Impact of global slowdown on real estate market of Mumbai, India

Thursday, August 18, 2011 · 0 comments

Today all global and Indian stock markets hit new yearly low. All market whether New York Stock Exchange's Dow Jones , NASDAQ,FTSE of London Stock Exchange and European and Asian markets   CAC, SEC, KOSPI , Nikkei and here in India, Bombay Stock Exchange's Sensex were down in the range of 2.5% to 5%.
We at will try to analyze impact of global slowdown on real estate market of India in particularly Mumbai.
As we all know for general public real estate has became safe haven in India. Now day's people stop allocating their money to any other investment class.They think it is best bet which gives better return then bank deposit and difficult capital market.In last decade they were right also, as they say that yesterday's winner might not be tomorrow's winner.Whether investors, speculators even builders were buying any form of real estate whether flats, offices, apartments or land at any prices like there is no tomorrow. This has created  a bubble in the sector, which got bigger because hype created by builders financed media. Builders are putting advertisements with lot of false promises like new international air port will be realty in Mumbai very soon same what they did for Noida in national capital region.

Now as we see global economy is heading towards  recession there is no new demand is coming. Due to volatile political environment and  global recession new companies is not coming to India.There was good demand from IT sector due to BPO boom but that sector is also losing cost advantage because of high salaries and real estate cost.Now companies managing their staff at 40% less space to control cost.This will hamper expected new demand form this sector.

Salaried class also leveraged and now going to have additional high EMI ( equally monthly installment) because of high interest so it can't expect new demand form this class also.

In 2008 people were talking that Indian market is decouple from rest of the world and they had it. 
This time no one is talking about decoupling theory.In flow will be muted due to high interest rates and vary global private equity investors. Banks is almost black listed real estate sector, so there is no way from where it can have money supply to sustain itself.

 In India quality of builders is also an issue. The way Competition Commission of India ( CCI ) slapped the 630 Cr. penalty it shows that builders can go any extant to take consumer for ride.
Corporate governance is also big issue which makes foreign investors wary.If slow down remain longer then if Indian living abroad  get affected by this slowdown by this that will make things worse.

There are few technical signs which shows that long rally in this sector is on its last legs.Like builders is organizing property fair in UK, US and Gulf countries to attract NRI's with not much success.When every one is buying and prices doesn't go up then it show that market is making it top. People are buying on bigger fool theory means they will get buyer at higher then their buying prices irrespective of their buying price but these things doesn't last forever.
All this will to lead to slow down in real estate sector, which will last longest in real estate sector history.

Impact of Interest rate hike on Mumbai Real Estate

Thursday, July 28, 2011 · 0 comments

Tuesday's Indian central bank took very hawkish step which stunned all industries veterans and bankers by raising key interest rates by 50 basis points. RBI has done this to moderate inflation and check inflationary expectations, but this will be have huge impact on very leveraged real estate industry. 
Real EstateDealStreet thinks that this will create panic like situation which Indian real estate industry has never faced some thing similar to US sub-prime bust.
        As you read our previous blog posts we always mentioned that now real estate in India is over owned and over hyped it has now day’s by replaced stock market. Every one thinks that this is only investment class, where one can make good amount of money with out not having financial expertise and domain knowledge. This caused a bubble which is now it seems at its peek. Builders and speculators through media, bureaucrats and politician trying their best to take market to new high but from last few months they haven’t been successful.
         Now almost all the builders have spread themselves very thin and now burden of interest taken by them is becoming heavier day by day. Last few quarters they are shun by banks and forced to go to private lenders. These lenders charge heavy interest which now making things worse when there very few or no sale. It seems time has come for builders to blink and reduce the prices. This will start to take market downward but now it is double whammy for them due to interest rate only people won’t come forward to buy because almost all of them is also grappling with their current EMI’s ( Equally Monthly Installment). They also have to pay higher not only on their home loans but also for auto loans and personal loans.
          Mumbai real estate market is most vulnerable to this hike. Builders is not only to sale but they are buying land at astronomically high price that will make things worse. After these terror attacks and bomb blasts now people will spread to low density area’s or small city which are now providing good lifestyle also. Apartments, flats are unaffordable to even upper middle class. Due to new technology one not need to at one particular location. Now one can work from any where and deliver to his or her organization is also will start internal BPO that also working against Mumbai and its real estate market. Small example of that is Worde Trade Center at Cuffe Parade which is vacant more then 50%.
          What we thinks is now; real-estate sector is entering secular beer market. It will take years to come out of this. Only good take away from this is that it will remove froth from this sector and people will able to own house at reasonable price. For that is what is aiming. What do you think?

Trends of real estate market in India

Thursday, May 26, 2011 · 0 comments

Research wing of trying to find future trend in real estate market by using some unconventional tools. What its think that this time real estate market is heading for big fall, actually it seems it is heading towards burst. Few Points it would like to mention due to these factors thinks all type of real estate whether residential, commercial, retail all might will heading for secular bear market.
1) Over owned: - Real estate is one asset which is over owned by most of people. This is one class which didn't required very high level of expertise so every one found shelter under it. Who ever had money he/she bought apartment/flat/office and rent out and earned good rent and superb capital gain. All other assets class either gives very low return like fix deposit or debt etc and other assets like commodity, shares needs good skills and very risky. Due to this people started buying this asset and people certain extant over stretched and over bought this assets class. Here we are including builders also they leveraged themselves to build so called land bank.    
2) Herd mentality/ bigger fool theory: - Till now herd mentality (hearing some one made so much money in real estate brought new buyers in hope of making same sort of killing) and bigger fool theory (when one fool buy some thing and sell at higher to another fool) was working but it seems now it has peeked out because prices are not going up further.
3) Capital market sign: - One good quality capital market has that its discount any news very fast whether good or bad especially when we compare with real estate market. Capital market bit ahead of curve. In case of real estate the way real estate stocks got battered it shows that it has its doubt about the ability of this sector to give decent return.
4) Interest Rate: - We are now high interest regime that is double whammy for real estate sector. Builders holding huge stock and they have taken loans from private financiers at high interest rate and if we see 1Q results of realty companies their sales is lower then previous Q. This shows that builders are not able to sale at current prices. Now due to high interest rate people are not interested to buy house for their own use or investment purpose because of higher EMI they have to pay. Few of them might be already grappling with their it and this situation we have domino effect once prices start falling as it happened in American housing sector.
5) Foreign Direct Investment / Private Equity: - This route is also drying very fast or they are closing deal in such a way that they get fixed returns which as well as loan.Private equity players are not comfortable because of overly regulated sector.  
6) Government and RBI polices :- Now governments and our central bank's (Reserve Bank) polices and regulations and close watch on real estate sector making difficult to route black money in this sector.
       All these issues make us to believe that real estate prices looking for major fall. First we will sea price pain and letter time pain.  

Again new highs for South Mumbai's real estate market?

Wednesday, February 23, 2011 · 0 comments has learnt that an apartment in NCPA Building at Nariman Point is up for sale. This building is last residential building at famous queen's necklace called Marine Drive at Nariman Point. It is only residential building in commercial center of Mumbai called Nariman Point. In 2008 one apartment bought by one NRI (None Resident Indian. That time apartment sold at around 1, 00,000 per square feet. That time that was all time high for any residential apartment transaction which letter broken in 2010 by building called Samundra Mahal at Worli. It was sold at around 1, 08,000 bought by ex banker's wife who lost his life in 26/11 terroristic attacks. This time it seems that it is going to cross all previous tries with you to understand some sense or nu-sense why some apartments command such a high prices.

1) Location:- In these high priced apartments have excellent location building like Samundra Mahal is just touching the Arabian Sea so has unmatched view. One can hear sea waves from the apartment and due to that these apartments have lots of light and air. Building like Sunita, Grand Paradi has amazing view of queen's necklace. La Palmas gives you superb garden cum sea view. NCPA has view of Malabar Hill, Marine Drive, Arabian Sea, Cuffe Parade and close proximity to Nariman Point and top hotel like Hilton and Taj.

2) Supply: There is very few new apartments’ blocks getting constricted in South Mumbai. It put lot of supply constrain in the market which takes prices to new high by little bit of demand.

3) Snobbish Value: - In these apartments who is who of India living and people especially newly rich wants that they should be associated with these people that is why it takes prices to new high. The way it happens in Hollywood any super star’s buying creates ripples in US real estate market.

4) Past Performance: In past 30 to 40 years these apartments has given constant superb returns to their buyers. People who bought apartments in these locations haven’t 10 times or 100 times multi baggers but even 250/300 times multi baggers. 3) Outgoings: Due to old society of these building they have developed enough reserves due to that these building has good source of income to maintain these buildings. Few of these building have very low outgoings (monthly maintenance) that attracts prospective buyer.

5) Stronger Hands: People who own apartments have very good holding power. These people never sell their property in distress due to their strong financial muscle. That creates unofficial demand constrain due to that prices gets up tick. thinks that there seems to be big frenzy due to that and people started buying these apartments with out thinking that yesterday’s performers might not perform tomorrow. In case of commercial space of World Trade Centre and Nariman Point that is exactly happened. Prices in Nariman point is still close to 1995’s level. These locations now totally isolated from other parts of city which expand quite a lot. New Business Center like Worli, Lower Parel and Bandra Kurla Complex taken lot of sheen from them. Now in the tech era location wont be so important and South Mumbai’s real estate market will under perform by huge margin. What do you say ?

Entry of Donald Trump in Mumbai’s residential real estate sector

Wednesday, February 16, 2011 · 0 comments

There are rumors in real estate sector that US billionaire and real estate magnet and owner of biggest casino of world Donald Trump is entering in real estate business in India. He is planning to build 60 story tower in South Mumbai. It will have super luxury 45 duplex apartments.

We at after hearing this thought about this one social event in our mind, it seems this is going to similar to that event. In 1999 before the tech bust or you may say peak of tech boom. That time Australian business tycoon and person who ushered limited over and day & night cricket concept Kerry Packer bought stake in Vinay Maloo and Nahata owned HFCL. Ketan Parikh stock broker before caught in 2000 stock scam was the host of that party. Nahata is same one who is also named in 3G scam. He sold his telecom identity’s stake to Videocon. Kerry Packer’s son James Packer came with his better half. He bought the stake in HFCL at around Rs.2000 per share. Once security scam happened share went below par also.
RealEstateDealStreet.Com agrees that Donald Trump is much smarter then Packer. He is hard nosed tough negotiator. He has good track record of making money through his real estate investment. There is one thing that he hasn’t accustomed to is that Indian politicians and bureaucrats. These two things can make or break any investment in real estate.
As per research by that market in south Mumbai is going to underperform by good margin. South Mumbai is going to have time pain also. Things are not going to be as rosy as they appear. We think that the way World Trade Centre (commercial center at Cuffe Parade) is now totally isolated from rest of Mumbai. One day people will feel same for South Mumbai. Nariman Point was once top commercial center of Mumbai alone but Asia also. Now occupancy is around 60%. New Centers like Worli, Lower Parel , Bandra Kurla Complex even suburbs Andheri , Malad, Kandivali and New Bombay will give tough fight. People have good holding power that is way it is managing at these levels. Once open a time due to RBI, Stock exchanges etc. you need to be close to workplace but due to internet now not all the offices need to be close to main business centre. In South Mumbai good amount of buildings are not well maintained and have perennial problem of parking. These buildings don’t have amenities like Gym, swimming pool etc. thinks due to these issues real estate investment is going to face major challenges going ahead. Any way welcome to Mr. Trump. Your feed back is important to us.

Relation between scams and real estate sector, bureaucrats and all time favorites politician

Tuesday, February 8, 2011 · 0 comments

There was time any financial scam used to happen few things were common. In all scams before 2000 whether it was Hari Das Mundhra in 1970’s or Harshad Mehta in 1990’s or Ketan Parekh in 1999 stock market operators, politician and bureaucrats were common player. Now it seems real estate sector have replaced stock market .It is understand able it’s involvement in sale of defense land or housing finance scam but  latest 3G telecom scam also has element of real estate also. Let’s discuss about this why this sector is performing like this.

This sector actually was always unorganized any one who has land and money or both and knew how to manipulate law became builder. This sector started its journey from land scarce and financial capital Mumbai. It faced scare of mafia. After that with the help of politicians and bureaucrats it learnt how to manipulate the system. One of Maharastra party chief and one cabinet minister form Kokan region helped them who to extract the juice from government land and public. After seeing lucrative business like this some other players in other cities started. This sector became good ground for black money investment. Builders also became thick skin. Some of them likely to be arrested very soon.
The reason behind all this because there are no regulatory bodies for real estate sector. Like for stock market we have SEBI and for banks it is RBI. Due to that any one can become builder or real estate broker. India should have some regulatory mechanism to make this sector more transparent and efficient. awaits your response….   

Survey about the real estate brokers and findings

Wednesday, January 26, 2011 · 0 comments

We did one survey on real estate brokers. Question we ask all the participants was very simple. Mentioned  bad qualities of real estate broker not only in Mumbai or India but any where on the earth? Few responses we got from people are given below.

1)  Ramesh Kumar : You asked a good question. I liked it as you did not ask 'what do you most like or dislike...? Then there could have been no points for liking :-)

2) Katrina :  Unethical - they increase the rates, so that they get more margin.
3) Stifanno : Aggressive :- They become violent if you don't agree to their way of thinking

4) Rachel Banks : Greedy :- They try to make some money from things like documentations expenses. etc. 

5) Ranjeet          : They come form nowhere in the picture even if you find a buyer or seller yourself, some of       these agents will force themselves into the deal and would ask for a share. 
When we came to know about a property, the seller's agent approached us and established the contact. Then he sent a person to co-ordinate with us. We thought that chap is to help the seller.

We were shocked later when this chap demanded a margin when the deal was finalised. The person recommended claims, he is from the seller's side and the person who 'helped' us is from our ( buyer) side.

They made a big issue and we were forced to pay !! After this I promised myself not to buy any property !!!

6) Yurgan          : They pretend to be friendly and helpful, but you end up doing more work and spend more

7) Alexender      : They pressurise too much

8) Matthew        : Unprofessional

9 Alice D Sturler : That they don't prepare prospective buyers before going in an active home: to keep kids with them, not allow them to roam free, that it is not ok to open desk drawers, and that kids should not be allowed to play in another child's room. 

10)Dr. Savla        : Not punctual, disclosure,shabby ,not concerned about client taste and interest etc. .............

When we don't like them then why we need them?  Actually fault lies with us. We at with you will try to find out in our next posts and wait for your comments also.

These setings takeing too much of time

Monday, January 24, 2011 · 0 comments

I don't know why this happening.

Checking up setings

Wednesday, January 19, 2011 · 1 comments

This is just a testing of blog of We will be in touch with you through this social media. endeavour to keep you informed about not only but about the whole Real Estate sector in India especially Mumbai.