Saturday, January 10, 2009

Wait for 6 more months - Promoters and Builders Association of Pune tells you not to book now!

Take off point or Tip off point for Pune real estate market?

On Friday, to cheer up the property buyers who are sitting on the fence, waiting for the property prices and home loan interest rates to come down, Promoters and Builders Association of Pune (PBAP) gave a good news!

PBAP president Lalit Kumar Jain told the media that "In a few months interest rates would come down to around 7.5 per cent!" He also added that "It will be the take off point for the city's realty sector once again."

It means, now PBAP is also convinced that there is some sense in not booking a flat at this point of time and suggests you to buy a property after a few more months when interest rates come down!

Few means 6 months!

PBAP is giving you this tip because each and every member cares for Pune property buyer. And every builder is as anxious as the home buyer to find out when the wait is going to end and when (flat) booking will resume in full swing.

One of my source, has told me that this claim about interest rate is not only a motivational slogan but it is based on the solid prediction of nun other than CEO and Managing Director of ICICI Bank Mr. K V Kamath! Mr. Kamath has declared that "interest rates are set to fall by up to five percentage points in the next six months as inflation is moving towards zero level.
"All I can say is that four-to-five percentage points correction in interest rates from where it is today...this correction, I think, will be by July...this is where the interest rates are tending in six months from now," Kamath said in an interview.
But the credit for jumping to the conclusion that "low interest rate would be a take off point for Pune real estate" goes to PBAP! Because, actually in the same interview Mr. K V Kamath has warned us about the impending "deflation"! Mr. Kamath says:
"Interestingly, we are heading towards deflation that is very clear, or rather we are heading towards very low level of inflation...
Those who understand little bit of Economics and Finance will tell you that it would be a tip off point and not take off point!

Deflation: a declining spiral:

In simple terms "deflation" is totally opposite of "inflation".

In 'inflation' we have to pay more amount of money to buy a flat or a thing.

In 'deflation' we have to pay less money to buy a property or anything!

It means rate of the property along with the profits of the builder goes down.

Let me quote Colin Asher, an economist at Nomura Securities. He told Radio Free Europe that the problem with deflation is that:
"In deflation, there's a declining spiral. Businesses make less profits so they cut back on employment. People feel less like spending money. Businesses then don't make any profits and everything works itself into a declining spiral.

Deflation also has a psychological element as it becomes rooted in peoples' psychologies and becomes self-perpetuating.

Consumers are discouraged from buying expensive items like automobiles or homes because they know those things will be cheaper in the future."

What is your take on waiting for 6 more months?

Atul, who's comments you must be reading on this blog, i am sure, will say, "i am telling this for last couple of months!" Yes, i accept, i found it very difficult to agree with him.

Even now, i find it difficult to understand why the leader of more than 300 big and small builders in Pune, Mr. Lalit Kumar Jain is not encouraging property buyers to book a home when things are going exactly as Mark Gongloff (CNN Money) describes! He says:
"when prices fall simply because people have no desire to buy -- leading to a vicious cycle of consumers postponing spending because they believe prices will fall further -- then businesses can't make a profit or pay off their debts, leading them to cut production and workers, leading to lower demand for goods, which leads to even lower prices."
What is your take on postponing booking a flat for 6 more months and waiting for property rates and home loan interest rates to come down as Mr. Lalit Kumar Jain suggests? Please, share your views in the comments. (Comments Policy)

Related Stories:

1) Planning a home buy? Do it in first 3 months of 2009

2) Not Rock-Bottom for property buyers in (Pune) city - Ritu Goyal Harish

3) Banks begin to revalue properties as prices fall

4) "What is come first egg or hen.?"

5) Property rates in Pune real estate market

6) Smart property buyer's check list

7) Who is responsible for the unaffordable rates of residential and commercial properties in Pune?

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  1. I hope this will help the Ghajanies to recall the memories.

    --July 1997 to 1999- Asian currency crisis-
    --1998 till 2001: Indian economy went in to recession [IT was unaffected till 2000]
    --Mar 2001 till Sept 2002 : Dot com bubble burst [IT felled into recession.]
    --In 2003 slow recovery started.

    16/11/2001: Prices stabilise in Pune
    Prices in Pune are stabilising at 35-40 per cent below the boom time prices. Despite unsold properties, development activity is still going on. The growth of the software industry has spurred construction activity off the Westerly Bypass, especially in areas like Balewadi, Varje and Baner Road, besides the area around Rakshak Society, off Anudh. Houses range between Rs 650-850 per sq. ft. The low cost is attributed to the low cost of land.
    Many of the new suburbs are also in the growth mode with 36 fringe villages having been brought within municipal limits.
    Premium flats are offered for around Rs 1,100-1,200 per sq. ft in the Kondhwa belt, thanks to oversupply. These flats once cost around Rs 2,700 to Rs 3,000 per sq. ft. In Kalyani Nagar, the rates are between Rs 1,200-1,600 per sq. ft for flats and Rs 1,800-2,200 per sq. ft for row houses. At Koregaon Park and Boat Club, the rate is Rs 2,000-2,600 per sq. ft, down from Rs 3,000. For bungalows, it could go up to Rs 4,000. At Deccan Gymkhana, no new projects are coming up and old flats cost Rs 1,600-2,400 per sq. ft. At Viman Nagar, resale flats cost Rs 800-Rs 900 per sq. ft. At Kothrud, the rate is Rs 900-Rs 1,000, down from Rs 1,200 per sq. ft. The upcoming Anudh-Pashan belt is the new destination for house-hunters.
    Prevailing rates (per sq. ft): Koregaon Pak/Boat Club Road-Rs 2,800; Deccan Gym/Erandwane-Rs 2,200; Sopan Baug/Uday Baug-Rs 2,500; Kalyani Nagar-Rs 1,200; Anudh-Rs 1,200; Hadapsar-Rs 700; and, Kothrud-Rs 800.

    Agree the linear interpolation will not provide the correct price measure, still considering the global recession; current prices will stabilize around 50%.
    So guys let it fall then only pick up, minimum 50% price cut is guaranty.


  2. This only confirms the naivete of the PBAP and shows that they have still not grasped the gravity of the situation. Asking the consumers to wait for 6 months is a short-sighted step. Clearly, the high mortgage rates are not solely the problem. They are part of the problem, but the unsustainable growth in prices to irrational levels is the main issue here.
    Jain's statement says "wait until the interest rates come down". What he really seems to mean is that builders will not reduce prices even if it means that banks and other parts of the economy have to suffer for it. If this not market manipulation then what is??
    "each and every member (of PBAP) cares for Pune property buyer" - this is one of the most ridiculous statements I have read on this blog! I would say each and every member who endorses this so-called "tip" is a manipulative dog!!

  3. Critique, I conquer what you said.
    RADICULOUS is the correct word for these greedy guys.
    Most imporant thing that guys like you and me can do is sit in silence and do not listen to blogs like this and PBAP, they are all same and always mislead investors... it's all rubbish...

  4. # ref: critique said..."each and every member (of PBAP) cares for Pune property buyer" - this is one of the most ridiculous statements I have read on this blog! I would say each and every member who endorses this so-called "tip" is a manipulative dog!!"

    Dear critique, thanks for the comment. I appreciate your critical remark and agree with you too.

    I am sure, you are not referring to me as "a manipulative dog". But see the next comment of Mr. Anonymous! He thought that you are talking about me! He says: "Most important thing that guys like you and me can do is sit in silence and do not listen to blogs like this and PBAP, they are all same and always mislead investors... it's all rubbish..."

    He includes me!
    He did not understand both of us.

    May be he was not expecting sarcasm!
    (sarcasm - n - the use of irony to mock or convey contempt. sarcastic - adj. sarcastically - adv.)

    Thanks to all my readers, they all know i make "sarcastic" remarks very often. So i do not have to say this is a sarcastic statement or this is a humor!

  5. I certainly did not mean to vilify anyone in my comment. My apologies if the strong remarks were misunderstood as derogatory.

    Personlly, I find Ravi's blog to be a good place to catch up on the latest in Pune's real estate scene. However, it is also important that readers speak out their minds through their comments. We can only hope that the decision makers in this sector (eg. Mr.Jain) will read our comments too and finally get in touch with the reality.

    It would be a great achievement if blogs like this can channelize the readers sentiments towards improving the real estate situation in India.

    It's a long shot, but certainly worth it! :)

  6. Ravi, you appears to be a British... cares more about grammer haa...all adjectives, verb, adverb...
    Take care.