Tuesday, October 13, 2009

Rich behaving poorly

Sagarika Ghose seems to have hit the nail right on the head. When we see the likes of Bindas Bhai and others gloating over their riches when the average Indian is trying to make ends meet, it reminds me of Marie Antonette who said "If you don't have bread, eat cake". The liberalization of India has attracted legitimate capital as well as shady money. It is this shady money which is fuelling all the demand for real estate. Last January, at the mere mention of the abolition of P-Notes, the market crashed 20% from 21k to 17k. The money moving in Indian stock market is highly speculative leverage capital and part of those profits are ploughed back into Mumbai real estate. Folks who make money should be careful in how they invest it. We have seen how the mighty have fallen. I know of folks working on Wall Street earing $500k + bonus and those folks cannot find a job paying them 1/5 of their salary. Indian housing bubble is a subset of the Indian money supply bubble and both will unwind viciously when it become unsustainable. Manmohan, Montek and company are doing little to curb its appeal. They act like ostriches when the wolves are out in full play. The real money has to spent in building infrastructure, agriculture and basic necessities. The Naxals are not reading Sagarika's blog before striking back. They are rising against the unfair trade practices. If the poor don't become a participant in India's growth, the rich wont be able to enjoy their riches for long. Her blog is below.
Two seemingly unconnected events point to our most urgent contemporary dilemma: how should the rich behave in a country of the poor? Just a week after Corporate Affairs minister Salman Khurshid asked CEOs not to take "vulgar" salaries, Naxals beheaded police officer Francis Induvar in Jharkhand and as many as 200 Naxals attacked a police station in Gadchiroli. Four Indian CEOs recently made it to the Forbes list of 10 wealthiest CEOs in the world, yet almost half of India lives on less than a dollar a day. Today, many rich Indians are indeed vulgar and arrogant, and the poor are no longer content in their 'god given' lowliness and have taken up the gun. India and Bharat are on a collision course as never before. The government's response of a crackdown on Naxals is only a treatment of the symptom rather than the disease. If Naxalism is defined as a violent response against perceived inequality, then its not just occurring in the Red Corridor. There are versions of it going on all over India. Read more at IBNlive.com


Anonymous said...

Is it the civil unrest people talked about on this blog earlier happening now?

All thieves should be punished.

Anonymous said...

Google-up “mauldin third quarter 2009″.

An excerpt: “…The uncomfortable conclusinon of Fisher’s analysis is that major business cycle fluctuations are, in fact, caused by over-indebtedness and the fall in asset prices. Our present situation appears to mirror the exact sequence of events that have occured in previous depressions. This suggests that our current ‘great recession’ may morph into a more serious and enlongated downward business cycle.”

Anonymous said...

Foreclusures in US to top 25 million. What will happen is such a thing happens in India??

Foreclosures May Top 25 Million

Foreclosures could top 25 million homes and other properties, according to a new report by Housing Predictor.

Destin, FL, October 13, 2009 –(PR.com)– Foreclosures could top 25-million homes and other properties in the U.S. if government officials don’t take drastic action to lessen the impact of the foreclosure epidemic, according to a new report by Housing Predictor.

The real estate research firm was the first to forecast the foreclosure epidemic that would trigger the worst economic turmoil since the Great Depression. Read the new full analysis at Housing Predictor dot com.

In a new Housing Predictor survey nearly 1 in 3 mortgage holders say they will walk away from their homes if housing prices continue to fall. The action would leave bankers on the hook for trillions of dollars in unpaid mortgages and send the U.S. economy into a worsening financial crisis. It would also result in the highest number of renters in the U.S. housing market in decades.

Anonymous said...

There is no piousness in poverty. In the new India, either you make money or get left behind, handouts are over. Wealth redistribution is over. Infact Indians are one of the biggest buyers of real estate in US.


Shriniwas K said...

aaargh "piousness" - Which school did you go to ???
Someone kill me please .....

Anonymous said...

Salaries at IITs are down by half.
Who in the world says Re will stay the same in India and grow.

The Re has to crash like salaries another 50% or so. If any Behan C/Madar C tries to tell me to buy, fuck him.

Greedy bastards.


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Anonymous said...

Unfortunately we are not living in Utopian world. Greed is causing this, be it buyers, who wants to sell at a later date and earn money or fence sitters who do not want to buy for the fear of loosing money. Everyone be it bull or bear wants to make money either by selling or by buying cheap.

People like me believe in buying and selling and booking the profits, leave something on the table for the buyer and that is the reason that i have offloaded around 6000 sq/ft in chembur despite the fact i know the prices will further go up.

It is more of luck which plays a role in deciding you fortune.

America gives lecture to the world about democracy but was very eager to support Mushraff or for that matter any King/dictator which suits them. We all know this the truth of life.

I believe it is better to go with the flow then against. Remember to use common sense and always keep your mind open when it comes to investing.

Bindas Bhai

Anonymous said...

really a thought provoking article and views. thanks Vik for posting. posting my comments I posted to the original article...
Excellent article and views Sagarika! But what next? Few people like me will post their comments with nice words and should do this and that. The article will be there for some time and then eventually be moved to archival. If we agreed that how sensitive the issue is, can this be converted into some sort of movement by media? Can you push further to get mass appeal and further views and generate awareness? I guess there are many such thought provocative articles I see from few sensitive journalists but hardly anything happens after publishing? And as you said, the discussions and debates are shun by elitists which I don't agree completely. we can not even expect expect reforming protests from majority common man who is living hand-to-mouth and struggling for his basic needs. So who can at least raise the voice? I believe we "the people" who have at least access to such forms of communication / platform (like you published your views and we are commenting which in fact started) and opportunistic to express our views can do this. And unfortunately we fail somewhere or give up in the process and move on to our other such stories and so-called social issues or daily routines. So we end up with so many such articles, comments (we should do this that and blah blah) and it gets archived without taking it forward/further to bring into attention of those about whom this is been written. From our perspective you have better access to communication medium which I feel should not be limited to few online readers / bloggers. Can Rajdeep bring in his big fight like show or similar shows? I feel sorry when I see so many biggest mass communication is filled with so many so-called reality shows and Rakhi sawant nonsense. I may be wrong but do let us know how we can take it forward and I’m sure many would like to part of the process / movement.

- Anil

Anonymous said...

Yet another drama by ET - Dream Homes: Buy now or wait?

Ref - "However, experts recommend a ‘wait-and-watch’ strategy since they expect some clarity on prices to emerge by December"

Who are you refering? Can you take an efforts to list?

Ref#2 - "They feel that prices are likely to bottom out by the end of the year and that even if the fall is as marginal as 5-10%, it may be worth a wait."

According to whom 5-10% is worth waiting? All knows that RE prices have incresed 200-300% in short last boom which need to be corrected first.

And finally ET can not hold on the temptation to mention their regular representative of sponsor Johny Meghraj (opps! sorry - "Jones Lang LaSalle Meghraj")

Ref # 3 - However, even if prices are to soften by the year-end, one of the important determinants that would influence the degree of fall is the supply-demand mismatch in the suburbs. “In Mumbai’s western suburbs, prices could stabilise at current levels or marginally correct in the Bandra-Andheri stretch, as the demand is much higher,” said Ashutosh Limaye, associate director (strategic consulting), Jones Lang LaSalle Meghraj.

The another article and views we saw from moneycontrol recently. Here is link again for those who missed -

Can real estate prices crash 70%?

And btw, did you observed the diff in these two articles? well, here are few which I have been observing and listed. you can add more -

1. ET and TOI writers profile is not seen. even link is not provided, do you see?
2. References of experts will either be vague / generic or the list will be regular contributors - JLLM, CREDAI, Gera, Kumar etc) They are the experts they refer to. oh..common man is not an expert and not worth mentioning even he is the major customer (othern than rich NRI, HNI and black money spiiners)
3. Moneycontrol has displayed Yogesh Chabria's photo and link to his profile for people to belive views
4. ETs reporters hardly gets repeated and always changing - at least I was not able to see who they are, what they do and and their credibility when they are writing on such sensitive topics

Anything else I missed out?

I guess this is how they able to push the crap and remain unaccountable to what they are publishing
I would have posted the comments to the ET article but from my exp, hardly any such comments are published by reviewers

- Anil

Venkateswaran K Iyer said...

The failure of the rich is in keeping quit while the politician babu nexus fails to administer the country properly and indulges in corruption which steals money from the poor.

If we keep quiet, they will continue to rape the country. Their capability for rapacity is probably 10 times higher than that of the British rulers before them.

Previously they did it quietly. Now they take pride in being corrupt and indulge in competitive corruption - The "I looted more money than you" syndrome.

The rich should take pride in being rich by legitimate means.

But taking pride in being rich by illegitimate means and vulgar display of one's ill gotten gains - if we keep quiet about that, we are condemning our country to collapse.

If we keep looting each other, soon we will find that China has financed the Maosists to break up the country, and will join Pakistan to loot us comprehensively and break up our country. Many parts our country (Bengal, Jharkhand, NE states, parts of Bihar) will be enslaved under puppet Maoist regimes, just like the Muslims and British enslaved us before and China enslaved Nepal before our very eyes. And the other parts (South, north, West) will become independent countries which will fight among themselves and will not work effectively to re-unify the country.

That is the danger of having useless and corrupt administrators, like we have today. "We are like this only" and the Hindu growth rate do not work - others will not let us be in our poverty. History teaches us that the powerful will vanquish the weak and survival is of the fittest.

In what way are we showing our fitness in being independent? The way we are, we are fit only to be slaves. That slavery is what our country is headed towards, and what the Chinese have in store for us (through their puppet communists).

The way media can help is by denying a voice for the communists - who speak self righteously but serve the interests of their Chinese masters. Media should not allow communists - like Nilotpal Basu, D
Raja, Sitaram Yechury, AB Bhardhan etc - to talk on television. Normally media likes communists because they talk a lot and the media loves their "bak-bak". But airing their "bak-bak" is only giving voice to Chinese moles within India's politics. Their purpose is to scuttle reforms and prevent meaningful economic activity so that India becomes weak while China races ahead, pursuing the same reforms which their commie puppets decry within India. The communists speak always in one voice, because their handlers from China script the nonsense that they talk in one voice (and Russia did before their communists collapsed and China took over)- unfortunately the media likes their hysterical shouting because the media also indulges in a fair share of hysterical shouting, so they like the decibel levels. This should cease.

Secondly, media should expose corruption with a vengeance and if one person is caught in corruption, then hounding him persistently until he is put is prison.

Currently, our media has attention deficit disorder - they create a lot of noise but after a few days they move on and forget about what they were vociferous about a few days ago, because something else has caught their attention.

Thats is two ways in which Media is irresponsible and two ways they can improve themselves.

Venkat ND

Anonymous said...

Vik and All -
I understand that poor will not accept the fate for long time and watch; they will soon raise their voice/hands.But What I believe is current uprising of naxals 'maoists' only because of cheina's hand. China will be creating issues in Nepal,NE states and will be more inetnse in the coming days. Our jokers(politician) jokers are already handling the whole issue without any strategy already.

When Rahul becomes PM... we will have more fun.

BB - We are predicting about bubble and sitting on fence not because that we will loose money.
We are doing this just because we would like the buyers to be rational and should not pay more for what he is getting.Indian RE is completely a black box and manipulated by gang of looters like politicians,media,brokers,developers and many more.

Anil - Do you think "Discussing in Big Fight' will be great idea. Come on man... we have see 1000s of shows...and media will just move on something else topical..

I don't see anyone from our media as responsible and can stand up against evils..


Anonymous said...

US$7 bn headed for Indian realty
by News Desk


Anonymous said...

Venghat ND and other anti-communists who think the present situation of being a slave to america and its wishes is quite liberating,

US is waiting for an oppurtunity and working overtime to stir up passions against china and thereby create a war between two giants. Another war could revive the fortunes of american manufacturing.

But rather than being american slaves, you bloggers like bvnkat nd should start to think for yourselves.

The whites (US NOW BUT PREVIOUSLY BRITISH) ARE THE GREATEST threat to the world peace.They befriend India only to help bring about destruction to ourselves.

Eventually the nations with most population will succeed always in becoming powerful states. America would like to prevent that, but how??? Make them both fight and hence they will ruin themselves. Just like france and germany britain fought the first and second world war and became indebted to america and from whose shadows US rose as superpower.

India has to learn a lesson. keep away from the war hysteria whipped up by americans and let both america and china fight each oher and we shall live in peace and rise soon afterwards.


And indian communists are doing a GRAND job. If not for the LEFTIST forces, india would not be livable.

P.S: If only the third front had come to power, we would have seen our dream of owning a home a reality, cos RE would have come down drastically due to their policies.

Anonymous said...

Anon said: US$7 bn headed for Indian realty, by News Desk

Well, it is not good for money to come to Indian RE as the bubble would be further inflated. If the prices keep going higher as too much money would be chasing too few properties, it would not site well with 99% of Indians who even today cannot afford the RE.

Let's wait and watch how it turns out to be. Maybe another 4-6 months before this whole thing crashes with a thump.

Abeer Bagul said...

Hi Vik,

In Pune, me and a couple of my friends are exploring an idea where we buyers can group together and create our own housing project.

This involves a little more than the "Group Booking" currently in vogue, and i would like to discuss our idea with you.

Please send me your email address on abeerbagul at gmail dot com, since the discussions are at a sensitive stage right now.

Will love to post the concept for the whole group once it is matured.

Abeer Bagul

shailesh said...

US$7 bn headed for Indian realty.

I think this is good news for Indian Realty. Presently RE is largely financed by black money especially in initial start-up period. The land acquisition is normally done via backdoor deals, politician support and mafia pressure. This group is like a cartel, creating shortage of supply and controlling infrastructure. Going thru the article, it seems most money is flowing into new areas like Navi Mumbai SEZ, where land prices are not exorbitant like mumbai. The better the surrounding areas become, the lure for central areas in Metro goes down. I see the posts here for people looking for housing in Navi Mumbai. 15 years ago, very small percent would have considered Navi Mumbai. I am in favor of more supply, which will break the backs of land mafia of mumbai.

shailesh said...

From ET,

Investors should be cautious on investing in realty

things have changed since the heady days of 2006 and 2007. At that time, one of the selling points that developers used to lure HNI investors was the supposed safety and stability of real estate investments vis-à-vis stocks. The developers' story basically was that real estate never really lost value and the price that you got in at didn't matter because prices were going to be headed only one way for years and years to come.

Today, this story lies in tatters. The last two years have been a nightmare for many of investors. These claimed special characteristics of real estate investments turned out to be largely fictional.

Now that investments in real estate are being pitched again, it's time to re-orient the process of evaluating these to the same process that must be followed with every investment. The basic characteristics of any investments are returns, liquidity and volatility. Another factor that a knowledgeable investor would generally consider is whether a given investment moves in a different cycle than his other investments so that it acts as a hedge.

Real estate investors have learned some harsh lessons about liquidity in the last year or two. In any market, the basic definition of a price is whatever a buyer is willing to buy at and a seller is willing to sell at. In real estate the definition has been changed to whatever a hypothetical buyer, imagined by a broker, should be willing to pay were such a buyer to actually exist.

shailesh said...

Farm land worry for IPO-bound Emaar

Real estate developer Emaar MGF, which is planning an initial public offering, has disclosed that it is yet to convert three-fourths of its landholdings into plots for real estate development.

The company, which has completed one project in the last four years, claims to possess 11,340 acres, of which around 8,660 acres is agricultural land.

According to Indian laws, relevant authorities, mostly at the state level, must officially allow the use of agricultural land for non-agricultural purposes.

The process is usually cumbersome and time-consuming. Moreover, the government may disallow the conversion of agricultural land to protect the interests of the farmers.

shailesh said...

ED probing income source of lands owned by Satyam's Raju

NEW DELHI: Enforcement Directorate, which has attached close to 285 properties worth over Rs 1,000 crore of Satyam founder Ramalinga Raju, his relatives and others on the charge of money laundering, is now probing more such assets.

Official sources said while about 285 properties
were attached by the ED through an order in August, the agency is now probing the financial trail of many other properties which have been linked to Raju, his relatives and others.

They said the properties, which were aquired through various front companies, were attached under relevant sections of the Prevention of Money Laundering Act (PMLA) after it was found that firms under whose name land was bought did not have any first hand source of income to purchase any such assets.

Sources said many of the properties were declared as farm land even though they were prime commercial lands.

Sources said while the trial is set to start soon with the Adjudicating Authority in the national capital issuing notices to all the accused, they said the ED had already recorded statements of Raju in jail.

They said though the original value of the properties was less than Rs 200 crore as shown in paper, the current rate would be over Rs 1,000 crore even on conservative estimate.

They said while many properties could have been acquired through ill gotten wealth from the Satyam accounting scam, which is being probed by various agencies including CBI and Serious Fraud Investigations Office, the agency is looking after only those that have been acquired after 2005, the year in which the PMLA came into effect.

Anonymous said...

Commercial-Mortgage Defaults Jump Sevenfold

Oct. 12 (Bloomberg) -- The volume of delinquent commercial mortgages jumped sevenfold last month as borrowers who got loans with lax terms fail to make debt payments amid sinking real estate values, according to Credit Suisse Group AG.

In September, installments on $22.4 billion of mortgages were at least 60 days late, up from $3.2 billion a year earlier, Credit Suisse analysts wrote in a report. The delinquency rate rose 33 basis points to 3.34 percent, according to the New York- based analysts led by Gail Lee. A basis point is 0.01 percentage point.

Commercial-property owners are struggling to repay debt as data from Moody’s Investors Service show prices have plummeted 38.7 percent from October 2007 peaks. Defaults on shopping malls, skyscrapers and hotel loans are increasing as borrowers that took out mortgages expecting rents and occupancies to rise miss payments , according to the analysts.

“As the credit crunch intensified over the past year, the poor underwriting on recent vintage loans has resulted in early defaults,” the Credit Suisse analysts said.

Anonymous said...

@ Abeer Bagul 6:34 AM,
Abeer, thats exactly we should start now to find out what does it really takes to build a home which anyways we are going to live for years to come. once such initiative we few likeminded guys started and you can find more info - http://dreamhomeinpune.blogspot.com

You are most welcome to join or form another such group - there more the better as it will be collective efforts and learning and shairng will be not be that easy but have decided to give a shot inspiring from similer efforts by Infosys guys.

- Anil

Anonymous said...


interesting one...

Anonymous said...

If legislation for REITs get passed in India, then another burst of price on the upside will happen.

However, it makes no sense for South Mumbai to be more expensive than NYC.

Shriniwas K said...

People who support communists Please remember the following -

Josef Stalin murdered 23 million of his own people whom he considered enemies of the state. Almost all of them were innocent

Mao Zedong Murdered 70 million Chinese who did not approve of Party directives.

Pol Pot Murdered 2 million Cambodians

Holocaust claimed roughly 6 million lives.

These were organized mass killings and not the fallout/damage of real military warfare.

You cannot be supporting totalitarian government without justifying mass murder. If the naxals come to power, they will have many innocent people branded as traitors and have them executed.
To be honest, communism doesnt work, all the communists will do is - thay will fill the place of todays builders-realtors-politicians, and they wont even allow any blog where you can criticize them.

Anonymous said...

Why Naxalites should join the Democracy?

We have joined the democracy & what’s the benefit, where politicians & rich are setting the rules to exploit the middle class? Join the democracy, to respect Chidambaram? So he can maintain his status, power & extort more & more people. First put this traitorous guy behind the bars.

Only naxalism is going to solve the problems in India. As usual to divert the attention they are pointing fingers towards China & Pakistan. If you are still not convinced, first answer about disparity. Getting basic food itself is a big deal for so many tribal & villagers. Yes, there was an article about a politician distributing 10kg rice bags to buy votes. I have seen a tribal man digging whole day in a field to catch a rat for food. There is another extreme in Metros, even though a guy can get into IIT or any premier institute; he can’t afford a house in Mumbai.

Social disparity will become the next partitioning/dividing theme of India. There are already good amount(30%) of naxalites. In the remote parts they are operating as naxalites & in metro they are operating as Gangsters. Now the growing disparity in society is forcing people to join the new community with a rapid pace.

The disparity index will help you to track the forthcoming revolution.

[Income of richest person in the country] / [Income of poorest person in the country] = Disparity depth index

[Income of top 100 rich people in the country] / [Income of bottommost 100 peoples in the country] = Disparity width Index


NOTE: Capitalism is good only when free market is not interfered. Last year only Capitalism had failed.


Anonymous said...

Watch the new movie by Jim Moore on Capitalism.

It defines the distinction between capitalism and democracy.

Anonymous said...


Interesting RE in Vegas.

Shriniwas K said...

The movie is Capitalism a Love Story ...

http://www.imdb.com/title/tt1232207/ Playing at your local Multiplex ...

Michael Moore (And not Jim moore :P )happens to be from Michigan which has been worst hit since the slowdown began in 2006.

Anonymous said...

Patricians and the land mafia has made the housing unaffordable for almost everyone. The Rot in Realty

- Anil

Anonymous said...

in above post...read

Politicians and the land mafia

Anonymous said...

Excellent video again here....

check it out

Anonymous said...

Swiss banks to reveal Indian Black Money.


Anonymous said...

Hey diwali is 3 days away and where is your 7 K sensex???
and 70% Fall???Vashi hunter is dreaming of becoming my next door neighbour in Bandra when prices fall 70%

Ha ha ha

70% fall means my 2 Crore bandra apartment will cost 60 lack????
When oh you crystal gazing oracle??

And then shit from vashi ,vashi hunter can buy our bandra apartments from his outright money???? Vashi f**er please f**k urself.This is bandra .Do not dream ,we do not even tolerate "sandas bhai's" from chembur and people from shanty shitty subrbs like Cenral one and beyond Andheri ,a Vashi guy should not dream of bandra!!!

Anonymous said...

Its american and jewish propaganda that many people were killed.

Any sane person will never beleive it.

All things we generally read about holocaust (6 million jews as per shriniwas)(fake and created by zionist propaganda machine supported by imperialists) and other mayhem is just american psychological war against gullible people like you,shriniwas.

Stalin killed 23 million and that again is false...American propaganda machine working overtime.

Poor Mao, all he tried was to do was to increase productivity by doing communal farming and gather the self respect of chinese by increasing the manufacturing capacity of china. It went wrong but the many people dying was due to lack of food. That happens so much in india even now.Its american propaganda again on poor Mao.

And finally Americans brutally but in a sophisticated manner murdered and butchered so many of its fellow americans, those native people and dont you ever forget the number of wars around the world where millions have been killed just because america wants to maintain its hegemony.

Dont fall for such propaganda, you wise and educated one. Your education should be worth something.dont you think???

And marxist communists (CPM) are quite different from naxals.And in CPM are the best brains of India. Remember India will never be a superpower with so many of out own people with no food to eat and no self respect.

Marxist communists provide succor to the disenfranchised ordinary people of India.

Anonymous said...

Bandra Guy
Yours is most disgusting comment I read.
Man bandra property was a joke and I thought everyone took it in that way.
Myself is too doubtful about 70% fall and I've ridiculed that..

You are disgusting..remember time is not constant and mighty may fall...........

Anonymous said...

Just saw this story:


According to this the starting salary of IIT grads has dropped from Rs. 9 lakhs/year to Rs. 5 lakhs per year. This is almost a 50% drop in wages, and these guys probably make the largest starting salaries amongst techies in India.

If wages drop by 50% across the board, shouldn't we expect real estate to drop by 50% as well, as affordability will go down by the same factor? People on this forum who have been predicting a 60% drop in RE have been close in my opinion, and this might just be the tip of the iceberg.

Shriniwas K said...

@ Anonymous Commie comrade,

Please dont quash the reality as American/Jewish Propaganda. In fact America and Israel are protecting whatever freedom the world has. Being able to live a decent life, with civil/civilian rule is impossible in totalitarian government. Man is inherently selfish and competitive and once a dictatorship is imposed, it becomes the sole responsibility of the dictator to maintain sanity of the government.

Denying the Holocaust as Jewish propaganda is equivalent to accepting denial of historical crimes committed against the native Indian subcontinet people (including Hindus, Syriac Christians) by Islamic invaders of India from Mahmud of Ghazni to Ahmed Abdaali by the left wing History textbooks.

You most certainly seem to he a deranged man who thinks that Communism can solve all problems peacefully, please think again. Mao's Cultural Revolution and Great Leap forward, Stalin's forced famine in Ukraine and his great purges in the 30's, Pol Pot's agrarianism campaign and Hitler's Final Solution all have historical records.

Double check yourself before denying anything as propaganda, in fact you yourself have been brainwashed with Communist and Socialist Propaganda ...

Anonymous said...

anonynous above at 7:56

Your assessment is right, but typically, the real estate cycle trails the economic cycle by 6 months to a year. So, the IIT paycuts etc u r seeing will affect the realty sector late next year. By then, the US stimulus money will run out and the Indian banks will have to start raising interest rates to control runaway inflation. Check the pao-bhaji prices and you will know what I mean.

Expect more than 75% reduction. This is the reason Bindaas and gang are so desperate to make a sale right now.

shailesh said...

Really good article on Bank supporting RE companies.


I think the intention effect is similar to QE done by US Fed, but I think in case of India, this will backfire. In US, at least the portion of money put into Banks will be lended to end users. With housing credit, I know many who are returning back into buying homes.

Printing Money / Quantitative Easing

In india's case, instead of helping end users, PSU are helping crook Builders. Who in turn are increasing prices as they have the immediate money and now do not have immediate need to reduce prices. This does not have multiplier effect, or increases lending. In few years, these builders will again go belly up and this time will take PSU banks with them as well. Too bad we do not have any transparency into such dealings. Common man is screwed.

shailesh said...

RBI cautions banks on lending to builders

"It has been observed that some of the companies operating in the real estate sector have significant exposure in the form of advances, investments, etc to their subsidiaries and other group or related entities. As a matter of prudence, banks may meticulously assess the inherent group risk of their borrowal accounts falling under the purview of the real estate sector," the RBI circular said.

"The directive makes sense since there could be a situation where the risk emerging from the performance of a subsidiary can affect the repayment capability of the parent company to which banks have a direct exposure," said the credit monitoring head of a large public sector bank.

Developers were, however, not pleased with the move and said it would be a time consuming and voluminous task if they had to furnish details of all subsidiaries.

"Normally, real estate companies have hundreds of subsidiaries and, if one has to submit details of all of them, it would be time consuming. We have to see whether banks have to check the details of projects they are funding or all the projects and see what is the extent of disclosure they seek,'' said Sunil Malhotra, vice-president (finance) of Omaxe, a Delhi-based developer.

Basically, Builders saying to RBI, Screw you, we are not doing it.

Anonymous said...

@Shailesh 10:18 AM thank you for the link

Real estate was one of the worst affected sectors during the economic downturn in India. Following the credit crisis last year, some banks had to restructure their exposure to some of the country's leading real estate players.

"Restructure the exposure" = "Bail out of the crooked builders" at the behest of whom ? Reserve Bank of India.

Now they want to rein in Frankenstein monster. Unfortunately it has been let loose.

Anonymous said...

The Indian Banks, foreign hedge funds have played a BIG role in ballooning the real estate bubble and sucking the gullible home buyers.

RBI tells banks to do a realty check
25 Sep 2009, 0407 hrs IST, ET Bureau

It’s evident that RBI is closely monitoring the stunning recovery by real estate companies, many of which are back from the brink. A year ago, these companies had forced
- mutual funds to roll over bonds,
- made banks restructure loans
and borrowed at as high as 25% interest to stay afloat.

A few, which had borrowed against stocks, almost lost control of the company. Today, they are back in business.

The RBI note is specifically aimed at the large firms. It says,”....while assessing the loan requirements of large builders/land developers, they (banks) may carefully analyze the financial credentials/viability of the borrowers on a consolidated basis supported by the consolidated accounts/position of the group. They may also examine the financial credentials/viability of the relevant unconsolidated related entities such as special purpose vehicles (SPVs).”

RBI’s unstated concern may the nature of deals that these SVPs have entered into. In the past five years, the Indian real estate sector has received close to $20 billion foreign direct investment , a chunk of which has come into multiple SPVs floated by builders to promote special projects. Tagged with this money, mostly in the form of quasi debt, are tough conditions, which local builders have to meet to avoid loan recall and litigations.

Anonymous said...

Foreclosure explosion..!!!

At foreclosure auctions, broken dreams on sale

Thu Oct 15, 2009 11:52am EDT

After Barack Obama's election as U.S. president last year, Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, imposed a foreclosure moratorium that lasted about four months. Many private banks followed suit.

As a result, there was a gap in the pipeline of foreclosed homes that pushed into late spring. That helped auction prices stabilize for a few months and permitted some analysts to claim the market had found its bottom.

But the moratoriums have now expired. With the mortgage modification and foreclosure prevention efforts championed by the Obama administration unable to keep pace with defaults, as many as 7 million homes and condos may eventually enter foreclosure before the dust finally settles, according to a report by Amherst Securities Group issued in September.

"There are a lot of things that have temporarily stabilized the market," Tilson said. "But those things are going away ... Delinquencies are spiking. This is going to be a mess."

confused said...

Thanks Anil, you echo my sentiments on RE and the current corruption embedded into the indian society.One result of this is that the powerful,corrupt few are siphoning off black money into RE and hence have no vested interest in bring transparency into the RE practices .they are the politicians,judiciary,police, and the gundas.their nexus is creating havoc in the indian society scene?..

freesms-india said...

Excellent Post, Carry On .........

rajni sharma said...
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Voora Group said...

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