Real estate is the buzz word today. Soaring realty prices, rising interest rates and the need to have one's own house make this one of the most talked about topics all over the country.
So what the factors that affect real estate the most? Does inflation or a rise in global oil prices have an effect on the realty market?
Is is the right time to buy realty now? Or should you wait for a while? Will realty prices drop ever?
In an hour-long chat on rediff.com on Thursday, Gulam Zia, national director for advisory services, Knight Frank (India) Pvt Ltd, answered many such queries.
Here is the transcript:
GULAM ZIA says, Hi, this is Gulam Zia welcoming you to this chat.
Clive asked, Guys - he is not a real estate broker.. so stop asking questions like..where can i buy a flat for so much money. etc etc
GULAM ZIA answers, at 2007-04-05 14:29:25: Thanks Clive, so considerate of you. But as real estate consultants we are very much in touch with the market and hence such questions are also welcome.
sam asked, do you think property prices will face a downward pressure because of the rising interest rates? Not many people would like to take loans at such high rates and some of those who've alredy taken loans may find their EMIs to high to sustain and thus may want to sell?
GULAM ZIA answers, Yes Sam, your analysis is absolutely correct. We are all expecting that down-ward movement in near future. As you correctly pointed out, the rising interest costs are making the houses beyind reach for many of us. This in turn is reducing the transaction volumes in the market. Now the only point is "who blinks first". Investors with deeper pockets can wait for longer period without feeling the pinch. The rest would want to make whatever they could out of the market and start reducing the prices. Hence, lets see how soon do we face the corrections.
Clive asked, Ha ha.. ok Gulam, just trying to help so we could get more important adn genreal questions answered. So simple question to begin with for me.. Are prices in Mumbai going to fall?
GULAM ZIA answers, Thanks again Clive. I answered your question a few minutes back.
Pbr asked, Is there a thumb rule to calculate the price a used house/flat? I bought a flat for about 10 lacs(in 2005) in kolkata which is yet to be handed over. I am planning to sell it off to build a house of my own. Can you tell me the what it should cost maybe 5 years down the line? And, what is the standard rate per sq. ft. for building a standard house (besides cost of land)?
GULAM ZIA answers, The only parameter that affects the value of a used flat is its age. So older the apartment the more discount applicable. Roughly, the life of a structure is considered as 80 years and you may take a depriciation of 10% every decade. What you will get for your property when you sell it will be entirely based on the prevailing market prices. If a new flat at that time is sold for 10 lacs you may apply a discount of 5% after five years. For constrcuting an independent house, you may take a rough estimate of Rs 600 to 750 per sqft for an average quality of construction. It may differ for the kind of finishing that one wants, like an imported marble flooring would take the cost up by anywhaere in the range of Rs 250 to 500 per sqft.
Akash asked, MUMBAI MUMBAI MUMBAI!!!! HELLO PRICES ARE TEARING THE SKY....ANY Chances they will drop? WILL THEY DROP? I M DESPERATE FOR A HOUSE! IS THIS THE RIGHT TIME?
GULAM ZIA answers, Slightly more patience. We are both in the same boat Akash. I am also waiting to buy my home. We can expect prices melting down in a few months.
Hitesh asked, Hi how do u Analyse todays Scenario @ increase in Interest rate on loan? Wil it help to bring down property rate?
GULAM ZIA answers, Yes Hitesh, we discussed in an earlier question the impact of risign interest rates on prices. We do expect noticable climb down.
lokesh asked, Hi i have a flat at Khargar navi Mumbai, should i sell it or keep it
GULAM ZIA answers, This is the right time to sell in Kharghar. The prices are high and the rising interest costs shall affect further increase. So you may sell it today.
Jackdaw asked, Sir, What role do you think will ICT (information and communication technology) play in the real estate sector in India?
GULAM ZIA answers, IT is currently the foremost growth driver in the real estate sector. The growth of IT industry as a whole is currently driving almost 75% of all the new office demands in the country. Which then means more employment genereation which then pushes up the demand of all the other sectors like housing, retail, hospitality and leisure, etc.
AHUJA78 asked, Hi Gulam, Do you think living in a rented house paying Rs 5000 is better or take a loan of 20 lacs means emi = half my salary is better. Pleae guide.
GULAM ZIA answers, Current market prices are on a peak and interest rates jacking up. It will be prudent to wait and watch before you buy your house.
sab asked, gulam bhai.............y taking so long to answer....further ure not answering many questions.......u dont expect we people to be online here all day long...or do u?
GULAM ZIA answers, My apologies for the delay, we have a series of questions to answer and just selcting the easier ones is taking all the time, .....
hiteshshahj asked, How do u look at Pune Real Estate Scenario?
GULAM ZIA answers, Pune is riding on IT story and posting tremendous growth in real estate. The prices however are still in the affordable range unlike say a Mumbai, Delhi, etc. You will still find good deals to invest in specially in the areas near upcoming IT destinations.
Amol asked, I think the incease in urbanisation and development of employment end infrastructure facilities out of bombay can only help to decrease th eproperty prices in cities like bombay. Day by day the advantages of living in mumbai are vanishin with pathetic transport facilities, high cost of living, load shedding etc.
GULAM ZIA answers, Mumbai is a land-locked city and hence the land prices going high due to the scarcity. But with better connectivity with New Mumbai, Thane, etc. will definitely see an exodus of indutries, corporates as well individuals. Which would in the longer term have a softening effect of the prices.
gopal asked, Mr ZIA, though everyone seems to be pointing towards a correction, there are also views expressed by persons in the real estate business that people are just waiting/watching n staying away for the time being. Hence from the people actually in need of homes, demand is still there but supply has not matched up. So the correction could only be marginal. Pl give your views
GULAM ZIA answers, As regards to the supply constrain, the developers are also going slow on their projects thus reducing the infusion. Recently, Govt has introduced an idea of levyin charges for undeveloped lands thus pressurising the developers to build more. Thus maintaning the balance. However, talking about the correction, it will also vary from property to property. If a property is located in a place where good infrastructure has come up or is expected to come up in near future then the correction will be marginal. The rest may see a higher redcution. So the point is a value proposition will also decide the correction in prices.
GULAM ZIA says, Friends, my apologies for not being able to answer all the questions. As you must have seen the overwhelming inflow of questions would require perhaps 5 gulam zias to be at your disposal. We shall try to answer as many questions separately by e-mails. Ans yes, i intend joining a typing class. Thanks. See you later.
Chat with Gulam Zia every month!