India Story 2008

Implications: Everyone talks about the “India story”, this is the India Story. India is poised to grow and there is no stopping. Neither Inflation nor rising fuel prices will affect our Growth. What might affect us is ‘Greed’. Just like what ‘Yahoo’ did when they had an offer from Microsoft for a buyout. Now they have no one. I think it is important to realize the worth plus premium plus sweat equity premium but illogical figures would only scare the analysts and give opportunities for your competitors to get an edge. 

Analysis: With the various changes we see taking place in India; like SEZ’s, modernization of airports, Increase in number of International banks, Hotels, organized shopping (malls), Multiplex cinemas etc define the “Emerging market” story. Emerging from what and from where is what we always ask ourselves. Like for “far east”; far from where and east of where. It is the developed countries that have run out of making money in their own countries and in the International markets, who now love countries like China and India. 
With new entrants in various sectors it gives birth to job opportunities for all across the country and across sectors. Visit any mall in Mumbai or New Delhi or NCR regions during a weekend and see the number of people visiting which gives us an idea of the staff strength required by stores to support sales, accounting, managers etc.
We are witnessing all of the same ‘Illogical experience’ in the Real estate market across the country now. Wherein developers, land owners, sellers (Supply) who were playing tough with illogical pricing are now looking at ways to lure buyers. In Mumbai Shapoorji Pallonji called our office offering their project for sale at Tardeo. The words used were they have now opened the project for sales through brokers. Hmmm, let me think, why?
Similarly, other developers have been following up keenly and few others following suit to re- establish relationship with brokers. With slowdown in sales and budget cuts in promotions the easy way out is to look at success based outflow which is the broker/agent route. Such cycles have happened twice in India in the last three decades and this is the third time around.
I am confident if gradually the prices are ‘corrected’ over the next nine to twelve months by almost 5 to 7 % every quarter, making it about 20 odd percent effectively by August 2009  we will see a great support across all sectors in Buying and Rental markets respectively. During this period and until end of 2010 we will see additional supply of ready goods entering the markets in select locations. Assuming all this happens, we will see goods disappear off the shelf gradually and once again creating scarcity and an upward trend.
For the sake of predicting; considering the slowdown almost came into effect in May-June 2008, and putting factors like resistance, supply, demand, pricing etc we will see a “Correction” phase spread over two years with random deals, unless 100% FDI opens into retail or any other major sectors or any major positive influence pushes market back into bullish sentiment. After which there may be a ‘Plateau’ and gradual upward trend. My reading is from December 2011 onwards we will see the markets across all sectors in Metros like Mumbai, Hyderabad, Bangalore, Nagpur, Pune NCR, and Cochin on an upswing.  Pune, Jaipur and few tier II and III cities where there is excess residential supply in select locations within the city will continue to see correction and perhaps a fall or dip allowing buyers or investors an opportunity to enter. Like I said the India story is alive and true. It’s the greed coupled by stock market correction and fall that has taken over creating a slowdown besides the sentimental effect created by media on Inflation being at two digits.
Having said that, my prediction above may not hold good for premium locations and premium and luxury properties. For example in the Residential segment in Mumbai prices at Malabar Hill, Napeansea Road might or will hold up. Prices in Mid Town regions like Worli, Prabhadevi will remain flat and might go up. But Bandra for sure is set to move northwards and the only way is up. Ever increasing demand, lack of quality supply and being the new mid-town address with proximity to bandra-kurla complex the new CBD, the Diamond Bourse, Airports etc make it the hot favourite destination. However, my feeling is the “Commercial Property” segment will see a correction of up to 15% over the next year across the city.
Similarly in New Delhi residential segment, locations like Vasant Vihar, Greater Kailash and few other locations prices will remain steady and might not see major collection. Same will apply to hot pockets in other cities with little or no supply but may not hold good for new emerging locations.
To sum it up, we have a great future ahead. The JP Morgan Land deals report states:  deals totalled to Rs.23,000 crores ($5.7 billion) in the ‘First Quarter’ of 2008 most of the huge deals predominantly happened in Mumbai and Delhi and respective suburbs such as Noida and Gurgaon (in excess of Rs.5000 crores) and in Mumbai MMRDA Bandra Kurla complex (Rs.4000 crores). The Indian Real estate sector is said to balloon up to $140 to $150 Billion by 2012 up from the present level around $50 to $70 billion.