
Indian Real Estate Market: Bubble or a bit Trouble?
A fear of bubble comes in the mind of everyone who is looking to buy or invest in real estate now a day. But without looking at facts one should not come up with any conclusion that speculates real estate bubble in India.
Indian real estate industry is growing with a CAGR of more than 30% on the back of robust economic performance of the country. After a little downturn in 2008-09, it has revived rapidly and shown tremendous growth. The market value of under construction project has increased from $70 bn at end-2006 to $102 bn by end-June 2010, which is equal to 8.2 per cent of India’s nominal GDP for 2009.
Besides the Govt. initiatives- liberalisation of foreign direct investment norms in real estate in 2005, introduction of the SEZ Act, and allowing private equity funds into real estate, key factors contributed to this tremendous growth were ‘lower price’ which has attracted buyers and investors not only from India but NRIs & Foreign funds have also deployed money in to Indian real estate market. In addition to that, aggressively launching of new projects by builders had further improved this positive sentiment which paved the way for rapid growth in market last year.
Now question is whether any Bubble is forming in Indian real estate market? Let’s look at the recent real estate bubble in USA, Europe and middle-east. Beside economic factors, key contributing factors in those bubbles were rapid rise in price beyond affordability, home ownership mania, belief that real estate is good investment and feel good factor among which rapid price hike is a key cause of any real estate bubble.
Comparing it with Indian scenario, all those factors are working in major cities of India specifically Tier-I cities. Prices has skyrocketed and crossed earlier pick of 2007 in the cities like Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune. Even in some cities like Mumbai, Delhi, Gurgoan and Noida prices have gone by 25-30% higher than the pick of the real estate market in 2007. However during economic downturn in 2008-09, prices fell by 20-25% in these cities. Other factor is home ownership mania and belief that real estate is good investment. Need based buyers and investors were attracted by lower prices in the end of 2009 and started pouring money in real estate market. Tier-I cities Mumbai, Delhi-NCR, Bangaluru, Chennai, Pune, Hyderabad, Kolkata has shown maximum investment in real estate projects. Developers have taken the advantage of this improved sentiment and started launching new projects. This has further boosted confidence among those buyers and investors who had missed opportunity to buy or invest earlier which has further increased price unrealistically fast. And at last feel good factor which is also working since last few months. The key factor of any bubble market, whether we are talking about the stock market or the real estate market is known as ‘feel good factor’, where everyone feels good. For the last one year the Indian real estate market has risen dramatically and if you bought any property, you more than likely made money. This positive return for so many investors fueled the market higher as more people saw this and decided to invest in real estate before they ‘missed out’. This feel good factor is at the heart of any bubble and it has happened numerous times in the past including during the stock market crash of 2008, the Japanese real estate bubble of the 1980’s, and even Irish property market in 2000. The feel good factor had completely taken over the property market until recently and this can be a key contributing factor for bubble in Indian property market. Even after flow of negative news on real estate market correction and/or bubble, people are still highly positive on real estate growth in India.
Looking at above factors, there is possibility of bubble formation in few cities in India but it can harm buyers and investors only if it bursts. Generally bubble form with artificial internal pressure and can stay for long time if not acted by external force. Similarly, in case of real estate market, bubble can burst if demand and price start falling suddenly and drastically. Few findings of recent research by IKON Marketing Consultants throw more light on this. According to that majority of investors from Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune are now not willing to invest at this level of price as not seen any rise recently. Majority of them are about to exit and book profit on their earlier investment. Other factor is demand supply gap. In city like Mumbai were around 6500 apartment with 45 million square feet space is under construction but majority of developers are worried on lack of 100% booking. Same situation is with Delhi and other major towns of India which has demonstrated higher than expected enthusiasm. Though developers giving positive outlook of market while interviewing them but their confidence level is very low which is giving negative signals of falling demand in nearest future. Third important factor is expected outflow of foreign fund. India, as an attractive investment destination a huge fund has been deployed in Indian property market by foreign institutes and NRIs. But now property market in US, Middle east and Europe has been stabilized and started growing gradually which is attracting foreign funds due to lower prices. A huge fund is expected to withdraw from India as foreign investors see greater opportunities in those countries. All these factors may act as external pressure which may lead to bubble burst.
Considering above facts, IKON Marketing Consultants predict that there is a possibilities of real estate bubble in Tier-I cities like Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune. However, IKON does not see much trouble in overall market as Tier-II and Tier-III cities are growing gradually and are the backbone of Indian real estate industry. According to IKON’s research, Indian real estate industry may see some down turn in 2011. It may start from 1st quarter of 2011 and last up to 3rd quarter of 2012. However it will be not too intense as it was during recession period. It is expected that price may slash by 10-15% during this phase of correction but under certain situation it may last up to end of 2013 with price correction of 30% specifically in Tier-I cities.
By its nature, a bubble is a short term phenomenon while Indian property market has shown continuous growth, apart from periodic adjustments, in the last few years. One should not forget that there are more than 400 million Indians waiting to hit the middle class group which will require more than 75 lacs housing units by 2013. Whether bubble burst or see a bit trouble in short term, growth story will remain intact for Indian real estate industry. However affordability is the most important factor when it comes to housing prices and middle class housing is much levels of affordability in most of the major cities in India. People, who compare India with developed European cities, forget the huge difference in affordability in both areas. Of course there is a huge demand for housing but they can only buy what they can afford.
About the Author
Azaz Motiwala is a marketing consultant and CMD of IKON Marketing Consultants India, a leading marketing consultancy company assisting corporate and SMEs with expert advices and solutions on various areas of strategic marketing.IKON serves wide variety of Industry including Construction and Real Estate for real estate marketing in India
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Analytical Report $12.27 New – Project Report from the year 2009 in the subject Statistics, printed single-sided, grade: 1,0, Midwestern State University, language: English, comment: Applied Advanced at Statistics Midwestern State University, Wichita Falls, Texas, USA, abstract: In Wichita Falls, Texas, a new real estate company was established. In order to become acquainted with the local residential market, the company requires a statistical analysis of the determinants that are likely to influence the price per squar |
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Analytical Report $12.27 Used – Project Report from the year 2009 in the subject Statistics, printed single-sided, grade: 1,0, Midwestern State University, language: English, comment: Applied Advanced at Statistics Midwestern State University, Wichita Falls, Texas, USA, abstract: In Wichita Falls, Texas, a new real estate company was established. In order to become acquainted with the local residential market, the company requires a statistical analysis of the determinants that are likely to influence the price per squa |
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Analytical Report $18.91 New – Project Report from the year 2009 in the subject Statistics, printed single-sided, grade: 1,0, Midwestern State University, language: English, comment: Applied Advanced at Statistics Midwestern State University, Wichita Falls, Texas, USA, abstract: In Wichita Falls, Texas, a new real estate company was established. In order to become acquainted with the local residential market, the company requires a statistical analysis of the determinants that are likely to influence the price per squar |
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Bailout: What the Rescue of Bear Stearns and the Credit Crisis Mean for Your Investments $24.95 In March of 2008, the world markets woke up to the news that Bear Stearns, the fifth-largest U.S. investment bank, had essentially collapsed. The fall of Bear Stearns nearly crippled the short-term money market, the lifeblood of modern finance. Bank lending ground to a halt. Municipal financing, which pays for roads, schools, and other daily essentials, evaporated. The company’s fall changed the way the government regulates Wall Street, and it shook the faith of investors to the core. How did this happen? How will it affect the future of the markets? What does it mean for the individual investor?In Bailout, John Waggoner—the investment columnist for USA Today—answers these and other questions surrounding the recent market catastrophes. As the author explains, this was a different kind of market panic. Bear Stearns didn’t collapse because its stock was low—the company crumbled because no one would lend it money. The Federal Reserve then intervened, not because they were worried about Bear Stearns, but because they feared a meltdown in the credit markets if Bear defaulted on its debt. The dangers in this cycle, says Waggoner, could be bigger than we’ve seen in a long time. Investors need to act now in order to protect their portfolios, and Waggoner shows how. The author offers specific advice on protecting portfolio finances against both inflation and deflation through the use of Treasury bonds, gold, commodities, and real estate. He explains the critical importance of paying down debt—pointing out that paying down a 19% credit card is the equivalent of getting a 19% return on an investment! And he offers a range of other strategies to help your portfolio weather a storm, including rebalancing and using foreign currencies—as well as identifying a few strategies to avoid.Your ultimate protection, Waggoner explains, is to have a plan. Assume we’ll all get through this—you can’t predicate your investment plan on |
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Burst This!: Frank McKinney’s Bubble Proof Real Estate Strategies $24.95 Frank McKinney continues his international bestseller tradition of delivering contrarian perspectives and strategies for generational success in real estate.During his twenty-five-year career, this ‘real estate rock czar’ (The Wall Street Journal) and undisputed ‘king of ready-made dream homes’ (USA Today) has not only survived but thrived through all economic conditions by taking the contrarian position and making his own markets. Burst This! presents a resounding counter-opinion to the doomsayers and the get-rich-quick schemers, helping you guard against falling into their traps. In it, McKinney reveals . . . • Six distinct real-estate cycles in the last thirty-five years, sifting out critical, recurring trends that highlight significant opportunities while signaling where history might repeat itself.• The evidentiary truth, not the fear-mongering or the sugar-coating, on real estate’s ups and downs. See exactly how McKinney has successfully handled the predictable cycles with timeless financial and investment strategies.• Which real-estate investments—and the proven approach to marketing them—that have consistently shown immunity to the market’s volatile fluctuations.• How you can aspire not just to survival, but also to what McKinney calls ‘thrival,’ developing your ability to capitalize on all market conditions.• Why the positive and negative excitement (a.k.a. greed and fear) associated with boom and bust times are your worst enemies, brought on by nothing more than recurring market cycles.Frank McKinney is a five-time international bestselling author, philanthropist, and extreme risk-taker best known for his unprecedented success as a real estate ‘artist’ and visionary. McKinney began with a modest $50,000 fixer-upper in 1986 and completed his first $2.2 million spec home on the ocean in 1992. Since then, he has created and sold 36 oceanfront |
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Burst This!: Frank McKinney’s Bubble-Proof Real Estate Strategies $3.08 Frank McKinney continues his international bestseller tradition of delivering contrarian perspectives and strategies for generational success in real estate.During his twenty-five-year career, this ‘real estate rock czar’ (The Wall Street Journal) and undisputed ‘king of ready-made dream homes’ (USA Today) has not only survived but thrived through all economic conditions by taking the contrarian position and making his own markets. Burst This! presents a resounding counter-opinion to the doomsayers and the get-rich-quick schemers, helping you guard against falling into their traps. In it, McKinney reveals . . . • Six distinct real-estate cycles in the last thirty-five years, sifting out critical, recurring trends that highlight significant opportunities while signaling where history might repeat itself.• The evidentiary truth, not the fear-mongering or the sugar-coating, on real estate’s ups and downs. See exactly how McKinney has successfully handled the predictable cycles with timeless financial and investment strategies.• Which real-estate investments—and the proven approach to marketing them—that have consistently shown immunity to the market’s volatile fluctuations.• How you can aspire not just to survival, but also to what McKinney calls ‘thrival,’ developing your ability to capitalize on all market conditions.• Why the positive and negative excitement (a.k.a. greed and fear) associated with boom and bust times are your worst enemies, brought on by nothing more than recurring market cycles.Frank McKinney is a five-time international bestselling author, philanthropist, and extreme risk-taker best known for his unprecedented success as a real estate ‘artist’ and visionary. McKinney began with a modest $50,000 fixer-upper in 1986 and completed his first $2.2 million spec home on the ocean in 1992. Since then, he has created and sold 36 oceanfront properties with |
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Buying Real Estate in the U.S.: A Guide for Canadians $12.2 Used – With many opportunities in the US real estate market and the strong Canadian dollar, the trend of snowbirds purchasing properties south of the border is top of mind for many Canadians who currently live in, or visit the USA. This thorough financial, tax, and legal guide will help snowbirds understand the process, and make informed investments south of the border. |
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Buying Real Estate in the U.S.: A Guide for Canadians $12.14 New – With many opportunities in the US real estate market and the strong Canadian dollar, the trend of snowbirds purchasing properties south of the border is top of mind for many Canadians who currently live in, or visit the USA. This thorough financial, tax, and legal guide will help snowbirds understand the process, and make informed investments south of the border. |
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Buying Real Estate in the U.S.: A Guide for Canadians $12.2 New – With many opportunities in the US real estate market and the strong Canadian dollar, the trend of snowbirds purchasing properties south of the border is top of mind for many Canadians who currently live in, or visit the USA. This thorough financial, tax, and legal guide will help snowbirds understand the process, and make informed investments south of the border. |
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Buying Real Estate in the U.S.: A Guide for Canadians $12.14 Used – With many opportunities in the US real estate market and the strong Canadian dollar, the trend of snowbirds purchasing properties south of the border is top of mind for many Canadians who currently live in, or visit the USA. This thorough financial, tax, and legal guide will help snowbirds understand the process, and make informed investments south of the border. |
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Buying Real Estate in the US $18.95 With many opportunities in the US real estate market and the strong Canadian dollar, the trend of snowbirds purchasing properties south of the border is top of mind for many Canadians who currently live in, or visit the USA. This thorough financial, tax, and legal guide will help snowbirds understand the process, and make informed investments south of the border. |
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Financial Crisis as a Result of Risk Management Failure $43.71 New – In this thesis, we examined time period from year 1993 to 2008 concerning real estate market in USA and coherent risk management decisions and tools used by US government and private mortgage institutions. After qualitative analysis of information resources (financial data, official documents and statements, economic researches and comments), we tested hypothesis of underestimation of real estate price bubble in years 2000 to 2007 by mortgage agencies and US stock market. The tool we used |
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Financial Crisis as a Result of Risk Management Failure $66.94 New – In this thesis, we examined time period from year 1993 to 2008 concerning real estate market in USA and coherent risk management decisions and tools used by US government and private mortgage institutions. After qualitative analysis of information resources (financial data, official documents and statements, economic researches and comments), we tested hypothesis of underestimation of real estate price bubble in years 2000 to 2007 by mortgage agencies and US stock market. The tool we used |
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Financial Crisis as a Result of Risk Management Failure $66.94 Used – In this thesis, we examined time period from year 1993 to 2008 concerning real estate market in USA and coherent risk management decisions and tools used by US government and private mortgage institutions. After qualitative analysis of information resources (financial data, official documents and statements, economic researches and comments), we tested hypothesis of underestimation of real estate price bubble in years 2000 to 2007 by mortgage agencies and US stock market. The tool we used |
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Financial Crisis as a Result of Risk Management Failure $43.71 Used – In this thesis, we examined time period from year 1993 to 2008 concerning real estate market in USA and coherent risk management decisions and tools used by US government and private mortgage institutions. After qualitative analysis of information resources (financial data, official documents and statements, economic researches and comments), we tested hypothesis of underestimation of real estate price bubble in years 2000 to 2007 by mortgage agencies and US stock market. The tool we used |
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Global Trends in Real Estate Finance $100.02 With the rapid developments that are taking place in the global scale and structure of real estate markets, there are significant changes in the financial structures and processes that underpin these markets, with a far greater degree of sophistication and complexity emerging. This is clearly reflected in the real estate investmenet trusts (REIT) products now being developed in Europe and Asia, the range of unlisted products emerging in UK/Europe and the innovative financing structures being developed in many countries.Changes are also reflected in the processes and environment needed to ensure the success of these property products, including increased disclosure, corporate governance, market transparency and improved skills base.In order to work effectivley in the future dynamics of change in the real estate markets, it is increasingly important that there is a full understanding of these new investment and finance techniques and processes that can be effectively applied to the real estate markets. This helps to ensure effective investment decision-making within the property sector.Chapters are written by leading international contributors, both academic and practitioner. The context is explicitly international, with a focus on UK, Europe, Asia, Australia and the USA. The aim is to identify specific market areas to describe the key innovations, rather than simply providing a description of various geographical markets. |
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