Saturday, May 08, 2010

Nariman point soon to be deserted

As financial institutions head for the exits South Mumbai is fast losing its allure as the premier business district of Mumbai. Ofcourse we won't see such articles in the various editions of the toilet paper of India. We get this news thru Bloomberg. Just as we hear this news there is other news that Edielwess securities moving into the BKC area. J.P Morgan moved to the Malad(w) area. Why overpay for realestate in Nariman point when employees commute from far flung suburbs.

JPMorgan Quit India’s Manhattan as Buildings Rot (Update2)


May 6 (Bloomberg) -- UBS AG and JPMorgan Chase & Co. are leading an exodus of finance companies from Mumbai’s Nariman Point financial district as they balk at paying double midtown- Manhattan rents for crumbling four-decade-old buildings.

UBS, Switzerland’s biggest bank, moved to a new complex on the site of a drive-in cinema about nine miles north. JPMorgan, the second-biggest U.S. lender, shifted to an adjacent suburb, while private-equity firm KKR & Co. went about three miles north of Nariman Point. Local lender Axis Bank Ltd. and broker Motilal Oswal Financial Services Ltd. are moving in the next year.

They are departing a district reclaimed from the Arabian Sea in 1940 that is marred by traffic jams and poor sanitation, and constrained by a 46-year-old law that limits building height. The city’s shortcomings and fragmentation may hinder Mumbai, with the fourth-most-expensive office space in the world, from establishing a financial center to rival Shanghai and Dubai.

“Transforming Mumbai into a world class financial center is very distant,” said Sunil Saberwal, chief executive officer of Bombay First, an organization modeled on London First to work towards the regeneration of Mumbai. “We are at least 15 to 20 years away from something like that. Even then, Mumbai will not be as beautiful as Dubai, but it will be functional.”

If Mumbai doesn’t get its act together by 2030 by improving transportation, housing and water systems, and reducing costs, the city may lose out to places such as Dubai as Western companies seek a base in the time zone, Saberwal said.

39 comments:

Anonymous said...

Once the stock markets tank all over the world, all these Wall Street banksters will Quit India also.

Anonymous said...

India's Debt to GDP ratio is 83%. Look at what other countries are at which are failing: The PIIGS.

Italy 116% of GDP
Greece 115% of GDP
Portugal 77% of GDP
Spain 53% of GDP
UK 68% of GDP
India 83% of GDP

If Portugal, Spain have been downgraded I think it is just a matter of time when India could be on that list.

Anonymous said...

Corruption ranking of these countries:
This is important as corruption is the major
factor in the financial crisis of these countries:

Italy ranks 63
Greece ranks 71
Portugal ranks 35
Spain ranks 32
India ranks 84

Data is from http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table

Anonymous said...

http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table

Anonymous said...

Lesson for India after Greek crisis:

This brings us to the first lesson for India, which is actually an economic union of many linguistic states, just like the eurozone: don’t let central or state debt grow to unsustainable levels. For the last few years, the UPA government has been squandering the fiscal prudence achieved in the NDA years through profligate spending. The public debt-to-GDP ratio is a high 82 per cent for centre and states — and rising.

Anonymous said...

Global uncertainty has pushed volatility levels across the globe. India is no exception. Ever since Greece’s credit rating downgrade, India VIX, the Volatility Index , has risen more than 23 per cent, after staying in a narrow range for a couple of months. Market participants, however, feel the index is still away from “alarming levels” and will stay in the current range due to a combination of domestic and global factors.

Anonymous said...

"We had to inject Rs80,000 crores as stimulus package to overcome the crisis, which helped arrest further deterioration of the Indian economy," Mukherjee said while delivering a speech at a function organised by a newspaper in Nagpur.

He also said he wants to bring the fiscal deficit down to 5.5% from 6.7%.

Mukherjee said that the plan expenditure rose to Rs2.45 lakh crore from Rs2.27 lakh crore and then to Rs3.20 lakh crore and now is at Rs3.73 lakh crore.

Anonymous said...

Look at what Minister Sharma is saying: He doesn't understand one basic thing that from where is this stimulus coming? The country is going further into debt to pay for this massive stimulus. I wish the politicians could run the country expenses the way they run their own home expenses i.e. do not get into too much debt and do only waht is needed.

Union Commerce and Industry Minister Anand Sharma on Saturday said that "stimulus package" to the industry would continue in spite of robust recovery over the past one year.

Talking to media persons in Shimla, he said that the Rs 1.86 lakh- crore incentive given to the industry in three tranches and policy interventions to help it ride the slowdown have shown results and the industry is recovering fast.

Anonymous said...

Who is right?
80K crore or SHarma's 1.86 lac crore for industries.

Bunch of jokers running India!!!

They will make India a beggar in the long run.

Pandu said...

@To all anti-Indian anonymous guys

The rubbish that you guts are spewing in this blog doesn't make any sense. India has lot of potential and we do not depend on foreign investors. Why do you compare Greece, Italy, Portugal, UK etc with India. It is like comparing Tata with road side garage though both these parties deal with automobiles.
The transparency.org guy who wrote a report on corruption is wrong. As all we know, India is the no. 1 corrupt country in the world as this is the way of our life. If you guys are familiar with with 'Gita' there is a mention of 'Dakshina' (Gift)and it is the norm of our life.

Now, coming to the real issue. This so called corruption has become the property of Indian intelligentsia and less intelligent people like me don't have access to it. All of us can not get govt. jobs and therefore dont have access to black money.
The best solution to this is to wait and watch. May be someday, someone will bribe us and our dream of owning a home becomes true

Jai Hind

Anonymous said...

Anon above:
When someone tells of a wrong thing happening around him in India, he doesn't become anti-Indian. He is merely pointing facts so that the country moves in right direction. Btw, don't be too optimistic about India's capabilities.

Do you know how much India depends on Foreign Investors? Go and educate yourself. Even the Govt. salaries are funded by foreign borrowings.

Debt is good but not at the levels we are seeing now. If it is not curtailed, India could be Greece.

People supporting the wrong doings are anti India who don't care for the long term health of the country. Like all the corrupt thieves living there and making the country hollow each day.

Anonymous said...

The people are expressing their anger, frustration over the bailout fund which is nothing but the siphoning off the hard earned money of the honest people to feed the greedy bankers.

German voters deal Merkel state election setback



(Reuters) - Germans punished Chancellor Angela Merkel's center-right coalition in a state election on Sunday, depriving her of a majority in parliament's upper house after she angered many by agreeing to aid Greece

WARNING SHOT

Analysts said the Greek debt crisis had hurt Merkel's party.

"People don't feel happy about Germany being Europe's Paymaster General," said Langguth.

Opposition parties have attacked Merkel for her handling of the Greece crisis after she initially resisted granting aid due to massive popular opposition to a bailout.

The loss of a CDU-FDP majority in NRW means Merkel can no longer bank on the Bundesrat, or upper house, made up of representatives from the states, waving through her policies.

She needs Bundesrat approval for her main policy platform, including tax cuts, health reform and the extension of the lives of some nuclear power plants.

"The loss of the Bundesrat (upper house) majority is not an insurmountable problem for the chancellor but it makes it more complicated for her coalition to get through some important policies," said Langguth.

US banks have $176 bln exposure to Greece

"The FFIEC data shows that 10 U.S. banks -- Bank of America (BAC.N), Citigroup (C.N), JPMorgan, Wells Fargo (WFC.N), Bank of New York (BK.N), State Street (STT.N), Goldman Sachs (GS.N), Morgan Stanley (MS.N) and the U.S. branches of Deutsche Bank (DBKGn.DE) and HSBC (HSBA.L) -- hold 96 percent of the risk, Barclays said.

The banks have $86 billion in exposure to Ireland, $68 billion to Spain, $18 billion to Greece and $9 billion to Portugal, Barclays said



The cascading effects will be felt in the Indian Stock market soon.

shailesh said...

The height of all the claim is statements like,

The authority will complete a 146 kilometer metro rail project and build a 100 kilometer monorail in the city by 2014, Gaikwad said.

Now, if I understand the first metro line is only 10 or 15km, and it has taken may be at least 4+ years and still not done. How the heck he can deliver 10 times of that capacity in 4 years !!! Did govt even buy land on which this will be build?

shailesh said...

`Mumbai realty has peaked too fast'

Home prices are up again to peak-2008 levels. The RBI is talking of reemergence of the asset bubble with prices across cities galloping anywhere between 30 and 70 per cent. Is this justified? I think it is up 15-30 per cent, in general, since last year. In any case there are two parts of the country - Mumbai and the rest.

Mumbai is altogether a different ballgame and obviously gets all of our attention. The city has seen some very steep increases in the last year and is back to the peak of January 2008. But the good part is the kind of people coming back to the market are largely endcustomers and not so much investors.

I think Mumbai has kind of peaked too fast. Is the price rise justified?

I think it varies from location to location and project to project. In some places I think the increases have been too steep and difficult to justify.

Laaloo Prasad yadav said...

the following link is not related to housing ... but i found it interesting...

http://betterexplained.com/articles/the-rule-of-72/

Anonymous said...

In Mumbai there are more more crorepatis than the available flats resulting in price increases just like auction houses. Most people who avail loans from banks in fact have sufficient funds to meet eventuality in case of job loss etc. They pay 50% in black and the rest bank finance. The fear of income tax raid prompts them to use the bank though they have sufficient black money stashed. Therefore, all these black moneywalas give a damn about bubble or prices going down by 70%. After all ill gotten money has to go somewhere. The population of city is on constant rise so as crorepatis. Therefore, bubble burstetc is not going to bring the price down.

No use comparing India to germany, Greece, Italy etc etc. All the book theories are not applicable to our economt. Jungle law prevails here, just like survival of the fittest. I dont believe that NRI money has created this problem as there maybe very few NRI crorepatis who aren't foolish enough to invest their hard earned money here.

Just speak to a couple of Marwari Havala dealers and you will realise how much money is transacted everyday. I personally know one such guys, who has a plastic buckets showroom who boasts he can exchange money upto 5 crores in just a days notice, that is to say you can buy or sell dollars through him.

Anonymous said...

I feel only bribe money is free money. That is you haven't done any work for it. But other than that what builders, businessmen and traders receive in cash without receipt is tax evasion. Please correct me if I am wrong.

In first case the person can take risk up to complete erosion (100% downward risk) as anyway it was free for him/her.

But in second case the person can take the downward risk up to 35% which is the average corporate tax for them. More than it would be loss.

Right now from the news floating around the reality really seems to be a bubble. So why would second case people take a chance there? when he can enjoy rest 65% in peace after paying taxes.

So I am not really sure of the theories of infinite black money availability.

Another point is if there is abundance of black money so much so that it leads to a non-busting bubble in one asset class then how RBI is able to control the economy with their instruments like CRR, repo and reverse repo etc?

In that case India will never have a recession. Economy will run on black money in recession and on external and internal legal money while in growth.

Lowest IQ

Anonymous said...

The black money collected by the builders goes to payoff gangsters, politicians, govt employees, police, judges etc whose cooperation is required to run the business and these groups don't touch the white money (bank drafts, cheques etc ). Eventually part of the money finds its way to france/swiss border where it is sold. The buyers are usually governments of foreign countries who smuggle the money into india for their agenda, usually supporting political parties that are nurtured by them for business etc

Real estate has become the biggest money spinner and I am in the opinion that nothing less than a strict action by the ruling government put a dent to it.By saying strict action means a law like 'enterprise corruption'as in US where the entire assets of the guilty are ceased by the government plus jail sentence for those involved

Anonymous said...

India immune to debt crisis in Europe: Govt
Here is the link
http://timesofindia.indiatimes.com/biz/india-business/India-immune-to-debt-crisis-in-Europe-Govt/articleshow/5913908.cms

Anonymous said...

Once India goes down as it has done all the same things as Greece, who will bail out India? Does it have money to bailitself out?

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Laaloo Prasad yadav said...

HE HE HE TO THE GUY ABOVE....

Anonymous said...

Rate increase

Rustomjee Elanza at link road was selling for rs 10500/sq.ft for 1100 sq.ft flat. This rate was in Jan 10.
Just today i found out that it is 14500 plus 100 for every higher floor from 5 floor onwards. So the cost for a flat on 20th floor works out to be 16000 per sq ft. So a 1100 sq flat would cost 1.76 crore + stamp duty, registration cost etc etc. taking the cost upto 1.9 crores.!!!!!!

The location is Goregaon west surrounded by buffalo sheds, filthy garages, and slums.
1.9 cr isn't a small amount. At my present salary, it would take me 63 years hard work to just to raise the amount. If some bank lends me this money which they wont, the monthly interest alone would be 8 times more than my monthly salary.

Mind baffling. I just wonder who are the people buying these apartments.

Fortunately I own a small 1 bedroom kitchen in kandivili in a decent society and my wife wants to move to a bit more spacious flat. When I cited the cost to my wife, she thought i was making up all this.

I just wonder, how can a fresh starter in life, can ever dream of owning a home in Mumbai. Will out offsprings forced to live in slums ? The future looks gloomy

Anonymous said...

According to sundaas bhai and sussuu...the flat prices are poised to grow at a rate of 20%/annum or more. Eventually, all the black money wallas and slum wallas will end up owning these "luxury" houses.

The middle class will be forced to live in Alibaug or maybe even further...and commute from there to Mumbai. Alternatively, they can occupy the slums since all the slum walas will be living in luxury flats in Chembur!

Anonymous said...

Rustomjee morons were selling for 4300 in 2006. Like they say in Hindi, chinti ke par aaye hain. When ants start sporuting wings, we know the end is near

Anonymous said...

1.9 corore for a flat!!!!! mind boggling. How many people can afford this

Anonymous said...

It is very common in Delhi NCR region that a normal flat is more than a crore. A good flat costs around 2 crores in Gurgaon, Noida etc and really good flats in Delhi can range anywhere from 2 crores to 10 crores based on location in Delhi.

Everyone is on Dope. The whole country is smoking pot now. Wait for the CHinese crash in the coming weeks. And is following that. It will be such a massive crash, everything will go down in a freefall. And it is not wishful thinking, but reality coming to Realty.

Anonymous said...

And=India in the above post.

Anonymous said...

The situation doesn't look promising. All things have become unaffordable. I don't think the home prices will reduce much in metropolitan cities and owning a home is becoming like a dream to people like me who live on monthly salary.

Unless the black money menace is curbed, I don't think people like me ever see a home ownership

Omkar said...

Hello Dreamers,
I too is waiting from 5 years for Mumbai real estate to crash.. when will this crash happen ??

DhImAn said...

The situation doesn't look promising.

Don't take the western view that things are linear. The ancients knew that everything is cyclic; so are economies and businesses. In other words, have patience, good things come to those who wait.

All things have become unaffordable. I don't think the home prices will reduce much in metropolitan cities and owning a home is becoming like a dream to people like me who live on monthly salary.

No this is untrue. Think this through to its logical conclusion - if prices keep rising indefinitely, they will become infinite some day. Now, the price of anything never becomes infinity - because at that point, demand is necessarily zero, causing prices to fall. This means that there is some (to use mathematical language) finite price that forms an extremum in the curve. In simpler language, there is always a top.

The question is when the top will happen. Nobody can predict the when, but that there will be a top after which prices decline is a mathematical certainty.

So it behooves the saner amongst us to have patience.

Unless the black money menace is curbed, I don't think people like me ever see a home ownership

I've said time and again, money is money. Regardless of the source. There is no such thing as black or white money. Fact is, too much money has already been created by the worlds central banks. It is a sea of liquidity sloshing around, and has to find a sinkhole - and right now, real estate is that sinkhole.

If the central banks continue to create more liquidity, it will raise prices further, but at the same time, the currency has no choice but to lose value eventually. Obviously central banks will try to "manage" the decline, but longer term, the currency will lose value, unquestionably.

Knowing this game, it is a rather simple matter for you to be short currency and short the real estate market - that's all - to come out richer when this all is brought to its inevitable conclusion.

Meanwhile, it is already akshayatritIyA, so go buy some gold. It is the only long term (> 10,000 years or more) proven way to be short currency and short real estate.

Anonymous said...

But DhimAN,

If currency loses value, wont RE prices go up and not down?

DhImAn said...

If currency loses value, wont RE prices go up and not down?

Sometimes the simplest questions have the most complex answers. Congratulations, this is one of those questions.

So, currency loses value, causing every unit to be worth less, i.e., a single Rupee can buy you less and less stuff as its value goes down, speaking in general terms. Thus, in general terms, when currency value goes down, in general things become more costly, priced in that currency.

However, specific prices are another beast altogether. Let me give you a concrete example.

Say the RBI conjures up more money and increases money supply by 100% - only one time. Eventually this liquidity will find a home - causing things in general to become twice as costly when priced in Rupees.

However, different things will see different increases in prices. Some things, such as food, may see only 50%, but real estate may see 150%. There is nothing to guarantee that each and every thing must become more expensive by exactly the same percentage value.

Why is this? This is because of market dynamics, politics (such as government subsidies or taxes), black money (yes, this does play a part), or people simply being irrational.

So now you may ask the question - "But if overall inflation is 100% and RE is 150%, then does it not make sense to buy RE - after all it beats market average performance?"

And this is a very valid question. To understand it we need to delve a bit further.

Now assume that the RBI doesn't inflate 100% all at once, but say 20% every year forever. This changes the dynamic because people now anticipate this change, and build it into their thinking. So they think that year after year, this excess liquidity has to go somewhere, and RE is a big enough sinkhole, so it is safe to assume that it will continue to outperform the market in general.

This thinking isn't flawed in the short term, say a year or so - but longer term, the effects of increased liquidity are exponential. I recall the story of a young woman that asked the King for a grain of rice today, two tomorrow, four the day after - and so on, doubling every day for a month. If I recall correctly, the kingdom was bankrupt by the 24th or 25th day. This is exponential growth.

The same thing happens with a constant liquidity injection, year after year. Initially, the large RE sinkhole absorbs the excess liquidity - and continues to do so year after year. But the exponential is relentless - it accelerates the filling up of the sinkhole to the point when the excess liquidity simply cannot flow into it. What would such a point be for Mumbai real estate? I don't know, but maybe Rs 10 lakh per square foot in Chembur would do it?

What happens then? Continued...

DhImAn said...

So when the sinkhole overflows, the excess liquidity chases something else. Because of RE having drawn a great deal of the excess liquidity to itself, other sectors have "underperformed", so some smart cookie decides to get into that sector - thinking "contrarian investment, buy low, go against the flow" etcetera.

This causes that sector to go up, and then people herd to that sector, causing excess liquidity to flow thereto. Eventually that sector sees a bubble, and RE sees a burst. Now RE becomes the under-performer.

We have seen this sloshing around of the liquidity sea again and again - late 90's - technology - 2000's - real estate - and so on. If you are interested in history, you can trace this back centuries if not millenia.

Anecdotally, there must have been a RE bubble in Ayodhya when Rama returned victorious from Lanka, right? Or in Indraprastha when the Pandavas won - yes?

And yet, those bubbles burst, and those palaces were replaced by ruins. And thusly shall Mumbai go. This is the fate of all real estate.

So short term, who knows what will happen to prices, but eventually for a city to thrive, housing has to be affordable. It matters little if it costs Rs 10 lakhs per sqft if you are making Rs 100 crores per year. Of course, that would be depreciated money, not 100 crores of today.

So, either prices will become affordable in Mumbai, or Mumbai will become irrelevant. This is true for every place on earth.

So, simply have patience. Either the liquidity sea will turn away from RE, or the liquidity will dry up. In this latter case, you'll have a deflationary scenario, and cash will be king, as before. Perhaps you won't see it happen, but if you are going to give your children something, better give them cash - cold hard cash - than fixed, immobile and illiquid RE.

By the bye, there is a reason cash is called "cold, hard cash". Do you know that reason?

Anonymous said...

The phrase "cold hard cash" was coined by merchants and traders who were used to handling coins that, because they had a high gold and silver content, were warm and soft and did not wear very well. When more durable metals came into use it was generally noticed that they were cold and hard.
In the cut and thrust of commerce a lot of transactions rely on the use of cheques and various forms of credit. Where these are not favoured the phrase "cold hard cash" applies to both coins and notes which are immediately available, or ready, as a form of payment.
Lowest IQ

DhImAn said...

@ Lowest IQ

I know you got the answer from here, but it is only partially correct.

Cold and hard refer to precious metals - harking back to the days when cash was gold and silver. All metals at room temperature feel equally cold to the touch, and your fingertips sure can't tell whether steel is harder than gold; both are far harder than your fingers.

Before definitions got corrupted, cash simply meant specie, or gold or silver.

That was the point.

Anonymous said...

DhimAn, RE cannot be more expensive than earnings, agreed.

But in India there is scarcity value to RE. RE may inflate less than food, but slower inflation is not deflation.

You cannot stockpile food :-)

DhImAn said...

But in India there is scarcity value to RE. RE may inflate less than food, but slower inflation is not deflation.

RE may be scarce, but it is scarce only in specific places, like Mumbai, Bangalore or Pune. The reason it is scarce is because there are jobs in these places and people want to go there to earn money.

Imagine if there were no jobs in Mumbai, and existing jobs started disappearing. Well, then people would have no reason to go to Mumbai, and RE would fall automatically.

The RE market in a place is a direct function of the ability to earn an income in that place, no more, no less.

If this fundamental equation breaks, the RE market has no choice but to follow.

You cannot stockpile food :-)

Then stockpile the most hoardable commodity.

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