On price and recession prediction for 2012

Actually recessions are predictable - they come every 4 years in industry and every 7-8 years in RE.

Question is different

1. - how bad will the recession be?
2. -What kind of recession?

It is possible for each country to be in a different kind of recession. Looking at current data, it seems to me

1. USA: Standard heavy recession will continue with unemployment for prolonged period till 2020 with no big upmove in stocks or RE

2. UK: Shallow recession has ended and 2011 will see pick up in economy and RE. Both will peak in 2014

3. Germany: Same as UK. only stronger

4. France: Same as USA

5. Spain and Italy: Worse than USA, but same pattern as USA

6. Japan: Stagnation will continue till 2020.

7. China: Will continue spectacular growth

8. India: Will see standard business and RE cycles with exagerated stock and RE price movements, recap of USA from 1945 onwards

Obviously, investing strategy for each country has to be different.

In India, I expect best returns from stock market but with exagerated see saw. RE should be a smoother and safer bet.

I expect stagnation in Gurgaon with problems expected for leveraged and overinvested people whenever the stock market collapses - which I expect in Feb 2011. Same for Mumbai. But from 2014, prices will jump for Gurgaon and Mumbai

I expect two situations for NOIDA.

1. Currently under construction projects will go thru. But price for RE will be capped and will not give fantastic returns at all - I expect price stagnation / keeping pace with inflation with muted returns till 2014. People should expect good returns in NOIDA from 2014 onwards, but not as much as Gurgaon.

2. If there is a heavy recession in 2012 (expected in a 4 year cycle after 2008), many of the yet to be constructed projects will face severe delays or abandonment. People with bookings in such projects will miss out on the good returns expected from 2014 onwards.

I would therefore urge people to book only in projects where there is some assurance for construction, lest they miss out on the expected returns from 2014.

As for ATS, one can always hold for rental returns and keep quiet. One can sell for 2.5 crores in 2017 or so when the next RE bull phase reaches its peak.

Munish, best capital appreciation in RE is always in luxury category and not in affordable category. Advantage of affordable (and NOIDA in general) is that downside is limited. Unfortunately upside is also limited. Lluxury prices move maximum in bull phase but crash too much in recession, preventing exit effectively - except with huge loss).

NOIDA flat will find ready seller/buyer regardless of market timing. Gurgaon luxury flat will find seller/buyer only in good times (which is right now!).

NOIDA is a conservative investment and one should expect returns in line with inflation. Since it is currently some 14% (CPI) I expect some 40% return from your booking by completion in 2012-2013 which corresponds to Zohaibs prediction of around 4200 psf.

Later:
Hi all.

This was actually a post in NOIDA forum, in response to recession discussion, but wanted your valuable opinions as well from Gurgaon.

And I think you all have made valid points.

Sachin, this was individual perception only. I am pessimistic by nature, but my prediction for India was USA from 1945 to 2010 i.e. 65 years of superlative growth with recessions superimposed. Dow went from 300 to 14000.

Thats being optimistic only. There will be ups and downs but overall growth will be up. So I am nor predicting doomsday, but pointing out the reality of industrial growth and contraction being normal every 4 years.

Durbious, very good points. Gurgaon has definitely matured and may not see much downside. I think people now have holding power and the leveraged investors, flippers and heavy loan RE companies have learnt a lesson - and wont repeat.

But I expect static prices +/- 10% till 2014 when it will take off for a next bull run.

YOu are right, Gurgaon is much safer feeling than NOIDA, without doubt. We go to Gurgaon malls all the time and come home late. NOIDA is too scary after dark.

NOIDA will not see price fall, instead people will lose their bookings in case of major problems. Prices are so low, it cannot possibly fall further. And regardless of big or small recessions, some of the dodgy bookings will default on delivery and a lot of lower middle class people who have booked in NOIDA will lose their money to the builders.

RBBR, actually I am bullish on RE because of inflation effect. I dont think we have seen the last of inflation.