Thursday, February 26, 2009

Property rates to go down by 50%

NRI realty investments drop by over 50%

The NRI season is now at its fag end. Despite undertaking tours to the US, the UK and Middle East and doling out freebies and discounts, realtors have been unable to catch the attention of this cash-rich community.

At a time when the domestic demand in micro-markets in Tier-I, II and III cities began to slump in the third quarter of this financial year, the developers were hopeful that the demand from the NRIs will pep up the sentiments in the realty markets.

Job insecurity:

However, the global slowdown and the resulting slump froze the bullish sentiments among NRIs. “Though a far-from-spectacular number of transactions have indeed taken place this season, generalised job insecurity and a desire to conserve available cash among IT employees abroad has curbed investment demand for high-end properties, Mr Sanjay Dutt, CEO - business, Jones Lang LaSalle Meghraj (JLLM), a global real-estate consultancy firm, said adding that the response was “significantly muted” from the NRI community this season.
To read more, please, visit - The Economic Times

Integration of Indian real estate economy with US economy:

Indian economy may not be that much integrated with US economy and strong Indian consumer base may support the growth of Indian economy but when it comes to Indian real estate, in the forms of foreign direct investment, real estate investment funds and individual property buyers, integration is complete and deep.

Don't you think that drop in the NRI investment is going to grow and property prices are going to go down, may be by 50%, in the next few months? Please, share your views in the comments. (Comments Policy)

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  1. Hi Ravi,

    I had predicted the 50% price cut since last one year. As well warned about trouble if prices will not correct on time. But people didn’t like any economic or financial advice. Agreed, lot of them are in business by fluke not by profession. You can read various aspects of crisis on


  2. Hi Ravi,

    You perfectly are on right track. I think it is a high time, in absense of any regulator for Real Estate industry, somebody should take a lead and start building a database which can provide a real time analysis of what should be the fair price for an area and for a property after considering various parameters affecting property price.

    I have an idea developing in my mind since long, however, unfortunately, due to work pressure I could not put it in reality. This can work something like Area Price Index (API). The 10% plus and minus may be contributed based on the amanities provided by the dwelling unit.

    If you are interested, please let me know, I can spare some time on Saturdays and Sundays to share my ideas with you.

  3. Hello Atul, Thanks! Sure but i have some reservations. We will talk about it some time in the evening. Today is Thursday. Power may go at any moment!

    My point: Amenities, location, specifications are of no use because it's not a product. In India - Pune real estate development is a service while booking it has to be valuated as a service. Builder's capacity to provide satisfactory service of constructing, designing and delivering the final product at your preferred location is, (most of the time, not always,) more important than the product itself. (Including property rate! Do you think you only pay per sq.ft. rate charged by the builder to buy the property? No!)

    This is what i have realized after creating attractive products - when i was in real estate advertising and marketing - and while personally getting involved in planning, selling and delivering the property. (This experience is the motivation behind my blogging)

    You know,valuation of service is not easy! But you can see the result. People book 1200 flats in 2 days. Pay 1.25 + cr for a bungalow. Why?
    Problem is not a product. Problem is a service.

  4. Hmmm..

    You have a novel idea.

    However, incidentally, my own background is from Service Management and Service Selling. So from my understanding, I might not be able to relate Real Estate with Service.

    I still would call this as a Product since:
    - It has a Asset connected to it which can be revaluated over a period of time and is being transferred to the buyer as a part of purchase deal.

    - Typically, builders in Pune are not in just construction business where people buy land on their own and contract the land to builder to build a house. Here, builders themselves buy land, add value to it by building a structure on it and sell it whole package as a product.

    I agree to your point on Quality. Product quality is one of the parameter in property valuation which is covered under cost factor. Again, the quality needs to be well defined.

  5. This article is very timely and relevant. As I quote Cameron Muir, an economist, "Home sales are unlikely to fall much further..That being said we expect home sales not to decline much further."

    But it's never too late, with the right business plan set up, it will lead to valuable outcome. This is what most counselors would give as an advise.