Bangalore Real Estate: Guidance (Market) Value
As mentioned in an earlier post, the official land values in Bangalore are about to go up significantly; here is the revised table.
On a 2,000 sq ft apartment (at an existing price of Rs 1,500 per sq ft) in an area that has seen an upward guidance value revision of 50%, the buyer will now have to cough up more than Rs 3.75 lakh as stamp duty, an increase of more than Rs 1.25 lakh.
On a related note, Business Standard reports on the impact of rising home loan rates - Loan repayment tenures shooting past 20-year mark.
With the default rate on housing loans already as high as 3.5%, banks are offering to increase the tenure of loan repayment up to 25 years for customers who are uncomfortable with the substantial increase in EMIs.
Home loans have grown by around 33% in the last two years and the total outstanding at the end of December 2006 was around Rs 2,10,000 crore.
Also, the FM has asked banks to cut back on real estate lending - Check credit growth of 30%, FM tells banks.
Banks will have to rebalance their portfolio and moderate credit flow to high-risk sectors like commercial real estate, capital markets and NBFCs.
My take - atleast for Bangalore: There are pockets (eg. Whitefield, Sarjapur Outer Ring Road) where a large number of apartments are rapidly coming into the market, and are about to witness a drop in resale & rental prices during 2007-2008.
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April 21st, 2007 at 12:53 pm
Couldn’t agree more.
There is too much vacant apartments in Outer Ring Road - Sarjapur stretch. When I see the “Completed” apartment complexes in the night, not more than 10% of the houses are light up. But the owners rent expectations are too high, they have not started reducing the rents yet. At the same rent, once can easily rent in other well developed areas in Bangalore. IMO one of the reasons for rent not coming down is, most of these apartments might be owned by investors, many of whom are working in US/Middle East. They can effort to keep feeding those “alligators”.
At the same time, I can see ads in many newspapers and websites, where the apartments are being offered by some investors at a discount to the current price quoted by developer. For example, some apartments are available in the open market for 2900Rs/Sq Ft (which is completed or will be completed in mid 2007), the developer is asking for 3200+Rs /Sq Ft for similar apartments (which is yet to be started, and might be completed sometime in late 2008). Atleast one big developers have removed the details about Villa project from their website, which they accounted last year. I would assume the lack of interest is the main reason. Also I have received emails/phone calls from few developers asking If I am still interested in buying. Somewhere I read most apartment complex will be finished by end of 2007. I think the serious down trend will start after that.
Effortability is too low. Unless one is a DINK, it is not easy to buy without over leveraging.
On the positive side, many new companies are starting their campus in ORR-Sarjapur side. Most of them are hiring big time. All those people might want to live nearby and avoid the Bangalore traffic. That might improve the vacancy rates and absorb new apartments which are being completed.
I rent now, and don’t plan to buy unless the rental yields turn more favorable.
I am not much familier with Futures and Options market. I am interested in knowing how to short RE developers. I don’t want to buy short term put options. But I am sure over longer term, there will be a deep correction in their price, and I want to profit from that.
-Nagarajan
May 29th, 2008 at 12:58 pm
Have the same opinion/view. Rates are unrealistically high whether uyfor rent or new buy. It has to correct sharply which will happen after some time. Poeple are not fool rather cautious while planning for rent or new buy. Let’s watch out for deep correction in rentals and new buy - I am sure