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Old 14th November 2019, 17:10   #1
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Default How long to sell all of India's unsold houses?

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There were 6.56 lakh unsold houses in just the top seven cities of India at the end of the third quarter, and it will take an average of 2.5 years to clear this inventory, according to the latest report by Anarock, a property consultancy. In Delhi NCR, the stock clearance of the unsold housing inventory will take close to 4 years that is, by 2023 in the current market conditions.

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In terms of the total number of unsold stock of houses, it's Mumbai Metropolitan Region (MMR) which leads the country, with more than 2 lakh units unsold, followed by Delhi NCR. These seven cities Mumbai/MMR, Delhi NCR, Kolkata, Chennai, Pune, Hyderabad and Bangalore constitute 64% of the total unsold stock of houses in India.

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While realtors grapple with houses that no one wants to buy even if the total unsold stock has declined by a measly 5% from the 6.87 lakh unsold units as on Q3 2018 buyers have to contend with living in ever smaller houses. In Mumbai, for instance, the average dwelling unit size has almost halved in the last 7 years while in Delhi NCR too, houses on an average are almost a quarter smaller than what they were in 2013.

How long to sell all of India's unsold houses?-unnamed4.png

Full text and picture source : Times Top 10 Newsletter
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Old 14th November 2019, 17:49   #2
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Default Re: How long to sell all of India's unsold houses?

Only in real estate business do you see that the unit prices rise while the unsold inventory piles on.
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Old 14th November 2019, 18:00   #3
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Default Re: How long to sell all of India's unsold houses?

Another factor.

Most modern construction isn't robust like stuff built in the past, builders now pay more attention to bling and functionality rather than outright build quality - where else have I seen that? It's like a trend or something - and it's fairly obvious even in pricey specimens. My current rental in an apartment building built barely a half decade ago already has electrical and plumbing issues that didn't exist in my decade-old previous one, or the two-decades old house my parents own.

So these properties aren't just sitting unsold, they're deteriorating quickly too, which I have to presume will put more pressure on asking price if/when someone does want to buy.

Last edited by Chetan_Rao : 14th November 2019 at 18:02.
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Old 14th November 2019, 18:10   #4
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Default Re: How long to sell all of India's unsold houses?

I keep thinking about real estate as an investment avenue, but looking at what people are selling, the per sq feet price continues to pile on! Even in this market!

Whats horrible is, Builders have done away with balconies, are using POP to build internal walls, even reputed builders like Kanakia use the cheapest of materials for important house features like main door lock, window frames, etc.

All these builders build poor quality houses, decorate the lobby (add AC), outsource sales to JLL with fancy suited sales people and expect people to fall for the sale. The unfortunate part is, A LOT OF PEOPLE DO!!

In Mumbai, people are building 45 50 storey buildings, I dont know what will be the value of such a flat in such a building after 30 years? Whose longevity is fairly questionable! Your undivided share in such a building will be negligible. Plus the chances of a good redevelopment is inversely proportional to number of signs required, hence taller the building, lower the chances!

This is a bubble waiting to be burst and a tragedy waiting to happen as well!

Last edited by 2000rpm : 14th November 2019 at 18:12.
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Old 14th November 2019, 18:21   #5
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Default Re: How long to sell all of India's unsold houses?

Quote:
Originally Posted by Chetan_Rao View Post
Another factor.

Most modern construction isn't robust like stuff built in the past, builders now pay more attention to bling and functionality rather than outright build quality - where else have I seen that? It's like a trend or something - and it's fairly obvious even in pricey specimens. My current rental in an apartment building built barely a half decade ago already has electrical and plumbing issues that didn't exist in my decade-old previous one, or the two-decades old house my parents own.
Agree with you, the quality of construction by same builders over the years have gone dramatically. I want to get a 3BHK in Bangalore as our current 2BHK apartment might be insufficient in a few years, but I am not happy with the options in the market. Even the villas built by most developers are not satisfactory.
In the end, I might rather not buy, but rent one if need be. I do not think apartments in major cities will appreciate in terms of investment. An ex-colleague of mine bought a 2BHK apartment in JP Nagar 5th Phase from a mid-tier builder for 65L in 2014, he is not even getting 55L for his apartment today.
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Old 14th November 2019, 18:37   #6
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Default Re: How long to sell all of India's unsold houses?

In my 34 years of buying and selling real estate by take is as follows:-

As public transport, especially metro rail grows the land area that is practically available for big city residentials within reasonable commute time will keep growing. Hence over time i.e. 10 years supply will rise.

The Real Estate will come under full blown Central Govt regulation like Insurance, Telecom etc. That will reduce, though cannot eliminate, the malpractices of builders so rampant today.

So if you can wait to buy an apartment better to wait. The notoriety of builders is sky high and they will have to reduce prices significantly to clear their inventory. The data in this thread seems to include flats/houses under construction or suspended construction (due to shortfalls of capital)
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Old 14th November 2019, 19:11   #7
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Default Re: How long to sell all of India's unsold houses?

Many aspects of the market - real estate; cars; smartphones; textiles - seem to be down! With real estate in particular, it appears the equity that funds it is bottomless. Almost insensitive to the economy otherwise. We all know the job that is most recession proof in India and has the potential to be source of such equity.

Quality of the construction certainly appears lot poor. My dad constructed his house of a plot he bought almost 20-yrs ago. No issues have cropped up. One of my recent rental places was a Purva apartment less than 10-yrs old. It had cracks, leaks, electrical issues, etc. Hideous!

Apart from unsold inventory, I assume we might also be sitting on plenty of uncompleted, stalled projects.

Guess the GoI needs to help stop sanctioning of any new projects before it makes sense to resume. I had read some place that no new projects will be sanctioned in Bangalore for the next 5-yrs. Can't be sure where I read/heard that.
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Old 14th November 2019, 19:15   #8
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Default Re: How long to sell all of India's unsold houses?

The banks who have financed these buildings maybe just holding onto it and waiting for the land value to increase. There are quite a few big builders who have kept construction on hold \ at very slow speed after starting around 2013 - 14.

I`m not a structural engineer, however two of the construction sites I visited had utility pipes going through the horizontal concrete beams - They drilled through the beam and ran a massive PVC pipe through it. I do not know if this is a standard practice, looks dangerous to me.

Last edited by Kosfactor : 14th November 2019 at 19:16.
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Old 14th November 2019, 19:48   #9
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Default Re: How long to sell all of India's unsold houses?

Agreed that the quality of construction has come down either due to the developers greed or non availability of certain raw materials like Sand and skilled labor.

The other side of this inventory pile up is due to non availability of cash. Also called BLACK MONEY

I have a couple of builder friends doing real estate projects at least for the past 10 years. They do these 20-25 flats projects and get them sold in very quick time. Small projects get sold quickly but not at the same pace it used to be some 2-3 years back. They get sold.

The issue is with the bigger projects where the rate of conversion has slowed down in the last two years and they blame demonetization and scrutiny from IT as the major cause. Most of the builders & buyers try to sell & own the flat/house at the guideline value. Rest of the amount is generally transferred as cash. Now after the demonetization there is very low inventory of cash with the buyers and the builders are not ready to accept the sale consideration in to their accounts as there is a IT payment involved and subsequent scrutiny from IT on the previous transactions. Even the registration office is not supporting the transaction if the mentioned sale consideration is above the guide line value. The quote that the future transactions has to be made to the new value which increases the overall cost.

The change has to come from both the buyers and sellers to make the purchase process as transparent as it can and pay the nation its right dues.

Quote:
Originally Posted by Kosfactor View Post
I`m not a structural engineer, however two of the construction sites I visited had utility pipes going through the horizontal concrete beams - They drilled through the beam and ran a massive PVC pipe through it. I do not know if this is a standard practice, looks dangerous to me.
Don't think they will drill through a concrete beam after its laid. The provision would be made while laying the concrete itself and will be used later in the construction. They would have drilled to open up the provision they already made.

Last edited by saisree : 14th November 2019 at 19:51.
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Old 14th November 2019, 21:16   #10
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Default Re: How long to sell all of India's unsold houses?

Compared to cars, real estate (apartments especially) still offers tremendous value for money.

At Rs. 45 Lakhs, what do you get? Honda CR-V? Toyota Fortuner? Audi A3? I would rather buy a small cozy two BHK apartment with acres of open space, in a quiet residential area.

And that's what I did!

Yeah, I know cars and apartments are "different" - one is a depreciating asset and another is an investment etc etc. But to me, both are physical assets. And when you are buying a physical asset, you can "measure" the value it offers - relative to each other.

Heavy taxation has made automobile purchase poor value for money (especially cars with high import content, but otherwise too). Meanwhile, relative popularity of "low cost" housing has made certain apartments excellent value for money.

Last edited by SmartCat : 14th November 2019 at 21:18.
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Old 14th November 2019, 21:39   #11
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Default Re: How long to sell all of India's unsold houses?

Property as investment isn't very sound of late, what with brokers and realtors giving you false hopes of rental income that's not there. With the booming vacant apartments comes low rental income. When one goes to sell at times of need they milk you dry at absurdly low prices. As realtors they will not reduce prices of their new apartments by much but when you try to sell your apartment they quote really low prices! The reason for this the nexus between realtors, politicians and brokers.
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Old 14th November 2019, 21:59   #12
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Default Re: How long to sell all of India's unsold houses?

Whether the real-estate crisis or even the serious banking NPA & NBFC crisis, the first place for all parties to start is to find pathways to protect their interest with due diligence with due help from dedicated & honest professionals. Until this is fixed, IMO there will be no asset class to conserve value safely.

We as a society, have ALOT to learn from this real-estate crisis which IMO is the making of 3 parties :

(1) The consumer/buyers who relied on branding rather than due diligence. There is NO excuse for this, whether it is family issues, or being mis-informed/poorly-informed, or greed/lure of a seemingly too good offer. Atleast after SO MANY years of formal education people should know that they must have a contingency plan to exit without losing much money incase any builder isn't capable to complete their part of their deal.

(2) The professionals who not only failed to adequately guide buyers to protect their interest, but sometimes played a role to the detriment of the consumer for their personal interests.

(3) The Government is responsible in its incapability to help enforce high-value contracts (for which the Govt collects stamp-duty & registration charges) with a fair outcome. This is a black-mark on the all the Govts who've been in power - their inability to help enforce such contracts shows poorly on India as an investment destination.

ALL these aspects put together created an atmosphere wherein the key individuals who were supposed to fulfill their promises, managed to either legally (by creating what is designed to look like force majeure) or by other tricks, absolve themselves of liabilities.

Last edited by GrammarNazi : 14th November 2019 at 22:22.
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Old 14th November 2019, 22:09   #13
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Default Re: How long to sell all of India's unsold houses?

Having worked for a real estate company (which mainly has/had projects in Gurgaon, Punjab), let me tell you the truth. Most of these unsold appartments exist only on paper. Builders have launched the project, got a few flats booked, pocketed the initial payments and are now waiting for the other flats to be sold too. Most of them have done some construction to get a few more installments but can't/won't finish the project. Some projects may even have a tower or two among, say 5 or 10, ready. On paper though, the whole project would be listed as unsold. Strange but true!
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Old 14th November 2019, 22:13   #14
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Default Re: How long to sell all of India's unsold houses?

Buying an apartment for getting rental income and appreciation is a pipe dream these days. By the time, the land prices rise, they apartment will become totally useless and decrepit and would have lost significant value.
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Old 14th November 2019, 22:26   #15
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Default Re: How long to sell all of India's unsold houses?

Having lived in quite a few apartments across a broad spectrum of builders in Chennai on rent there are only a few I would buy. I think the worst was in my sister's apartment where they used cheap speaker cable (that I wouldn't even use for speakers) for wiring lamps etc. I'm pretty sure they had zero flame retardant capabilities.
Isn't there supposed to be some sort of regulation for this sort of stuff?
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