The question ringing in the minds of observers who are watching the rip roaring increase in plot rates around Hyderabad is: "Are we in for a crash test, where the car gets smashed, like the Nano?!". Is this not a case of irrational exuberance? (defined as investor enthusiasm that drives asset prices up to levels that aren't supported by fundamentals)
In 360 degrees around Hyderabad , in suburban localities with little development (bad roads, no drainage and in many areas no GHMC drinking water) , the plot rates hover around Rs.35,000 to 50,000/sqd.
We are not talking about suburban locations close to main roads, but a little deeper. The potential of high class development in such areas are almost nil. Still the plot rates are astronomically high. During the last one year, prices have been increasing month on month, non stop.
Can the people who live in those areas really afford above 1Crore for a 267sqd plot, assuming Rs.40K/sqd? Certainly not! Go around and look up the localities and you will find lower middle class people, struggling with their lives.
Then how is this increase happening? If there are no transactions, the prices would reduce. It's because transactions are happening, that prices are increasing. So there are buyers even at such rates.
Obviously, these must be short term investors who sell plots after holding for couple of months, to pocket the handsome margin. The ball gets passed on, till the unfortunate genuine buyer, buys it and holds only to find himself hurtling towards bottomless pit!
The political stability and the unending goodwill schemes announced by the current Govt, have created a false aura of heavenly pleasure, for Hyderabad residents! And there are now talks of opinion polls suggesting TRS might find it hard! No boom ever lasts! Boom and bust happens in cycles! And when the balloon pricks, the crash will be steep and very painful.
And when the "boom" is only on real estate rate and not in development works, you should know you are in trouble!
Examples of irrational exuberance? (curtsy OLX - Hyperlinks will be removed after few days. The pictures will tell you the real worth!)
https://tinyurl.com/y9ww9qhu Rs.36,500 at Jayapuri Colony
https://tinyurl.com/ybb9jv46 Rs.40,000 at Hanuman Nagar
https://tinyurl.com/ya652f7e Rs.35,000 at Bandamkommu(?)
https://tinyurl.com/yd23dk62 (Rs.30,000/sqd Inner area of Ameenpur)
https://tinyurl.com/ybjrutlz (Rs.50,000 at Jiyaguda?).
13 Nov 2018