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Tuesday, April 7, 2009

Are real estate bears running out of time?

For more than two years now, a set of people have been screaming from rooftops about the existence of bubble in Indian real estate market.

After getting convinced about this so called bubble, all sorts of doomsday scenarios in the aftermath of the bursting of this bubble were conjured up.

The pet argument is that prices rose 300% in three years beginning some time in 2004-2005 and wage gains were much smaller during this period.

This is not a sound economic argument, in fact it amounts to little more than quackery or spin-doctoring.
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What's your take on the crash of Pune real estate market?

I find this blog, written by "THE BOSS", very amusing! It talks about "crash", "bust of Pune real estate bubble"!! I don't think these are any more issues. What say you? Please, visit the blog and share your views in the comments. (Comments Policy),

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17 comments:

  1. I am a bear. I am currently in US.Layoffs are happening everywhere. For people with jobs, there are no bonuses, no salary raise. 70% of the people I know had 5-10% salary cut on top of it.
    Now let me talk about people working in outsourcing companies. In my apartment complex on average I see 1 person/day returning to India. No new projects are getting sanctioned. Existing ones have rate reduction and man power reduction. Remember there was talk about this happening in US for almost 2 yrs. Finally it is happening now.
    I think IT downturn will propagate to Indian IT cos. Expect salary cut, layoffs etc. Ok enough of this aspect.
    Now lets talk about builders. You had some posts and threads on builder strategies. They are trying gimmicks but there is no real rate cut. Even your low budget projects are quoting around 30 lakhs for under 1000 sq ft apartment. So as far as I can see there is very little "real" correction in prices.
    Obviously currently there is race in govts. to print money. SO far all of it is going in the drain. There is still some possibilty of eventual huge inflation which might make current prices look bargain. But so far it is all deflation.
    Sorry but I am still bear. At least in Pune market, there has not been RE correction.My hope is evetually some new builder can jump in and offer more realistic projects. I don't have much hope with existing ones as they have made enough killing to keep the RE market frozen.

    ReplyDelete
  2. #! Ref: I find this blog, written by "THE BOSS", very amusing! It talks about "crash", "bust of Pune real estate bubble"!! I don't think these are any more issues.

    Ohh really? then what are the issues? has recession got over in Pune? I don't think so. In fact lay-offs are now happening in Pune IT sphere, which till now was only affected by pay-cuts. The sentiment will be really down going forward. So all you wishful thinkers, wish you luck!

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  3. Ravi,
    Thanks for acknowledging my still nascent, floundering blog. I am glad it is amusing because I cannot furnish the kind of details and insider information as you do. Based on my rants, people might conclude that I am wildly bullish on Pune property market. But in reality, I continue to oppose the irrational point of view of some people who are propagating their wild crash theories without any basis. I believe genuine home buyers with the capability to buy a home are being misled by this noise.

    http://rightadvice4u.blogspot.com/

    ReplyDelete
  4. # Ref: "I believe genuine home buyers with the capability to buy a home are being misled by this noise. "

    - Yes, THE BOSS! I agree with you completely!!
    You are doing great. Keep up the good work. Please, install Google Friend connect or/& Feedburner. So that i can subscribe to your blog.

    ReplyDelete
  5. # Ref: "Ohh really? then what are the issues?"

    There are many! But for sure, IT is not an issue anymore.

    Being at the center of economic and social life of India for the last 8-9 years, you will find it difficult to accept but you are no more "an issue" or "a hero!"

    Please accept that, your days are over. It will help you to survive in "Real India"!

    This is not "wishful thinking". No one says that we are doing well. You also accept that troubled IT industry is not going to end Indian story.

    ReplyDelete
  6. # Ref: "My hope is evetually some new builder can jump in and offer more realistic projects."

    Rajiv, good news is it's already happening!

    Your "hopes" are turning into reality.

    You will be happy to know that not any new but "existing builders" are launching
    "realistic projects"
    .

    Not only that,
    property buyers in IT companies
    are coming together, forming their own groups and developing real estate projects as per their needs and in their budgets.

    Please, subscribe to my Ravi Karandeekar's Pune Real Estate Market News Blog to keep yourself updated with these positive developments.

    One day, you will stop being a bear and become a proud property owner.

    ReplyDelete
  7. That's very good news. I am not in big crash camp. I will look into these projects. Please continue great work of keeping us updated on Pune projects.

    ReplyDelete
  8. Ravi,

    Most of the comments are your own. Your blog seems as hyped up as the real estate market in pune. Remove the IT industry and economic growth will slow down to 1%-2%. Its great to hear that India can sustain high real estate prices without I.T. Finally someone has the guts to say that. Delusional but gutsy..

    ReplyDelete
  9. #! Ref: Being at the center of economic and social life of India for the last 8-9 years, you will find it difficult to accept but you are no more "an issue" or "a hero!"
    Please accept that, your days are over. It will help you to survive in "Real India"!

    Thanks for enlightening me. Please please elaborate more in your next post why do you think so. And if this really is the case what sector do you think will fuel the growth in Pune or in general. Who else will be buying so many overpriced flats, bungalows out there in Pune market?

    ReplyDelete
  10. RE crash is already in play at Pune. Only difference is at stock market it happen in day & in RE it happen over years. For Example. Balewadi Prices quoted Mid 2007 are 3400/ sq. ft. One known person booked apartment even at rate 3350. Two weeks back same apartment complex phaseII agent is quoting for 2800 while one of my friend directly negotiated with builcder brought it down to 2200. Isn't it crash. Compare with this my another friend who booked apartment in diwali 2006, at Bavdhan at 2100. So we are already at price level of late 2006.
    Just for analogy, in US RE slowdown started in Mid 2007 & after 2 years still prices are coming down & prices come down only 20% to 40%. So similarly we can also assure that prices will come down but over long period. In US you can easily check transaction prices where in India it is really hard so RE crash is not visible so may be prices which already come down are not known to masses. So everytime someone visit builder he has to negotiate from price builder quote without knowing the recent rates.

    ReplyDelete
  11. # Ref: "RE crash is already in play at Pune"

    - It's "price correction". Not a "crash"!

    "Property Price Correction" has become a popular term. Mostly so called economists and international real estate consultants use it. Generally, "correction in property prices" is considered good and Indian real estate industry welcomes it!

    ReplyDelete
  12. Take a look at this also...

    "Property buyers in Mumbai appear to be looking for 2004 prices in the current economic scenario, going by the responses that HDIL got last fortnight. "

    http://www.thehindubusinessline.com/iw/2009/04/05/stories/2009040550781500.htm

    The prices across India are falling already, returning to 2004 and here (Pune) people are trying to call it just a correction... :-P ... The builders here (Pune) are so stubborn, that they even don’t acknowledge that their properties are over-priced and keep on continuing in the living in the dream they lived last couple of years...

    The matters are made worse by the estate agents; most of them are a useless lot, who are good for nothing in their real life. All these useless people used to join politics once, but now they become RE agent in Pune and keep on boosting the property price un-necessarily.

    If the big players like DLF, Parshwanath can reduce the prices in Delhi, Gurgaon, B’lore, H’bad and Chennai along with HDIL, Lodha, Hiranandani can do the same for Mumbai, why not Kumars, Geras, Goyals, Paranjapes and Baals do the same in Pune??? Their so-called budget flats are priced at 3050 Rs/sqft against 3450Rs/sqft for luxurious (sic) flats (Goyal’s on Sinhgad road). Shall we laugh about it??

    @ comment about IT, let me make it clear, IT was/is the main development-driving force in Pune and whoever thinks otherwise is a fool... all the useless, overly priced properties were lapped up by IT yuppies before... and they are the one who are going to suffer now due to recession and so is the RE market of Pune. Without IT, Pune is as usual home for retired people and students, none of them able to boost the property demand. As a passing remark, Pune’s growth as education hub is also boosted due to IT industry here, so if you want to wake up, it’s your call.

    Sooner or later, I am waiting for the suicides of builders as they happened for farmers sometime back in some parts of Maharashtra... :-)

    ReplyDelete
  13. # Ref: "If the big players like DLF, Parshwanath can reduce the prices in Delhi, Gurgaon, B’lore, H’bad and Chennai along with HDIL, Lodha, Hiranandani can do the same for Mumbai, why not Kumars, Geras, Goyals, Paranjapes and Baals do the same in Pune???"

    - Because, my dear friend, real estate is a "local business"!

    ReplyDelete
  14. # Ref: "fuel the growth in Pune"

    Hearing this term after a long time. No body uses it any more! Actually, we all, in India, are trying to forget about "fuel", "growth", "emerging market", "beating China", "fastest growing economy", "global-economy", "open policy"!

    Those who coined and made it popular have already withdrawn their cash and gone back home!

    ReplyDelete
  15. # Ref: "Who else will be buying so many overpriced flats, bungalows out there in Pune market?"

    - Good thing about prices is they can come down.
    - Good thing about property is it has a long shelf life.

    ReplyDelete
  16. #! Ref: comment about IT, let me make it clear, IT was/is the main development-driving force in Pune and whoever thinks otherwise is a fool... all the useless, overly priced properties were lapped up by IT yuppies before... and they are the one who are going to suffer now due to recession and so is the RE market of Pune. Without IT, Pune is as usual home for retired people and students, none of them able to boost the property demand. As a passing remark, Pune’s growth as education hub is also boosted due to IT industry here, so if you want to wake up, it’s your call.

    Completely agree. Not caring about the state of IT in Pune is like self-denial for Builders and salespersons alike. We have seen a slight snag in sentiments of IT professionals has hit the Pune RE industry to 'correct' the prices to more than 20% in just 6 months! One can imagine what will happen if this sentiment continues or even worse, goes down further. As an insider I can tell you that Pune IT sphere was not hit so far as bad as other cities in India. Also the big players in Indian IT industry have still not faced the real brunt of the global financial crisis. Both are expected to happen very soon. Lay-offs are secretly happening in the second-tier IT companies in Pune and salary-cut or no increment and possible lay-offs are eminent in the first-tier IT companies.

    Anyone who is dreaming about making money in Pune real estate sector and not considering IT is like living in paradise (you know who's:))

    ReplyDelete
  17. Anybody who thinks that IT/ITES is not behind these jacked up prices of real estate in Pune needs to get his head examined. If not IT and ITES people, who else is buying flats in Pune in bulk? Vegetable vendors? Is that why every builder advertises "proximity to xyz infotech park?" who lives in magarpatta city, an IT professional or a medical representative? Why are the areas such as wakad, baner road, pashan, aundh, pimple gurav (all close to hinjewadi) in demand? why not Katraj, Dhankawdi, Bibwewadi? WHy is it that almost everybody in my newly built bldg on Sus road works in Infy, Wipro, Cogni? I have seen that non-IT folks who are jealous of IT folks always try to undermine them. Which other sector is creating thousands of jobs paying them lakhs or rupees per year, giving them the opportunity to earn in us dollars or british pounds?

    ReplyDelete