Check out these articles 

http://news.in.msn.com/business/article.aspx?cp-documentid=1402226,  http://business.timesonline.co.uk/tol/business/markets/india/article3810486.ece

It’s finally happening. The real estate market in India is cooling down. This is probably a breather before it snatches up its skirts and start trotting again. But nevertheless, what many people argued would never happen has happened. Prices of homes have declined not just in small isolated pockets but in large localities and across multiple cities.

The fact that this has happened at roughly the same time in different places is very interesting. According to me, it is good proof that real estate market is also a sentiment driven market like the stock market. After all, supply could not have exceeded demand in all the cities at the same time!

There is probably a bit of the FUD (fear, uncertainty and dread?) factor as well. With US real  estate market showing no signs of looking up and most experts predicting the slump to last till the end of 2009, it’s no wonder that Indian home buyer has started having second thoughts. Check this piece for the latest on the US market - http://www.bloomberg.com/apps/news?pid=20601087&sid=aS8rWyvV0osg&refer=home. Quite informative. For instance, didya know that the average US home cost is now $200,000. That’s roughly 80 lakhs. For that price we can only get a semi decent place in Mumbai !! Guess, a reality check was long due.

However, our advice to those who are yet to own a home would be - BUY it now. There is no need to wait for the magic price on things as important as this. You may never get the extra 10% discount you were wanting. With tax deductions and all, it makes sense to invest in a home for the first time.

Probably Related Post(s)

• House Valuation - A forgotten art

A while back we covered our take on the Best Indian city for Real Estate investments  from an investment perspective. We have received lot of comments following that article and that more or less prompts us to do this follow up piece.
 
Although at a broad level, it is true that past record of growth is usually a good predictor of future performance as well, there are exceptions. It does not mean that a city with poor growth record will never do well in the future. Take for instance, Bangalore. It was a genteel retiree’s place two decades back. At that time anyone forecasting growth would have predicted a very dull future, however as we all know that is not what transpired. The reasons for the resurgence were multiple and we will not get deep into that space here.
 
Another point to note is that, real estate investments are always local in nature and not based on a large city. One usually bets on the local growth prospects in terms of townships, malls, office complexes that are coming up and the city performance is only at the background of this analysis.
 
There are also some key factors for predicting the areas within a city that will do better than other areas in the same city. For instance why did South Chennai growth take off, while North Chennai did not see much growth in recent years. Why did Kochi’s growth move to the North rather than the South? Answers to these questions are interesting and we will address them in a following post. We don’t have all the answers and most of our comments will be based on what we have observed in the real world and some rational thinking.

Probably Related Post(s)

• Best Indian city for Real Estate investments
• Land now being ‘coldsold’ over phones !!
• Independent house vs. apartment - part 5

We had briefly covered the topic of home valuation earlier. You can find the articles here and here. There is a lot more to be said on the matter though. So, you may keep finding the subject cropping up here in the future.

For instance, which is the best Indian city to buy a home in ? Here, I am speaking purely from an investment perspective; so the livablity of the cities don’t enter the picture. After all, best city to live in is a question that can never be resolved since we will attach different weightages to different factors. It is a very subjective decision whereas investment can be viewed objectively because of its inherent measurability in monetary terms.  

Anyways, the answer is easier to come by than you may think. Lots of research has been done on this topic and the consensus is that cities that are already on the growth path is likely to move up the ladder far faster than those that have yet to get their place in order. For example, if you were a Malayalee and wanted to invest inside Kerala you will want to invest in either Kochi or Trivandrum as opposed to say Thrissur or Palakkad. This is inspite of the fact that the real estate costs are far higher in the first two towns!

Reminds me of the well worn parable of driving a car using the rear view mirror (use the front windshield, dummy!). The analogy was actually created to make people ignore the past events and to focus on the likely future trends. Ironically, in real estate markets the opposite is largely true and we have to drive using rear view mirrors.

Check out these two links - here and here.  They should tell you pretty clearly which Indian cities show the best likelihood of growth going forward. In case you are too lazy to click on the links, let me give it you in one word - Bangalore (despite all the traffic mess we keep hearing about).

Probably Related Post(s)

• Best Indian city for Real Estate investments - 2
• Independent house vs. apartment - part 5
• Reva - Maini’s electric car