Myths about real estate
Source: The Times of India
There are no indications that investor activity has overtaken genuine buyer activity in the market, says Anuj Puri
MYTH 1: There is a 'bubble' in the Indian real estate market, and it will burst soon.
Fact: There is no evidence of a 'bubble'. When a bubble develops in any market, it is because prices for that particular commodity or asset have gone through the roof and beyond affordability. This is far from the case in Indian real estate. The residen�tial sector is led by endusers and it is they who dic�tate the state of the market. Neither is there a sig�nificant correlation between the state of the stock market and that of the property market. There are no indications that investor activity has overtaken genuine buyer activity. In residential, the propor�tion is approximately 80% end users and 20% in�vestors. In the commercial sector, the proportion is almost 100% end users who are taking property on lease. There are instances of overheating but these are localised.
MYTH 2: Indians do not figure very large as prop�erty buyers on the international property market.
Fact: Residential rates at Mumbai's Nariman Point or Cuffe Parade are priced anywhere between Rs 25,00055,000 per sq feet. For the price of a 2BHK flat in these areas, one can buy a villa in Dubai or Lon�don's suburbs, a luxury flat or a standalone house in New Jersey. Many Indian buyers have woken up to this fact and are buying homes abroad.
Myth 3: Thanks to India's booming economy, high�er salaries, higher aspirations and easier home loans, most Indians are buying highend homes now.
Fact: The accent is still very much on affordable housing. As before, the Great Indian Middle Class is not motivated by its need for greater convenience, but by the ability to pay for a home. In that context, the greater demand will always be towards afford�able housing options.
MYTH 4: Major Indian developers are abandoning the MIG sector and concentrating on highend resi�dential projects because it makes better business sense.
Fact: Most bigbanner developers still see sense in constructing midincome housing projects, since they can construct more volumes. The demand in terms of units is phenomenal and developers getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one or the other new town as the next coming thing.
A fundamental real estate investment mantra is that emerging localities are preferable to established and often saturated ones. Established areas eventual�ly reach a peak in terms of appreciation potential, af�ter which the growth rate either slows down or stag�nates. Moreover, there is little scope for new market drivers such as malls to find a place in saturated local�ities meanwhile, prices remain high. This is not the best of scenarios from an investment point of view, since optimal investment requires low entry levels and appreciable growth within a realistic timeframe. Therefore, as one or the other destination reaches its peak potential on all these counts, new ones come into the limelight.
Anuj Puri is Chairman & Country Head, Jones Lang Lasalle Meghraj
There are no indications that investor activity has overtaken genuine buyer activity in the market, says Anuj Puri
MYTH 1: There is a 'bubble' in the Indian real estate market, and it will burst soon.
Fact: There is no evidence of a 'bubble'. When a bubble develops in any market, it is because prices for that particular commodity or asset have gone through the roof and beyond affordability. This is far from the case in Indian real estate. The residen�tial sector is led by endusers and it is they who dic�tate the state of the market. Neither is there a sig�nificant correlation between the state of the stock market and that of the property market. There are no indications that investor activity has overtaken genuine buyer activity. In residential, the propor�tion is approximately 80% end users and 20% in�vestors. In the commercial sector, the proportion is almost 100% end users who are taking property on lease. There are instances of overheating but these are localised.
MYTH 2: Indians do not figure very large as prop�erty buyers on the international property market.
Fact: Residential rates at Mumbai's Nariman Point or Cuffe Parade are priced anywhere between Rs 25,00055,000 per sq feet. For the price of a 2BHK flat in these areas, one can buy a villa in Dubai or Lon�don's suburbs, a luxury flat or a standalone house in New Jersey. Many Indian buyers have woken up to this fact and are buying homes abroad.
Myth 3: Thanks to India's booming economy, high�er salaries, higher aspirations and easier home loans, most Indians are buying highend homes now.
Fact: The accent is still very much on affordable housing. As before, the Great Indian Middle Class is not motivated by its need for greater convenience, but by the ability to pay for a home. In that context, the greater demand will always be towards afford�able housing options.
MYTH 4: Major Indian developers are abandoning the MIG sector and concentrating on highend resi�dential projects because it makes better business sense.
Fact: Most bigbanner developers still see sense in constructing midincome housing projects, since they can construct more volumes. The demand in terms of units is phenomenal and developers getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one getting into this segment can build for years to come. They have the assurance of sureshot absorption, as well. Most major Indian developers are NOT shifting from affordable to highend housing only branching out. While they get into middlesegment housing, they continue to build highend projects.
Myth 5: The metros are still the best places to in�vest in real estate.
Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middleincome homebuyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one or the other new town as the next coming thing.
A fundamental real estate investment mantra is that emerging localities are preferable to established and often saturated ones. Established areas eventual�ly reach a peak in terms of appreciation potential, af�ter which the growth rate either slows down or stag�nates. Moreover, there is little scope for new market drivers such as malls to find a place in saturated local�ities meanwhile, prices remain high. This is not the best of scenarios from an investment point of view, since optimal investment requires low entry levels and appreciable growth within a realistic timeframe. Therefore, as one or the other destination reaches its peak potential on all these counts, new ones come into the limelight.
Anuj Puri is Chairman & Country Head, Jones Lang Lasalle Meghraj
Real estate sector plays a big role in countries economy. For the rapid expansion many folks are purchasing the property in Pune.
ReplyDeletePune Property
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