Real Estate Speculation

The real estate market is on fire, and speculators have made money in the market. Over the past few years, speculators have made money by blocking apartments and then transferring the titles. This market now I think has peaked out. With rising interest rates, the possibility of appereciation in flats/apartments is now low.

Right now, speculators have started to look southwards in tamil nadu. The government of TN is now interested in developing Southern Tamil Nadu. The land prices there are right now rock bottom, largely fuelled by high level of urbanisation happening in TN right now. Anyone with good information can make money by speculating on land in TN now.

The information I refer to is on which specific areas of TN the government plans to develop, and this information is necessary before announcements are made. Secondly, the reliability of the information plays utmost information. This poses a huge risk for potential investors. Those willing to undertake such a huge risk are likely to reap huge rewards from this sector. Some likely areas in TN are Madurai-Trichy belt, Kovai region, and my biggest bet is on Yelagiri. 4 hours from both Chennai and Bangalore, with the evolution of the weekend get away culture, land values here are bound to increase. With the growth of the economy, logistics will become more important, and I expect land value in the Thoothukodi and Namakkal to appreciate. The former is Tamil Nadu's second port, while the latter is the hub of trucking business in TN.

Fallout of Realestate Boom

A few days ago I wrote this post on homeowners in the USA being unhappy with quality of their homes. I also added that this is not an isolated incident and should be widespread in India. The following video is of an UNITECH construction in India.

Structurally Deficient Homes?

Puravankara has just launched its IPO, DFL has done so. The real estate sector is on fire, prices are skyrocketing. Just like in India, there is a housing boom in the USA. Currently, the market is experiencing a slow down.

Angry homeowners in the US who bought homes, and found them to be structurally problematic have taken to the internet.

The Internet has rapidly become an outlet for frustrated homeowners to chronicle their bad experiences with new homes they have found to be structurally defective. Homeowners can now post complaints, discuss legal options, and warn future buyers on at least a dozen builder-directed "gripe sites," with names such as www.crapconstruction.com and www.khovsucks.com. (Link)

This is the expected fall out of a boom in the housing market, more so if customers are not patient and demand quick delivery of homes. In the construction business, the level of technology determines the shortest time span required to build a house/flat. In a market where the buyers are impatient, there will be some sellers who will be willing to deliver houses quicker than the minimum time as determined by the level of technology, therefore they will have to cut costs.

Secondly, if there is a boom in the housing market, the cost of raw materials will increase. If the seller does not have adequate clauses to pass this onto the buyer, then the seller will cut corners to reduce his losses from increasing prices.

I reckon that either of these two factors led to faulty constructions in the USA. If this is the case in the US, where builders give some form of guarantee for the houses, I wonder what is the case in India. after a few years, the number of dissatisfied home owners might increase. This will become evident once the real estate boom slows down and the value of their property drops.