Tuesday, March 31, 2009

High Net Investors become High Loss Investors

Newspapers and moronic channels like CNBC TV18 have always led the common people to believe that High Net Investors (HNI) know what they are doing since they have access to the best and the brightest financial advisors. The more apt term for these HNI folks should be speculators and short term traders who run in the direction where the wind is blowing. With one rash decision after these others, these folks are losing their shirts in every investment they make. First they crashed with the stock market, their property investments are going bust and now their supposed safe investments in Gilts are losing sheen as well. Soon these folks will join the ranks of the middle class, a casualty of the following the pied pipers of Dalal Street.
Economic times reports

HNIs stuck with gilt funds as yields rise
MUMBAI: 'Out of the frying pan, into the fire' — that best describes the plight of high net worth investors (HNIs), who shifted their investments
from shares to gilt schemes at the start of 2009. Yields on government bonds have risen sharply in the past couple of months and are expected to stay that way for some time. Consequently, investors in these schemes are staring at sizeable losses, should they decide to redeem their investments anytime soon. Yields and bond prices move in opposite direction. So higher bond yields means lower bond prices, and vice-versa. As yields rise and prices fall, the value of government securities declines. As gilt schemes trade in government bonds to benefit from the price appreciation, a decline in bond prices impacts their performance. Gilt schemes of domestic mutual funds attracted money worth Rs 39,000 crore and Rs 20,000 crore in January and February, respectively. From roughly 9.55% in July last year, the yield on government bonds fell to around 5.5% in December, and slipped further to a historic low of 4.86% early January. Many HNIs flocked to gilt schemes, expecting that interest rates would fall further and settle between 4% and 4.5%, thanks to the downward bias in inflation and policy rates. But that assumption turned out to be a costly mistake. Contrary to expectations, 10-year bond yields have risen sharply to over 7% last week from lows in January, partly triggered by news of the government's huge borrowing programme. Fund managers and money market participants do not see the yields falling soon, as higher government borrowing increases the supply of bonds, which negatively impacts prices and pushes up yields. Even though RBI has consistently maintained its stance to reduce policy rates, some of its responses in the bond buybacks have left market participants confused. It announced that it would buy back bonds from traders to pump in liquidity into the system. But market participants feel that the move has been largely half hearted, with the central bank only buying back illiquid papers. This affected its "signalling" ability, they suggested. Now with RBI once again announcing details of its borrowing and buyback plan for the next fiscal, opinion is split on whether it will succeed in reigning in yields. Ritesh Jain, head of fixed income at Canara Robeco AMC, said bonds could do well in the next two quarters. "But the real skill would be to exit when the situation changes again towards worse. With government pumping in money the way it is, inflationary pressures are sure to resurface by the end of the year," he added.

53 comments:

Kannan said...

A fool and his money are soon invited everywhere.For fools, the stockmarket is a casino or a lottery, where, if they hang around for too long, they are certain to lose money. And the sad fact for most fools is that they simply love the action of the stockmarket too much. So much, that even though they are net losers, they keep coming back for more. Persistent failure seems to go to their heads.

Anonymous said...

Job losses spur cancellations in luxury residential projects.


The developer fraternity now faces a new crisis: buyers queueing up to cancel transactions after months of paying the booking amount

- Six months ago, as the economic slowdown started settling in, Sobha introduced a clause in its sale agreement that the developer will refund the booking amount only after re-selling the same apartment and after a 25% deduction.

- Some can afford refunds but “how many builders can refund immediately with each one suffering a cash crunch?” asked Raminder Grover, chief executive of Homebay Residential Pvt. Ltd, a unit of Jones Lang LaSalle Meghraj, a property advisory firm. Nearly 70% cancellations are in the luxury segment where buyers are feeling jittery about paying a huge monthly instalment, said Grover.

Anonymous said...

Revenue down 50%, Sobha cuts workforce

Sobha’s net profit fell by 88% to Rs7.5 crore and revenue by 49% to Rs181 crore in the December quarter against the same period a year ago. The developer is also in the last leg of restructuring its debt of Rs1900 crore. “We are restructuring over Rs1,000 crore and are in the final stage of getting approvals from various financial institutions,” said Sharma.
....
Sales have not picked up even after developers such as Sobha are trying out various out-of-the-box marketing techniques such as its recent Home Mela. The two-day property exhibition that showcased 18 different properties of the company concluded with only six apartments being sold.
....

Anonymous said...

DLF's NRI customers press for full refund

CHENNAI: Irate NRI customers, who want to exit the 3,493-apartment ‘Garden City’ project of DLF in Chennai, are exerting pressure through Indian consulate in Dubai. Seventeen customers in the Emirates region have managed to indirectly force DLF to commit full refund of the advance money, a year after the project was launched.

In its communication dated March 25, 2009, Consulate General of India Dubai’s consul (commerce) Partha Ray has urged DLF Southern Homes MD KK Raman to “kindly take immediate note of the exit notices of these 17 investors and refund their invested amounts in full, at the earliest.”

Stating that these investors were dissatisfied with the progress of the project, especially with regard to certain commitments made at the time of accepting bookings, he said, “They have reasons to believe your company will not be able to deliver.”

The total number of people who want to opt out of the 53-acre project is estimated to be 580 out of its existing base of 1,800 customers.

shailesh said...

Russian Real Estate Market Devastated By Falling Commodity Prices

Sounds very similar to Indian story.

Anonymous said...

Who caused the asset price bubble & how it can be prevented in future?
Indian central bank, by allowing loose credit policy?
OR shadow banks (non banking institutions)?

It is clear that the exorbitant price rise in last 4 years is not due to sudden surge in productivity. It is an outcome of easy credit & leverage. Leverage is another form of
credit expansion.
Central banks can’t be solely hold responsible as they started tightening the credit since late 2007. Another important point is, they lost the control over long term interest rate due to shadow banking system.
Shadow banking institutions are nothing but the outcome of foreign central banks policy.
Central banks can’t print infinite money due to inflation & currency devaluation but what if they can export this fiat money to foreign country, fantastic idea. That explains the foreign investment in emerging market.
The money supply growth in US in last 4 years & investment made by shadow banks in Indian RE shows a high co-relation.

“The price level will become sustainable only when it will match the income level of people.”

In the G-20 discussion about framework for world financial system, credit expansion was one of the issue but who is going to regulate the credit expansion of foreign central banks?

“Concerns for financial stability are relevant not just in times of financial crisis, but also in times of rapid credit expansion and increased use of leverage that may lead to crises.”Paul Volcker.

http://marketforceanalysis.com/Media_assets/
Greenspan%20s%20Gold%20Rush.pdf

http://spectatorinquiry.pbwiki.com/
William-White-transcript

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

Vulture.

Kapil said...

I have been saying people here that we should not see full depression in economy and now I am getting more confident on it. Overall, market sentiment is getting better. Banks will start lending and it will not take much longer for capacity/demand to balance. So, do not expect those hefty 50% cut in property rate you are expecting. Over the long run you will repent. Look for good project and negotiate. I am talking to people who really need homes not investor.

Anonymous said...

@Kapil.."Overall, market sentiment is getting better."

wait until the end of this month i.e. Apr-2009 ..the companies will be declaring the quarterly results.

Kapil said...

I do't watch market on daily or weekly basis. I have told before, that in May there will another attempt to set bottom and that should be final one.

I am talking about overall economy and not just stock trading!! It is upto you, how you interpret market sentiment.

It is time to romove depression scenario from market and act smartly.

Anonymous said...

@Kapil... "I am talking about overall economy”

Aren’t company’s quarterly results associated with economy?

Nirmal said...

Companies progress based on forward looking scenario and not backward!. Balanced sheet you going to see is for last quarters and companies will start pricing soon that depression is not going to happen. Many of good companies are down 90% in just 5-6 months and they thought depression is coming. This is changing very quickly. Market is almost 30% up in last few weeks and that is good indicators. Again, do not get into market, it will go down too. But market sentiment with respect to depression vs non-depression is quite different things and that why I know many people thought there will be fire sell in real estate in India.

Kapil said...

> Aren’t company’s quarterly results associated with economy?

Well, upto some extent you are correct. RIMM is up 30% AH. Worse is over...

Anonymous said...

Even British Prime Minister Gordon Brown is not confident about near term recovery. Nouriel Roubini didn’t know about the near term recovery but Indian builders are very confident about economic recovery & price rise.

Does the overall economy include National economy or Global economy?

Do you mean the macro economy is improved or improving in near term?

Looks like the new economy forgot the unemployment & only considers builders’ sentiments.

http://www.cnbc.com/id/
15840232?video=1078630238&play=1

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

Vulture.

Anonymous said...

Most economists were wrong about bull cap, same way they will be wrong on bear cap. Nouriel Roubini makes his earning as speaker and get paids for scary thought. Nobody will listen him in bull cap. That does not make him right. He has been wrong on many occasions earlier.

Employment is lagging indicator.

Anonymous said...

The morons who are predicting the recovery after Mid 2009 are as good as

- Commerce & Industry minister, Pink media and Former Finance Minister touting "Decoupling Theory"

- NASSCOM chief bragging about 25% growth in IT/ITeS post global economic crisis

- IT "Consultants" suggesting about getting more business from Merger & Acquisition activities in Finance & Banking industry

Visit any private engineering college and check how many final year students have been offered job letters.

U.S. March Unemployment Probably Rose to 25-Year High


April 3 (Bloomberg) -- The U.S. jobless rate rose in March to the highest level in 25 years and payrolls plunged, exposing the economy to the risk of renewed declines in spending that would scuttle a recovery, economists said before a report today.

Unemployment jumped to 8.5 percent from 8.1 percent in February, according to the median of 79 estimates in a Bloomberg News survey. The figures may also show employers cut 660,000 workers from staff, bringing total losses since the recession began to 5 million, the biggest slump in the postwar era.

Evaporating jobs and declining pay mean President Barack Obama’s pledge to create or save 3.5 million jobs through tax cuts and government spending may fall short of what’s needed to revive the world’s largest economy. Federal Reserve Chairman Ben S. Bernanke has conceded joblessness could top 10 percent under a worst-case scenario.

“The unemployment rate is not done rising and the gain in March won’t be the last,” said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group Inc. in Pittsburgh. “With jobs still declining and incomes being squeezed, consumer spending still looks quite weak.”

The job cuts have been spreading from manufacturers like Johnson Controls Inc. and Dana Holding Corp., to service providers like International Business Machines Corp. and even the U.S. Postal Service.

Anonymous said...

>Visit any private engineering college and check how many final year students have been offered job letters.

That is funny. Anybody can open Private Engineering College ( Kind of Shops) and expect Infosys to come for campus... Give a good argument before using words like moron.. That make you more silly..

Sorry, if my comment about private college hurt anybody but my intention was to correct "Anonymous at 5:20 AM" to fixed his critical thinking before commenting.

Anonymous said...

@Anonymous 1:39 PM "Anybody can open Private Engineering College ( Kind of Shops)..." then go and open an engineering college. Dont display your idiocy?

So this is your critical thinking?

I don’t know which state of India you are from but just have a talk with a student in the final year of engineering degree in Maharashtra. These students are really worried about their future prospects. Some of them who got admission through payment seats have spent fortune. Most of the IT/Automobile companies haven’t turned for the campus interviews.

Stop peddling lies about the economy. Not sure you are the one who posted "Nouriel Roubini makes his earning as speaker and get paids for scary thought"....

Anonymous said...

Most of the economists were wrong but the anon correctly predicted bull cap.
Can you please explain the bull cap & how long will be the run?

“Employment is lagging indicator”. Do you know how to interpret it?
RE depends on employment. After economic recovery, unemployment will reduce with a time lag, then after sometime RE market will improve.

Now I understood what the cause of RE trouble is. Thanks anon for advising builders & taking them to cliff.

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

Vulture.

Anonymous said...

Realtor Brigade cuts rate by 15% across projects
Plans to build cheaper flats for buyers with Rs25-30 lakh budgets, construct hospitals, residences and malls
Bangalore: Close on the heels of DLF Ltd slashing ticket prices of its homes by 30%, Brigade Enterprises Ltd cut rates by 10-15% in all its projects and will build small, cheaper apartments to cater to buyers with budgets of Rs25-30 lakh.
The Bangalore-based developer has lined up 12 projects, which include hospitals, residences and malls, and would start building them before the end of this year. It plans to raise Rs1,000 crore for its ventures.
“We are planning to raise the money this year through a combination route of private equity and institutional funding,” said chairman and managing director M.R. Jaishankar.
Brigade, which has around 14 million sq. ft under development in southern India, is aggressively looking at expanding its hospitality business in 2009.
On Friday, the company, in partnership with Accor hotels and resorts, launched Mercure Homestead, which is a 126-room luxury service apartment complex in north-west Bangalore. This also marked the launch of Accor’s global Mercure brand in India, with the next property lined up at the hill station of Lavasa, near Pune in Maharashtra.
“We are positive on the Indian market and are planning 50 properties here by 2012 under our various brands, such as Mercure, Novotel and others,” said Daniel Tannenbaum, Accor’s India regional director of sales and marketing. He was responding to a query on a dull hospitality sector and dipping demand in the serviced-apartments segment.
Brigade has a debt of Rs350 crore, but will not restructure its loans like other developers that include Unitech Ltd, Sobha Developers Ltd and Housing Development and Infrastructure Ltd.
“We didn’t commit the mistake of buying land indiscriminately and only bought enough that would be developed within five-seven years. So, if there is a good piece of land, we are still looking to buy,” said Jaishankar. The company has a land bank of about 450 acres.
Brigade’s net profit for the nine months to 31 December dipped by 17.3% to Rs67.44 crore from Rs81.55 crore in the same period a year earlier.
The company’s stock closed at Rs38.75, up 5.59%, on the Bombay Stock Exchange on Thursday, on a day when the Sensex rose 4.51%. The markets were closed on Friday.

Bharat said...

In my thinking, the original condo's/apartments/flats the builders were building, were already very small. So for example a 2BHK of 1000 sft super built-up translates to roughly about 600 sft of Carpet Area. This is barely livable space. I have noticed a similar trend in a lot of things..for example school notebooks they have shrunk from the size that one would see about 20 years back..this is the way businessmen in India increase their bottom lines. They shrink the product while maintaining the cost constant.

So all this talk of smaller apartments for 25-30 lakhs while maintaining a cost of 6000 rs/sft or whatever..is pure trash. I don't think people will buy houses of 300 sft carpet area for 25 lacs simply because its in their buying range. I hope the builders do not do further damage to themselves and to the land available by creating these "warrens"..it would be ludicrous and a criminal waste.

I think the demand is for 1000 sft carpet area houses at around 30-40 lacs.

shayna said...

Most of the stimulus declared in london is to buy the toxic assets on the BANKS balance sheets.
The money for IMF is basically to bail out anglo-saxon countries like U.K. which are heading for a free fall.
The $5trillion worldwide stimulus will lead to increase in TAXES and INFLATION.
In the western economies this will mean massive reduction in state benefits and mass retrenchment of public sector, which will lead to drop in the retail sector and the DOMINOs start to topple again.
For the ones that are seeing ''The light at the end of the tunnel, it is a huge FREIGHT TRAIN loaded toxic scrap''.

We have way to go...........the Indian IT sector rose on the back of FIAT currency, where it was a case of throw money at IT with no Q asked about deliverables.
Now most IT contracts are tied up with huge penalty clauses and strict evidence/proof of savings. Here in U.K. the state medical NHS had dished out a contract worth £10billion, Accenture and Fujitsu have exited the contract after 2yrs by paying the penalty running into nearly a £1billion.

IT ka diwali ab khatam.........

Srini said...

I just don't understand why the Stocks are moving up on Wall St. Two Millions jobs are lost so far this year, and by the end of this year atleast another 4 millions will be lost. Which translates to a loss of around one Trillion dollars in terms of spending power this year alone. Result will be more Foreclosures, weighing down prices further producing more toxic assets.
I just don't get it. WHy is Wall St. celebrating now?

Kapil said...

To Srini:

Stocks are expecting better days ahead. Job market will continue to slide for at least this year. Cost cutting is one way to grow for these companies. That is how people increases their productivity and it cost less for companies to produce same. Initially recovery start with less workers than once companies realized that growth will be back soon, they start hiring aggressively.

Kapil said...

To Bharat:

I have raised exactly same issue some time back. Builders are not really cutting rate, you are getting smaller size home. I have not seen those 50% cuts people are talking here. Has anybody bought home at 40-50% discount in this room?

Anonymous said...

Kapil,

I guess you are a broker whose profession is bullshiting people... My builder has 100s of flats at 50 % price friom the peak

The prices have come down from Nov 2005 when i booked a flat...The flat is ready now and the builder is quoting a price below by my purchase price and 50 % down from the price at the peak.... I paid 10 Lakhs as interest money to ICICI bank and i am not including the interest for 15 % margin money i paid to the builder... Builder is cheating existing customers by asking more money... I am fighting for just registration where as in the market he is quoting very low prices...

1800 Sq ft house for 36 lakhs in JP Nagar 9th phase (near kanakpura road...) the flat is ready for occupation....

IF you want lets have a bet for Rs 1 Lakh... I will prove that you are wrong... Are you ready ?

Anonymous said...

Anon:
Which apt complex is this ? it might be useful for some people here

Kapil said...

I am not broker and have couple of investments in India but I work in US. They are doing fine. Like many others in this room I am also trying to figure out market direction so that educated move can be make on further investment.

However, if my bull move make some people uncomfortable in this blog, I will stop posting my message. In this regard , this should be my last message.

gadadhari_bhim said...

Kapil,

Obviously this blog is for the bears, but they are not perma bears but they are bears on the Indian real estate for now. In the heat of the discussion you might find people say things that in retrospect they might think they shouldn't have said. We need bulls as well as bears to make this blog a success, just like every democracy in addition to a ruling party needs an opposition and hopefully a powerful one.

So, I hope you will keep posting on this blog with your contrarian views.

Gotta go, my own draupadi(non shared) wants me to take care of the dishwasher.

Anonymous said...

If stock market can lead the economic recovery then fed should start buying the stock not bond & treasuries. If fed will invest all bailout money in stock market, the indices will go above 2007 high level.

Though the video is 2 months old, it will answer your question.

http://www.youtube.com/
watch?v=GbacdXDr_gc

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

Vulture.

Anonymous said...

Kapil,

There are hard facts on the ground.. On that basis i called you for a bet.. If you are so convinced about the bullishness of the market please enter in to the bet... I would like to cut my losses...

The people in the blog who have not bought a house are smart people... They are not emotional or they dont get easy money.. IF a person is eithe remotional or had easy money he would have bought one in 2005/6/7.. I was emotional... But I bought one in 2003 too (Ideal time for buying property)

The bloggers like vulture do not gain anything by saying it will fall... They have conviction and they believe that they will only pay value for money....

Anon at 12.21 pm i am waiting to check whether kapil comes for a bet... I will surely reveal the name of the complex...

Anonymous said...

Vulture,

I guess 50 % is minimum... What price you are planning to enter actually? Because in India rents also go up...

My experience given below

I grew up in a small town (Trichy in Tamilnadu) We paid a rent of Rs 300 in 1993.. The house can be considered as a 2.5 or 3 BHK.... IT does not have wardrobes... Its 1 block form the Bus stand (Sri rangam - Trichy Junction bus stand)

That point of time my dad got a house for a price of 1 Lakh.... he found it high as interest is much higher than the rent...

IF you now look at i guess rents are going 5 K in Srirangam... Dont understand why it should go so high even in these places which are not major cities....

subel said...

People,

Most of the people commenting on the prices are living in the USA, you guys have no idea what the local prices are.

You will never know the prices at ground zero until you have 2-3 meetings with the builder/developer.

Talking to chacha, tau, pitaji over the weekends will not help you understand the local market and prices.

Keep wishin!!!!!

it ain't happenin!!!!!

Bharat said...

Dear Subel,

If US people are dreaming about price fall, why are you getting frustrated? :))

The people in US have seen a complete cycle where wild exuberance and sky high prices reigned. People(even Greenspan and Buffett) were convinced that real estate would not fall to the extent it has and the way it continues to fall.

Greedy people hoarding land and artificially inflating prices can only have a nasty fall..this is the law of nature. Some call it Newton's law - what goes up has to come down.

Also there are people in this blog who are from India. All of us are ready to wait another year or two rather than lose 50% of our savings to greedy builders and greedy banks. Don't worry, we know very well how badly the RE prices are going to fall. Its a matter of time.

Anonymous said...

Guys,
2 things i noticed over the last 2 weeks or so
1)US stock market has been going up fast. So is indian stock market.
3)The FD interst rate has come down in most of the banks. (I dont know about the lending rate). Normally FD interst rate will be low in good times.
Is this an indication that economy is recovering? Please throw some light

Anonymous said...

Ask this question to yourself. Is the city where you want to buy the apartment going to provide you enough opportunities to generate revenues which can support you for next
25 years? Do not consider the people who bought the house 20 years before & can survive on little income.

While considering the affordability also consider other segments of the society,
IT is not the only sector in India. If affordability is scarce, liquidity will be the problem.

Price discovery mechanism:
For an example, if RE prices in Chennai goes up, all towns & villages show price hike in Tamil Nadu, don’t ask the reason.

Market makers in RE:
The prices are decided based on the last transaction rate in the area. Suppose in area “xyz”, builder “A” quote an apartment for 1Cr then it becomes the prevailing rate in the area & every one follows that rate. Next day builder “B” quote 1.10Cr with a reason that in his project all bathrooms have Jaguar fitting where as project “A” have non branded fittings.
Is the 1Cr price correct? Why builders should worry about it, when some fool is ready to pay.

The rental scene is bad in India as law is favoring the tenants. Also we have number of cases in past where owners can’t even claim the property. If the law is made favorable
to owners, huge number of apartments will be available for rent & not only rents will fall down but RE demand will also drop drastically.


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


Vulture.

Anonymous said...

@Kapil,

You said that you have couple of investments in India & live in US.
Now you are advising first home buyers.
“I am talking to people who really need homes not investor.”

Last time also you advice about good builders, I don’t know how sitting there you got experience about good builders.

Anonymous said...

In US the FD rate is 1.85% APY still no one is buying the houses nor economy is recovered.

http://www.bankofamerica.com/deposits/
checksave/index.cfm?template=cd_riskfree&cd
_bag=&ch_bag=&context=&sa_bag=&statecheck=NY

gadadhari_bhim said...

I never thought that this could happen..... but looks like someone BEAT!!!! Vulture's prediction of "50% price cut guaranteed".

Edelweiss sees 60% decline in realty prices over 5-6 yrs

The Boss said...

Here in Pune market too, there is a lot of noise and misplaced belief that a price crash is underway. But in most cases, it is a flimsy discount of 10-15% in fringe areas. Some builders have abandoned projects instead of selling at steep discounts. After reading local, vernacular newspapers, one can easily see that builders are launching altogether new, 'affordable' projects where flat sizes are much smaller and there is definite compromise on overall specification. Most of these projects are quite far from the city. If pro-crash crowd wants to call it an example of great depression in RE market, go ahead and declare victory. But first time home buyers know the truth.
There could be a handful of schemes where prices have really been marked down in big way due to various issues, but they are more likes exceptions than the trend.
The best time for a crash has clearly passed with nary an impact.

http://rightadvice4u.blogspot.com

Anonymous said...

well, I say this again Mr. Boss, when builders put price tag more than what market wants, you have this depression in Pune RE market.

Now if builders commit second mistake of offering less area than what market wants, what would happen is open secret for anyone's guess. I am sure you are capable to understand this.

People want 2-3 BHK at afforable rates near to 15-20 lakhs in good locations in Pune. Unless that demand is met, neither high prices appts are going to be sold nor compact sized 2 BHKs or 1 BHKs. Only one thing is sure, first mistake is taking down investors like you, secod will be doom for builders.

The Boss said...

Of course you would like to believe that anyone not chanting the bubble-crash mantra is a trapped investor looking for exit. Worse yet, he/she could be from builder lobby. Very predictable.
It is delusional to think that a 3 BHK in good locality of Pune can be had at 20 or even 30 lakhs any time in the foreseeable future. Some people in Pune, including myself, want to own a palace in the heart of city for 20L rupees. That doesn't mean they will get it!
Again, only a handful of people may be dreaming about the kind of prices you are espousing. It is a small but noisy minority. In general, people have much more realistic expectations. And the new affordable housing schemes are attracting plenty of buying interest.

http://rightadvice4u.blogspot.com

Anonymous said...

The Boss one of the most influential voices in the world of investing is saying prices will crash and he has even explained it over and over again. I guess you haven't still read Happionaire's Cash The Crash, Yogesh Chabria and that is why still feel prices will not crash.

Anonymous said...

Mr. Bossman,
I am not sure why are you spreading rumours about Pune's real estate. 15%? Two of the most prominent builders in Pune (Kumar and Darode-Jog) are selling 1BHK in Hadapsar and Sinhgad road respectively for 9L and 11L respectively. The latter is selling 2BHK for 17L. And still nobody is purchasing. The earlier flats from the same builder were above 40L. And these are not old constructions. These are NEW constructions. The possession date is given as within 1Y guaranteed. So stop spreading rumours.

Shriniwas K said...

Well the problem that Boss is not recognizing is that he only sees the property value in terms of INR. The collapse of the Rupee due to steadfastness of our Govt which assumes that India is recession proof has caused the rupee to tumble. If it falls to below 55 Rs per US$ that means for any investor there is already a 25% drop from rupee's peak at 39 Rs per $.

I still dont see why I should buy a crappy house in Pune for 100000$ while I can buy a much better house in US for exact same price. (NRIs and PSU employees are the only real honest possible buyers in today's scenario) I have been looking for a second hand house for my parents for the past 2 years and my parents say that in fringe areas there are houses available from 8 lakhs. (So long affordable housing mega projects).

One more thing that BOSS is not considering is that the Builders have halted construction at the expense of poor investors who have already bought in their schemes. Because India's legal system is so sluggish - no body wants to sue the builders. Moreover every builder has underworld connections which makes it risky to take panga with them. So this is nothing but highway robbery by the builder community in unethical and criminal misuse of our system. There is no point paying your hard earned money to goons and gangster who offer fake promise for your dream home.

I am sure that money is funneled off to pay hafta to Dubai dons who will use this money to attack our country or to fund elections to corrupt politicians who are looting our tax money.

DUH so much for your BHAI builders...

Anonymous said...

The Indian real estate supper bubble which was fuelled by the cheap credit from the foreign banks has been punctuated. These beggars (listed Real Estate companies) have been thumbed down from the foreign investors and now crying foul over Indian banks not lowering the home loan interest rates.

Bank woes nowhere near over - analyst

Loan losses will exceed Great Depression levels, says Mike Mayo of Calyon Securities.

NEW YORK (CNNMoney.com) -- The percentage of loans that banks will need to write off will exceed levels seen during the Great Depression, according to a bank analyst's report Monday.

The report helped send bank stocks and the overall market lower as of mid-afternoon trading.

Mike Mayo of Calyon Securities gave the banking industry an "underweight" rating, citing "the ongoing consequences" of banks' increased risk-taking.

The seven deadly sins of banking
- greedy loan growth
- gluttony of real estate
- lust for high yields
- sloth-like risk management
- pride of low capital
- envy of exotic fees
- anger of regulators

Kapil said...

Talking about Great Depression has become fashion now a day. Most of the bears read media clipping and post here. I can do it but I prefer not to do that. Do your own analysis and media will be more wrong than you. Most of the media houses are biased one way or another.

I know I started this bull vs bear debate but I see no point doing that on this blog. People will not tolerate bull case in this blog. You need positive discussion; one-sided discussion will never be helpful.

Anonymous said...

@Kapil,

Before starting both sided healthy discussion can you answer my above question.

Thanks.

Kapil said...

There are many Anonymous.. I am not able to get it. What is your question?

Anonymous said...

Instead of understanding the enormity of the crisis, some people are just speculating based on what has happened in last 8 months. They consider the economic downturn as some nightmare, just pass the night & everything will be as usual.
Even though global economy comes out of the recession tomorrow, the losses can’t be unwind in few months. Market will still take 2/3 years for recovery. Some of the speculators & businesses will never come back & it will take some time to innovate new instruments. It took 3/4 years for bubble formation, you can’t bust it in 8 months, be considerable give some time to burst.

Some gentlemen are convinced that the prices are perfect, there is no bubble & based on that explain the rationality behind the price.
Some are advising that genuine buyer should buy it. Means the RE is overpriced but you should not think in that way, be emotional & buy it.


“Bubbles can arise when some agents buy not on fundamental value, but on price trend or momentum. If momentum traders have more liquidity, they can sustain a bubble longer.”

http://online.wsj.com/article/
SB123897612802791281.html

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

Vulture.

Anonymous said...

@Kapil,

Before starting both sided healthy discussion can you answer.


You said that you have couple of investments in India & live in US.
Now you are advising first home buyers.
“I am talking to people who really need homes not investor.”

Last time also you advice about good builders, I don’t know how sitting there you got experience about good builders.


Thanks.

Kapil said...

You should check past execution history, balance sheet, cash flow, professionalism, project competitiveness. At any time you have doubt ask for relevant information. If they are unwilling you should avoid. Talk to different department/people in the builder and see if they are consistent. Keep calling your builder and pretend you are new investor, see if he gives you cheaper rate. If, yes, avoid that builder. Avoid very small street kind of builder. These are just few points and everybody deal those differently.

Anonymous said...

How to track delayed projects from balance sheet?

If Satyam can cook the balance sheet, why can’t builders?

Are you advising to buy, because the prices are rational?


You mean as an Investor one should not buy; only needy person should buy.
Do you think I don't have roof on my head?

Kapil said...

>How to track delayed projects from balance sheet?

Did I say that?

>If Satyam can cook the balance sheet, why can’t builders?

For your mindset CD/ fixed deposit will be good.

>Are you advising to buy, because the prices are rational?

I am not advising anybody. I am saying 50% cut will never happen.

>You mean as an Investor one should not buy; only needy person should buy.

Why not, if you have money and think bottom is near.

>Do you think I don't have roof on my head?

That is very stupid question. How will I know if you have roof or not...

I thought you have reasoable questions but you attitude does not desereved any answer from me in future FULL STOP