A recent article in the Financial Express reported that Real estate developers fear 30% to 50% increase in prices as well as demand for property in Mumbai, Pune, Nasik, Chennai and Bangalore, compared with the ongoing steady demand and prices in Delhi and the NCR region from March 2008 onwards.
According to Abhinandan Lodha, director, Lodha Group:
“The commercial property rates in Mumbai are expected to rise by about 50% with more premium buildings getting constructed.”
Looking ahead in 2008, we predict that the growth in the sector will remain firm though the growth might be slightly less spectacular then previous couple of years.
The recent problems in real estate sector affecting western economies are not equally applicable in India because the driving force for the new real estate purchases is the upwardly mobile working force rather then easy availability of loans (though it does not mean that easy loans were not available as they were). Though we do expect people to take cautious approach, it is unlikely to affect the sector growth due to the sheer latent demand.
An article in the Economic Times also believes in the same theory with some supporting numbers.
“In 2008, market watchers feel residential market will firm up – mainly because of large demand for commercial space. According to one estimate, around 15 million sq ft commercial space is likely to be rented out in 2008, as against the absorption of around 13 million square feet in 2007. The office space of 15 million square feet will create workstations for around 1.8 lakh people. Even if 50% of them end up buying residential units, the demand will be too huge to be easily met.”
All the information above indicates yet another year of magnificent growth so let us investigate a bit deeper into the reasoning why we feel that the growth is likely to be slightly dampened.
There are two reasons that we think will affect the growth adversely.
- First of the reasons is the rise in the rate of interest on home loans. The rates have now bounced back to a significantly higher level then last couple of years so this will have an impact on the prospective buyers.
- The second factor is the proportion of the speculative investment in the sector.
We believe that more than quarter of the investments in the sector are speculative in nature. This is especially true in bigger cities. As the rates slow down and money supply tightens, it would be but natural that speculative nature will be less in evidence. These two trends should put some breaks on the growth in the prices.
Overall, the fundamental factors of rising incomes and increasing city populations coupled with lack of available housing will ensure that 2008 is another happy year for realty developers.
The IT and ITES sector are expected to continue growing at over 30%. An additional 367 million sq ft of office space will berequired between now and 2012-13 to meet demand. In the unlikely scenario that there is a downturn in these sectors, the requirement for additional office space will decline to 256 million sq ft by 2012-13.
Retail real estate is booming too. By the end of 2008, 66 million sq ft of retail space will be added in the eight largest Indian cities, and 13 million sq ft in the next seven largest cities.
According to the Ministry of Tourism, by 2010 India will have 2.9 million hotel rooms compared to today’s 1.2 million.Will the housing boom in India continue? Yes. this is not akin to the US housing boom where sub prime mortgages and the corresponding mortgage backed securities sold to institutions clearly lost all their value once the sub prime sector started defaulting on their mortgage payments as the reset clauses on their mortgages came into effect.
Ours is more a local consumption driven economy. Yes, we are NOT immune to the US and Europe happenings but the point I am trying to make is that our real estate boom is triggered by local consumption and infrastructure needs and the simply supply/demand equation with supply still in short supply and demand only increasing thereby leading to a rise in pricesFor more one can visit my blog-realtydigest.blogspot.com
Ours is more a local consumption driven economy. Yes, we are NOT immune to the US and Europe happenings but the point I am trying to make is that our real estate boom is triggered by local consumption and infrastructure needs and the simply supply/demand equation with supply still in short supply and demand only increasing thereby leading to a rise in prices.
CHENNAI AND ALL OVER WORLD RATES GOING TO RAISE.THIS RECESSION THING HAPPENS ONCE IN EVERY 8YRS.IN 1992 IT HAPPENED LIKE VRS SCHEME.IN 2000 IT HAPPENED VIA Y2K COMPUTER PROBLEMS.NOW WITH SUBPRIME PROBLEM IN U.S.REMEMBER ITS ALREADY A DEVELOPED COUNTRY,AND WE HAVE JUST STARTED TO GET DEVELOP,STILL 20 YEARS OF GROWTH LEFT IN INDIA,FOR NEXT TWO YEARS ITS GOING TO ONLY GO UP IN REALESTATE.HERE AND THERE SOME CORRECTION MIGHT COME IN PRICE.BUT NO ONE BUYS LAND FOR BUSINESS PURPOSE TO SELL IN 2 OR 3 MONTHS.,AS ITS A SUBPRIME PROBLEM,REAL ESTATE VALUE FELL SOMEWHAT,IT FELL ONLY IN BUILDING FLATS,PUNTERS STARTED TO SELL THE PROPERTIES IN MKT IN MID MAY 2007.ONCE PROBLEM AROUSE IN 2008,THEY STARTED TO MAKE PANIC WITH BLOODY MSGS IN MEDIA ABOUT FALLING ECONOMY AND REAL ESTATE VALUES BECAUSE OF THAT,PEOPLE HESITATED TO BUY.NOW THOSE PUNTERS AGAIN BOTTOM FISHING IN REAL ESTATE,AROUND 1LAKH CRORES GOING TO BE INVESTED IN REAL ESTATE SOON.THIS ALL A CYCLE IN ECONOMY.THOSE WHO FEEL LEFT IN THIS BULL RUN IN REAL ESTATE WILL JUST KEEP ON PRAYING AND GIVING BULLSHIT MSGS LIKE PRICE WILL FALL MORE AND BLA BLA.AND THEY WILL FEEL MORE SOON.SHIT THIS KIND OF MSGS AND TRY TO BUY A LAND SOON…JAI HOOOOOOOOOO …AND FOR YOUR KIND INFO..I AM A PROFESSIONAL ONLINE SHARE TRADER AND ANALYST…..NEWS FROM MARKET,.MARKET STARTED TO RAISE,REST WILL FOLLOW SOON.ALREADY REAL ESTATE STOCKS DOUBLED IN LAST ONE MONTH.YOU CAN CHECK IN http://WWW.NSEINDIA.COM………ALL THE BEST FOR LOSERS,WHO KEEP ON CRYING……..ALREADY RATES STARTED TO APPRECIATE IN OMR AND ECR ROUTE.CHECK WITH BROKERS…….FRESH BUYERS,DONT FEEL LEFT OUT…USE YOUR BRAIN……..NO MONEY HAS GONE WASTE WHEN YOU INVEST IN LAND……..