Are the IT Professionals to Blame for the Real Estate Prices Hike in Hyderabad?

[KRRIndia]

I agree with sftrade. This is gone beyond we may want think because of black money. If you go to any big builder and ask for statistics on the flat owners, they will tell about 15% is IT professional (both resident and Non residents) from Hyderabad. All other 85% business is being done by political leaders and local business men who want to invest and get out once price is doubled and invest elsewhere. As the prices are already high, only NRIs and Software Engineers could at least think about owning a home. others can't even imagine to rent at those prices.

It is true from those house wives perspective, a family income of Rs.15,000 -20.000 per month is no good for even renting, owning two wheeler and sending kids to school. They can't even think about buying a flat or home in Hyderabad outskirts. Forget about in and around IT parks. What is exactly not true is their opinion about NRI's or IT professionals. IT is bigger than they think.

[oasis138]

To start off with, I am an IT Professional. During my recent visit to India (Hyderabad), while talking with people with various backgrounds (different professionals) I came to know that the prices of the real estate are more because of the demand from the IT professionals.

One incident which I still remember is, when I was traveling in a bus I overheard 2 housewives in my adjacent seat discussing about the same topic, they were very happy that the IT job market is down and they feel that now the prices may decrease. They definitely have a very bad opinion about the IT professionals. (Only with respect to the Real Estate).

In general, the common people's perception is that, "IT Professionals are the reason for the hike in Real Estate Prices".

What do you think?

I think that's a very narrow way to look at it. Prices have not only gone by 2-3-4-5x in areas in Hyd. but in a lot of other metro cities like Delhi/Bangalore etc. The reasons for this are mani fold -

1. Compared to the 90's the economy is a lot more open today. Banks are providing loans in the 50 lakhs- to even 1 cr range which was un heard of due to RBI restrictions in the 90's. Much like the US when credit becomes fairly easy people will borrow and invest. So that's been a good support to the market place.

2. As sftrade pointed out the liberalization of the economy has allowed corrupt gov officials to make use of the black money (basically money laundering if you think about it) to funnel into malls/ apt's etc. In today's environment with banks lending, folks making lot of money its easier to mix dirty money into the economy. I also feel this is one of the main reasons why we might not see a massive correction in real estate prices in India because when ever prices will drop a bit there is enough black money on the sidelines that will come in to support prices. Some estimate the black money to be 60-70% of India's GDP- so that's a big amount.

3. Salaries have no doubt increased thanks to not only IT but a lot of other fields such as financial services etc. The salaries have made housing much more affordable for a section of the society. Further banks are also willing to provide larger loans to folks who bring in a decent amount of cash flow monthly (50-60k to 1 lakh a month salary is pretty common now).

4. Housing continues to a dream for all classes of the society. Whether its lower classes or the middle class everyone (and rightly so) is looking to move up.

5. Also most importantly folks in India are daring to dream that tomorrow's gonna be definitely better than today. This has increased risk levels and folks now look at taking out mortgages which exceed there annual incomes by 8-10 times.

6. Inflation hedge - As a lot of folks on various threads here have pointed out India will continue to see high single digits to low double digits inflation for some foreseeable future. This btw is not unique to India but should be expected for any economy growing at 7-10%. Goes without saying real estate acts as good inflation hedge.

7. Speculators - Dont think many would deny it but there is decent amount of speculation going on in the market and for some time now its been a one way trade (prices going up). Speculators by definition also provide liquidity so one really cannot fault them. Plus they always take the risk of taking mark to market losses (if they are leveraged and prices take a hit).

I might also finally add...if you look at the threads on r2i as a proxy for "what issues are NRI thinking about" its quite obvious to me that almost 3 in 4 topics are real estate related. Admins please feel free to correct since you might have exact stats.

Hope this helps.

[direstraits88]

Easy money... When abundant money is available on credit, everyone tends to gamble.. 15 years ago, the banks won't lend more than 3 times your salary and you need to put down 25%. If the banks had stuck to the same lending standard today, you need to put down 15-20 Lacs down payment and have an income of 15-20 lacs to buy a flat worth 60-75 lacs. But now, the bank are willing to give you a crore easily upto 90% loan.

Check out why RE never went high in texas and why there are not many foreclosures there. The loan underwriting standard in texas is more stringent which is a surprise for a free lancing "cowboy" state which threatens to secede during every controversy.

[krivan1]

The other day I walked in to auto showrooms to buy the car and also a bike for family. I was shocked when dealer told me that I have to wait for 3 months to take the delivary after payment of booking amount. I thought it could be specific to my home town or with that dealer and scenario elsewhere could be different.

The next day I happened to see an article in a daily newspaper that similar trend is prevailing all over the state. Then I heard from the family that we need to shelve out extra bucks to get the vehicle within a week. It reminded me of my childhood days, where in my father had to wait a year to get the bajaj scooter. No doubt the demand for certain brand/type of vehicles is so high as is evident from the crowd at dealer's showroom.

I was just thinking what changed so much that we are driven to monopoly days of Bajaj. I found the answer when I visited couple of banks and spoken to branch Managers. Undoubtedly easy 'auto loans' are the biggest contributors for fuelling the demand. Both the branches that I had visited are flooded with auto loan seekers. I think same anology applies to real estate. It is the credit availability at attractive rates that is driving the growth.

The second reason which I feel driving many towards ownership is the poor standard of alternatives available. The attitude of drivers/property owners are so frustrating that it makes ones feel to own the house/vehicle at any cost. I fall in this category.

Recently SBI declared first quarter results and their deposits are down to 20K crores from 100K crores just in one quarter. Most of the money had gone to home & auto loans. With recent approval of 53 private banks to be allowed in India, any hopes of prices crashing appears futile. Undoubtebdly the economy revival baton started with IT and every other sector raced in to catch up with it. No respite for the buble advocates irrespective of boom/doom in IT at least for the next 10 years.

[oasis138]

The other day I walked in to auto showrooms to buy the car and also a bike for family. I was shocked when dealer told me that I have to wait for 3 months to take the delivary after payment of booking amount. I thought it could be specific to my home town or with that dealer and scenario elsewhere could be different.

The next day I happened to see an article in a daily newspaper that similar trend is prevailing all over the state. Then I heard from the family that we need to shelve out extra bucks to get the vehicle within a week. It reminded me of my childhood days, where in my father had to wait a year to get the bajaj scooter. No doubt the demand for certain brand/type of vehicles is so high as is evident from the crowd at dealer's showroom.

I was just thinking what changed so much that we are driven to monopoly days of Bajaj. I found the answer when I visited couple of banks and spoken to branch Managers. Undoubtedly easy 'auto loans' are the biggest contributors for fuelling the demand. Both the branches that I had visited are flooded with auto loan seekers. I think same anology applies to real estate. It is the credit availability at attractive rates that is driving the growth.

The second reason which I feel driving many towards ownership is the poor standard of alternatives available. The attitude of drivers/property owners are so frustrating that it makes ones feel to own the house/vehicle at any cost. I fall in this category.

Recently SBI declared first quarter results and their deposits are down to 20K crores from 100K crores just in one quarter. Most of the money had gone to home & auto loans. With recent approval of 53 private banks to be allowed in India, any hopes of prices crashing appears futile. Undoubtebdly the economy revival baton started with IT and every other sector raced in to catch up with it. No respite for the buble advocates irrespective of boom/doom in IT at least for the next 10 years.

Read a couple of quarters back that for Citi its India's loan portfolio was among the top ones when it came to non performing loans.