|»5 Minute Wrap Up by Equitymaster|
On This Day - 11 JUNE 2010
Is it right time to buy property in Mumbai?
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Property experts are now talking about an oversupply of premium houses looming large on the island city's skyline. As per some estimates given in today's Business Standard, around 7,000 new luxury apartments are expected to be available in the city within a year. And these houses are priced at over Rs 47 m each! So, while someone is talking about building the largest luxury housing society in the city, there is another who is talking about the tallest!
In such a scenario, what's the way forward for the middle class guys looking to buy their first property in the metropolis? Is it the right time to buy a property in Mumbai?
Well, if one were to go by the views of Ajit Dayal, Director of Quantum Mutual Fund and founder of Equitymaster, "...if you have to live in Mumbai, then the answer is that there is no right time, because it is very difficult to forecast Mumbai property prices, because Mumbai is an island and within the island there are enough things happening that take property out of the ambit of most people who can't afford them. So, if you have to be in Mumbai and you want to own a property, it's never too early, it's never too late. You can't take it as an investment, it's a necessity."
It should be noted that the most Indian companies managed to raise in a given year so far was US$ 18 bn. Thus, even at this rate, it will take three years for all the companies to comply with the new rule. Furthermore, this fund raising will most likely crowd out companies seeking to raise capital for genuine investments like a new plant or a new project. Clearly, the Government does have a lot of soul searching to do on this.
In our view, sooner or later, Chinese exports will feel the pinch of weak economic conditions in both its key markets - Europe and the US. Then there is the controversy over the valuation of Renminbi, wage hikes and labour unrest. Clearly, China's status of the world's factory is not as sure a thing as it once was.
Normal monsoon would also encourage the government to allow export of foodgrains. The wheat and rice exports, which were banned in recent years because of tight supplies, could be resumed. It is also expected to lower food prices and make it easier for the government to ease controls on fuel prices. We sincerely hope the Met department gets it right this time!
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