REAL ESTATE PRICES IN PUNE – HYPE AND REALITY

REAL ESTATE PRICES IN PUNE – HYPE AND REALITY

THE MYSTERY OF INVENTORY OVERHANG

MUSINGS OF A NOVICE SELF-STYLED PROPERTY GURU Part 2

By

VIKRAM KARVE

Continued from Part 1…

WHY ARE PROPERTY RATES SO HIGH IN WAKAD PUNE

MUSINGS OF A NOVICE SELF-STYLED PROPERTY GURU Part 1

http://karvediat.blogspot.in/2012/03/why-are-property-rates-so-high-in-wakad.html

If you want to, do read Part 1, but remember to come back here and read Part 2, or you can always read Part 1 after you have read Part 2 - so read on ...

THE MYSTERY OF INVENTORY OVERHANG

Before I delve into mystery of INVENTORY OVERHANG let me tell you a Mulla Nasrudin story called THE CAT AND THE KABABS

One day the gourmet Mulla Nasrudin bought five kilos of the tastiest kababs  from the best restaurant in town to enjoy with his friends in the evening party he had organized for his closest friends.

He gave them to his wife with explicit instructions in how to serve them in the evening party and went out for a walk.

Mulla Nasrudin’s wife garnished the kababs and kept them in serving plates on the dining table.

Suddenly, her sister and her kids arrived unexpectedly.

Mulla Nasrudin’s wife’s noticed that her sister and her kids were staring at the mouth-watering kababs in hungry anticipation, so the wife asked her sister and her kids if they would like to taste a kabab.

“Yes,” they all said and so the wife, her sister and her kids tasted a kabab each.

The melt-in-the-mouth kababs were so delicious and tasty that they could not resist the temptation to eat a few more.

They loved the kababs so much that, while gossiping, they unconsciously kept popping the kababs into their mouths, till suddenly all the kababs were finished.

Then the wife’s sister and her kids said goodbye and left.

Mulla Nasrudin’s wife realized that the kababs were finished.

To salvage the situation Mulla Nasrudin’s wife quickly prepared pakoras to be served in lie of the kababs.

When Mulla Nasrudin’s friends arrived they were served pakoras instead of kababs.

After his friends had left, a furious Nasrudin demanded an explanation from his wife about why kababs were not served.

His wife meekly said that the pet cat ate up all the kababs.

“There were 5 kilos of kababs.  Don’t tell me the cat ate up the full 5 kilos of kababs,” Nasrudin shouted.

“Yes. Your cat ate all the kababs - the full 5 kilos. Why don’t you ask your darling cat instead of scolding me?” his wife said.

Mulla Nasrudin caught hold of his cat and put the cat on the weighing scale.

The cat weighed exactly 5 kilos.

Nasrudin looked at his wife and said, “The cat weighs 5 kilos and the kababs were 5 kilos.”

Nasrudin’s wife said, “So?”

Now, tell me my dear wife,” Nasrudin asked, pointing to the cat sitting on the weighing scale:

“If this is the cat then where are the kababs?

On the contrary if these are the kababs then where is the cat?”

ARE PROPERTY RATES GOING TO RISE or FALL IN WAKAD PUNE ?

Please keep this story in the back of your mind while we discuss the impact of inventory overhang on real estate prices, especially in Wakad Pune.

In real estate the only factor which determines property prices is the DEMAND versus SUPPLY Equation. 

Thus, if you want to estimate whether the real estate rates are going to rise or fall you must have some idea of the Demand – Supply situation in the location where you want to invest in property. 

But how do you do it? 

Well, one quantitative measure of the Demand versus Supply Equation is a term called INVENTORY OVERHANG.

Inventory Overhang is the number of months it will take for all the unsold supply of units in the market to be sold out at the current sales velocity (rate at which housing units are being sold). 

To give you an example, say in the location of Wakad, there are 1000 apartments available for booking in launched, ongoing and completed housing projects and say about 50 apartments are beings sold per month (sales velocity=50) then the inventory overhang will be 1000/50 = 20 months. Thus, we can reasonably forecast that it will take 20 months for the unsold supply of units in Wakad to be sold out at the current rate at which units are being sold (sales velocity).

However, it is not so simple, since both the supply and demand are variables and the number of unsold units will keep fluctuating depending on increase in supply as new projects are launched and also increase or decrease in sales velocity.

Price Appreciation is inversely proportional to Inventory Overhang.

The lower the inventory overhang the faster and higher the prices of property are going to rise and the higher the inventory overhang the slower the property rates are going to rise.

In fact, if the inventory overhang exceeds the “safe” limit (20 months or so) then property rates are likely to fall.

So if you are an investor you better estimate the inventory overhang before you invest in property at a certain location.

But does all this theory work in actual practice?

Let’s take a hypothetical example of Wakad in Pune where I live.

Now Wakad is a huge spread out place. In Wakad, the general infrastructure is very poor and the Social Infrastructure is almost non-existent. The current property rate in Wakad is certainly not commensurate with the infrastructure and amenities.

If you walk around the fast emerging concrete jungle proliferating all over the place, you will realise that there is probably a huge oversupply of residential apartments, due to a large number of ongoing realty projects, and, if you ask around, it seems that hardly anyone seems to be buying flats.

This means that in Wakad Pune the inventory overhang is quite large.

Is the inventory overhang 20 months, 24 months or even more? I will not risk even a rough guesstimate since, as a layman, I do not have any authentic data. That is the real problem for a layman – it is difficult to get credible data regarding supply and demand (in view of the opaque nature of the realty sector). Whereas the likely availability of units may be relatively easy to compute based on the data given by developers in their brochures and advertisements, it may not be possible to accurately compute the sales velocity since developers may like to be discreet about actual sales.

Of course, if you are really interested, one way to get reliable data is to go to the municipal authorities and find out (by RTI or otherwise) the number of property sales registered and the dates from which property tax is being levied. But doing all this may be quite difficult for the layman. So the inventory overhang you compute is at best a guesstimate.

Now, as I said, by sheer observation it appears that the inventory overhang in Wakad is quite large. Also, as supply keeps on increasing due to new launches of residential projects, which happens almost every day, the inventory overhang will grow even larger and larger by the day.

This means that hypothetically, at least in Wakad, the property prices are certainly not going to appreciate very much. Theoretically speaking, property rates in Wakad may even decline in the near future like they did a few years ago, in 2009 I think.

The inventory overhang keeps rising, the number of unsold flats keeps increasing, but despite this, the property prices, actually keep rising, instead of falling. It seems that the inventory overhang theory is turned topsy-turvy.

Intriguing, isn’t it? How can this happen? Are there any hidden factors? Or is it all hype? Or is it a case of artificial demand being created? Will this realty “bubble” ever burst?

Well, I can only comment that IN REALTY HYPE MATTERS MORE THAN REALITY.

Why doesn’t the theory of Inventory Overhang work in practice?

Is this strange phenomenon of high prices despite oversupply happening only in Pune or is it a common occurrence everywhere?

You tell me.

Can you solve this mystery?

Well, you figure it out.

Maybe the answer to this paradox lies in the Mulla Nasrudin Story I told you earlier – The Cat and The Kababs

Till next time, Happy House Hunting

To be continued in MUSINGS OF A NOVICE SELF-STYLED PROPERTY GURU Part 3 ...

VIKRAM KARVE 

Copyright © Vikram Karve 2012
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work.
© vikram karve., all rights reserved.

Did you like this blog post?
I am sure you will like the 27 fiction short stories from my recently published anthology of Short Fiction COCKTAIL 
To order your COCKTAIL please click any of the links below:
http://www.flipkart.com/cocktail-vikram-karve-short-stories-book-8191091844?affid=nme
http://www.indiaplaza.in/cocktail-vikram-karve/books/9788191091847.htm
http://www.apkpublishers.com/books/short-stories/cocktail-by-vikram-karve.html

COCKTAIL ebook
If you prefer reading ebooks on Kindle or your ebook reader, please order Cocktail E-book by clicking the links below:
AMAZON
http://www.amazon.com/dp/B005MGERZ6
SMASHWORDS
http://www.smashwords.com/books/view/87925

Foodie Book:  Appetite for a Stroll
If your are a Foodie you will like my book of Food Adventures APPETITE FOR A STROLL. Do order a copy from FLIPKART:
http://www.flipkart.com/appetite-stroll-vikram-karve/8190690094-gw23f9mr2o

About Vikram Karve

A creative person with a zest for life, Vikram Karve is a retired Naval Officer turned full time writer. Educated at IIT Delhi, ITBHU Varanasi, The Lawrence School Lovedale and Bishops School Pune, Vikram has published two books: COCKTAIL a collection of fiction short stories about relationships (2011) and APPETITE FOR A STROLL a book of Foodie Adventures (2008) and is currently working on his novel and a book of vignettes and short fiction. An avid blogger, he has written a number of fiction short stories, creative non-fiction articles on a variety of topics including food, travel, philosophy, academics, technology, management, health, pet parenting, teaching stories and self help in magazines and published a large number of professional research papers in journals and edited in-house journals for many years, before the advent of blogging. Vikram has taught at a University as a Professor for almost 14 years and now teaches as a visiting faculty and devotes most of his time to creative writing. Vikram lives in Pune India with his family and muse - his pet dog Sherry with whom he takes long walks thinking creative thoughts.

Vikram Karve Academic and Creative Writing Journal: http://karvediat.blogspot.com
Professional Profile Vikram Karve: http://www.linkedin.com/in/karve
Vikram Karve Facebook Page:  https://www.facebook.com/vikramkarve
Vikram Karve Creative Writing Blog: http://vikramkarve.sulekha.com/blog/posts.htm
Email: vikramkarve@sify.com

© vikram karve., all rights reserved.

   

WHY ARE PROPERTY RATES SO HIGH IN WAKAD PUNE

WHY ARE PROPERTY RATES SO HIGH IN WAKAD PUNE

MUSINGS OF A NOVICE SELF-STYLED PROPERTY GURU Part 1

By

VIKRAM KARVE

I live in a place called Wakad in Pune. Luckily, my house is in the better part of Wakad, serene relatively green unpolluted South Wakad, and not in the grimy congested noisy polluted concrete jungle of North Wakad.

I’ve lived here for quite sometime now (almost two years) but nothing has changed for the better. Even now (as was two years ago), there is Zero Quality of Life in Wakad since there has been no improvement in the amenities and infrastructure.

In Wakad, the roads are perpetually dug up and there are no footpaths to walk on and nowhere to go for healthy walk, except the verdant Mhatoba Temple Park on the banks of the Mula River where you can stroll on the expansive grassy green lawns and enjoy the fresh unpolluted air and noise-free atmosphere.

Public Transport is pathetic and you must have your own vehicle (and you must know how to drive) if you want to live in Wakad.

Even for your basic needs and requirements you have to go towards Aundh or Baner in Pune, be it food, shopping, banking, school, doctor or dentist – you name it and it is not there in Wakad.

If you want to go to the Post Office the nearest one is in the Rajiv Gandhi InfoTech Park at Hinjewadi almost 5 kilometres away.

And if you want to see a movie, you better forget about it, for the nearest Multiplex called E-Square is more than 10 Kilometres away.

So the best way to live in Wakad is to stay inside your home and develop hobbies like reading books, watching TV, hearing music or indulging in meditation and cultivate what is known as a “retiring nature”.

That is why I wonder as to why property rates are so high in Wakad, despite the woeful lack of amenities and zero quality of life. When I ask someone they say it is all because of these overpaid young IT Nerds (“Techies”) working at the InfoTech Park at Hinjewadi, who at a very young age have plenty of disposable income, and most of these Techie Couples are desperate to buy houses . It seems that the priorities of these IT Nerds, Geeks and Dorks are all mixed up – you won’t believe it, but I recently met a newly married Techie DINK Couple who were more worried about buying their own house rather than having their own baby.

(Yes, Investment in Property takes Priority over Investment in Family)

Is this the reason why property rates are high?

One thing is sure. In the case of other products prices primarily depend on input costs, production costs and brand value (due to guarantee of quality). Real Estate Prices depend purely on Supply and Demand. That is why whereas the same specification product (Car, TV, Washing Machine etc) will cost roughly the same all over India, the cost of a same specification house will be wildly variable depending on the location. Real Estate Prices are sometimes 10 times more (or even 20 times more) in some cities compared to other cities and property rates vary a great deal even at different locations within the same city.

Therefore, in order to get a proper estimate of the property price at a particular place you must have a “quantitative” measure of the Supply versus Demand Equation. A few days ago, I learnt that there is indeed such a measure and it is called INVENTORY OVERHANG.

What exactly is Inventory Overhang? Is there a relation between real estate prices and inventory overhang? I’ll discuss this with you about it in my next post.

Meanwhile, I’ll walk around Wakad and try to estimate the Inventory Overhang out here and try to explore how this may impact property rates in Wakad Pune.

Till then, happy house-hunting and have a good day.

And, by the way, if you know why property prices are so high (or low) in your city, do comment and tell us…

To be Continued in Part 2…

VIKRAM KARVE

Copyright © Vikram Karve 2012
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work.
© vikram karve., all rights reserved.

Did you like this blog post?
I am sure you will like the stories in my recently published book COCKTAIL comprising twenty seven short stories about relationships. To order the book please click the links below:
http://www.flipkart.com/cocktail-vikram-karve-short-stories-book-8191091844?affid=nme
http://www.indiaplaza.in/cocktail-vikram-karve/books/9788191091847.htm
http://www.apkpublishers.com/books/short-stories/cocktail-by-vikram-karve.html

COCKTAIL ebook
If you prefer reading ebooks on Kindle or your ebook reader, please order Cocktail E-book by clicking the link below:
AMAZON
http://www.amazon.com/dp/B005MGERZ6
SMASHWORDS
http://www.smashwords.com/books/view/87925

About Vikram Karve

A creative person with a zest for life, Vikram Karve is a retired Naval Officer turned full time writer. Educated at IIT Delhi, ITBHU Varanasi, The Lawrence School Lovedale and Bishops School Pune, Vikram has published two books: COCKTAIL a collection of fiction short stories about relationships (2011) and APPETITE FOR A STROLL a book of Foodie Adventures (2008) and he is currently working on his novel. An avid blogger, he has written a number of fiction short stories and creative non-fiction articles in magazines and journals for many years before the advent of blogging. Vikram has taught at a University as a Professor for almost 15 years and now teaches as a visiting faculty and devotes most of his time to creative writing. Vikram lives in Pune India with his family and muse - his pet dog Sherry with whom he takes long walks thinking creative thoughts. 

Vikram Karve Academic and Creative Writing Journal: http://karvediat.blogspot.com
Professional Profile Vikram Karve: http://www.linkedin.com/in/karve
Vikram Karve Facebook Page:  https://www.facebook.com/vikramkarve
Vikram Karve Creative Writing Blog: http://vikramkarve.sulekha.com/blog/posts.htm
Email: vikramkarve@sify.com        

© vikram karve., all rights reserved.

© vikram karve., all rights reserved.

A MEMORABLE MORNING IN WAKAD

LIVING IN PUNE

While browsing through my Blog I found this picturesque post which I wrote almost one year back in April 2011. 

PICTURESQUE WAKAD 

By

VIKRAM KARVE

The view from my ninth floor balcony is awesome.

Early in the morning, at dawn, I look towards my left, towards the eastern horizon, in the distance, I can behold the breaking of the sun’s upper crest over thick layer of grey-white smog that envelops the city of Pune, and soon the silhouettes of the tall buildings in the concrete jungles of Aundh and Baner become visible.

The air in Pune City may be quite polluted, but here, high up on the south facing terrace of my top floor apartment in Rohan Tarang, in the southern part of Wakad, the air is pure, fresh and so refreshing that I can cleanse my lungs with it, almost like the pristine morning air in the hills of Girinagar, in the foothills of Sinhagad Fort, which lies beyond the range of hills I can see in the distance.

I stand in my open-to-the-skies spacious terrace-like balcony, at the edge, look around in front of me, have a panoramic view. The scene is picturesque and the mood is uplifting. The placid waters Mula River meandering down from the verdant hills in the distance, bisecting its lush green scenic valley, renders an air sublime stillness to the environment.

On this side of the river lies the well laid out, clean and tranquil Wakad village, and at this early morning hour, everyone is in their homes, except Chavrya, the redoubtable white guard dog, who moves around like a sentinel at the entrance of the village. Wafts of pleasing devotional music emanating from the famous and beautiful Mhatoba Temple gently uplift my spirits and enhance the sublime ambiance.

On that side of the river, across the valley, there is large tract of greenery, fields and farms, being gradually swallowed up by the expanding concrete jungle spreading out from Baner in the distance. Soon it will be all dust and grime, as the construction work of buildings starts, but then all this is quite far away, and will not disturb the glorious view or equanimity, which I enjoy from my balcony.

Sunset from my terrace is a special event. 

First the orange sun plays hide and seek with the peaks and troughs of the range of hills far away from where the Mula River emanates and then it suddenly goes below and the sky gets lit up like a painting, first a crimson red, then the interplay of colours starts, both in the sky and on the waters of the Mula River, yellow, gold, silver, grey and then it is dark, and to your right you can see the fast moving lights of the vehicles on the Mumbai – Bangalore Bypass Highway, a distance away right ahead are the floodlights of the Balewadi Stadium and colourful neon signs of the numerous hotels and inns like Holiday Inn, VITS, Orchid and Sadanand Residency, and towards the left, to the east, just a few lights in the high-rise apartments at Baner and Aundh, most of which are empty as they have been bought for investment and not to live in.

Though progressive and in the midst of modernity, with clean well-lit roads and neatly laid out, the beauty of Wakad is that it is a quaint, serene, picturesque village which still retains a delightful old-world charm. On normal days, sleeps early, and the nights are quiet, but tonight is special.

Shri Mhatoba Dev Utsav is being celebrated and the entire Wakad village has been brightly illuminated. Shri Mhatoba Devasthan Temple (Mandir) has been beautifully decorated and brilliantly illuminated and looks superb. In fact, the illumination of the temple dome is truly exquisite. There is ajatra, carnival, music, and people have come from distant places to the Shri Mhatoba Devasthan Mandir in Wakad to have darshan, seek blessings and pray to the God Mhatoba, the village Deity of Wakad and Hinjewadi and participate in the utsav or festival. It is celebration time, the entire place, even the Mula Riverside Park and Garden, is brimming with people, of all ages, dressed at their best, the atmosphere is festive, the place is resonating with positive energy and happy vibes, and from my balcony I enjoy a grandstand view which is truly breathtaking.

Actually the huge windows of all rooms in my spacious and airy house afford a wonderful view, but I love standing in my spacious open terrace balcony, especially at night under the starlight open sky, and enjoying the magnificent view. And as I write this spectacular fireworks illuminate the sky and fill my heart with joy.

PS – I am lucky that I live in South Wakad, towards the Mula river side of the Aundh – Hinjewadi Road. If you live in North Wakad on the other side of the road – well, that is a different story!

VIKRAM KARVE 

Copyright © Vikram Karve 2012
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work.
© vikram karve., all rights reserved.

Did you like this story?
I am sure you will like the 27 fiction short stories from my recently published anthology of Short Fiction COCKTAIL 
To order your COCKTAIL please click any of the links below:
http://www.flipkart.com/cocktail-vikram-karve-short-stories-book-8191091844?affid=nme
http://www.indiaplaza.in/cocktail-vikram-karve/books/9788191091847.htm
http://www.apkpublishers.com/books/short-stories/cocktail-by-vikram-karve.html

COCKTAIL ebook
If you prefer reading ebooks on Kindle or your ebook reader, please order Cocktail E-book by clicking the links below:
AMAZON
http://www.amazon.com/dp/B005MGERZ6
SMASHWORDS
http://www.smashwords.com/books/view/87925

Foodie Book:  Appetite for a Stroll
If your are a Foodie you will like my book of Food Adventures APPETITE FOR A STROLL. Do order a copy from FLIPKART by clicking the link below:http://www.flipkart.com/appetite-stroll-8190690094/p/itmdyv7tdkhzn9vm?pid=9788190690096  

About Vikram Karve

A creative person with a zest for life, Vikram Karve is a retired Naval Officer turned full time writer. Educated at IIT Delhi, ITBHU Varanasi, The Lawrence School Lovedale and Bishops School Pune, Vikram has published two books: COCKTAIL a collection of fiction short stories about relationships (2011) and APPETITE FOR A STROLL a book of Foodie Adventures (2008) and is currently working on his novel and a book of vignettes and short fiction. An avid blogger, he has written a number of fiction short stories, creative non-fiction articles on a variety of topics including food, travel, philosophy, academics, technology, management, health, pet parenting, teaching stories and self help in magazines and published a large number of professional research papers in journals and edited in-house journals for many years, before the advent of blogging. Vikram has taught at a University as a Professor for almost 15 years and now teaches as a visiting faculty and devotes most of his time to creative writing. Vikram lives in Pune India with his family and muse - his pet dog Sherry with whom he takes long walks thinking creative thoughts.

Vikram Karve Academic and Creative Writing Journal: http://karvediat.blogspot.com
Professional Profile Vikram Karve: http://www.linkedin.com/in/karve
Vikram Karve Facebook Page:  https://www.facebook.com/vikramkarve
Vikram Karve Creative Writing Blog: http://vikramkarve.sulekha.com/blog/posts.htm
Email: vikramkarve@sify.com

© vikram karve., all rights reserved.