Wednesday, March 19, 2008

Mumbai Real Estate Crashes 30% -- Finally!

Good news in this morning's newspapers. Both the DNA and the Times of India have reported a 30% crash in Mumbai's real estate market. The benchmark for this is the sale of commercial plots in the Bandra-Kurla Complex. Of course they won't say it like it is, but you do the math and you will understand why this is true.

Last year, in 2007, prices were at a staggering Rs 48,600 per sq. ft. paid by the Wadhwa Builders. The scenario changed yesterday; an empty auction hall wore a deserted look, with Jet Airways picking a plot for Rs 32,000 per sq. ft. Jet proposes to build its global headquarters in the area.

The drop of 30% went largely unreported, because the focus was on signals of the slump rather than the quantum. (Editors note!) This "30% drop" would have made one screaming headline.

Read the Times of India story here

Read the DNA story here (with a rather inappropriate title)

Posted by Eclectic Investor at 8:34 AM  

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IN PASSING

Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book


“When everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

"Most people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

The most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Prachi Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror

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