Wednesday, May 02, 2007

End is near for the Real Estate Boom?

I was always vary about the soaring residential real estate prices in India and was pretty sure that the bubble will burst sooner than later. Looks like that has started happening right now.

This is not because the supply has exceed the demand however. My take on this is that the demand is still there but the real estate prices have become so unrealistic that people just cannot afford to buy a new house or an apartment. In Chennai for example, if you want to buy a decent new apartment measuring say a 1000 Sq feet, you have to fork out anywhere near 40 lakhs - and that acts as a huge barrier because one just cannot afford to pay an EMI of that high a magnitude just on one salary alone.

Another indication of flagging market is that the rents have not kept pace with the real estate prices. I recently rented my apartment out for 6000 Rs a month. The price of my apartment in the market? Anywhere near 35 lakhs. Now, that is a minuscule return on investment if you are buying an apartment as an investment property don't you think?

So my advice for the prospective buyers out there is to wait another 6 months or so before buying any residential real estate.

3 comments:

Prem Sagar said...

WElcome back to blogging!

I agree, prices are crazy at some places!

And beyond reach of an avg buyer!

And ppl who bought high-end flats on floating loans have seen a significant rise in their payment period.

I too dont think these prices can sustain.
Regards
Prem

Ketan said...

Ever heard that "great men think alike"... here is another "great men blog alike". check out

http://greenbuck.blogspot.com/2007/05/real-estate-prices-dipping.html

Prasanth said...

Ketan,
Thanks for your comments - and read thru your blog. Yes, "great" men do think alike !!!

Regards,

Prasanth