Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

India Real Estate Market About to Crash Or Consolidation?

Housing-Market / India Jul 07, 2011 - 04:07 AM GMT

By: Jenson

Housing-Market

Diamond Rated - Best Financial Markets Analysis ArticleIt is not easy to find an analyst on the street who will be mildly bullish on the real estate market leave along someone who is irrationally bullish. In a scenario where the market seems to be short the real estate market, the laws of contrarian investing state that “when the whole market is long/short a trade, the trade may not fructify” which is what is happening to the real estate market in India. Fundamentally, the market is poised on a knife edge with multiple triggers slowing the market down. Some of the macro pointing to an imminent fall in real estate market are:


■75 bps Rate hike by India central bank in 2011 has had debilitating effect on families who have been thinking of a new house purchase. Rising borrowing costs and inflation are reducing ability of Indian families to purchase a house.
■With more interest rate hikes from RBI in the offing, macro environment is expected to continue to get tougher. Therefore, the risk of an accelerated downturn in sales still remains.
■Lower Loan/Equity ratio: RBI has now instructed banks to accept nearly 20% of house value as equity portion from the buyer thus effectively reducing the ability Indian families leverage to buy a home.
■Developers borrowing cost: Rising borrowing cost have also effected developers who now find it difficult to complete projects.

Ground situation

■Launches declined to 13.5 mn sq. ft in March 2011 (from 21.5 mn sq. ft in February 2011) as developers got cautious and regulatory hurdles delayed approvals and hence launches.
■Anecdotally, we hear of approval hurdles easing out in Mumbai and Bengaluru and also Mumbai developers looking to soft launch a few projects.
■Though we hear of a marginal price discount across developers for perceived genuine buyers, data still indicates to flat to marginally up pricing though prices in Mumbai are clearly flattening out.
■Total absorption of 14.4 mn sq. ft is the lowest since March 2010 – declining absorption continued in Mumbai while other regions too saw a declining trend.

The Indian Real estate (BSE Realty) index has significantly underperformed the broader based Sensex (India equity market Index) to the tune of 30%.

The markets continue to be negative the underlying. Given the overwhelming bearishness prevalent in the market, we do not see a massive price correction in the underlying (land prices) purely on the basis of contrarian logic. Too many people are short the market.

A quick look at the launch and absorption data across four geographies needs to noted for the muted absorption of real estate supply.
Total launches decreased to 13.5 mn sq. ft in March 2011, down 37% from 21.5 mn sq. ft in February 2011.Bengaluru had the least fall while NOIDA launch volumes fell 60% monthon- month. While part of this decline could be attributed to lower potential demand, regulatory/clearance-led delays were partly responsible for weakness in Mumbai, Bengaluru and NOIDA. Anecdotally, we hear of Mumbai developers exploring pre-launch of their projects (Lodha, Sunteck, Rustomjee) and Bengaluru developers near to getting approval.


Also, as per news reports, BMC has cleared a backlog of 70 projects in Mumbai which could push up launches in 2QFY12E.

Total absorption of 14.4 mn sq. ft is the lowest since March 2010 – declining absorption continued in Mumbai while other regions too saw a declining trend

Even with fundamentals pointing to a correction in the real estate markets, the factual data do not suggest so. Indian real estate markets need to be analysed region wise and for the purpose of this article we are only looking at Mumbai and the NCR (Gurgaon, Noida and Delhi) region.

Mumbai
Sales registrations for the month of May are up 8% on a MoM basis but down 1% on a YoY basis. The registrations have shown an uptick on a MoM basis coming in at 5,287. Sales, at ~5000 levels in the last few months, continue to remain at the recent lows; the only bright spot being an absence of a further deterioration in the sales trend from the already low ~5000 levels.

However, registrations for the month of May would pertain to sales that have happened in the month of March or end February, thereby, not factoring in the impact of the ~75bps hike in lending rates that have taken place since March 2011.

Lease registrations continue their uptrend, with leases for the month of May at a new high of 9950, up 12% YoY and 5% MoM. Thus, leases continue to point to the built‐up of a huge pent‐up demand in the system.

NCR: Gurgaon, Noida Region
Gurgaon still predominantly remains an investor-led market where the first buyer of a project remains the investor. However, investment timeframe for investors has changed over this period from 5–12mths earlier (speculative) to 2–3 years now and is primarily because of higher upfront payment demanded by builders now-a-days (30–40% in the first 4–6mths now vs. 10–20% earlier), thus stripping off small-time, over leveraged buyers. The investors include (1) second home buyers, (2) NRIs, (3) service class executives, and (4) professionals

Given stable demand from investors and end users, Gurgaon and Noida, continue to offload their inventories, a sign of strong and sustainable demand. Noida inventory of unsold apartments and plots were at 52 week low of just 5 months while for Gurgaon it was closer to 9 months. NCR region is home to large corporate head offices which continue to put upward pressure on prices. We believe that while a real estate correction is overdue, as long as there is stable demand, we do not see developers in NCR cutting prices in a hurry.

So while you may wait for a price correction in India, one must also remember that the US real estate market was one continuous rise for 25 years till the time the house prices corrected in 2008. The question that begs an answer then, is whether the Indian real estate market has just enetered into one such bull market spanning over a decade.

The signs of such a bull market are evident with the whole market overwhelmingly short and doubtful of a sustainable rise in home prices. It is such doubtful times that the savvy make their millions.

Happy investing

Source : http://gmbpost.com/investment-news/india-real-estate-market-about-to-crash-or-a-mere-consolidation/

by Jenson

http://gmbpost.com

Bio: Worked with a hedge fund for 10 years as a Director and now work with the consulting firm "GMB post"

© 2011 Copyright Jenson - All Rights Reserved
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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Real
18 Jul 11, 01:33
Mumbai real estete

Mumbai is turning into one of the most expensive cities to live in among all the cities in the developing world. And as the Indian government has started to take measures to curb inflation, many property developers are now faced with fund shortages. A number of analysts and economists believe Mumbai’s property market will see an oversupply between 2012 and 2013


Landsmith
19 Oct 11, 04:30
India Real Estate Market About to Crash Or Consolidation

It is really true It is not easy to find an analyst on the street who will be mildly bullish on the real estate. what you are also made good job own work.Thanks for posting this nice blog.keep up


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules