Sentiment versus reality! - 6th June, 2009. Times Property (Times of India)

While there is some optimism, it is vital to see commitment on issues such as infrastructure

While on holiday in U.S. for almost a month, I discovered that “Recession” seems to be just a rumour. Whether it was Los Angeles or New York, shopping plazas like Saks, Macy’s, the malls, restaurants, pubs, and airports were all packed with people. The bee line queues at the cashiers at Starbucks and clothing stores tell a different story. What I gather is that the rich and super rich are not that affected. People who have been laid off from secure jobs are the ones who are!

Also, people have lost a lot of money in stock options they were holding, especially in the finance companies on Wall Street are feeling the pinch. The fact remains that till the jobless folks do not secure jobs, the future remains uncertain.

While here in India, the buzz post election seems to be optimistic which is great, but the numbers (transactions) are not moving. Almost everyone seems to feel that the worst is over. This is echoing across the globe too. I wonder if this again is a rumour just like the “recession”. The good news is that U.S. stands committed on pumping in about 80 plus billion dollars out of the 787 billion stimulus bailout package into roads, infrastructure and here in India too the UPA government is standing by their commitment on the same. Since everything brings us back to infrastructure when we talk about growth and sustainability it is vital to see 100% commitment.

Roads, bridges, dams, airports, ports bring about connectivity and that in turn brings opportunities in real estate. One announcement of an airport being built in Navi Mumbai creates a buzz of growth and brings about positivity within the locations surrounding it. We do have a long way to go. For example, we have not exploited tourism as an industry; there are so many opportunities that await us via SEZ’s and FDI opening up in various sectors which all in turn add volumes in property transactions. A segment like retail can alone create massive turnover if 100% FDI is allowed.

As for Mumbai, the battle continues on seller’s price expectation versus buyer’s offer. Most sale transactions seem to be resulting in stalemate situations. In the rental segment we have observed some positive movements which have been encouraging but the inventory of vacant apartments seems to be piling up. Most owners have willingly reduced their rents from the peaks of mid last year to less 20 to 25%. For example a four-bedroom penthouse in Bandra which was priced at Rs 6.50 lakh a month is now available for five lakh a month. In another case at Juhu sea front a three bedroom apartment rented to an expat for 2.25 lakh a month is now available for 1.50 lakh.

The resale segment is where people are still trying to hold on to their prices. Most developers have very sensibly corrected their prices and are managing sales almost as per target. The commercial market however seems to be sluggish. Decision-making is taking longer than it ever did and that is making things difficult for both the owners and the brokers involved. To me it seems when people start re-hiring and get on with expansion plans/ growth as they were to in July/August 2008 the sentiment will turn into reality.