Sunday, April 24, 2011

Rents hit the roof in Mumbai, up by 11%

This was bound to happen sooner or later. Now Manmohan has to take notice of yet another piece of inflation hitting the common man. First you get priced out due to black money and next you get pushed to the outer suburbs as rents escalate. If prices don't fall soon, landlords will raise rents another 10% over the current 11% as demand for housing is ever increasing.  Maintenance cost borne by owners has jumped as well. I know where a 3k monthly maintenance  has jumped to 5k in just over 1 year. This phenomenon is across cities so renters will be forced to cough up more or leave their current residences. This is another way for the rental yield to catch up with sky high prices.

DNA India reports. 

Rising realty rates may have resulted in a sharp decline in property sales, but it has led to a growth in rental value in Mumbai and other metropolitan cities in the country. Mumbai and the outskirts of the city has seen an 11% growth in rental value in the past year, according to a study conducted by private real estate portal, 99acres.com.

The figure for Bangalore, Pune and Delhi has shot up by 13%, 11% and 9% respectively.

Surprisingly, rental value in South Mumbai, one of the most preferred locations to stay in the city, has seen a dip. The Worli residential market saw a 21.31% dip last year, while the figure for Prabhadevi, Parel and Bandra (West) fell by 18%, 12% and 11.57%.

“The rent in South Mumbai had gone through the roof. It is still unaffordable. So, people are shifting towards the suburbs and outskirt of the city,” a real estate expert told DNA.

However, the rental value in the suburbs too has shot up drastically. Borivli (West) witnessed a record 42.25% growth, while the rates have shot up by 35.04% in Powai, 28.32% in Malad and 20.40% in Kandivli (East). The Mumbai metropolitan region too has seen a ruse in rental value.

The figure for Mira Road and Seawoods shot up by 39.28% and 36.36% respectively in the past year.

A real estate expert attributed the rise in rental value to exorbitant property rates in Mumbai.

“People prefer to stay in rented homes instead of buying a house. Also, there is a huge influx of people in the city. As a result, there is a huge demand for rented homes,” he said. Government data compiled by the stamp duty department also shows that there is a 35% rise in the number of lease agreements being signed in the city.

Business head at 99acres.com Vineet Singh said: “People are relocating or moving in better homes, which in turn, will affect the rental values of properties. Also, the state of real estate is not in trend with the moving economy because availability of fresh inventory is less in the Mumbai region. Therefore, rental values escalate on an annual basis.”

arshal Shelkar, who has been staying at Seawoods for the past three years, is finding it difficult to cope up with the rising rentals. He used to pay Rs7,000 as rent for a 3BHK house. The owner demanded Rs12,000 last year. “Now he is asking for Rs20,000. I am staying in Navi Mumbai, not South Mumbai. Each day, I have spend one hour on travel. If I continue to stay in houses with such high rents, my monthly budget will go haywire. I have other liabilities like EMIs and daily expenses. There should be control over the rise in rent rates,” he said.

103 comments:

Anonymous said...

Haha... Now starts the real fun. Like to see how low already lowly Indian will go.

Is there anything below slum in Mumbai?

Anonymous said...

Increasing rents means higher inflation, rising cost of Oil means higher inflation. I think another Greece/Egypt is forming. It is just a matter of time people may come to the streets and all this phony growth will go to the toilet.

Anonymous said...

Now this will trigger in RE sale and demand. If someone is ready to pay higher rent, he might as well buy RE and pay EMI.

Great time for RE ahead !!

Anonymous said...

Anon above:
Well, maybe the whole thing crashes. People refuse to pay higher price and even igher rent.

I think a collapse is coming in the next 3-6 months. Party is getting over.

Anonymous said...

@Anon above: You started your sentence with 'May Be', that says it all. MAY BE.

Regarding refusing higher rent or refusing high RE is not possible - one needs to stay somewhere.

I think people will start to live more shoddy life. 1BHK 6people atleast and still they will be happy and proud to be in Mumbai buying mobile phones, and cars.

Anonymous said...

Enjoy, more fines and penalties for 'aam aadmi' who earns but does not want to be in compliance.

http://timesofindia.indiatimes.com/city/mumbai/Only-23-of-2k-mobile-towers-in-Thane-district-legal/articleshow/8075898.cms

karthikraoa said...

hey guys,
instead of laughing about how the housing market is going to crash, why not discuss means of how to profit out of it...are there any shares we can short

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

I have been researching a lot how to profit from housing bubble burst as and when it happens. Stocks like DLF and Unitech are already beaten down significantly, but still would go down if bubble bursts. In the US, traders did go long on CDS before the burst. Not many instruments exist in India, but I guess because of volatility in Nifty itself, one might short Nifty at appropriate levels. For one thing is sure, RE will go down as liquidity dries up and FIIs pull out.

Anonymous said...

Party now begins, be prepared for buying new homes. Time to celebrate with RE crash.

==> said...

Party now begins, be prepared for buying new homes. Time to celebrate with RE crash.

==> Dream dream dream.

What makes you think so that party is over? At the most RE prices will be stagnant (or low rise), but crash is DREAM.

I'm glad that landlords have realized that they have to raise the rents to keep their earnings upto mark of inflation. Now we have to see how renters are going to keep their earnings up - either by revolt or cutting down expenses or increase in back door dealings or live pathetic hypothetical lifestyle. In any case RE is not coming down BECAUSE most people who are renters are also landlords.

Amar said...

What about people and companies getting out of Mumbai because of high home prices and rents?

==> said...

What about people and companies getting out of Mumbai because of high home prices and rents?

==> Where will people and companies move?

There is more inflow then outflow in cities. Why? Because India has very very poor infrastructure outside metro cities.

Do you know more and more farmers/villagers/small city people are moving into cities daily.

skeptic's ghost said...

Also India's population explosion shows true colors in the RE bubble.

just in last decade 200 million + babies were born - which means the supply of people is relentless. The net increase was 182 million

With low death rate, this means that every decade these 200 million people fast strain all existing resources (food water electricity space).

If every kid gets married at 20-25 there is no stopping this as every 2 decades these 200 million continue producing another 200 million (@ 2 kids per couple). However they dont die until they have great grandkids (3+ generations)

So every decade there is going to be addition of approximately 200 million people unless people overnight stop having babies

==> said...

Good news and Bad news.

just in last decade 200 million + babies were born - which means the supply of people is relentless. The net increase was 182 million

==> infact a great news! Because India adds more pool of consumers. Helps richer get richer.


With low death rate, this means that every decade these 200 million people fast strain all existing resources (food water electricity space).

==> Bad news. With increase in demand poor people will have to compete more for resources.

Let the powerful win. India is shining.

Anonymous said...

Real estate fund crunch forces cash scrounge

Raghavendra Kamath & Reghu Balakrishnan / Mumbai April 25, 2011, 0:52 IST

~ According to PE funds and consultants, many property companies from in and around Delhi and from Mumbai have raised structured debt from PE firms at 16-21 per cent to repay what they’d borrowed from banks .

~ The desperation to take such loans was there because developers needed to repay Rs 20,000 crore to banks in interest and principal by March 31 and home sales in cities such as Mumbai are almost at a standstill

~ To meet their obligations, they are replacing cheaper loans with expensive debt from PEs. It is more of a financial jugglery when the cash flow generation is becoming difficult.

~ PE firms will see good opportunities ahead, as developers such as DLF, Unitech, Prestige, Sobha, Orbit and others need tp repay Rs 5,000 crore in 2011-12.

skeptic's ghost said...

I can bet that the Government (i.e. we all taxpayers' money) will bail out the banks if the developers default. The taxpayer bailout will be same as the 60,000 crore Farmer loan waiver.

Most of Chinese, Dubai and other emerging market RE will face same Iceland-Ireland too much debt problem - China too will have to bail out its banks (or it probably has been doing by asking fly by night government institutions to purchase all those ghost property)

Aftermath will be different from US bubble - where prices are still falling. In India and China - all this property will be still worth lot of money and the (government run) banks will auction entire projects off to some other investors.

Hindusthani said...

I see so many anti-nationals are on this blog. Everyone of them is expecting RE prices to fall down, which is biggest attack on Indian/ Mumbai soil than 26/11.

If by any chance RE prices will crash, Mumbaikar's will become poor compared to their counter parts in other part of world. With no paper money, people will buy less, use less services, spend less, bribe less, less bribe mean less tip to bar dancer, waiters, cabbies etc. that will have trickle down effect on all sections of society.

Rich people will be out of Forbes list, stock market will crash, middle class will have less money, poor class will have to pay cut from already meaningless income. Nations GDP will reduced that lead to downgrade of India's rating by heavenly rating agencies S&P and Moody's etc.

This will lead to India becoming not viable investment destination. It will further reduced investment options. No investment no growth of vibrant manufacturing sector.

Hence all activities carried on this blog are anti-national, so demand this blog to be shut down under anti-national activity act of India pinal code 430 section c.
All bloggers should be arrested under TADA and MOCCA for dreaming RE crash.

Jai Hind..Jai Maharastra...

Anonymous said...

Hindustani,

Strangely, your sarcastic post made perfect sense.

Some degree of inflation between 5 and 10 % is extremely healthy precisely for the reasons you explain.

It is when inflation runs away and in RE price inflation is probably 20% per annum - then things start crashing.

Killing the goose that lays the golden eggs.

But RBI, banks and govt by means of service tax and VAT have done their level best to contain this madness on the part of builders to raise prices beyond limits.

Kudos to Pranab Mukherjee and RBI.

Builder's greed is what is antinational - why they cannot be happy with 5-10% rise every year?

Arrest them like Shahid Balwa and put them in jail - then things will become more sensible

Anonymous said...

If the builders have indeed taken the loan from the PE's then this means that this bubble will blow up further coz now the stakes are higher for them.

Kanjani said...

Black money comes mainly from India: Assange

http://timesofindia.indiatimes.com/india/Black-money-comes-mainly-from-India-Assange/articleshow/8087852.cms

now that the cat is out of bag, the Indian 420s will try some other avenue to invest their black, real estate being the 1st priority.

Don'rt expect the prices to go down. Crooks will somehow protect their assets and we will be forever blogging about the imaginery bubble.

Anonymous said...

@Hindusthani,

You are a big stupid.If country is to grow, the gap between rich and common man should shrink not widen. If rich are out of Forbes list that is not the end of the world. If real estate prices come down, people can spend the same money that they otherwise spend on interest becoming EMI slaves on goods and services that can spur job growth and inturn increasing the standard of living. If anybody is going to lose with real estate bubble are speculators who gamble on prices going up without wanting to work hard to generate wealth.

skeptic's ghost said...

@Anonymous & @Hindustani
You are forgetting that there are 2 types of rich -
1st ones who have been ethical and obeyed the rule of law established by the people yet have taken risks to get rich
2nd ones who have become rich by subverting the law over and over again.

The problem is that India is overflowing with rich of the 2nd kind (black money economy). This needs to go and the other ethical rich need to increase.

Moreover the concept of statehood, nationhood, rule of law, individual responsibility are all Western (mainly Anglo Saxon) ideas which many Indians don't even proscribe to or are too undereducated to understand. This needs to be solved too.

On the other hand India's middle class is booming. The lower middle class is also booming (both in population and economic growth).

The problem is that nothing is sustainable in India (yet). However there is hope - There wont be a collapse but a correction.

I am still to see numbers though. 10% 15% 25% 50% from peak???

Anonymous said...

Hindusthani is probably an illegal bangladeshi living among his brethren in some slum of Mumbai. It is estimated that 1/2 million of them living in Mumbai alone. The Maharashtra govt has legalised their stay by issuing ration caards, birth certificates etc. No wonder that this guy is cheering for Maharashtra

Now coming to the bubble, I dont think there is any. Flats are sold out, before the foundation of a building is laid. No one knows whether the builder is manipulating the papers or transferring them to people who extend loans to him. The involvement od banks may be there to give a legal picture for this scam.

Anonymous said...

@skeptic's ghost,
How do you define 'middle class' in India. In other countries , a person or family is middle class, if they own or able to rent decent accomodation, and lead a comfortable life. Now by this definition, middle class in India is shrinking. In Mumbai 90% of the people dont have decent accomodation. This used to be 75% few years back.

Owning maruti cars, mobile phone and led tvs which dont make a persons life easier, are a curse than a signs of prosperity. First and foremosr is decent accomodation, clean water and clean roads. These things are dwindling

GSM said...

I am still to see numbers though. 10% 15% 25% 50% from peak???

Do not compare with fiat rupees, compare with real money Gold and Silver which cannot be printed, you will see all the numbers and more stated above

Anonymous said...

@GSM Sir,

Sorry, I was not able to grasp your comment on Fiat Rupees/Gold/Silver. Your advanced 3G/4G lingo is beyond my understanding. Kindly can you explain your point in simple 2G language

Thankssulout

GSM said...

@Above,

If you see Gold and Silver have increased ~50% and ~200% from 2008 respectively. Have the real estate increased by that much? So if you buy Gold and Silver regularly and if the real estate does not increase as much as Gold or Silver value you are effectively seeing a price decreasing in Real Estate aren't you? And add to it the interest you will be saving on EMI.

samix said...

GSM, people's mind are too twisted to understand Gold, they just can't see it coming...

Mumbaikar said...

This is really good news. First black money moguls have outcasted middle class from RE. Now they also want to outcast this class from rental market. Eventually it will lead to rise in property prices as yield is also rising from rent and value is also appreciating. Eventually Mumbai will only become city of rich and richest. No more for people defecating on open. That will make it 1st class city. Isn, t it? Only dogs of rich and richest will be remained to defacate in open....etc

==> said...

@Mumbaiker

Eventually Mumbai will only become city of rich and richest. No more for people defecating on open. That will make it 1st class city. Isn, t it? Only dogs of rich and richest will be remained to defacate in open....etc


==> That would be fun. Rents should increase on par to prices of RE in Mumbai. I don't understand math of landlords - are they that dumb? they should increase rent 20% every year as earnings on rise, inflation is on rise and also RE prices are on rise.

I like see Mumbai free from poor and middle class people.
* Only crorepatis allowed to stay in Mumbai - rest can goto hell.
* No slums, no chawls - All cheapo labor replaced by hitech gadgets.
* Clean roads, clean water - no more rush in smelly local trains and buses.
* As you rightly said only tamed dogs allowed to defecate in open - with their masters doing clean up later.

==> said...

@GSM and Samix

==> You need to understand dynamics of countries, culture, psychology of people in bigger picture.

First of all we all agree that currency (of any country) is fiat currency - no one is saint here. India is not an exception. Massive currency is already printed and this needs to go somewhere.... and where ever it goes it causes bubble - it can be RE, Gold/Silver, Technology, Stocks, etc.

What is so different about people investing in Precious metal or RE or Stocks? Do you think Gold or Silver have more value than RE, if so Why - what reasons? It's all hedging, balancing and creating demand supply.

To make money - search and ride bubble - if not create or be part of one.

This is what westerners and rich people have done - punish currency savers, create bubbles for their assets - make money - sit on cash for awhile and ride another bubble. Else would can afford Gold and Silver at today's price.

Anonymous said...

Increase in rent reflects the growing demand in Mumbai.
Normally rent is based on 5% return on the investment in the property. This applies to commercial property too. In other words, rent is proportioanal to property value . Property value is based on speculation rather than the actual value.
As someone in this blog mentioned earlier, the demand is mainly from people upgrading from sub standard life styles. This segment of population is huge and grab up whatever comes along. Most of the traders near mumbai railway stations though crorepatis, choose to live in slums just like their ancestors. This trnd is changing rapidly.

The people who will be squeezed or trampled by this are mostly employees that depend on banks for assistance. Even in these cases, they need to have 40% downpayment in black.

These factor contribute to high level of corruption in government circleswithout which the survival of govt employees is not possible in Mumbai.

let us all hope that many more people like Anna Hazare will stand up to the government.

shailesh said...

RBI is never behind the curve, says Parekh

Parekh does not see any impact of the rising cost of home loans on demand for loans, but said that if rates continue to go up, demand will come down, and at this point the growth drivers are relatively smaller cities and towns where property prices are not as high as in cities such as Mumbai and Delhi.

He also does not see any bubble in the real estate sector, and said: “I don’t see that the commercial prices are going to go up in a hurry, whether for rental or for purchase.”

shailesh said...

For Real Estate, Investors from Mumbai Prefer Dubai

Mumbai real estate prices have been on a tear lately, with the city now around 50% more expensive than that capitalist Arab mecca of Dubai. Dubai has been the traditional second home for rich Indian investors and now that trend is accelerating with Dubai offering some bargains following the real estate slump there.

Mumbai is also facing a shortage of housing in many areas, helping to drive up places. As one might expect in a poor country like India, where the economy has been developing quickly over the last decade, there is still significant differences between the income classes. Some areas in Mumbai will cost $2,000 per square foot to buy, while other areas are around $100 square feet. Average sales are for properties between $200 to $300 square feet. That’s still quite expensive, and puts a small 500 square foot home at around $150,000 in a country where per capita income is under $2,000.

Overall market consensus is that Mumbai’s real estate market will face a correction this year, but not so steep because of general housing shortage in the city.

shailesh said...

Let's not buy houses

Say, a family of four wants to purchase a two-BHK flat in Mumbai, the cost would be as much as Rs 50 lakh, even in the distant suburbs. To purchase it, you need to raise Rs 10 lakh cash as initial payment.

In addition, there will be an equated monthly instalment (EMI) of Rs 38,000-40,000 a month. Banks, typically, cap the total EMI-to-salary (take home) at 40-45 per cent, including all loans (home as well as any personal loan). So, the borrower needs a salary of almost Rs 1 lakh (take home) to purchase the flat.

In effect, it means a gross or pre-tax salary of Rs 1.3-1.5 lakh a month or Rs 15-18 lakh annually. One wonders how many Mumbaikars can boast of such salaries to purchase a flat, even in the distant suburbs.

==
Here’s the best one that I heard. Early this year, a PE head was approached by a real estate company for a loan of Rs 75 crore for three months. The real estate company said the company was willing to give a post-dated cheque of Rs 100 crore, which could be encashed after three months. Stunned by the rate — 120 per cent a year — being offered, the PE head rejected it.

Financial planners berate a retail investor, if he/she is taking a loan to pay another, by calling it a debt trap. But many companies in a critical sector are surviving on it. As a result, they have held on or even raised prices of flats.

Unless an early 1990s happens again, when property rates crashed by one-third, it is really difficult to purchase a house. I will continue to rent.

==> said...

In effect, it means a gross or pre-tax salary of Rs 1.3-1.5 lakh a month or Rs 15-18 lakh annually. One wonders how many Mumbaikars can boast of such salaries to purchase a flat, even in the distant suburbs.

==> What kinda of world are you living in?
Let me start with bottom down food chain. Maids that clean and sweeps floor, clean vessels, washes and dries clothes earns Rs. 15000 per month CASH i.e. same as after tax money.
A shopkeeper who simply buys and sells stuff - a vendor that adds no value to product earns per month atleast Rs. 40K to 50K.
A pocket expenses of many college goers is 5K to 10K per month (includes mobile, gas for car, dining out, etc).
A salaried guy in any profession earns atleast 50K to 70K per month directly or indirectly, don't believe me - check out doctors, IT, BPO service centers, Bank clerks.

NOW, add to that another working member in family - today many spouses are employed full time/part time. Add to that earning parent, brother and sister.

Now you can do the math of earning per household. A household where 6 people stay happily squeezed, boasting earnings and biying flats outright in few years.

Wanna smell coffee.

Anonymous said...

to guy above me: then why are you wasting your time on this blog?

Anonymous said...

==>Said is a proven fool. He comes with all his nonsense. I think he is a paid pimp who spends all his time on this blog trying to explain people paid ideas.

Get a life man.

==> said...

Anonymous said...
to guy above me: then why are you wasting your time on this blog?


==> let me ask you same question - why are you wasting your time on this blog?

All this is irrelevant. The point is you are blabbering without any content in your comment.

==> said...

==>Said is a proven fool. He comes with all his nonsense. I think he is a paid pimp who spends all his time on this blog trying to explain people paid ideas.

Get a life man.


==> I know I know Truth hurts. This is free blog feel free to let out your frustration.

GSM said...

What is so different about people investing in Precious metal or RE or Stocks? Do you think Gold or Silver have more value than RE, if so Why - what reasons? It's all hedging, balancing and creating demand supply.

You are looking at gold and silver as any other commodity. I am looking at as real money and cannot be printed. Go and check out with any bullon dealer/jeweller weather he has the inventory to sell you 10Kg of pure silver or 500g of 24Karat Gold the same day, you will understand how precious it is.
No wonder the ETF's are marketed the way they are.

If we had a fixed money supply and not debt driven money supply, I wouldn't care about Gold and Silver. With Debts and deficits of Govts soaring through the roof, there is no other way of paying them back other than with depreciated currencies. I would buy real estate only when its median price is equal to 1Kg of Gold or 20Kg of Silver.

You can argue that we can pay back the loan with depreciated currency as well. While that may be true, we need to understand that there will be a intermediate time of increasing interest rates and fragile economic situation that you need to survive just like 2008. The risks should be well understood.

Venkat said...

If you look at RE market in last 3 years, it has been following the textbook pattern of a 7-8 year cycle.

2007 flat prices peaked (previous cycle). Assume imaginary index for RE(IMex)=100

2008 prices crashed IMex =80 (Bears scream crash crash)

2009 RE firms got into debt trouble and there were distress sale of plots (Vatika plots GGN) and flats (Unitech Uniworld gardens 2 GGN). Many affordable flats were released. Imex = 70. (Bears keep screaming crash crash although crash is already over)

2010 Prices stabilised and went back to peak 2008 levels. IMex=100
(Bears scream crash crash - since prices are rising, they say crash is imminent)

2011 Prices stabilised, fresh inventory being continuously sold. Imex = 130
(Bears scream crash crash - just more imminent)
If we have a normal cycle, then we can expect:

2011: stable prices for rest of the year, rates reach peak of BAse rate 10%. IMex=130 (Bears scream crash crash continuously, always around the corner)

2012: Decline in sales, end of industrial cycle upmove, poor economic performance. Lowering of rates by end of 2012, Bank base rates 8%. IMex= 100(Bears scream crash crash and say - I told you so!!!!)

2013: Delivery of inventory initial pipeline coincides with lower rates, good resale with loan possibility, industrial cycle starts upmove. Base rate 7%, IMEX= 140. (Bears scream crash crash - prices are not sustainable)

2014: Good stock market performance, good economic performance and good RE price upmove coincides (for residential and commercial and real estate RE). Nifty 10,000, IMEx 250, Base Rate 6%. (Bears scream crash crash - more imminent)

2015: Massive performance by nifty and real estate. Nifty 14000, IMEx 400, Base Rate 6% (Bears scream crash crash - but many people start to doubt the bears - they have cried wolf for 7 long years. By end of 2015 everyone decides it is stupid to stay out of RE market, because it keeps rising - so they all go and buy. Bears scream crash crash but no-one listened because they have been screaming this always)

2016: Continued delivery of flats results in massive oversupply, Real estate crashes. Massive inflation causes Rates jacked up to Base rate 12%. Currency crashes. Nifty Crashes to 9000 levels from 15000. IMEX crashes to 250 levels from 500. (Bears scream crash crash - I told you so!!!!!! - but poor suckers lose all their money, having timed their entry all wrong - they swear off real estate and stocks for ever

2017: Indistrial and RE cycle starts all over again.

Thats how things happen over and over again. Always has and always will.

Guy buying Nifty 5000 and exiting at 15000 makes massive profits. Guy buying at Nifty 6000 and remaining invested makes 50% in 2016 when markets crash to 9000 levels.

Guy buying IMEX 70 and exiting IMEX 500 makes massive profits. Guy buying IMEX 100 and remaining invested, makes 150% when IMEX crashes to 250 levels.

That is the way of this world. Those who understand cycles time entry and exit properly.

Pravin K said...
This comment has been removed by the author.
Pravin K said...
This comment has been removed by the author.
Pravin K said...

Excellent Real Estate videos linked from Deepak Shenoy's excellent blog/website Marketvision.in @ http://www.marketvision.in/blogs/deepakshenoy/videos-real-estate-prices-253.html

(sorry for multiple posts, had a little keyboard issue)

Pawan said...

@GSM
If you see Gold and Silver have increased ~50% and ~200% from 2008 respectively. Have the real estate increased by that much? So if you buy Gold and Silver regularly and if the real estate does not increase as much as Gold or Silver value you are effectively seeing a price decreasing in Real Estate aren't you? And add to it the interest you will be saving on EMI.

If you were offered a flat for 50L in 2008 for which you had 10L in down-payment and were hoping to get a loan of 40L. Instead you bought gold worth 10L and it went up to 15L with 50% upmove in 2 years. In the same duration, the flat went up only 20% and is now worth 60L. Today you need to take a loan of 45L to buy the same!!!

That is the problem. Who would offer you 4 times your money to invest in Gold at 8-12% interest rate along with Tax benefits? NONE.

shayna said...

@Venkat,

All sounds very attractive.

Real-time figures
1) Brand New House (4500sft) bourght in the north of ATLANTA, suburb called Alpharetta for $460k in 1994
2) Same sold in 2008-Dec for $420k.
3) Present value as per latest transaction in neighbourhood $350k.

What do you have to say for that ? Also bear in mind that this period has seen QE1 and QE2, with very little possibility of QE3.

As compared to RE, an investor can physically move around with his gold holding or use it as a collateral. Having said that i believe going forward gold will loose its shine post this bubble for many years to come due to credit deflation.

India will see a similar drop simply because a huge part of the earnings is going into Mortgages or rentals, denying the retail economy the revenue. With very little manf (compared to G20)to support, indian eco needs the retail industry to sustain growth.

skeptic optimist said...
This comment has been removed by the author.
skeptic optimist said...

1)
Unlike US and Dubai, India does not have oversupply and good cities and neighborhoods keep getting hordes of wannabe migrants from rural areas. Jobs are restricted to few zones in the country and everyone wants to live around those zones (Blore, Hyd, Chennai,Pune,Ahd, Cochin, Goa, Navi Mumbai North Mumbai suburbs, Gurgaon-Noida,Chandigarh etc)

2) Gold vs fiat currency problem reflects inflation at its worst. The world will keep punishing people who save currency. Money is just paper - the real value is in goods and services purchased/produced (technically includes everything bought or sold but I exclude human trafficking & prostitution)

I just bought my new BMW because I didnt want money to rot in the bank with negative interest rate as (inflation > bank interest)
The goal however is to borrow and spend within means. Same goes for RE.

3) Everyone agrees its unethical for shelter seekers to compete with rich or middle class investors. Shelter is an essential requirement like food, clothing and water. Ethically, if shelter seekers having compete with rich investors sounds extremely wrong - but the world does not work that way, does it? Look at the China post, poor workers live in bunkers and slums while 64 million apartments lie vacant changing hands from "Communist government run" investment agencies. If communist China can't solve this inequality how can we expect any free market to solve it?


Again I reiterate - RE will not collapse unless there is civil unrest or civil war, or external war or massive natural calamity.

Be prudent and rational while you buy - every transaction in life is a risk. Same goes for relationships. Buying a house is similar to marriage - its a big life changing decision for many - However we never see India's marriage expense bubble do we?

Anonymous said...

@ Shayna

You are the first person I have come across who is riding the gold wave, despite the firm conviction that after this fiat currency bubble deflates, gold will go firmly out of favour.

I have been a firm believer in this - that this gold upmove wil lprobably last a few more years until economies stabilise and the income/productivity inequalities between big emerging markets and developed markets equalise. Once the global imbalances decrease to insignificance and global economies stabilise, gold will end its run, drop like a rock and will never again be an investors target for the remainder of the century (or until they find a use for it other than jewelery)

I think gold will collapse after one big inflation event of mammoth global proportions, when gold prices will go to ridiculous levels. Once this event, which will cause global economic disruption for a couple of years gets over, stability will come and gold will fall like a stone. Probably around 2016 is my guess-estimate.

Skeptic Optimist is right about Indian RE being different from US RE - or generally, RE in developing markets vs. mature economies.

US housing is in decline for the next 10-15 years, until you encourage more immigration. Same with US stock market.

India is a structural bull market on which a cyclical pattern is super-imposed. As Skeptic says, there is going to be rapid urbanisation in India and so if you are comparing US RE to Indian RE you should compare US RE of 1945-2000 to Indian RE of 2011-2060.

Perhaps, even better would be to compare British RE of Victorian times (1860-1914) to Indian RE of 2011-2060 for a more meaningful comparison (both high density populations, both getting rapidly educated, both urbanising rapidly)

Sociologically and economically, India probably comes closest to Victorian England, Japan in Meiji Era, China from 1970-2011, South Korea from 1945-2011.

Probably south korea comes closest in terms of both India and Korea being slave nations, both partitioned, both illiterate to start with.

Korea from 1945-2011 saw per capita income in real terms go from 500 to 35000 (ball park figure)

India will go from 500 to 35000 per capita from 2011 to 2060. If you want to see India's future in 2060, visit Seoul.

Mumbaikar said...

India always had and will jhave bull market is true. Since liberation India has quadruple in population, India had min 7% inflation since last 50 years, so it is not bull run it is devaluation of rupees which is causing prices to go up. Ask u r parent or grand parent their initial salaries and buying power of money at that time.

India needs to control over population, should have educated mass not just literate, and also socially and nationally responsible citizen. You can not compare India with any developed or developing country because in India each state is as if a seperate country in it's own rights. People believe in quota rather than merrit and elections are won by freebies, rigging rather than any progressive agendas.

In other countries people loose election on basis of extra marital affairs, bribery charges and in India these are min two qualifications to even get ticket. So stop dreaming and come to reality. Keep dreaming with equiality with western countries, be happy in own world.

Anonymous said...

Facts speak for themselves - in 2050 - $

1. Indias projected population in 2050- 1.63 billion (UN stat)

2. Indias projected GDP (PPP) per capita - $6700

Currently we are ranked 132 in GDP per capita

In 2050 we will still hold the rank + 0r - 5% margin of error

The fact is 10% of India is developing fast and this is marketed as the overall growth. Govt. doesn't show the rest of 90% where groth is nil or negative.

In 2050 India will have a very rich and very poor population, the poorer comprising 80%

This is going to be a very good recipe for civil unrest, crime and mayhem, resulting in a violent society just like the current Pakistan like situation


Our Netas know this. They are encouraging their off spring to build safe haevens abroad. With all the money they can loot, this is not a tough situation. People with money are welcome in all countries.

Jai Hind

PS : The reincarnation of Satya Sai Baba may change the situation. Keep your eyes open

Anonymous said...

Reincarnation of Satya Sai Baba will be called Kalki and he / she or It will kill us all....well except of we vote for the CONgrArse

BinadasBhai said...

Guys,

Those of you interested in real estate investment, here is a golden opportunity.Invest in Doddamallur, a village near Bangalore. Land prices are few thousands for acre, but going to skyrocket reaching crores in a few years time. Here is a report

http://www.rediff.com/news/slide-show/slide-show-1-prema-sai-baba-will-be-born-in-doddamallur/20110429.htm

God incarnation 'Sachin Tendulkar', so the rumours say, has reserved 100s of acres. So has Cms of Bangalore., Andhra Pradesh and Karunanidhis daughter Kundimozi.

Aninvestment oppotunity that you will always greatful to me

Binadas Bhai

shayna said...

Anonymous @ 11.11pm

Basically this is what i said, which you've reiterated in your post As compared to RE, an investor can physically move around with his gold holding or use it as a collateral. Having said that i believe going forward gold will loose its shine post this bubble for many years to come due to credit deflation.

shayna said...

I find this argument about RE in India is not the same as that in te WEST to be hallow.
Having lived in Dubai and now in UK, the EA gave the same argument for the runaway RE prices in these countries. The reasoning in UK was that it is an Island and there are not many places to build. Dubai's take was, it will be a financial hub between India and EU.

Yes Indian RE is not the same as other countries in that, there is a huge disparity between prices and earnings. Todays papers talk about Naxals being recruited in western Maha, Pune, Nashik and Aurangabad. These are major industrial areas of the country, go do your math.

Nearly 7yrs back i had mentioned this fear to a friend of mine after reading about Rio and Sao Paulo. Apparently there they have these gated communities with armed gaurds and residents are bussed out and back in with a armed convoy. This might sound too far fetched today, but has to be seen in light of the news report on Naxals. 2 Toddlers were kidnapped in Mumbai and Delhi, these 2 got media attention because of the big money behind them. Guess how many more are being kidnapped for ransom.


The GOI has been pumping huge amounts into the economy for the last 5yrs, mainly for Infra, the present boom is because of this. RE was the highest employer as a result of this however other industrys have not kicked in to take the slack. Going forward we'll see the outcome.
GDP AND PER CAPITA ARE NOT NECESSARILY A LINEAR FACTOR.

ChatuKutty said...

@Shayna Moley,

Very inderesding enalysis. As for Nagzalites, this is a failed movement and unlikely to succeed. Real Esdade prices are indeed high in Bombay city but suburbs beyond Thane and Virar are still cheab. Now the gavernment building nice roads and this will make oeople to move out amd prices will fall

Mahareshtra needs minesters like karunanidhi or andhony. let us offer preyers in temple for good government

Anonymous said...

PPP only means you can afford some lifestyle in your country. However if there is a war only the country with high GDP can win/sustain the war. China and India has high population and hence will not go to war with other powers, so will choose to remain slaves to the west....Buying or imitating western products and always building real estate in crowded areas......All it takes is one neighbor to screw the growth up because of their jealousy. So who will be this neighbor. Yes damm right the Pakis..

jhon mathew said...

Property rates are rising very faster these days and to make your dream home,firstly you have to think thrice because it's not the same time as it was before,still we have good services for you people to make your dream home across northern part of india especially chandigarh and nearby areas over here.

Anonymous said...

The dollar has started its downward slide. Indian exports will suffer and NRI remittances will have less value.

http://finance.yahoo.com/news/Dollar-extends-slide-on-views-apf-3112272241.html?x=0&sec=topStories&pos=7&asset=&ccode=

What will be the impact on Indian RE?

Anonymous said...

Anon at 11.58

India will print some more currency so that the rupee does not go below $43 to the dollar. It only means more inflation in India, nothing else. NRI bhi khush, exporters bhi khush, and IT services sector bhi khush...

Cool Head said...

Gold and Silver are rising because they ARE MONEY, not commodities. They are actually not rising in value, simply the currency in which they are valued is getting debased due to massive printing. Those who understand this economic phenomenon will not be surprised, the others who do not understand this wonder why.

samix said...

and they will wonder forever, as one guy once said time will tell all things

Vik said...

@Shyna and others Anybody close to central London care to meetup for a drink this sun/monday ? I'll be here all week till friday

Vik

shayna said...

@Vik,
I would have loved to meet up in london, especially since the weather has been great. Unfortunately i am down with a viral infection and am on DRUGS. Secondly am due to start my contract in paris later this week.

Thanks for the invite, hopefully the next time round when you are here.

Anonymous said...

@shayna Moley,

sorry to hear about your viral infection. Saare, you should try ayurvedic medicines instead of DRUGS
@Vik
I live near Gloucester rd, close to central london. If you can give your contact number, i 'd love to meet you. you may call 2072441999 (Ashburn Hotel) and leave a message. People call me 'Mike' though this isn't my name.

Chatu Kutty

GSM said...

If you were offered a flat for 50L in 2008 for which you had 10L in down-payment and were hoping to get a loan of 40L. Instead you bought gold worth 10L and it went up to 15L with 50% upmove in 2 years. In the same duration, the flat went up only 20% and is now worth 60L. Today you need to take a loan of 45L to buy the same!!!

That is the problem. Who would offer you 4 times your money to invest in Gold at 8-12% interest rate along with Tax benefits? NONE.


Lets take your case study, Say you bought the flat 30 months back. 40L loan 9% interest has an EMI of 50k for 10 years. For 30 months you would have paid 15L as EMI. Lets say the tax saved on Home loan interest is same as the tax saved on HRA. And say you stayed in rent @ 16k month, thats ~5L you spent.

So if you invested the (50k EMI * 30 months = 15L) 15 - 5L(rent) = 10L amount in Gold and Silver as SIP and you got a average returns of 30% for two years, the amount would be 13L. Add to it the 15L you had with the down payment, the total sum you have is 28L. For a 60L flat you have to take a loan of 32L now. 32L @ 10% interest today for 7.5 years (10 years - 30 months) has an EMI of same 50k!!. Most likely your salary has increased since 2008 and 50k today is much less than 50k in 2008. And for the same EMI you took in 2008, you still have a outstanding principal payment of 33L. All these calculations are based on teaser rate 9% offered in 2008, when the interest rate resets to 11 or 12% after 2 years (thats now), you can see a bigger change.

28L downpayment and 32L loan has very less risk of going on a firesale and most likely can survive a job loss of 6 months. Can you tell the same for 10L downpayment, 40L loan and 30% reduction in price? This is exactly my point, We can hedge ourselves with Gold and Silver against price increases and buy when we can afford them with much less risk.

If you sell the house today at 60L, yes you have a profit. But thats the bet you took and that came off. It might have gone bad as well.

Cool Head said...

Another problem of RE as compared to Gold and Silver. You cannot get partial gains to recover your capital cost. I mean you cannot sell off say, one bedroom out of your 3BHK to recover your gains, you have to sell all of it or nothing. GOLD and SILVER are infinitesimally divisible and fungible. Not so with RE. A 1BHK in Kandivli is worth less than a 1BHK in Prabhadevi.Also you can move about your investments in physical metals very easily. You cannot do that with RE.

Skeptics Ghost said...

Gold and Silver are not goods or services, Houses can be lived in - Cars can be driven - you cant use gold silver for anything useful other than exchanging for other goods or services.

Again people here want ROI as well as home to live in. That is the problem.

The bubble/surplus is in Investment RE - - People still need housing for decent lifestyle and are sharing existing homes to beat this (like children staying with parents/brothers, roommates, etc)

The Rental bubble is unsustainable - the more the rents rise, the more people will cut back and cause downwards spiral in demand for other things.

Simple Man said...

The rent in malad/kandivili/borivali area for a 5 year old 2 b/r flat varies from 18000 ~23000 with 1 or 2 lakh deposit. For new buildings with amenities like smimming pool , car park etc people are asking 25000~28000. All these flats are valued at 1 cr and above. Actually landlords are getting 2-3% returns on their investment. These returns are sometimes wiped out and turn out to be negative if the tenant is crooked or uncivilised and causes damage to the flat. Capital appreciation is speculative and no one knows about the state of real estate in a few years time.

I really can't figure out as to why people buy flats at a high price and rent it out for 2% returns. The whole thing doesn't make any sense

Anonymous said...

@Simple Man,

Indians love to hoard and they get great pleasure out of it. Olden days they used to hoard jewellery, precious stones etc, noe they buy flats. No one expects or wants any return. They just derive pleasure of ownership while maintaining their pathetic living standards. Most of these guys live with joint families, relieving themselves on roadside, enjoying chewing/spitting paan everywhere.
This tradition is passed on from generation to generation. These guys are also simple like you but their brain is programmed to cheat, hoard and vandalize clean places

Anonymous said...

if you people cant figure out then why you are breaking your head and blaming the person who has earned well and he is well ahead of you. Just because you want everything at your desired price, you will blame and use this tapori language...

If you want something then work hard and get something or stay quiet

Pawan said...


If you sell the house today at 60L, yes you have a profit. But thats the bet you took and that came off. It might have gone bad as well.


Some more points:
1. I took an illustration that prices have gone up from 50L to 60L for the flat. Fact is prices of RE are up 70-100% in Gurgaon from 2 years back. I can quote hard figures for that. Don't know about Bombay though.
2. If fiat currencies are going down, all hard real assets should go up - some more some less. What tells you precious metals will outperform RE? Silver had a 10% correction yesterday itself. Who could say Gold is undervalued today compared to RE? The Gold bet can go equally bad if QE3 does not come. Gold is as much a speculation as RE.
3. Yes you can move around with your gold but not with RE. But then too much moving around may be risky and you may not want it for other reasons too. If you are living in a society and have kids and they have become friends with other kids in the society, every time you move you make them lose their old friends. I am sure other disadvantages of moving around can be found out for argument's sake.
4. I am sure the person who buys a BMW instead of Nano is vain but then if you don't spend for your happiness, what else would you spend for. Legendary investor Rakesh Jhunjhunwala has said on record that one must make a house for oneself before venturing into 'investing'. Coming from RJ, that advice should mean something.

GSM said...

2. If fiat currencies are going down, all hard real assets should go up - some more some less. What tells you precious metals will outperform RE? Silver had a 10% correction yesterday itself. Who could say Gold is undervalued today compared to RE? The Gold bet can go equally bad if QE3 does not come. Gold is as much a speculation as RE.

If currencies are all going down, history has shown us that Gold and Silver outperform any other assets. History has also shown us that empires have collapsed which tried to replace Gold backed currency. If you take a compare historical ratio of RE vs Gold, you will see which is undervalued.
You mean about 10% correction in silver for 1 day, what about the 100% increase in last 6 months or so?

And coming to QE3, Fed is buying 70% of the treasuries and the largest bond holder PIMCO has liquidated all the treasuries and is naked short. 7 trillion or so US debt is financed short term (3-4 years) at absurdly low interest rates and if fed is not buying them, the interest rates are going through the roof. We have all seen what can happen when interest rates increase in the example of Greece and Ireland (Spain and Japan coming soon). Based on this, it is very unlikely the fed money printing comes to a end. Already the big brains in Davos have stressed the need to bump up the world's credit supply from 70 Trillion to 200 Trillion dollars by 2020.

More importantly, fiat currency is only based on confidence in currency, if the printing does come to a end and the confidence does not return, the currency is going to collapse anyway. This is exactly what happened in Weimar Republic of Germany in 1921 which led to the rise of Adolf Hitler.

Skeptics ghost said...

On hyperinflation and runaway currency devaluation-
The difference between US and Weimar Germany is that the US is the worlds sole military Superpower .
They can bully their way out as no one will pose a challenge.
US also has huge untapped oil and gas reseves - a 10 year drilling can repay all it's debts. Also US has below replacement level population growth - which cuts future liability.

All this however can change - look at UK which is a fraction of the superpower it was before 1942-43

In India people like hoard because many are scared and not confident of the future and for that they ruin their present. Even my retired parents think that way

Anonymous said...

"You mean about 10% correction in silver for 1 day, what about the 100% increase in last 6 months or so?"

And what about the 500% increase in RE in last 10 years or so?

GSM said...

And what about the 500% increase in RE in last 10 years or so?

That is my point. RE is richly valued. RE is at all time high way above previous boom's peak value in 1996. Silver is still below 1980's peak. I can say if currency keeps getting devalued, silver can easily increase 200% from current value in 2-3 years. Can you tell the same for RE?

Vik said...

Mike,

I called up the hotel and they couldn't locate you. you can call me 07423775213

@Shyna,
you get better and ets meet up when I'm back.

GSM said...

The difference between US and Weimar Germany is that the US is the worlds sole military Superpower .
They can bully their way out as no one will pose a challenge.


Times are changing. Since recently China has made agreements with Russia, Iran and Turkey to trade in their own currencies instead of dollars.
Could anyone have thought of challenging the dollar 10 years back? Alas, Indian Govt could have made a similar agreement which would have resulted in containing inflation.

In India people like hoard because many are scared and not confident of the future and for that they ruin their present. Even my retired parents think that way

And savings is a good thing. For every rupee credit issued, if there propotional rupee saved, that would result in a sustainable system without runaway inflation and bubble.

==> said...

==> Economy is not same as it was in past something really big happened - "Globalization". So comparision past to present is simply delusive.

==> In Globalization world, more the population (read consumers) better it is for Global powers who can innovate and sell goods and services. India and China are shining for this reason alone. They make almost 40% global population.

==> Gold and Silver shining metals were favored many years ago - may be from time of Lord Rama and Lord Krishna - Why? because there were no other financial vehicles - but today there are many choices - ask finance gurus - list is endless and growing - MBAs are at work.

==> Savings can be in precious metals, RE, business, currency, etc etc.. some instruments can be manipulated and duplicated - e.g. Currency. In any case if any instruments are hoarded it creates demand!! Same is with RE and Gold.

==> What if in future water was traded like gold, RE? How much would you invest?

Anonymous said...

Two of the biggest players in Indian realestate are Sharad Pawar and his crony Dawood Ibrahim, though they remain mostly behind the scenes. Now that USA managed to kill Osama, India too will try to bring Dawood to justice. If this happens, Sharad Pawar will loose his right hand man . This will have wide repurcussions for real estate. FDI souces will dry up, so will be the investor fearing the entry of small time gangsters who will operate with impunity.

This is the begining of slide that all of us expecting. Do not buy anything now. Wait for the bubble to burst

pol said...

The long term average price to annual rent ratio for western countries is around 15. This was the case even in Japan in the 60s and 70s when it was growing at 9%+ (like india and china today), with fast urban growth. In India price-rent ratios are around 25+. So either rents have to increase or prices have to fall. Therefore rising rents probably imply a reversion to long term mean. It might also imply that prices will not fall.

GSM said...

==> Gold and Silver shining metals were favored many years ago - may be from time of Lord Rama and Lord Krishna - Why? because there were no other financial vehicles - but today there are many choices - ask finance gurus - list is endless and growing - MBAs are at work.

You are right. The financial terrorists innovated the vehicles of financial distruction like Options ARM's, Mortgage backed securities, Collateral debt obligations, credit default swaps and not to mention the derivatives for speculation. And we have seen all the results.

==> What if in future water was traded like gold, RE? How much would you invest?

Definitely in future when there is going to be water crisis, we will see ETF's on water to speculate.

==> said...

In India price-rent ratios are around 25+. So either rents have to increase or prices have to fall. Therefore rising rents probably imply a reversion to long term mean. It might also imply that prices will not fall.

==> My bet is that prices will not fall, but rents will rise. Why? Because there is no one who is burdened with debt nor laws are powerful enough for go after people who default. There are no credit woes, people have good disposable income to sustain their financial hardships.

So rents will go up and yes, people will cry foul but will pay and survive.

Mumbaikar said...

Any way Sharad Pawar is 60-70 years old and counting his days. Till then he will ensure that he made enough money for his 1000 generations.
For god sake keep u r karunanidhi where he is right now. Three marriages, unaccounted money, thief daughter, unable to walk, knows only to distribute goodies to win election. No state or country should have these kind of leaders.

Mumbaikar said...

Silver dropped 10% within a day. The reason it is all speculative bets. The way it went up it will go down. When traders try to out smart each other this was bound to happen.
If you go into more details it was all paper trading without physical delivery. All future contracts have been transferred to next month. So guys enjoy the fire work.
If silver is in so much in demand what changed in a day to drop it by 10%? Think about it?
We all r living in speculative world. Today it is silver, tomorrow it will be gold, then oil etc.

karthikraoa said...

I stay in Mangalore, Karnataka and I just went around the city and looked at real estate.. There are so many apartment constructions going on and almost all apartments are empty...Most buyers are buying so that they can sell later for a higher price and also because they can hide black money...This is an enormous bubble...

karthikraoa said...

@Mumbaikar..
Regarding the drop in silver price.. That is the way bull markets works.. Drops in price are sudden but the rise is slow.. Look at the US dollar chart. It has been in a bear market since 2001... It had a sudden spike up in 2008 and it is down again and is going to go much lower

Anonymous said...

Good postings here nowadays.

Price rent ratio for India more like 40-60.

When it falls to 25, it is time to buy - it means RE prices are absurdly low

GSM said...

If you go into more details it was all paper trading without physical delivery. All future contracts have been transferred to next month. So guys enjoy the fire work.
If silver is in so much in demand what changed in a day to drop it by 10%? Think about it?


Correct. There is a leverage of 1:100 on physical to paper on Gold and Silver trading. When people lose confidence on currency and want physical delivery of Gold and Silver, that is when there will be a short squeeze and prices sky rocket. We saw a trailor on ICICI bank in 2008 when people were queuing up in ATMs to withdraw their money just on a romour despite RBI assurance. Just goes to show how much the system is dependent on confidence and how quickly it can change.

On rolling future contracts, if you observe, there is a backwardation in silver which means that markets are ready to pay a premium for silver delivered today rather than in future.

Anonymous said...

How was the drink Vik? ;-)

Mumbaikar said...

Point here is this demand is not created by common people it is by investor community so called big boys , borrow at 0% and then even if u make 5% it is big profit. But these guys are not happy with less than 40% return.

Secondly 70% of trading is proxy or high frequency trading, based on algorithms rather than fundamentals. Retail investors r shying away from market because they don't when it will drop and why . For them return over last 10 years is zero. Also market keep going up in thin trading every day , so it is big bubble there also.
Suddenly Euro become strong though fundamentals have not been changed there either except .25 % hike in interest rate etc. So enjoy the show. Hegde funds r making profit and killing small people are suffering every day.

shailesh said...

Home sales at record 2-year low

Anonymous said...

"You mean about 10% correction in silver for 1 day, what about the 100% increase in last 6 months or so?"

So you knew of it in advance and doubled your money in Silver in 6 months?

GSM said...

So you knew of it in advance and doubled your money in Silver in 6 months?

Yes. I have been investing in gold and Silver as SIP every month since 1 year.

kao said...

To all the silver bears, you don't know imbalances in the global economy and the deteriorating fundamentals (exploding trade and budget deficits) especially in the western economies (U.S., U.K and some European countries)...
The bubble is not in silver but in fiat currencies.. The price of everything is going to through the roof..
Silver just hit its all time high (50$) ... Its inflation adjust high is well over 100$.. How is something in a bubble if it hasn't even touched its inflation adjusted high.. Take a look at the report by the CPM group.. Ownership of precious metals (as a percentage of total investments) is at an all time low (it is just 1%)

REBear said...

Here is a proof of ultra high speculative activity in Real Estate:

http://timesofindia.indiatimes.com/city/ranchi/Registration-fee-increase-bursts-real-estate-bubble/articleshow/8155497.cms

To all those who believe in fundamentals of precious metals than Fiat money, time is coming near to make a purchase of gold and Silver. Gold and Silver have international value, there is no difference in Indian gold or American Gold, whereas there is difference in house in new Delhi and house in new York. Among Fiat currencies, the most worthless is rupee, and Indian houses are valued in rupees. Gold and Silver are valued in dollars.

Dadaji said...

REBear baba,


No.1... My advise to you, is to stop smoking pot. Why do ordinary Indians. need dollar. We don't need western luxury goods. We lived without them for thousands of year. We have achieved food self suffiency. We dont need viagra. An increase in rape cases prove this. Our desi Dharu is as good as scotch.

Take it easy baba

REBear said...

@Dadaji

Its a myth to say we don't need dollar, for as soon as you see dollar inflows drying up, India being a current account deficit country will see all soughts of chaos. Rupee will depreciate like anything and inflation will go completely out of control. All the gdp growth hype you have seen will be washed away. That is why I do not favor any rupee denominated asset like Real Estate.

Pawan said...

That is why I do not favor any rupee denominated asset like Real Estate.

You have to think Rupee if you are in India. If you convert all of your rupee to Gold/Silver whose price is quoted in dollars and then dollar depreciates against rupee then your holdings in Gold will retain their dollar value but still drop in rupee value. Do you prefer that?

Anonymous said...

Hmm It seems Vik is busy. This post has completed a century and still no new post? Amazing.

REBear said...

@Pawan

>> If you convert all of your rupee to Gold/Silver whose price is quoted in dollars and then dollar depreciates against rupee then your holdings in Gold will retain their dollar value but still drop in rupee value. Do you prefer that?
<<

Well if the long term view is that rupee is going to appreciate, then holding dollar is a loss. But the fact of
the matter is Indian currency is bound to crash in the long term simply because of hyper inflation that is going to be a longer term issue in this country. When world was going through periods of deflation in 2009, we at India had major inflation. Sooner or later, it is going to be another Zimbabwe which was forced to scrap its currency.