Friday, January 30, 2009

David Swensen's interview on Charlie Rose

As Yale’s chief investment officer, he manages more than $20 billion in endowment assets. During his tenure at the school, he has contributed more to Yale’s finances than anyone ever has to any university in the country. His new book is called "Pioneering Portfolio Management," and it is an update of his 2000 book of the same name.
Video link here

48 comments:

Shailesh said...

To buy or not to buy a home

This is ridiculous!!!

K said...

Vik,
Man you ran out of stories... here you go...

http://www.thehindubusinessline.com/iw/2009/02/01/stories/2009020150561500.htm

http://www.thehindubusinessline.com/iw/2009/02/01/stories/2009020150561500.htm

http://www.thehindubusinessline.com/iw/2009/02/01/stories/2009020150471400.htm

Anonymous said...

as IT and related professional salaries in india dip to more usual 20-25k /mo (or may be even lower) in urban settings, a rent of 7-10k/mo would be what market can afford.
A thumbrule of 100Xrent will mean that coolie-box apts should go for ~10 lacs.. This is what cooliedom can support w/out going bellyup. So kaluratnam & gangadin should wake up from mungerilal trance and smell the coffee. hey, bengaluru coffee ain't that bad.

Anonymous said...

Anatomy of the crisis for the years 2009-20??. The swagger of the so called Techies and Middle class is on the anvil.

RGE Monitor:
~~~~~~~~~~~
Recession will last for two years. GDP will continue to contract throughout all of 2009 (Q1 2009 -5%; Q2 2009 -4%; Q3 2009. -2.5%; Q4 2009 -1%) leading to a yearly real GDP growth of -3.4% in 2009 and a cumulative output loss of 5%. 2010 will see a slow and sluggish recovery.

Personal consumption will continue to contract sharply throughout 2009 due to negative wealth effects from
- housing and equity market losses
- rising job losses
- high debt & tight credit conditions,
- unemployment rate will reach 9% by the end of 2009
- capex will contract in the high double-digits throughout 2009. (due to slump in domestic and foreign demand and difficulty in accessing short-term credit, weak corporate earnings)
- contraction in imports (slump in pvt demand) will exceed contraction in exports (global recession)

Rosenberg, Merrill Lynch (not online): Depressions tend to follow years of leveraged prosperity.

Given that in the recent leveraged cycle of 2002-07,

- a record 40% of corporate profits were derived from financial activities
- household debt relative to income and assets surged to unprecedented levels and the personal savings rate briefly went negative at the height of the housing bubble
- it is safe to say the down-cycle we are currently experiencing did indeed follow a classic elongated period of leveraged prosperity.
-Depressions are long recessions that can last from 3 to 7 years and are marked by balance sheet compression and deleveraging: debt elimination, asset liquidation and rising savings rates.

Last but not the least
~~~~~~~~~~~~~~~~~~~~~~
- when the credit expansion reaches bubble proportions, the distance to the mean is longer and deeper

Vik said...

I'm getting bit depressed with the overall situation so I thought I will refrain for a while

Anonymous said...

The power is shifting towards to the home buyers. The recent story clearly proves that the collective will and patience of the sane people have prevailed and failed the attempts by former finance minister, Banks/Housing finance companies, RBI Policies ( forcing banks to restructure the loans, giving more leeways for the external commercial borrowings, not classifying the risky assets as non-performing assets) to prop-up the real estate market. Had it not been for the financial chicanery i.e. manipulating the books and fictitious sells (selling products to the companies within the group) and the assistance from the politician friends, the real estate companies would have gone bankrupt.


Please don’t get fooled by one more scheme by the SBI to put the freeze on home loan rate for one year. If you fall into the trap then please be ready to repent for the hasty decision. One year down the line the price of the asset (house) will crash but the cunning lender with reset the home loan rate to the higher one. The only recourse will be to blame yourself.


Realtors feel the heat, net crashes

BS Reporter / Mumbai February 1, 2009, 22:43 IST

....
....

Unitech and other developers have also been struggling to repay debt to banks and mutual funds as they fail to generate enough sales. Fitch Ratings on January 14 cut Unitech rating to junk grade on concerns of the developer’s ability to repay debt.

PARSVNATH, another property developer which announced its results today, said its consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore from 112.5 crore. Sales of the New Delhi-based developers in the period dropped 80 per cent to Rs 90.52 crore from Rs 465.31 crore.

ANSAL PROPERTIES reported a loss of Rs 15.73 crore in the third quarter. It had a profit of Rs 52.15 crore in the year-ago period. Sales of the company dropped 23 per cent in the three months to December 2008 to Rs 200 crore. Unitech shares have slumped 92 per cent in the past year to close at Rs 32.15 on Friday on the Bombay Stock Exchange. The benchmark Sensitive index has declined 79 per cent in the period.

Parsvnath shares have dropped 90 per cent in the past year to close at Rs 31.4 rupees on Friday on the exchange.
...
..

Anonymous said...

Heard of the Indian government's decision to develop mass affordable properties. Vik you're take on that?

Anil said...

Vik, I have always enjoyed new postings and opinions generated out of those stories but what is the reason of this recent slowdown in postings? Ideally, more the situation worsens, more users would like to know the real situation in other cities, around their localities, their personal experiences etc...Like I said eariler, we can hardly trust these Media with their sponsored stories constantly urging people to buy, think +ve blah blah..

Please keep the momentum of this blog...

Shailesh said...

DLF, Unitech Trapped in ‘Catch-22’ as Profits, Demand Dwindle

Housing prices fell as much as 40 percent in central parts of Mumbai, India’s commercial hub, and transactions dropped during the quarter to Dec. 31, Sanjay Dutt, chief executive at Jones Lang LaSalle Meghraj Property Consultants (India) Pvt., said in an e-mail on Jan. 23. Prices in Delhi and Bangalore dropped by about 8 percent, he said.

==
Unitech’s credit rating was cut to non-investment grade on Jan. 14 by Fitch Ratings, which cited concern about the developer’s ability to repay debt amid a slowdown in demand. The following week, the company paid or won extensions on three- quarters of the 25 billion rupees in loans due by March.

The company needs to make interest payments of 3.5 billion rupees each quarter at an average cost of 14 percent, according to Kotak’s Jain.

Shailesh said...

Hyderabad realty in a flux

Most property seekers are playing a wait-and-watch game. Forty-three per cent property seekers from Hyderabad expect further price correction in the coming months. Significantly, about 13 per cent are holding back due to prevailing job insecurity.

“Most developers purchased lands at high prices as if there is no tomorrow. With the real-estate sector now mirroring the harsh market conditions, it has created unmanageable burden on the entire system. The interest rate at about 11 per cent was high till recently and the recent downward trend in rates is welcome news,” he said.

Significantly, developers are looking at the affordable housing segment where there is heightened interest. Any apartment priced at more than Rs 2,000 per sq.ft and above is being approached cautiously. Buyers continue to discuss but postpone, hoping prices will come down further, he said. Asked about freebies, Mr Brar countered with, “how can one offer freebies such as car or discount? A builder will have to make good this amount from somewhere to offer such a deal.”

At least half a dozen developers have unveiled plans to develop apartments and houses for the affordable segment, looking beyond the IT sector staff. Due to the impact on the tech sector, builders too are looking at other segments. New projects will take about 12-18 months for implementation.

Shailesh said...

Slightly older, but relevant article,

‘Political parties are driving our land scams’

Why are land scams increasing in so many cities across India?
Because our political parties are using urban real estate as a prime source for finances. Of course, some money stays in some people’s pockets, but the engines driving this corruption are not individuals — they are the political parties themselves.

Anonymous said...

india's immature, sneaky & untrustworthy industry is known to fudge facts & jump likr babboons at the slightest perceived positive news.
W/ the orgy days of 2001-2008 now over, a pall of reality hangs over the wannabe foreign accented, pub milling crowd.

They are falling from sky into the indian gutter. welcome home, injuns.


http://economictimes.indiatimes.com/News/News_By_Industry/Jobs/Their_jobs_gone_Indias_young_seek_out_psychiatrists/articleshow/4059248.cms

Anonymous said...

Infosys cuts US staff, non-performers under scanner
1 Feb 2009, 1601 hrs IST, PTI

NEW DELHI: Infosys Technologies, India's second largest software exporter is believed to have slashed its on-site employees in the US, according
Infosys
Coming to terms with lay-off
Crisis: Keep staff motivated
How to stay afloat in your job
to sources.

In response to a query on this, the company spokesperson said, "We undergo an organization restructuring at periodic intervals, during which a very small number of roles may get redundant due to merger/consolidation at the business unit level. This is a normal process".

The Nasdaq-listed company which is putting a brave front in the face of slowdown, has also put its low ranking workforce under scanner while trying to reduce the bench employee numbers.

The spokesperson said Infosys follows a 'limited tolerance' policy for non-performers'.

"We have a performance management system in which people are categorized into various groups based on their performance. We have a personal development plan to improve their performance. If they don't improve even after them being part of the plan, we let them go", he stated.

However, the company did not give any figure on the people who have so far been asked to quit or those who have voluntarily gone under this category.

The bellwether IT firm is also on track to hire 25,000 people in current fiscal, in fact it could cross that figure as the long term prospect of the company improves.

"Though we said in the beginning of this fiscal that we would hire about 25,000 people, in our estimate our hiring will go up to 27,000 by March 31, 2009," Infosys Head of HRD, Education and Research T V Mohandas Pai had said earlier during the announcement of the third quarter results.
http://economictimes.indiatimes.com/Infosys_cuts_US_staff_non-performers_under_scanner/articleshow/4059856.cms

Vik said...

Anil and others,

I was waiting for some substantial developments on the real estate front. I think the SBI decision to slash rates to 8% seems to be pretty significant. It remains to be see how Unitech, Omaxe, Pasvanath, DLF and others survive this downturn. There remains no doubt that the stock investors are screwed, however the lenders of loans and repayment of bonds interest are the real worry for Unitech and others.

On the Infosys front, I have several friends in Cisco who have told me that all on-site Infy contractors have been moved back. So expect Infy revenue to decline significantly. They are also allowing deferred payments so Infy will take hit in first two quarters for offshore work. With a client like Cisco, Infy can afford to do that. What happens to Infosys less reliable clients with cash flow problems like Banks and financial companies

Anonymous said...

Vik,

The bellwether company (and others) has one more weapon in the armory which is the Variable Component of the salary. In true sense the variable component of the monthly salary is linked to an individual performance which prods ( as a stimulant/deterrent) to perform to the best of one's abilities. So far so good…!

Now comes the slowdown and the company uses the same for the unintended reason. Ok...they are highly ethical so they can not fudge the books and show the fictitious sells. One of lucrative options left to prop up the profits is by lowering the expenditure on employee salaries. How to achieve this? Send the directives to give bad appraisal rating compulsorily to 5% of workforce. Show up in every TV prime time show and mouth the lines " We have less tolerance for nonperformance...etc".

Whether these guys were sleeping when there was no MANDATE to COMPULSORIY push 5% of workforce under non-performance category. Once you get the CRR4(bad appraisal) your monthly salary is reduced drastically and of course the company's total spending on employee's pay is reduced. Hurraaah...lots of cost cutting by cutting the corners and the record profit...

I know few of my friends for whom EMIs is greater than the monthly in-hand salary. They can’t sell the house and can’t repay loan. They are in fix

This is just a cursory analysis but GOD only knows what methods these crooks adopt to prop up the profit and whack the hapless employees.

Bharat said...

The IT sector is definitely due for a further contraction. It has been under pressure for 6 months, but the months ahead are going to face further southward pressure.

Debt and severe economic pressures were forcing realtors to confront reality and realty had started a nosedive. However, now it seems with the SBI move, the politicians may have bought some breathing space for builders. But, I think this is temporary, Unitech is about to go bankrupt and people have already seen what teaser rates did to stupid buyers. This time people will wait for prices to crash. In the absence of Vulture's proclamations, let me say -
Guys, let it fall and then only buy it. 50% discount is guaranteed!!
Hope, I did that right :)

Anonymous said...

It seems as if Business Standard is keeping an eye on this Blog. -:)

and the plot thickens...

Infosys likely to slash variable pay

Ravi Menon / Bangalore February 02, 2009, 0:26 IST

Anticipating weakening demand from the US market, coupled with pricing and margin pressures in the fourth quarter of the current financial year, Infosys Technologies will look at slashing variable pay-out to its employees.

..
..
The weak marketing conditions have already affected pricing and employee utilisation at Infosys, with new projects slowing down and scaling down of some existing projects. Though the impact on Infosys' cash flows has been limited, according to Standard & Poor's. The company is clearly anticipating further pressures from pricing and foreign exchange fluctuations in the fourth quarter. The Bangalore-based IT major has also made it clear that it expects tougher negotiations from clients and delays in new orders till mid-February.

..
..
..

Anonymous said...

To buy or not to buy a home …
Roti, Kapda aur Makaan is the rousing war cry of many a politician. It is such a basic need, that politicians have been happily wringing this slogan dry, for decades. They were spot-on, latching on to this highly emotive issue. But the fact of the matter is that the Roti, Kapda aur Makaan they talk about, is actually for themselves.
Roti & Kapda are easier to achieve – many have crossed the threshold of worrying about these basics. However, Makaan poses a serious and often insurmountable challenge to even the decently endowed. Real estate prices have gone through the roof, especially in the last 5 years. In a city like Mumbai, the prices are virtually in stratosphere – the one crore rupees figure for homes has been breached in many suburbs of Mumbai. In fact, there are a whole lot of places where one would not get anything below half a crore!
So, is renting of homes the way out? Yes, it is, if one is able to convince the lady of the house about it. Ladies especially crave the security of a home. But, is renting of homes really a feasible idea? Yes, it is. Let us take Chembur, for instance. I enquired about the rentals and the prices in Diamond Garden Area in Chembur. The prices for a 2BHK apartment ranged from Rs.80 Lakhs to Rs.1 Crore and beyond. The rentals paid as a percentage of the property value was just over 4%. To an owner, that may well translate to 3% or even less, as society charges, repairs & maintenance, property tax & brokerage are costs to be borne by him. No wonder, you find lot of landlords grumbling about the pittance they get by way of rents.
A big plus with renting a home is that one does not have to take on huge loans and keep worrying about them. The downside of renting a home would be constant shifting and address changes, which could become irksome.
But, why do people buy properties and hold on to it? There is this primordial satisfaction of owning stuff- properties are definitely top-of-the heap. Properties do not depreciate in value – in any case, not like equity and hence score with investors. They have good residual value – like gold. Properties also appreciate over time – what with population increase, upward mobility & rapid urbanization. Properties are easy to understand – you pay money and you get land or a home ( unlike an entry in your demat account ). A whole lot of them prefer staying in their own homes – the satisfaction of being the master of one's castleis ofcourse priceless.
But the 300-500% appreciation of the past 5 years is not going to be replicated for a long time in the future. Going forward, the growth in value is going to be in single digits for a longtime to come. But a lot of them would still prefer the security of an asset, which is a solid store of wealth.
Then, is it a good time to buy? Is the time right, now? Before answering that question, let us consider a few facts. After touching 13%, inflation is down to 5% levels. There is talk of nil inflation by June/July, this year. Liquidity crisis has abated. Interest rates have started climbing down. Lower interest rates would mean better affordability for home buyers – they get a higher loan for the same EMI. Also, the home rates have come down to between 10-40%, across locations. That has again raised the expectation in the buyers mind of finding a property, they can afford.
The demand for homes, continue to be high. The main problem is of finding the right home at right price. With demand intact, the buying interest should get kindled again, given the confluence of various benign factors enumerated earlier. In a city like Mumbai, supply of land is a big constraint across the city – which means prices will not exactly crash. The prices may continue to be where they are, for a few months – maybe till June. By that time, elections would be over, the yearly results of corporates would be out and there would be a collective sigh of relief. The situation in the economy would have become better by then – inflation would be near datum level, interest rates are expected to settle between 7-8%, by then. From June onwards, home prices may slowly start rising along with the economy. There are a couple of potential problems though – 1) If there are further job losses till then and later, it could be a dampener 2) Any national or global fiasco would again depress the market.
Barring this, it would be a good time to consider buying a house. There are a few months left to buy your dream home and get the thumbs up from your lady!

Anonymous said...

This blog is for people who have lost hopes and really frustrated because they have missed their life time opportunity for buying a house earlier. I for quiet sure that most of you guys are desperate to buy a house, either they cannot afford it or don’t have the guts to buy thinking that the prices will crash.

My advice to you all is stay on rent for life long, keep shifting periodically like gypsy, pay brokerage and make new friends and neighbour. Before putting a picture on the wall please check with your landlord and off course keep good relationship with your old landlord so that you can receive your mails.

Increase in rent is not a problem as you can see your friends are paying an increased EMI. School for kids is great and my kids can go to school by bus so what now if they can walk.

Staying on rent is the greatest thing to do keep paying Rent which will be 1/3rd the EMI and after few years it will be close to the EMI in which you could have brought a bigger house of your own in a better area.

You guys are loosers and this blog shows till what extent you'll can go just to ensure that you can buy houses cheap. I am sure your wife’s will be hating guys like you who don’t have the balls to take decision and later plan to time the market.

SHAME ON YOU LOOSERS!!!

Dilip

erebus said...

The SBI 8% loan has a fine print for disatser....it is 8% only for a year, and then it adjusts to the prevailing market rates....THIS IS EXACTLY what brought the US real estate market ot its knees...Adjustable rate mortgages, Today I could take a loan with low interest rates, and take A higher loan than i could afford, sinc ethe rates are so disguised, and one year later 1 am doomed, in the US banks lent out at 1% ARM for 3 years....and when the rates were reset, the hell broke losse...

Observer said...

Looks like Dilip is a frustrated real estate broker or builder's agent. Now they are saying that paying more for some overpriced apartment is a sign of "manliness". Then I would advice Dilip to start paying 3 times more for Petrol, food, electricity and other items to show their own "manliness". In fact, it is foolishness to overpay for something.

Silly emotional appeals aside, the one thing on the side of prospective buyers is that they can afford to wait, and stay on rent. With all these vacant brand-new apartments, landlords are now competing to get tenants. Good for those who had the foresight and "girlishness" to wait and not buy those overpriced apartments and send all their hard-earned money to these real estate crooks.

Real estate people are doing all kinds of tricks to keep up the impression that things are going well. DLF has created this DLF Assets Ltd (DAL) company to "sell" their overpriced property to. They will then book these "sales" on the books of DLF, and try to raise money in the market for this DAL company, by trying to fool gullible investors. This way they can roll over the problem over to the next quarter. There will be an entry against DAL on DLF's books showing the property sales as receivables to be paid next quarter. But if they are not able to raise the money for DAL, then they will have to take back the properties from the DAL company on the books of DLF.

These financial tricks can only be played for another six months or so before banks force DLF and others to sell assets to rollover their debt. DLF has made it through 2008 because of the huge and gigantic profits made in the boom years from 2003-2007, which allowed them to service their debts and everyone in the company to make lots of money.

Now the poor buyers who bought at the top are suffering from psychiatric problems, financial worries, job insecurity, slaves to the bank and the companies, with no peace of mind. What is so "manly" about this situation? I can guarantee that these people like Dilip will not care a damn about these people they have conned. Now they are frustrated they cannot con more people.

Shame on these parasites like Dilip. Go get a real job which does not depend upon looting people of their hard-earned money. Most of these builders and brokers follow highly unethical business practices, do not deliver properties on time, raise fees arbitrarily, lower quality, do not deliver promised amenities or falsify corporation approvals, and refuse to return booking money upon cancellation, and will promise anything in words to con people to buy. Now the law of Karma is catching up with them.

Anonymous said...

Observer,

People like you from last two years are screaming on top of your voices about the crash in property prices. What happened barring few correction here and there?

People like you are responsible in influencing people for not buying and you can see what has happened.Are you going to pay for the opportunities they have lost.

Wait and watch in couple of months people will start buying houses because of fall in interest rates.

No external force can influence the market not even the brokers or jerks like you. Market moves purely on demand and supply and affordability.

Demand is huge and the same is also visible in this forum. Jerks like you can only keep dreaming about creating an asset.

Normally in bear run the bears make money but loosers like you sit on the fence and keep waiting for life long.(nothing personal when i say you)

Keep cribing through out your life guys like you will pay rent thru your noses in coming times.

India story although shaken but still strong it is only a matter of few months thing will look up again.

I am a salaried person myself and strongly beleive that only one thing which can mess India's growth story is Mayawati becoming the PM. If this happens Jerks like you will be right.


Dilip

Observer said...

Looks like Dilip has many investment properties which are now suffering losses. Too bad. One of the main reasons prices went up was because many salaried people bought properties as "investment" vehicles. These are people who are depriving genuine buyers from property purchases by driving up prices artificially.

Arguing that prices should stay high is stupid. This is like arguing that petrol prices should be 200 Rs/liter. Actually low prices for essential goods like petrol, housing and food are good for the economy because people will then have more disposable income and peace of mind and a good standard of living.

Investors who are sore at seeing losses in their property should remember that all investments carry risk. If housing prices are low that is good for the economy and for the entire nation. Anti-national people like Dilip and the real estate lobby are responsible for much of the troubles in the country.

The only reason politicians protest against high petrol prices, and high food prices, but not against high housing prices is because they are themselves involved in the real estate business.

So, I hope for the good of the entire nation, prices fall by at least 50% or more, so that houses become more affordable, and EMIs are comparable to rents. Rents are the true measure of affordability, what real end-users can afford to pay for housing.

Let us all help the country by fighting for lower house prices for all, and defeat these internal traitors who want to keep house prices high. Let us join this noble mission to take back our country from these corrupt people.

Jai Hind!

Observer said...

Many investors and real estate companies are now lowering rents to attract tenants. Unlike what Dilip above says, rents are going down because of oversupply of unaffordable investment properties. Here is the latest report in the Hindu Business magazine:

Bangalore rental market woos tenants

The economic slowdown has also played its part in bringing down the rental values, “as most of the apartments are occupied by IT employees; as the spending power gets tightened, tenants look out for better deals/offers, putting more pressure on the market,” he adds.

In order to combat the weak market sentiment, apartment owners are now offering discounts to retain/attract tenants.

Says Mr R. Balaji, CEO, Propmart, an end-to-end property solutions provider, “if a landlord misses the prospective tenant, his chance of getting an alternative tenant becomes difficult now.”
....
....
....
Today, four-five property owners are fighting over one tenant… giving the rental property-seekers so much to choose from. “Today people seeking rental properties have a lot of options to choose from, and there are so many owners who will bend over backwards to have a tenant,” says Aparna. “Owners/lessors have to tone down their expectations,” points out Mr Mathur.

Having more options to choose from has given tenants more negotiation power today, he says.

Observer said...

Let us also analyze Dilip's statements about paying through the nose for rents compared to EMIs. I am cutting and pasting Dilip's statement from his above comment:



Staying on rent is the greatest thing to do keep paying Rent which will be 1/3rd the EMI and after few years it will be close to the EMI in which you could have brought a bigger house of your own in a better area.


Now, rents are approximately 25-30% of the EMI payments as has been demonstrated many times on this blog over the last 3 months in previous postings by me. So let us say the EMI is 100 Rs/month and the rent is 30Rs/month. Let us also assume that rents go up approximately at the same rate as salary increases (7-8% a year from now on).

Assume:

Starting rent = 27.5 Rupees.
Annual rate of increase on average = 8%.
Constant EMI payment = 100 Rupees

Result:

Time for rent to become equal to EMI = 17 years!!

So, if you take a 20 year EMI, your rental amount will become equal to the EMI amount only after 17 years, almost until the end of the loan! Of course, you should not lose your job during that period. Because if you do, after listening to people like Dilip, then you will not only lose your house, but also your initial 15% downpayment (many lakhs) of rupees. Then, you can also be one of those psychiatric cases in the newspaper article posted here:

Depressed Indians lose jobs and property

Also, during those years you were renting, the money you were saving all those 17 years invested in Fixed Deposits at 10% would add up to approximately Rs. 21883, which is 220 times the EMI, or nearly the entire EMI payment itself over the 20 year period!

With that money, you can buy a plot in a small town, and build your own house without all these builders etc and just retire there in peace. These investors like Dilip and other real estate lobby people will not allow you to think in logical terms. Save yourself, and do the above calculations yourself!

Anonymous said...

See realty prices at inflation-adjusted '98 levels: DLF

http://www.moneycontrol.com/india/news/results-boardroom/see-realty-prices-at-inflation-adjusted-98-prices-dlf/383218

ankit said...

Dilip stop spreading false rumours.
Real estate is not at all an investment and rentals are crashing all across India. See the results of any real estate compnay.

In fact the richest investors right from Warren Buffett, Rakesh J. to Yogesh Chabria have said that real estate isn't an investment. Some of them like Yogesh Chabria have even analysed how it is better to live on rent and why real estate prices will fall over 70% in India.

Today all of us have the power of the internet to share information and do not try to spread rumors. Mind your 'dirty' language also.

People are smart to understand themslves.

Jai Bharath!

Anonymous said...

Observer,

Keep dreaming and see how the markets moves. People like you talk about lot of unsold houses of the investors. This loose talk is in air wont help, these kind of talks were there for two years what happened everyone knows.

Builders and investors have learned how to deal with the situation. With interest rates coming down the builders can see light in the tunnel. Now jerks like you still feel that prices will crash? :-)When the builders did not reduce the rates during Diwali lot of you guys were disappointed, i can understand but jerks like you failed to understand that despite the fact that 80% of sales are done during diwali builders choose not to reduce rates.

Builders know for sure about the demand for the kind of enquiry they are getting. These guys have earned for generations ahead and will not bring down the prices.

Some builders are in a fix for overtrading but those guys are marginal and they have gone slow on there projects or selling limited properties at discounted price.

Sometime back Oberois construction have brought down the price for the new building in Goregaon (yet on paper) to Rs 7500 but my friend this price was closed within a week after selling 84 flats of 2800 sqft area each.

Please go and take a walk and wait for couple of years before anything of these sort to happen. I have brought property in 2005 and i am sure that it will never come back to those levels.

I am proud and happy that I have brought property and will continue to do as an when I get a good deal.


Prices were at Rs.175/sq ft in Mumbai in early 70's why don’t you predict that it will reach those levels.

Jerk think from a neutral person, Land is a scaricty in Mumbai, you get nothing less then Rs.4000 in a descent area, add paper work, constructions and ther margins it will come atleast to 7000 to 8000 as of date.

BTW 4000 is the cheapest land in slums of Mumbai.

Keep dreaming and wait for the crash which may come in, god knows when but as of now crash in Mumbai is ruled out.

Some builders may sell at lower price out of sheer compulsion but overall crash lets forget it.
Pls. dont say Jai Hind, guys like you must say Jai Mayawati!! :-)


Dilip

Observer said...

I remember people like Dilip saying the same things during the boom of 95-96, and then the crash of 97-98 when property prices plunged by 40%. They then stayed flat till 2001. ALso, the property boom in the early eighties and the crash in 1989-1990 followed a similar pattern.

Those articles have been posted by me and other users on this blog a month or so ago. Investors like Dilip should read those. History repeats itself. Enough said. Time to exit those investments rather than buy more. Otherwise it will mean only more losses. Prices will come back to pre-boom values.

Anonymous said...

Observer,
You have written the following

Now, rents are approximately 25-30% of the EMI payments as has been demonstrated many times on this blog over the last 3 months in previous postings by me. So let us say the EMI is 100 Rs/month and the rent is 30Rs/month. Let us also assume that rents go up approximately at the same rate as salary increases (7-8% a year from now on).

Assume:

Starting rent = 27.5 Rupees.
Annual rate of increase on average = 8%.
Constant EMI payment = 100 Rupees

Result:

Time for rent to become equal to EMI = 17 years!!


Great work but please mention both sides of the story. I think unless you are planning to stay in forest after retirement and don’t want to buy a house then follow what observer says.

My dear friend have you ever thought what will be the price of the same house after 17 years. Traditionally Mumbai has given 12% return YOY with this logic the price of the house which is 1cr now will cost 6.86Cr.

Now look at paying rent for the same house which will on an average be 4% of the value i.e Rs.27,44,000 per annum which works around 2,28,000 per month, whereas your EMI for 1 Cr flat on an average will not be more then one lakh per month.

Please do not forget that the capital appreciation you have earned.

Let guys like observer pay rent and let there money go down the drain these guys deserve this.

Either you can choose to buy a house or rent the choice is yours.


Dilip

Anonymous said...

ankit said...
Dilip stop spreading false rumours.
Real estate is not at all an investment and rentals are crashing all across India. See the results of any real estate compnay.

Dear Ankit,

I dont what others say but if i get good returns to hell with others. You also do the same, will be happy in life.

Dilip

Anonymous said...

remember people like Dilip saying the same things during the boom of 95-96, and then the crash of 97-98 when property prices plunged by 40%. They then stayed flat till 2001. ALso, the property boom in the early eighties and the crash in 1989-1990 followed a similar pattern.


Observer,

I dont know whom you were discussing with and what was your age at that time but i know for sure Internet was not acessible to most of us.

Dilip.

Observer said...

It is laughable to suggest apartment prices will be 6.86 crores in another 17 years. Real estate moves in cycles, booms followed by prolonged busts. Any serious investor knows that. Who will buy these 7crore apartments? Already apartment prices in Mumbai are approaching US prices. Salaries are not going to be higher in India than in the US. I sometimes wonder if these investors really believe their own hype. Looks like they are in their own universe. heheheheh.

Relax man. Take it easy. If you are so confident that prices will keep going up, then go ahead and buy more properties for their capital appreciation! It means only more properties for low rentals for people!

I think Dilip = Anil = SabbalSeshu = Bindaas Bhai.

Also, about the 1989 crash and the 1997-98 crash, go back a few posts and reread the articles from Business Standard issue of May 1997 that I had posted. Same arguments from the builder lobby at that time also. Yes, Business Standard had an internet edition even in 1997 also. It looks like you are uninformed.

Bharat said...
This comment has been removed by the author.
Bharat said...

Dear Dilip,

You sound really pissed off and anguished. If you are so confident about your analysis and are making tons of money as you seem to be projecting, why would you be so pissed off with people here and use bad words to provoke others into angry responses.

Your analysis about rents and emi is impeccable and compelling. You should not waste time, pls. go and invest in all these marvelous opportunities make crores of money and leave these losers to be with their flock :)

Vinay said...

Vik/etc. This is my favourite blog. Keep it up.
I have a doubt on the gloomy job market. I have been seeing a lot of bearish stuff in web/media. Is it really as bad as written?. Just to given an example, one of my friends works in a small service based IT company ( around 500 people ). Looking at him gives an impression things are normal. Also keep in mind most of their customers are banking customers. And he is a senior guy and mature enough to know whats happening around. This is just one example. There are many like him around. (You can even make out by reading their scrcp book in social networking sites :-)).
In contrast,I work for a leading MNC which is very strong. I am not scared for the time being. But if this continues like this, surely will be worried. I have always been conservative and will continue to be like that. But if i look at those friends,i wonder if am doing the right thing.

Anonymous said...

Hey Dilip,
The title of this blog says it all. It is India Housing Bubble. Got it? This is a place for people who believe that there is a housing bubble in India. Obviously you don't believe it, so why are you here? Go run out, buy some properties, they will rise in price again! And hurry because the interest rates are low.

Anonymous said...

Hey idiot,
If you want to keep sane voices away from this blog, keep it a private list. This blog essentially freeloads on google blogspot although that is not an issue but it also shamelessly copies and pastes copyrighted news articles and then dumbos like you ask people to stay out? Does the honcho Vik wants to make it a bears only gated community? AS an aside, if you make a real life gated community of bears on this blog, man I'll say prices will crash down to gutter level. For all other real estate in India, there is only a correction. But keep fantasizing about crash. After all, that's all dunces, filthy mouth bears and run-of-the-mill 'observers' can do.

Now which one of the all-too-predictable bozos will be the first one to say that I am a desperate investor trapped in multiple investments trying to get rid of them?

Over to you!
:-)

Anonymous said...

Dear Observer/Vulture/Shailesh and others,

We need to avoid getting provoked by trolls. They get their raison d' etre by provoking others and getting into discussions where they can abuse and degenerate the sane way people are discussing in this forum.

I think the SBI move and other things we are seeing including this provocation are a bull trap. For people who follow stock markets or have a look at Hyman Minsky's model...after the peak of the bubble- the delusionary phase, prices fall sharply, but bounce back a bit due to various traps and inducements by market players. At this time the smart operators who might be trapped, make an exit and leave. After this phase, you see a sharp decline. The market has touched the peak, prices have slightly corrected, now by hook or crook (mostly crook), people are looking for the greedy greater fool to offload their toxic assets and make their exits. Mark my words another 3-4 months and thou shalt see the chasm!

-pilid

Observer said...

"Sane" voices? The voices which say if one does not buy property, one lacks testicles? One is not manly if one does not pay ridiculous sums of money for an overpriced apartment? So far, all over the world, the "insane" voices who claim there is a housing bubble seem to be correct.

Naturally in any market, those who have product to sell will want the highest price for it, while the buyers will want to pay the lowest amount. When the two disagree very much on the pricing, then sales are going to suffer, as they are currently. Secondly, a 40% drop in price does not seem to be a "correction". So one needs to define what exactly is a correction, and what is a crash.

Needless to say, regardless of which definition is used, prices are headed only one way, down, this year.

Anonymous said...

Sobha Developers Q3 net dips 88%

http://www.business-standard.com/india/news/sobha-developers-q3-net-dips-88/03/00/54097/on

Anonymous said...

article on realty companies

http://premiuminvestments.in/cover-feature-28397/106/Realty-comes-tumbling-down.html

Anonymous said...

40% correction could be in select pockets. No way we can pretend that there is across the board 30-40% crash in Indian realty. If you focus yourself exclusively on area around airport road in Bangalore, you are bound to come out with the feeling that whole world is collapsing. Find some friends in Bangalore who are seriously looking for a house, but waiting for crash. Ask them how much of a pullback they have seen in the values of homes they like. You would be surprised.

Anonymous said...

It is laughable to suggest apartment prices will be 6.86 crores in another 17 years. Real estate moves in cycles, booms followed by prolonged busts. Any serious investor knows that. Who will buy these 7crore apartments? Already apartment prices in Mumbai are approaching US prices. Salaries are not going to be higher in India than in the US. I sometimes wonder if these investors really believe their own hype. Looks like they are in their own universe. heheheheh.

Observer,

Keep laughing but try to do some homework. My request to you is to look at atleast five suburbs in the city limits of Mumbai and find out the price twenty years back and the current price over there and then laugh.

Let us see who has the last laugh. Jerk this is very easy to find out just check with your friends who are staying in Mumbai for twenty years or so and have brought the houses.

Govt employees who have stayed on company qtrs vis a viz people who have not opted to buy hiuses check with them about their decision and share with this forum. Guys like you just give talks without even getting into the market.

Reading books and giving theory won’t help look at the real situation.

Dilip

Observer said...

Dilip:

Did you even read the article about the boom of 94-95 and the crash of 97-98? Were you even around at that time. Keep living in your dream world. If you want to live in the real world, learn about real estate cycles. Otherwise you come across as very naive. The smart ones are the ones who sold in the 1996 top, because they could see the crash coming, and then bought it in early 2002-2003 when they saw the oncoming boom, and then sold it to naive people like you during 2005-2007.

This is what separates the gullible and naive investors like you from the smart ones who end up rich. Life has many lessons, looks like you still have to learn a lot. Take care. It is futile to argue with someone who refuses to live in the real world, but this is how the world works pal.

Anonymous said...

Observer,

I know how smart you guys are for not buying a house when there was an opportunity.

Now guys like you have the balls to talk about timing the market.

Go and take a walk. We dont beleive in timing the market.

Dilip

Anonymous said...

Observer rambled:
"The smart ones are the ones who sold in the 1996 top, because they could see the crash coming, and then bought it in early 2002-2003 when they saw the oncoming boom, and then sold it to naive people like you during 2005-2007."

So your average homeowner is supposed to buy and sell his home according to realty boom and bust cycles. This is probably a first where ordinary people are quoted examples of those who trade homes every few years and make money.

To other poster Dilip:

My family had a home in tier 3 city built in 1980 at the cost of 2 lakh rupees. The average Joe contractor didn't do a very good job. When we sold the home in 2004, it was not in the best of condition but it still fetched 22 lakh rupees. I don't look at it as a bumper return on investment, but it was able to beat inflation quite handily. With those 22 lakh rupees, my father was able to buy a nice, compact 2 BHK flat in a bigger city in 2005. By the way, 7 cr rupees may not be a very sensational amount 17 years from now. But it takes certain level of thinking to understand that. :-)

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