Sunday, October 26, 2008

Navi Mumbai's Palm Beach Road prices slump 50%

It would be overkill to write about the fall of the real estate market which we have been tracking here since we gave a call that in February 2008, the realty market in India had made a top. It still took some time for an official confirmation of the crash in real estate prices, but today the Times of India (Mumbai) confirmed that the famous Palm Beach Road in Vashi has seen an almost 50% crash in real estate apartment prices.

For starters, this is just the beginning. Builders are willing to sell swiftly without any fuss. While a few months ago, home buyers were willing to invest by putting down payments even before the plinth was raised, today no one is ready to even consider a ready apartment.

Previously touted as the Marine Drive of Vashi, the 9 km Palm Beach Road, was becoming a upscale real estate stretch between Vashi and Belapur. Today, plauged by zero-sales and a crashing stock market, in which real estate stocks have fallen more than 90% of their high values, On paper, residential sales are still sitting pretty at Rs 7,500 to Rs 9,000 per square foot, but with near-zero sales and a volatile market, panicky developers and regretful investors are selling for as low as Rs 4,500.

Navin Makhija is a director with the Wadhwa Group, which is stuck with the biggest project—six towers of 25 floors each on Palm Beach Road. He tangentially acknowledges the slump in rates. "In these days when the global market is bad, sales are down and so is sentiment. It's natural that some will offer lower rates to sell houses," he says.

Makhija adds that for their Palm Beach Residency project, prices have been "internally lowered to Rs 7,000 to 8,000 psf. We are not going to make any sales for the next one-and-a-half months, but hopefully things will pick up", he says.

Read the story here

Posted by Eclectic Investor at 2:42 PM  

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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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