Luxury Property Market in India – Lying Will Not Help The Situation

Much like the UAE-based "news" sources, the Indian ones seem also to rely on press releases instead of providing any sort of genuine information. Any fool can see the Indian luxury property market is in trouble, with developers canceling projects, laying off staff and prices falling through the proverbial floor. But putting out press releases to the contrary does no one any good. At best you might attract a gullible buyer, but when the time comes for a mortgage, the banks are not going to fall for it. Take this "news" source for example. Here are snippets from two articles from this Sunday's online edition of The Economic Times -

HNIs still go for luxury homes...

14 Dec 2008, 0149 hrs IST, Aman Dhall & Raja Awasthi, ET Bureau

NEW DELHI: India's super rich just can't resist falling in love with luxury houses. Even as slowdown mania grips the nation, the demand for dazzling luxury residential properties in India is showing no signs of slackening.

During the last six months, the home loans in the above Rs 75 lakh segment witnessed an average growth of 15-20% thanks to the young high networth individual (HNI) population liking for the high-end property. In fact, with real estate developers in a money tight situation, they are offering discounts to the tune of 10-15% for the properties above Rs 1 crore and above. With the buyer conversion rate (BCR) significantly high in this segment, the realty players are counting on luxe home buyers as their best bet to bail them out of the current cash crunch.

Says Ashish Mehrotra, business manager - mortgages, Citibank India; "Home loans in more than Rs 75 lakh segment has seen significant growth in the last two years, especially in tier A cities where property prices have steadily increased. Over the last few months, though the market has been sluggish, demand in this segment has not weakened.

We have seen a 15- 20% increase in the share of these loans in the last six months."

Super-luxury residential complexes are coming with quality construction and world class amenities that showcase an aspirational living style to the urban upper middle class. The amenities include swimming pools, gyms and jacuzzi, themed-landscaped gardens, water bodies and meditation centres.

With HNIs usually rated high on credit ratings, bankers say the loan approval process is generally easier and done in double quick time. The clientele generally includes non-resident Indians, and senior level executives in MNCs. In fact, due to higher returns on investment, a number of developers have now switched on to luxury housing segment, especially in bigger markets such as Mumbai and Delhi National Capital Region (NCR). Original article

Just a few minutes later. And I mean just a few minutes, this article is published -

NRIs delay realty buys; 50% drop in bookings

14 Dec 2008, 0208 hrs IST, Neha Dewan, ET Bureau

NEW DELHI: Recession in the United States and Europe has forced many Non-Resident Indians (NRIs) to rethink their property investment plans in India.

There has been a drop of 50-60% bookings by the NRIs over the last three months owing to tight liquidity conditions in the international markets, top realty players told SundayET. What's more, many NRIs are cancelling their earlier bookings as well.

Developers such as Parsvnath, Omaxe and Hiranandani Developers told SundayET that there has been a dip in the NRI buys over the last few months despite the dollar remaining firm vis-à-vis the rupee.

According to Pradeep Jain, chairman, Parsvnath Developers there has been a 50-60% drop in bookings since September. "Over the last three months, the impact of recession in US has been felt strongly in the Indian realty market. If 100 bookings were being made earlier, today that's not more than 30. This situation may continue till liquidity situation improves in foreign markets," he said.

The US subprime crisis and the global economic downturn have also taken a toll on the NRI community. "There have been atleast 15-20% cancellations over the last few months. NRIs, who had booked properties earlier, are now hit from all sides as the rupee has depreciated a lot. Hence, the current sentiment is very negative," Vipin Agrawal, executive director, Omaxe, said. Original article

It doesn't take a genius to work out that there has been an increase in the share of loans to HNIs because there has been a massive drop in interest from NRIs, and the last time I checked, Citigroup had just been loaned $15 billion by the US government because they are incapable of making a sound investment. So, why would anyone listen to a representative of that company?

At best this is simply poor journalism. At worst, it is an attempt to fool people into paying more money than a property is worth. The same thing is happening in Dubai's property markets - a mixture of out-and-out lies combined with genuine information that make it extremely difficult for the average investor to make a sound decision. It is not unusual to see the estate agents and the analysts coming to opposite conclusions. At this very moment an analyst is saying, "prices have further to drop," whilst an agent is saying, "now is a good time to buy." But to see a newspaper print directly opposing articles within minutes of each other?