Market health-update

The market that received a jolt during the recession seems to be recovering now. People are slowly purchasing, the demand is again shifting: the no. of buyers in the 50 lakh range saw a shift from 16% to 38% in the last two months. The pent up demand that remained untapped due to uncertainty in earnings and savings, has started converting into business.

In an attempt to tap potential buyers, financial institutions like Citibank, HSBC and Standard Chartered Bank and ICICI Bank have launched an interesting concepts and attractive interest rates in home loans. Interest rates offered by some the leading banks is as follows: Kotak Mahindra: 7.1%, Dena bank: 8.5%, IDBI: 9.25%,Axis bank: 9.5%, Allahabad bank, Citibank: 9.75%, SBI: 8% for the first year and then 11% and ICICI: 11%.

Some advice for property seekers in Hyderabad:

Gachibowli, Tellapur, Satyam Whitefields, Kavuri Hills, Kondapur and Kothapet are some of the good locations for value buying of property. Any property that is available between Rs 2500-Rs 3000 p.sft is the right price based on, of course, the quality, amenities, the location and infrastructural facilities available in the vicinity.

Market health Sep-Oct 2009

September and October months saw the prices of apartments appreciate by around 10% across the country. With the market sentiment improving, transactions in the residential sector of real estate have gone up. This has made developers to increase prices by 5% to 10% in the last three months.

In parts of the city Hyderabad, hardest hit by 2007 - 2008 foreclosures, it is predicted that prices will continue slightly increase. At least stabilize if not increase. There will be not be more dramatic price drops such as 30% to 50% declines we saw between 2008 and 2009, but the market will not fully stabilize until mid 2010. Furthermore, consumer confidence will take some time to reestablish, as more people are still finding it hard to save their jobs. On the bright side, employed property seekers with good credit should find 2009 an excellent time to buy! November-December 2009 is a real good time to buy.

Enthused with the partial recovery, people have started investing and so buying now is good, i.e., before the market keeps up pace and the prices again take an upward curve.

Also, in an effort to drive up housing prices, banks are slowly plummeting interest rates. It is common opinion inside the market that competition will shrink towards monopoly and a few companies like Aliens Group and Ramky will control various aspects of the real estate industry, little guys will continue to get stomped on.

A story told a hundred times

I'm amazed at the real estate market has changed since the days I bought a flat.

Just to give you a perspective, I bought a flat of 1500sft for 1200 Rs per sft at Malaysian township, back in 2005. My neighbour sold his at 2800 Rs per sft!

What is the reason for this unprecedented growth in Real estate market?

Burgeoning Indian middle class consumers: This is the biggest reason. Indian middle class is making more money than ever before. The demand from growing Indian middle class is so high that there is a huge gap between demand and supply. Yes, even during recession.

Multinationals in India: India has become a growth strategy for every major multinational worldwide. The entry of multinationals in India has grown by over 300%. These multinationals provide lucrative jobs which again has a spiraling effect. With higher incomes, Indian people are investing more in real estate than ever before.

Foreign Direct Investment:With Indian Government opening up Indian real estate to Foreign Direct Investment in 2005, lot of money is being invested in various projects across the country catering to the demand.

Friendly government policies: Not only has Indian Government liberalized the FDI norms, it has also allowed private equity funds to enter the real estate market, this has led to the improvement of Indian infrastructure fueling the real estate growth.

Positive outlook of Indian Economy
With Indian economy looking up, Investors are confidently pumping money in Indian property market.

Demand for quality lifestyle
With higher incomes, markets looking up and concept of nuclear families becoming a norm, Indians are looking for quality lifestyle, thereby increasing the demand for integrated townships that offer commercial, retail, residential, and leisure facilities!

Update on real estate markets

We are slowly putting behind us the rising unemployment, rising foreclosures, the plunging of the major market averages and evaporating consumer confidence that was soon becoming a part of us.

Encouraged by price correction and lowering of interest rates, the real estate market in Hyderabad, after a period of relative inactivity has witnessed improved levels of activity on the part of home buyers and property seekers turning into investors in the residential sector, especially in the low to mid-end housing segment, as shown in many a market analysis reports of the second quarter in 2009.

CBRE Market View published for the second quarter, said: “Level of enquiries went up and, more significantly, transaction velocity also increased marginally as compared to first quarter of 2009.

Most developers have announced launch of new projects, which was being put on hold for quite sometime now.

All in all, good times are here again!

Why realty prices in Tellapur are soaring?

The rates in one area of the city are soaring and at another, they are plummeting. The macroeconomic factors that determine the market are same for both these areas; then why the difference?

Example; the pricing at Kukatpally (Hyderabad) is lower than the neighbouring Hitech City.

The real estate prices in Tellapur are soaring and the neighbouring BHEL are not as high.



It could be because of two reasons:

If there are not too many housing projects then due to the supply bottlenecks, the pricing in that area could be high. On the other hand, if there are too many projects mushrooming in some part of the city, due to oversupply of homes/choices there, there could be a price reduction.

If there is proximity to large developments, the project picks value, and as the distance increases, the value drops.

Certain neighborhoods retain their cache due to their intrinsic value, like best constructions, good housing society, self-sufficient in terms of market, schools, hospitals, etc. Ex: D.D. Colony (Hyderabad)

Apart from these each project has an intrinsic value of its own; the builder, the quality of construction, the amenities provided, the scope for appreciation etc.

Macroeconomic factors like high population increase thus leading to increase in population in prime household formation age, significant increase in the per capita income, interest rates, inflation, market sentiment, stable jobs, stable government, favorable policies etc all contribute to pricing, demand supply in realty but in the pricing and demand, the biggest influence is local market.

The Market and Real Estate in Recession

Recession had manifested in every part of economy, including real estate. Indian real estate players had their liquidity funded by US firms and they were hit hard after the Lehman debacle. The IT segment, which was mainly funded by the PE firms or had their exports to US markets have noticed very sharp drop of net worth of their firms. This recession also affected the Sensex, which is bullish and brought down the net worth of the leader of Indian Real Estate Players. The impact can be shown in share price of DLF, Unitech, GMR group, Reliance Group, Wipro, Satyam etc groups. The market rates in India are also dropped by 10 to 30 per cent in most of prominent as well as upcoming cities and the trend seems to be still continuing.

Though it might be the end of the worst rut and liquidity crunch, Real Estate Companies are still dealing with lowered and shifting demand. With the market conditions improving since the last quarter, things are going to be better in the months to come. The Real Estate Market is now growing at 15-20% compared to last year. The actual recovery is when there is a positive sentiment floating in the market, that it is the right time to invest and that it is safe to invest.

The recent financial budget (2009) outlined plans for India Infrastructure Finance Company (IIFCL) to be given more flexibility and has been authorized to raise Rs 100,000 crore for the development of the infrastructure sector. The clearance of regulatory bottlenecks for infrastructure projects will help bring forward many pending projects, thereby giving the necessary thrust to the construction sector. The hike in infrastructure spending will be a huge boost for the Real Estate Industry as it increases the value of Real Estate Development.
There are already positive signs in the market now and one can see that new projects are being announced and the construction process (which had become sluggish during the slump) is picking up.

And here, a small digression:
One good thing about recession has been a check in the form of doing away with age old real estate discrepancies:

Real Estate Market in India was highly unorganised, fragmented, mostly characterised by large amounts of unaccounted money, shady dealings and no transparency, unscrupulous means to acquire regulatory approvals

The real estate market is now becoming more aggressive and organized. Even this sector has become highly competitive and as is true with all transparent markets, there will be a far higher reliability of product, and promises to deliver on time will be adhered to.With the finance minister pushing the public sector banks to lower lending rates, we can hope that home loans will come down to more affordable levels, and will spark off the much awaited revival in the Real Estate Market.