Monday, February 16, 2009

20,000 defaulters to lose homes

Here is another video where Nassim Taleb and Daniel Kahneman discusses the crisis hitting the US and consequently the world. Officially Japan is in depression. Just as Lehman was leveraged 30:1, I expect the builders to have similar leverage. Financial wizadry aside, we now turn to psycology for answers.

Source Deccan Chronicle 17/Feb/2009
Around 20,000 houses in the twin cities are to be auctioned after borrowers defaulted on home loan payments. This is the first time that so many houses are being put up for auction. Many of the borrowers are IT employees who were unable to pay the equated monthly instalments because of the current slowdown in the software industry. Several techies who took loans have lost their jobs and others were forced to accept salary cuts making it difficult for them to meet their financial commitments.

Apart from techies, there are many employees in the aviation sector too who are unable to pay their EMIs. Banks are in a piquant situa tion since borrowers have not hurried to pay their EMIs despite the threat of the auction.

In fact, they are willing for the auction as they are not in a position to mobilise resources. The borrowers have no option but to forego the amount that they have invested may come to around 20 per cent of the property value. Banks which provided 80 per cent amount as loan fear that they may not get the amount even if they auction the properties. “There is no option for banks except to dispose the properties when the borrowers are reluctant to clear the dues,” said the IDBI director, Mr K. Narasimha Murthy. “More auctions will be held in the next few months since many borrowers are yet to receive final notices from banks.”


Anonymous said...

Now IT begins to talk job cuts

Infosys, Nandan Nilekani - "clients are delaying spending, leading to a slowdown in orders. They are not ready to make big investments and are conserving cash. Infosys has a lot of inefficiencies which have been overlooked so far and will be looking to eliminate them."

HCL,Vineet Nayar - "There is no point in repeating that the tunnel is dark. But a majority of the clients are telling us that they are in trouble. 'Caught in the headlights' is the right expression,"

TCS, Ramadorai - "We can't just say we will run the same way we used to.. We can't have a role for an employee where it is not a business role. How long can you keep saying you have a social responsibility (to protect jobs)?"

"They [the customers] are not optimistic in the short term, they are not optimistic in the medium term and they are not optimistic about the long term,"

Trimming of workforce would be done gradually through a performance-based system.

These are the same people who with their planted media reporters were spreading the false information about the growth in IT sectors.

The realty firms, one bad news for you. The Techies who used to be the new entrants in your zombie scheme have been hit hardly and your entire pyramid has started cracking up. No matter whatever tactic is applied to hold the prices up artificially, you will have to bite the dust.

Anonymous said...

The following is coming in India:
--Sensex to go around 6000 level.
--MBAs will be begging on streets.
--People who bought in 2008/9 will repent and thrashed by families.
--People who bought in 2003-2006 will see prices going back to 1998 levels.
--Govt. will change but motto would be to save the economy by pumping money and saving builders/banks.
--Many investors would get suicidal thoughts as people are yet prepred mentally for the coming downfall.

Salaries would be reduced by almost half, especially for people making 15-18 lacs p.a. and above. A lot of middle managers would be laid off. US/UK will kick out Indians on visas diplomatically.

And above all the RE prices will come down by 70%. A flat selling for 1 Crore today will be selling for 30 lacs in 2-3 years time.

Cash is king. Keep your cash and wait for liquidation by banks/builders.

Anonymous said...

Registration Ban hits Maytas Hill County buyers
TOI 15.02.09

The Satyam fraud has begun pinching the public at large. Those who bought properties from Maytas are unable to get their properties registered. V S N Raju purchased a villa (unit no 215) in Maytas Hill County at Bachupally in October 23, 2006 and paid the entire amount of more than Rs 47 lakh. But when Raju went to Suraram sub-registrar’s office to get the property registered in his name on February 4, 2009, he was informed that it cannot be done as a ban had been imposed on the transactions of Maytas Properties Ltd which promoted the project.

Similarly ‘E Centric Solutions Pvt Ltd’ bought eight villas (nos 85,483, 664, 675, 700,701, 702 and 703) in the same Maytas Hill County in February 2007. When the director of the company R V V Prasad sought to register the property, the officials informed it could not be done because of the ban. More than a dozen people have approached the Suraram subregistrar office for registrations in the past one week and their requests were denied. The fact that they spent lakhs of rupees buying property which they are not able to get registered is causing anxiety to them.

Several people have sent requests to the inspector general of registration and stamps department to allow transactions on their individual bungalows as they were suffering for no fault of theirs. Sources said nearly 300 bungalows were sold in the Maytas Hill County and Maytas Properties Ltd in the last two years and most of the buyers have secured loans from eight banks. Fifty per cent of them have not got their property registered in their names.

Transactions on the property was stalled on January 29, 2009 by the registration and stamps (R&S) department after the CID investigating officer of Satyam fraud case, N Balaji Rao, wrote a letter to the inspector general of R&S department on January 13, 2009 to stall the land transactions on properties of Satyam Computer Services Ltd, former chairman of Satyam B Ramalinga Raju, his family members, Maytas companies and properties in the name of former chief financial officer of Satyam Vadlamani Srinivas.

Maytas Hill County project was developed by Maytas Properties Ltd. Swarnamukhi Green Fields Pvt Ltd and 13 other companies have about 95 acres land in survey nos 194/p, 196/p, 197/p which was also developed by Maytas Properties Pvt Ltd in the name of Maytas Hill County at Bachupally village in Qutubullapur mandal in Ranga Reddy district.

Anonymous said...

Mantri builders in Bangalore screws Mantri Flora residents. More information at

Anonymous said...

I have a lot of comments here saying RE wont fall drastically unless salary levels go back to 2003. But this is not a valid argument.
1)The sentiment is very bad. Even if the salary is not cut, people are scared of lay off. I know a friend who was searching for a property in 4000rs/sqft budget. Now he is not ready to buy even at 2500. I guess he even stopped searching
2)Every day we keep hearing lay offs. Most of these guys have paid whatever their savings as prepayment and paying huge EMI. So they have to sell it off urgently
3)And thers other category. people who are sitting on cash or confident that they wont be laid off. A majoriy of them are delaying because they think it will come down further

Anonymous said...

Hello all-
Salaries have nothing to do with falling home prices. In US, the salaries rose only 10-15% and home prices rose 400-500%. The decline in housing in US started in 2007 and salaries started going down in 2009. Low salaries are a result of housing downturn and not the cause. Once housing goes back to sane levels in India, there will be layoffs and ssalary reductions tied to banking, RE sector. IT is dependent on world economy and with major world economies going in depression (severe recession), IT will be hit hard. It is a double whammy.

Anyway, RE will go back to 1998 levels in a year or two. If you are a buyer, wait and don't catch a falling knife.


Shailesh said...

Economist Article.

America's banking crisis: Worse than Japan?

K said...

RE assholes are talking about affordable homes only in terms their basic cost like 30 lac or 20 lac but if you look at sq. ft rate and other overheads.Its the same.

They want central & state govts. to bring down every other thing that impacts the sector but they are not ready to reduce the price.These fools don't understand again same tax paying public is paying for both house and RE package.

In boom time; public will think alike (means no one thinks) and goes ga ga over anything and everyhing. In the tough times also; public will think alike (now really thinks) and will be bearish till it really sees something very obvious.Then kicks off the next bull...till then like vulture says

"So guys let it fall then only pick up minimum 50% price cut is guarantee."

Anonymous said...

Bangalore: Failing to attract buyers, DLF Ltd, India’s largest developer by market value, has decided to relaunch its maiden Bangalore project in a different format and has reduced prices—for the second time in three months—by one-third.
DLF is repositioning the project, Westend Heights, converting it from a premium residential development with large apartments to smaller, less-expensive homes. The prices for the project have been cut from Rs2,775 a sq. ft to Rs1,850.
Not just prices, the sizes of apartments have also shrunk. Two-bedroom apartments, which were about 1,310 sq. ft in size, are now being sold as 1,085 sq. ft flats. This basically means that buyers who would have had to pay Rs36.35 lakh will now have a cheaper option in a 1,085 sq. ft flat at some Rs24.5 lakh including registration and stamp duty. The 80-acre property will come up with 700 flats in two years.
DLF didn’t respond to emails and phone calls on Tuesday for comment.
DLF has been attempting to launch this project since early 2008 but was unable to do so due to delay in getting approvals and then the economic slowdown. Even after dropping rates and a soft launch in mid-November, sales didn’t happen. “At the present price, DLF should be able to bring in sales. The average property buyer is so price-conscious today that even Rs100 a sq. ft makes a difference,” said Ranvir Dugal, managing director of PropIQ Realty Tech Pvt. Ltd, a Bangalore-based property advisory firm.
In November, when DLF had pushed down the per sq. ft rate from Rs3,500 to Rs2,775, property consultants had said that it would be difficult for the the developer to sell at that price and predicted it would further slash prices.
Last month, DLF repriced a project in Hyderabad, The Summit. “The per sq. ft prices that were to open at Rs4,000 have been slashed to Rs1,850 for a 1,760 sq. ft flat and to Rs2,000 for a 1,185 sq. ft flat in the project. Construction hasn’t yet begun and the project is expected to finish in three years,” said a DLF executive, who did not want to be identified and is not authorized to speak to the media.
DLF recently warned the Karnataka government that it may pull out of the Rs24,000 crore Bidadi integrated township project, asking the latter to return its earnest money deposit of Rs400 crore. The reason cited by DLF, which is developing the project through a 50:50 joint venture with Dubai-based realty firm Limitless Llc., was delay in the government’s acquisition of land for the project.
A senior official of the Bangalore Metropolitan Region Development Authority, on condition of anonymity, told Mint that it has urged DLF to reconsider its decision and not to withdraw at this stage. “We also fear that DLF may quit from the project because it doesn’t have the money to execute it,” said the official.
In eastern India, too, DLF is building a 500-acre township in suburban Kolkata instead of the initially planned 4,840-acre township.

Anonymous said...

Anon above:
DLF's houses will not sell. Right now the problems are more than lowering of prices.
--Speculators are mostly out now.
--Banks will not give loans easily.
--People are scared of losing jobs.
--Salaries are being cut all across
--The sentiment to buy has vanished

Now if someone has cash and not many people have it, can buy and suffer later.

The more I read about the economic conditions, the more I get convinced that prices will fall at least 70% in India by 2011. Sensex will touch 6000 in the coming months and Dow will also be around 6000 soon.

Kapil said...

Good reading in free time

Read both Part I and II.

Anonymous said...

Great link Kapil,
Question is how does India compare to US in this situation. Indian living standards are very different the US. How will different strata of society in India be affected by the global recession ?

Anonymous said...

A lot of information Kapil.
To Anon above:
India has lower cost of living than US, infact very cheap. Rents are low, food is cheap, clothes are cheap, eating out is no expensive etc. Petrol I'm counting as world equivalent as the Govt. subsidises it a lot. Salaries are also very low as compared to US salary.

How come housing is same as US. Flats in some parts of India are more expensive than NY city, which is one of the most expensive areas of US.

I think India is in a more bublicious state than US and will fall down fast and farther than US with no recovery for a long time.


Anonymous said...

India ’on the brink of property boom’
by News Desk

Market analysts are predicting a seven fold growth in Indian real estate value – from US$12 billion to $90 billion by 2015 – in the wake of the government’s decision to implement a 100 per cent relaxation of foreign direct investment regulations last year.

Martin Bowen, UK Sales Director of Profile Europe (UK) Ltd said, “The residential property market is experiencing exponential growth right across India, but especially in urban areas and those close to the government’s new specialised industrial zones.

“Recent figures cited by the Bank of Baroda’s Chief Economist show properties have appreciated by as much as 60 per cent to 100 per cent over the last 12 months in most towns.”

The ratio of supply and demand is believed to be a key factor in the massive growth. Bowen continues, “There is a shortfall of some 20 million units, this is largely due to 55 per cent of India’s population being under 25 and the fact that the economy is booming and has resulted in a growing middle class, looking for quality accommodation because of growing disposable incomes.

“Add to this the growing mortgage market and declining interest rates which have made property more affordable despite actual property price increases.”

Profile Europe (UK) Ltd comes under the umbrella of the Profile Group, which was established in the UAE in early 2003 with interests in capital, investments, consulting, real estate developments, project management and real estate sales.

Anonymous said...

so another so called billionaire Stanford is found to be engaging in fraud & showering money on cricket.
If truth be told, banya ambani & mittal's fraud if unearthed could be a real shocker. Heck ambani's nefarious activities would implicate half the govt ministers.

Shriniwas Kulkarni said...

Great to hear from HB about house prices. Here in Arizona you can get a 2000sq feet house for 100k-120k US$ with only 20% down payment.

Even commercial space in India is highly overvalued. So many builders have built "IT parks" - where are they going to get clients ? Are they going to set up Vada-Paav or Pan shops in Air conditioned 12 storeyed offices ? Banks, MFs and Investment cos, Insurance Cos, IT, ITES and then what ?
None of these sectors will grow for the time being (I put this at 2 years - 3 years*) Who is going to buy the commercial space? The stupid real estate agents? I have seen large complexes in Pune quietly turn into tailors' shops who stitch anything from Salwar kameez to car upholstery. With any luck these complexes can become some colleges, or coaching classes max. God bless our real hard working Indians and curse these greedy builders and greedier agents.

This economic downturn (I call it the great Depression 2.0) is a structural problem of the global money system.
Till 1900 USA was out of the world's banking system and had its own rules and standards and dealt with other countries in Gold and Raw materials only. The moment US entered the World Money system things went up and then collapsed in 1929.

The whole concept of money relies on YoY growth which is not sustainable in the long term. Those who have good bandwidth, please watch Paul Gringon's Money as debt series


I think there are going to be a big structural changes in the world and should take at least the full Obama tenure.

*I have no personal enimity with any caste, but if Mayawati becomes PM in May then I will not guarantee any future for India in her term.

Anonymous said...

Now Gold is getting into bubble mania. It will reach Rs. 20,000 per 10 gm soon. People now feel safe investing in gold as housing is gone, interest rates are low in banks, stocks are spooked, bonds are not yielding much and everyone all over the world is buying Gold. An Ounce of Gold would be close to 1200 dollars in 2 months.

Anonymous said...

Correction in real estate is bound to come: Parekh


Anonymous said...

The question is not whether the correction will come or not at this time. Right now the question is:
--How much correction. Is it correction or just getting back to the old prices of 1997-98.
--How long it might take. It may take upto 2 years as masses are holding onto there newfound paper wealth.

Today Obama in US lashed out at the whole housing industry, banks and Bush administration about how dumb they were. He asked when these assets were going up 40-50% every year, why didn't anyone catch that it is too good to be true.

So, prices in India are also too good to be true. I don't agree with Vulture that there will be a 50% drop. I think there will be a 70% drop over the next few years.


Vik said...

The 1 billion dollar question is

Will an apt priced 10,000 at peak drop 50% and is 5,000 the bottom ?


Will an apt priced 5,000 at peak drop 50% is 2,500 is the bottom ?


Will an apt priced at 20,000 at peak drop 50% and 10,000 is the bottom ?

If 40L loans are hard to come by, how hard will it to get a loan of 80L ? All higher end properties will have to transact in the black and in cash. There is no scope of leverage. this mean higher end apts will drop more then lower end apts. In the 20-30L range, banks will support the buyers.

Anonymous said...

You are right. The higher end properties will see major fall. It is about affordability of common man and the prices affordable to common man would stay fine. Like in the US, RE in the range 400k -
500K range already has dropped 40-50%, whereas RE around 150K-250K range is down by 20-30%. My friends in Virgina who bought at the peak for 1.2M are seeing their properties assessed at 650K for 2009 and the declines are not done yet.


Vik said...

Yep. Dallas/Houston have seen drops of 10%. A 220k house there is now 200k. but

Million dolar houses in Sacramento has seen drops of 50% to 500k.

The bigger they are, the harder they fall.

So Mumbai will beat every city hands down in the decline, no-withstanding all positives like density/demand/lack of suppy/black money/investment bankers/stock market/private equity

Anonymous said...

Guys- I used to see views in the blog to buy property 150 - 180 months of rent. Rent varies based on the demand...

My friend is saying people should not buy houses more than 25 - 30 months income... Sounded initially stupid to me but this is very reasonable... If your monthly income is 30K then we should look for 7.5 - 10 Lakhs... Will be possible? Yes its possible...

I was in chennai and i remember that we used to get flats for 5 Lakhs (2000 - 2003 times)... The rent for the property was Rs 1500... As a yield it was not much... Person earning 16K it will be close to 30 months salary...

By this logic i dont find a reason for residential properties at 1 Crore...

In this scenario one can also pre-pay if rates go up....

Thankfully the maximum tenure for loans is only 20 years in india... Else RE A***holes would have quoted flat prices nothing less than a crore...

Anonymous said...

In this blog you guys regard Deepak parekh as great... He is another a***hole who charges existing borrowers with very high interest... read the comments in the above link... Yesterday he said SBI is doing a gimmick... What was he doing 2 years back... Atleast one can trust SBI if the govt applies some pressure they will not charge huge rates... The private guys will squeeze our balls to the core...

Guess Deepak is feeling the heat from SBI.... Good if lots of borrowers move from ICICI and HDFC... They have become arrogant these days...

Housing bubble is created by the Lenders like ICICI And HDFC who gave loans... PSB did not approve projects like this and by the time they approve the property price would have kumped 30 % and its good the people will not buy those stupid properties... this is not the case with HDFC /ICICI... They will have a deal with builders and approve properties whose land title will not be good!!

Anonymous said...

Why does this news is not there in any other indian newspaper?

Anonymous said...

--In mid Jan the furious bankers issued a statement for more RE price cut.
--On 15th ICICI, issued a statement for 15-20% correction
--On 17th HDFC, issued a statement for price correction.
Looks like Bankers are more worried than buyers.
On the other hand ICICI is sending the promotional offers for RE deals, yeah
yesterday only received a offer for apartment in Indore.

These are another observable signs of deepening crisis, where Banks are desperate to get away RE exposure from balance sheet.

So guys let it fall then only pick up minimum 50% price cut is guarantee


Anonymous said...

Bank crisis is yet to hit India. A lot of NPAs will be exposed. Banks like ICICI will even go bankrupt.

Anonymous said...

IT dreams crash with fraud

Bhubaneswar, Feb. 18: Thirty-one budding software engineers of an engineering college in Rourkela were cheated of Rs 50,000 each by a dud IT firm in Calcutta that had promised them jobs.
Rahul Barua, a final-year computer science student, said: “The company promised us Rs 7,000 for the first three months during the training period.”

Vik said...

News reporters have a positive biase. They want to sound optimistic and therefore will underplay the real situation. Also newspapers get revenue from builders and banks from advertisements so it is in their interest to advance their cause. the end users are least important to the news media. It is but natural to not bite the hand, that feeds you.

Shriniwas K said...

@Anonymous with the IT Job fraud -

This fraud trap is exactly what engineering students must be taught by their colleges not to fall into. Why would a guy giving you a job ask you money! (I know this because one of my stupid relative lost 2 lakh in getting govt job that paid 50,000 a year - what a loser!)

There are more frauds like Nigerian 419 (where an African Man will primise you one million $). Many Gujjus have lost lakhs of rupees falling for such schemes.

There are more scams like work from home schemes, Amway-Quikstar type MLM marketing (referral marketing), Visa and immigration promising scams,

All these operate on the greed of the needy.

look around you its fraud all over.

The companies promote fraud,
The politicians are super - frauds
The media is a big fat lying fraud
The marketing guys are paid to do fraud
The cops are fraud,
The judiciary is a legitimized fraud,
The education system run by politicians is fraud,

India has become a big fraud nation- who ever is imaandar is either left poor, or never allowed to come up - barring extreme exceptions. There are no ethics or morals - business has become a legal way of cheating each other and out borrowing each other. Is there a silver lining to all of this mess - perhaps, I am optimistic. Smart people should channel their energy in fixing the problems than complaining about them!

Anonymous said...

Mr. Kulkarni,
US is no different. In fact greed is everywhere. Big banks are charging 40% interest rates on credit cards in US, all the banking sector is full of ponzi schemens and the whole US economy is full of bublicious products.

The greed and love for money is commong all across countries.

Shriniwas K said...

Well though US is greedy, you are not harassed for being truthful or ethical. If any ponzi schemer is caught he/she is brought to justice unlike in India where 99% of guilty are never punished.

Anonymous said...

Govt uses SBI to bail out builders.

Anonymous said...

Govt uses SBI to bail out builders.