"Gardening is not a rational act."
—Margaret Atwood (Canadian, 1939)
Word
for the day
Savoir-faire (n)
Knowledge of just what to do in any situation; tact.
Malice
towards none
PM Modi has played the trump
card, which AK played in last Delhi election - "Anyone who does not
support me is corrupt!"
If this card works - expect
280-290 seats for BJP in forthcoming UP elections, and a majority in Goa and
Uttrakhand.
Punjab is tough and Manipur
unpredictable.
First random
thought this morning
The move to abolish the extant currency notes has seemingly
brought the opposition parties together for the time being. However, it appears
more as a floor management strategy than a political game plan.
Imputing any larger motive to this or expecting any substantial
outcome from this may be political naiveté.
Except for few jokers, most of the opposition leaders have seen
the Emergency in 1975 and the subsequent events. They know very well that two
and a half year period (to the 2019 elections) is too long a period in
politics. A majority of the voters would not remember the hardship they
suffered due to this move.
Good times for realty market around the corner
Commenting on my yesterday's post (see here)
Many readers have highlighted that one major source of land for real estate
development is the surplus land with the civic administration. The civic
agencies sell these land parcels to users or developers at a relatively lower
rate, who in turn are able to sell these at the market determined rates,
accepting the "gain" part of the compensation in cash. This cash adds
to the stock of black money in the system and perpetuates the cash element in
the real estate dealings.
In my view, this was true till a few years ago. Now a days, most
of the sale by civic authorities, except housing for economically weaker
section, is at near market price; and the sale is also through a mostly transparent
process of computerized draw or auction. In Delhi, for example, many flats
offered by DDA have remained unsold vs. 100x demand two decade back. Many
commercial sites sold by DDA in past decade have also remained unviable for the
buyers.
Now coming back to the main topic - I firmly believe that the
expectations of a major correction in real estate prices in short term may not
come true. To the contrary, after a short period of subdued activity, we may
actually see prices firming up.
Top five reasons for my positive view on real estate are as
follows:
(a) The real estate prices
have been correcting in most micro markets since past 5years. In many markets,
like NCR, Punjab, Haryana, UP, Gujarat, Rajasthan, West Bengal, MP, Punjab,
etc. the prices have seen material correction. In many other markets, we have
witnessed time correction. The commercial real estate prices have reacted fast
to the interest rate cycle and have already started to firm up in past few
quarters. The housing demand may have bottomed out. With rise in affordability,
lower rates, and better tax incentives, this segment may also see better days
soon.
(b) In many micro markets,
the current market prices are not very far away from the cost of construction
and government prescribed floor rates (circle rate or stamp duty rates). The
scope for prices to fall further therefore is limited. The cost may actually
rise in the short term.
(c) The stress in real
estate market in past few years, new regulatory regime, new land acquisition
laws and now currency abolition has ensured that the smaller, unorganized,
inefficient developers go out of the market and the markets get consolidated
with 4-5 large player in each micro market. This consolidation will bring the
pricing power back to developers.
(d) More money in bank
accounts, and better tax compliance will enable lot many more people for bank
credit and demand for residential and commercial estate shall begin to firm up.
(e) There could be supply
constraints in short term as the holders may be reluctant to sell for various
reasons.
No comments:
Post a Comment