Friday, March 19, 2010

When we see such articles hitting the mainstream media, we know that the bubble is on its way to pop, sooner or later. Fast money never lasts and Mr Yadav will soon realize this. New York times link. Farmers owing land in outlying areas of all Indian metro's have experienced this windfall. Personally I have witnessed farmers become overnight millionaries in Pune, Bangalore and Nagpur. However as we all know that is just a fraction of the farming population in India.

On the other post of Persistent, that IPO has been oversubscribed 93 times. I would not be surprised if the stock doubles in a few days. Some people are going to be very rich, and others very poor.

NOIDA, India — Bhisham Singh Yadav, father of the groom, is stressed. His rented Lexus got stuck behind a bullock cart. He has hired a truck to blast Hindi pop, but it is too big to maneuver through his village. At least his grandest gesture, evidence of his upward mobility, is circling overhead. The helicopter has arrived.
Kuni Takahashi for The New York Times

At a wedding on Delhi’s outskirts, the groom, Kapil Yadav, and the helicopter his father hired.
Enlarge This Image
Kuni Takahashi for The New York Times

Girls protected their faces from the dust near Delhi as a helicopter carried the groom to his bride’s village less than two miles away.

Mr. Yadav, a wheat farmer, has never flown, nor has anyone else in the family. And this will only be a short trip: delivering his son less than two miles to the village of the bride. But like many families in this expanding suburb of New Delhi, the Yadavs have come into money, and they want everyone to know it.

“People will remember that his son went on a helicopter for his marriage,” a cousin, Vikas Yadav, shouted over the din. “People should know they are spending money. For us, things like this are the stuff of dreams.”

The Yadavs are members of a new economic caste in India: nouveau riche farmers. Land acquisition for expanding cities and industry is one of the most bitterly contentious issues in India, rife with corruption and violent protests. Yet in some areas it has created pockets of overnight wealth, especially in the outlying regions of the capital, New Delhi.

By Western standards, few of these farmers are truly rich. But in India, where the annual per capita income is about $1,000 and where roughly 800 million people live on less than $2 a day, some farmers have gotten windfalls of several million rupees by selling land. Over the years, farmers and others have sold more than 50,000 acres of farmland as Noida has evolved into a suburb of 300,000 people with shopping malls and office parks.

29 comments:

Anonymous said...

This blog is out of context. Irrelevant articles are posted and soon the subscribers will disappear if this continues.

Anonymous said...

RBI raises interest rates. Good for India. Not good for builders and industry. Good for controlling inflation.

Anonymous said...

http://www.livemint.com/2010/03/19211936/RBI-hikes-rates-amid-price-woe.html

Mumbai: The Indian central bank sprang a surprise by increasing two key policy rates almost exactly a month ahead of schedule, a sign that it is now less focused on supporting the economic recovery and more concerned about resurgent inflation.

The Reserve Bank of India (RBI) said in a statement on Friday that it was raising the repo and reverse repo rates by 25 basis points each with immediate effect, to 5% and 3.5%, respectively. These are the rates at which the central bank lends and borrows overnight money from banks. Most economists and bond traders were expecting such an announcement only when RBI was to unveil its new monetary policy review due on 20 April.

This is the first interest rate increase since July 2008. RBI had cut interest rates between October 2008 and April 2009 to combat economic weakness

Anonymous said...

New Delhi: The government on Friday raised the cost of living allowance for its employees and pensioners by 8%, a Cabinet minister told reporters.

The hike will cost the government an additional Rs6,970 crore ($1.5 billion) each year, Ambika Soni said at a briefing after the Cabinet took the decision.

The dearness allowance (DA) is linked to the percentage rise in the 12-month average of the consumer price index (CPI) and is revised twice a year.

Anonymous said...

So, this is a quarter point hike right?
On a 10% interest rate loan, that would
roughly translate to a 2.5% increase in EMIs. Not much really. If you have financed a crore, and are currently
paying 1 lakh a month, do you really
care if your payment goes up by Rs. 2500 ?

I think property rates will only go up from here. Interest rate hike is to control inflation. As the cost of living goes down, people will think where
to invest their money and I think
Real estate is king. If you have recently invested 1 crore in real
estate get ready to count the two crores your property is soon going to become worth.

At this point, I would recommend taking all your money out of banks, retirement funds and gold, and putting it all in real estate, specially Bombay. I am going to do that, and I will make a lot more money that all these chicken on this forum who are afraid to make the most important investment of their lives.

Anonymous said...

Anon above:

You are a big insane lunatic. Looks like you are heavily invested in RE or are a paid pimp. Talk sense here as people may lose their savings. Why don't you give your number and mail ID on the blog and people will find you when the prices drop.

If the market further overheats, RBI would raise rates again. I think by the end of 2010, they would have raised another 75-100 basis points.

Market has no where but to go down. The party was over in 2008 but the Govt. kept it going for 2 more years. Both stocks and RE will fall by 50% starting this year and for years to come.

Get ready for painful years. The easy money is gone. Get a real job.

Anonymous said...

Rising rates = more interest on FDs
Rising Loan Rates = More EMI on housing loans

Rentals are based on market rates, ie, demand and supply.

Now, renting is going to be more profitable. I will sit in my armchair and watch this castles of morons go down.

Anonymous said...

Anon above:

How can you profit from any rental in India. I've a flat that is worth 1.1 crore and it rents for Rs. 20K per month. Even if it goes to Rs22K per month, I'm still losing a lot of money.

1.1Cr would give me more from a CD without any hastles of owning the flat. Around 10 lacs per year. and rental gives me around 2.8-3.0 lacs per year.


In a period of 10 years, I can double my money but the flat is already in so much bubble that the price may only stay same or go down.

Anonymous said...

I think RBI will keep raising rates and pop the housing bubble. It is the same thing what US saw in 2006. But RBI will not increase rates drastically to derail the economy. Maybe another 1% by the end of this year.

The problem is once the bubble pops, there is already a lot of overbuilding and who will buy all these flats. Moreover credit will get costly with rising interest rates. It will be a pressure on housing values to decline as the demand would evaporate by 2010.

This will lead to a drop in construction activity which means lots of layoffs at cement plants, steel plants, bankers, contruction workers, realtors etc. This would further put pressure on consumer spending and the whole thing will keep going down for another 4-5 years.

And RBI will start to lower rates again to re-inflate the bubble. This whole process will take RE prices down by 50-60% in major metropolitan cities of India and the stock market will keep going down everytime rates are increased. Sensex may again see 10K mark.

So, fightling inflation will also lead to a curb in a lot of economic activity. And if the bubble bursts simultaneously in China, EU and Australia also, whole world is toast.

Jayant said...

The propaganda by the Indian Real Estate Companies/Builders that there is exclusive offer/product for NRIs is ridiculous. The NRIs ( UK/US) are not fool to invest their hard earned money in the overheated market. The NRIs have already been whacked by tumbling economy and are affected by student loans, tuition fee, auto loans, health insurance, auto insurance etc. They are already "Underwater" on their home mortgages. The house prices are going down and expected to fall more since the Fed has decided to stop buying the Mortgage backed securities.


Fed Plan to Stop Buying Mortgages Feeds Recovery Worries

JANUARY 8, 2010
By LIZ RAPPAPORT and JON HILSENRATH


The Federal Reserve's pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course.

The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market.


The US homeowners have understood the dirty tricks being played by the lenders, banks, media touts spinning the false stories of 'jobless recovery' and taking the financial wise decision. They are just walking away from the homes and passing the loan burden back to the banks. The banks are playing all the accounting tricks and keeping the home loan on the books as the healthy one when there are less chances of recovering the loan or selling the loans to the fools through "Structured Instrument Vehicles".

More homeowners are opting for 'strategic defaults'
By Alana Semuels
March 17, 2010


"There is a growing sense of anger, a growing recognition that there is a double standard if it's OK for financial institutions to look after themselves but not OK for homeowners," said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.

Just how many are walking away isn't clear. But some researchers are convinced that the numbers are growing. So-called strategic defaults accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago's Booth School of Business.

He and colleagues at Northwestern University's Kellogg School of Management reached that conclusion by surveying homeowners about their attitudes and experiences with loan defaults.

They found that borrowers were more willing to walk away if someone they knew had done it, and that the greater a homeowner's negative equity the more likely he or she was to default, even if the monthly payment was affordable.



The US regulators have allowed the Banks to keep all the loans at their face values when there are almost slim/no chances to recover the same. The banks cannot play this trick for a long time and soon they have to unmask their lies which will lead to the second act of the 'Great Recession'. The cascading effects once again will be felt by the Indian companies mostly IT/ITeS companies who are feeding the buyers to the real estate companies.

Anonymous said...

Forget about RBI raising rates for a long time. Crucial elections are coming up in
many north Indian states next year and the price rise has to be controlled. They will
keep raising rates till inflation is in check. Inflation should probably be under control by 2012, but then, we will only be
a year and a half from General elections
and they will not risk another inflationary cycle at that time. So,
high rates are here to stay.

Get a warm cup of tea and enjoy the tamasha!

Anonymous said...

Sorry: In the above post, please replace
this line:"Forget about RBI raising rates for a long time." with "Forget about RBI lowering rates for a long time."

Anonymous said...

- US and Europe is in deepest recession (depression) of 70 years.
- 60% IT business comes from US, 30 % from Europe and 10% from rest of geographies.
- Quite a few organisations and banks have gone bankrupt and are still going bankrupt.
- US and UK governments have bailed out many big organisations and the orgs are still struggling.
- IT is a discretionary spending.
- If these organisations are struggling themselves and as IT is discretionary spending, how can the clients spend on IT to this extent (as reported by IT companies) during recession ?

In the context of above points, how did IT companies report such handsome revenues and profits during recession ?

Their accounts and balance sheets need to be audited again to reveal the manipulation of accounts and facts.

Anonymous said...

Builders, bankers, RBI and politicians are colluding with each other to hold the country to ransom by artificially maintaining high RE prices.

Somebody should file a PIL (Public Interest Litigation) in Supreme Court to expose the loans provided to RE sector, the restructured loans, the NPAs, also regarding transactions done with ARCIL for troubled assets, so that RE bubble gets burst.

Anonymous said...

VIK,

HOW ABOUT A NEW POST ON THE INTEREST RATE
HIKE? AFTER ALL, WE HAVE BEEN EXPECTING THIS FOR A LONG TIME AND IT MAY SIGNAL THE END OF THE BUBBLE.

Anonymous said...

Jayant:
About NRIs investing in India from US/UK.

This bunch of people who left India for money are/have foolishly investing in India. You are right they already got burnt in US/UK and they are so foolish that they didn't learn a lesson. They will soon face the same fate in India.
All this Globalization thing is history as US will try to protect their jobs if Democrats want to get re-elected.

I know of a professor in a big US university who is heavily invested in Mumbai and Hyderabad. This idiot doesn't understand basic economics and has become a party to this casino.

I also met a lot of H1Bs sending money to India to payoff their flats and living like slums in the US and Australia. 6-8 people in one 2-3 bedroom flat. Well, H1Bs are under tight scrutiny from Obama administration, L-1 visas will be next to be tightened as many Indian companies are misusing them and Green Cards are history. Cheap labour is available to US companies on EAD.

Anonymous said...

You said:
"Forget about RBI raising rates for a long time." with "Forget about RBI lowering rates for a long time."


RBI has to first control inflation and they will have to raise rates. They have no choice as 70% of India doesn't care about RE prices, but they care about the cost of rice and daal.


So, we'll see increases in steps of 25 basis points at least 4-5 times this year. The next one is coming on April 20. This is all the more important to raise rates due to elections.

No matter what Congress does this time, they will not win the elections. One of the issues they will have to fight will be falling house prices. Starting this year massive drops will be seen and some bankrupcies. Moreover, stocks will also go down by 30% or so due to higher value of dollar and increase in rates.

Anonymous said...

To Anon for FED exiting MBS:

My dear, do not trust Fed. They say something and do something else. It would be good if really exit but as soon the Dow sells off, and NAR/lobbyists start sreaming, then instead of Fed, Treasury will step in to buy MBS.

Moreover, they still have Fannie/Freddie doing the God's work and they are backed by Treasury.

But, the interest rates on Mortgage would rise by another 1% in the next 6-8 months in US if Fed/Treasury don't interfere again. This means housing in US will drop by another 15-20% by the end of 2010 couples with more unemployment.

Real unemployment rate in US is close to 20% and will stay like this for many years to come.

The whole world is in a mess. Wait till Europe defaults and the Australia/China/India.

Anonymous said...

7 more banks shut down in US.

How can people be so foolish and arrogant in India that they don't want to believe what is coming. They just think "we are different" and India has all the growth. Our housing will never fall.

Well, then wait till the shit hits the fan. India is no different than US in terms of bublicious prices or greed of builders/bankers and Govt. participation with rates.

Anonymous said...

By REIJI YOSHIDA

Prominent economist Yukio Noguchi is one of the few who correctly predicted the collapse of Japan’s bubble economy in 1987, warning the preceding euphoria was based on a major distortion in land prices.

Now the doomsday prophet is making another terrifying prediction: Japan is likely to be devastated by a snowballing public debt that will bankrupt its government and trigger catastrophic hyperinflation.

“There is little hope,” Noguchi said in an interview with The Japan Times at Waseda University’s Graduate School of Finance in Tokyo. “Japan’s fiscal conditions are so bad, it can no longer be fixed without causing inflation. I’m very pessimistic.”

Noguchi is not the only one deeply fretting the debt.

Compared with Greece, Japan’s gross government debt is far worse, at 181 percent of gross domestic product — the highest among the developed countries. Greece’s debt-to-GDP ratio is 115 percent.

Anonymous said...

Business school grads flocking to Asia for jobs
Exodus of talent from U.S. may be part of structural shift in corporate world

By Michelle Conlin
updated 12:51 p.m. PT, Fri., March. 19, 2010

James Tsai is the sort of MBA corporate recruiters covet. He went to a good prep school, earned a degree with honors from Middlebury College, and made vice-president in Bank of America’s international wealth management group at the age of 26. Today, Tsai is about to graduate, straight A’s in hand, from Northwestern’s Kellogg School of Management, a top-rated program in America. And he’s hustling to land his first post-MBA job — in China.

Executive Class strivers like Tsai used to have just one post-grad career destination, the U.S. Not anymore. “I am doing everything I think I can to get over there,” he says.

kanekar said...

It is amazing to note that bloggers are seeking solace and almost rejoicing the recession in europe/us /japan etc. This thinking draws a parallel between people boasting about tatas, ambanis and the Indian elite forgetting about their own poverty . There is a difference between europe/america/japan and India. The former dont have to worry about roti/kapda and have a roof on their head whereas we are driven to slums by our netas and corrupt businessmen
Many of you are frustrated because you are not able to buy a flat for 40-60 lakhs but there are millions who only pray that they get two meals a day and a hut to sleep during monsoon

This situation is going there to stay, maybe for another few generations.
So stop talking about us/europe/japan and start thinking about what is happening here.

Anonymous said...

Kanekar,
It is India who is copying the west and have their RE priced more than NY and Tokyo. India has to think about its people and the poor. The west is there to benefit as long as they can.

Btw, no one is frustrated that they couldn't buy at 40 lacs. It is about reasoning and sustainability. I have 2 flats in Delhi but I still feel very uncomfortable with the way prices have risen. More risk than reward.

Anonymous said...

One of my Australian friend friend had to say this about the bubble in Australia: See if it resonates with what has happened in India???

The cause of high house prices is not so much a "shortage" as real estate spruikers and developers and other vested interests like to constantly reinforce (marketing psychology 101: if you reinforce and repeat a statement long enough, people will accept is as fact), but rather the ease of credit enhanced by the low interest rates. ( ease of Foreign ownership rules also has an influence). The old adage applies: make money cheaper to buy and people will buy more of it. Use this money to by assets and snow ball effect causes asset purchase price to increase beyond its real value (relative to other assets). Bubble is created and circular psychology kicks in. Better buy now, or I will miss out later because it will be more expensive. Cost of money goes up meaning less to buy and down goes the asset purchase price. So those who purchased at the high price now upset that price has come down and cannot meet commitments. Forced to sell at lower price enabling next level of purchasers to get into market. And so on, and so forth. Bubbles are great actually. Beautiful to watch Like poetry in motion.The outcome is so predictable because the herd mentality of people is so predictable.

Anonymous said...

A Double-Dip Recession is Inevitable
By editor|Mar 15, 2010, 1:13

Robin Griffiths, a technical strategist from Cazenove Capital, says a double dip recession for the U.s. economy is inevitable.

“I have to say all of my work on cycles, if I have learned anything in my life it says there isn’t just a risk of a double dip, the probabilities are such that I think it’s baked into the pie and is inevitably going to happen,” Griffiths said.

According to Griffiths, FedEx (FDX) gives investors a clear insight into how the U.S. economy is going to perform. FDX chart “is in a brilliant position to have a forward look at the state of the U.S. economy, ” he said.

Jai Hanuman said...

If you own a Unitech property, share your comments on new website http://unitechhorizon.blogspot.com/
to put pressure on Unitech owners.

Anonymous said...

Jai Hanuman,

Start jumping on their heads and whack them with your tail

Jai SitaRam

Anonymous said...

One of the biggest benefit in Western Countries is enforcable laws when if comes to property rights. Since these rights are 'flexible' outside large cities in India....people with money have no choice but to invest only in reputable buildings with clear titles and enforcement of property ownership. If NRIs could invest in land and feel safe, the they would invest in land in India. Until then, all money goes to cities like Mumbai.

Anonymous said...

Anon @ 3:19 PM

Forget about clear titles anywhere in India, including slumbai.

Recently, there was a story of defense land being stolen by a systematic removal of municipal records in a city in MH.

You take the same risk by investing in or outside of big cities. Stay clear of the BIMARU states and you should have slightly better prospects of clear titles. Legal recourse in India is a joke.