Raj aristos common update - Real Estate Market could Gash in 2013

Investing in property definitely has been a punch for the middle class people in India who challenge. Over the last decade, the property values have increased by four times on an average.

Indicating the slow sales and rising inventories, real estate experts say that till now the real estate has benefitted from the dream of the common man to buy home, but recently more signs show that this trend could be ending very soon.   To prove this, a recent report in Economic Times shows that there is a surplus of independent homes in South Delhi and the story is same in separate micro-markets around the country.

Hence, this situation arises a question that could real estate in 2013 could crack.  In order find answer for this question, let us go back a decade ago and take a look at the real estate strategy:

First, let us start between the period of 1995 and 2002, when the Indian economy was at an annual rate of 4.9%.  According to a developer in Mumbai who wanted to remain anonymous, a year ago the real estate prices eased by 2-3% in many large cities and by the end of 2002, year-on-year decline were by 20%, which was extremely steady.  He also added that the growth by 5-6% for three years and a similar situation may be continued.

Second, the entry of many proficient real estate investors; over the past 10 years, the market has witnessed an increased number of middle class Indians who wanted to invest in property, whose hypothetical behavior was same as the middle class Americans, who bought houses just for a 15-20% profits in a couple of years.

The real estate situation in India roughly in 2013 is the same, where investors’ buyer properties in real estate expecting for a 20-25% gain every year.  But, Sanjay Dutt - Chief Executive at Cushman and Wakefield said that if a developer sells 2,000 flats and 70% of buyers intend to put them on the market in a couple of years, then those should not be considered as sales.

This creates a circumstance, where houses in under-construction projects in large metros are offered anywhere between Rs 1,000-1,500, which is less than the builders selling price. At the peak of this situation, it is likely that the market would rectify.

Last of all, according to the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), in urban areas around11.09 million homes are lying vacant.  Sellers keep it vacant hoping for an increase in capital values in the market, whereas the buyers think the current prices are unreasonable.  When the stocks pile up, then this could also warn for a price correction.