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Hello,
What are the factors driving the real estate market in B'lore and Mysore? If anyone wish to invest in real estate for long term, say 10-15 years, which is the best city? In case of recession( one can definitely expect one or two cycles in 10-15 years), which city has the potential to bounce back in a reasonable amount of time, say 2-3 years? Please share your views.
Thanks,
harish

I think Bangalore is best place for investing your money,because many new IT companies start their offices in Bangalore and many people from all over india coming here for Job so rates of real estate increasing very fast in Bangalore so Investing in Bangalore's property is very helpful for better returns in future..

harish

Its a very hypothetical Query you've asked in this forum. Its highly unpredictable to answer to this kind of Q's based on the current scenario for the context of next 10-15 years. I'm not discouraging you in any way. I'm just putting my 2 cents here, as this could be the other extreme end you must be ready to bear.

The very sudden boom in the Indian real estate happened 10 years back and currently nobody knows which direction it goes in the coming years. So today Bangalore (spilled on Mysore) got this real estate boom just b'cos plenty of Foreign companies started their offshore MNC offices here and created thousands of jobs just b'cos they felt India has more younger generation population and works for low cost(as assumed 10-15 years Back). But today that scenario is no more holds good. We don't know when these same companies finds another low-cost region and shifts all these jobs from here. Bangalore is growing only because lot of people are migrating here and creating social imbalance and making real estate a lucrative option for investment.

if we look at the Detroit city of US which was considered as the "Lord for World's Automotive industry' also boomed like a heaven in the 1950's. Today its a bankrupt city. Nearly 50% of the manufacturing jobs eliminated. More than 70% of this city is vacant literally looks like abandoned. More than 60% population has left this city. More than 35% of population is living below poverty line. Like in Bangalore, Detroit City Municipal corporation is not even have money to clear the Garbage generated everyday and most of the time lying on the roads causing health & environmental Problems. Only reason for this situation is, most of these automotive industry jobs shifted to Latin American Countries like Mexico, Brazil...etc for low cost operation. Today this city has the highest number of Poor people in USA. No banks or any financial institution is giving any loans to this city municipal corporation or to majority of individuals, and CMC is unable to collect Revenue(less than 50% of the population paid property tax in the recent years) and maintain the healthiness of this city.

On the other hand, similar ways, even in Bangalore, if this trend stops abruptly one fine day, Bangalore can also become another Detroit City. In such a scenario, what will be the real estate value at that period ???

The comparison of Bangalore with Detroit is not right. Detroit is a blighted and bankrupt city but only the bankruptcy is new. Detroit was in doldrums since the 60s. Oakland county in the immediate vicinity of Detroit is one of the richest counties in the USA. Birmingham(in Oakland county) that is about 20 miles north of Detroit is one of the richest towns in the USA.

Bangalore's real estate prices reflects the reality of Indian population growth, which stands around 1.2 Billion and counting. Bombay, Chennai prices have gone even more in the same time period. Smaller cities like Pune, Surat, Jaipur, Madurai have undergone the same growth, if not more, in prices. There are no software industries(or MNCs) in Madurai to the best of my knowledge.

The high real estate prices are here to stay, regardless of the number of companies operating out of Bangalore.

Many of them may not agree with my view. Even i'm not saying mine is the very perfect. My personal opinion was only based on the point "unique source of High income" which poured into the rising Real estate field in the last one decade. per say

1) Detroit was dependent only on the flourishing Automobile Manufacturing industries. They did not had Secondary Option for their survival. Hence they lost everything alongwith the closing automobile Industry.

2) In Japan, Real estate prices were in the sky when their automobile and electronics industries were controlling the whole world Market & their economy was very robust. After their electronics companies lost the market against korean & chinese companises, manufacturing industries moved to china, automobile companies under loss due to too much of market recall(Defects), Today its almost opposite situation in japan.

3) 5 Years back in India, Retail markeing became very popular & many big companies from different field ventured into the Retail business. Today Those companies are slowly exiting this business as they're not able to sustain their prediction.(Big Bazaar closed many of their outlets(ex. KH Double Road, Whitefield, Mysore Road, ...etc. Total Mall in Mysore Road will be closed shortly(rumour), Tata's star bazaar in Rajajinar closed, Vishal Retain closed many of their retail outlets, Khoutons Apparents closed many Outlets...etc). Even Many of the small & Mid sized Retail chains like Spensor, Foodworld, Heritage, Safal are closing their doors slowly. Even Reliance Mart/Fresh is consolidating its business by closing the non-profitable units.

4) In Bangalore, Toyota Kirloskar(a dream company for many technocrats) was in rising mode since the day it entered India. It was running in 3 shifts full year till last year. Due to lack of demand & stiff competition from smaller vehicles like Ertiga & Duster, This year they started operating in two shifts. It seems now they're giving 5-7 days extra holiday for their company in a month and also planning to give VRS to all the senior staff. Now the whole automobile industry in india is witnessing stiff market resistance and much competition, Also the manufacturers are not in a position to gauge the pulse of the customers who are postponing their buying options - which is affecting their survival. So anything which was rising continuously, can take a break or u-turn at some point of life.

5) Already many of the foreign investors who invested in Indian Real Estate Sector are exiting India as they don't find its profitable for them. They even lobbying with the Central Government to relax the Norms set at that time for their entry for safe passage(Exit). Two years back when almost 15-18 Real estate developers were in line to enter the Public listing with their IPO, But they postponed their IPO plan indefinitely due to unstable and dynamic situation & many of them are in deep debt condition.

6) In the recent years, we are hearing more of negative sentiments In Indian market/economic scenario/developments in any cities/states in terms of infrastructure status. Just making some apartments or layouts is nothing great anymore. Providing descent infrastructure also essential. many of the cities are even lack of basics like Drinking water, Roads or drainage.

7) Many of the Technical and Management college seats are vacant, Campus recruitment's is more of a dream now, Not many recruitment's happening and lateral entries are very much restricted, hikes are restricted to single digit even with promotions....etc. many companies are downsizing or not taking any initiatives towards increasing their operating strengths or new ventures. Even many of the firms are moving out their corporate/business offices from posh areas to lower rental areas.

So my general view, Indian Real Estate Prices suddenly shoot up only after the entry of MNC's & IT Companies, which is the only source of high income for individuals/salary class which makes the major percentage of younger population. After 20 years of economic liberalization, the same Country is facing too much of economic & Political instability as too many regional parties with narrow minded selfish goals are controlling the central Government's decisions in the name of Coalition partners which is taking the country into multifold crisis. We can't rule out the coalition government at least for next one decade.

So One fine day(may be after 5-10 years), If this single source of high income (Salary) starts drying up, obviously Individuals stay away from the real estate market. Don't we think Indian Real Estate market is also vulnerable to this single source of high income ???