Take off point or Tip off point for Pune real estate market?On Friday, to cheer up the property buyers who are sitting on the fence, waiting for the property prices and home loan interest rates to come down, Promoters and Builders Association of Pune (PBAP) gave a good news!
PBAP president Lalit Kumar Jain told the media that "In a few months interest rates would come down to around 7.5 per cent!" He also added that "It will be the take off point for the city's realty sector once again."
It means, now PBAP is also convinced that there is some sense in not booking a flat at this point of time and suggests you to buy a property after a few more months when interest rates come down!
Few means 6 months!PBAP is giving you this tip because each and every member cares for Pune property buyer. And every builder is as anxious as the home buyer to find out when the wait is going to end and when (flat) booking will resume in full swing.
One of my source, has told me that this claim about interest rate is not only a motivational slogan but it is based on the solid prediction of nun other than CEO and Managing Director of ICICI Bank Mr. K V Kamath! Mr. Kamath has declared that "interest rates are set to fall by up to five percentage points in the next six months as inflation is moving towards zero level.
"All I can say is that four-to-five percentage points correction in interest rates from where it is today...this correction, I think, will be by July...this is where the interest rates are tending in six months from now," Kamath said in an interview.But the credit for jumping to the conclusion that "low interest rate would be a take off point for Pune real estate" goes to PBAP! Because, actually in the same interview Mr. K V Kamath has warned us about the impending "deflation"! Mr. Kamath says:
"Interestingly, we are heading towards deflation that is very clear, or rather we are heading towards very low level of inflation...Those who understand little bit of Economics and Finance will tell you that it would be a tip off point and not take off point!
Deflation: a declining spiral:In simple terms "deflation" is totally opposite of "inflation".
In 'inflation' we have to pay more amount of money to buy a flat or a thing.
In 'deflation' we have to pay less money to buy a property or anything!
It means rate of the property along with the profits of the builder goes down.
Let me quote Colin Asher, an economist at Nomura Securities. He told Radio Free Europe that the problem with deflation is that:
"In deflation, there's a declining spiral. Businesses make less profits so they cut back on employment. People feel less like spending money. Businesses then don't make any profits and everything works itself into a declining spiral.
Deflation also has a psychological element as it becomes rooted in peoples' psychologies and becomes self-perpetuating.
Consumers are discouraged from buying expensive items like automobiles or homes because they know those things will be cheaper in the future."
What is your take on waiting for 6 more months?Atul, who's comments you must be reading on this blog, i am sure, will say, "i am telling this for last couple of months!" Yes, i accept, i found it very difficult to agree with him.
Even now, i find it difficult to understand why the leader of more than 300 big and small builders in Pune, Mr. Lalit Kumar Jain is not encouraging property buyers to book a home when things are going exactly as Mark Gongloff (CNN Money) describes! He says:
"when prices fall simply because people have no desire to buy -- leading to a vicious cycle of consumers postponing spending because they believe prices will fall further -- then businesses can't make a profit or pay off their debts, leading them to cut production and workers, leading to lower demand for goods, which leads to even lower prices."What is your take on postponing booking a flat for 6 more months and waiting for property rates and home loan interest rates to come down as Mr. Lalit Kumar Jain suggests? Please, share your views in the comments. (Comments Policy)
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