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$4 Billion Golden Oppoerunity

Indian Residential property prices rise 15%

Housing-Market / India Oct 10, 2009 - 04:06 AM GMT

By: StocksBuddy

Housing-Market

Best Financial Markets Analysis ArticleIs this even realistic in today's climate? First time ever it is seen that Banks are advertising using hoardings and pleading to take loans in metros to buy houses. And on the other hand we see articles that state residential property prices will go up by 15% in an year as they start to call it a bottom. Welcome to the world of pump-and-dump.


Wonder why Indian realty woke up so late when the US realtors started this almost 3-4 months back and are about to wind up their campaigns as there aren't anymore buyers left for them to lure at these prices. Is RE really getting better in India, let's see. Residential property prices rise 15%

The upswing has begun. Not only have the sales picked up, but the prices of residential property too have increased 5-15 % in the last couple of months. With a long festive season ahead, realty experts believe property markets could see heightened activity, provided developers desist from increasing prices of residential space any further. “After almost a year-and-a-half, we see a renewed demand in the residential sector.

During the last three months, sales have picked up by almost 100%, and with a long buying season ahead, the property prices will definitely move up the graph,” says Sameer Sinha of Savvy Infrastructures Ltd. “In Ahmedabad, going by conservative estimates, the prices of residential property is expected to rise by another 25-30 % in the next one year”, Mr Sinha said adding that the prices in the city have already risen by about 15% since the markets bottomed out earlier this year.

The fresh demand in the housing sector has boosted the confidence of developers as well. Earlier this month, the city-based body of developers, GIHED (Gujarat Institute of Housing and Estate Developers) displayed about 500 projects worth Rs 3,000 crore at property show in Ahmedabad. “As the economy recovers and grows on a pan-India basis, residential demand is expected to grow along side. C&W Research estimated demand to be over 7.5 million units by 2013 across all categories such as Economically Weaker Section, affordable mid segment and luxury segment. The residential demand for NCR, Mumbai, Bangalore, Pune, Chennai, Hyderabad and Kolkata is estimated to be 4.5 million units by 2013”, Ms Aditi Vijayakar added.

Has the author actually gone to ground zero. If you walk around Wakefield/IT park in Bangalore, you will see 1000's of flats in vacant position either to be sold or lent out with NO takers. In fact, you can easily find an apartment that is NOT even ready at this time being sold at a discount of upto 40% to what the builder is quoting.

For example, if the builder is quoting 50L for a 2 BR in wakefield, Blore, you can easily find the same sized flat on some of the RE websites where owners have put up theirs for sale at a whoppingly low price of 30L. Now that's the kind of demand these analysts who write all "hypothetical stuff" are seeing. Sentiment is improving in Hyderabad is another article. Hindu Business Line article

Referring to the supply situation, Mr Agrawall said that while there is glut in the Rs 50 lakh to Rs 1crore apartment and villa segments, the supply in the affordable segment is inadequate. In the Rs 1 crore and above category too the number of builders and projects are very few, he added.

All these projects costing 1 crore are at least 10-15 Kms away from the city. Traveling within city, from one end to the other takes an easy 2 hours. One can only imagine the pain one would need to take to travel if they buy at these places that too at exorbitant prices. This is a trend that is way too familiar. Stock market rises 100%. Everyone blindly puts money in it. Makes ton of money. They now move to RE. RE picks up for a little bit. Folks start the "cat and mouse" chasing game and force the prices to go up. When the number of such folks are done. RE comes crashing down.

One can write up a program depicting this behavior and pattern in india and put it in a loop. Unfortunately, common man who may not have access to gory stock markets or higher salaires is the one that gets trapped in all this mess. Common man always gets inot the chasing game at the very end. Like folks who have bought stocks in the last month are trapped for a good 6months to 1 year before they could realize a profit. Similar is the case with RE too.

Coming to affordability, with Labor pains growing not many folks are out there who could a) afford to buy a house, b) qualify for a loan to buy a house. If US market is any clue, then Indian RE market too will go down further. At the current juncture the oversupply of units is hurting and NOT the demand. Demand is and will always be there in a country that is growing. However, unrealistic predictions got Realtors into building too many units when they did not need. Another case in example is Raheja builders who are stuck with a multi-crore residential project in Bangalore whose construction has been shut-down after almost 70% of it being complete. What we at SB would like to state is that do NOT get swayed by those analysts articles and get too pumped up.

Always do your own research before jumping into any ship. Internet is a great resource, make the most of it. We have gotten so many feedbacks stating that we are always on the pessimistic side rather than being optimistic. Please do realize that you switch on TV, everyone will say buy stocks, buy houses. There wouldn't be anyone who would say do NOT buy. Because everyone has a vested interest. We do NOT and hence our analysis is unbiased and true to our knowledge. And truth is always bitter.

PS: Did you ever wonder where were these analysts and their articles when RE market was at rock bottom just 6-9 months back? What is obvious to everyone if told AFTER the fact doesn't help, does it?

Remember, if you are buying a house to actually LIVE in, then No time is better than NOW.

But if you are doing an investment, don't go beyond your means to make a quick buck. It could turn out that someone else made that buck while you were planning to make one. Good luck.

Source : http://www.stocksbuddy.com/blogs/?p=9288

http://www.StocksBuddy.com

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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