Monday, June 21, 2010

1 bed room flat - 4 crores in Khar(w) Mumbai

Crazy days are here again. Thumbs up :). Good for the residents of this building who can make merry at the expense of the black money of the builders and politicians. However these folks have no other choice but to buy another apt in Mumbai from another building at an exorbitant price. These folks will now drive prices of the neighboring buildings assuming they like to stay in the same area. The music is playing on so keep on dancing :)

MUMBAI: In a bonanza for residents of a Khar housing society, a builder has been buying off their mid-sized flats, paying each family between Rs 4 crore and Rs 5.5 crore.

Mumbai-based Parinee Developers claims to have shelled out between Rs 4 crore to Rs 4.5 crore for a one-BHK flat and Rs 5 crore to Rs 5.5 crore for a twoand-a-half-BHK in the three-decade-old Bharatiya Bhavan Cooperative Housing Society, which is located at the corner of 17th Road in Khar (west). Parinee plans to demolish the buildings and set up a high-end residential tower.

However, there is a word of caution from real estate experts. They warn these huge amounts may send wrong signals in the redevelopment market, unnecessarily create hype and raise expectations of other housing societies in the area. However, Parinee said it is paying this astronomical price only because the society has utilised barely 40% of its floor space index (FSI).

The developer has already bought out 20 of the 37 flats in the society and said it is negotiating with the remaining flat owners. “We are finalising the purchase of the remaining 17 flats. Our acquisition cost for all the flats is around Rs 200 crore,’’ said a spokesperson for the developer.

The society comprising six buildings, each ground plus two floors, is spread over an area of 5,570 square yards (over an acre) with ample open spaces and car parking. The one-BHKs have a carpet area of between 580 to 625 sq ft while the two BHKs are between 800 to 900 sq ft in size.

Tip from expert: Don’t be greedy

The Bharatiya Bhavan CGHS in Khar (West) has been on the block for the past four years. In 2007, TOI was the first to report that the society had invited sealed bids from various developers and that a Navi Mumbai-based builder, APA, had offered Rs 180 crore to the society. There were several other leading builders in the fray, including Tata Housing, Wadhwa Group, Naman Developers and Acme.

However, the builder subsequently withdrew the offer due to recession and also because of infighting between two groups of flat owners. Some residents thought that APA’s offer was not enough. The fight culminated in a legal battle — Parinee Developer now claims it has helped resolve the issue between the two groups.

In 2006-07 , a slew of housing societies in the suburbs had received phenomenal offers from developers if they agreed to redevelop their properties. While some builders wanted flat owners to move out permanently by paying them off handsomely, others agreed to rehouse them in new and larger flats in the redeveloped property.

However, many of these deals failed to take off because either residents became too greedy and kept on demanding more from the developers or the builders themselves backtracked when the property market slowed down two years ago. Sprawling housing colonies like Nutan Nagar near the Bandra (W) station and Khira Nagar in Santa Cruz got stuck after getting offers running into hundreds of crores. In 2007, Khira Nagar housing society entered into agreement with the Pune-based Kumar Developers for a reported Rs 900 crore for the 640 flats in 16 buildings. But the project never took off.


93 comments:

Anonymous said...

Wow...get ready for cascade effects in Pune..4cr...wtf

Jaggu Dada said...

This is just MIND BOGGGLLLIIIINNNGGGG!!!!!!!

At 600 sqft carpet, the developer is paying 66,666.67 Rs per sq.ft.

If we need any sign that there is a bubble in Mumbai Real Estate then it doesnt get more obvious than this article.

66K in Khar is just mind numbing. India has 3rd world infrastructure but higher than 1st world real estate prices. Hope the developer goes and drags down a few institutions or funds with it. Maybe that can spark off some correction in the Mumbai real estate market.

Anonymous said...

there are hundreds and thousands of crores of black money which needs to find its way into real estate. there is no other place where this can be converted to white. The conversion will be done by the middle class who will pay up for the flats with bank loans. This pyramid is going to get bigger before it collapses.

Anonymous said...

I am willing to buy one, not sure how to approach. Hope I do not miss the opportunity.

SabbalSeshu said...

Good investment. I see a potential of 50-60% net profit though large portion of it is going to be black. The same situation is going to be repeated elsewhere and prices are likely to skyrocket.

Currently I am negotiating with a coop society in malad west that has 112 flats of 1 and 2 bedrooms. My client is willing to pay up to 16,000 per sq/ft but nothing is finalized yet. The idea is to build a 24 storeyed luxury residential tower and the land available meets all the requirements. This building was originally built by lonkadwalla builders.

As the city develops, more and more old buildings will be demolished and high rise towers will be built. Prices are also going to shoot up.

You may call this a bubble or whatever you like. This isn't going to be deflated unless government launches a massive campaign to root out black money. This is unlikely as most black money hoarders are members of the government

Anonymous said...

waiting for the collapse of the estate markets.. till then no buying homes for me :)

Anonymous said...

Fantastic.

Now this does make me feel like a proud Indian. This has boosted my confidence that India will be super power, super wealthy within 2 or less years. If land on moon was for sale I am sure Indians will be ready to purchase with price tag of atleast 10 Lacs ($1Millon) per sq feet. Well, there will be overbidding too I am sure.

I cannot afford to purchase Mumbai real estate with 1/8th of price builder is buying. Please let me know what kind of work people do in India to afford this. I will be more than glad to train myself, my wife and my kids on that front.

Anonymous said...

@Anonymous 844

You will be surprised. I've heard that the going rate fore a high society whore in Mumbai is 100,000 a night. That is equivalent to $2200. India's per capita GNP is around that much. Now, take this yardstick to compute the disparity between have and have not s
Honestly, I believe that the country is going to dogs. I visit Mumbai frequently on business and no where on earth I've seen the vulgar display of wealth and contempt towards the poor, not even in Saudi Arabia or Colombia

Bankrupt_NRI said...

Anon 9:52

Colombia!!!!! What business do you conduct in Colombia. Are you representative of Medellin cartel or conduct business with them!!!!!
I do not agree with you that Indians treat underdogs badly. Probably your associates in Mumbai do so which is no surprise. How much do you pay for a whore in Mumbai.
The very fact that you are lurking in RE blog suggests your clandistine involvement in RE either direct investment or money laundering.

Thanks for your comments anyhow

Anonymous said...

Those who purchased before 2002 are the lucky ones, they have not only paid the old mortgage which was very cheap but have ton loads of cash to book another one.
There are also other category of people who sold the 2nd one in peak 2007/2008 and are waiting with cash in hand.
IMHO people with black money are restricted in current market. Any transaction of real estate above 50L will come under IT scrutiny.

Anonymous said...

Anonymous 5:28
May I know what you smoked before penning your ideas. Whatever it is, it sure is potent.
IT is corruption ridden and way behind the ingenious builder/brokers in ideas and therefore the probability prosecuting someone for undeclared money is almost zero. The main function of this department is conducting raids at politicians behest.

Anonymous said...

I check this blog hoping to read good news. But the news is turning from worse to bad. Those predicting crash have suddenly disappeared. Mumbai situation is turning bad. No one is selling old flats as they are hoping that some builder will turn up and offer them crores. Even slum dwellers are consolidating their slums hoping that they will be crorepatis soon

BB & SS Bhais, please advise what we should do. Is there any hope for us.

Just I reas that India is one of the 13 most countries in the world. This report is doing injustice. India is no. 1 and no one can or will beat us in corruption

Anonymous said...

I haven't seen 50% guarantee bhai for months. Wonder if he is one of the 4cr benefactor from khar.

Anonymous said...

Corruption: Link

http://www.mid-day.com/news/2010/jun/230610-India-among-13-nations-corrupt-badly-governed.htm

Anonymous said...

A interesting interactive graphic on Chinese housing market.

http://online.wsj.com/article/SB10001424052748704764404575286060469264510.html

Any similarities in the Indian housing market?

Anonymous said...

Chinese bureaucrat and policy makers specially political work like army precision. That is the problem as they predefine what the demand and growth model is, which is far too away from reality. There are lots of ghost city around china due to this skewed policy.

Average worker is paid < 150 USD PM and millionaires are prosecuted for various charges. Not sure which segment are willing to buy these premium (un)real estate in China.

India is a different case.

Anonymous said...

Chinese bureaucrat and policy makers specially political work like army precision. That is the problem as they predefine what the demand and growth model is, which is far too away from reality. There are lots of ghost city around china due to this skewed policy.

Average worker is paid lessthan 150 USD PM and millionaires are prosecuted for various charges. Not sure which segment are willing to buy these premium (un)real estate in China.

India is a different case.

Anonymous said...

Classic bubble top behavior! India is different...this time its different...

I have never seen people so proud of being corrupt and possessing black money as some of the touts in this forum do.

While the bubble is straining and still inflating..no one can show that its a bubble. Its only when the bubble bursts that people realise they were duped by a bubble..

Anonymous said...

We got the capitalism wrong, we started inflating realestate and stock market to shown virtual wealth, instead of the other way around.

Western economy created wealth, ivested them and created realestate demand for it to appreciate resonably. Now the fall is an anomaly, with lot of money flowing out for WOT in Iraq and Afganistan.

Anonymous said...

WHY ARE PEOPLE PRESSURED TO BUY?

People are engineered by society to feel that by NOT owning a home they are:

(a) not responsible - like not doing good in life or making very less money in comparison to others who bought

(b) not progressed toward maturity

(c) “lowlife” or suspected part of the criminal element

(d) or combinations and permutations of the above.

Anonymous said...

People who say that are embarrassed to rent, because it somehow shows you don’t own a house and aren’t a real Man.

Tell him/her even if he/she “bought” a house he/she would still be renting - because that is what mortgage payments are - a rent check to the bank. (S)he doesn’t “own” the house until his/her principle is zero. It still cracks me up when people talk about how much stuff they “own”.

Ulimately it is the banks that own the property for 15-20 years and make massive money as interest.

And unlike US, when RE prices will fall, what would happen to this home ownership and balance sheets of banks???

Anonymous said...

The shortcut to wealth has made people so greedy that they consider the rise in real estate to be real all the time. Time and time again there were correction and people have absorbed shocks. This time the balloon is so massive most of the speculators may not be able to escape (provided they short sell). Like any pyramid model the people at the bottom will be crushed (provided they sell as they are not able to continue pay). For all of those who are either side of price and continue to pay will eventually overcome the brief market correction.

Real estate unlike other investment is real and can be of utility (more for personal use). People should work out the rent vs purchase to see which is good at a given point of time.

Anonymous said...

Anon above:

I think by calling the bust as brief market correction would be nonsense. This time it would be at such a scale that prices in 2025 would still be the same as of today. There could be a 50-60% correction for the next 7-8 years and prices may rise again starting 2022 and come at current prices in 2025.

Anonymous said...

Current estimate of number of millionaires in India is 127,000. A million dollar is roughly 4.5 crore. One got be millionaire to be able to afford 1 BHK hell hole in Khar. In US more than 2% of all households are millionaires, but they cannot support the prices like Mumbai. Even if all millionaires in India lived in Mumbai there would be only 4.5% of all households in Mumbai assuming 5 persons per household. Even with this assumption median price of houses shouldn't be more than 1.5 crore. So, who is buying? May be the numbers are wrong. India must have the highest number of millionaires in the world! Government should print more money and circulate in the black market to mint more millionaires living in 1 room kitchen. Heck, while we are at it, we should mint millionaires in slum huts!

Anonymous said...

Anonymous 7 07

The estimates are all wrong. Most Indians don't declare their wealth and therefore it is hard to know who the millionaires are. Most judges , bureaucrats, IAS/IPS officers, Politicians are millionaires for sure but there may be others.

If we assume 1% is a reasonable figure, that makes nearly 13 million millionaires

Pandurang said...

Indians whether they are millionaires or paupers, the standard of living is the same. They eat the same dhalbath, urinate in any available public place eat paan and spit wherever there is a clean spot. The only distinguishing factor is the flashy cars, jewelery and the pomp behavior. In one old housing colony in Goregaon where many millionaires live, people living in bungalows send their children to defecate on the roadside lest they make the toilets dirty. Same paper clean their house nicely and throw the dirt on road. All these guys have child laborers who performing domestic work as well give oil massage to grown up men and women whenever required.
Imaging a khar resident owning a 5 cr flat making his children defecate in Khar gutters!!!

Ours is unique lifestyle and we are part of incredible India

Anonymous said...

What's your point Pandurang? Are you trying to show us all the usage of the word 'defecate'?

Anonymous said...

Jai Ho......

Welcome to the Rich India.

Just think about it. If a developer builds a complex of 100 flats in a decent locality and prices each at 1 CR each in a city like Mumbai or Pune; all he has to do is wait for 100 buyers..that's it.

Only 100.

Do you think it is too difficult to find 100 buyers who would be willing to pay 1 CR; from millions of residents? All the developer has to do is wait. And he can afford to wait, he has holding power, thanks to our banks and politicians.

Now as the newer flats in the region goes for 1 CR, the resale flats also increase their price.
And this cycle continues.

If you are thinking that the prices would drop like 50%; they won't. Imagine, the development and re-development would not stop anytime...

Desi Batman said...

Basics of economy as we all know is Supply and Demand. Also my understanding is that more demand will raise prices and more supply will create fall in prices. Now for demand to be high, affordability plays important factor.

To understand real estate affordability, here are my calculations:
(A) Selling price of flat : Rs. 1 Crore
(B) 40% down (may be black or white): Rs. 40 Lacs
(C) Loan (A - B) : Rs. 60 Lacs
Interest rate on loan : 8% per annum
Period of loan : 240 months (20 years)
EMI per month : Rs. 50,186.40

(D) At 10 years, total interest paid : Rs. 4,453,686.59 (44.5 Lacs)
(E) At 10 years, total principal paid : Rs. 2,120,732.36 (21.2 Lacs)
(F) At 10 years, total principal due(C - E) : Rs. 3,879,267.64 (38.8 Lacs)
After 10 years one has still not paid 50% towards principal. Isn't this fascinating!!

Average household expense per month:
House EMI : Rs. 50,186
Other all household expenses: Rs. 20,000
TOTAL : Rs. 70,186

Considering 25% tax slab, household should earn minimum before tax per month: Rs. 1 lac i.e. 12 lacs per year

I feel there are many households in India who earn much more than Rs. 12 lacs per year. No wonder real estate is booming.

In nutshell if household income is less than 10 lacs per year and don't have 40% down payment ==> YOU ARE F**KED !!

Comments, bashing, smashing welcome! NEXT.

Anonymous said...

Congress Party Jindabaad! Maharani Soniya Gandhi Jindabaad! RajPutra Rahula Gandhi Jinda baad! Pradhanji ManMohan Sing JindaBaad!

Looks like India is really progressing. Getting Super Rich with its Super fast way! Every Year India is adding more numbers of crorepati than anywhere on the Earth. I am sure "India ke Log Abhi Gold Ka Atta Khate Honge"

Awesome!The Great Growth Story of India!I am a proud Indian!

Anonymous said...

Not been to "Rich" India for a long time. Are there still beggars in "Rich" India? if so, what is minimum they ask for? ...one rupee?

I guess there are no beggars as far as I read growth of India. All I see is Infosys, Ambani, Tata, IT, Cricket, Shah Rukh Khan, Ashwiyra Rai, etc etc...

All is Well... ahhaa Beyond well in India.

Anonymous said...

Incredible India!!

The video is also filmed on a construction site. The irony of it all.. :)

Anonymous said...

This is seller-buyer transaction. Does builder have to pay stamp duty (5%) and registration fee for every flat purchased? if so stamp duty would be: 5% of 200 crores is 10 crores .

Incase of individual sale of 1 crore rupees real estate. Stamp duty is (5% of 1 crore) 20 lacs.

Why would government intervene or change policies. They are getting huge money. Also citizens of india should be delighted, as all these tax payers money will be used for betterment of country.

Looks like all win win situations here - for people who have money, builders who want money and politicians who get tax payers money, citizens who get benefits in infrastructure with growth in tax payers money (e.g. bandra worli sea link).

Anonymous said...

Anon above:

5% of 1Cr is 5 lacs and not 20 lacs.

Anonymous said...

anon @ 9:53 AM

What a wonderful sentiment!!

I would be delighted to pay more..why stop at 5%? Let's make it 50% or 500% stamp duty...that way entire India would be smiling in ecstasy at fulfilling our patriotic duty!

Giddu said...

To all anonymous Babas,

Just count the number of new flats costing 1 cr+ resale flats+under constuction flats and compare this with people willing to pay 1 cr and above.

I am sure, in mumbai city alone the supply:demand ratio is certainly 1:10. In a situation like this the builders start an auction game. People flush with money wont hesitate to pay 5cr for a 1 cr flat if it suits their needs just like in auctions people outbid others.

In mumbai, there is a scarcity of land. so builders purchase old buildings, demolish them and sell the new flats to the highest bidders.

One thing is certain. The prices are never going to come down. Curse me or call me by names, the situation is not going to alter. This time the prices risen, are there to stay.

I just sold my apartment in vile parle and bought a bungalow in khandala. After all the expenses like luxury car, furnishing etc etc I was able to purchase property fetching regular income, have a bank balance which provides me nearly a lakh for month in interest, plus 15 acre farmhouse near kadaikhosla.

Before I sold my flat, I had difficulty in meeting the ends, had a large debt, driving a two wheeler and cursing the govt for increasing petrol price. I gave up my job, carefree, wife is happy, has a fantastic cook at home, Gardner to look after my property.

I advice those of you having an apartment, sell it, leave bombay and enjoy life. Let the moneywallas breath the polluted air and live in the world class gutter city

Anonymous said...

@ Anon 10:57 AM
Am glad people like you are still there willing to pay more for sake of country.

God bless you. Indian government will surely accept anything you give them above 5% stamp duty.

Anonymous said...

To Anon 10:56 AM
Thanks for correcting the error.

I think I got carried away... 5 lacs doesn't seem significant number anymore. sounds like some 'cchuttaa aka cchillaar' (change for tips). :-)

Anonymous said...

Giddu sethji at 11:28 AM

You rock!! Wish like you, I too had flat in Mumbai that I could sell for around two crores. Then we both would be friends or may be neighbours in Khandala!

But dear residents in Khar(w) with 4 to 5 crores cash will move to Khandala and overheat real estate there too.

good luck.

Anonymous said...

Can this be true

Sundaas bhai!! Sussuu behan!! This can't be true can it? Developers strapped for cash? Inventories piling! Sounds like a bundle of lies...whatever happened to black money? and those millionaire slum dwellers??

Anonymous said...

well, this is bound to happen as people are scared to put money in industries, market etc after what happened in 2008 especially the way the government is spending on welfare schemes to gain vote bank we are heading towards the disaster so people will invest in real estate only as a physical asset, plus i am 100% sure if inflation which is not less than 25%, indian currency will be like indonesian bhat where people go to buy one piece of bread with bag full of money. that days are coming very fast, very fast especially when more petrol price hike is coming

Anonymous said...

petrol price deregulation has come.

I think that we need to now not just leave Mumbai but India.

Jayant said...

Trillions of dollars didn't help homeowners

24 June 2010

"Outlook for home prices grows darker," says the Wall Street Journal.

Well, yes. Much darker. Bloomberg:

Sales of U.S. New Houses Plunge to Record Low as Credit Ends

June 23 (Bloomberg) -- Purchases of U.S. new homes fell in May to the lowest level on record after a tax credit expired , showing the market remains dependent on government support.

Sales collapsed an unprecedented 33 percent from April to an annual pace of 300,000 , less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.

Exceeds Drop Projected

Sales were projected to drop 19 percent to a 410,000 annual pace, according to the median estimate of 76 economists surveyed. Forecasts ranged from 300,000 to 530,000. The government revised April's purchase rate down to 446,000 from a previously reported 504,000.

Hey, what happened to that $12 trillion worth of stimulus spending, guarantees and bailouts? We said it wouldn't work from the get-go. They said 'yes, it will.' We said 'no, it won't.' Can we have our money back?

Last week's report showed that used or existing houses were not selling. Now we find that new houses are selling even worse. The tax credit doesn't really expire until the end of this month. But you can't build a new house in 4 weeks, so the May new house data reflects the end of the credit.

Anonymous said...

how to spot a bubble

Anonymous said...

how to spot a bubble

http://www.chrismartenson.com/crashcourse/chapter-15-bubbles

Anonymous said...

Characteristics of Asset Bubbles - Interesting Chart

The same site contains a lot of other videos on the australian real estate market worth looking.
-For example - this time its different...and how its never different - bubbles burst!!
- Australian property market is up because there is less land and more people etc..How in japan which really has a shortage of land and burgeoning population - property prices dropped 70%!!
- How its always the touts who shout about wild things like inflation etc..and how inflations precede deflation!!

Interesting set of videos and collections of videos..

Anonymous said...

I have been reading, watching the articles , videos about the bubble for the last 4 years. Why isn't it bursting. This is what a highly placed govt officer, rank equivalent to undersecretary told me.

In all the development housing projects, be it a public sector company or a private org., the Maharashtra politicians have shares ranging from 10-25%. This translates into billions of
rupees, if not trillion and this privileged few wont allow building industry to go bust. They will use nationalized banks to maintain status quo. So, though the situation looks like a bubble, it is not going to deflate.

I don't know what to belive, my friends

Anonymous said...

Indians IS different.

Except for wishful thinking, what makes anyone think India real estate prices will come down?

- Most of the buyers pay 20% to 50% down payment and some are full payment.
- I don't think Indians are so stupid to buy what they cannot afford.
- What is delinquency rate on home mortgages?
- Indians have "save" mentality and can adapt low life standards to save or extract money from someone.
- Indians have embedded thinking to NOT sell house and/or gold under any circumstances. They will only sell at lower price at very very extreme situation after begging, borrowing or stealing fails.

Hence Indian real estate will always have equity.

Survival of Meanest - Indians subconsciously have only one rule: 'Eat or Be Eaten'. Now.... Which one are you?

Anonymous said...

I am not in a hurry. I will wake up only after the deflation starts happening.... snooze.....

Anonymous said...

@Anonymous 10:04 AM

Excellent point. I totally endorse your view

Anonymous said...

Anon @10:04

About India is different:

I think what you are saying about Indians didn't happen suddenly and has been there in Indians for 100 years or ages. So why RE prices have risen suddenly 400% in the past 5 years? Why didn't is happen before 2004? Have they started gambling also?

You should see what is different now. Indians have been prudent savers but greed rules the world. In US also there were many buyers who paid good down payment and even bought RE cash. Still it crashed and is further crashing. US had a lot of buyers from Europe and China who paid full cash for their investments in Florida etc. In US there are many-2 people who want to buy but have been waiting for the market to become stable. People there have money too. US also has smart people. It is the smartness of US people that India is seeing where it is today.

No one in the world wants to sell their house, even investors. People in US are selling becuase their equity have eroded. In India also, once the equity is washed out by lower prices, suddenly you willsee a huge investory building up with no buyers. SOme people may have more then50% equity, but not all. And even people with positive equity will want to sell and sit on profits which will further increase inventory and reduce prices.

It is yours and foolish greedy folks like you encouraging people to buy. It is your wishful thinking that prices would stay same. If you are so confident, stay away from this blog and keep buying more RE. Do not try to convince people here how smart you are.

Anonymous said...

Anon at 10:04::

I don't think Indians are so stupid to buy what they cannot afford.


The same Indians were so smart with their investments in US that more than 75% of them are under water in US. Many Indians like Tanejaand Singh etc. have been arrested for fraud. The Indians in US have the same prudent thinking as of Indians in India. I know many of them in California, Florida, NY, DC metro area with 200-300K minus equity in their houses and ready to file for bankruptcy. All these idiots bought with the same thinking as yours. A lot of Indians were fraud enough here who took loans against their inflated RE prices in 2005-6and invested in India.

It is the Greed that plays the role, not the smartness of Indians. Indians are not smarter than any other race. We in India are normal people and not smarter than Americans or Europeans. One thing for sure, we in India are more corrupt and steal from our country than people from other countries. At least many people who I have met in US are honest.

Desi Batman said...

Anon @ 2:33 and @ 2:44

boom bash bash... ouchy.. :-)

In USA on average people stay in same house for 7 years, they move because of work relocation, kids schooling or upgrade from started house.

What is average years of Indians staying in same household?

In USA most common reason for personal bankruptcy is medical bills:
http://www.consumeraffairs.com/news04/2005/bankruptcy_study.html

In USA many many people got 5/1 or 7/1 ARM mortgages. Many people paid only 3% to only 5% down. These people had nothing major to loose when they couldn't pay mortgage, BUT these wave of foreclosre caught up with many people who had enough equity in house.

In India how many people pay less than 20% downpayment?
In India what is foreclosure process.. Banks will ALWAYS work back door loan modification programs with defaulters.

In USA, many people took home equity loan to take lavish vacations, luxury cars and gadgets -- all on credit.

We know many people in India now have Merc, BMW, take vacation every year roaming around whole India and world tours - How many of Indians use their loan for these?

Mind you I am not convincing anyone to buy RE in India. Personally I don't own any RE in India because I can't afford one! but that doesn't mean this bubble is going to burst - just trying to say that RE will remain flat at worse case scenario.

Most Indians are not smarter... rather they are cunning and crafty.

Slumdog said...

@Desi Batman.

Right on point.

Comparing India with countries where people can't get away with dishonesty/cheating, is utter foolishness. India is corrupt and will remain corrupt unless some European power colonizes it again.

Corruption is a virtue in India. The judiciary/police are the living proof

Anonymous said...

bubble or no bubble, I feel that when the time comes the prices will fall, maybe not as drastically as the US.

All we need is just trigger and it could be anything

remember how the house prices in various areas had crashed during the floods ?

another trigger could be people loosing a lot of money in the stock market , I mean it could be anything and India is ripe with such triggers, in this case we are indeed different.

Anonymous said...

yeah right!!!!

The stock market is reached the bottom and that is the reason why large amount of black money is migrating to real estate. Another reason is, hiding money abroad has become exceedingly difficult and dangerous. Anyone can be framed if a large transaction takes place using hawala, as it is monitored by domestic as well as foreign spy agencies.
Returns or no returns, this is the safest area to launder black money. As someone mentioned in this blog earlier, govt is actively involved in this clandestine operation.

Wale of to reality guys. Your MBA theories etc have no value in this market.

Anonymous said...

I am no MBA, just my two cents, nonetheless i feel that the RE price in Mumbai is way too much, and there is no way I can afford a house with these price's

for you guys who have hit the Gold mine, then good luck to you with your new found wealth!

nonetheless, there is no doubt that RE is currently the best money laundering operation around.

Anonymous said...

sales drop in mumbai by 50%

to all the RE estate bulls, time to liquidate ?

http://www.dnaindia.com/mobile/report.php?n=1401348

Anonymous said...

Reports by journalists who have no exposure to the real estate market are misleading. There are few flats available for sale in mumbai resulting is less sale compared to the previous period.

Even journalists are paid to con people. Do not take any report by face value. Do your own investigation, talk to builders, real estate agents and then draw your own conclusions.

There are hardly any flats for sale in bandra. The advertisements that appear are just a means of gauging the demand by the big players.

This sort of exercise by big realty companies is just to gather data. I am an employee of a such big company

Anonymous said...

there are tons of flats on sale in bandra but at extravagant prices. Unless, you recently made fortune in something you can not buy flat in bandra. People are asking anything even for 40 years old flat which looks like on verge of collapse.

I don't understand why people are so blind and don't want to understand that prices just can not go up @ 50% every year as they are increasing since last 5 years.

Prices increased 200% in 2005-2007 due to government allowing direct investment from FII's which is no longer available hence prices are not going to increase for 4-5 years. Anyone investing in real estate for short term will cry.

Anonymous said...

anon@5.25

I don't know if it is bubble mentality to look at every bad/adverse news in a favorable light and in one's favour ?

nonetheless I won't be surprised if the ad's in the newspapers are gimmicks by realty firms, that's how all businesses function....

My uncle is a lawyer and he gave me an scoop of things, he says that in the past some years of RE boom the builders have made a killing and thus they have the holding power and are in no hurry to unload their inventory, thus it's either their way(rates) or highway.

Anonymous said...

Anon above:

Builders would be filing for banakruptcy in the time to come. Many are under pressure to pay their loans. They have done a foolishness of buying land at very high prices.

Anonymous said...

Money goes the way it comes. If people cheat or steal money, it goes also like that.

Anonymous said...

I was expecting a drop n prices of RE for the last three to four years. Now slowly self doubt is creeping in.

I am in two minds now. Though my mind says the drop will eventually come, i also wonder if the drop will be too little too late. I think i would give myself a few more months, but at the end of it will see me enter the market.No doubt.

Anonymous said...

A few months is a small time for such a massive bubble to burst, it may take some years atleast.

If you need house for living and have the cash jump in.

If you have cash and want to short the market jump in there is still some milk left to leech

If you don't have the cash and still want to buy/invest via loans please think multiple times before taking the leap

DhImAn said...

Have to agree with Anon at 1:31 AM above.

Markets can stay irrational longer than you can stay solvent.

Thus, it is in your own best interest to only buy when you are not at risk, which means don't borrow.

To the bubble deniers. Just because the market continues to stay irrational doesn't mean it will be that way ad infinitum. If markets could only rise then their eventual price has to be infinity.

This means that a drop is coming. As sure as night follows day. The only question is when.

Desi Batman said...

As many people I talk to, they say they can afford to buy and have purchased RE in India, even at these high prices.

Now, as long as affordability is feasible RE prices are NOT going to come down.

Frankly speaking many of readers on these forums have affordability to buy RE, but choose not to. Some will give up and buy eventually. Few will wait for RE to come down. Question is how long will they or can they wait?

As long as people in India have income to support these RE high prices, prices will rise. Crash starts when RE becomes unaffordable.

Now lets talk about sources of such high income.

Jayant said...

In 2009, 95% of all US home mortgages were backed by the Government (through Fannie Mae and Freddie Mac) and 45% were for first time home buyers. The private investors didnt participate in this game because they knew that the housing prices were going down and nobody was there to buy shitty/stinky products ( synthetic CDOs on subprime mortgages) peddled by Wall Street.


Meredith Whitney - Guaranteed double dip in US housing

Gregory White | Jun. 21, 2010, 10:57 AM


~ People are squeezed from all sides with rising taxes due to state deficits
~ The states are under water by $200 billion, and Obama has only offered $50 billion to bail them out
~ Areas of consumer spending outperformed, but problem mortgages are rising because people are choosing not to pay their mortgages
~ People are going to start to kicked out of their homes and start renting
~ The consumer hasn't deleveraged, they've only gotten worse
~ For certain there is a double dip in housing


Once the government stopped the unscrupulous support to the Builders lobby i.e. 'first time home buyer tax credit' , there was a historical drop in the sale of houses. The people have been living in their houses for 1 to 2 yrs without paying a dime because they know that the foreclosure proceedings are expensive for banks and the banks still want to fool the investors with the "phantom" paper profit when the delinquent home loans are rotting.

Now there is a tremendous resistance to all such unpopular financial unsustainable programs. e.g.

As 1.3 Million Americans Are About To Lose Their Jobless Benefits This Week, The Unemployment Rate Will Surge To 10.5%

Submitted by Tyler Durden on 06/26/2010 22:24 -0500

As we reported on Friday, a critical bill that was unable to pass this past week was the extension of unemployment benefits to millions of Americans currently collecting a $1,200 average monthly stipend from the US government for sitting on their couch and not paying their mortgage. As a result of this huge hit to endless governmental spending of future unearned money, the WSJ reports that "a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week." Furthermore, the cumulative number of people whose extended benefits are set to run out absent this extension, will reach 2 million in two weeks, and continue rising: as a reminder the DOL reported over 5.2 million Americans currently on Extended Benefits and EUC (Tier 1-4).

So where to make money from ? You are right..from developing economies...screw up the middle class of India (make them loan slaves and work throughout the whole life to pay for exorbitant EMIs) to the last penny through FDI investment in housing sector with strong protection from Government of India, Reserve Bank of India and Banksters of all stripe.

Desi Batman said...

@ Jayant 8:47
In India, people put down heavy down payment when buying a house unlike USA where one can get 3.5% FHA loan for 30 years fixed.

Gov't of India isn't providing kickbacks such as first time home buyer credit or as such to RE buyers.

Jobs are on rise and so with increase in salaries. India has positive outlook, and it is there to stay for another 10 years atleast.

Most importantly many many Indian households have enough income. Previous years only business men used be rich, but now with two or more wage earners with same household has increased affordability of all cominforts and luxuries.

I feel only when AFFORDABILITY gets hit the RE will get hit, else RE will increase or remain stable.

Now when and how will affordablity get hit?

Anonymous said...

desi batman@ 09:40

Good Joke!! are you seriously implying that houses are current affordable in India?!!

4 crores for 1 BHK in Khar...1.3 crores for 2 BHK in Malad...

If you call this affordability, you must be related to marie antoinette!!

Anonymous said...

Mumbling Manmohan's Meanderings !!

Moronic Manmohan wants stimulus to continue! He claims he is scared of deflation!!

What does he want? The rich to become richer because of stimulus which is nothing but an indirect tax on the poor and middle class....and what's wrong with deflation? We do not need a secular inflationary trend...after all this stimulus and inflation we need deflation or else we will not be able to afford anything very soon..its almost there already, where people cannot afford food and shelter!

Desi Batman said...

@ Anon 8:01 PM

That's the point - keyword "affordability:. I don't think RE worth crore(s) is affordable, atleast not to me.

But there are many who have that affordability. What is ratio of people who cannot afford to who can. I bet on people who can afford are more.

Whoever bought houses prior 2003 have 300% increase in house equity. They have no pending loans. They have holding power and they can hold onto more or same price for another 10 years without making any loss.

it is like people who bought at lower prices and people who have holding power are playing the game well.

We are screwed. All that is left is hope hope and hope.

More over India doesn't run on productivity like USA. Mostly rich guys are rich by inheritance or exploitation or gambling. In RE all three things are in play.

Anonymous said...

In Colaba, One BHK 510sqft Carpet, on 7th floor quoted at Rs.2Crores. When I said it was not worth even 50lakhs 3 years back. It seems there are buyers lined up at that price. Which I know for sure arent b'cos this property has been around for sale for over a year and price has just increased by 100%. And get this NO PARKING. The society will charge some Rs.20L for parking. How fucked is that??

Anonymous said...

Well banks are suspending teaser rates...which could mean:
1. they have had their full! consuming people and now their risk management folks are telling them not to do this anymore.
2. The GOI has decided to curtail the deficit and increase rates and has informed the banks to stop lending at lower rates.
3. Banks are no longer getting bakras and therefore are stopping their shenanigans and turning to the rightful path to boost their assets..

All in all, the american malaise has not hit Indian banks. They have learned to lie and fool their customers into EMI slavery. I would compare this to a Indian tiger(or some other carnivore) getting a taste for human flesh....they have become man eaters! One will need to be very careful in dealing with Indian banks in future...

Anonymous said...

On a side note as long as inflation keeps rising, I am not that confident that real estate prices will fall.

The government will keep bringing new rupees into circulation that will automatically keep the price of RE propped up, as all goods and services will try to soak up this newly created money.

True, the value of the house wont change , actually it will decrease as the quality of rupees falls, but unfortunately how many people know the difference between value and currency(price)

Desi Batman said...

@ Anon 6:50 AM

True.
so far Indians are/were cash rich, no debt.

With RE prices so high, lots of black and white money will be locked in for many many years. Therefore Indians will not be cash rich anymore.

To sustain cash richness, either income has to increase at same or more rate and/or individuals will have to spend less money towards non-RE expenses.

What happens from 5 years from now when liquidity dries up. Fun, I guess.

Anonymous said...

anon@12:32

"In Colaba, One BHK 510sqft Carpet, on 7th floor quoted at Rs.2Crores. When I said it was not worth even 50lakhs 3 years back."

Do you regret not buying that time for 50L and now you would be able to sell for 2CRs, 4 times in 3 years, not bad from investment point of view.

It is the corruption money that is high in circulation in India. And it is not only government offices, private companies also do lots of corruption. If you are in IT service sector, you would know what I mean...

BTW, to get an idea of the level of corruption; everyone should watch movie "Well Done Abba", it is a refreshing take on the corruption, and the movie has optimistic outlook...

Jai Ho..

Anonymous said...

Desi batman, no need to worry if liquidity dries up, the printing presses will be ready churning out 5000/- 10000/- 50000/- rupees notes, now come on can't we ATLEAST trust our politicians to do this favor for us...

Anonymous said...

@8:53am. On the Colaba flat @2Cr.

The broker commented about its availability for past one year. Honestly had I know, I would've bought. But I really didnt know. But anyways, I got something else finalized today and dont regret anything. Life is short. However I am an end user. Dont think this is the right time to invest at all.

Desi Batman said...

@ Anon 9:37 AM

Correct. As such in India there is no accountability for anything. Print more money and circulate in black market. This stratergy has been going on since MANY years and kept economy humming.

As someone already mentioned on this board, black money WILL NEVER be accounted and tracked, if it is that will be END OF INDIA.

Anonymous said...

Bulls,
Sell your RE now. Double dip is coming. This is going to take down all the bubble from India and China. Really bad times ahead.

Anonymous said...

Anon above:

Looks like the party will come to an end this time. If GOI keeps printing money and doesn't stop spending, next Greece could very well be India. I think EU is doing the right thing. Some cut down is better than crying later.

We could very well see the slowdown starting today.

Anonymous said...

I think when US interest rates rise to normal levels in a year or so, Rupee may plunge to 60/USD.

Even now, if Sensex drops by 2000 points, rupee will cross 50 mark.

Anonymous said...

I think by end of July DOW would be lower than 9000 and Sensex by 1500 points. This summer is not going to be good. The whole world id entering into a different era. At least 10-15 years of misery ahead till all the excesses are corrected. People who got it too easy would see the real world soon.

Anonymous said...

Anons @2:08PM & 8:44pm

What makes you guy(s) think that the markets are going to go down, there will be double dip and 10-15 years of misery ahead, while all the experts are saying that the worst from europe is also behind us now.
I am really curious as I am invested in the market. Your reasoning is valuable to me.

Anonymous said...

Anon above:
Most experts keep lying till the crash. Maybe they are paid to keep the morale high among people and stock market. No one wants misery.

What has happened in the past 6-8 years is all countries have followed Keynesian theories and borrowed more than they can repay. Consumers feel good because salaries go up and a lot is spent in infrastructure. But do people realize where the money is coming from? Mostly is borrowed money and money borrowed by selling bonds.

Almost all EU countries,US and India etc. have done the same thing. Greece cannot pay it back now. Same is the case with Spain, Italy and Portugal etc.

This growth based on steroids will not last forever. All these countries, the G-20 has similar housing bubbles. Now EU doesn't want to borrow more and maintain some austerity. Which means less spending and less growth in EU. THis will also lead to protectionism in terms of visas and jobs. Who will take a hit? The same will happen in US as unemployment is high there.

India/China cannot grow alone unless US consumers consume.

The story is like there wasa chicken that laid golden eggs and the smart people killed that bird by creating massive RE bubble. Now the RE prices that you see are 2025 prices. So,10-15 years of no growth.

Desi Batman said...

I am no economist. Just basic lessons learnt from recession, real estate and finanacial events in USA and India.

Why India has NEVER and WILL NEVER face deflation. Here are my thoughts on comparing deflation vs. inflation:

Causes and Events during Deflation:
1. Value of Rupee increases
2. Value of white money increases
3. Value of black money decreases
4. Good for common/poor people
5. Affordability of many things increases
6. Salary cuts and layoffs possible to sustain
7. Feels like economy is going down


Causes and Events during Inflation (Opposite of deflation):
1. Value of Rupee decreases
2. Value of white money decreases, basically people with cash on hand are SCREWED.
3. Value of black money increases
4. Bad for common/poor people (have-nots), but good for rich people with assets.
5. Affordability decreases.
6. Salary hikes, lots of new hiring, investments.
7. Feels like economy is on run.


Refer to point #3 above: BLACK MONEY will run economy in India during inflation and WHITE MONEY will run economy during deflation. That is why many people say that we have parallel black economy in India. Whenever economy has fear of deflation all government of India has to do is print more money and put that into black market. If money is put into white market that will have opposite effect (i.e. Deflation).

India has always been in inflation. Think about this, what was value of one paisa 30 years ago, 10 years ago and today. Now think about 1 rupee, then 100 rupees.

Anonymous said...

"Holy Cascading Inflation, Batman - The Joker (Manmohan), the Riddler (Montek), the Penguin (Pranab), Catwoman (Sonia) and Two Face (Chidambaram) have joined hands to launch a concerted attack on the Indian middle class."

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