What would be the effect of demonetisation of 500 & 1000 notes on Pune property rates?:
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I feel pity for Pune builders.
In the last couple of years, the builders in Pune had lost respect & credibility.
Somehow, with the help of private housing finance companies these builders were managing to remain in business. They were tempting the buyers to book a flat by offering discounts & easy payment plans.
The naive flat buyers were reluctantly accepting these baits & booking flats only because they were still afraid of property price rise.
In spite of the huge inventory of unsold flats laying around, investors', bureaucrats' & politicians' black money was empowering the builders in Pune to hold on the property rates.
Instead of waiting for 50 % property price correction - it is safe to surrender and accept 15 % - 20 % discount and book a flat now - was the popular idea among these naive flat buyers.
But the demonetisation completely neutralized this fear factor. Flat buyers in Pune no more fear of property price rise. Flat buyers in Pune no more belive that of property rates will remain stagnant. Even naive flat buyers in Pune strongly believe that property rates in Pune are going to fall.
So, now, the builders in Pune have lost their most effective weapon - the fear.
But, there is no cash component in Pune - the difference in ready reckoner rate and selling property prices is not much - builders in Pune go for construction finance - if you consider the land price & construction cost, the property rates in Pune are quite reasonable and there is no scope for price reduction - some experts told me.
Booking a flat is a sentimental act - not a rational decision - dude! I told him.
But, financially price reduction is impossible - one expert said.
Financially? Whose money is this? This industry runs on the flat buyer's money - if you don't bend then they will break you - I told him.
I really feel pity for these dumb, disrespectful, unreliable, untrustworthy, powerless buggers.
You know?
In the last 15 days, since the demonetisation of 500 & 1000 notes on 8th November 2016, everybody asked me only one question - "What would be the effect of demonetisation of 500 & 1000 notes on Pune property rates?"
Eventually I realized that this was not the question. It was a firm belief. Not a wish. Not even a prediction. Everyone was very much sure that because of demonetisation property rates in Pune are going to go down.
Not only that! Everyone was ready to wait till the property rates really go down. Ready to wait to book a flat. Ready to postpone the registration of agreement to sale. Ready to renegotiate the price of the resale flat. Everyone was sure that there was no point in rushing. Better wait & watch.
What happens when the flat buyers do not book a flat?
Property rates go down. Right?
What say you?
Share your views in the comments, please.
Related Stories:
2) How to survive the sinking Pune real estate market
1) 8 Questions every flat buyer in Pune should ask a builder
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Builders will observe a wait & watch policy. Buyers will also do the same. Sales will be low for next 6 months, but demand will eventually pick up due to following reasons : 1) Housing loan ROI will def go down & quite drastically in next few weeks (or days) & buyers will start coming in slowly since demand will remain high, families keep expanding & housing need will historically never end. 2) Builders will supplement above with "innovative" models/discounts/extra amenities etc hence increasing sales.
ReplyDeleteBut, unfortunately, builders (not all) will go back to black money model offering stupendous discounts since now they want to show even lesser profits & save on taxes due to demonetization losses.
Please, understand the difference between the real money & digital money, Feroz. RBI prints real money. Banks create digital money. Home loans are basically digital money. How can real money will affect the digital money? Particularly when the real money is 7 - 8 per cent and digital money is 92 - 93 per cent!
DeleteDigital money is a subset of debt in case of banks. At least Builders don't let debt create in thin air but as you mentioned they create fear factor in thin air to drive debt numbers higher. Real money affects digital debt in the sense that it helps pacify this bubble that can only grow in the debt part. Unless there is growth like in terms of salaries (which itself comes from GDP growth) nobody can payoff with the real (white) money. Cash component has 'high velocity', i.e. it changes hands "way faster" than digital debt. 2000 denomination will take it to the next level, and builders are positive thinkers too.
Delete"Housing loan ROI will def go down"
Delete- Issue is not of interest rate but base cost. By this logic, if interest rate is 1%, then anyone can afford 10 Cr flat, right ?
200-300 rs per month hardly matters when a person is paying 40-50k as EMI.
Builders also were running No EMI till possession etc. still failed, why ? Because it's the price, not interest rates.
And yes, US Fed is going to hike interest rates next month. Today US$ has already fallen below 68. This would also mean more oil bills for importing country like us. Both these factors will reduce extent of reduction in rate cuts.
Apart from this, we are migrating from Basel 2 to Basel 3 norms. This means Govt would be required to pump 2.40 Lakh Crores in banking system just to conform to the new norms.
Those who don't know about BASEL norms can check this link for easy explanation -
https://www.kotaksecurities.com/ksweb/Meaningful-Minutes/7-things-to-know-about-BASEL-III-norms
So Feroz, things are not that simple as builders are trying to make. You need to look at the entire exercise with atleast 3 years perspective.
" families keep expanding"
- LoL. So why did prices crash 50% in Chandigarh few days back ? The population there reduced by 50% or what ?
DEMONETISATION EFFECT
Real estate prices crash 50% :
http://www.tribuneindia.com/news/chandigarh/real-estate-prices-crash-50/323419.html
I think property rates in core areas like kothrud may have small correction's. I do not expect big correction. Instead builders will go for smaller size flats instead of big luxurious apartments.
ReplyDeleteSmall correction! How much small, Indian Tiger?
DeleteMejor cost affecting factors are Pradhan Mantri Aawaas Yojna, DP, ring road, Metro.
DeleteWe may expect 10 % price drop in near period.
"small correction's"
Delete- You mean 30-35% ?
"builders will go for smaller size flats"
- And what about those couple of lakh flats which are ready/being built ? What about those flats with hoarders ?
Just to inform, Vasant Kunj area in Delhi is already down by 30% compared to early this year & demonetization effect has not even yet started. And this area is one of the most sought after area in Delhi.
Chandigarh link is already mentioned above where prices have crashed by 50% & still counting.
Again its game play wait and watch game with builder. whoever have more patience will win the game .But one thing to note buyer will loose nothing in waiting and watching but builder will loose. so appeal to all buyer don't be in hurry and please wait and watch at least next 1 year. Rate will come down !!1
ReplyDeleteI fully agree....wait and watch........"buyer will loose nothing in waiting and watching but builder will loose"...this will surely impact on builders who are just role playing for black money lenders. Builders are able to wait only due to black money......and now if demonetization work well in all manners..........so there will be no black money lenders and builders have to get loan from banks............so now here the route cause where builders can not wait....and hence suer shot reduction in property rates......and there is truly no harm in reduction in property rates as right now builders are almost making more than 60% profits ( do the true and practical analysis). So for property rates reduction will just reduce the profit margin of the builders. Even if right now builders think to just have 30% net profit, property rates will reduce to 30%, irrespective of demonetization..............So buyers,,,,,,,,don't be in hurry and don't believe on paid news saying that demonetization will not affect on property rates......
DeleteSpot on Ravi sir.
ReplyDeleteI believe the effect of demonetisation will not be seen on real estate immediately and it might take some time probably 6 months to 1 year. if people do not rush to buy home immediately and wait for that much time they might get good deal and also the re-sale prices of flats should come down more as compared to the builder's flat.
below economic times article stating the same.
ReplyDeletehousing-prices-to-drop-up-to-30-wiping-rs-8-lakh-crore-in-value
Housing prices to drop up to 30%, wiping Rs 8 lakh crore in value
ReplyDeleteRead more at:
http://economictimes.indiatimes.com/articleshow/55601210.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Good to see this blog Ravi. It was very much required.
ReplyDeleteApart from demonetization which will hit black money hard thus affecting the pulse of builders, other important aspects which will directly affect especially Pune real estate is change in Visa norms by US & UK. This means less on-site jobs for IT persons, thus lowering their purchasing capacity. UK visa norms have into force from today. These were last buyers left who could afford & they too will be affected which means double whammy for builders.
Fun will be with hoarders, who will be having so called asset with 50-60% value wiped out plus no buyers to buy from them with cash. Reduction in flat prices means lower rentals too. So those who aren't sure about purchase & prefer to wait & rent, expect fall in rentals in coming time. Some news links which show crash in real estate prices are inevitable.
India’s housing sector waning demand -
Pune launches from 2013 to 2016 has crashed by 77%.
http://infracircle.vccircle.com/waning-demand-indias-housing-sector/
No buyers at inflated prices, stay wary of real estate -
http://www.moneycontrol.com/news/business/no-buyers-at-inflated-prices-stay-waryreal-estate-bhandari_7901501.html
The Un-real Estate: The sector that is going to take the biggest hit
Yashwant Dalal, President, Estate Agents Association of India, believes the recent demonetisation has only brought the spotlight back on an industry that was already slowing down. The money that was rotating had slowed and with this demonetisation, things will only slow down further. At least 30 to 40 per cent of the prices are expected to fall in the coming days.
http://indianexpress.com/article/india/india-news-india/the-un-real-estate-demonetisation-process-100-500-rupee-note-narendra-modi-black-money-4372286/
DEMONETISATION EFFECT
Real estate prices crash 50% :
http://www.tribuneindia.com/news/chandigarh/real-estate-prices-crash-50/323419.html
And this is the latest news. Maza to ab aayega.
Housing prices to drop up to 30%, wiping Rs 8 lakh crore in value -
Housing prices in 42 major cities across India could drop by up to 30% over 6-12 months after the demonetisation of high-value notes, wiping out over Rs 8 lakh crore worth market value of residential properties sold and unsold by developers since 2008.
http://timesofindia.indiatimes.com/business/india-business/Demonetisation-Housing-prices-to-drop-up-to-30-wiping-Rs-8-lakh-crore-in-value/articleshow/55601791.cms
Black money hoarders buying benaami properties will now see their properties being taken away by Govt free of cost alongwith jail term of upto 7 years.
Exit from benami properties to be tough after demonetisation drive -
http://www.hindustantimes.com/real-estate/exits-from-benami-properties-to-become-tough/story-xK7yxP6J1vLkvNwvIYuNWN.html
Everyone is now openly saying atleast 40% fall in property prices. Like seen in Chandigarh, it's already down by 50%. So it won't be of surprise if we see minimum of 50-60% crash in Pune real estate going forward irrespective of interest rates.
Not only benami properties must be targeted but also those properties bought with black money.
DeletePART - 1
ReplyDelete______________
Namaskar Ravi Sir,
The demonitization is just one among the steps to make our country free from corruption,black money,debt free
and a super power nation in coming years.
Vision of Abdul Kalam 2020 India becoming economical powerful nation , could have been easily reached if strong/bold steps would have been taken in 2004-2014 govt tenure.
Inspite of having so many problems like 2G scam,Coal scam, Commonwealth games - Kalmadi scam and many small scams + 2008 market crash our dear India kept growing at
small ans slow pace , which is still better than other emerging market.
Just think if step by step if these problems start solving , black money comes to govt/RBI , govt will definetly spend this money on social infrastructure which will help us
the citizens of this great country.
Next surgical strike will be surely on Benami land/property.
Demonitization + RERA act + transparency in RE business + Use of digitization + scare in market = Achhe Din for Home buyers who want to live in their own house !! Not for Investors
PART 2 -
ReplyDelete______________
My thoughts :
______________
* I'll modify Darwin's statement for current scenario Its not just survival of fittest : "Its survival of fittest , wisest & honest"
* Good builders who follow fair practices in building a Home , who deal with less component in cash will get demand in near/long term.
* Over Inflated areas will come down.
* More purchasing power for salaried person.
* For PUNE : Scenario is not as same as that of 1999-2004 ; IT guys used to get onsite opportunities , the current scenarios has changed alot !!
Only few are able to go there and make money and invest in cities for their home.
Not just IT ; even Auto,Manufacturing has faced less demand. L&T has come up with bas news recently.
No body wants to put their hard earned money in Real Estate in such uncertain scenario.
* Stop waiting for ORR(Outer Ring Road) , Metro , Garbage depo at PCMC . These things are important in city's infra development, but just look at how much time
it has take just to make a start , imagine when it will be started !!!
* The Demonitization plan is good , but could have been handled in better way at rural areas . For people living in cities , we are used to Q's.
I've even seen people chanting Vande-Mataram and Jai Hind at Q's !!
My Request to Readers/Citizens :
______________________________
* Please buy vegetables from local vendors atleast for few days , they are the ones who need white cash for their daily lives.
* Lets stay united , let us all do transaction with builders in Cheque , lets not pay in new white cash to builders.
* Hope the builders refuse to pay the govt. the bribe they ask !!
On Funny note :
________________
* I've read in news papers,saw many debates in news channels concluded that 40%-50% prices will come down for new/old homes.
* So will Wakad/Pimple Saudager will come at Pirangut's price :P !! And in fringe village a common man can now buy 3BHK or even a independent bunglow ?? !! Ha ha !!!
My Request to Ravi Sir :
________________________
The only thing which forces the young boys who have started their career to buy home in new city is social pressure.
It is sad to see that girl's parents want a 25-27 aged boy to take 60L+ home at the start of career , else they simply refuse for marriage proposal !!!
The right time to buy home is when a person is emotionally(happily not with stress !!) and financially(not using 80/20 scheme !!!) ready to buy.
Its advisable to live happily rent in Kothrud/Baner/developed localities in PMC+PCMC , enjoy Punyanagari , eat Joshi cha wadapav/ Garden wadapav, have lunch at Badshahi ,
trek small hills, happily trek Taljai !! without the TENSION of EMI !!! and then buy at later stage whe you are ready.
Ravi Sir , as you have many readers its my humble request to address this issue in newspaper like e-sakal/pudhari/MahaTimes and also in your blog.
People should come to know the current situation which is among the main reasons for the bad economic situation.
Jai Hind , Jai Maharashtra !!
Jai Jawan , Jai Kisan !!
Very good patriotic post Ramesh. Agree with you.
DeleteAnd in funny note, be assured that what was being called as XYZ annexe will be cheaper than XYZ itself. And there won't be much buyers left to buy in jungle areas without any infra since city areas will be cheaper.
Hoarder flats coming to market, benaami property getting confiscated will add to the fun.
"It is sad to see that girl's parents want a 25-27 aged boy to take 60L+ home at the start of career , else they simply refuse for marriage proposal !!!"
- Some may not like this sentence but it's a fact that the boy also needs to understand whether he is marrying a girl or pseudo escort !
And all this happens due to bs caste system. If parents of boys easily allow inter-caste marriages then see how the demand falls down from girls side because far better options will open up for the boy.
I just could not resist responding to this comment. Psudo escort??? seriously?If two couples ie inlaws and young married couple are living in same flat then 2 bhk is necessary.Then in some cases there are additional members in house .Some time younger son or daughter who is still unmarried.Or guest frequently visiting.Young married couple need at list their own bedroom to have some privacy.
DeleteIf women should stop expecting two bhk then men should stop expecting girls to stay with inlaws.Its simple as that.
Why 2 bhk, you can have 4 bhk.
DeletePlease read my comment carefully. It was in context of buying even with rented money by over-leveraging oneself rather than renting and creating a good financial portfolio. This has nothing to do with number of bedrooms ! Ample of 4 bhk flats available even on rent.
Absolutely Agree with you TheMonk.
DeleteI've seen cases in my own friends circle where a property was a necessity for marriage. Even if it meant selling your life to a bank and serving the rest of your life as a slave to a mortgage.
Also agree about the comment about caste system, we are an inter-caste couple living happily understanding the concept that an apartment was only an investment in 90's to early millennium. The people advising you have already reaped returns albeit from a false inflation. You know things have to be wrong when an EMI cost more than 3 times the rent.
Possible Scenario:
ReplyDelete1. Stagnant Sales in the Real Estate market has already constrained the cash flows for many builders.
2. The Black Money reserves of many builders has now been rendered useless by demonetization.
3. The biggest bakra community (IT) in Pune is already facing concerns on increments and growth in their jobs (IT companies are not doing as well as before). This could make many bakras fear the long term noose of a home loan.
4. "RERA is Coming!". After May 2017, builders will be expected to park 70% of the funds received for a project into that project's special escrow account. Based on what I remember reading, this will be applicable for ongoing projects also. If points 1,2 and 3 remain consistent or get worse, builders will not be able to get the money to park in the escrow account.
5. Most builders maintain land banks as a backup investment or for future construction. Some builders may turn to selling their land banks to raise cash. Considering the depressed market, they may be forced to sell at a lower price to the existing norm.
If this happens, the cost of land and of flats may come down significantly.
I heard some builders in kothrud & karvenagar are already started offering 20% discount on ready flats.
ReplyDeleteRavi... I believe one aspect you completely missed.. Cities like Mumbai and Pune has lot of Benami properties.. black money invested by folks.. These properties will also come in the market either for distress sale or govt auction..
ReplyDeletePrices are bound to go down..
Everyone is forgetting one more point ...north Indians invasion in other parts of the country. How long other parts of the country has to bear this crowd. Some how now the donkeys of UP - Yadavs have understood the importance of development and created the deldi-lakhnow exp way now development needs to happen across this road. I would suggest create triangle of development delhi-jaipur-agra-lakhnow force all IT companies to open their shops in these areas. I don't have any hopes from pigs of Bihar.
ReplyDeleteAdditionally there can other dev corridors like Ahamadabad-surat-badoda, Kolakata-bhuvaneshwar, Chennai-Bangalore, Hyderbad-warangal, Chennai-Vishakhapattanam, Kochi-Mangalore, Bangalore-Davangeri, Mumabai-Pune-Nashik, Nagpur-Amaravati, Indore-Jabalpur. I don't understand why government doesn't think on this kind of all round development.
Hi Ravi da I know no one will speak freely on this issue. Ravi da is there any way to send a message/note about this issue to our dear honorable development focused hard working PM?
DeleteIts a high time that other parts of country is bearing this kachara/dirt. Now no one can keep dirt in his home for long time else own survival will be hard. I lived in Kolkata, Blore, Mumbai and our own garbage city same problem of these north Indians everywhere.
If these people come here ..they r welcome, work here they r welcome, earn money..welcome, they settle in few numbers is also welcome but if they settle in bulk then there is definitely problem in future. Da what say u.
Ravi Da just take small example of 2 states.. State X and State Y. State X citizens in hand wot GOV manages its population and hence GOV manages its resources effectively so that all resources can be shared across all citizens equally. On the other State Y produces and grows its population like anything as there rules are dumbos...automatically bcz of lesser opportunities people from State Y migrate to state X which will cause problem to obviously create issues in managing its resource.
DeleteIf we take case of only Maharashtra there was specific class of politicians in previous governments who dont wanted the local maharashtrians to become IAS/IPS (fortunately awareness about IAS/IPS has spread among young maharashtrians and many officers are from here and we are seeing in action IAS Mr. Mundhe) as definitely they would have been problematic to them in their decision making.
DeleteThough MH is well managed state only bcz of certain class of politicians and people we are facing so many issues; as its result we are seeing day to day march here and there happening all over MH.
*Resource distribution is one of the major responsibility of the ruler/government.*
Guys.. why don't you start protesting for Maharshtra as separate nation.. like people doing in kashmir.. Its not our fault that we are not getting opportunity in our state..
DeleteCustomers will be able to negotiate prices 10% to 20% with the developers. Our real estate industry does not follow any index as a baseline to determine price, So I doubt any huge correction. We should not forget cost of construction and land costs are still high.
ReplyDeleteWhen baseline is not there how can you say 10-20% fall, LoL ? High land cost, high labour cost, increasing population......can builders come out with some more logical reasons ? Today's buyers are not like the same yedas whom builders fooled with same logic few years ago.
DeleteEven before Diwali, builders were giving 15-20% indirect discount in form of free taxes or offers like pay for 2bhk and get 3bhk etc.
Just wait & see, it won't be surprising if property prices fall by 50-60%. Not to forget lots & lots of resale market being flooded by hoarders, Pune & Mumbai based who will sell very cheap as they also have benaami property which will be confiscated & culprits will end up 7 years in jail.
Rentals too will fall which means more time for buyers to wait & buy later post big crash in prices.
And yes, even post crash, better to opt for ready possession flats with all approvals as the possibility of builder running away can't be ruled out due to removal of black money & RERA which needs 70% amount in escrow account. Crash process has already started.
See this latest news.
Property Registrations In Maharashtra Drop Nearly 40% Since November 9
http://www.bloombergquint.com/business/2016/11/25/property-registrations-in-maharashtra-drop-nearly-40-since-november-9
So if you are a buyer, just wait & see the fun. And as we discuss here, several builders are going bankrupt.
Demonetization was much required & most welcome. It doesnt affect majority population of our country (barring inconvenience & few issues e.g hospitalization etc).
ReplyDeleteBut govt needs to immediately look at the unorganised sector & traders for e.g. laundry men who go house to house collecting clothes for ironing etc & charge just Rs 5/- per cloth, but own or operate from a property which is worth many lakhs or even crores. WHOOAAA>..Rickshaw walas work really hard (we all do!!) but never paid a dime to IT. DOCTORS (NOT ALL) charge cash in OPD & now its upto them to show their income. You go to buy a LED TV & there are difft rates for cash & cheque/cards. So, these ppl are already hoarding new currency.
So, educated/uneducated/organized/unorganized/affluent etc all sectors prefer to hide their income. While abolishing DT is far away, govt must address this issue somehow immediately else demonetization will not meet its objective.Before attacking benaami properties (or at the same time), I hope this issue is addressed?
One way to start is, all transactions be made plastic/electronic in METROS followed by tier II cities & so on. There are enough banks in metros so no dearth of debit cards, smart phones, credit cards, cheque facility, net banking, e-wallets etc hence no excuse for not accepting plastic money. This way towns & villages already know what is coming & start preparing. Ofcourse villages should not be covered until there are enough banks. It may take a few years but it is doable.
Even though the downsize in property price is certain, it will depends on lot of factors.It will also vary from case to case.
ReplyDeleteIt looks that the house should available to investor/buyer at min 10% to 50% discount. It all depends on amount in hand (white money/legal money) of buyer, need of seller (to get out of existing investment), knowledge of buyer (about real estate/rental yield), need of buyer ,locality, supply in market and most important Negotiation Skills of buyer. Everybody are not very good when it come to negotiations. Even if we all know prices will come down, many of us will not able to get it at our desired price.
In locality like Wagholi/Kharadi it is bound to crash, after a year (i feel), builders will start distress sell. Even if they sell 25-40% of flats they are break even and can hold for more time.
If you are an investor then good to buy only if you are getting good rental yield (around or more than ~6%).
It's all academic discussion here, though enlightening.
ReplyDeleteFew points though:
1. The very real effect will start from 08 Dec onwards as the contracted and black money paid transactions start drying up. Generally one month payment and notice period is given in most of the land deals which usually have huge black money component paid upfront before the kaccha agreement.
2. Benami transaction and in others name property are going to face axe.
3. Land holding liquidation of bldrs ( reputed) is already ON for few yrs now ,since downturn started, now this trend will only accelerate and percolate to smaller bldrs. Do not fall for bldrs false bravado and face.
4. Small bldrs are going to vanish from the mkt. Beware and avoid such under construction projects.
5. Bldrs of all hue are totally unsettled and unsure of future move.
6. The raids have dented the bldrs hugely and they are afraid.
7. Investors are now stuck with the RE investment whether land or luxurious flats. Better to exit at small profit than face music later.
8. Missing component is the corruption chking mechanism like lokpal and actual locking up of these black marketeers.
9. Lastly, demonetisation will deflate all other prices other than RE where easy money has flowed. Interes rates are set to tumble opposed by FED rate hike.
Ravi what about this:
ReplyDeleteHousing prices unlikely to come down due to note ban: CREDAI
Read more at:
http://economictimes.indiatimes.com/articlesh…/55641098.cms…
Buying houses is sentimental decision for home buyers, it's a way to print easy money for investors. Buyers never push prices, it's the cushion of investor allow house to remain vacant. The moot question is, if people are able to convert there black money then price will rise as they will not like to keep cash. If they were not able to then obviously cushion gone and builder is tamed
ReplyDeleteIn my own humble view, property buy and sell is an emotional decision. The only people making a business of it are the builders, especially the small and un-branded builders. And these un-branded builders are the ones with the shallow pockets, and conducting the majority of black money transactions.
ReplyDeleteThe established and branded builders which are run as a corporation, have done away with these kind of transactions a long time ago. Their dealings are almost all in white.
Therefore, now when it comes to sell, the emotional flat owner and the branded builder, are going to let go of their property only if they realize the price they are looking for, unless of course in case of the emotional flat owner, he is in absolute distress, in which case he may discount it by 10 to 15%.
The branded builder, may hold on much longer, and they too, maybe in a years’ time, if inventory does not move, discount it accordingly.
Now when we come to the un-branded builder, his decisions are quick and business like, he would most probably off-load his inventory at a steep discount, as he may not have the staying capacity for more than a year as the branded builder, and secondly, he can make these decisions to discount much quickly, and get hold of cash, as quickly as possible.
On the questions of whether any discounting in the market is sustainable, over a long period, then I do not think so.
Prices will generally start climbing again, that is because, there will be growth in the economy, people will be earning higher, builder will be offering sops, and if the country and economy has even a small sign of vibrant growth, then the prices would rise, as that is how an economy will function, especially a capitalist and free economy, as otherwise we can categorize the people as those staying in a dead country with no hopes, whatsoever. The only time, when such a situation is expected is during a war, or a black swan event, which is the complete crash as noted in 2008 (and as experienced by USA).
After all brief analyst...do u all know how builders slash prices...hear about loading factors...40 to 50 percent loading....previus 3500 with 30 prrcent loading n now 3200 with 40 percent loading ..where the prices down...even u r paying more at lucratI've price...builders r not foolish as buyer...
ReplyDeleteRavi, did you notice that you don't find so many commentators on your blog as are there on this page? Indeed, it is exactly what people want at this time - prices to go down!
ReplyDeleteMy reckoning goes like this:
There is fraction (maybe 20%) of buyers in Pune market who buy with black money. They are out of market for now so the demand will go down.
A good chunk of sellers in secondary market take 5-10% in black. They won't be willing to drop prices but that will surely increase revenue to the government.
People are expecting surgical strikes to happen in real estate. That will push the demand down.
Passive impact of prices going down in north India (like Delhi, UP) and possibly Mumbai will occur.
Builders are still blunt. They say that "with black money going out, the supply of land will fall and that will lead to price hike". Are baba, what about the unsold inventory? And why will supply of land fall? Just why? No black money means prices will go down, not up ;-). Otherwise government's revenue will go up.
No interest cut by RBI is also giving a setback to the builders and sellers.
Finally, some people may be thinking if this is the best time to reap off profits on their investments as prices may not increase in near time. But I can't comment on what impact it will create. Overall, I see that demand will push downwards for some time more.
You are right, Ashutosh. We all want property prices to go down. Because we all want to own a home. At least at some point of time in our life. If not in 20s. May be in the late 30s or early 40s. However, besides property prices, now we are expecting better construction quality & better basic infrastructure services too. It means that only less rates are not enough anymore.
DeleteAll this wishful thinking is fine and dandy. Let's hear some firsthand experiences from the readers. With names of properties and corrections. I said first-hand, so cut out "friend's friend told me...".
ReplyDeleteHi.....
ReplyDeleteJust happen to come across this conversation and after reading all the comments... i thought let me ask a question to everyone.....
Lets say if prices fall by 20 % even (eg kharadi cost per Sq ft rs. 5500/- will be now available at 4400/-) i have bought an house last year wherein even the BSP price is more than the new price indicated after reduction (also keep in mind Kharadi ready recknor is Rs.4800/-) ... so this means my property is now valued lesser than ready recknor and new prices indicated after demonitization effect.
Obviously since banks do not like to increase there exposure will start to increase my EMI to lesser period forcing me to increase my EMI payment. which in term i believe would force many to default. Which could also effect markets since we are sentimental/emotional shareMarket holders.
Is this practical? Are we heading towards this situation?
In my opion.... resale flats would be cheaper compared to new flats (since presently everyone wants to sell their resale flats at the same cost of a marvel/KPDL/ etc in that area).
Hi..
ReplyDeleteif u have observed.. the prices have been increased by 20 to 30% by the builders to counter the sentiment that there will be rate cut due to demonitization. They will do everything to play with buyers emotions and keep incaresing the price on reagular basis. I dont see realty market crash of now .
anyone has any market analysis data ? whats happening ? are pricing going down? I searched though pune area, but rates are not changing much. In pimple saudagar the rates are still around 6700. In ravet its around 4000.wakad is also around 6400.
ReplyDeleteDont believe what builder says.
DeleteGo along with cheque book and negotiate hardly. They will come down.
Real Estate India majorly runs on cash transactions from people who pile up their undeclared money and invest it in property in India. It is a popular mode of parking idle and unaccounted money and a huge number of real estate transactions in India are either not reported or under-reported in order to avoid property transaction taxes.
ReplyDeleteYou have missed one very important point. Pune's property price was inflated by the foreign income which majority of the IT people had access to. With the recent US visa issues and also other European countries including UK changing their visa rules, very less people are getting opportunities to earn in Pounds and Dollars so now a downpayment of 20 lakhs is also hard to arrange making the properties unaffordable. There is also a fear in IT now so people who did not hesitate taking huge loans are now shy. If you add this perspective also to your observation - The builders have big reasons to worry.
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