Land value in Kerala

[Massie69]

The unprecedented exponential rise of land value in Kerala especially in cities like Kochi is often attributed to speculation. Is speculation by itself illegal? When the property value gets pushed by sheer speculation irrespective of any basis, it traverses all known borders of legality. When all property transactions become buying and selling and not buying for any related purposes like living or conducting any other legal business is the making of a phenomena called a bubble.

Speculators make profit out of hype, an artificially created and maintained hype. If the prices in Kochi are a result of such hype and the land prices are being manipulated, then sooner than later the price of land is sure to stagnate if not crash.

Is it possible that all the genuine investors in Kochi are going to loose? It is often admitted that there are some scrupulous speculators here as elsewhere. However, the land scarcity in Kochi is no hype and sooner or later, there will no longer be any land for the taking. Considering the current level of investments in various sectors of industries, it can be safely assumed that the need for residential and commercial space in Kochi is only going to increase and not decrease.

Given the fact that land is and will continue to be at a premium investing in land or property in Kochi today is certainly the right move. There are many resident and non-resident keralites, who have wisely invested in more than one Kochi flat hoping to reap a profit. Investing in Kochi is a sure deal.

In my opinion, the land value in many parts of Kerala is unjustified because of its inability to generate revenue. When you invest in a company, you look at its current earnings and earnings potential.

Let us consider a person buying a flat for Rs. 60 lakhs. Every residential community charges at least Rs. 2000 per month as maintenance charges. Now, if you rent it out what do you get -- Rs. 10,000 per month? works out to 2% returns per annum.

The value has to depend on potential appreciation in land prices or increase in rentals. To get an annual return of 8% (achievable easily otherwise), the price of the property should be Rs. 90 lakhs after 5 years. Is that pricing justified? If not, how do you think rentals will increase?

I believe that at a time in future, people will shun such high prices when buying property. The lack of demand can cause a reduction in prices. Will it crash? I don't know. But, one thing I know is that nothing rises for ever. Another thing is that the higher and faster the rise, the most it falls. I would be expecting a rapid fall in land prices based on the value proposition that land investments offer.

[Erby21]

The unprecedented exponential rise of land value in Kerala especially in cities like Kochi is often attributed to speculation. Is speculation by itself illegal? When the property value gets pushed by sheer speculation irrespective of any basis, it traverses all known borders of legality. When all property transactions become buying and selling and not buying for any related purposes like living or conducting any other legal business is the making of a phenomena called a bubble. Speculators make profit out of hype, an artificially created and maintained hype. If the prices for a Kochi flat are a result of such hype and the land prices are being manipulated, then sooner than later the price of land is sure to stagnate if not crash.

Is it possible that all the genuine investors in Kochi are going to loose? It is often admitted that there are some scrupulous speculators here as elsewhere. However, the land scarcity in Kochi is no hype and sooner or later, there will no longer be any land for the taking. Considering the current level of investments in various sectors of industries, it can be safely assumed that the need for residential and commercial space in Kochi is only going to increase and not decrease.

A few safety measures may help maintain the purpose of safety and companionship why people invest in a Kochi flat. There should be only a single entrance into the premises and there should be round-the-clock security at the gate. A caretaker should be present at the reception and it should be made mandatory that visitors should reveal their identity and the resident he wishes to visit. An intercom should be provided at the reception so that the caretaker can contact the resident to get his consent before the visitor is allowed to proceed to the apartment. Even domestic helps who come to the apartments should be asked to sign in the register provided. There should be an alarm reachable from all apartments with generator back-up in case of electricity failure.

Instead of building scattered blocks on small plots in low rise, high density residential areas, which rob existing residents of their privacy and their already strained infrastructure facilities, larger sites preferably away from the city centre should be selected for high-rise apartments. The design and layout of the blocks are important for security. Care should be taken to provide limited entry/exit points.

Given the fact that land is and will continue to be at a premium investing in a Kochi flat today is certainly the right move. There are many resident and non-resident keralites, who have wisely invested in more than one Kochi flat hoping to reap a profit. Investing in Kochi is a sure deal.

Originally Posted by Thomas George

In my opinion, the land value in many parts of Kerala is unjustified because of its inability to generate revenue. When you invest in a company, you look at its current earnings and earnings potential.

Let us consider a person buying a flat for Rs. 60 lakhs. Every residential community charges at least Rs. 2000 per month as maintenance charges. Now, if you rent it out what do you get -- Rs. 10,000 per month? works out to 2% returns per annum.

The value has to depend on potential appreciation in land prices or increase in rentals. To get an annual return of 8% (achievable easily otherwise), the price of the property should be Rs. 90 lakhs after 5 years. Is that pricing justified? If not, how do you think rentals will increase?

I believe that at a time in future, people will shun such high prices when buying property. The lack of demand can cause a reduction in prices. Will it crash? I don't know. But, one thing I know is that nothing rises for ever. Another thing is that the higher and faster the rise, the most it falls. I would be expecting a rapid fall in land prices based on the value proposition that land investments offer.

I am totally against the point that has been mentioned here.In an ever growing population such as we have in India there is no doubt where the price of lands would go.It would go only one way and that is upward and to add to this let me also quote that the writer whoever it is has been little negative in his/her approach.As there should be no doubt that the demand of lands will never go down.Anyway not in the near future.......

Originally Posted by Unregistered

I am totally against the point that has been mentioned here.In an ever growing population such as we have in India there is no doubt where the price of lands would go.It would go only one way and that is upward and to add to this let me also quote that the writer whoever it is has been little negative in his/her approach.As there should be no doubt that the demand of lands will never go down.Anyway not in the near future.......

People believe what they want to see. This writer and the original writer, I think, is excited about prices going up (for whatever reason), so they believe that in spite of facts that say otherwise.
The prices in Kochi, and elsewhere in Kerala and India, has gone up so drastically in the last few years. The average income of the people - the ultimate users of the land or homes - has not even gone up by a fraction of that percentage increase. The lands may be affordable to the builders and some investors, but ultimately if the land and the homes build on it are not affordable to the general public who will actually live in them, those prices will not stand. The world is headed to a recession, and India will feel the pain as well.
This is a bubble, the best case scenario is the prices will stagnate for the next several years, and the more realistic scenario is there will be a crash. Some people say "land prices will never go down". That's what they said during the early 90s, but it did crash around '95 time frame and was stagnant for several years after that. So - stay away from buying land and flats now; if you already have one, try to sell it off if you get a buyer to offer a decent price.

Land prices in kerala is facing stagnation. Being a consumer state, wealth generation is slow in Kerala. Appreciation of value of an asset like land is different from generation of wealth by that land. Thousands of crores of rupees were exchanges in Kerala as consideration of land price over the last few years. The source of these fundings are unclear. Unfortunately no study has been done about the sources of these money. Legitimate resources like compensation for land acquisition, savings and loan are marginal. Much of the financial resources we funded from outside kerala and the resourdces are fast drying out. Given the melt down in global financial market and its repurcussions in India, the real estate players are facing liquidy crunch in better developed centers like Mumbai, Delhi and Banglore. Liquidity crunch is forcing them to borrow money at the higher market rate from Banks and utilie their past profits to hold on to the price.


Every speculation requires investment. Speculation in itself may be illegal in all circumstances. However if the speculation is funded by illegal resources then that speculation becomes criminal. It alienates a large section of the people from the scarce resource like land as well as it allows the utilisationof illegal fundings which is legally prohibited. Logically this requires state intervention and remedial action. However this did not happen any where in the world including Kerala.

Our legal system also is not responsive to this malady. No punishment is provided for purchase of property using un accounted money. The Money Laundering Act, and the IPC are not addressing this issue properly. Given its effect in alienating poorer people from occupying land, speculation backed by unaccounted money or illegal funding has to be controlled and made punishable.

The Control should be proactive and requires strict state intervension. Such transations are civil and does not involve criminal action under the present laws. Secondly the crime committed is against the society at large not against any individual. Therefore complaint by individuals cannot be expected also. State agencies live vigilance assumes importance here. State action is necessitated by the imminent danger of terror funding for such land deal. Kerala economy with iots scarce reserves and small magnitude can easily be manipulated by a few thousand crores.

There fore even though a market correction seems to be unavoidable in land prices of kerala, the financial investments that boosted land price in kerala beyond all logics requires thorough enquiry by the state machineries in to theirsources.

Here is an example of an asset bubble, and how speculative price rises correct itself after each bubble, leaving some speculators rich and the victims poor:

*****
Once upon a time in a village, a man announced to the villagers that he would buy monkeys for $10.

The villagers seeing there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts.

The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort
to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.

In the absence of the man, the assistant told the villagers: ' Look at all these monkeys in the big cages that the man has collected. I will sell them to you at $35 and when he returns
from the city, you can sell them back to him for $50. '

The villagers squeezed together their savings and bought all the monkeys.

Then they never saw the man or his assistant again, only monkeys everywhere!

****

Moral: Know when to walk away from an asset value bubble

Look at the actual scenario...Now World is under financial crisis and peaople in india also started suffering the consequences...Normal people in Kerala aslo started striving for their daily needs...Who can afford to buy and make profit from the much hyped real estate?Answer for the above discussion has already started happening...A CRASH in land value...Public started selling the land for whatever they get..Good thinking.....Lage raho....till it reach at the original price

Rocketing land prices in Kochi was only bubble created by the speculators. The recession started in economy will lead to witness falling realestate prices.