Our friends from the real estate industry are eating humble pie. At one time, many properties would not entertain walk-ins. The prospective buyer was told, the property was sold by invitation only. Now they are calling, chasing and running after anyone who they possibly think might be able to buy the property.
Why real estate businessmen got into trouble?
A few years back, when the plot and flat prices increased rapidly every month (yes every month!) the real estate businessmen got into the habit of owning everything. Those were the times, when parting with possession of the flat or plot quickly did not make sense. Why would they when the prices would increase in a few months and they could make more profit. This desire for more profit, lead them to get even more greedy. Well, this greed was what got them into trouble when the financial crisis and the recession hit the market.
Since, the businessmen at the peak of the boom ended up holding all the real estate flats and plots. When the market changed course, they suffered huge losses. Plus, the market dried up – there were no buyers. Now, most of them neither have free cash nor profit. Many no longer travel in their Skodas, their old Toyota Qualis’ are back in use. Lavish lunches and dinners are gone. They are holding on to cash and looking at getting into other businesses. Some got into major troubles and suffered a lot. Several suicides of real estate people, kidnapping of delinquent real estate businessmen are some of the sad stories from the real estate bubble.
Proven: Real estate prices in Hyderabad can fall after a real estate bubble
Well, people used to say real estate prices do not fall in Hyderabad. Well, they have. So that assumption was proved wrong. Real estate prices do crash even in Hyderabad, if you take it to unreasonable rates!
Don’t get carried away by advertisements
We used to wonder why there were so many ads in Times of India if the real estate market is down. We are told that Times of India does advertisement for payment in kind or barter. They either get shares in the company or some property in return for doing advertisements. You can find enough material over the Internet for Times Treaties (now renamed into Brand Equity Treaties). So don’t get carried away by the advertisements.
EMI payers have been the worst sufferers
Know anyone who got carried away with the fancy ‘developments’ in real estate market and moved from the core city to the outskirts? Especially, the smart friends working in IT companies. Yes, those who are good at Mathematics – projections, trajectories, correlations, growth charts, algorithms etc. Well, our country cousins from the real estate industry really proved why they are considered street smart. Those who bought the apartments had months of very sleepless nights. (worse is the situation of those, who purchased second apartments for investment purpose on housing loans). For one, they got locked into a high expense lifestyle. No reasonably priced schools, no reasonably priced groceries. Lack of public transportation, away from major markets, inaccessible to good doctors or other city infrastructure.
Then there were no pay hikes, reduction in the variable component means net income fell in 2009. Constant tension of being fired. Increasing EMI’s. Earning to pay taxes and housing loan EMI’s. Well, if about a dozen of them can speak up and tell the problems they got into. A generation of Hyderabadi’s will be careful with their real estate investments.
Apartments are manufactured items, they will not remain shiny for ever
Eventually, they will discover that by the time they finish paying the last EMI, the building will start to decay. After all, what is the life of a regular apartment? Seen any of the old apartments in the city. Who wants to live there? Definitely not those seeking an aspirational lifestyle or not even those who are looking for good flat. With loans difficult to come by for old flat, the prices are significantly lower than new ones.
Real estate decisions need to be made with a healthy dose of pessimism
Overall, this is a lesson for everyone. Real Estate is one of the biggest investment that you will make. It has long term repercussions – so this decision needs to be made vigorously and with a little pessimism. Real estate investment is not like buying a shirt or a perfume. It is something that if you do not like – you can afford to throw away or put in the airbag holding old clothes. With real estate, you have to live with the negative consequences and pay the price for a long time.
Remember, during the peak many people bought at high prices, worried that homes would get priced out of range and they could never buy in their lifetime. One thing is for sure, the prices are corrected now and they are available at much lower prices. Plus, you get treated like a King now that you have the ability to buy.
So be careful, be wise, don’t get carried away and it makes sense to be a bit pessimistic on real estate investments.
You may also like to read:
No Meaningful Correction in Hyderabad Real Estate Prices
Builders Selling Small Number of Super Luxury Apartments are Fringe Players Nationally!
Hyderabad Real Estate Bubble Busts
The Coming Bust in the Hyderabad Real Estate Bubble
Can Cyberabad Exist Without Hyderabad