Tuesday, August 11, 2009

Underwater Mortgages Reach Epidemic Levels

Heard on the radio today. Caller bought a house in Merced, CA for 300k in 2005, now the house is worth 150k. Multiply this situation for all purchases made in 2005 in Merced. Isn't everyone who bought a house in merced in the last 4 years under water ? When the loan goes into foreclosure the caller loses all the equity he has paid up to the bank and the interest payments for sure. All housing loans are structured to pay of the interest first so the principal payment to the house is negligible.
Now assuming an area like Cupertino, CA which hasnt' seen such a drop, maybe 10%. By definition if the owner's equity portion on the house in the first few years is negligible so without doubt this buyer is under water too. By this metric all housing transactions made in the past 4 years should leave their owners under water. Houses prices have dropped to levels more then the outstanding loan amount because of negligible payments made towards the principal.

Lets random sample a house in Santa Clara, CA using Zillow in one of the sought of areas by Indians and Chinese first generation immigrants.
06/19/2009: $660,000
03/14/2001: $650,000
4% closing costs of $650k = $26,000
Total cost (2001) = $676,000
Downpayment ~10% = 76,000
Total Loan ~90% = 60,0000
Total interest paid at 5.4 % till date = 243,311.60
Total principal paid till date thru monthy payments = 80,000
Property taxes = 8,000 x 8 = ~64,000
Income Tax Interest deduction in taxes at 30% = -80,000
House maintainence cost 3,000 x 8 = 24,000

Total equity in the house = 76k + 80k = 156k
Total cost of ownership = 243k + 64k + 24k = 331k
Outstanding loan =520k
Total Loss = 660 -(520k + 331k)  + 80k(IT deduction) = -111k

Total Loss for owner over 8 years = ~$111,000

Lets assume owner had rented the place for 2k a month as an average over 8 years = 2 x 12 x 8 = $ 192k total

Assume the owner saved the difference between mortgage and the rent (3.3k -2k) = 1.3 x12 x 8 = $125k

Total savings in the bank of renter  = downpayment + difference = 76 + 124k = 200k
Assuming an average return of 3% over 8 years of 200k, yielding simple interest = 48k

Total savings with renter in the bank = ~248,000

24x7 Wallst reports
Underwater mortgages hurt home sales and increase delinquencies and foreclosures.

People who have to pay their mortgage holder to sell their homes are less likely to be sellers. A home sold for $200,000 when it has a $250,000 mortgage is a home that the owner may not be able to afford to sell.

People living in homes with monthly mortgage payment that stretch their abilities to cover their living costs may stay in homes that they believe have a lot of equity and where a sale will eventually bring them a profit. That hope for a bonanza may encourage them to go through the agony of making large payments. People who have no hope of making money on their homes are more likely to be willing to abandon them or be kicked out.

Both of these trends make it more likely that the housing sales pace will continue to be slow and property values will not recover.

Real estate research firm Zillow says that 23% of mortgages are now underwater. The company adds that the number could be 30% a year from now.
One of the major reasons for the trouble is that home values fell 12.1% year-over-year in Q2 to a Zillow Home Value Index of $186,500, resulting in a total 22.3% drop in value since the market peaked in mid-2006. Twenty-two percent of all transactions in June were foreclosures, a possible sign that people are not willing to fight until the end to save their houses.

61 comments:

shailesh said...

Move on. According to BB, this is not an issue in India. Everyone makes 1cr and has ton of black money here. Its all Cash deals in India, esp in Chembur.

shailesh said...

Not enough incentives

Let’s consider an example. Ram Joshi, earning a salary of Rs 5 lakh a year (working in Nariman Point, at the tip of South Mumbai) is hardly enthused. Here is why: He has been looking for a house for quite some time and unable to find one for his budget of Rs 20 lakh. Four years back, a 1 BHK house even in Andheri was possible for Rs 20 lakh. Now even a 1 BHK sells at more than Rs 55 lakh. He has been unable to find any decent accommodation for this budget till Virar. Some that he saw were low on amenities, not so great construction, and at places away from schools and train stations. He wondered what impact a 1 per cent subsidy will would have on his purchase. In pure monetary terms, Ram would probably save around Rs 500 or so per month in the first year. The total savings will not exceed Rs 6,000 and this will hardly matter for a budget of around Rs 20 lakh (0.3 per cent of Rs 20 lakh).

Considering Ram’s takehome of around Rs 34,000 per month and monthly expenses of around Rs 15000, he can manage an EMI of Rs 12,000-15,000 (considering Rs 4,000-7,000 is allocated for investments and insurance). However, the challenge today is that prices are extremely high and he is unable to get a decent dwelling for the EMI he can afford. Additionally, most of the properties built are 2-bedroom and upwards, which takes the budget of most properties to at least Rs 60 lakh. At the same time, banks are expecting him to put a higher margin upfront on the property he has liked in Mira Road. He currently lives in a rented property in Andheri for around Rs 10,000 per month in a decent society and is contemplating whether he should really move far away just to own a house. Tired of finally unable to get anything decent in his budget, he has taken the wise decision of staying on rent.

Venkat said...

I believe the rent for these houses will be atleast $ 3000 per month... Tough to get house on rental...Thats a fact which is missing in this analysis

Bindas Bhai said...

Shailesh,

I never spoke about any properties but Mumbai. I feel the demand in Mumbai is huge and it is finally demand/supply and affordability which determines the market in long run.

Any amount of external intervention be it media, politician etc cannot change the fundamentals of the market. I still feel most of the areas in Mumbai have yet to see a bubble.

It is only recently i spoke about Pune and Bangalore because i saw a lot of value and i believe that if not today, tomorrow IT will pick up and will come back with a vengeance. I may be wrong but this is a calculated risk.

Where there is hill there is always a valley and to time exactly that we are on top of the hill is very difficult and equally it is also difficult to know how steep the valley is.

All the best.


Bindas Bhai

Anonymous said...

BB , till people like you do blogging during office hours in a BPO . IT/ITeS will never come back with a bang.
(Please note that I owe the internet cafe' .. in short self employed.)

Anonymous said...

I think BB can buy couple of Internet cafe's along with guys like you.

shailesh said...

BB: So can you show me some growth areas for Mumbai? IT has long left the city. There were BPO jobs, but lot of them are getting laid off and the pay is not that high compared to IT. Mumbai does not have large NRI base like Kerala, Gujarat or Punjab.

See the above example on affordability. When a person earning 5 lakh a year can not buy even in Mira Road, something is wrong.

On question of demand, that is artificial myth created. When you add MMR region, there is lot of land to build upon. In fact, the policy response on supply side is just kicking in. With all the redevelopment of Slums, New Roads bringing remote areas closer and increased FSI for older building redevelopment, the supply you speak of is set to grow exponentially.

On your point of detecting Valley. The last bust was in 1995. It took 10 years before RE took off again. You think this time it will start back up in 2 to 3 years? History tells me something different.

Bindas Bhai said...

Dear Shailesh

about: Mumbai as a City

Correct me if I am wrong, Mumbai still contributes around 27% of total tax collected. This city is very dynamic and because of the work culture it will always have its advantage.

about: Increase in FSI

FSI is increased selectively and not across the board. Our reading says that this is miniscule if you compare with the demand.

You said:
On your point of detecting Valley. The last bust was in 1995. It took 10 years before RE took off again. You think this time it will start back up in 2 to 3 years? History tells me something different.

Are you saying that RE has already crashed in Mumbai?

If your answer is yes then pls. do some leg work and you will come to know the current prices.

Certain pockets had corrected but as buying started those prices have also firmed up.

As we all know markets are very dynamic and are very difficult to predict the market.

God only knows what will happen tomorrow but looking at today’s trend it is unlikely the markets will crash in near future for Mumbai.

All the best


Bindas Bhai

shailesh said...

BB: Well you pointed some common myths, and I am glad to dispose them.

Mumbai contributes this large tax because of the fact that most large company in India have HQ here. India's majority collection is indirect taxes. Being HQ's located in Mumbai, the tax collection number also comes high. Having said that Mumbai does have large number of rich people. But when you look at percentage of population, it is very small percent.

Regarding dynamic nature of Mumbai. I read a report that said Mumbai's GDP is lagging India overall. I will try to lookup the report. In fact Mumbai is loosing its grip on economy very fast. It is no longer attracting best and brightest due to chronic infrastructure and quality of life issues. On the other end, it is attracting lot of uneducated rural folks coming in for low paying jobs. I get saddened by the fact that city which was pioneer in IT (I worked in Seepz in early 90s), has not even been able to maintain the lead.

Regarding Crash, you are in denial stage. But deep down you know that volume has dried up. RE does not crash, it deflates. Even in US, there are lot of homes on market asking same price as 2006 (peak of market). They are rotten listing. Asking prices mean nothing. Similarly what Builder quotes as price mean nothing. The important aspect is Sales Price and Volume. Both are off significantly. I think I already posted that fact that in recent auction by MMRDA for space in BKC the price they got was 30% less than peak, with only 2 viable bidders. In my book, I would not even call that deflate, but a crash.

shailesh said...

BB: Here is the link on recent auction results,

Sole bidder gets Bandra-Kurla land for mere Rs92 crore

Mumbai: In yet another sign that the real estate market has cooled, a land auction at business hub Bandra-Kurla Complex on Thursday fetched Rs1.55 lakh per sq. metre—half the price from the previous auction in March.

Just five months ago, Jet Airways (India) Ltd picked up a plot in the same area at Rs3.52 lakh per sq. metre.

Land sales have been down since this year’s beginning compared to 2007, when city-based Wadhwa Group had bought a commercial plot in the complex at a staggering Rs5.04 lakh per sq. m for a 16,500 sq. metre plot.

Anuj Puri, country head of property consultancy Jones Lang LaSalle Meghraj, said few land transactions have taken place in Mumbai in the last six months—though there hasn’t been any substantial correction in prices.

“Developers are not willing to pay astronomical prices for a piece of land and are waiting and watching for some correction to happen,” he said. “Many developers are also under a liquidity crunch which is why they are staying away from land purchase.”

So, you are telling me that its ok for Builders to time the market to purchase land, but not for Individuals to time market for their own use !!!

Anonymous said...

"Many developers are also under a liquidity crunch" ...that is the crux of the matter. These beggars have already been booted out by the Indian lenders and they can not fool more the Foreign Investors i.e. Hedge Funds etc since the supply of the cheap money has dried up. They themselves are frightened due to all the bad economic indicators...!!!

Good reply Shailesh. Please keep it up. People like you are helping to protect the gullible home buyers.

shailesh said...

Surat, fastest growing city in India

Surat, Bangalore and Ahmedabad are followed by Mumbai (8.5 per cent), Delhi (8.4 per cent), Hyderabad (7.8 per cent), Pune (7.4 per cent), Bardhman (6.6 per cent), Kolkata (6.3 per cent) and Chennai (6.2 per cent).

So, I was not accurate on GDP numbers. But this report confirm, Mumbai no longer leads GDP Growth list. A large reason for this is chronic shortage of affordable space for businesses and housing. These issues will become more focus in coming years as companies look for more cost cutting.

shailesh said...

So drop in Land prices have been from Rs5.04 lakh per sq. m to Rs1.55 lakh per sq. metre. Bear in mind this is for the most promising CBD district in richest city that is Mumbai. I can't imagine anything that was hotter compared to BKC.

It has everything bulls like to point out. Good Location (accessible to both WR and CR), Good Connectivity (near both Highways), Convenient for travel (near airport), Cheaper than Nariman point etc.... Everything was great, so why land prices dropped 69%.

To me that is Crash !!!

shailesh said...

Anuj Puri, country head of property consultancy Jones Lang LaSalle Meghraj, said few land transactions have taken place in Mumbai in the last six months—though there hasn’t been any substantial correction in prices.

I am confused. Did he not know the article's main point was that prices crashed 69%. Can someone tell him, go out of his air conditioned office and visit MMRDA office.

shailesh said...

Just sent following email to Mr. Anuj Puri at anuj.puri@tcmindia.net

Any one on board who want such behaviour stopped should also write email and ask Mr. Anuj to publish correction.

====
Sub: Please do not mislead common Indian citizens

Dear Mr. Anuj Puri,

As country head of JJLM you are being quoted in this article.

http://www.livemint.com/2008/08/21225221/Sole-bidder-gets-BandraKurla.html

The article clearly states that land prices crashed from over Rs 5 lakh per sq m in 2007 to Rs 1.55 lakh per sq m to now. Even with such clear cut evidence of price crash, you are still maintaining the stance that, "there hasn’t been any substantial correction in prices". How can you justify your position?

With such absurd statements you will soon loose all credibility as authentic and reliable source.

I would appreciate, if you would put correction in press to your statement.
===

Anonymous said...

Shailesh
This is "Chembur Hunter"
I am in peculiar scenario - I do not want to go for loan but I have 50 L in white
As per this blog which I am following for long it should fetch me 3 BHK right??
In chembur I am not able to get decent 2 BHK + parking

Now I am not some outsider - Born n stayed in goregaon ( parents still stay there ) and have palce in Navi Mumbai...

So Shailesh when this crash will happen according to you where I can get 3 BHk + 2 parkings in Chembur @ 50 L :)))

This should have happened long back according to you ad a no of pessimists but did not happen...how come??

In last 2-3 monts I am seeing upword swing..

Now not only chembur -Me My friends and bro looking for homes in Chembur,Navi Mum,Goregaon ,Dahisar ...nowhere we are seeing downturn...

Also a curious observation - I've seen a lot of MBA's from mumbai either work in mumbai or go abrod and many of them after short stint come back to mumbai ,and I've seen a lot of delhi guys coming to mumbai!!In fact if this outsider will go ,we will have breathing space!Places like Thakur village , Kharghar ,Hiranadani is full of outsiders!

Anymay why everyone talks about only IT? Where is finance,pharma and media industries?

In goreagaon in 1995 highay was farway place and Inorbit was dumping ground ,now these are new Posh locations...ditto about Oshiwara...

So fact remains same - half a crore rs is not fetching me desired home ( I want it for staying -not for investment!)

Bindas Bhai said...

Shailesh,


about: Mumbai
It is a personal choice if you think Surat or Bangalore is better then Mumbai then that is the call people have to take. There are lot of people like me who prefer to stay in Mumbai. BTW we all know that Mumbai is housing a lot of head offices and will continue to do so in future.

What you have posted is partially true i dont want to dispute on that but friend has the prices come down. Infact TDR prices which was 650 before election today stands at 1950. (purely because sales have picked up)

If you think that the prevailing prices of Mumbai are crashed prices then i cannot say anything.
I feel the market had corrected because of fear (US collapse) and not because of demand/supply nor affordability. Now the prices have already increased by 15 to 20%

The same guys who were ready to negotiate before May are unwilling to budge now. Trust me this is what the market is now in Mumbai. Sales are happening whether you like it or not.

BTW check this link on Finlay Mill Land. This is more updated then your report. Normally when the market is deflating no one will dare paying almost 16k for per sf/ft.

Remember prices of finished products never come down because there is fall in RM/PM prices. You need a good alternate product/price to bring down the prices. Sad thing is that it will normally work other way round, quiet unfair but that is how the world is :-(

http://www.expressindia.com/latest-news/finlay-mill-land-deal-lodha-to-shell-out-rs-710-cr/494202/

All the best my friend.


Bindas Bhai

Vik said...

Shailesh : well said about Seepz. Banglaore and Chennai has stolen the lead which Seepz had. Seepz was setup in 1976

shailesh said...

Chembur Hunter: What is the rent for 2 BHK in Chembur?

I know someone who rent nice 2 BHK in Raheja on Borivali east for Rs 15K per month. The asking price on this flat at peak for 80L. Even if I were to take 60L for that flat, and take only 60% on loan, you still have Principal of 36L. At 8%, EMI comes to 34K. Just the Interest portion is 24K.

If you smart Financial expert, you will easily do the math. If it cost only 15K to rent and 34K for EMI, IMO it is stupid to buy. Why not pay only 15K and enjoy the same house. If you would have bought the place, you would pay 24L in down payment and 35K in EMI. In fact, if you have 60L in cash, put it bank and you will get at least 50K in interest.

The issue is you are getting emotionally attached to houses. Most people see few folks living in expensive homes and think they need to prove it to other people that they are rich as well. Also in our society everyone pretty much compares to other people based on wealth.

Coming to home values it will take time to deflate. I can easily see 50% drop in prices in next 3 years.

shailesh said...

BB: How many years have you been involved in Mumbai Real Estate?

The article link you posted basically confirmed the fact that bubble has ended. Only 2 bidders and that too offer was less than even reserve price. In 2007 NTC would have gotten twice the amount. Is that not crash then what it the crash?

If you are looking for ready possession flat where Builder has already recovered his investment, he would not budge till there is some alternative. So, the only sane thing to do in such insane world is to Rent and keep smiling. No need to prove it to world that you are rich. The time will take care of it.

shailesh said...

BB: You have way to distort the story without giving details.

1. The reserve price was already discounted 30%.
2. This deal would allow NTC to sell other mill lands. I will gurantee you that Lodha will get some kind of preference in next bids.

The first to be put on the block as part of phase 2 was the 10.5 acre Finlay mills at Parel. However in December 2008, when NTC opened bids for Finlay, it received quotations less than half its reserve price of Rs 1,065 crore. While senior NTC officials had then maintained that NTC will hold on to its rates despite the slump, the textile corporation recently decided to re-invite bids at reserve price 30% lower than before.

Mill land auction: 90 acres more

I still don't get why few on this board are averse to renting. IMO rent and live happy for now. I would rent the best place possible and show off to all friends who bought houses at peak.

shailesh said...

All the fun in deals for Mumbai RE

The Mystery of NSE’s land acquisition at Kohinoor City

shailesh said...

Interesting stuff. Buyers and Sellers Beware.

Is India prone to sub prime Morgatge Crisis Yes

Anonymous said...

Chembur hunter, financially it makes better sense to rent in Chembur and put 50L in the bank and earn some 4L per annum as interest, which will more than cover your rents.

Emotionally, if you are connected to Chembur, hunt for a great flat and buy it. You can live in peace for the rest of your life there. Money will come again later and fill up that 50L hole.

Chembur is not the greatest place in the world, when I recently visited the place, found it rather lower middle class. Lots of my south indian relatives live there on tenant flats, very run down. But if thats where your happiness lies, I would buy and forget financial sense. I dont think prices will come down drastically there - nobody will sell. Most of the people in Chembur, Ghatkopar etc seem very happy with their relatives and friends. Cant buy that for money.

Shailesh, some good posts from you. I am horrified that land is selling for 1.5 Lakh per square meter - thats atrocious for a run down place like Mumbai. Why dont they develop Dharavi - that is also near the airport and releasing so much land should reduce land prices of BKC to realistic levels.

Makes better sense to buy land abroad.

Venkat ND (not the other Venkat)

Anonymous said...

Home Price Declines Accelerate in Second Quarter

By Kathleen M. Howley and Brian Louis

Aug. 12 (Bloomberg) -- Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values.

~ Home prices are tumbling even as mortgage rates remain near all-time lows.

~ U.S. foreclosure filings -- notices of default, auction or bank seizure -- rose to a record in 2009’s first half

~ The world’s largest economy will contract 1.3 percent this year, according to a July 10 forecast by Fannie Mae. The U.S. unemployment rate may climb to 9.9 percent in 2010, from 9.3 percent this year, according to the mortgage buyer controlled by the U.S. government.

Anonymous said...

At last we have somebody who is doing analysis and posting, but I don't completely agree with shailesh.

You cannot apply text book rules in Mumbai. Renting definitely makes financial sense but then, are you prepared to shunt around with your family after every 11 months. Two leases is the max any landlord would allow you to stay in his/her flat in Mumbai. There are so many landlords who wouldn't even want to keep a tenant, so this supply never reaches the market.

There is huge demand out there, but demand exists below specific price points, if you are willing to sell a 500 sq feet 1 BHK apartment at 25 - 30 lac, it will vanish in no time. I have been witness to this since I recently sold my flat in Bhandup.

Now if you talk about a 2 BHK flat then the price point is around 50 - 55 lac.

And not everybody who is buying needs to rent, they already have a house, they are just upgrading, from chawls to 1 BHK ... from 1 BHK to 2 BHK, from Dombivili to Bhandup/Mulund, from virar to kandivili, from thane to ghatkopar ... from vashi to chembur ... etc etc .....

Have u seen the crowd in virar and karjat locals, there are so many folks who have been shunting since decades, now that they have saved enough money, would like a better life ...

and mind you these guys are not the IT professional ....

Last but not the least, How many IT guys does India have ... I don't think more than 50 crore ..

How many govt servants does india have .... I think more than 10% of the population is into govt jobs ... Has anybody looked into the 6th pay commission revision ?

Guys wake up, congress has come into power, they will do anything to please the builder lobby who have financed their election .... SBI home loans is the case in the point ....

If you guys wanted a crash, should have voted for BJP ... not we can jus sit and watch ...

Anonymous said...

Another housing crisis looms

~ What has been driving the consumer hasn't been gains in incomes. What has been driving them is easy credit and rising home values. And the fact that their home price was rising and they could borrow against that through home equity lines or loans or refinancing, it augurs for a very different economy going forward if people don't have that option.

~ On option ARMs (adjustable rate mortgages), the way those loans work is that the payments are very small. And the difference between a normal payment that would cover someone's full interest and principal, and these lower teaser payments, is added to the balance. So even if prices did nothing, an option ARM could end up with negative equity.

~ I think the surprise is prime quality mortgages. That's where the biggest deterioration could take place in the next leg. Right now about 16% of those borrowers are underwater. If our home price forecast is correct, down another 14%, we could have 41% of borrowers underwater in the prime mortgage space. That's what happens when another 14% decline occurs.

Anonymous said...

Anon @11:44:

Be it Congress or BJP, no one wants a crash for RE. Everyone wants India to do good. Bears here only fear that all this growth going on could be phony and may lead middle class people to lose a lot of money.

The reality is that if this market has been going up not based on fundamentals for the last 4-5 years, it will eventually come down. Some places it may correct upto 70% and some desired areas may correct only by 40-50%. As regards to 6th pay commission, salaries have definitely gone up a lot but still not enough to afford the kind of prices RE is tagged to today. Moreover, the salaries would be paid from by taking loans from the World Bank and IMF, which would further increase the budget deficit of India. Overall this salary thing may not be a good move by politicians for the country. Too much too early.

Anonymous said...

Shaliesh,

Why are you posting August 08 news now, has the market not changed since then ?. Stocks have doubled and RE has increased by atleast 20%in Mumbai?

AK

Bindas Bhai said...

U.S. Stocks Rebound; Builders, Financials Up

http://www.123jump.com/market-update/U.S.-Stocks-Rebound;-Builders,-Financials-Up/34099/

Bindas Bhai

Bindas Bhai said...

Shailesh,

Just to give you more update on Jet Airways deal and this is the latest news and a year old which you posted yesterday


Jet in talks with realtors to develop BKC land

http://economictimes.indiatimes.com/News/News-By-Industry/Jet-in-talks-with-realtors-to-develop-BKC-land/articleshow/4887687.cms

Bindas Bhai said...

Shailesh,

This will give you more insight.

Residential realty ‘stabilising’ in Delhi NCR, Chennai, Kolkata
Residential realty ‘stabilising’ in Delhi NCR, Chennai, Kolkata

Moumita Bakshi Chatterjee

New Delhi, Aug. 11 After a virtual freefall triggered by the global meltdown, the prices in the residential markets in Delhi NCR, Chennai and Kolkata appear to have ‘stabilised’ in July.

The average capital values in these markets remained more or less unchanged in July compared to April, according to data compiled by Cushman & Wakefield.

The Pune market, however, bucked the overall trendand saw a price decline of 2-11 per cent. Interestingly, the Mumbai mid-range residential market actually saw a rise in capital values in suburban locations — Bandra (W), Khar, Santacruz (W), Andheri, Malad, Powai.

“We have seen a bit of an improvement across most markets, and prices have plateaued. The ready-to-move offerings are attracting end-users, but even the projects that are under construction are seeing end-user interest now. Although there is an improvement in demand, there is supply coming into the market and so the capital values are unlikely to spike in the short-term,” said Ms Shveta Jain, National Head, Marketing and Investment, Residential Services, Cushman & Wakefield India.

The capital values in the key locations in Chennai have stabilised over the past few months, mainly on the back of new projects with attractive price tags. However, high-end development in Boat Club and Poes Garden have seen capital values drop 5-6 per cent.

India’s financial hub, Mumbai, also showed some encouraging signs, as spike in demand lent stability to values. The demand has been particularly visible in the mid-range segment, especially suburban Mumbai.

This, in turn, has led to an increase in values for such locations.

The high-end property space continued to correct albeit marginally and the dip was not as pronounced as the previous quarters. Supply for new ready-to-move in apartments has been constrained due to slowdown in construction activities while there is an improvement in demand, said C&W.

There were no major price adjustments in Delhi NCR in mid and high end segment in July. The same was true for most parts of Kolkata.

Pune, on the other hand, registered fall in capital values both in the premium and mid-range housing. The drop in value for North East and East locations in both the categories stood at nearly six per cent (compared to April this year) as builders reset their expectations in line with buyers’ perception. In the mid-end segment, Wakad witnessed significant correction (about 11 per cent) owing to excess supply. Wanowrie including NIBM Road and Kondwa too have been hit by an oversupply situation and unrealistic prices.

Bangalore mid-range market showed minor correction in some parts (Central, South, North West) and stability in others (East, South East and North). The high-end housing market continued to see further correction – over 10 per cent was seen in the Off Central area (Frazer Town, Benson Town, Richards Town and Dollars Colony). Secondary market outperformed the primary housing market, with end-users willing to take advantage of reduced prices and lower interest rates.

http://www.thehindubusinessline.com/2009/08/12/stories/2009081252370100.htm

Anonymous said...

Bindaas Bhai
You sit in office idling your time researching in real estate.
People want to know which field you are in.
Are you in a BPO as Retired old man said you were. or are you self - employed.
Was wondering if you could let us know which profession allows so much time.
Well as far as real estate story goes. New Draft Bill for taxes is out. The 1.5 lakh exemption limit for Housing Loan is nowhere in it.
So all the best for your Huge EMIs that you are paying and please get mental check up if you still feel prices are to go up.

In your earlier post you mentioned that their is enough affordability in India. Please tell me what is the affordability for a middle class person aspiring for a 2 BHK if he earns 6 Lakh a year . (definitely not poor.)

Waiting for your reponse BB.. hope this time your response is to the point and not like your earlier swaying posts.

Bindas Bhai said...

Dear Anon:

At this juncture i would not like to tell you more about me as the tone of your post don’t sound very friendly.

about:Tax exemption

Really wont make much difference at the current scenario because currently it is an actual user market and infact for an actual user he will be getting more money in hand as per the new tax policy.

about: affordability

I know a lot of couples who earn atleast 18 to 20L PA house hold income and that is driving the market. Aspiration to buy a bigger and better house is also driving up the market.

Friend pls. dont worry about my EMI, with gods grace even if the property falls 50% still I will sail thru comfortablly. Just to inform you that I earn more then 60L monthly income as rent only on my commercial property. The same is likely to double by 2012. Just to give you an example I have leased at Rs.50/sqft and today after the dip the current lease is at Rs 100.

Similarly I have again caught a 5 star commercial property at Pune which will be completed in 2012. I know for sure IT will bounce back till then and god willing I will get good return. I could go wrong but i am ready to take this risk.

Remember one thing in this world the brave is only rewarded. We all need to take calculated risk otherwise we will never get financial freedom.

All the best.

Bindas Bhai

Anonymous said...

This means Bindaas Bhai is a Property Dealer. If you have so much commerical property than you will definitely want the asset bubble to remain.
The prompt reply proves that you are hooked to the internet almost all the time. (in particular to this website). Quite unlikely for a person with your kind of wealth to personally track and reply on this forum daily. Moreover like your true shitty nature you have written everything but answer my question.

Now coming to some highlights in your statement.
You are about to buy a 5 star commercial property in Pune. You say you earn 60 L per month just from property alone. This amounts to more than 7 crores per annumn as rental income only. And you also have EMIs !!!
Guys on this forum please let me know if you know any people who are about to buy 5 star properties (must be > 30-40 crores) and earns 7 crores a years as rental incomes but still pays interest for EMIs. At least I don't know any. Vik, Shailesh do you know any?

Also please let me know if any black monies was involved in your transactions? Are you paying tax on your rental income? I doubt that.
Vandana Mohan : - You had mentioned that you can track the IP of people and know a lot of people in Mumbai Crime Cell.
Can you send me your details to professionals.ltd@gmail.com. I guess BB is using a handheld device. Trust me you will be doing the nation a lot of help.

Bindas Bhai said...

Dear Anon,

I know you are the same retired old man but don’t have the balls to admit, never mind. I don’t have anything personal against you.

Now pls. tell me what point i have not replied of yours?

about: EMI

There is something called rent discounting if you don’t know pls. ask your bankers to help you on this. Perhaps your CA will advise you why people go in for this despite having money.

about: IT

There is something called as TDS and 30% tax exemption on rent. Besides if you have gone for rent discounting the tax finally payable by you is miniscule i.e around 3 to 4% and in some case you don’t have to pay. Pls. check with your CA.

Now who on earth will try to avoid this amount and live in fear. Friend do your homework properly before you write.

All the best and don’t feel J when someone earns be happy and that is what our parents have thought us.

BTW the tax which you will pay in your lifetime I pay in a year.(I am sorry don’t mean to hurt you ) I have only mentioned about by rents on commercial property and not the properties i trade. Life is always a learning and we need to look up to people and take what is good from them this will always help us. No point in keeping your mind closed

I am sure one day I will meet Vik and lot of others from this forum . Pls. be straight and honest, we all can go wrong but our intention in life must be always clear and GOOD.

All the best!!

Bindas Bahi

Anonymous said...

Yes I am the same retired old man. And I could have had the balls to admit it but they were lost during a safari in Africa.

You are mistaken if you feel that you pay tax in a year which I won't pay in my lifetime. If you really have balls send me your PAN number. Will see how much tax you have paid.

Anonymous said...

Rent Discounting is Just like Bill Discounting where your future receivables are discounted at an interest rate. (around 13-14%) and I don't understand how come TDS etc. comes into picture and taxes are reduced. Did anyone understand the math of BB? or is it that I have forgotten my fundaes. Rent Discounting is relatively new product in the market.

Bindas Bhai said...

If you are so interested in knowing my tax returns,give me you phone number i will call you and give you my pan number. Now let us see who has balls.Give me your mobile number so that you can also see my number.

Let us see your guts!!

Bindas Bhai

Anonymous said...

Bindaas Bhai is sleeping with builders and RE brokers.

shailesh said...

BB: Looks like, your jig is up. You are in RE business. Most likely an agent. You were developer, you would be running around doing construction. Your income went thru roof when RE went into bubble zone. Now its kind of difficult to keep up with last few years.

The last thing I want to trust is the person who benefit from more RE sells. The Developers, Agents, Analysts and Media all fall into that category. Have you seen any one analyst who predicted crash? They have hidden benefit from cheer leading the bull run.

Well, did not realize that was old news. I don't do this daily. But that confirms the bust theory even more.

It seems NTC is scared of market want to get rid of properties by doing Auctions. They are expecting almost Rs. 20K per sqft. The real test will be on this auction. If it sells at anything above Rs. 15K per sqft in next 6 months, I will bow down. If the auction gets delayed or reserve price gets marked down, that will confirm the theory that builders are dead scared.

Big-ticket land buys on realty radar again

shailesh said...

This is really interesting. First of all Lodha agrees to increase bid to 710 cr at request of NTC, since in previous bid all were below reserve price. Now the market tone seems up, NTC want Lodha to up the ante. What is sanctitiy of auction process?

NTC asks bidder to reconsider Finlay offer

shailesh said...

Now, an IPO deluge. Another bubble building up?

Anonymous said...

The party which was driving the IT boom ( and the associated Real Estate bubble in Pune, Bangalore..) is over. All the reckless buyers/debtors ( IT guys) are out of this giant ponzi scheme.

U.S. home foreclosures set another record in July

Thu Aug 13, 2009 8:12am EDT

NEW YORK (Reuters) - U.S. home loans failed at a record pace in July despite ongoing federal and state programs to avoid foreclosures, which have severely strained housing and the economy.

Foreclosure activity jumped 7 percent in July from June and 32 percent from a year earlier as one in every 355 households with a loan got a foreclosure filing, RealtyTrac said on Thursday.

Filings -- including notices of default, auction and bank repossession -- have escalated with unemployment.

shailesh said...

Classic case of chasing the market down.... NTC will have so much tough time selling all other things due to this one stupid decision. I guess Politicians fiddling around is much to blame.

The NTC has called for bids for Finlay Mills thrice since December 2008. The first time, the highest offer was just Rs 405 crore made by D B Realty (Nine Paradise Hotels Pvt Ltd). NTC had then fixed the reserve price at Rs 1,065 crore. In March, when the bids were called again, there was only one interested party from Chennai; but it was disqualified because it had not submitted the entire earnest deposit amount.

Realising that the property market conditions were not so happening, NTC called for the bids a third time but slashed the reserve price to Rs 710 crore.

There were only two contenders-Lodha and Indiabulls Real Estate (Angina Properties)-when bids were opened last month. Indiabulls could quote only Rs 520 crore and was out of the fray.

NTC no to Lodha's Rs 710-cr bid for Finlay plot

shailesh said...

Navi Mumbai airport not yet approved: Ramesh

Mumbai: Union Minister of Environment and Forests Jairam Ramesh on Wednesday said that his Ministry had not yet given the approval for the Navi Mumbai airport project.

Anonymous said...

This is interesting Shailesh, large # of people have/are investing in New Bombay purely cos of the proposed airport! I am sure it would get approved ultimately, more hands wd be greased and returns would materialize eventually.

Anonymous said...

Shailesh,

What you are saying and what NTC is expecting is exatly the opposite. I think you have not read your link properly.

Jairam has also mentioned that he wont allow the salt pans to be developed which means again the supply is curtailed in Mumbai. Have you read about the FSI today on CRZ. The Govt has clearly stated that they wont allow extra FSI on CRZ properties. All these factors will put additional strain on supply front in Mumbai.

I think we are fighting a loosing battle.

AK

Anonymous said...

Jairam isn't keen on development of city's salt pans
http://timesofindia.indiatimes.com/news/city/mumbai/Jairam-isnt-keen-on-development-of-citys-salt-pans/articleshow/4887807.cms

Anonymous said...

Ha Ha Ha Ha Ha....

I had to roll in the floor laughing at this stupid BB. He writes such homilies and then posts gali's as anon. Then he asks other people to have balls!

Secondly, this is the same BB who had no idea about compound interest and the impact of inflation on rental income...he had no idea on how to calculate %age gain. Today he is talking such nonsense about rent discounting!

BB a crore pati??!! more likely a crow pati..Ha Ha Ha Ha Ha ....

Anonymous said...

Supply is contrained! That's a big joke!!!

Building after building are lying empty..the price have been driven up artificially and not due to any supply constraint.

These fools do not understand the concept of cost of capital..living on debt day to day and this is the sector which is going to revive??!!

Its so hugely funny....just sit to oneside when these giants collapse and then you can feast..

shailesh said...

What you are saying and what NTC is expecting is exatly the opposite. I think you have not read your link properly.

All, I am saying is when companies like NTC start precedence of not honoring Auction process, everyone will start mis-trusting them. What is guarantee that when a bidder wins a bid in next auction, they will actually get the land? Lodha's increased their bid to meet minimum reserve price. Now NTC sees that market seems improving and want to get out of Auction. It is short sightedness.

Also the way they set reserve price it self says something. They priced it 1000+ cr first, it did not sell so set it to 710 cr. That is called chasing the market down, when the prices were set unrealistic to begin with. Once builder will develop mis-trust, no one will bid at such exorbitant prices.

On topic of Airport

There are looser everywhere. I am not sure if builders will be able to wiggle easily out by paying hefty sums to politicians. I am suspecting government is tied due to all PIL like litigations. That is why in India always - "Caveat emptor"

shailesh said...

What you are saying and what NTC is expecting is exatly the opposite. I think you have not read your link properly.

All, I am saying is when companies like NTC start precedence of not honoring Auction process, everyone will start mis-trusting them. What is guarantee that when a bidder wins a bid in next auction, they will actually get the land? Lodha's increased their bid to meet minimum reserve price. Now NTC sees that market seems improving and want to get out of Auction. It is short sightedness.

Also the way they set reserve price it self says something. They priced it 1000+ cr first, it did not sell so set it to 710 cr. That is called chasing the market down, when the prices were set unrealistic to begin with. Once builder will develop mis-trust, no one will bid at such exorbitant prices.

On topic of Airport

There are looser everywhere. I am not sure if builders will be able to wiggle easily out by paying hefty sums to politicians. I am suspecting government is tied due to all PIL like litigations. That is why in India always - "Caveat emptor"

Anonymous said...

If you have guts call me on 100 & give me your pan number.

Anonymous said...

This article was published in Aug -2005 & today you can see it is perfectly following 18 years cycle.

The 18-year cycle
House prices can’t rise indefinitely for the simple reason that at some point they become unaffordable. Wages can’t rise as fast as house prices can when a speculative frenzy is underway, so there will come a point when the average man can’t buy the average house, and prices have to fall as a result. My research shows that this tends to work in 18-year cycles. There are usually 14 years of rising prices followed by four years of recession across the broader economy. I’ve looked at data across four continents and at 300 years of British economic history and it seems that this 18-year cycle is present across the globe, irrespective of the distinctive characteristics of each economy – whether the country is resource-rich (USA) or resource-poor (Japan), or whether the population is high density (the UK), or low density (Australia).
http://www.moneyweek.com/investments/
property/bust-will-follow-boom---but-when.aspx

The unemployment figures mean carnage for the property market

But the real damage of a further job loss surge is likely to be a flood of home loan defaults. Stansfield reckons the number of residential property borrowers who fall behind with their payments could climb even higher than the 350,000 level reached in the 1990s recession.

http://www.moneyweek.com/news-and-charts/
economics/uk-economy-unemployment-house-prices-93308.aspx

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

Vulture.

shailesh said...

What no response from BB?

Anonymous said...

Chembur Hunter here ...
Why ppl are laughing as BB being croropati ....man I mumbai because of property there must be thousands of croropati - so what ias the big deal

My dream area is really bandra - so as per sailesh and pessimistic team my 50 L should fetch a 2 BHK + 2 parking home in bandra in 2 tears am I right?( Current value appx 1.5 Crores)

Do anyone beleive this will happen?

Anyway shailesh know any builder personally? I know one smalltime one and frankly these guys are not worried -in fact hopeful.

Anonymous said...

Chembur Hunter / BB

You are so hilarious..changing names, changing sentence construction, but remaining the same BB. You want a 50 lakhs flat in Bandra? Why not Peddar Road or Worli Sea Face? Ha Ha Ha Ha

Look at yourself..so funny. I think that's one of the reasons I come here to read your comments. Its definitely worth a laugh most times!!

Anonymous said...

Anonymous @ 11.11
Chembur Hunter Here - and I am different than BB

I am not the laughing stock but people like you who are pedicting 70% fall across india - you are living in fool's paradise!

YOU said 70% fall is possible AGAINST today's prices righrt so renmaing value is 30% ( As per math I learnt 100-70= 30) IS THIS RIGHT MEANING OF 70 % FALL?

Now In bandra good 2 BHK is available @ 1.5 Crore - Assume @ 1.7 Crores - Now after 70% fall predicted by YOU emaing value is 51 L ( 1.7 x 0.3 = .51) I think math is right ? :)))

Remaing 4-5 lack like Stamp duty REgistrn,Commision I can arrange

1.5 Crore flat post 70% fall is 45 L + 5 l = 50 L -is my budget

SO DEAR SHALL I WAIT FOR 70% FALL ? HA HA HA

YOU said fall is 70% not ME and when I just ave an example you started laughing?

And I say being crorepati is NO big thing in Mumbai - those who are born n brought up and bought homes apart from parental homes at right time ( i was late but slightly)- without stressing finances became crorepati due to property valuation!

You are laughing ,but seriously I am telling you check your family net worth - libalitiex and you may be touching that figure of 1 crores!!

I AM NOT DREAMING OF BANDRA -BUT LEAVING IN HARSH REALITY THAT 50 L IS NOT FETCHING A DECENT ACCOMADATION IN CHEMBUR!!

Anonymous said...

Anonymous @ 5:36 AM
Hi Chembur Hunter Here
So people have come down from 80 % to 70% to now 60% ha ha ha,,,
Now tell me 60% drom means residual ( remaining value) is 40 % right – as I learnt maths ( no pun intended) where 100-60=40 – or PLEASE SOMEONE TELL ME IT IS SOMETHING ELSE!!
Man I started dreaming big! As my budget is 50 L and worst case I can sell my current house and arrange 15 L Extra ( I am not talking about LOAN that will be above it!) so I can stretch upto 60 L
Now If a 1 crore property is going to become 40 L according to you –then 1.5 crore property is going to become 60 L and 1.75 Crore property will be 70 Lack right? THIS IS SIMPLE MATH –RATIO PROPORTION   NOT ANY FANCY PREDICTION MODEL WITH TRIPLE INTEGRATIONAND LAPLASE TRANSFORMS .OR YOU LAERNT DIFFERENT MATHS
So if I’ll wait for some time ( don’t know when it will be) I can dream of Bandra right !!
Now yes my other property will fail but again my 50 L will be accumulating interest right???
So read this – I think I am a fool but don’t know why a this Anonymous @ 11:11 am laughed at me?
( This is comments from one post earlier)

**************************************

I wrote
--------------
Chembur Hunter here ...
My dream area is really bandra - so as per sailesh and pessimistic team my 50 L should fetch a 2 BHK + 2 parking home in bandra in 2 years am I right?( Current value appx 1.5 Crores)
Do anyone believe this will happen?

Anyway shailesh know any builder personally? I know one smalltime one and frankly these guys are not worried -in fact hopeful.





NOW Anonymous @ 11:11 Wrote
--------------------------------
Chembur Hunter / BB

You are so hilarious..changing names, changing sentence construction, but remaining the same BB. You want a 50 lakhs flat in Bandra? Why not Peddar Road or Worli Sea Face? Ha Ha Ha Ha

Look at yourself..so funny. I think that's one of the reasons I come here to read your comments. Its definitely worth a laugh most times!!





MY ANSWER WAS – AND READERS AM I WRONG WITH MY MATHS???:) Please let me know
-----------------------------------------------------

Anonymous @ 11.11
Chembur Hunter Here - and I am different than BB

I am not the laughing stock but people like you who are predicting 70% fall across India - you are living in fool's paradise!

YOU said 70% fall is possible AGAINST today's prices right so remaining value is 30% ( As per math I learnt 100-70= 30) IS THIS RIGHT MEANING OF 70 % FALL?

Now In bandra good 2 BHK is available @ 1.5 Crore - Assume @ 1.7 Crores - Now after 70% fall predicted by YOU remaining value is 51 L ( 1.7 x 0.3 = .51) I think math is right ? :)))

Remaining 4-5 lack like Stamp duty Registeration, Commission I can arrange

1.5 Crore flat post 70% fall is 45 L + 5 l = 50 L -is my budget

SO DEAR SHALL I WAIT FOR 70% FALL ? HA HA HA

YOU said fall is 70% not ME and when I just gave an example you started laughing?

And I say being crorepati is NO big thing in Mumbai - those who are born n brought up and bought homes apart from parental homes at right time ( i was late but slightly)- without stressing finances became crorepati due to property valuation!

You are laughing ,but seriously I am telling you check your family net worth - libalitiex and you may be touching that figure of 1 crores!!

I AM NOT DREAMING OF BANDRA -BUT LEAVING IN HARSH REALITY THAT 50 L IS NOT FETCHING A DECENT ACCOMADATION IN CHEMBUR

rajni sharma said...
This comment has been removed by the author.