Sensex being at 15000, we know that we went to a low of 7800 from a high of 21000. We recovered smartly in a short span.

We realized by now that, anything which grows suddenly can come down suddenly. However, it would not be right to say that we are again growing suddenly. Instead, we can say that we are ‘recovering’ smartly.

Let us understand, how this market grows. Though it’s difficult to explain precisely, we will give it a try.

Market is driven by investors who are investing in companies that contributes to an index like Sensex. These investors does great research on various parameters like past performance, projected performance etc. And this performance is linked to customers/consumers of that company’s product/services. So if the consumer confidence index (CSI) is good then market tends to grow better.

These consumers will consume the products or services only if they have enough money to spend. So, as long as he have a job and handsome salary and most importantly if there are products or services that he/she is interested in, then he/she spends.

Now consider a case where a product is priced very expensive. Let’s take an example. Any guess what example we are going to take? Real Estate..!!

When real estate prices increase due to greed of Builders or due to increase in demand etc, at one stage, prices will reach such a level that most of the investors will feel it’s very expensive so these consumers will stop investing in real estate. And the problem starts here.

Though he is earning handsome salary, he reduces spending thus affecting all dependents of Real Estate market. We also need to understand that sectors are depend on each other. To make our example simple, let us also consider that such consumers reduces spending on few other sectors. This results in decrease in demand and thus all the affected companies will have to cut costs by cutting salaries or cutting jobs which in turn will only worsen the situation as consumers have less money to spend. This will turn to a deadlock where one is expecting other to act first.

This is the time when investors will even stop investing in equity markets and will start investing in Gold or prefers to put their cash in Debt instruments like Fixed Deposits. This is the how market goes down. And when the deadlock that we discussed starts getting relaxed then slowly the market will recover and this is the state that we are currently in.

When people saw market at 8000/9000 levels, they though it may further go down to even 6000 levels but they lately realized that it was only going up. So what should they understand from the market? Never time the market.

If we are somewhere near market lows, invest more and if we are at market high, invest less. And if we are some where in middle, then invest consistently some amount so that you would be averaging your investment cost and most likely you wouldn’t regret for not investing or for investing.

Good Luck..!

Post 2004, India has seen good growth due to IT/BPO sectors and employees working in these sectors started getting huge salaries and they started spending money, as a result many other sectors flourished well. Employees in these sectors considered buying their dream houses at very young age creating sudden demand for housing. With both husband and wife working, they aimed high and went on to buy a luxury house even if it’s little difficult to them. They thought their jobs are safe and their increments will always increase year on year.

Due to this demand for land, land owners have increased their property prices exorbitantly and these builders bought these lands at high cost as they will anyway pass this to consumer. Due to the same demand across locations, the cost of construction material, services of labor also increased. With all this hype around, investors invested heavily into real estate sector thus pushing the prices further to the north and this is the obvious time to make money for any builder and their margins were huge. Advertisers, middle mean also made good money.

With all this happening, it’s certain for the property prices to increase.

Now that, IT/BPO sector is under pressure and employees no longer consider their jobs safe, can they invest in properties?

Many think, I will anyway settle down in my home town after retirement so I shall manage living in rental premises.Though their argument is not wrong, they could wisely own a house in the city they are living with a bit of proper planning.

If you properly calculate the rent you are paying till your retirement, post retirement, tax savings you get on your investment, appreciation of the property, Plight of ownership, hassles from owner etc., you will feel that investing in a house is definitely better.

Which is better? Apartment or independent house? Clearly, Independent house is better if you can afford. The best part of this is you don’t have to share the land of your house. Unlike apartment, your land prices appreciate as years pass by. But the biggest problem in buying a land or independent house is whether the seller is genuine so due care should be taken by seeking advice from a layer before buying your dream property. Such incidents rarely happen in case of an apartment.

Now if your question is can I go ahead and buy? We would suggest you to buy a house if you feel your job is comparatively secure, you have adequate life insurance to dole out entire sum by your dependents in case of unfortunate event of death and the property prices correct at least 30% from its high. Price correction means that, if a property at a location with say 1500 sqft with good amenities was costing 50 Lakhs earlier, then the same property should now cost 35 Lakhs. But if a builder is offering a new apartment for 35 Lakhs, don’t you think that they have reduced prices since they advertised 30% discount. So now the challenge is whether the property he is selling would really cost you 50 lakhs in case the market wouldn’t have crashed? So how do you determine this? Your estimation should include the over all build, finishing, fittings, flooring, basic infrastructure for your apartment/house, location of the property, amenities, free parking lot, whether the property is inclusive of registration costs, whether there are any hidden costs, and last but not least carpet area of your apartment or villa.

One important thing we have to notice is property prices have not increased out of proportional in every place. So in case property prices at your place is steadily increasing say at the rate of 15% per annum, then with price correction seen now, you can go ahead and buy properties you wished to buy. But if your city has seen lot of increase in property prices then you have to wait till it corrects in such a way that it normalizes to a price increase of 15% per annum.

So, these real estate players have marginally compromised on the profits and are trying by all means to hold the price drop.

One thing we should understand is, it is difficult for any body to accept loss and that too if they have seen huge profits till then. So, these builders are trying by all means to convince consumers that they are selling properties at throw away prices. But the catch is these builders are not transparent in the offers.

How long and how many consumers can they attract with these offers? Not long and not many..! They are exploring all routes to some how hold these prices thinking that the consumers will get back to them. They don’t understand the meaning of healthy growth. Once all the routes are closed, they will have no option but to really reduce the prices by at least 30-40%. So when will it happen? It will happen slowly say by end of 2009 as the government and financial institutions are trying by all means to help this important sector.

Though many home buyers feel cheated for buying these homes at higher prices, they can have a sigh of relief due to interest rates cooling off thus easing their EMIs.

Investors have to keep in mind that if the rental income from that property they have invested is giving more returns than other investments then they can go for it.

What you need to check? Whether you are getting the same property you wanted for reduced price? This includes the over all build, finishing, basic infrastructure for your apartment/house, location of the property, amenities, free parking lot, inclusive of registration costs, hidden costs, and last but not least carpet area of your apartment or villa.

Some of you may already have bought a house/property and many of you are still waiting for the prices to drop. But will it happen in 2009?

We strongly feel, real estate will still go in for a major correction because we know anything which goes up has to come down and anything which comes down has to go up of course this has terms and conditions which is not of our importance here.

We see lot of attractive advertisements by real estate developers assuring buyers with buy back guarantees, free luxury cars, buy one get one free, houses at cost price, house at the price of 2005, apartments starting at 10 lakhs etc.

How is it possible? The clear reason is sudden fall in demand. How? Sub prime crisis in US caused large organizations to fail resulting in cascading affect to all industries across globe which resulted in stock market crash, job cuts across Globe etc.

Let’s understand. Who are the property buyers? 1. Investors and 2. Genuine buyers who buy house to live in it. While investors lost money in stock market, home buyers who are salaried are facing heat due to firing, lack of hiring and pay cuts where as home buyers from business background are fighting for their survival due to reduced consumer spending resulting in revenue and profitability drop.

So, these real estate players have marginally compromised on the profits and are trying by all means to hold the price drop.

One thing we should understand is, it is difficult for any body to accept loss and that too if they have seen huge profits till then. So, these builders are trying by all means to convince consumers that they are selling properties at throw away prices. But the catch is these builders are not transparent in the offers.

How long and how many consumers can they attract with these offers? Not long and not many..! They are exploring all routes to some how hold these prices thinking that the consumers will get back to them. They don’t understand the meaning of healthy growth. Once all the routes are closed, they will have no option but to really reduce the prices by at least 30-40%. So when will it happen? It will happen slowly say by end of 2009 as the government and financial institutions are trying by all means to help this important sector.

Though many home buyers feel cheated for buying these homes at higher prices, they can have a sigh of relief due to interest rates cooling off thus easing their EMIs.

Investors have to keep in mind that if the rental income from that property they have invested is giving more returns than other investments then they can go for it.

What you need to check? Whether you are getting the same property you wanted for reduced price? This includes the over all build, finishing, basic infrastructure for your apartment/house, location of the property, amenities, free parking lot, inclusive of registration costs, hidden costs, and last but not least carpet area of your apartment or villa.