CASE study3, were Indian Housing sector will correct by atleast 30% in next 1year and gradually rise only by 20% in next 20 years.
Indian housing market is in Bubble phase for sure when measured based on Affordability Index , Price to Income basis, Mortgage as percentage of Income, House to Income Ratio & Price to Rent ratio basis.
It's also for sure lot of Black money is been parked into this sector & Govt itself is in least interested to cool of sector by taking relative measures.
Real Estate Sector is not targeting poor common man in streets as it's beyond their reach, it's targeting the NRI's residing abroad.
NRI's hardly know what would be best use of their money, they don't want to bet in Equities market and yet what something steady in their portfolio.
NRI's have been happy with the Rupee depreciation in last 6 years of close to 35%.
They fail to realise that Real Estate investments are not very liquid and would take time to sell when they step into the market.
Indian Real Estate comes up with property show in major cities across the world where rosy picture of new Township is sold to NRI pockets.
When they sign up the agreement they fail to realise that the agreement is totally one sided favouring builders and nothing is in their favour.
Builders are delaying projects by 3 to 4 years this is Indication of oversupply and cash trapped builders.
One should be cautious of big township projects if water table of that region is depleting and weak.
NRI's are over leveraging in some cases by making following Assumptions.
They can repay loan in 30 years.
They will always have steady & Rising pay structure.
They can quickly sell back the property if in need of cash.
Like Gold property prices will always go up.
Reasons why Property prices would come down in next 5 years:
As the GDP derails jobs derail.
Politicans need to fund elections which will see pull back from Real Estates.
Pvt Equities are exiting this sector (smart Individuals are money there money out)
Banks will refuse to restructure loans further to Builders which will lead to defaults or lowering of Rates.
Slow phase of job creation in India (especially service sector)
Failure to cut down the rising influence of Chinese mfg will slow to Indian mfg industry which will again slow down jobs in country.
Cost of Cement & Steel would correct as China slows down.
Interest Rates in Banks will moderate and this will lead to lower cost of borrowing n lending .
If Govt is really people oriented emerging 2 tier & 3 tier cities which are well planned can see rising jobs and and shift of population based on availability of Basic amenities.
Rising Unsold Inventory in Real Estate:
http://articles.economictimes.indiatimes.com/2013-02-13/news/37079528_1_unsold-inventory-knight-frank-research-market
http://www.firstpost.com/economy/why-bangalore-property-is-more-real-than-mumbais-352467.html
Also some good readings & images from the web for you.
http://en.wikipedia.org/wiki/Indian_property_bubble
http://www.zerohedge.com/news/2013-03-07/guest-post-unpopped-housing-bubbles-abound
http://www.numbeo.com/property-investment/gmaps_rankings.jsp?indexToShow=getMortgageAsPercentageOfIncome&year=2013
http://www.numbeo.com/property-investment/gmaps_rankings.jsp?indexToShow=getHousePriceToIncomeRatio&year=2013
http://www.numbeo.com/property-investment/gmaps_rankings.jsp?indexToShow=getPriceToRentRatioCityCentre&year=2013
http://www.numbeo.com/property-investment/gmaps_rankings.jsp?indexToShow=getAffordabilityIndex&year=2013
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