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Is it the right time to buy a flat?
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September 24, 2008

Are you planning to buy a flat in the near future? If yes, then should you wait for another 6-9 months given the global meltdown in financial markets?

By how much will the prices of property correct in the next 6-9 months? Will real estate prices correct all over India or will there be pockets where it is likely to stabilise? What's the general outlook for real estate in India today?

Amit Goenka, National Director -- Investments at Knight Frank India Pvt Ltd in a chat with Get Ahead readers on September 23 answered these and many other queries related to the recent developments in the real esate markets.

For those of you who missed the chat, here's the unedited transcript:

rohanv asked, whats the future for Mumbai, where there are no land banks for residential developments. and new developments happening in clusters in redevelopment projects?

Amit Goenka answers, The landmark Supreme court judgement on DCR 33(7) opens up nearly 20,000 cessed buildings in Mumbai for redevelopment. Besides mill lands, slum redevelopment and industrial lands are all coming up for development in Mumbai which will add substantial stock.

Ashish asked, Dear Amit, We are planning to buy a house in Delhi [Images] for own residence. Is it advisable to buy now or wait for some more time?

Amit Goenka answers, For end users, I believe, it is sub-optimal to try and time the market for purchase. If you can find a property that meets your budget, location and size requirements, it is a good idea to lock it in. Your budget obviously factors in the ability to service EMIs if you borrow.

srini asked, Hi Amit, Planning to start a modular kitchen business in chennai- Basically franchisee operations of the leading Modular kitchen solutions provider.In the wake of the recent turmoil, how do you see the opportunity.

Amit Goenka answers, More and more developers as well as end users, giving the mobile quality of life, are opting for ready to fix solutions. Prima facie, it seems like a good idea. But do your home work on the feasibility very well before you get in, due to budgetary constraints these days.

Y asked, Hi, i am looking at buying an apt purely for investment. I live in chennai and am ok to invest in any good property in south india. I have seen a few apts in chennai, should i buy now or wait for the prices to fall?

Amit Goenka answers, We have already witnessed correction in product prices of up to 20% in the South. Our view is that investors should wait for atleast a couple of months. The impact of liquidity and financial crisis should play out by then.

uddhav asked, Hi Amit I have one house on OMR - Chennai and one in Hadapsar - Pune, am looking at buying one more for investment purpose, which city and area in it will be a good invest option? Builders like Purvankara on OMR road are giving good offers like pay only 3% of the total cost now & emi will start only after possession 2 yrs hence, does it make sense to buy the second house on OMR itself in this offer? thanks Uddhav

Amit Goenka answers, Developers are sitting on completed stock which is being offered at a discount. Timely completion of buildings is a big question mark even with the most reputed developers. If you are being compensated for untimely completion, then it may make sense to look at this deal. OMR is seeing huge stock coming up and generally prices should correct further there.

Sankaran asked, Hi Amit, Good afternoon! I am planning to buy a 3 BHK apartment in Brookefield (near marathahalli), Bangalore for 50 lakhs, which will be 46k p.m EMI for me and will be 60% of my salary and my wife's salary combined. Q 1) Is it right time to buy a house, because the EMI will be a problem if one of us loses job due to recession and the US effect. Q 2) Due to the new international airport, will it make sense to buy a house in Brookefield, Marathahalli area ? Will I be losing money on my investment (though I am taking the house for stay now and may be selling after 12-15 yrs). Pls advice.

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Amit Goenka answers, Brookefield is a fast developing area and generally appreciation over the next 5 years can be expected. However there is also substantial supply coming up over the next 2-3 years. Interest rates should correct downwards in 12 months and so should the EMIs. I would suggest, look at other planned projects, bargain hard on the price, ask for minimal deposit now, stretched payments to reduce the net salary impact to below 50%.

abcd123 asked, Hi, I am planning to sell my flat (Pune) in march or april 09 but many people involved in real estate business says "Property prices will go down in coming months". Is it true and if yes then how much correction is expected in Pune property market?

Amit Goenka answers, Pune markets, like most other markets are bound to witness further price correction over the next three to six months. If you need liquidity now, start looking for a good buyer. If you can hold, prices should rebound within 12-15 months. However location matters, if excessive stock is coming up near your flat, then today is a good time to sell.

rupesh asked, I can spare 20,000 per month for investing in real estate. what is the best way to take maximum profit over a period of 15 years.

Amit Goenka answers, SEBI has recently paved way for Real Estate Mutual Funds, which can directly invest in ready properties, stock, bonds and construction finance. Such products should hit the market within 6 months. That would be the best way to stay invested in real estate.

mangy asked, Hi Amit I was looking for a flat in Kandivali, malad area for almost 2 years and i have seen a drastic change in prices in last 2 years. I am staying on rent with my family and every year instead on increasing rent by 5% as per govt rule its increasing without any reason. Now I want to buy a flat so that I don't have to pay more on rent but will have my own flat. What will be the good time to buy?? Plz Help

Amit Goenka answers, Start looking now and buy within the next 6 months. Most developers are offering special deals and willing to negotiate.

Mitesh Turakhia asked, Hi...We would like to know whether this is the right time to buy home? If Yes, than should we pay 5500/per sq.ft for Thane-west, near vasant vihar for 2bhk duplex flat?

Amit Goenka answers, The prices in Thane West are inching closer to 4500. If you can negotiate it around or below that, its a good idea, else wait post Diwali for prices to come to those levels.

jp asked, if we get good house in california in USA at 2.00 lacs US dollar than is it sense to buy house worth rs 1.5 cr and above in India ??? Please come USA and buy good property at throw away price.

Amit Goenka answers, True, yields and cap rates have improved due to deep discounted valuations in the USA. However given limited supply in India, the yields in India continue to be higher (6-7% vs. 3-5% in the US. Also net gains on house property historically has been over 30% in India as opposed to 20% in the USA.

Sameera asked, Hi Amit, do you think its right time to buy a flat in Pune or should I wait for another 6 months so that the rates will be lower by then? The property rates in Pune have been reduced to around 2700 now from 3500 few months back. Do you think there will be more correction and one should wait till then?

Amit Goenka answers, Another 15-20% correction in the Pune market can be expected over the next 6 months.

kris asked, Hi Amit ... I have some stocks in HDIL ... should I hold these or sell them bearing the loss .. or is there any possibility for it to increase in the near future ... please advice

Amit Goenka answers, Most analysts have given a HOLD rating to HDIL. Realty stocks should rebound once fundamentals are restored in the market.

yogesh1357 asked, Is it worth buying newly developed property in south bombay or buy into a existing property. I am looking to buy a three bedroom apartment and what would be the price range. regards

Amit Goenka answers, Existing properties in South Mumbai are being offered at discouts compared to 6 months. New projects are being developed on land bought at abnormal valuations and hence the product price is bound to be much higher. In terms of value, it would be prudent to look at existing properties.

imy asked, Amit, we have a 7 acre Main road property in prime Neelankarai, Chennai. We have been in the market for last 6 months to sell. Our target is 110 Cr and are in no hurry to sell. Some ppl came close but not able to finalise. Your thoughts pls...

Amit Goenka answers, Land valuations have taken major corrections. Besides almost no developer is willing to buy land outright. You could look at acheving your target through a JV structure. Pls. write in to with the land details and we could help find the right structure and price.

raman asked, Hi people are talking about demand supply figures. But what I think is that most of the demand is in sub 15 lakh category. What is your call on this and if this is the scenario then there should be free fall in the real estate market considering financial woes in US.

Amit Goenka answers, Yes, there is a huge demand for low cost housing. Hence most big and listed developers have launched budget home companies. However these products just about meeting construction standards and will not impact mid-income and premium homes.

vicks asked, Hi Currently my homeloan is at 12%. for duration of 15years. Shud I reduce my tenure to 10 years in order to reduce interest outflow.

Amit Goenka answers, If you can reduce your tenor and service it, it is the most prudent strategy!

hj asked, Hi, I want to buy a house near IIM Bangalore, will it prove a value for money?

Amit Goenka answers, With the new ring road, that area is poised for major development and growth...if you get a good bargain, it would make sense.

vijay asked, I have invested in a house in Panvel at lower prices. Now the price has sabiised @ Rs 3500 per sq feet. Should I sell the house or wait for some time. Where do you see the trend going forward?

Amit Goenka answers, Prices are correcting downwarn or stabilizing. Further appreciation will take a much longer -- say 5 years. If you can stay invested for that period, then hold.

LRS asked, Hi Amit, I bought a new house constructed on 30*40 site near Rammurthy Nagar, Bangalore for 38 lakhs including registration. Would it be ideal to sell it for 41 lakhs or should, I hold on to the property.

Amit Goenka answers, I would suggest to hold it for a year when prices will stabilize and gains on completed properties can be realised.

somarajuk asked, Is it good time to buy Flat in Miyapur, Hyderabad for Rs 3500 per sq feet?

Amit Goenka answers, The prices should be around 2,800 in that area. Look for bargains...

hs asked, Ayesha: Hi I have booked a flat in commercial wing of SRA society but the building construction stopped and there is no progress in last 4 years. Who do i approach for help. Builder is giving only false promises for years.

Amit Goenka answers, Consumer courts have provided favorable verdicts in such cases with compulsory compensation for rent or alternate locations...consult a lawyer

Star asked, Is it the right time to buy land or flat in chennai? Or can I wait for another 3-6 months for prices to come down. Also which one is good from investment point of view. Land or Flat

Amit Goenka answers, Land valuations in most metro cities have peaked and further gains are hard to expect. Hence within main metros, flats are usually a better bet.

rawat asked, Amit bhai hamara jabab bhi likh do yaar is it expected to fall in the prices in ahmedabad in coming few months an dby how much?

Amit Goenka answers, Ahmedabad [Images] has witnessed considerable interest. However the downward correction is not very severe. However a 15-20% correction, like in other major cities should be seen in Ahmd. within 6 months.

Sampath asked, I have homeloan with 13% intrest rate and left over tenor is 5 year and EMI is 36000+. I would like to change to another bank who are offering lower intrest rates. Can you suggest me if this is prudent decision with all conditions (tenor and EMI) remain same and if so what is the intrest rate I should look for?

Amit Goenka answers, Considering processing charges and fees, you may not be better off by changing your lender and terms. But talk to a few public banks in the vicinity and do a reality check..!

niraj asked, What is the best time to buy property in andheri/ juhu scheme in mumbai. Should I wait for prices to correct?

Amit Goenka answers, Prices are already under pressure. However we can expect another 10% drop in that belt over the next 6 months.

Sreedhar asked, Hi, Recently golden gate properties have launched a project commune for low cost housing, is it viable to give a decent quality in such an amount

Amit Goenka answers, The cost of construction in low cost products is usually 1/2 of a regular A grade apartment. It is certainly viable for the developer who have bought cheap land banks.

Amit Goenka says, Dear Readers: Thank you for your interest and queries. My allocated time is over. I look forward to answering the balance questions the next time.\ Signing out for now... Regards

Amit Goenka is National Director -- Investments at Knight Frank India Pvt Ltd, a part of the Knight Frank Global Network. Knight Frank India Pvt Ltd provides a comprehensive range of real estate related services covering residential, commercial, land, investments, hotels & leisure, valuation, advisory services and facilities management.
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