Sunday, May 03, 2009

Obama says financial sector to shrink

Now if the financial sector shrinks, so do the financial epicenters. New York, London, Hong Kong and Mumbai could be easily affected by the downturn. The process of creating money from thin air is now sub-primed. As the financial sector shrinks so will all other sectors which support this sector, be it Information technology, travel, real estate or offshoring.  Now who will buy or rent all the commercial real estate in BKC or Nariman point at 2007 prices. Mr Bhai argue with Obama on why these prices should not collapse. If I had properties with loans in these areas of Mumbai, I would exit immediately. If Mr Ratan Tata, a Mumbai icon, wanted he could've built the next TCS campus in horrendously expensive Bandra Kurla, but he didn't. He built it in OMR, on the outskirts of Chennai where he got land for cheap. The photo you see on this blog is of the TCS campus. 

The Tsunami is coming and sub Rs 10000 prices in prime areas is on the horizon. Lets continue the 24x7 debate.

The Yahoo article is here.

By Jeff Mason – Sat May 2, 6:28 pm ET
WASHINGTON (Reuters) – The financial sector will make up a smaller part of the U.S. economy in the future as new regulations clamp down on "massive risk-taking," President Barack Obama said in an interview published on Saturday.
Obama, whose young administration has spearheaded a raft of reforms in the banking sector as part of efforts to tackle the financial crisis, said the industry's role in the United States would look different at the end of the current recession.
"What I think will change, what I think was an aberration, was a situation where corporate profits in the financial sector were such a heavy part of our overall profitability over the last decade," he said told the New York Times Magazine.

"Part of that has to do with the effects of regulation that will inhibit some of the massive leveraging and the massive risk-taking that had become so common."

Obama said some of the job-seekers who may normally have gone to the financial sector would shift to other areas of the economy, such as engineering.

"Wall Street will remain a big, important part of our economy, just as it was in the '70s and the '80s. It just won't be half of our economy," he said.

"We don't want every single college grad with mathematical aptitude to become a derivatives trader."

40 comments:

Bharat said...

Looks like I am the first one to post this time around! :))

I want to limit my observation to the US Economy and Americans in general. From what I have observed here, Americans in general dream about being heroes, have lots of moneys, do cool things, be admired by their better half, work minimally and smartly.

Almost all the folks I meet here, day trade, have an opinion and study markets with a vengeance. Most Americans are active investors. Kramer has a mass following and everyone dreams of making millions through their 401K's.

A lot of the smart people made their way into WallStreet and made millions by flouting regulations, finding loopholes and inventing derivatives around the Subprime phenomenon or secondary derivatives like CDS. These people made a killing and their organisations were growing exponentially before reality hit home. Its a bit like the man-eating lion's having tasted human blood. I have yet to see what kind of regulations Obama and Geithner's team come up with to curb derivatives...but my bet is that this is a temporary lull. The gamblers will be back again in about 2-3 years and politicians will be winking again...Things do not change in a major way.

US has outsourced manufacturing and most of its services. They will continue and even accelerate outsourcing to dig their way out of this super recession. Which implies that the way to make money and what gets retained in the US is the finance sector...

In the mid term, the world will print money and run up hyper inflation. Before that one can expect deflation to hit...anything which has been in super bubble mode and has an excess inventory is going to be dir tcheap...one example is going to be all those touch screen phones and mp3 players. I have noticed that jewellery watches and luxury pens have already become quite cheap..

shailesh said...

Times Roman Empire: Is It The Decline?How Bad Is IT?

* In a first, large IT players are showing falling revenues, weak guidance. Profitability is under pressure too.
* Recession-hit US & UK clients are delaying projects, decisions. Sizes of contracts are gradually getting smaller.
* IT firms facing pricing pressure. Contract prices being revised 5-15 per cent downwards for most firms.
* No increments. Bigger IT firms have announced salary cuts for senior staff.
* Top IT services firms not going for fresh H1B visas; US firms reluctant to hire foreign workers

***
Is The IT Boom Over?

* IT sector growth expected to fall from 15 per cent to around 9 per cent in the next year, flat growth in the next 2-3 quarters
* Billing rates will continue to be subdued for the next couple of years, hiring strictly on need basis
* Smaller players will find it difficult to survive; there will be increased M&A activity
* Analysts say no sign of recovery for over two years, IT stocks likely to underperform

Anonymous said...

I can shown atleast ten news in last two days which are positive. Pasting some news which suits the bears will not drive the market.

Typically the bears also make money but the bears in this forum are nothing but failures in life, major part of your life they will crib and finally when you guys buy RE that is the time RE will crash. Same happens with stock, lot of guys like you will sit on the fence and then at the last or second last lap will buy mutual fund and then througout your life you will crib.

Now let me post atleat ten news in last two days which are positive. These news are not paid by me so pls. do not fume.

1)
RIL adds Rs 40,085 cr to its m-cap in April
http://economictimes.indiatimes.com/RIL-adds-Rs-40085-cr-to-its-m-cap-in-April/articleshow/4478749.cms

2)
Are global markets ignoring bad news?
http://economictimes.indiatimes.com/Markets/Analysis/Are-global-markets-ignoring-bad-news/articleshow/4478391.cms

3)
Investor wealth swells by Rs 12L cr; adds Rs 5L cr in April
3 May 2009, 1138 hrs IST,

http://economictimes.indiatimes.com/Markets/Analysis/Investor-wealth-swells-by-Rs-12L-cr-adds-Rs-5L-cr-in-April/articleshow/4478228.cms

4)
Indian stocks second best performers among BRIC in April
1 May 2009, 1528 hrs IST
http://economictimes.indiatimes.com/Markets/Analysis/Indian-stocks-second-best-performers-among-BRIC-in-April/articleshow/4472020.cms

5)
Toyota to hike production to full capacity in India by July
3 May 2009, 1622 hrs IST, PTI

http://economictimes.indiatimes.com/News-by-Industry/Toyota-to-run-at-full-throttle-by-July/articleshow/4478826.cms

6)
Rate cut: NRIs invest more in residential projects
2 May 2009, 1043 hrs IST, Namrata Kohli, TNN

http://economictimes.indiatimes.com/Features/Realty/Rate-cut-NRIs-invest-more-in-residential-projects/articleshow/4474864.cms

7)

Emerging-mkt demand key driver for global growth: CreditSuisse
3 May 2009, 1551
http://economictimes.indiatimes.com/Economy/India-China-to-driver-global-growth/articleshow/4478778.cms

8)

SBI cuts deposit rates by 25 bps
BS Reporter / Mumbai May 03, 2009, 0:09 IST
http://www.business-standard.com/india/news/sbi-cuts-deposit-rates-by-25-bps/356929/

9)

WKLY TECH ANALYSIS: Market rally likely to sustain for a while
Rex Cano / Mumbai May 03, 2009, 0:02 IST

http://www.business-standard.com/india/news/wkly-tech-analysis-market-rally-likely-to-sustain-forwhile/60290/on

10)

Fresh signs of recovery bolster Wall Street
2 May 2009, 0535 hrs IST, REUTERS

http://economictimes.indiatimes.com/Markets/Global-Markets/Fresh-signs-of-recovery-bolster-Wall-Street/articleshow/4474398.cms


Minimum 50% increase in next three years for Mumbai.

Dont time, dont time DONT TIME.


Bindas Bhai

Anonymous said...

Bindas Bhai,

You are great. Keep up the good work!!

Finally this blog has life.

Anonymous said...

Anonymous @6.41:
If your investment decision is based on the news from economictimes, then you are really in trouble. Back in 1997, when there was only 1 ISP in india, I received 100's of email routed to me which were suppose to goto economic times. I easily figured out how news are created and printed to change mind view. I can try to dig up from my backup. You can get printed whatever you like as long as it directly or indirectly favour your big money ad providers.

Vik said...

Shaliesh, Good link of the outlook article, athough they have goofed up the photos of Vivek Wadhwa and Kapil Dev Singh :).
I know a friend who moved back to India few months ago since he couldnt get a project on the H-1B. He moved to Pune and yesterday I heard he got a new job for 10L all things included. In the past people with lesser experience could've higher salary, so the race to lower wages has begun in India.

What is the current billing rate your clients are looking for ? I think that could decide the eventual salaries the IT employees could end up with, once al the paycuts are put in effect ?

Vik said...

Mr Bhai:
We wish you great success in your property buying spree. We all know how stock markets operate. If the media has any balls, let them report on the day to day gamblers who inhabit the circuit. In the past I've received tips from tipsters on some stocks, some of which have seen spectacular rallies and other miserable failures. There are only a handful companies where the big money operators don't control the day to day trading operations.

Instead of focussing the discussion on bulls and bears, lets discuss affordability in light of market conditions.
I don't want to discuss the ET articles as we know they are all plants. Lowly paid new graduates are given direction on how and what to report. I would say Mint is a better newspapers for economic news then the pink trash.

What Obama does affects the whole world. That is news coming from the most important man in this world. Do you disagree on his assessment ?

Anonymous said...

After failing to sell RE on “Akshaya Tritiya”, the frustrated builders (bulls) have intensified the promotional activities.

Open market Interest rate : 2 - 2.5% per month.
Banks lending rate to Builders : 13 -16% per annum
Banks saving rate : 8 -10% per annum

Now builders are sitting on non-performing assets & paying the interest in hope of price rise in falling market. For agents & brokers, it’s a loss of income & no liabilities.

Sales in months ahead critical for DLF: analysts

“A survey of six analysts by Mint last week had projected that DLF’s net profit would decline 38.59% and revenue shrink by 35.86%”.

“DLF has already reduced prices at some of its projects—the only company to do so—and we might see some more price reduction at its other projects during the next few quarters,” another analyst with a domestic brokerage firm, who too requested anonymity, said. “The company might also sell some of its land and other assets, but that would be mainly to bring down its debt position.”

http://www.livemint.com/2009/05/02000347/
Sales-in-months-ahead-critical.html

Bhai, one serious question, how long you are into the business? My doubt is that you are not able to convince buyers & don’t tell me that you have financed your project without debt.

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

Vulture.

Anonymous said...

Bhai seems very worked up. "Bindaas" portion needs to disappear :).

Anonymous said...

The real estate developers aka beggars ( listed companies) would have been on the street, had the banks not restructured the loans.

Anonymous said...

Vik,

All the talk of 10-12 lakhs salary for IT professional is a mere farce. I sincerely request you to check with friend for how much monthly salary gets deposited in his account. There is a sea of difference between Salary mentioned in the offer letter and the actual money employee gets.

Shailesh,

Thank you for a nice post. Since there are new entrants (reckless IT guys) in the zombie scheme , the so called "Bulls" have become desperate to offload their real estate investment. There are very few new suckers and nor there will be in near future.

Whoever is touting the current slowdown in IT/ITeS services as a temporary lull, he is spreading the false propaganda. He is no different from the chipmunk who was predicting 20/25% more IT business in the aftermath of financial crisis.

Guys, dont spend your hard earned money on ready possession flats from builders, affordable housing (minuscule carpet area). The humiliating crash of housing super bubble is due very soon.

Anonymous said...

Since there are NO new entrants (reckless IT guys) in the zombie scheme , the so called "Bulls" have become desperate to offload their real estate investment.

Anonymous said...

Some of us do our investment based on ground realities, conviction and news. Touch wood (god’s grace) I have never lost.

Like you all for two months even i felt Mumbai property will come back to 2007 levels (forget 2004 levels no chance) Now i am quiet sure that it wont happen. It is just not IT which drives the market it is also the other industries.

A lot of Industries have shown good recovery (god willing it will continue) and a lot will follow in coming qtrs.

We never make investment and earn money once we have confirmed news of anything. The only way we can make money is by taking risk, now taking risk does not mean to go like an ass and buy as an when you want. Here some of us can sense recovery hitting the market in coming two quarters and to this the market will react. Look for good project/company do your homework and then take a call. Now a few people can smell money but majority will continue to sing the old song.

Money is always made in anticipation of the good news as you cannot time, you need to take the risk based on reading between the lines of any news and looking for market reaction to any news good or bad.

In coming qtrs you will hear more good news and bad news will be discounted.

Minimum 50% increase in next three years for Mumbai.

Dont time, dont time DONT TIME.


Bindas Bhai

Anonymous said...

All vague points. There is no concrete news about anything. I wonder where the money is going to come from. Maybe the god of hope is the only choice.

Bharat said...

Dear Bindaas,

Having an alternate view is important. However, we also need to understand two important things -

1. The last India RE superbubble was not because of the economy or any other reason than the free availability of liquidity via PE and other routes. Excess speculation by the Builder's and other players in the RE ecosystem. I remember in 07 when I was in India a lot of people were expressing disbelief at the high rates prevalent and how impossible it would be for any sane person to buy a house. These people were senior folks in IT and not slouches when it came to salary or savings...So this was just a case of excessive speculation which was bound to crash at some point or the other.

2. When the US RE bubble collapsed, all the printing m/c's of Fed and the US Govt. treasury could not arrest the decline. All the presses and propaganda could not do anything to stop the fall which is still continuing and will continue in the foreseeable future. Likewise, although people might try their best the Indian Superbubble is bound to crash and no amount of low interest rates, govt. intervention and propaganda by the Indian press is going to help...Indian economy clocking 8% growth is not going to help other.

Think about it and it will be clear that these kind of bubbles and busts have been going on throughout history and we still haven't had a bust in RE yet.

Anonymous said...

Dear All,

I am new to this forum, I really appreciate the intellectual debate taken forward in this place, and Vulture has great knowledge so are others like Vik, Bharat and lot of others.

I just want to pose a question which time and again Bindas Bhai has asked. If someone can reply convincingly i would be grateful.

1) 98 after the crash in Mumbai we needed 22 times our annual income whereas today we need only 6 times. This despite the fact that India has changed dramatically and also interest rates down by half vis a viz 98.

Can someone throw some light on this? I think BB has got a very valid point r v conveniently ignoring the fact. If so has RE reached the peak yet?

Awaiting reply.

Anuj Thakur

Anonymous said...

Dear Anuj,

I am not saying this but HDFC reports mentions about this, pls, read the following:

I am once again posting this for jaundice eyed people

Opportunity’ in realty chaos

Even if property prices and interest rates fall, ‘sentimental recession’ in the buyer’s mind may put off purchase.


Mr SUNIL ROHAKALE, EXECUTIVE DIRECTOR, ASK INVESTMENT HOLDINGS

Suresh Parthasarathy


Vidya Bala



Unless interest rates drop to a compelling level of 7 per cent, there may not be a significant pickup in residential demand, says Mr Sunil Rohakale, Executive Director, ASK Investment Holdings. This Wealth Advisor has nevertheless chosen to launch a real estate private equity for Indian investors. Mr Rohakale explains as to why this fund, which will predominantly invest in residential units, was chosen to be launched during a downturn. He also explains the reasons for the slowdown in demand and how a realty fund may be a superior option for investing in real estate.

Excerpts from the interview:

How does investing through realty fund score over direct investing in realty or buying realty shares?

For one, there is concentration risk of buying a property as against the diversification that a fund offers. Two, investing in a realty fund amounts to stepping into the developer’s shoes instead of buying from the developer. In other words, one can benefit from the extra margin enjoyed by a developer. Three, direct investing in realty has additional costs such as stamp duty and registration and recurring costs such as property taxes. Four, the question of when one should exit and who should moot such an exit would arise in direct investing. Five, maintaining a building/flat and leasing and managing it is a hassle.

In investing in realty through stocks, one loses control of money and cannot have much say in the capital efficiency. A private equity fund keeps full watch over money flowing in and out of the project and ensures that there are no diversions. Risks attached to a project – including those related to reputation, completion and title – are evaluated by experts in the fund. A private equity fund with a clear-cut strategy and which is not open ended can, therefore, score over the other options of investing in real estate.

With realty sector being overshadowed by various concerns, would investors not view your fund as a high-risk investment?

Historically, real estate, whether land or house or office space, would have grown to 3-5 times the cost. With GDP growing from 5 per cent to 9 per cent, the home buyer’s profile too has changed. So if one sees the changing profile of a customer (from a lender’s perspective) the average age of a borrower was 47 in 1998 and he was looking for a Rs 3.5-lakh home loan and was happy with a 70 per cent loan to value ratio. In 2004, the average age of the borrower was 38 who wanted Rs 7 lakh of home loan and the loan to value was 80 per cent. In 2008, this profile changed to a 32 years, wanting a Rs 15-lakh loan, with a 90 per cent loan to value ratio.

The point that I am trying to make is that the customer has moved from being a risk-averse Indian to a risk-taking Indian; from a low-income individual – whether government or bank employee or working in a private company – to a higher income individual, with higher surplus income.

When did the home buyer’s demand wane?

Housing became unaffordable for many, as developers began to make luxurious houses. When this happened, interest rates too went up from 7 per cent to 12 per cent between 2004 and 2008. This also reduced affordability. Property price hikes also added to the fuel.

A 0.5 per cent increase in interest rate means an increase of Rs 30 per lakh of EMI. Interest rates have gone up by almost 500-600 basis points. Where the individual EMIs was Rs 50,000, a 6 percentage point increase in interest rate leads to EMI becoming Rs 65,000. Now, where am I going to pay that additional Rs 15,000 from? Initially banks were kind to increase the term… but you can’t be an 80 years when the loan matures.

You were talking about the sharp hike in interest rates. Was this not accompanied by a huge jump in income levels as well, especially in the last 10 years?

Correct. If you see HDFC’s data it says that 22 times of your annual income was needed to buy a house sometime in 1995-96. Today, you need six times your annual income to buy a house. But worldwide this figure is 3-4 times. So there is still scope for either incomes to rise or property prices to decline.

Our observation is that in India, the income of government employees has risen 6-7 per cent CAGR in the last 10 years. Private sector employees earn 12-15 per cent more. The knowledge economy – primarily IT and IT-enabled services, banking and insurance and telecom – which has been the driver of growth for quite some time now, has seen a salary increase of 15-20 per cent CAGR in the last 6-7 years. So an average Indian has seen a 12-13 per cent increase. Property price in the same period has increased by more than 13 per cent, affecting affordability. If you take the property price index of NHB, a property in Bangalore priced at Rs 100 in 2001 had gone to something like Rs 230 in 2007 (this works out to a CAGR of 15 per cent). This growth is definitely far more than the rise in income. The quality of houses and amenities offered have also changed between 2001 and now, thus putting additional burden on affordability.

Now that interest rates are declining, would housing demand pick up?

Unless interest rates drop to a compelling level of 7 per cent from the 10.5 per cent, there may not be a significant pickup. In our country, 6.5 per cent mortgage rates have happened. This will bring EMIs to a reasonable level; the original level where the borrower will once again have his surplus.

Even if this happens and property prices comes down, the ‘sentimental recession’ in the buyer’s mind may put off his purchase. He is today worried about the economic uncertainties, his job, whether the factory would work three days or five days and so on.

So what is the opportunity that you see in real estate today?

In any private equity investment, the investor is more concerned about the entry point. We do not see an opportunity to enter at the land stage because land has already been aggregated in the last two to three years. So entry has to be in the development stage. The opportunity for us is to get into those residential projects, where the plan approvals are already in place and the construction is about to start; or where construction has been started but there is no financial closure.

Secondly, there is opportunity for investment at the asset level rather than at the holding company level. The latter needs exit opportunities such as IPOs; this makes it more uncertain. We do not want to be a builder but a facilitator of the asset development so that we have control over the execution.

The third point is that SEZs and townships have longer gestation period, are decade-old projects and are not meant for an investor with a horizon of five to seven years.

Similarly, the current rentals in malls have become so unaffordable to the tenant that his business is no longer viable. Tenants have started re-negotiating fixed rents. So we feel that these segments are ahead of times, although there will be opportunities for long-term players.

We were looking at a five-year period, and therefore these did not fit our bill.

As the first three years have already been given for the developer to acquire land, the question here is how much time would be required to build a three-lakh-sq.ft or a 100-flat residential project? Architecturally, 30-36 months is a reasonable time for a 100-flat project when the plans are approved.

So, do you expect the demand to revive by the time the projects you enter into are completed?

A revival may take another 18 months. By then some amount of interest rate decline and price correction is likely to happen. I do not rule out another 25-30 per cent correction. So, a total correction of 50-60 per cent from the peak prices is very much possible. While we would reach a neutral stage in the December quarter, with a stable Government, clarity on jobs and income and improvement in global economy, transactions will start happening from the September quarter of 2010 onwards. The current journey of developers launching projects, at lower rates and lower sizes is a step towards liquidity and affordability for various segments. So we will use the next 24 months to deploy our funds.

We will collect 20 per cent of the application money and the rest over 24 months to provide value proposition to investors.




Q Why have you chosen the top cities alone for your investment?

We feel that residential demand is intact and thought that city-centric residential projects which are self-liquidating should be our focus for 70 per cent of our fund. We feel that the top seven cities are much more attractive – so Mumbai, Bangalore, Chennai, Pune, Delhi, Hyderabad and Calcutta – in that order. Why these cities? Because 50 per cent of the top spends in infrastructure under the Jawaharlal Nehru National Urban Renewal Mission project is going to be in the top 7 cities. Two, the job creation post revival is going to be much faster in these cities. The talent availability for the next level of expansion will be available in plenty here. The capability, quality and size of the developer in these cities is much better than in smaller towns.

But 30 per cent of our portfolio will be invested in completed, fixed income generating office space. We will not enter speculative commercial or in other words commercial space under construction or those not occupied. I call this speculative because - take Bandra Kurla complex, which touched something Rs 400 per sq ft, has melted to Rs 250 per sq ft. Similarly in Worli what was at Rs 500 per sq ft has come down to about Rs 300 per sq ft.

http://www.thehindubusinessline.com/iw/2009/04/12/stories/2009041250531300.htm


Minimum 50% increase in next three years for Mumbai.

Dont time, dont time DONT TIME.


Bindas Bhai

Anonymous said...

BB is contradicting himself. The last few statements speak to the drop in rental values in Mumbai by 40% and then BB says that real estate will increase by 50% in the next 3 years. Unless everyone starts buying houses now, how can prices increase ? There is no increase going to happen, that is for sure. If you buy without a 40% discount, you will lose all future appreciation. The boom has to unwind for the next boom to start. I just saw a new development in Palo Alto, CA where 1300 sq/ft townhouses with an asking price of 600k-700k. If someone said 2 years ago they will get these prices, everyone would laugh. Today is different.

Vik

Anonymous said...

Bindas Bhai,

Need to get in touch with you to understand more. How do I get in touch with you.

My mail ID is Vandanamohan27@hotmail.com

Thanks,

Vandana

The Boss said...

Hi,
This is regarding the post of Anuj
9:06 PM:

"1) 98 after the crash in Mumbai we needed 22 times our annual income whereas today we need only 6 times. This despite the fact that India has changed dramatically and also interest rates down by half vis a viz 98."

This is a great point. I have been trying to tell the same thing to bears, but they keep shouting about how IT sector is shrinking, western world is slowing down, no BFSI business etc etc. If we compare the wage growth over last 15 to 20 years to growth in home values in the comparable period, it is plain to see that the former is much ahead of the later. It is silly to manipulate the sample period from 2005 to 2008 and then wail about home costs going up by 200% or 300% in 3 years. This 'clever' argument cannot fool all people all the time.
The fact is, historically homes have been very expensive in India. There was an imbalance in 2003-2004 when home values were quite cheap with respect to the salaries of white collar professionals. Once the frenzied buying started, homes became expensive but they are still cheaper if we look back to our parents' times.
And don't commit the same rookie mistake of calling me a housing bull. I am not there yet. But I believe things are not bad for first time home buyers.

http://rightadvice4u.blogspot.com/

Anonymous said...

This blog is a classic example why very few people make money in stocks and real estate, an eye opener :-)

shailesh said...

These flat buyers want Cidco to slash their rates

MUMBAI: Following the economic downturn, around 225 Mumbaikars who have booked 2-BHK flats in a residential scheme, `Celebration', by the City and Industrial Development Corporation (CIDCO) at Kharghar have threatened to withdraw from the project if their demand to slash the rates by 35-45% was not fulfilled immediately.

In `Celebration', there are a total 532 2-BHK flats and 465 1-BHK ones. The construction work on the scheme is underway in full swing. After a lucky draw, people had booked the 2-BHK flats at Rs 3,450 per sq ft (with Rs 25 per sq ft as floor rise) in this seven-storeyed scheme. Now, people want these rates to be reduced up to Rs 2,245 per sq ft. In Vastu Vihar, too, there are around 1,000 flats besides Seawoods' 400 flats.

"Due to the global economic downturn, the real estate market prices have come down by 35-40% as GDP has fallen from 9% to 5.3%. Similarly, the cost of construction material like cement and steel has come down with city developers slashing property rates by 35-40%,'' a delegation of buyers who called on CIDCO officials stated in their memorandum of demands. The letter has been signed by over 220 buyers.

"Recently in our meeting at Dhruv hall in Dadar, we decided to withdraw our bookings as the last resort if the CIDCO pays no heed to our demands,'' said N C Upase, one of those who had booked a 2-BHK flat.

Bharat said...

Housing Ponzi Scheme http://www.youtube.com/watch?v=21uSWryTBkI

As the Indian Govt. embarks on creating affordable housing it might be good to learn some lessons from the subprime disaster of the US. Add to the rampant corruption in govt and poor quality of govt. vendors...is it a case of throwing away tax payers money down the tube and creating more ghettos?

Anonymous said...

It is also a classic example how pumpers push their wares on unsuspecting end users who end up paying their life savings to the builder. Besides I think if the pumpers wish they can open their own blog, they don't need to convince the practical minded people. The bottom line is if you take a loan you cannot afford, that is bankruptcy for you.

Anonymous said...

Bindhas Bhai,
The links you have posted all majority from ET which is polarised by our lungi finance minister, any ways.
Indian stock market rallied by 700 points in sensex which is a good news for stock traders, but this is nothing to do with real estate, right..!!! Rather, stock market investment is becoming more and more attractive than real estate as it is fast liquid and comes back fast after a correction. One can play with small capital and mitigate risk by short sale, which is not the case in real estate. Also, 90% indian companies stockes are dams attractive post last Sept08 correction, so it is all time worth to put in money there than real estate.
Investing in real estate means we are giving our honest money to most dishonest people and further that money goes to namy reck hands such as politicians, local guns/mafia's, uneducated party workers and their uneducaed voters. This is not the case in stock market, won't you agree????

Anonymous said...

30-40 years before, marriage ceremonies were also a costly affair. People used to take generational loans but today it’s more affordable & at least people are not taking generational loans to repay debt. By citing this example will you take an exorbitant debt & convince others that in past generation it used to take 2-3 generation to re-pay now you should take more which you can re-pay for next 25years.

Just by looking at the stock market rally, there is no reason to be excited. Have you made money
in the rally? If companies outlook is so +ve, have they raised your salaries. Why they are laying off employees?

The economic recovery is a slow process, which will take 2-3 years after reaching the bottom.
If corporate sector is showing positive signs, why commercial RE is in trouble? Why retailers are closing down the shops.

RE market is an illiquid market, housing is a 20 years commitment. Even to complete the purchase deed it takes 3 months, there is no short turnaround like stock market “T+3” settlement & immediate liquidity.

Before taking the devil’s advice asks him, what is the time value of money?

Which other industries have shown the sign of improvement?
 IT/ITes every one knows the situations.
 Manufacturing is still bad; companies are running under capacity with only 1 shift. [ From personal survey, done yesterday. ]
 Financial companies are still in bad shape.
 MNC are not doing good.

The simple thing you can do is float your resume in market & demand for 10-20% rise & judge
the +/-ve outlooks of companies .

Do not throw your money in rat holes.

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

Vulture.

Anonymous said...

Dear Anon 8:06,

I totally agree with you that stock market is more attractive. I do not foresee any investor for at least two years.

The point i am driving is there is huge demand in Mumbai for actual user and people who are sitting on the fence will jump to buy once if market moves further up say around 15k.

Now i know for sure some of us will again give the same sad story of slow down, job loss blah blah..... Guys these are stale news , please look at the latest trend of market and how market is discounting any bad news

Supply is curtailed by the builders by going slow and by not taking new project. This will again put pressure on supply side. I do not want to comment on other areas but yes Mumbai will see movement in coming months.

I don’t want to be over confident let us wait and watch till June end 09.

Minimum 50% increase in next three years for Mumbai.

Dont time, dont time DONT TIME.


Bindas Bhai

Anonymous said...

The data that it required 20 times annual salary in 1998 was not correct...

I worked with Auomotive companty and my Salary was 1 Lakh per annum... The 2BHK Flat in Nangannallur chennai was 4.5 Lakhs..

Nanganallur is 2 Kms from the International airport and i can reach the city in 30 minutes travel.. We got the palaru water...

Guys stop this bull shit...

People earning more need not pay to the real estate bas*****... There are so many ways they can give the money to charities instead of giving to these goons

Anonymous said...

I agree. I remember people being paid around 1.5 to 2.5 lacs in 1998 and 2 BHK flats were around 8-12 lacs...lokhandwala/oshiwara area used to cost around 11 lacs for a 2 BHK. Thane/Mulund/Ghatkopar was around 8-12 lacs...

So these figures do not seem reasonable. In 2002 the prices of 2 BHK went up to 15-20 but salaries at that time were around 8-10 lacs...

A 22 multiple means if a person was getting around 2 lacs...he would be buying or having housing options of around 44 lacs!!! I found that ridiculous to believe.

Lastly, I find this concept of lower interest rates driving up sales absurd. Who would want to take a massive loan at teaser rates and then get locked in while the banks ratchet up the rates? The article which Bindaas Bhai has put up shows some one who is strong prejudiced with Bankers and Real Estate player...he actually calls the Bankers Merciful!!! and Real Estate Companies as people trying to do beneficial things for the common people!!! Such a person has an obvious bias. Use your critical reading skills!

Anonymous said...

There are two storms on the horizon. 1) Option ARM Loan & 2) Commercial Mortgage-Sacked Securities.


Commercial mortgages the next crisisWASHINGTON -- Two years after fissures in the residential housing market gave way to a national collapse of home prices and sales, experts warn the next shoe to drop is the commercial real estate market, bringing more woes to the battered economy.

Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching a renewal date. By some estimates, two out of every three will no longer meet the original loan conditions and won't be able to refinance. And with prices for commercial properties expected to plunge, a vicious cycle may unfold much as it has in the nation's housing market.''It's the next wave to hit,'' said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a trade group for big banks and other financial institutions who are collectively concerned about the coming problems.

A commercial mortgage meltdown is likely to prolong the nation's economic recovery. The falling prices in commercial real estate will lead to additional bank losses at a time when banks are sapped by home mortgage defaults and soaring credit card defaults. This could lead to future additional taxpayer assistance for the banks.



SIMILAR BUNDLES

As in housing, many commercial properties have mortgages that were bundled together in pools, sliced and diced and instead of being held by banks were sold to investors as bonds and securities. Thousands of these commercial mortgage-backed securities, or CMBS, are reaching their maturity dates over the next three years. Ten-year mortgages issued in 1999 and 2000 start coming due late this year, and five-year loans issued from 2005 to 2007 come due early next year.'If you stop and think about what is coming up for maturity over the next couple of years, either on the banks' books or CMBS, there is going to be a day of reckoning as those loans mature and they have to be rebalanced and reset to today's underwriting standards,'' said Blakely, who worked 17 years as a bank regulator followed by 17 years as a bank executive and risk officer.

Anonymous said...

Economic externalities

In economics, an externality or spillover of an economic transaction is an impact on a party that is not directly involved in the transaction. In such a case, prices do not reflect the full costs or benefits in production or consumption of a product or service.

The best example of externalities is global warming. Similarly in economics the failure of banking system & private transactions have effect on all over the world. The externalities have had affect not only within the U.S but all kinds of people all over the world.[Joseph Stiglitz Nobel Laureate ]

The big drop: Trade and the Great Recession

“We have clearly been witnessing a dramatic drop in world trade. For policy purposes, though, an important question is whether the decline is out of line with the global shock to GDP and the underlying credit crisis. At the moment, trade seems to be a victim, but one reflecting non-trade weaknesses in credit and demand”.

http://www.voxeu.org/index.php?q=node/3527


U.S. Workers' Wages Stagnate As Firms Rush to Slash Costs

“Employers big and small have resorted to slashing hours and once-unthinkable wage cuts. In March, staffing agencies that work for Microsoft agreed to a 10 percent reduction in their bill rate”.

http://www.washingtonpost.com/
wp-dyn/content/article/2009/05/02/
AR2009050202207.html?hpid=topnews

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

Vulture.

Anonymous said...

US Housing Crash Continues
It's Still A Terrible Time To Buy

“House prices will keep falling in most places because those prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's yearly income. Landlords say a safe price is a maximum of 15 times the tenant's yearly rent”.

http://patrick.net/housing/crash.html

US Housing Crash Continues
Who disagrees that house prices will continue to fall?
“Real estate businesses disagree, because they don't make money if buyers do not buy. These businesses have a large financial interest in misleading the public about the foolishness of buying a house now. The NAR has harmed America far more than terrorism did”.

Unemployment Vs Housing market.

http://money.cnn.com/video/markets/2009/
04/27/news.markets.signs.042709.cnnmoney/

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

Vulture.

Bharat said...

Anon@2:16 PM

Other than commercial real estate backed securities, credit card defaults, CDS..in 2009 we still have Part A and Option ARM resets to hit. It sounds like the perfect storm or a gigantic tsunami.

Helicopter Ben will keep pumping money into the market and try to create inflation instead of deflation even if it debases the dollar...There are some very bad days ahead for the global economy. Essentially the next year or two the entire world will be hit by a catastrophe due to the externalization phenomenon explained by Vulture.

Anonymous said...

No Signs of Recovery for Indian Property Market

“As per the survey, 76% brokers expect price trend to be negative over the next three months and 53% brokers expect price trend to be negative over the next one year”.

http://www.businessweek.com/globalbiz/
content/may2009/gb2009053_440925.htm

Anonymous said...

Obama announcement below. So where will the good IT jobs come from?

OBAMA: Say no to Bangalore, yes to BuffaloWASHINGTON: 'Say no to Bangalore and yes to Buffalo,' seems to be the latest mantra of US President Barack Obama as he struggles to bring the
ailing American economy back on track.
Meeting one of his major election promises, Obama yesterday announced end to years of tax incentives to those US companies which create jobs overseas in places like Bangalore. Instead, the incentives would now go to those creating jobs inside the US, in places like the Buffalo city -- bordering Canada in upstate New York.

Anonymous said...

Bhai,
Dont waste your time with jerks over here, even the RE prices go up by 50% these Johnnys will continue the same song.

Dont waste you time even reading this blog.

Anonymous said...

sour grapes speaking. The sound of filing bankruptcy must be making you nervous. the people who didn't buy at peak must be laughing. specially Mumbai, the center of the biggest boom and biggest bust. enjoy the ride down

Anonymous said...

yes the grapes are sour since 07:-)

Anonymous said...

Guys, Just want to know what will be the impact on Mumbai properties when the Sensex reaches 15k+.

Thanks,

Kulkarni

Anonymous said...

@Anonymous 9:44 PM

You seem to be real boneheaded. Dont waste your time posting comments without any analysis/reference. Go and buy properties.