Monday, July 26, 2010

India Lands in a Mess

Article Link

A proposed property-rights bill could have far-reaching, positive implications for the economy.

Today, the labyrinth of bureaucracy makes it hard to realize property values, condemning landowners to poverty and making land artificially scarce. According to a national survey in 2006, about 40% of Indian farmers would like to sell their land and move out to more lucrative occupations, but can't find buyers because of archaic laws. A survey this year found that about 40% of people in urban areas live in slums, also because of restricted land supply.

Another law has recently been proposed by the government to help give the people clearly defined land titles. The Ministry of Rural Development has recently drafted the "Land Titling Bill 2010" to encourage states to adapt similar legislation at the provincial level. The draft is open for public comment until August 31, and it is well worth reading.

The deliberations over the coming months could determine whether this legislation will transform India or merely remain a piece of paper that scores high on intention, but fails in practice.

The draft Land Titling Bill 2010

Comments/opinions/suggestions on the draft Bill from all stakeholders are invited and may kindly be sent to e-mail ID da-dolr@nic.in

57 comments:

Anonymous said...

publicity stunt

shailesh said...

The Law of the Land

Seems like lot of momentum is there. Time will tell....

Desi Batman said...

Creating law is different than implementing into practice. But this time it will work. Two reasons:

1. Looks good on current government. Helps in winning elections.
2. Eliminate wait time for clearing disputed land titles and therefore land with clear land titles available for grabs at faster rate.

No free lunch. Either ways you lose.

Vik said...

India zillow.com follows next :).

samix said...

Can any of our readers please explain what the act is all about in simple English ?

Desi Batman said...

hey Samix, read the link Shailesh provided on 6:30 AM. That might give you insight on the new initiative.

In nutshell, process to identify and have clean record keeping of ownership of land will be implemented. There will be clear documentation at single source of how much land, map of land and ownership of land.

Jayant said...

Banks' NPAs at alarming level, real estate a worry

TNN, Jul 25, 2010, 11.57pm IST

The outstanding credit of banks, both public and private, to commercial real estate at the end of March 2009 was Rs 91,500 crore against Rs 63,000 crore till March 2008. This was an increase of 45% over the previous year and more than double the amount of Rs 44,000 crore exposure of these banks during boom period of 2007.


Speaking on the sidelines of a meeting of heads of Regional Rural Banks with the finance minister in the Capital, banking secretary R Gopalan said NPAs in the restructured loan category of the real estate sector had gone up .

He said the government may not go in for any more restructuring of loans as the past concessions were one-time measures and granted to beat the slowdown .

The tough stand of the government, if coupled with lending rate hikes by RBI which is to be announced on Tuesday, may make survival of many builders and developers difficult given the fact that they had pumped in hundreds of crores into the sector and were holding on to their stocks for lack of customers.

granted to beat the slowdown -- are you kidding? Please read as below

the real estate had collapsed but we bailed out the crooked builders with the savings of the common people in the public/private banks. We restructured the loans to let them sucker in more gullible buyers. We as a sidekick of politicians, allowed the banks to hide the losses

Genuine home buyers please stay away from buying flat/home.

The Bankster who is supposed to safeguard our savings/advise us about protecting against inflation is using our own hard earned money to loot us legally with the real estate friends.

Desi Batman said...

RBI increased repo rates by 25 basis points. But looks like that might not push up home loan interest rates. So the loot continues. Enjoy.

http://profit.ndtv.com/news/show/rbi-s-rate-hike-unlikely-to-push-up-home-loan-rates-85094

Desi Batman said...

Industry views is that RBI raising key rates won't impact as growth and demand in India is robust.

http://in.reuters.com/article/idINIndia-50418720100727

Anonymous said...

More on RBI's moves and how it may increase EMI

Hey Desi B'man, agree with you RBI's moves are a placebo to address inflation. Since BJP is making a lot of noises and COngress is scared, they have introduced some increase. The problem with India is that no one would be able to quantify whether these measures are adequate because everything is so opaque!But clearly this interest rate is notional and public making more noises in future, which is bound to happen, will lead to more rate hikes.

I would say in another year we should start seeing serious rate hikes by RBI and which would mean Vic's comments on zillow would start coming true as well...

Anonymous said...

Is this a dream... since when did Indian govt got motivated to resolve common people's issue. SHAM or a REALITY?

Anonymous said...

This blog has become boring. Irrelevant subjects are discussed here No one is posting the real situation.

It is high time to move away from here. Bye Bye

samix said...

Very Insightful

"Without lots of leveraged debt, you don't have a "bubble" merely an overvalued market - since it is the IMPLOSION of too much leveraged debt which creates the "popping" phenomenon.

The situation in Canada, China, and many places is that markets are overvalued - the consequences of too much "easy money" (i.e. 0% interest rates). But the sort of radical over-leveraging which exists in the U.S. MAY exist in a few of the European economies, but not the economies of Asia, nor of Canada. "
- Jeff Nielson

Does anyone have any Idea how much debt is actually involved in our RE market or is the market grossly overvalued ?

Anonymous said...

samix,

sometime back I had a look at financial statements of the top 4 Indian realty firms comprising the realty index - all of them are leveraged to the hilt.

In fact to survive and repay debt they have to constantly seek more debt via the fccb route. Now that route has dried up and no money seems to be available...so the last resort for these companies is the equity market. Indian banks are also in dire straits they do not want to touch these realty companies anymore and therefore the implosion is in the anvil...

Like I said their last hope is the equity markets and IPO route..if that fails you will see all kinds of implosions...

Anonymous said...

@ anon 2:01 PM

we would like to hear your opinion on current Indian RE market. Hope that would make this blog more interesting and realistic.

samix said...

@anon at 5:51

If that is the case, ie their books are over leveraged with debt, then I can confidently claim that we are in a bubble from the realty firms point of view.

But what about the average house holder are their books also over leveraged ?

Desi Batman said...

Samix:

Today's house holder are burying themselves into debt thinking RE will always rise at atleast 25% appreciation rate y-o-y. So hold on to the RE as long as possible, at the worst case all one has to do is to sell the house and book the profit.

The part they forget is that all this music is running on batteries. When batteries are close to dead, music will slow down and ultimately there will be THE END. OK OK... unless there is possibility of borrowing more debt. This is exactly what happened in USA and is happening... but new batteries also have expiration date.

I spoke to several people and calculated the debt they have accumulated for RE loans. Also their plans of paying that for next 20 years with high possiblity of increase in rates after 2 to 3 years. Suprisiingly, they don't have any plans and haven't accounted future rates increase! As for now they are extremely proud and satisfied as their RE wealth has increased 4 folds.

samix said...

Suprisiingly, they don't have any plans and haven't accounted future rates increase! As for now they are extremely proud and satisfied as their RE wealth has increased 4 folds.

Haha, It seems that the batteries are getting sucked dry, in spite of the assurance that the banks will not increase the home loan rates, seems that the Reserve bank of India has arm twisted them to increase the rates. thats what NDTV tells me....

samix said...

Read this on the internet...

Since hike in lending rates is not expected, is it a good time for those looking for a home loan? Says Harsh Roongta, CEO, Apnapaisa.com, a loan portal: "Since interest rate hike is inevitable in the future, if you are planning to buy a home, you should go for a teaser loan, which gives a fixed rate for the initial few years."

Fuckers want to suck every penny from the man on the street..

what dazzles me is the impunity with which many many idiots will jump into this fire when the builders will tell them "See demand and supply is tight, interest rates are increasing, rates of home are increasing, this is your last chance to own a home"; and so will the idiot jump into life long slavery and possibly insolvency.

Anonymous said...

The name of the current game is 'swindling'. Suckes who bite the bait are going to sink in the hellhole.

If you have crores, migrate away from BhaRat. The money can buy you an immigrant visa to countries like newzealand, australia or canada. Start a new life and dont waste your time in this god forsaken corrup country. If you dont have the required cash explore the possibility of moving to a small town

Jai Hind

shailesh said...

Malaria vivax now attacking hearts, docs left baffled

Not sure how big is this issue, but Mumbai folks be careful....

Bindas Bhai said...

People who have held on. Please wait till June 2011. I personally feel that the overheated market like Mumbai is in for around 50% correction.

I dont believe in timing the market but there are lot of indication which has made me write this post.

All the best.

Bindas Bhai

Laaloo Prasad yadav said...

If Bindass bhai says so,,,..
we r ready to accept. All his forecasts have come true so far.

All those waiting for a crash, here it begins

Jayant said...

NPAs in restructured loans to real estate sectors are increasing but for Reserve Bank of India, it is not yet sign of a bubble. It can’t see the enough evidence of the price increase so far. Not sure in what world these morons live?

RBI to assess realty lending curbs in November

Published: Wednesday, Jul 28, 2010, 23:39 IST
By Parnika Sokhi & Neelasri Barman | Place: Mumbai | Agency: DNA

Subir Gokarn, deputy governor of the Reserve Bank of India , spoke with DNA on the state of monetary affairs. He said he doesn’t see a realty bubble now, but the central bank will consider prudential provisioning in November - though it does not rule out an early clampdown if the situation rises. Excerpts:

We are back to, if not above, the 2007 peak in real estate prices. What’s the RBI’s position on realty prices? We haven’t seen you beginning to stamp down using provisioning…

Just two aspects on that — one is that from a monetary perspective, the only way to deal with real estate prices is to reign in liquidity, to raise interest rates, to make borrowings more expensive - in short, make money less attractive. We have started doing that. Now we have broken up the cycle — into half-yearly ones where we take monetary and policy-related actions, and the quarterly cycles where we take only monetary actions. So, the provisioning issue would typically be done in either the April or the October-November policy. Obviously if we feel there is some crisis growing we can act any time. but we assessed the situation and decided that there wasn’t enough evidence of runaway price increases that warranted an out-of-schedule action.

Bindas Bhai said...

Thanks Laaloo for your kind words but this is only my judgment, I could be really wrong.

Prices in Mumbai will further rise, now at a greater pace. Sellers (re-sale flats) will keep increasing the price even if they get the customer for the price they have quoted. Builders will launch lot of new projects during Diwali and will be see fairly good sales during pre-launch. Investors will be the main buyer and a lot of hype will be created in the media justifying RE as a good investment.

Suddenly we will find there are no good flats on the block. Greed and fear will start working. Welcome to the final lap which will work atleast for three to four qtrs. 95KCr debt of builders will swell along with unsold inventories in first qtr 2011.

Banks will start getting jittery including RBI, builders will put a brave front till June 2011 but will not be in a position to hold on further.

Prime properties will still have demand but me too properties will be thrashed in just two qtrs. From greed fear will set in but this time sellers will be scared.

All the best.

Bindas Bhai

SabbalSeshu said...

I second the opinion of Bhindas Bhai.
The unabated real estate price rise is also making the government jittery. A crack down on black money may destabilize the market and prices may see a southward trend.

It is wise to hold on to your money until the situation becomes clearer.

Anonymous said...

loan seekers should anyway stay away from the mumbai market now and forever. it is not possible to pay down 1cr of loan with 10% interest rate even with a salary of 20L.

business ppl generate black money and then buy these houses. it is not possible for a salaried middle class indian to own in mumbai. he might have to goto dahisar, kalyan or dombivile. kya zamana aa gaya.

Desi Batman said...

Bindaas Bhai:

I am strong believer that Indian RE is a BIG bubble. There will be correction, but 50% reduction from peak price is still a bubble.

Prices in Mumbai have increased 4 folds in 4 years. On average 100% appreciation per year! So 50% correction based on prior year price will simply put prices to past 6 months price. STILL there is tons of air in bubble. Bankers and builders and investors are not morons they know this and are playing game accordingly.

Reality prices are unaffordable to many since past 3 to 4 years. Yet there are buyers. BUT most of these buyers are investors who would then hold genuine buyers for a ransom.

This will all continue until there is a downturn in economy.

Desi Batman said...

@ Anon 8:39 AM

"loan seekers should anyway stay away from the mumbai market now and forever. it is not possible to pay down 1cr of loan with 10% interest rate even with a salary of 20L.

EMI for 1cr loan for interest rate10% per annum for tenure of 240 years is 96,502.16 per month, very close to 1L. People who get 1cr loans are the people whose earnings are atleast 24 lacs per year (there are tons of people who earn this money). So they are paying EMI 50% of gross, more over they get tax deductions, so effectively this will come to approx 40% overall expenses to them. With 20L earnings per year (i.e. 1.6L per month), it should not be that be difficult to pay the EMI.

Problem if you don't earn that amount, then probably think of living in slum or shared apartments or out of metro cities.


"business ppl generate black money and then buy these houses. it is not possible for a salaried middle class indian to own in mumbai. he might have to goto dahisar, kalyan or dombivile. kya zamana aa gaya."

why blame business people? they do not generate black money. I have seen businesses run for many years. Business cannot run without black money... because most of in and out cash flow is demanded in black money. for e.g. as a buyer even if you have 100% white money , builders and investors will demand black money. Same if you have to sell to save on taxes you will demand black money! This is the way India works.

Right way to put up is that the new person on market without strong financial support is screwed when comes to RE.
Yes you are correct, move to virar, dombivilli and beyond.

Anonymous said...

India is not God forsaken.

We Indians have forsaken God.

Builders of course have always been Devil worshippers

shailesh said...

Devangshu Datta: City development via devolution

The wealth of Mumbai’s citizens doesn’t translate into better infrastructure. It never will, and there is not much they can do about it. This is because of the gerrymandering inherent in Indian electoral politics. In India, the rural vote counts for much more than urban votes.

The revenues of Mumbai are controlled by politicians, whose constituencies lie deep in the Maharashtra hinterland. Using that money to improve living conditions in Mumbai would do nothing to help them win re-election. So, beyond taking their turn at the feeding trough, they see no necessity to overhaul city infrastructure. Nor can the Mumbai municipal agencies raise debt by issuing bonds or securitising their own revenues because the city is tied to a state with poor finances.

Mumbai is an extreme example. But all of urban India suffers from the same problem. Infrastructure is uniformly poor, ranging to terrible. Urban revenues are controlled and allocated by politicians, who have little interest in the urban landscape.

At the same time, more and more people are migrating to urban areas. So, the pressure on existing infrastructure is increasing. The cities attract people because they offer more income opportunities. In turn, those people generate more revenues for cities.

The only way to improve urban infrastructure is devolution of power to local authorities. The British model does seem to work to a large extent with city councils raising and spending their budgets. The Americans do something similar and the mayor of major cities are big wheels.

Devolution makes local authorities more powerful as well as more answerable to locals. Oddly, India’s politicians have seen the utility of devolution when it comes to panchayats. It’s also worked well in the city-state of Delhi, where the state government empowered residents’ associations through bhagidari.

samix said...
This comment has been removed by the author.
samix said...

People need to understand that inflation or government policies are not the real culprit, it is the system of irredeemable money.

I doubt how many people reading this blog even know what is the difference between redeemable and irredeemable money.

Redeemable money: This is sound money backed by something tangible, like for example gold.

Irredeemable money: The type of money that we have been used to, this money is backed by nothing but the promise of the Reserve Bank of India, have you ever wondered what is printed on our notes "I promise to pay the bearer the sum of X rupees" ?

How is the sum of X rupees quantified ?

Think over this

"Like a drug addict, people exposed to irredeemable currency do not
regard it as a dangerous and undermining narcotic agent. Even the loss of purchasing power
does not disturb them to any great extent. Their response is to demand more money, and they
take pride in the fact that the government listens sympathetically to their demand. They
welcome the soaring stock indexes and real estate prices, and put great stores on them. Heavy
taxes and burgeoning debt are not regarded with anxiety. A frequent and common agitation is
for ever more government spending."
- Antal E Fekete

Anonymous said...

Mumbai mill land sold for 474cr
http://timesofindia.indiatimes.com/city/mumbai/Mumbai-mill-land-sold-for-474cr-/articleshow/6242396.cms

Imagine the cost of flat once the apartment buildings come up.

Obviously, the real estate firm hasn't jumped on a bubble bandwagon

Anonymous said...

An old gem on the internet but still relevant..
-------------------------------------
http://tinyurl.com/25ea56x

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollars as there were only two pieces of 1 dollar coins circulating around.

1. There were 3 citizens living on this island country. A owned the land. B and C each owned 1 dollar.
2. B decided to purchase the land from A for 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar.

The net asset of the country now = 3 dollars.

3. Now C thought that since there is only one piece of land in the country, and land is non producible asset, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the land from B for 2 dollars.

* A has a loan to C of 1 dollar, so his net asset is 1 dollar.
* B sold his land and got 2 dollars, so his net asset is 2 dollars.
* C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net residual asset is 1 dollar.

Thus, the net asset of the country = 4 dollars.

4. A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar.

1. B loaned 2 dollars to A. So his net asset is 2 dollars.
2. C now has the 2 coins. His net asset is also 2 dollars.

The net asset of the country = 5 dollars. A bubble is building up.

5. B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A.
1. As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars.
2. B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars.
3. C loaned 2 dollars to B, so his net asset is 2 dollars.

The net asset of the country = 6 dollars; even though, the country has only one piece of land and 2 Dollars in circulation.

· Everybody has made money and everybody felt happy and prosperous.

(to be continued ...)

Anonymous said...

6. One day an evil wind blew, and an evil thought came to C’s mind. “Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more.” A also thought the same way. Nobody wanted to buy land anymore.
1. So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.
2. B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.
3. C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his Heart is palpitating.
4. The net asset of the country = 3 dollars again.
7. So, who has stolen the 3 dollars from the country ? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B’s net asset is still 2 dollars, his heart is palpitating.
1. B had no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.
2. A owns the 2 coins, his net asset is 2 dollars.
3. B is bankrupt, his net asset is 0 dollar. ( he lost everything )
4. C got no choice but end up with a land worth only 1 dollar
5. The net asset of the country = 3 dollars.

************ **End of the story; BUT ************ ********* ******

There is however a redistribution of wealth.
A is the winner, B is the loser, C is lucky that he is spared.

A few points worth noting -

1. When a bubble is building up, the debt of individuals to one another in a country is also building up.
2. This story of the island is a closed system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
3. An over-damped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
4. When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.
5. If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw.
6. When the bubble was in the growing phase, everybody made money.
7. If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.
8. As in the case of land, the above phenomenon applies to stocks as well.
9. The actual worth of land or stocks depend largely on psychology

Anonymous said...

6. One day an evil wind blew, and an evil thought came to C’s mind. “Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more.” A also thought the same way. Nobody wanted to buy land anymore.
1. So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.
2. B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.
3. C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his Heart is palpitating.
4. The net asset of the country = 3 dollars again.
7. So, who has stolen the 3 dollars from the country ? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B’s net asset is still 2 dollars, his heart is palpitating.
1. B had no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.
2. A owns the 2 coins, his net asset is 2 dollars.
3. B is bankrupt, his net asset is 0 dollar. ( he lost everything )
4. C got no choice but end up with a land worth only 1 dollar
5. The net asset of the country = 3 dollars.

************ **End of the story; BUT ************ ********* ******

Anonymous said...

There is however a redistribution of wealth.
A is the winner, B is the loser, C is lucky that he is spared.

A few points worth noting -

1. When a bubble is building up, the debt of individuals to one another in a country is also building up.
2. This story of the island is a closed system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
3. An over-damped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
4. When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.
5. If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw.
6. When the bubble was in the growing phase, everybody made money.
7. If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.
8. As in the case of land, the above phenomenon applies to stocks as well.
9. The actual worth of land or stocks depend largely on psychology

Dajiba said...

Interesting story. I still think that the abnormal price rise in mumbai is due to the supply/demand equation. 99% of the buyers in Mumbai don't fall into the investor category. Therefore i am very skeptical of the bubble theory.

?Having stated the above, I doubt that the prices will ever come down. It is best to explore accommodation in the outskirts of the city which are relatively cheaper.

Anonymous said...

So the next big crisis will be outside the U.S, with the key being inflation and dollar liquidity. With all the world depending on helicopter's Ben dollars falling around on all who is too big to fail, a short squeeze in the dollar(like what is maybe happening now with the potential collapse of the Euro) will bring all the "emerging world" to it's knees. Anther thing that could happen, with or without a dollar rally is a pickup in inflation which will force those central banks to tighten. In India and in China it seems like it is happening and in Israel it is happening for sure.

Anonymous said...

July 27 (Bloomberg) -- Bank of Israel Governor Stanley Fischer raised the benchmark interest rate for the first time in four months in a bid to cool housing prices which he says could develop into a bubble.

Fischer yesterday unexpectedly increased the rate by a quarter percentage point to 1.75 percent. Only five of 16 economists surveyed by Bloomberg had predicted the decision, while eleven expected no change.

“He is very concerned about housing prices,” Jonathan Katz, a Jerusalem-based economist for HSBC Holdings Plc who predicted the raise, said in a telephone interview. “He is aware that monetary policy has contributed to the froth.”

Fischer raised the key interest rate by a percentage point between August and March as the economy recovered from the impact of the worst global recession since the Great Depression. During the past year, housing prices have risen 21 percent and the Organization for Economic Cooperation and Development warned in a May 26 report of a “speculative” property bubble in Israel.

Anonymous said...

There is a bubble all over. It will burst in the following countries soon:
--China
--Australia
--Israel
--India
--Hong Kong
--Singapore
--Korea

US, EU has already burst. All because of loose monetary policies of these Governments and calling it growth for the past 6-8 years.
Shame on politicians.

Anonymous said...

To add on the above list:
--Canada
--Brazil
--South Africa

samix said...

It seems that everyone in Mumbai is only buying flats!

I was with my mom and some of her friends were discussing guess what! flats, how to buy more flats and how to turn rich richer richest!

By the way reading news and views from the RBI, I think that thankfully they have decided that it is time to take care of the bloating RE scenario.

But unfortunately sheeple will not take a cue from this and will keep investing in RE, until the RBI shouts from the rooftops that we are in a massive RE bubble.

On the demand and supply front, then this is a bull shit argument, there is indeed demand but not from people who don't have a house, those guys are renting anyways.

There is massive demand from investors and get rich quick typos and this time these investors are not just professional investors but every tom dick and harry who has any money to spare.

Now, what we actually seem to have in the Mumbai RE market is a flipping game, you buy a property wait for it to appreciate and flip it in the hands of naive investors who are looking for a risk free trade.

Now on the holding capacity front, I have observed that the naive investors(your uncle next door) are putting in their lives saving into this RE madness. These people are buying RE now to liquidate in the future to cover their retirements, daughters marriage, child's phoren education, hospitalization etc. So I feel that their holding capacity is inversely proportional to the realization of these acts.

I would appreciate if someone can critically look at my points and provide some feedback.

Anonymous said...

samix:

You are absolutely right. Having seen this movie 2 times in my life I can tell you there is nothing you can do.

[1] No amount of rational argument will change anyone's mind.

[2] Bubble will grow even 2 times bigger. At some time you will begin to wonder if you were wrong!

[3] Eventually you will be right. But not before the bubble sucks everyone in. If you are lucky, you will manage to resist the urge to get sucked in.

Such is life

Anonymous said...

According to bubble theory, we are reaching the end game now. However the end game will only be triggred when RE goes up another 50 to 100% very fast (within 1 year) at which time look for massive selling and prices to crash 70% which would be equivalent upto to a 40% correction from current prices. So if you are a new buyer you be careful unless you think you can flip in 6 months, otherwise best to stay on the sidelines and watch this movies sad ending. I have many sad tales to tell you what happened to many many people in the U.S. when the U.S. market was at this stage of the bubble.

Watch this post a

Desi Batman said...

Can anyone please share what is average ratio for loan amount to ratio purchase amount of flats? e.g. flat is 1cr, downpayment 25% and 75% loan... ?

Basically whole worlds know that India has larrgest middle class people with high disposable income. As long as this disposable income is not completely tapped RE prices won't be impacted.

Builders and many investor make their 200% profit for 5 flats when they sell 1 flat, so basically 4 flats can sit idle for next several years.

Only downturn in economy can burst this bubble. This can happen if USA goes into double dip recession.

Bindas Bhai said...

Desi Batman said:

Refer your comment 8:39 AM

I can understand the point you are trying to make but those are obvious points and the majority will get sucked in because of this point but trust me for a crash we need the markets to move further up atleast 50% by April and then you will see minimum 50% fall i.e. 25% from todays price.

This is purely my guess i could be wrong but if i had to buy i would wait and scare the shit out the investor/builder and take a discount of atleast 35% from todays price.

Demand/supply/affordability will defy logic when fear sets in.

Please dont pass any personal remarks against me or for me.

All the best guys.

Bindas Bhai

samix said...

Another component that should arise to cause a bubble like fall in the RE market is defaults by people who have taken loans, it is when this happens that the fall will be accelerated.

Anonymous said...

Sundaas Bhai,

People pass comments on you because you are one of the manipulators who is now pretending to be a dal-badlu but still is trying to convince us to buy! Also, you come back as anonymouse and pass the worst comments on people who pass comments against you..

25% from today's prices, after prices have run up 500% is going to be just 375% from the actual prices...

I think prices have to drop at least by 70% for people to be interested..

Desi Batman said...

@ Bindas Bhai 9:31 PM:

"This is purely my guess i could be wrong but if i had to buy i would wait and scare the shit out the investor/builder and take a discount of atleast 35% from todays price."
- So will that fall make RE affordable? there are tons of people who just want to park their black money for several years, they care damn about market price. As of today RE is safest bet for parking BLACK money. Bubble will be kept inflated until people stop putting their black money in RE. Today corruption and tax evasion has increased many folds in India, black money is in roll more than ever.


"Demand/supply/affordability will defy logic when fear sets in."
true statement for stock market, false statement for RE. e.g. USA, UK, many are not selling their houses because of fear of losing moeny, infact people are holding on more to RE (even in downside).

"Please dont pass any personal remarks against me or for me."
what made you say so. I didn't offend anyone on these blogs. Name calling and cursing is done by losers who cannot defend themselves by logic or arguments.

Bindas Bhai, appreciate your comments, they are thought provoking.

Bindas raho! ;-)

Desi Batman said...

@ samix 1:12 AM
"Another component that should arise to cause a bubble like fall in the RE market is defaults by people who have taken loans, it is when this happens that the fall will be accelerated."
- What is % of people defaulting on their loans? Hope you know that lots of banks negogiate backdoor deal to reduce loan or loan rates, ofcourse deal happens after lots of hardships given by the bank and after going through lots of stress.
- What is average loan amount taken by RE buyers? most of the deal for cash component is done in black, many take loan just to get deductions on their income taxes.

- What type of loans are these? floating, interest only, fixed...? what I meant to ask, are lenders dealing in more risker loan types.

Anonymous said...

This is vashi hunter here .
I sold my smaller home and bought bigger one.
Now From 2006 Jan To 2009 Dec My smaller one gave me exactly 264% increase Or 164% profit ( Bought at 12.5 sold at 33)
actually that 1 Bhk was small for our family of 3 so bought another 3 Bhk with parking ( and space for additional parking too!)
So is it a wise move?

Desi Batman said...

@ 6:27 AM - Anonymous aka vashi hunter

"So is it a wise move?"
- A great move. You are looking for best to provide for your family.

"264% increase Or 164% profit ( Bought at 12.5 sold at 33)"
Good for you and that is normal. many have profited that in few months in Mumbai. Are you planning to buy more RE to make profits?

Anonymous said...

Vashi hunter here
No Have enough property -3 flats ,and cash strapped as bought without loan.

will not invest in mumbai but may be interiors of thane.

Anonymous said...

@Desi Batman at 9:40 AM
what kind of tax benifits... interest payment upto 1.5 lacs ? It is such a great benefit to buy a 1 crore flat just to save 1.5 lacs ?

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