Our long term view on real estate remains bullish, as we believe that underlying prices will be formed by the real demand for quality housing over the next 5-7 years. That being said, we believe that certain segments already present deflationary scenarios, where consumers are delaying purchases, anticipating prices, which have been soft within micro markets of Middle, South and Central Mumbai, to continue to decline. We do not view short term volatility as an indication of medium term deflationary outlook, rather as a phenomenon caused by both a policy and market driven liquidity trap, whereby suppliers are leveraged and can access limited capital at incrementally higher borrowing costs while consumers are constrained by higher interests rates and higher costs of housing. In the midst of this two-way push, higher borrowing costs for suppliers and home buyers and a build up of inventory where prices seem to be operating at a lag at the surface, higher, there are open opportunities to leverage cash reserves to purchase homes in soft micro markets from supplier willing provide strong discounts to the market for higher up front capital payments. Indeed our institutional research advisory arm, REMMA Advisory Services, which tracks institutional deals has seen the largest uptick in institutional buy-side deal activity due to private capital funds' ability to leverage cash for strong discounts and favorable commercial terms. Prior to this year, we've seen only tepid re-entry by institutional real estate private capital in 2009 and 2010, in the wake of 2008.
Similarly, REMMA Information Services, our online property,which tracks sample housing data internally and sources from data providers and publicly available sources, for Mumbai markets, shows continued downward movement in the number of purchases in similar fashion, 2009, 2010, and continuing into 2011, yet prices are seemingly steady or marginally downward within "infield" micro markets, while "outfield" developments continue to climb reflecting the trends over the prior seven years of growth in housing markets within Mumbai. Just as institutional buyers are utilizing cash assets to yield better terms in today's market, individual buyers with a 5-7 year plus mindset, should look at today's market as similar in some areas as the market conditions in Feb/March of 2009, providing opportunistic purchase opportunities which were in hindsight at the height of uncertainty and provided strong discounts to the market. Given that we work with our wealth manager channels to provide closed opportunities with both branded and niche builders, we thought to provide you with a new tool, a reverse - auction mechanism, that allows our existing customers to state what they are looking to purchase, with the available up front, so that our closed deal arrangements in Mumbai can be matched against your requirements, as a pre-qualified recipient of the online module that identifies "below the line" opportunities. Please contact us to find out more at mumbai@remmaconsulting.com.
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Newsletters 2011
