Tweet
If your annual income is not Rs 40 lakh (~ $88k !) or more, buying a new in Mumbai could remain a dream for you.
A recent study by property research firm Liases Foras covering 482 new housing projects across the city has revealed that the weighted average cost of a new house (not a resale) in is close to Rs 2 crore.
The weighted average cost is the sum of the sticker prices of all new houses available in the market, under construction or ready for possession, divided by the total number of such houses.
To buy a Rs 2-crore house, you got to be making Rs 40 lakh a year because as per widely accepted principles of affordability, no bank will offer you a housing loan that is more than five times your annual income. And that is not all, banks cover only 80% per cent of the cost of the house. Which means, in this case the buyer will have to raise Rs 40 lakh on his own.
Pankaj Kapoor, managing director, Liases Foras, said the survey proves that Mumbai is a waiting to go pop. “Such surveys indicate whether the growth in the real estate sector is realistic. This survey shows it is not,” he added.
Several other real estate experts agree that at Rs 2 crore, the weighted average is way too high for a city like Mumbai. “Even if you push very hard and exclude people living in the slums, majority of the people in this city don’t earn more than Rs 5 to 10 lakh per annum,” said Pranay Vakil, chairman, Knight Frank.
“Which means for a vast majority it’s next to impossible to buy a new house. Now if that is the case, where is the demand to warrant such high valuations coming from,” he asked.
Vakil said where lending is concerned , the EMIs are not expected to exceed 50 per cent of a buyer’s monthly take home. “Even with Rs 10 lakh as your annual income, you will not be able to buy a house costing more than Rs 50 lakh.”
And even for those who make Rs 40 lakh a year, it’s not an easy ride. The weighted average cost for a new house downtown, where somebody making that kind of money would aspire to be, is an astonishing Rs 6.85 crore. In western suburbs, it is Rs 1.44 crore.
What is scary is that the the weighted average has gone up by 50 per cent just between June 2009 and June 2010. This has reflected in home sales dropping to half in the same period, though developers continue to claim brisk business.
“Most of the buying is being done by investors and not end-users. This shows that there is a lot of black money finding its way into the market,” said Kapoor.
A recent study by property research firm Liases Foras covering 482 new housing projects across the city has revealed that the weighted average cost of a new house (not a resale) in is close to Rs 2 crore.
The weighted average cost is the sum of the sticker prices of all new houses available in the market, under construction or ready for possession, divided by the total number of such houses.
To buy a Rs 2-crore house, you got to be making Rs 40 lakh a year because as per widely accepted principles of affordability, no bank will offer you a housing loan that is more than five times your annual income. And that is not all, banks cover only 80% per cent of the cost of the house. Which means, in this case the buyer will have to raise Rs 40 lakh on his own.
Pankaj Kapoor, managing director, Liases Foras, said the survey proves that Mumbai is a waiting to go pop. “Such surveys indicate whether the growth in the real estate sector is realistic. This survey shows it is not,” he added.
Several other real estate experts agree that at Rs 2 crore, the weighted average is way too high for a city like Mumbai. “Even if you push very hard and exclude people living in the slums, majority of the people in this city don’t earn more than Rs 5 to 10 lakh per annum,” said Pranay Vakil, chairman, Knight Frank.
“Which means for a vast majority it’s next to impossible to buy a new house. Now if that is the case, where is the demand to warrant such high valuations coming from,” he asked.
Vakil said where lending is concerned , the EMIs are not expected to exceed 50 per cent of a buyer’s monthly take home. “Even with Rs 10 lakh as your annual income, you will not be able to buy a house costing more than Rs 50 lakh.”
And even for those who make Rs 40 lakh a year, it’s not an easy ride. The weighted average cost for a new house downtown, where somebody making that kind of money would aspire to be, is an astonishing Rs 6.85 crore. In western suburbs, it is Rs 1.44 crore.
What is scary is that the the weighted average has gone up by 50 per cent just between June 2009 and June 2010. This has reflected in home sales dropping to half in the same period, though developers continue to claim brisk business.
“Most of the buying is being done by investors and not end-users. This shows that there is a lot of black money finding its way into the market,” said Kapoor.
Property prices continue to go up even in high inflation environment. Of course the dynamics are much different than the US -- cash (& Gold) rich population, ability of the builders to hold properties for extended period of times when they cannot sell at a price they demand. But something gotta give.
I think Indian real estate market depends a lot on the Indian stock market, which has more than doubled since Mar 09.
As the article says, lot of buying done by investors -- cheap USD flowing in to India ?
I wonder what will/could trigger a downturn apart from the stock market -- any thoughts ?
Comment