Correction Or Recession In Realestate

Posted by Admin on November, 05, 2016


Correction or Recession in Realestate

There is a very thin line between the term Correction and Recession in the Real estate market,

It is so observed that when a city is about to explode with expansion and growth the prices sky rocket,

The prices go north wards in an uncontrolled manner, the chain continues with big expectations in return on investment from each buyer who in turns becomes a seller hoping to gain on the momentum.


In actuality there comes a point when this boiling steam settles,

Expectancies keep on growing in the minds of the owners who wants to sell, and the owners who wants to rent.


Often the over expectancy becomes the need of the hour, and the need becomes the necessity, ( due to commitments)


When the market reaches this stage, either the market Corrects itself collectively by the people, or it boomerangs into a Recession.


Presently in Bangalore we have reached at the same stage.

One needs to adapt to the situation and take decisions intelligently with open mind, or the personal position of the property holder can lead to a very stressful and unmanageable situation.


Unfortunately people are unable to differentiate between an asset and a commodity.


  • Take for instance there was a time Retail commercial rentals were having a going rate of about Rs 100 to Rs 350 per sq feet in a given locality just a few years back – today it has come down to about Rs 60 to Rs 100 per sft.
  • Office rentals were having a going rate between Rs 40 per sft to Rs 60 per sft - today it has come down to Rs 20 per sft to Rs 40 per sft.
  • Plug and play offices fully furnished were going at a rate of Rs 100 per sft -now it has reached about Rs 55 or even below,
  • Residential rental returns were at 5 % per annum - now it has reached about 2 % to maximum 3 % per annum.
  • Commercial Rental returns were at 10 to 15 % per annum , now it has reached at about 3.5% to max 8 % per annum .
  • Price appreciations of properties were at 25 % or even at times 50 % per annum now it has reached at about 10 % to 15 % per annum.
  • Price appreciation in pre-launches to completions we have experienced 100 % to even for some properties 300 % . ( over a period of 3 to 8 years depending on projects ) now one will see only a meagre appreciation of about 40 % to max 60 % ( over a period of 3 to 8 years depending on projects ).



It's because of the demand and supply ratio. Often it so happens

  • · first a demand is created
  • · than scarcity is experienced
  • · than the supply is created
  • · than the supply gets consumed.
  • · seeing the supply getting consumed
  • · Again supply is created un-controlled from all sides.
  • · More people follow the line
  • · Ultimately supply over comes the demand


Considering property is not a perishable entity, it cannot be recycled in any way. (Unlike any commodity)


Let us take an example,

2 owners were getting Rs 100 per sft for their properties, and the tenants moved out,

From both the owners the one who compromises and accepts the reality thus rents it out at say Rs 50, and his rental starts, - enjoys the income the other person who waits on to get Rs 100 which I believe shall never come,


Many a times the owners fail to understand the ground reality, As he is not been communicated or advised by any one,

the people who cling on to their Ignorance to the ground reality, - loose out heavily...

It’s a never ending calculation mess.


One needs to understand that Rs 50 is not a low price in fact that is the actual price,

We enjoyed the opportunity of bonus when price was high, now the honeymoon period is over...


Take for instance in rental of residential is also the same, there were days when the deposit amount was 20 months or some time I have seen even 40 months of the rental value. Today it has come down to the actual between 6 months to 10 months maximum. ( however bangalore is lucky compared to other cities who get deposits between 1 month to max 6 months)


The rent renewal was 7 % to 10 % increase every year, today its come down to the actual 5 % or even lesser.


Today the Real-estate field has changed drastically and within no time it shall reach a very professional and respected stage.

Take the case of developers ( who are the most hit lot when compared to the rest ) - the developers needs to deliver the product on time , with no compromise on quality , and need to complete with very compititive low margins, ( gone are the days when the price escalations were by the hour ), manage with the fluctuations of cost of labor and raw matrerials, systematically handle minimum funds, meticulously manage the running cost of the company with ever increasing overheads, arrange for project fundings at low cost ( gone are the days of prebookings and private finances), needs to work on Reputation management to keep the customers, consultants , brokers , vendors , employees with them loyal, and over all be lucky enough to get all the approvals on time. apart form all these he needs to price the product Right.


Not only owners / developers but even the Real-estate dealers / brokers / agents / consultants, need to upgrade their thought process,

Gone are the days when the exorbitant commissions, brokerages , price under writing and hidden charges were prevailant those days.

now professionalism has set in with transperant payouts to minimal percentages only. one needs to

Accept and learn to adapt to the change setting-in,


Educate themselves with the latest knowledge of rules,


Take time out and Learn to understand the latest technologies,


Hone and upgrade the required necessary skills,


And apart from everything


Mainly become Confident, change their Attitude, of communicating the right advice to the owners as well as to the tenants / buyers.



We cannot stop the changes that the nature is bringing to our society, but If we learn to mould ourselves and embrace the change, all of us can set sail for a longer and never ending journey.

hence forward transperency is the key for success.

Note - this piece of article is a personal observation with no hidden intentions of any kind.

As a reader you can be free to like , dislike , ignore , share this post.

As a reader if you feel the viewpoint is against your personal viewpoint - please accept my apologies and i am sorry for my ignorant article.

As a reader if you feel the viewpoint is matching your personal viewpoint also - I am thankful to you for spending some time on it.

vishal v parwani ssb properties.



This entry was posted on November, 05, 2016 at 22 : 06 pm and is filed under Realestate scenario in bangalore. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response from your own site.


Comments [1]

Admin

kiran

November, 15, 2016 at 12 : 30 pm

its very nice detailed post, it is the real status that you have expressed, i did took the inputs and have finalized my property, thanks for the information....rnnot many people have enlighten me on the issue. had some one shared the information i would have rented my place a few months earlier, ( sic lost a lot of rent )rnkiran male

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