Recent News flow has been suggesting that the Real Estate Prices will now stablize post diwali and Things will look upwards.
This is concluded by some real estate companies with claims that "RBI has cut Rates", "Banks are about to cut Interest Rates", Realestate company shares have already fallen a lot and further fall not expected. and stuff like that...
But I like to warn buyers that this is not expected to be true.
- Actually real estate prices have not fallen much as projected. The prices have fallen only in Suburbs and location where builders were quoting (only quoting not real sales) 5-6 times higher then normal expected prices. Builders had started projects on large land and put up rates that were just like rates at the city center. At present Builders have only reduced rates on these projects. which is actuall not a price fall but just a new price quote.
- The price fall means that if average (average in a quater) registered deals were being done at say Rs.5000 per sqft ... and this quater the average is Rs.4000/- then you can say that there is 20% price fall. In reality in many new projects that were launched there were no dealers done just price was quoted,, and now they are quoting low.. This is not what we can call a price fall.
- Many builders are projecting it as 20% price fall and saying that no further fall will happen, In reality they are making us fool. Obviously there is a price drop in real deals also but its not enough .
- Hence there is chance of a real price fall, Real Price fall is a Price Level at which the Buying Picks up and keeps growing atleast for a quater. At present there are no indications of this. Interest rates are comming down but now people are aware that its going to fall further in next few months so , people will wait.
- Also there is a huge dispute that has propped up in the Builders , before diwali all Builders has united for not to drop prices (except above artificial drop) and they were expecting sales to grow in diwali. But post diwali some builders have picked up argument (probably after seeing that there is not much sale in diwali) that the Real Price drop is necessary for the market to pickup.
- I believe that soon many builder will drop the rate and others will need to follow. This drop will be bigger and builders will offer low cost housing. Only if the demand grow significantly , people will start buying Real Estate shares. So even if builders do not make any profits but have sales, they can make up for it in their stock prices..
- Also there is news that all Private Equity deals in projects is being re-negotiated . This means that all new project plans will be changes. Instead of comming up with premium homes, IT parks they will get converted into low cost housing. And Builders will be forced to reduce prices significantly to ensure quick sales.
- Today SBI dropped the PLR by .75% . This is obviously very good for the Real estate section but I think it will need to be substantiated with real fall in prices.
- So wait for Real Fall in Price and more fall in Interest Rates. Overall wait for a feeling that you are getting a great deal that you never saw in the past.. Once this feeling come go ahead and buy.
- I also like to tell you that the Actual Real Estate Projects are still to come and nearly 10 years down the line. These projects will be associated with huge infrastructure projects and they will be of as big scale as a city. ALso they will be more affordable. Hence you will need to change your home anyway after 10 years. So while buying you home just think of it as 10 years deal.. Do not end up buying a Premium home with large EMI thinking that its your onetime investment. look for a home that is comfortable for you and near the place you work.
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