GalaTime

Back in October of last year, I wrote a post about the out of whack buy vs. rent equation for a 3BHK apartment in Sobha Mayflower, an apartment complex in South East Bangalore: Bangalore Real Estate: What happens when rents follow prices down?

At that time, the per square foot rate for this place had dropped from ~3500 to 2800. Even then, it was way too priced when compared to the cost of renting:

. . . the Price/Rent ratio is 63000 / 14000 = 4.5! Either the rents need to go up a lot (less probability given the huge number of apartments being completed in 2007/2008 in this area) or prices need to drop further.

Even if prices drop to Rs 2250 per sq ft and if the home loan rates drop from 13% to 10% (for a fixed interest loan over 20 years), the EMI works out to 42,000 - that’s a Price/Rent ratio of 3. Alternatively, even if you bought the apartment at Rs 2250 per sq ft, your rental yield is 4%.

Guess what - apparently someone did read my post.

Here is a very interesting ad at Bangalore Craigslist: Top properties for Sale at very reduced price

I didn’t paste the whole ad, but here is the listing for Sobha Mayflower:

4. Sobha Mayflower, off outer ring road - sarjapur rd - 3 bhk flat (INR 2200/sq. ft)

Whoa! 2200? That’s down 25% from October! And here is the last line of the ad:

No commission from Buyers. These are desperate sellers trying to get out of their holdings. Make an offer. Email only.

Well, for all I know, this might be a cruel prank being pulled by someone - just to spook the sellers and get them to give double-digit discounts. But if it is not, then this is fairly horrible news for the Bangalore residential real estate market.

I am not too keen to email the person who posted this ad. Do any GT readers have knowledge of such steep drops in asking prices?

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