Friday, April 10, 2009

Real estate developers warn to potential home-buyers, "If you wait too long, there could be dire consequences"

End the waiting:

At a time when real estate prices seem to be in free-fall, many potential home-buyers are sitting on the fence in the hope that prices will drop still further.

Real estate developers are now warning that if they wait too long, there could be dire consequences for a number of support industries, millions of unskilled labourers and the wider economy itself.

Prakash Challa, president of the state branch of the Confederation of Real Estate Developers’ Association of India (CREDAI), warned that the confused consumer could push the market too far.
“When they hear that prices have fallen over 30 per cent, that interest rates are likely to fall further, they think they are better off waiting,” says Prakash Challa.
However, developers are already operating with minimal margins and would be forced to delay or pull out of projects if the market falls further, he said.

Mr. Challa also blamed the Union Finance Ministry and the Reserve Bank of India for adding to the real estate sector’s problems.
To read more, please, visit - The Hindu - Priscilla Jebaraj

My dear friends, why are you doing this?

Booking a flat means fighting recession.

Booking a flat means contributing to the GDP growth of India.

Booking a flat means beating China.

Booking a flat means taking a step to make India super power.

Booking a flat means loving your mother India.

Indian real estate developers who give you an opportunity to serve your mother land are angry with you.

My dear friends, why are you doing this?

Why are you waiting?

Please, share your thoughts in the comments. (Comments Policy),

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  1. Booking a flat also means parting with your savings.
    Booking a flat also means taking a home loan that you may not be able to service in this bad economic weather.
    Booking a flat also means confirming to the unrealistic market rates that would otherwise see a 50% reduction and be affordable for the common man.

    Especially in a place like Pune where the unwinding of investor's flat more than fulfills the real need for housing - booking a flat creates an illusion and a burden that the city's residents will have to service anyways.

    And as I said earlier - Pune is a market where the supply is manipulated by a consortium of builders and politicians (plus the hypocrite media with ulta-bright stories of Pune as Silicon-une), the effect of a global recession is bound to take some time. And this is no garden variety recession, this is almost a depression and as such bound to have mini let-ups, intermittant false bloom hopes. Let us not be impatient in churning out conclusions.

  2. good article.

    What amuses me even more is this: You missed one very important paragraph between the two which you have copied here. The one after "However, developers are already operating with minimal margins and would be forced to delay or pull out of projects if the market falls further, he said."

    And that is:

    With employees in the IT industry having formed 65 to 70 per cent of the consumers during the growth phase of the last three years, the housing market has been badly hit by the tech slowdown. “They don’t know if they will get their increments or if they will even hold on to their jobs. So there is a crisis of confidence about borrowing even if the interest rates do fall further… It is all causing a fear psychosis.”

    I don't think this was intentional, was it? ;)

    It was very funny to know the builders have come to such a stage that they are using threats, emotional pressure tactics to scare the buyers to buy their property. "Why are you waiting? why???"

    Most of them are waiting because financial risk is too much. Nobody wants to enter 20-30K a month and 10-20 year long commitment now. And nobody wants to spend their savings on down-payment in this uncertain time. And above all most of them believe prices are not rational yet. most of them have started to do one thing that they weren't doing before "Think it through before you commit"

    Reducing interest rates won't get people to end their wait! The real issue is the value of the property. It is not that hard to understand.

  3. Ravi,
    Absolutely hilarious.

    Sure lets make India a supper power. Will that be before supper or after supper?

  4. Really funny Ravi, almost fell out my chair laughing. Instead of supporting rich land owners its a much better idea to support poor people of india who can hardly afford a square meal a day

  5. Wow, sorry Ravi this affects your credibility. Suddenly you look completely biased towards builders.
    Ok, when prices were Rs. 4500 /sq ft and cost of building well below Rs.1500 /sq ft., why didn't builders lower prices ? It was demand and supply right ? Or pure business right ( if people are paying more why charge less) ?
    So why is this sudden plead to ask people to buy. I can understand business arguments like if builders say look it costs 2000 to build so we can't go below xxxx. But arguments of India growth, help market, help other's to get employment are all BS.
    Sorry this post did not make sense. I hope you were not joking.

  6. Ref: "So why is this sudden plead to ask people to buy."

    I was making fun of the news.

  7. Pune real estate industry has reached a state where builder have taken it to a point where return looks very difficult.

    All input cost to the industry has gone up.

    They unreasonably hiked the price, this provided an opportunity to land lords to increase the price unreasonably.

    Understand that generally landlord has capability to hold land and they will generally not lower the price.

    Increase in gross margin for builder meant that to deliver flats on time they took labourers/workers from competitors at high cost......over all this increased labot cost. Labors/workers had more money to spend.....Over all economy bubbled up.

    Similarly raw material cost went up.

    Now even though some of these input cost has come down, it has still not come down in the same ratio as it has gone up.

    During good days builders never cared about it but now they are finding it extremely difficult to get to a reasonable price because for that first they have to understand the real scenario and forget about the kind of margin they were making. They need to completely undergo paradigm shift. This is still in their control and if there is willingness they can do it. However they can not control other input cost like land,labour,raw material.

    If you really think in a area like wakad land cost should not be more then 350 rupees per sq feet add 950 rupees construction and 100 rupees mislellaneous cost. This makes the actual cost to 1400 add 15-20% gross margin and the price will come to around 1700 rupees per square feet. Again here builder play with carpet to salabale area ratio and try to make money. Salable should not be more then 120% of carpet area. Builders are selling as 125 to 150 percent. TO give an example Lavasa is selling at around 138%. So if carpet area is 100 sq feet they are charging for 138 sq feet.

    Mr. Lalit Jain needs to wake up,understand and accept the current situation. He should face it with lot of courage and trigger the CHANGES. No point in blaming RBI, finance ministry etc. When you made all those unreasonable money, all you said was who does not want to make money..... They always said that it is demand and supply.

    We fool IT guys kept slogging 8 hours,10 hours,12 hours,20 hours, all this at the expense of personal life. Hard work triggered good salary hike during year end appraisal and we got good salary hike. However all the hike we collected in a big bag and gave it to builders,schools and to other merchants. Now even though we work for 24 hours salary will not be hiked. So as far as inflow is concerned it has reached peak and in all possibility it will come down.

    To sum up there is no short cut to this crisis. We all are optimistic but this one will have a much longer cycle time for upswing.Somone needs to acknowledge the mistakes made and be ready to take responsibility to correct it.

    To me it has to be the builders and Mr. Jain needs to be the first one to raise his hand and move forward. Are you hearing Mr. Jain.....if not please subscribe to Ravi Karandeekers's blog.

  8. I agree with all , builder need to understand that boom is gone and they have to do the business in realistic price.
    When builders are raising price on weekly basis, every one the same board to take the advantage(not to do business). Now its time do business and need be more practical if they really want sustain for long time.

  9. Mr. Jain himself is in deep financial problem so how he can help the common man, he has his own problems. Best option for him is to resign from PBAP president post.

  10. Almost all the popular media, Real Estate research agency are puppets of these builders, they don't publish a damn realistic picture. Don't agree with me? Read today's Times Property "The Right Pull" by Archana Sinha. Even if the prices are not likely to come down ... there are chances of increase ..... YES of course yes PBAP will increase this price by at least 50 % and then Pigeons, Termites, Ants and Spiders will organize their House Warming Parties.

  11. Bench mark is just wait for the price to come down to around 2000-2200 per sq feet in the areas like baner & balewadi.If you look back not much but just 2 years, Cost of construction has gone down. I don't agree that developers are booking minimal profits, rates are still high and unjustified. Buyers should not be worried at all to wait for the right time. Financial situation is in real trouble we just can't borrow lacs of ruppee in such a chaotic situation. builders, developers have made unjustified money in recent past now this is the time for them to realiaze the realities and should be ready to cut the prices further and they have no other options left.

  12. This was funny. Reminded me of the M1 commercial here in Singapore. A few employees are assigned a task to obtain customer feedback, which they carry out in their own sweet way, oblivious to the real customers. They come out with solutions which are totally obnoxious, although their boss is happy about it. The catch phrase is 'some companies just dont get it' and 'you deserve better'.
    Looks like Mr. Challa belongs to this category.
    BTW, Mr. Challa, we dont buy a car just because the people in the auto industry will get to keep their jobs.

  13. Very well said, Birendra !!!
    Realty market has entered into a bottom-up whirlpool. Reversing the effects will take / is taking longer time than building it up.
    'Reduction in prices' is difficult to digest for builders, the same feeling we get if we get reduction in salary instead of hike. But, things are happening that way and everybody needs to accept it.

    The news is funny, indeed.

  14. Builders cannot issue warnings to the home buyers, this is very ridiculous thing to do. Buyers will take their own time and if some one wants to wait, who is to stop him/her from doing so. Also, prices will come down further post election as there will be no clear majority of any party and economy will take a further hit due to uncertainty. I think 25-30% reduction in prices is soon coming so hold onto your nerves...

  15. Hi Ravi

    What would be the right price for Sinhgad road Rajyog. The builder is quoting 2925 and has come down to 2600. Is this the right price or should i wait??

  16. Well, I personally believe there is no point in blaming developers or property buyers or anyone for that matter.
    When market was upbeat, builders made good money - fare enough. No point in blaming builders for that. Had customers denied that price, they would have reduced it.
    Simlarly, there is no way customers can be blamed (obvious!) for NOT PURCHASING property.

    That's how you define a 'free market'.... purely driven buy demand-supply. And in tough times couple of rules of evolution-theory always hold good - Adjusting to teh conditions and survival of teh fittest.

    I covered some of the major points in my personal blog ( about the issues with Pune real estate market... check out