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- liberalization 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 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 housing 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 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 fac

Elevate the security of your haven with a Home Warranty – more than just a policy, it's a commitment to safeguarding your cherished abode. Home Warranty provide safety for your home. Embrace the peace of mind that comes with comprehensive coverage, ensuring every corner of your home is fortified against the unexpected.
Posted in Uncategorized | Tagged | Comments Off on Indian Real Estate Market: Bubble or a Bit Trouble?

Leasing, Renting, and Sales of All Sorts Hinge on Sales Triggers – Are You Using Them?

Sales is a pretty basic business and the most basic level leasing our rental homes is a sales game. In the business much research has been completed by psychologists understanding why a sales occurs. As investors, owners, and manager, we should understand sales triggers basic role in completing the sale.

First, there are really an almost infinite number of sales triggers that motivate people to buy. However, there are a few that are considered the core triggers. Every sales and marketing professional and certainly everyone on your leasing staff should know these. If you are the leasing professional the sooner you have these down the better.

The basic sales triggers are:

People want to make money. Offer a solution that puts money in their pocket and they are much closer to a purchase. Deliver a solution that offers a rebate at the close and you may have the sale.
People want to save money. Provide a purchase that will save them money every day and you are much closer to the sale. Provide a discount and you are one step closer to the sale. Throw in a an energy saver move in package that allows replacing every fixture with energy saving bulbs and you may get the sale.
People want comfort. Appeal to them in a way that makes them feel comfortable and sales are bound to increase. This is why the model unit is so effective.
People want to live longer. Highlight lifestyle factors that contribute to a long life and you are on the right track.
People want to learn. That Internet package may be more valuable than you know. Access to knowledge is powerful.
People want to be more attractive. Include attractive people in your advertising and make them feel like they are a part of a larger group of fit attractive people and they may feel compelled to be part of your community.
People want to save time. Locations that deliver on this promise because of access to shopping, entertainment, employment, schools, and other factors are much easier to lease. Do all you can to emphasize convenience.
After this short list of triggers, there are an almost infinite number of motivators. Certainly, none should be ignored. However, in someway almost all are permutations and variations on this initial list. And, smart marketers and leasing agents who understand this can find many ways to enhance the marketability of the properties they serve.

Blake Ratcliff recommends buying The Warrior’s Guide to Rental Investing and M

Posted in Uncategorized | Tagged | Comments Off on Leasing, Renting, and Sales of All Sorts Hinge on Sales Triggers – Are You Using Them?