Is it a good time to buy houses/Plots - Uncertain economy

[bdasites]

Will prices come down in the next few months owing to declining indian economy? Worried about investing al hard earned money into a property and if we end up in greece or Spain's situation, will be a nightmare....

Thoughts?

[msn1270]

We cannot compare Indian Economy w.r.to the western. Classic example, inspite of economic and Technological santion by the entire world on India after the 1998 Pokran Nuclear Test, India did not much Impacted and had an usual and healthy Growth.

India and asian economy is entirely different than western economy. Here people live with sentiments on everything like Gold, Properties....etc. Asian people live on their earnings and savings rather than credit Cards like Western.

Western Real estate Prices have dropped to the prices of 1980's after the recession. In contrast, Indian real estate prices moved up sharply after 2007-08 dip. Due to declining GDP and uncertain economy, definitely there will be a reduction in the number of real estate transactions and there could be chances of moderation in the prices. But it will not crash like western or japanese market.

[rkrishna]

Some more viewpoints around why real estate is unlikely to crash (though it may grow slowly)

1. Real estate is one of the safest places to invest black money and that part of the economy seems robust
http://www.iimb.ernet.in/sites/default/files/The%20India%20growth%20story%20is%20propelled%20by%20black%20money_0.pdf
2. Population in Indian cities is exploding (Bangalore is no exception) due to migration and general population increase. So real demand for housing will definitely go up in the long term
3. Land supply does not seem to be keeping pace with this reality? The last time BDA developed any layout was in 2005 (arkavathy) and land acquisitions are becoming far more difficult.

One counter argument is that there are many BDA layouts with no construction activity as folks are holding it as investments (Anajanpura layout, BSK 6th stage etc in south for example). Refer 1

IMO if reality has to crash, it will be because of change in government policies (opening up of new land parcels, major concessions to companies that help decongest cities by moving office spaces outside the city belt etc)

That is my personal opinion- I am neither a bull nor a bear. I just believe that land is a long term (15-20 years) asset and should give better than inflation returns for the long term. That said, I also dont think anyone should have more than 50% of their assets in real estate as it is not liquid and can fluctuate for short term.

[parkom]

Here are my 2 cents on it. The Indian economy today is much more homogenized with the rest of the world than it has ever been in the past. Lkefor instance, you could see the impact of the banks bail outin Spain last week on the the Indian stock markets. All the macro economic factors don't look good at all as is evident in the de-growth of the industrial sector, reduction of overall economic growth rate to below inflation rate, down grading by global financial bodies, Rupee nose-diving against the $. Add to that the nail on the coffin - policy paralysis in the government. Now, how's that as a recipe for investment of any kind ?

[m3_07]

Does anyone feel that the cost of raw materials could spike/ crash in the construction in the current economic scenario???? The cement industry is a mafia cartel. The prices were very much expected to come down with the start of monsoon, instead, we saw a 5 rupee increase last week. The ever increasing dollar price is ensuring that the wood prices keep soaring.

[msn1270]

Global Macro economic scenarios, like Greece goes Bankruptcy, Spain/portugal/ireland investment Rating becomes Junk or Japanese Market Sneezes due to appreciating yen or whatsoever, As long as Black money & Politicians are involved in the Indian Real estate Sector, Impact will be very minimal.

Only the no of transactions may come down and the developers( & Politician turned pseudo Partners) have enough undisclosed money to wait for more time to clear their inventories. Even all the public sector banks are controlled by the Central Government restructures the borrowers debts and make them comfortable till they clear their inventories.

[parkom]

Does anyone feel that the cost of raw materials could spike/ crash in the construction in the current economic scenario???? The cement industry is a mafia cartel. The prices were very much expected to come down with the start of monsoon, instead, we saw a 5 rupee increase last week. The ever increasing dollar price is ensuring that the wood prices keep soaring.

M3, can't say about cement, but all metals are likely to soften going forward. That's because China has considerably slowed down its heated growth as a kind of check to prevent their economy from overheating and the resultant inflation that comes with it.

[msn1270]

with yesterday's no rate change decision from RBI 2012 first Quarter Monetary Policy, definitely disappoints the real estate developers and they might be cursing their fate, as the sales are declining, inventories are building up, enquiries are not turning into transactions

All real Estate Shares lost 4 to 10% in their value since yesterday. While DLF has enough money to sponsor the IPL, few other Developers sponsoring Golf tournaments, buying a luxurious Hotel at USA, islands and But not ready to cut in their inflated margins. Propagates, there is a liquidity crunch in the reality market, Reality is crawling & pushing theo growth to negative in the country.

[rkrishna]

Agree that the above sentiments will certainly impact apartment projects where most of the transaction typically is white.

Irrespective of the state of the economy, black money continues to flourish. What are the safe avenues for investing black money today other than real estate? Did real estate go down during the earlier market down turns like 2000 and 2003?

[amit_pearl2]

Infy has delayed the joining for campus candidates. While few companies have let go people in huge number.
As per info in news paper, IT projects are drying up and the bench strength is building. HP has already cut
huge number of job.

All this and in addition to sky high R.E prices does not give positive signal.

I am not sure if at all R.E prices will correct. If at all it does, not sure by how much %.

For now Cash is King. Protect your money. Invest if you get best offer.

Regards
Amit