Real Estate Market Mantras

Daily, over 1000 people visit one of our website www.GroundTruths.com !! Several of them seek “Property Analysis Report” from us. I often go on real estate analysis shows on several national TV channels where people have lot of questions relating to real estate investments. Our assessment, is that while the investors are getting more careful and want to do due diligence before investing, lack of credible and reliable information limits them from taking informed decision.

Real estate is all about location – this cliché you must have heard from me as well as several other people. Yet another of my favorite quote is – buy land – they are not producing it anymore on this earth!

But apart from these standard words, what is least discussed is “perception” or “wave” or “hype”. This is one key factor in real estate that must be understood well, if you really want to make quick money in Indian real estate. So let’s take a case.. a good developer comes up with a good project at a good location and has lined up good brokers for “selling” the projects. These brokers create wave/hype.. and if you are smart and can understand the hype, you must book a flat early..this hype continues for some time and fairly quickly you will find that project price gets increased. There are at least a dozen project that followed this trend in last 6 months.!!

I know several “smart traders”, who booked several flats @say Rs 2 lakh and exited from the project within three months at at cool 100 per sft profit booking. At avarage 1,000 sft per flat this was cool 1L Rs profit on Rs 2 Lakh booking !! 50% ROI within 3 months? Sounds crazy – but this is reality. This is possible in “realty bull” market. But can “any analyst” predict it? No. Who can help you in this “trade” – your “street smart” next door “broker”! And “trade” require ability to spot the trend and this is done by self-involvement and analysis. This is like day trading in stock market.

Is this hype important for a long term investor as well? Yes, actually extremely important!! This hype set’s up tone for project bookings. And continues for several months and helps in getting the long term investors/end-user for the project. And this is very very important for getting enough booking for project to get started and achieve completion in time? Do you know that very few developers put their own money to complete the project? It’s the project bookings that form bulk of financing for the project and this hype thus is very very important.

So, are there projects where there is hype but location of project and project quality is not good. Yes – very much. And that’s where analysis come into the play! Please note that a “smart trader” may make money in this “hype” even on a poorly located project but a a long term investor or end user may get locked and trapped in this poorly located project!

In this current market scenario – as we end first 6 months of the year today evening, here are my two key concerns:

1. Several projects that were hyped by brokers will loose that hype very soon. You will find developers struggling to completely sell the stocks. There is oversupply in the market!

2. There are too many projects that were launched in 2006/2007 and have not yet seen completion. The number of projects that will see a similar project fate will be much higher now.

So should you invest now? Yes surely.. but be careful in selecting project!!