Current RE market not for weak hearted

Now a days i am reading a lot of articles about falling RE prices, market melt down, global slowdown. I think one should treat this as ups and downs of life. Real estate in recent times are more looked upon as investment. In olden days not many treat it as investment but an life time asset which gives them a roof to stay.

It is this change which is causing the current panic. Why should you be worried about a short swing when you know for sure in the long run prices are going to become stable and only move forward. Thats the norm and i strongly believe it.

I read some where India’s population is supposed to be no 1 by 2050 and by 2015 it would increased by 20%.So if you buy a good property any where it is bound to appreciate irrespective of location. City land space is bound to saturate and the outskirts are going to appreciate definately. Where do you think people will find space to live.?

Please take long term view for RE investments. You may lose in short term if there is tide, but you are bound to gain in the long term. I am sure DLF, Purva, TVH are right priced. If one is expecting the price to down further, then they might be the loser.

Stay away from RE market only if you are not sure of your job and never try to stretch too much. I would recommend to stretch upto 15% over your budget and not more than that. I again iterate, people are still buying and selling properties and there is never a less demand for good properties.

Do your home work right, ask yourself 1000 times if the location, price, size of apartment,rent potential, future growth is right and then go for it. If i had the money i would blindly go for Sea view apartments by TVH. its worth the buy for that price.

This is what i think by 2012-2015. OMR will be priced like Adyar (7000-8000 per sq ft) and Adyar will be priced like Poes garden (14000) and Poes garden would be priced (25000 per sq ft).

I am very positive about Chennai RE and would definately recommend one to invest keeping a long term view.

7 Comments

  1. Tin Tin

    I agree that these are to be treated as UPs and DOWNs. But the questions is will someone invest with the same pace as they used to do in the recent years..

    a) There is certainly a crunch of the money inflow.
    b) NRIs have shifted to WAIT and WATCH mode, rather than taking the ‘calculated risk’
    c) West is proceeding towards recession

    Do you think people will invest with the same vigor which they were doing ? I hope NO.

    Discussion welcome.
    cheers

  2. Sri

    Mr Author,

    I would like to highlight some of the biggest mishappenings in the past few years

    1. The average growth of real estate was 7-8% a year till 2004 but for the past 3 years the growth has been 50%+, this basically is an over hyped growth and is not consistent at all.
    Considering a normal growth of 7-8%, an Apartment in OMR (say DLF) should cost you 25 lakhs max currently but it is being sold at 50 lakhs which I fell should have happened 5 years down the lane.

    I feel the current Market prices should actually have come
    4-5 years later and I feel there is going to be a huge market correction before this year end, just like what happened in USA.

    2. We all agree that IT has been the primary factor for this unprecedented Real Estate Market growth, with the fear of US Recession looming large, I am sure there is going to be lesser pay hikes n lesser bonuses, this is definitely gonna affect the mood of the people. How long can they pay 40,000 bucks as an EMI for an apartment/month.

    3. Remember not everyone is in IT, so a majority I would say 99% of white collar jobs are still Govt Employees, Bank employees etc. Among all my dad’s NON-IT friends I have not heard of a single person who has invested in real estate in the past 5 years, well most of them have sold their existing independent houses smartly n are waiting for the burst. Smart Guyz must say!!!

  3. Satheesh

    I couldnt agree more with post#3. I have said in my one of other comments. The RE appreciation from 2003 is purely by speculation and people wanted to make quick bucks and some did. But, I betcha majority of people are going to lose their shirt. If and when US goes in deep recession(which I expect will be this year end), guess what, the first one getting screwed is IT. Lets not forget China is picking up in IT faster than ever before. Lot of companies are not so keen on expanding its Bangalore operation, but very keen on expanding its china operations, as China is like India in 1999, so cheap.

    My point is plain and simple, if you have to afford 50 laks, loan you have to be making at least 14 lakhs per year. Otherwise, its not gonna happen.

    And, lets look at the apartments selling at 50 lakhs, all mom and pop builders are charging outrageously. I have decided against investing in RE, just because of one simple reason, if I can rent 50 lakhs apartment for 15,000 per month, why pay 50,000 in EMI?

    Sure, India’s population is going to grow, I am extremely sad to say that with all this corruption, 90% of the people are going to live below the poverty line.

    Cash is King for now. May be after a serious correction, I would be willing to look at it.

    I stay in Bay area and strongly advocated against buying properties in 2005 to couple of my friend, and they gave a look like I am some weirdo and they were afraid that they will be priced out for ever. Guess what, now, the same properties are selling below 2004 prices and the crash hasnt even started in my area.

    So, stick with fundamentals, some time, it takes long time to return to sanity, but we will get there. Sit tight, and enjoy the ride with cash making more money for you!

  4. ram

    “So, stick with fundamentals, some time, it takes long time to return to sanity, but we will get there. Sit tight, and enjoy the ride with cash making more money for you!”

    very well said…

  5. Chandroo

    I think the bubble has already burst. These days one would find all the major builders like DLF, Purva, Unitech, Hiranandani are camping frequently in various cities of the middle-east trying to rope in the gullible NRIs in their fold. For sure the demand for their over-ambitious projects in Chennai has dwindled quite rapidly and there is a desperate situation of cash flow to have them implemented in time. Although, the promoters are still sticking to their guns on their prices as of now, giving the usual sales talk that there is already a tremendous response and only a few apartments are available and all that, the depleted market would force them to either abandon the projects and run for cover or bring down the price drastically. One has to wait and watch.

  6. Thambu2008

    Chennai property values are extremely overvalued. I will not at all be surprised to see prices fall as much as 40% over the next few months. For every 1 IT guy who was willing to pay high prices, there were 20 speculators bidding it up in the hope of selling to an IT guy. Guess what? That 1 IT guy is facing lower salaries or a layoff, which means those 20 people are out of an investment. It’s the bank employee who can buy that apartment, and that means prices need to reset to sustainable levels.

    I say this as a person who owns properties in Chennai. I haven’t sold, but then again I have had these properties for a very long time.

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