since i was 13 years old, today iam 30 years. I still see the same picture in news papers.
If you are not badly in need of a flat wait for some time. Making profit is just about buying in the right time.
Consumers are not organized but the sellers are. Very few reports being published will be genuine. Every media company needs funding to sustain and the sellers fund them not you and me.
And yes, as per Sanjay the same flat may not be available but I promise you there will be some nice flat available for you and you will not be homeless.
Sanjay,
I would love to read your views about the following areas.
1. Affordability: Is there an logical standard to define affordability which covers analysis on factors like economic volatility (local/external growth related risks /variations, global recession factors)
2. Demand: Please discuss factors (SWOT analysis) for the next decade around the inventory planning process around maybe expected sales volume, profit margin comparison between Project in Residential (luxury vs volume) & Commercial (CBD vs High volume/SEZ)
3. Supply: Please discuss factors (SWOT analysis) for the next decade around the supply planning process Residential (luxury vs volume) & Commercial (CBD vs High volume/SEZ)
4. Risks: Please discuss scenarios such as possibility for aggravated acute housing shortage and its implications.
Thanks,
CP
Hi, Chaitanya,
It looks like you need a full-fledged analysis on the areas and aspects you mentioned. I recommend that you get in touch with Ashutosh Limaye, who heads our Real Estate Intelligence cell and commission REIS to prepare this report for you. His email ID is ashutosh.limaye@ap.jll.com
Thanks Sanjay. I don’t think Ashutosh will give free advice/report as I know I can’t afford to pay JLL for a complete report
. Maybe JLL internally can consider these areas as food for thought, because such info will help better analyzing real estate trends,pricing and profitability. For the moment, customers like me can interpret bits and pieces of such data from financial reports and historical references. I would like to thank you for sharing what you can in your blog.
Where do u seen Gurgaon property price post diwali? many development coming in delhi new master plan any way it will affect Ncr
Hey Sanjay,
In the article you have always spoken about prices, which many belive is irrational. Can you support you article, with the actual sales trend to confirm that the prices are in correlation with the demand.
Why was there a sudden rise in prices only from 2007? What was the changing point in the country’s GDP etc since 2007? If the reality sector is throbbing with liquidity then why was there the LIC scam? Why are the reality shares taking a hit year after year on the sensex?
What is the average income of a typical buyer today? Iam just curious about his family’s net income.
There are so many question in the minds of common people that remain unanswered. Its just that people succum to herd mentality and loose track of the rational.
If you answer to my questions, I will accept that the price increase is genuine.
Hello, sir. We’d be happy to discuss this with you on the telephone. Please provide your name and phone number and we can get in touch.
Hi Sanjay,
Thanks for a very informative article….
We live in the States and are interested in investing in the Delhi Market….would like your expert opinion on which location to invest in, please…
..Noida, Gurgaon…or somewhere else…???
Thanks again
Asra
Hi, Asra,
That would depend on your budget and investment objectives. I suggest that you get in touch with the head of our Delhi NCR operations – Nitish Bhasin (nitish.bhasin@ap.jll.com)
Regards,
Sanjay
Hi Sanjay,
I really like you blog and really appericiated the way you are putting the things in clear way rather confusing your readers..
Can you plese higlight the current situation of Property market in Noida extensions. I heard about many Projects in Sector 74, Sector 127,129 131,133,134 . What the correction you are thinking in future for those area and if possible to discuss in blog what is the right price market and what the future vision for these area…
Thanks
Arun
Hi Sanjay,
I am looking 2bhk flat in baner/pashan area (pune) & builders are quoting rate around 4800-5000 per sqfit rate for built up area. I have no hurry for possession. Should i wait for lower price.
Hi, Kiran,
If you’re in no hurry to take possession, you’re in the driver’s seat. Most developers with under-construction projects would negotiate on the official rate if you arrive at the table with chequebook in hand. However, I caution you to deal only with a reputed developer who has an impeccable market record. Timely project completion is not a given in the current cash-crunch scenario.
Regards,
Sanjay
Thanks Sanjay
Hi Sanjay,
Thanks for continuing to keep in touch through this blog.
I see that residential property (especially row houses) prices have steadily increased this past year in Hyderabad. How do you see the demand in Hyderabad? Especially with Euro crisis, not so upbeat U.S. economy, and predictions of real estate softening in China, do you see any softening in residential real estate prices in Hyderabad in the upcoming future?
Would you be a buyer of primary residence now?
Thanks for your insights.
Hi Sanjay, do you know anything about Pondicherry real estate? The so-called white town/french quarter is quite expensive because it is limited in area and adjoins the sea. We are looking at a residential house that is about 12-13K per sqft (1050 sq ft land/built space plus a lot of shared space with three other houses in the same compound). The house is 3 floors – 2 floors of 1050 sq ft and the third floor is a terrace. The owner is quoting 1.3-1.4 crores. what do you think? Would it be worth investing in Chennai or Bangalore? Thanks in advance! S
hi dutt…thanks for all the good stuff. interestingly one comment that sticks out in my mind is…”people will buy only if they can afford to buy”….so as long as the prices are within reach of the buyer the markets will be able to keep its level…
Hi Sanjay nice article .. when you wrote this article the price of new launching site near my house in pune was 35 lakhs ..now in 2012 its in mode of completion and same 2bhk 1000sq ft. flat comes at 47Lakhs.. in 2 years 12L increase but now its ready possession.i am worried now if I buy it if in emergency if i have to sell it will there be any buyer ? say for 55L cause i will not sell in loss. Who can afford 50L + flat in pune? except IT ppl core industry guys don’t have salary more than 10L after 56 years of experience. and IT industry no one has trust at any time any one can loose job. what is best buy time? 2012? OR 2013 ..whether to wait and see if Europe and rest of the world settle there economical problems? or live in rented 2bhk for 10K monthly charge and don’t go and buy 40k+ EMI wala flat ? 4000k to 5500k is max per sqr. ft. price for Pune for next 2 years(10 to 15 km range from central pune area?) ?? what will happen after that prices come down or go up? I earn 1 Lakh per month but still I fear to loose job anytime if software marker crashes so is it worth to buy 50L flat with 50k EMI per month ?
Dear Yogesh,
I would strongly suggest that you wait for another six months to see which way the IT / ITeS market swings before you make a purchase commitment.
Hi Sanjay,
Great blog for someone like me who is interested in learning more. I live in the US and am looking to invest in a new flat being built in Anand, Gujarat for 40 lakhs. The value of land and property has grown exponentially over the past 10 years in that area. Can you provide your thoughts as to whether this is a good investment or do you believe that the growth will lessen over time?
Thank you!
Sonal
Hi, Sonal,
Investing in a residential property in Ahmedabad makes a lot of sense. The upcoming areas worth looking at are Prahlad Nagar and also towards the north, where InfoCity, Raheja’s Mindspace and a DLF project are coming up. You can also consider the area adjoining GIFT. All these areas have long-term potential because they have favourable market drivers.
Hi Sanjay,
This article is dated sept’ 10 in this e-age article dated 1yr old could be deemed outdated but interestingly the contents in the article still holds true (word-by-word). Also anything written as a critical review to real-estate market seems more genuine than all the marketing gimmicks around.
Why is that the bubble sustaining and infact if anyone is to go by current news in economic times “Mumbai home prices may not fall, property around Delhi to get dearer “. When will the bubble burst or is it getting bigger? at whose expense?
Sanjay, i am sure, you must be having some predictions or analysis for the today’s ‘current state’. Can you pls share your honest informal thoughts?
For majority people (read genuine buyers) with no valid info to look for this blog is a good guidance, so your opinion is extremly important and helpful.
Regards
Behavioral finance has repeatedly proved that whenever asset prices start escalating, the initial interpretation has been of a ‘bubble’. In-depth analysis of price appreciation in real estate and the reasons thereof would help in comprehending these fears. Price appreciation in real estate is backed by the following fundamentals:
- Rising income levels, resulting in increased demand for quality constructions and aspirations for better locations in residences. This has also been made easy by nuclear families and double-income households.
- IT / ITEs continues to be a major revenue driver and outsourcing drives demand for office space.
With land always being a scarce resource, property prices would follow basic economics of demand-supply and pricing, whereby property prices seem to have increased. Normally, real estate returns are in line with inflation and if we look at the current price rise, factoring in inflation, the returns which real estate delivers still seems to continue compensating investors into property in the prime cities against inflation in the long term.
Hi Sanjay,
I have been reading articles related to Reality bubble since long & I found your article more sensible than others.People tend to compare bubble with US Housing market but they forget that India is a developing market/economy & inflation / price hike is unwanted but part of it.
I would like to thnkx for the efforts you’ve put in writing this site. I am hoping the same high-grade site post from you in the upcoming times as well. Actually blogging is spreading its wings quickly. Your write up is a great example of it.
It was nice reading such a great content after a long time!
You hit the nail on the head! Perfect summation. Those comparatively similar thoughts were running through my head for a few months. I had done the analysis around a year or so back and feel the Mumbai real estate may be in a huge bubble. Typically when buying a house the buying price should typically be upto 3-4 times their annual salary, so as not to be mired in debt. Some analyists put this number even lower at 33% of an individual’s monthly salary. With your take home at apprx > £48k, a £200k seems feasible and logical. But considering an annual Rs 20 lakh salary (how many people other than people in your bracket do infact make this in India?) the maximum you would pay for a home to stay with the same logic is Rs 80 lakhs. Compound that with the fact that the amenities are not up to par. Further, for a moment consider the median salary differences between UK (apprx £27,000/yr and India $1,800/yr), and you will see how nonsensical it is to purchase at existing prices.
Here is an example,
A Rs 20 lacs home
An avg person making Rs 10,000/mth or Rs12 lakhs/yr
This is 17 times the earning potential of the individual.
Granted that the salaries will increase in the future, but the home payment installment will not. However what people are not taking into the picture is that home prices are increasing more than the inflation or salary rates of people.
Also take into account that the 17 times given above takes into account other factors like cost of living. The individual will have to earn more to pay back, taxes, daily cost and expenses, travel, home insurance, property taxes, broker fees, utilities like water/electrictity/bldg repairs, child education/clothes/food/other costs, etc.
It will only put people into a lifetime of debt when the home is not even worth that much for a long time to come. Not everyone NEEDS to own a home but everyone wants to own one out of ego and greed. But it is free choice I guess, if that is what they would like to do, so be it.
UK avg sal resource,
http://www.telegraph.co.uk/finance/economics/8909797/Average-salary-falls-3pc-in-face-of-high-inflation.html
(PS I suggest replying back (if any) to the post on this page rather than the email address I have entered here for obvious reasons
)