Friday, March 25, 2011

Pop goes the bubble

Article Link

Median house prices in the main cities are close to Rs1 crore, far beyond the reach of most urban families.

This newspaper reported on 14 February that a survey of 2,400 housing projects in the nation’s commercial capital, conducted by Liases Foras, a property research firm, showed there were around 88,000 unsold homes in the Mumbai metropolitan region.

The chief executive of the firm had told Mint that up to 22 months may be needed to clear the inventory in cities such as Mumbai, New Delhi-National Capital Region, Chennai and Hyderabad. This inventory could increase if buyers stay away while builders continue to finish projects in the hope of generating sales.

However, the sheer frequency of overheated real estate markets is a symptom of a deeper malaise—the lack of policy focus on urban issues that makes India one of the most expensive real estate markets in the world. India has far few big cities for a country of 1.2 billion people. The existing cities have deteriorated because they do not have empowered mayors to manage them, are often used by state-level rural politicians as machines to generate cash, have been unable to broaden their revenue base through higher property taxes, have no rental markets to speak of thanks to outdated rent control and tenancy protection laws, and have failed to invest in infrastructure. Urbanization is an inevitable and welcome trend for a country moving up the development ladder. Many states—especially in the west and the south—may already have larger urban populations compared with rural ones. High real estate prices only force people to stay in slums. It is time the popping of a real estate bubble becomes an occasion for a new approach to cities.

84 comments:

Anonymous said...

There is all sort of anomaly in Indian (un)realestate market. NRI of all hues, black money, filthy rick players, greedy politicians against a wise common man who try to defy them with a dream of a decent house.

Vik said...

I guess by now everyone has agreed that
1. Black money from politicians , businessmen and corrupt babu's is responsible for the multifold increase in prices
2. indian middle class is suckered into thinking they are doing well, when infact they were better off 5 years ago.
3. Builders in mumbai specially are sitting on very high inventory levels with no buyers. Imagine if in a city of 2 crores 80k flats are still waiting to be sold, what does it speak of the prices.
4. What happened to the demand is high in Mumbai argument.
5. I expect another 80k flats to be ready in the next 2 years.
6. Rent and enjoy your stay in Mumbai or unless you have inherited weath you can buy the price tag and forget about paying EMIs. In this case it doesnt matter if your 1M went to 2M, 4M or went to 0.5M

Congrats to the bloggers for their century.

Anonymous said...

Vik,
Well said. To add to it, there has been a lot of foreign speculative investment which will disappear as soon as inventory rises further.

Anonymous said...

4 Lacs to 4 Crore in 10 years. Its not bubble, I guess India shining.

http://timesofindia.indiatimes.com/city/gurgaon/Private-developer-2-others-booked-for-illegal-land-sale/articleshow/7782907.cms

==> said...

blah blah blah... come out of hypothetical thinking and all 'if'.

India has corrupt roots since centuries, why do you expect this to change in few years?

So again blah blah blah...

Anonymous said...

Liases Foras, a property research firm, showed there were around 88,000 unsold homes in the Mumbai metropolitan region. !!!!!!!!!!!

Pankaj Kapoor, the CEO of this company is a known 420 fraudster deeply involved in FDI money laundering schemes. Every month he floats contradictory statements to satisfy his FDI customers. This time, the idea is to divert some FDI money to stock market.

Those on home hunting mission should never believe this sort of rumors. Best way to get genuine information is to go around the city, speak to real estate agents and recent buyers of new/old home and form their own conclusion.

If any of you really want to find out the vacant homes available, please contact the home registration dept. To my knowledge, almost all existing and upcoming projects are fully booked in Mumbai and if you really interested in one, you are directed to a resale by the builders office.

Currently i own a 1 b/r apartment at versova and have been looking for a bigger one in western suburbs for the last 3 years. The price of my place has shot up by 40% but price of new homes has doubled during this period.

These are hard facts. Don't be gullible and fall for con men whose goal is to make money fooling people

All the best to all of you

P.W. Rane

Anonymous said...

DO not trust many anons here who are RE pimps. Stay clear of RE for many many years till the prices correct. It is your hard earned money and India ia copying capitalism to screw the middle class. Inflation adjusted, people are poorer today than 5 years ago.
Save your money in FDs and wait for your opportunity. DO not loose hope. Your time will also come. Der hai andher nahin.

==> said...

I guess by now everyone has agreed that
1. Black money from politicians , businessmen and corrupt babu's is responsible for the multifold increase in prices
==> you forgot to add 'aam aadmi' with black money.

2. indian middle class is suckered into thinking they are doing well, when infact they were better off 5 years ago.
==> Really? how? Seen mobiles, cars, RE, clothes, ipods and yes bank balances. Purchasing power and disposable income has increased 2 folds.


3. Builders in mumbai specially are sitting on very high inventory levels with no buyers. Imagine if in a city of 2 crores 80k flats are still waiting to be sold, what does it speak of the prices.
==> 80k flats are fraction for size of Mumbai population.

4. What happened to the demand is high in Mumbai argument.
==> it is still the same.


5. I expect another 80k flats to be ready in the next 2 years.
==> that will not even make a dent in demand.


6. Rent and enjoy your stay in Mumbai or unless you have inherited weath you can buy the price tag and forget about paying EMIs. In this case it doesnt matter if your 1M went to 2M, 4M or went to 0.5M
==> I agree with a caveat, just pray rents don't start to rise. Which they will.. just be patient. Rents tend to increase with inflation.

Anonymous said...

Mr. Said:

If inventory rises what happens to the prices? You said "It wont make a dent in demand"
but what happens to supply. If supply increases what happens to prices.

I told you yesterday to take courses in Econ101, but you are a stubborn moron.

Anonymous said...

'NRI' purchasing power issue is extinct.

For fraks sake, NRI had purchasing power when the houses were 1/4 of current value, they could stretch and buy one property at 1/2 current value, and may be a very small minority of them can stretch themselves to breaking point and buy a property at current value.


This india has blackmoney is true, but that black money was always there. it will be useful to understand what is the trigger, sustenance for parabolic rise in last 5 years?

RealEstate Agent said...

@Anon above

There is no unsold inventory in the market. Don't believe all the press reports. Of course, there are plenty of homes for resale, but these can not be categorised as unsold.

Anonymous said...

Hi ==>

Nice comments, appreciate

Anonymous said...

@RealEstate:

Anytime a house is in the market as a new or resale, it is for SALE and it adds to the inventory. Your logic is absurd.

==> said...

"but what happens to supply. If supply increases what happens to prices.

I told you yesterday to take courses in Econ101, but you are a stubborn moron."
==> Econ101 is applied to where it can be applied. Look around you my friend, Indians think they are exception to everything - then no, econ101 does not apply here.

- India has highest black money.
- India has highest number and biggest of slums in world.
- India if checked correctly with many economies has highest corruption per capital.
- Ever wonder why is black money supply increasing and at same time demand is also increasing.
- Ever wonder how is black money made/generated.
- Many Indians who make good load of money but still prefer to stay in 10 x 10 kholi with 5 other family members - BUT they buy RE with all cash deal.

Regarding name calling moron or something else - I don't want to compete with you. I give up on that.

==> said...

"'NRI' purchasing power issue is extinct.

For fraks sake, NRI had purchasing power when the houses were 1/4 of current value, they could stretch and buy one property at 1/2 current value, and may be a very small minority of them can stretch themselves to breaking point and buy a property at current value."
==> Right and wrong. Right for NRI who are single earner abroad. But wrong for dual earners. For instance India exports many young IT professionals. In their age of thirties who are married and working couples have "disposable savings after all expenses" of 30 lacs or more per annum. i.e. one person's full income + some left from another's person's income.




"This india has blackmoney is true, but that black money was always there. it will be useful to understand what is the trigger, sustenance for parabolic rise in last 5 years?""
==> Fake money, black money getting back into mkt that was stasted abroad, black money needs black money to survive.
Also, many outsourced jobs. Ask anyone who gives service to end customer who is Indian and who ultimately who services end customer who are abroad.

If all these stops, yes there will be correction else I would recommend get back to work.

IndianCitizen not by choice said...

How is black money generated

1.India's defence budget this year is 37 billion dolars out of which 20billion is for imported weapons. Minimum 15% commission yields 3 billion dollars when converted into indian rupees works out to be 15,000 crores. This amount is drop in the ocean when compared to the private sector indulging in similar practices. All this money can not be stashed abroad.

2.Majority of people in India don't declare their correct income thus avoiding taxes eg: doctors, lawyers, business guys etc

3.counterfeit currency printing for vote rigging. Done by the govt, itself


To sum it all, all Indians are corrupt. Money generated by corruption is black money.To illustrate , It is proven beyond doubt that supreme court chief justice has accumulated accumulated money accepting bribes to settle cases.


Unlike olden days, it is difficult to stash money abroad. What better way is there than purchasing real estate to hoard assets.

your comments please

==> said...

@IndianCitizen not by choice

Thanks for sharing information. To add on to your post, I say Indians don't care for another Indian. Most are selfish but that is not by choice.
Finally most are in denial of their state and keep bragging of good gold India.

Anonymous said...

"India has corrupt roots since centuries, why do you expect this to change in few years? "

If you look back at bofors scam or fodder scam, no one was arreseted or no information came out in public. If you note recently Satyam scam, CWG or 2G people have got arrested and a lot of information made it to public. If this is the trend, next few years may see a revolutionary change

Cool Head said...

Some observations & questions for the Learned Pundits here (Mumbai/Thane/Navi Mumbai only)
1.There is a huge supply coming up that will hit the market in a few months time. Just go around Mumbai, Thane, Navi Mumbai. Compare with your memories of these places even 5 years back. Do you remember so many constructions of so huge buildings? I don't.
2. Some builders have started delaying tactics. Many smaller buildings are half constructed with hardly any activity. All kinds of silly reasons are given such as lack of sand, lack of labour,etc. Possessions that were being promised last Diwali are still not complete and handed over. However new bookings are being accepted with alacrity.
3. Some projects are showing progress but VERY SLOW-dunno if this has something to do with reduced bank lending?
4. A lot of loans are due for Rollover in April/May. What if the banks/RBI/HDFC do not allow and ask for payments? Will they sell some flats at lower cost to generate cash?
5.Suddenly over the last few months we are seeing a plethora of Full Page Ads in newspapers about various projects. Signs of desperation to garner cash?
6. A lot of spam emails from brokers and builders about "last chance" and "golden opportunities" to "invest", but mostly from Noida projects, not Mumbai.
7. Reports of brokers being incentivized to sell, sell, sell with double brokerage, Mercedes cars and what not? If there is so much demand why these tactics?
8. A lot of 2G scam money was diverted into RE apparently. This allowed many parties to sustain building and holding without any sales/limited sales. Now with the 2G s*** hitting the fan where will the new money come from? Future bookings?
9. RBI is now raising rates again. What happens to those poor souls who have EMIs of Rs. 50-60K to pay per month? Will they increase?
Will the much publicized increased increments make up the deficit?
10. The Mall Mania is in full force in Thane. The "old malls" have hardly anybody visiting. The latest malls get all the footfalls until...the newer Mall arrives. At that point of time the current "in mall" becomes outcast.
So many closed shops in the malls. What the builder does with them nobody knows/cares.
I think this is just the lull before the storm. June will be the start of the fun. Lets see what happens. As of now this seems to me a gigantic Ponzi scheme, suckering poor dual income slaves into buying bigger houses with bigger EMIs, a scheme for stashing ill gained money and a lot of hype. I do not think this will end happily for many of the participants.

Anonymous said...

9. RBI is now raising rates again. What happens to those poor souls who have EMIs of Rs. 50-60K to pay per month? Will they increase?

50 Lakh Loan @ 8.5% interest has a emi of 62k for 10 years but when the interest rate increases to 12% it suddenly increases to 71k a whopping 16% increase all of a sudden. Considering that the Teaser rates started taking off around this time 2 years back and now that rates of resetting to market value, and so even if ppl get a good pay increase, it would be interesting to see what will happen in coming months

Anonymous said...

@Cool Head Mama,

We are all fed up with conspiracy theories, yours being one of them. You know, Maharashtra government is the most corrupt one, and unless and until this scenario changes, we don't expect anything good.

Pawan said...

People are buying world cup semifinal tickets for 50,000 to 100,000 Rs and you are saying people in India can't pay EMIs?

Take any rich european country and we have more crorepatis in India than their entire population. 5 Crore rich are enough even if the other 120 Crores are sleeping in tents.

==> said...

50 Lakh Loan @ 8.5% interest has a emi of 62k for 10 years but when the interest rate increases to 12% it suddenly increases to 71k a whopping 16% increase all of a sudden. Considering that the Teaser rates started taking off around this time 2 years back and now that rates of resetting to market value, and so even if ppl get a good pay increase, it would be interesting to see what will happen in coming months

==> Ha ha, You are funny. Do you even know the average earnings of population who is getting EMI of 50k+. Their average earnings per year are 24 lacs to 36 lacs. Vist BKC someday or have a tour of finance industry, dalal street, IT companies director, COO, CEO and sometimes a simple manger.

Anonymous said...

People are spending 20k a go in bars in Juhu area. In some bars double scotch premium costs 1000+ . beer is 500. These bars are crowded. If you want to get in after 1000pm you have to know someone inside. Escorts demand 50000. Now tell me, the people who frequent there bars are middle/junior managers of local companies, semi westernised banias, few gangsters and govt employees like muncipal clerks, police inspectors, magistrates etc.

People who can blow 20,000 for a evening, can afford to posh flats irrespective of EMI. These people may just 1% , but this 1% comes to 250,000 people .

No matter how many buildings , the builders will be able to build, the demand will always surpass supply at least in the foreseeable future.
Jai Hind

Anonymous said...

to anon @8:17 AM aove

All these people you have mentioned have already bought home(s) or they might have sold their old flats for few crores and now having fun in bars :)
These people are not the customers for the unsold inventory. They could at most become investers. But if the set of people are reading this blogs or newspapers, they would not be buying new homes. Just my thoughts.

Anonymous said...

==> Ha ha, You are funny. Do you even know the average earnings of population who is getting EMI of 50k+. Their average earnings per year are 24 lacs to 36 lacs. Vist BKC someday or have a tour of finance industry, dalal street, IT companies director, COO, CEO and sometimes a simple manger.

In a pyramid structure, only a handful of people are directors or CEO's earn that much and these are the people who are kicked out at the first sight of cost cutting. If so many ppl earn what you say, why did the transactions come to standstill in 2009 at the peak of recession (go back in the blog and see the numbers) and builders were crying for bailout from RBI.

Coming to black money, can you explain why Dubai real estate fell from a cliff. After all Dubai as a state was formed to tap illegal gotten wealth into their real estate.

Regarding cars, mobile phones or ipods that we buy today is because of technological innovation that have bought the cost down so everyone can afford them and that would have anyway happened and have nothing to do with purchasing power.

On your Demand argument, I'am sure every one would want to own a private jet or a chopper instead of travelling in a car/train. How come the same magic of demand side economics not working in this example. Can you explain pls?

Vik said...

If there so much money in Mumbai, the 80k flats wouldve already been sold. Also the 80k flats do not take into account the investor flats which are funded by black money. Those could be another 80k or even more. Even the guys who enjoy life in bars know prices are too high. They would rather spend their money in instant gratification then spend it on some dump in Mumba

Anonymous said...

if people think RE prices will go up pls park all ur money with the builders.do not trust any bloggers,they r sick people who have nothing to do but brag about knowing sound economics.after all GOD created builders so that people can put more faith in them,dont worry the emerging market sense was not created by wall street to loot the indian people of their wealth bcoz there was not much left in U.S.A(UNITED SUCKED AREA)TO LOOT.CRAZY CONSPIRACY THEORISTS,I SAY GIVE ALL UR MONEY TO THE BUILDERS.TAKE OUT LOANS,SHELL 100K AS EMIS AFTER ALL ITS MUMBAI(IGNORE THE SLUMS BE POSITIVE)!

==> said...

In a pyramid structure, only a handful of people are directors or CEO's earn that much and these are the people who are kicked out at the first sight of cost cutting.
==> correct, all the RE mkt is about these handful of people. And these are not kicked out on cost cutting, they are decision make and they cut out bottom most layer first.


If so many ppl earn what you say, why did the transactions come to standstill in 2009 at the peak of recession (go back in the blog and see the numbers) and builders were crying for bailout from RBI.
==> because everyone wants free money, this was opportunity to get tax payers money. There was no standstill and there was never recession in India. If that was so how come people in India have so much money just after 2009?


Coming to black money, can you explain why Dubai real estate fell from a cliff. After all Dubai as a state was formed to tap illegal gotten wealth into their real estate.
==> Dubai, USA, blah blah is not India. Indians as of today are exception, they can defy gravity with their cheating, cunningness and corruption.


Regarding cars, mobile phones or ipods that we buy today is because of technological innovation that have bought the cost down so everyone can afford them and that would have anyway happened and have nothing to do with purchasing power.
==> With increasing purchasing power lots of things seems cheap and affordability.

On your Demand argument, I'am sure every one would want to own a private jet or a chopper instead of travelling in a car/train. How come the same magic of demand side economics not working in this example. Can you explain pls?
==> Indian govt should open regulations regarding aviation, and you will see this too. e.g. People buying mercedes, bmw when import taxes were minimised.

Anonymous said...

20,000 a go in a bar means 20 drinks. That's a serious alcohol problem.

Anonymous said...

The first 10 drinks (30ml*10) may be alcoholic. After that, the customers wont know the difference between soda and whisky. This is how bars (sometimes waiters ) make serious paisa.

Now in Mumbai 5 star bars one finds imported maals (guess east european from their accent) and our marwaris, banias, shettys and reddys are prepared to pay anywhere between 50k to 100k to bed with them

Mumbai is fast changing. Where is all the money coming from. I find big lines in KFC outlets and the customers are from all walks of society. people living in zopdas as well as posh flats

Black money is everywhere except with people who visit this blog and most are in denial

==> said...

==> Indian laws and regulations have to come up to high standard to provide quality services to their Indian population. This will trigger increase in taxes and more importantly accountability to public. But this is just a wish and will remain wish.

Another aspect is that Shailesh and Vik have many times stated - INFRASTRUCTURE in cities other than metro cities. Once that is in place, it will change whole RE scenario. But alas, this is also just a dream.

Lastly, black money (I called it as fake money) hoarders are held and accounted for severe penalties, but urgghh.. this is also a dream.

Too many dreams.

Anonymous said...

==> Said:

The best answer to all your queries is wait and watch. The RE market in India has to collapse. It will happen and when it happens you would disappear from this blog. Like many other bloggers here, I'll wait to buy till the RE prices make financial sense. Otherwise, being a happy renter like many others makes more sense.

I don't care about black/white or stolen money. All I care about is that my investment has to make financial sense and it would when RE goes down by 60% at least. I'm ready to wait even 5 years.

shayna said...

Personal exp, I am an brit citizen trying to relocate back to mother India. Born and bred in bombay, Aircraft engineer by qualification.

Make approx £6000/mnth in UK. Got a job offer for Rs2.3L/mnth from a dom airline, declined the offer.

Went house hunting to rent, just in case i land a good contract or job. 3 Bed apt in Chembur cost Rs50K+/mnth. Landlords are mostly ex-bungalow owners with re-devlp property. These same apts are demanding Rs14000psf i.e. approx Rs2-2.5cr for a 3bed on sale.

As a exercise, went to HDFC for loan enquiry. Loans above Rs20L @ 11.5% fixed for 10yrs, works out to Rs1440 for every 1L. So on a loan of 1cr i pay 144000/mnth.


Going around BOM and spending Rs20000/- in a resturant @ Juhu, i have noticed that all of these guys are flashing HOT-MONEY i.e. In today gone tomorrow. They bloody well know its like a illegal gamble jackpot, you blow it off in puff and don't build houses on it, i had witnessed the same in 1991 during MMs tenure as FM under Narsimha rao. He had allowed foreign gift remittances then to reverse the Black money. BOM was operating on Hundi and my friends in Chembur were running funds under the protection of Tilak Nagar (Chotta rajan). I wuld come back from work in AI straight to a resturant in Chembur where we eat Lobster daily, specially brought from Vashi for us. The bill was Rs5000/- night and for those that fancied it was tandav later where u culf get laid for another few 1000s. All paid for by the fund operating friends, as their daily income exceeded their own handling capacity. where r they now. Dead - AIDS. The E-EU birds have replaced the tandav nauch girls, builders are the new fund managers and this party is not new.

However this time round the correction/recession, it is going to be far worse than before (1995-97) for the simple reason that India is heavily leveraged and most indian families have become debtors instead of the traditional savers. In BOM i don't see any real economy other than Finance/Trading and Bollywood. Every time i hire a taxi i get into a chat with the driver, its the same story, am from UP/BIHAR/JHRK and i dont make enough. I notice BEST buses are not as full as they use to be but trains are the same. These cabbies are basically hoping for SRA jackpot. Yes its a simple effing theory, they live like dogs in the above mentioned states, they do the same in BOM but with the hope of raking in a few lakhs of SRA money.

So my conclusion is that RE undoubtedly will correct and so will the larger eco. We don't produce anything of value in this country except some BPO services trade that is valued at $80b. A friend of mine working for a french firm here in BOM was expressing his worry at the huge wages they were getting, his assertion i just don't see us making the money that justifies our wages and fear a correction soon. It is a retail eco, paid from the savings of the prv generation. Except for the few Indian biz houses actually producing white goods most are imported i.e. Outflow of FOREX.

Why then am i planning to come here, obviously if there is a correction valuations will be attractive. Ref the eco it has to then improve, hence the multiple scams coming out in the open. Keep expecting more of these.

The same effing fake/black/frat money u guys mention has to be stopped for the eco to expand. The expansion u see is only in the black component. Next expect a slew of taxes from property-motors with Insurance being mandatory for everything i.e. Health, cars, house, life, holiday etc etc more of the eco has to come under the revenue generation. This govt will bring a lot of changes, u'll also see the big supermarkets enter the fray. Small baniya hoarders will be gone. There will be supermarkets in the low-cost housing areas too with the PDS system, the big players will ensnare them.

Land will be made far less attractive. The builders know this and are already moving into other areas of the economy i.e. 2G,3G, POWER etc. BOM has tons of land, BPT will be the next global finance hub of the world.

Anonymous said...

==> because everyone wants free money, this was opportunity to get tax payers money. There was no standstill and there was never recession in India. If that was so how come people in India have so much money just after 2009?

US printed 3.8 trillion dollars since then and India printed propotional rupees to keep the exchange rate constant. As well India in the name of stimulus flooded the system with 8 lakh crore Rupees of newly printed money on deficit spending. And we are seeing the result of that with Inflation today.

Anonymous said...

I bought a flat in Bangalore in 2008 for 40L, just before recession. During recession, it went to 35L. Today it cost 50L and people are buying.

Case study - Open for analysis.

Anonymous said...

Bangalore RE is still in its nascent stage of bubble, a Bobaywalla will laughingly buy the MG Road apartment for 20K per SQFT. Anything below 10K is like a piece of cake for them.

Anonymous said...

weather the real estate bull run continue or slackens weather we get 20% or 50% correction, majority of people living in Mumbai have been phased out of the RE market.

Even if the price falls by 50% I cannot afford a flat, so for most of Mumbaikars it really does not matter any more.

Anonymous said...

Bangalore RE is still in its nascent stage of bubble, a Bobaywalla will laughingly buy the MG Road apartment for 20K per SQFT. Anything below 10K is like a piece of cake for them.

May be not for a Bombaywala, but Bangalore is a completely different market than Bombay. If you know the intrinsic forces at work, you will realize that BLR is in a much bigger bubble.

1. BLR can expand in all sides. No seas, no mountains. Miles of lat land to build on. So, as soon as the metro and new tollways are online, metro prices will fall. It is already happening in MG road and old airport road.

2. Intrinsic value in most of BLR is really more like 1500-2000 psf.
Huge inventory is coming up all around the city. So, don't go by Bombay prices.

3. Bangalore IT industry is headed for some big layoffs in a year when QE2/QE3 tails off. This time it will hit much harder since Vietnam/Philippines are coming up in a big way to do the "sade-la" work in IT that Bangalore has done so far. Don't let the current hiring craze in BLT fool you.

4. Bought for 40L and now selling or 50L in three years? See if you can find a bigger sucker than you my friend. Then, sell him your flat and run! I doubt if you will get your initial investment back in two years.

Anonymous said...

Bangalore is bursting in its seems, infrastructure is not following growth. Where are affordable shops like Jayanagar, Mallesearam in outskirts? We only see glitzy malls which are more a show piece than an affordable place to shop. You will know the real affordable Bangalore if you happen to stay very close to 4th block.
The sadela days of software development are almost gone, the industry is trying hard to mature and consolidate. Low end jobs might fly to Phillipines/Vietnam etc.

Anonymous said...

dude above: you want him to pay 7000 psf in Malleshwaram so he can save 20 rs. per kg on bananas and 10 bucks on a plate of idlis?

BTW, malleshwaram is super expensive, I have bought my groceries for half the price at Baniya stores at the outskirts. And now, it is extremely noisy, full of traffic and just not the old charming part of Bangalore it used to be.

I work in high tech. You are right. Sadela jobs are headed to cheaper countries. But, we are not getting high end jobs because all we can hire are half trained monkeys from donation grabbing engineering colleges, who leave in six months if someone pays them a thousand more per month.

Sad days ahead for Bangalore. Politicians have already milked the real estate. And the yeddies and reddies have stolen whatever could be mined.

To me, Bihar looks better than Bangalore right now.

Anonymous said...

No offence to Biharis, we Bangaloreans like Bangalore and we know where to get them. We can well understand why you like Bihar, it was once a great place under Nalanda.

Go to outskirts like Sarjapur, Marthahalli, you pay just Rs. 5000 PM for just water tanker plus everything else adds up 40~60% higher in terms of transport, restaurent, grocery etc. You can safely add Rs. 20L more PM on various bills incl. medical etc.

Anonymous said...

Sorry it is Rs. 20K more PM and not 20L.

Anonymous said...

If you look around there are so many commerical complexes with "To Let" board on them and more and more shops shutting down by day and many more getting completed in next 6 months in each locality in Banglore. Definitely we are headed a cliff with full accelaration.

Anonymous said...

"I bought a flat in Bangalore in 2008 for 40L, just before recession. During recession, it went to 35L. Today it cost 50L and people are buying."

If you bought the flat on loan and sell today at 50L, you are still at a loss, aren't you, if you consider the interst you paid on EMI and the interest you'd receive had you placed the same money in Bank and stayed on rent?

Anonymous said...

@ANON 10:06,

Well said sometimes we defy logic to justify once decision.

==> said...

I bought a flat in Bangalore in 2008 for 40L, just before recession. During recession, it went to 35L. Today it cost 50L and people are buying.

==> Either you are lying or you don't know current valuation of your assets. There are lots of fools with all kinda of money out there.

==> said...

If you look around there are so many commerical complexes with "To Let" board on them and more and more shops shutting down by day and many more getting completed in next 6 months in each locality in Banglore. Definitely we are headed a cliff with full accelaration.

==> don't get confused with commercial with residential real estate. Builders and many sellers have tremendous holding power before they start making losses. It will take about 5 to 6 years they break even with their profits in recent years.

==> said...

To me, Bihar looks better than Bangalore right now.

==> did you buy, moved or invested in Bihar currently ? Ya I can talk too... Africa has world best natural resources and has high potential... but I am not moving there.

==> said...

Go to outskirts like Sarjapur, Marthahalli, you pay just Rs. 5000 PM for just water tanker plus everything else adds up 40~60% higher in terms of transport, restaurent, grocery etc. You can safely add Rs. 20L more PM on various bills incl. medical etc.

==> and people are paying and enjoying. Where is the pain? Ok, water, electricity, etc are short, expensive... BUT RE is growing.. Chaachinnngg!! As long as one can hold on to anything even when one has to live substandard life it is all well. Still don't get indian mentality?

Anonymous said...

@==>,

Was just trying to make a point, outskirts or within Bangalore city. Owners/renters are enjoying affordable price for all goods and services from shops/establishments who have been operating for part 20+ years. While new ones in outskits are charging exorbitant price for even the basic amenities. Monthly maint. maid, schooling, medical, groceries, restaurent, club house, nannies etc. Over and above huge EMI for apartment which are built smaller by the day.

Anonymous said...

I transferred all of my monies from India to the US. In other words, I am out of India market. Some of things simply do not make sense. For example, one block from Times Square, NY, the residential apartment rate is $850/sq. ft. (carpet). In Lower Parel , it is $1,000/sq. ft. (carpet). However, the income gap between the two is huge! Even, the Newport area, which was rebuilt in last 10 years like Lower Parel the rate is $500-$600/sq. ft. (carpet). The rental yield in NY is 6% to 7%, while in Mumbai it is 3% to 4%. I am definitely missing something. Either all of this high asset valuations will get monetized through inflation and Indian rupee will fall a lot OR the whole real estate market will collapse like a pack of cards. I just do not feel okay about staying in Indian Rupee.

Anonymous said...

==> Either you are lying or you don't know current valuation of your assets. There are lots of fools with all kinda of money out there.

I suggest you to understand how money supply works in current monetary system and then repost. Again please don't reply saying it doesn't matter in India, Black money, corruption blah blah.

==> said...

The best answer to all your queries is wait and watch. The RE market in India has to collapse. It will happen and when it happens you would disappear from this blog. Like many other bloggers here, I'll wait to buy till the RE prices make financial sense. Otherwise, being a happy renter like many others makes more sense.

==> I wish too that RE should collapse, but am wondering what factors can trigger this fall, can this happen in non-Indian country? Yes it can. Can this happen in India? NO!


I don't care about black/white or stolen money. All I care about is that my investment has to make financial sense and it would when RE goes down by 60% at least. I'm ready to wait even 5 years.

==> That is good news that you can wait and have money power. Many don't have that luxury and are tamed to rich guys in terms of loans or providing cheap services for own survival.

==> said...

I transferred all of my monies from India to the US. In other words, I am out of India market. Some of things simply do not make sense. For example, one block from Times Square, NY, the residential apartment rate is $850/sq. ft. (carpet). In Lower Parel , it is $1,000/sq. ft. (carpet). However, the income gap between the two is huge! Even, the Newport area, which was rebuilt in last 10 years like Lower Parel the rate is $500-$600/sq. ft. (carpet). The rental yield in NY is 6% to 7%, while in Mumbai it is 3% to 4%. I am definitely missing something. Either all of this high asset valuations will get monetized through inflation and Indian rupee will fall a lot OR the whole real estate market will collapse like a pack of cards. I just do not feel okay about staying in Indian Rupee.

==> Correct and that baffles me too. What are these Indian eating and shiting to have that load of money. Where do they get this load of money to buy RE and do show-shinning. Most of the people have earned money in stock market, corrupt means and selling RE that they never really owned (slums), inheritance.

==> said...

I suggest you to understand how money supply works in current monetary system and then repost. Again please don't reply saying it doesn't matter in India, Black money, corruption blah blah.

==> Really? Can anyone explain the operation of Indian economy without mentioning - Black money, corruption and blah blah.

Now what that again about monetary system in India?

Anonymous said...

A few years ago, no-one gave a rat's ass about corruption. Today, everyone realizes that it is a major obstacle for India's development and people are talking about it. That is indeed a positive change.

In fact, there is a huge political movement against corruption called "Bharat Swabhiman" headed by Swami Ramdev. I was initially skeptical about what a "Sadhu in a langot" can do about such a thing, but you just need to attend one of his talks to see the impact he is having. Thousands of people show up to his speeches although they are neither fed free biriyani, nor transported in trucks to his rallies, like our politicians do!

This "swami in a langot" may not accomplish anything politically,
or scare the "chor-politicians",
but he is sensitizing people at a grassroots-level on the evils of corruption. I think it will have some impact somewhere.

Anonymous said...

@10.29 Langot fan - wishful thinking! I watched IBNlive briefly which covered Anna Hazare and few other individuals (kiran bedi) going on an indefinite fast on 5-april to push for stringent laws to be enforced as well. Everyone is chipping in with something, but we Indians need a dagger on our backs to act positively. Not easy in a democratic society where 'democracy' is taken literally. Someday, perhaps! Not in our lifetime (for those in 30's).

MB

Anonymous said...

==> Really? Can anyone explain the operation of Indian economy without mentioning - Black money, corruption and blah blah.

Now what that again about monetary system in India?


Explain me why the number of transactions are going down with increase in interest rates that is known to reduce the money supply in the system and that 80k flats are empty. Why are your COO's, CEO's and fools with all kinds of money not jumping to buy.

chidambaram said...

@Anonymous above,

To answer your questions, we need to know your nationality and the reason for interest in Indian Economy. The reason for this information is to ensure sensitive information to Pakistani/Bangladeshi potential immigrants.
Thank You

Imran said...

FDI is drying up.

Read:

http://www.rediff.com/business/report/fdi-down-by-30-pc-in-february-to-usd-1-point-2-bn/20110329.htm

Anonymous said...

FDI is drying up, but HUNDI remittances increasing. One is able to buy $100,000 at a nominal rate.

If you guys don't believe me, just visit the money exchange gus in either Bhendi Bazar, Kalina or Ullas Nagar

What does this tell you

Anonymous said...

what is the nominal rate?

==> said...

what is the nominal rate?

==> Normal rates i.e. there is no demand of USD. In other words there is enough supply of USD, decrease in FDI doesn't really impact much.

who needs USD when we have fake Indian money, we can buy anytime how much ever we want USD - cost is not issue any more.

Anonymous said...

Very interesting phenomenon!! Patels traveling to USA no more buy US currency in India. They take 1000Rs bundles. When asked, one frequent traveler revealed that, in US one has to declare more than $10000, in currency where as the customs treat indian rupees as some sort of junk and dont bother them . Once in US, this money can be easily exchanged for US $ without any monetary loss. Our banias are becoming very sophisticated!!!!

==> said...

Very interesting phenomenon!! Patels traveling to USA no more buy US currency in India. They take 1000Rs bundles. When asked, one frequent traveler revealed that, in US one has to declare more than $10000, in currency where as the customs treat indian rupees as some sort of junk and dont bother them . Once in US, this money can be easily exchanged for US $ without any monetary loss. Our banias are becoming very sophisticated!!!!

==> There is difference between good faith and actual. When entering US one has to declare in good faith that you are limited to carrying $10,000 worth cash (any currency). Most of the times US customs go by good faith what you declare and nothing comes up on their scanning radar or through their intelligence reports.

...and banias think they are smart, well being a cheat is not same as being smart.

Anonymous said...

Whenever DOW goes up FDI tends to dry up. Also $$$ tends to become stronger.

==> said...

Explain me why the number of transactions are going down with increase in interest rates that is known to reduce the money supply in the system and that 80k flats are empty. Why are your COO's, CEO's and fools with all kinds of money not jumping to buy.

==> If you had 10 troy oz gold for $10,000 2 years ago, would you sell same today for $10,000 if there was no change in your situation or need to do so?
NO you won't sell and will hold on to that as long as you could.

Same goes with RE hoarding. It don't matter if 80k or 200k flats are vacant as long as all these are have jacked up prices and sellers have no need to lower the rates.

laloo said...

World cup finals in Mumbai.

So Mumbai real prices can increase further..

Anonymous said...

http://www.moneycontrol.com/news/cnbc-tv18-comments/realty-loan-relief-sources-say-rs-6000cr-rescheduled_532991.html

Keep dreaming.

==> said...

http://www.moneycontrol.com/news/cnbc-tv18-comments/realty-loan-relief-sources-say-rs-6000cr-rescheduled_532991.html

Keep dreaming.


==> Expected - wasn't it and realty firms knew this was coming.

Enjoy guys - as usual keep dreaming - keep being in Denial.

India is shining, and shining so bright that many of you can't even open your eyes

Anonymous said...

I LIKE this refinancing. The bigger the bubble the bigger the bust. Look around what happened to Hong Kong, Dubai, California, Florida, Arizona, Japan, UK, etc.

I am sitting on my USD as long as it takes. I doubled my money in last 3 years when stock market crashed and then recovered.

I am now waiting for this real estate balloon to become bigger and bigger and bigger and then bust. As an investor I have infinite horizon.

Anonymous said...

I fully agree with the above post. Do you know what a thousand US Dollars (Rs. 45000) will buy you in India?

Probably some groceries for a big family, but no real estate. Now look what 1000 USD's buy you in Detroit:
http://www.realtor.com/realestateandhomes-detail/14863-Turner-St_Detroit_MI_48238_M30567-71474

Believe it or not, it is a real single family home with 4 bedrooms!

Still don't believe in bubbles or crashes? Then, look at where is was
in 2005:
http://www.zillow.com/homedetails/14863-Turner-St-Detroit-MI-48238/88727677_zpid/#{scid=hdp-site-map-bubble-address}

It was priced at $80,000!!!

So, am I saying that your 8 crore flat will sell for 10 lakhs after the bubble bursts?

Nah, I have no idea about how much black money and corruption exists in India. These will change the basic rules of economics for the first time in the history of the world. India is the ONLY exception. The housing market in India will never crash. I can guarantee it. Buy, Buy, Buy!!!

So, why am I not buying? Only one reason: I am very stupid to lose out on all this profit. But, what can I do? I am stupid.

==> said...

@above anon bhaya:

Don't compare USA to India and Detroit to Mumbai. PLEASE, you really sound stupid.

==> said...

Ever bought movie ticket from black marketer? I find interesting similarities.

- Black marketer, ticket seller in theaters, cops all work in harmony to help each other.
- Black marketer buys all premium seats from ticket seller at regular price.
- Ticket seller innocently says ALL SOLD OUT, only few available.
- Cops get their commissions - we all know how this works.
- Now comes important part "BUYER", he sees everything sold out, but HE HAS to see this movie. So he buys with premium price from black marketer and he is proud that he saw movie and ate popcorn with his girlfriend and it was so much fun.

Well, we all know new movies get released every week and there is no end of pool of people ready to pay to watch movie.

Show goes on....

Anonymous said...

Average taxes in many city in US 5000 dollars for property = 2.5L rupees every year just to own it

GSM said...

- Black marketer, ticket seller in theaters, cops all work in harmony to help each other.
- Black marketer buys all premium seats from ticket seller at regular price.
- Ticket seller innocently says ALL SOLD OUT, only few available.
- Cops get their commissions - we all know how this works.
- Now comes important part "BUYER", he sees everything sold out, but HE HAS to see this movie. So he buys with premium price from black marketer and he is proud that he saw movie and ate popcorn with his girlfriend and it was so much fun.


And what will happen when there will come a time when the new movies can be streamed on to your Home theater system on pay per view. Black Marketer, Theater guy and the cops all are gone bust because they leveraged themselves based on this income stream. This is what happened to cable wala's a few years before. These are the people who live in Denial.

Anonymous said...

Excellent point GSM,

I litrally clapping here, your point suggest that future cannot be predicted easily. Anything can happen. A king can become a beggar and beggar an Emperor.

One thing is for sure, no market can be bullish forever.

Anonymous said...

88000 empty homes is being cited here as a big number, but is it really that high?? in a city of 17 mill and at least 1m flats, 88k empty flats is nothing. Look at Japan wherein despite much higher salaries home ownership in Tokyo is really a pipe dream for 90%+ of population. Real estate prices are only going to go north for another 30-40 yrs with a couple of short term blips. You think Mumbai realty is expensive?? agricultural land in Punjab/Haryana goes for at least 1cr/acre despite there being little development. Indians have a hoarding mentality and RE is the ultimate hoarding tool. Incomes are growing @ 20% annually, people will make 6 times as much money in 10 yrs. Property prices will be up at least another 3-4 times in next 15 yrs whilst you can cry over the "bubble". Personally I don't understand our need to own property

karthikraoa said...

Hey guys,
Does anyone know how to profit out of the Indian property bubble bursting. Are there any shares that one can short sell (For ex. in the U.S. one could short Home Builders, Fannie Mae, Freddie Mac, Investment Banks etc.)
Just take a look at the chart of one of the home builders in India (DLF)

http://www.moneycontrol.com/stock-charts/dlf/charts/D04

It looks like the property bubble burst in 2008. Is it a good idea to short this again

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

Is there an Indian equivalent to the Case-Shiller index in the U.S. that show home price history

Anonymous said...

Bull Shit arguments, who cares. Middle class, even the higher middle class cant afford buying at current prices. So it doesn't really matter for most of us whether it will appreciate or not. If u cant buy u cant buy - simple as that. Only those in slums and those in palaces get flats in Mumbai. Others are homeless unless their parents have bought flats in pre-boom years.

nantucketwalk said...

Another informative blog… Thank you for sharing it… Best of luck for further endeavor too.