Wednesday, August 31, 2011

Realtors fear Lokpal will expose nexus with govt

Aricle Link

Among many other things, the implementation of a strong Lokpal Bill will expose the nexus between government officials and developers. It will also control the flow of unaccounted black money in the real estate sector, which has been used as a parallel source of funds and income for decades.

“Developers as a private player will not directly come under the ambit of the Lokpal, but their nexus with the BMC and especially income-tax officials will surely be exposed. The flow of black money is enormous in real estate sector. Buyers frequently become victims of developers who demand black money. Citizens need to be alert and file regular complaints if something amiss is happening,” said noted IPS officer turned activist YP Singh.

Another developer said, “If we stop accepting black money, then the majority of profits will go in paying huge government taxes. We are not the only ones involved in this wrong practice, Even buyers do so while selling their own flats. They do not mention the real transaction amount in the sale agreement to save on taxes.”

102 comments:

shailesh said...

Zell to Limit U.S. Real Estate Investing as He Expands in Colombia, India

“Colombia is the next star of Latin America,” Zell said on “In the Loop” with Betty Liu. “In India, we’re doing a hotel/motel program like Residence Inn at Marriott and we hope to build a chain across the country.”

aam aadmi said...

You will soon find many realtors on the street selling paan and cigarettes.

Anonymous said...

Why Indian RE stocks are trading below book value?

Anonymous said...

"For the last few years, RE was the easiest way to make money. Lever up, buy a plot of land or an apt and just sit on it. Voila - Inflation thrashing gains like magic. "

The problem is that the Central Banks worldwide has made it abundantly clear that they will continue to steal from savers and give to leveraged debtors by printing money.

As long as the current central banking paradigm of ultra-Keynesianism prevails wordwide, there will be competitive devaluations of currencies accompanied by massive inflation. This will strongly benefit highly-leveraged debtors and harshly punish foolish savers.

And no, RBI/GOI won't do a fig about inflation. They haven't given a rat's behind about it for the past 10 years, they're not going to start now.

Anonymous said...

Book value of indian RE companies doesn't reflect the true book value because they book the revenue based on percentage completion. If the accounting standard is changed to book the revenue only at completion then their B/S will look highly leveraged. Do you know what accounting games companies are playing?

Pawan said...

Its official: Mumbai worst place to live!

http://www.moneycontrol.com/news/current-affairs/melbourne-worlds-most-liveable-city-mumbai-among-worst_581535.html

Pawan said...

The problem is that the Central Banks worldwide has made it abundantly clear that they will continue to steal from savers and give to leveraged debtors by printing money.

Why do we forget (nominal) earnings increase when we put forward this argument. I am from IT industry and I can tell you starting salaries are up 5-10 times in last 10 years. Can they go up another 5-10 times from here in next 10 year? No way unless GOI is ready to devalue rupee to dust which will stoke huge inflation and cause low growth. In Zimbabwe everyone would be a billionaire in their local currency but what's the use?

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samix said...

come on guys, I don't think that the LokPal bill is going to do anything, people were similarly ecstatic that RTI will root out corruption, what happened those activists that pester the powerful with the RTI reach the graveyard and no one does anything about it

http://www.sify.com/news/pune-rti-activist-murder-case-handed-over-to-cbi-news-national-kehsubiffcb.html


http://timesofindia.indiatimes.com/india/BJP-MP-to-be-questioned-in-RTI-activist-Shehla-Masoods-murder/articleshow/9821164.cms

and countless other murders that would have taken place before the activist became famous. Laws are useless in the absence of a unbaised and rigorous implementation, and we all know that this is not going to happen, so why all this hoopla.

Anonymous said...

"Laws are useless in the absence of a unbaised and rigorous implementation, and we all know that this is not going to happen, so why all this hoopla."

This is exactly right. There's plenty of laws on the books to deal with corruption right now. What is missing is broad-based enforcement (why would such laws be enforced when the enforcers - politicians - are the people most affected if such laws are implemented?).

This whole idea that LokPal will change anything is a lot of nonsense. Real Estate corrected in Japan, US, Spain, UK, Dubai and now Australia due to market forces and not due to some ridiculous new law.

Black money, government meddling and the developer-GOI nexus may keep real estate afloat for several years but ultimately the laws of economics will prove too powerful for even these potent forces to combat (don't take my word for it, just ask the US Federal Reserve).

But for now, I think we must concede that the "it's different this time" folks have firmly won the round (3 Years has elapsed since 2008 and the RE market is stronger than ever).

polt said...

" But for now, I think we must concede that the "it's different this time" folks have firmly won the round "

We'll see :) http://globaleconomicanalysis.blogspot.com/
(Recessions looming in Brazil, China, AU, Canada. The countries that escaped last time around). Will we really be different?

Anonymous said...

Read somewhere that Robert Vadra, ghar-jamaai of the Gandhi family has invested billions of dollars in RE including stake in DLF?!!

I think this is one of the easiest things Lokpal can expose. A low hanging fruit if you will...

aam aadmi said...

@Polt
And even if BRIC's escape the worst of recession, they will not be able to escape the effects of peak oil, I'd love to see how our growth story fares in the face of 200$ Oil.

Anonymous said...

If at all Gandhi family including vadra family had or has investments in any clandestine Indian company s or any link to them, BJP would have exposed it long back. People just want to spread rumors like Tata and Birla groups have links to Hawala business run by Dawood Ibrahim.

We have to wait and see what effect this bill has or will have on real estate.

shailesh said...

MMR realty sales plunge 60 pc in two years

Mumbai Property sales in the Mumbai Metropolitan Region (MMR) have plunged by 60 per cent between June 2009 and June 2011, according to latest figures compiled by the real estate research agency Liases Foras. Still, typical of the highly speculative nature of the financial capital’s realty market, the weighted average rate of an apartment in Greater Mumbai has rocketed to an all-time high of Rs 2.24 crore.

This means that for the price of one apartment in Mumbai, you could buy four apartments in cities such as Hyderabad, Chennai, Bangalore, National Capital Region (NCR) and Pune, where the rates are in the range of Rs 44-68 lakh. The weighted average cost is the total capital value of all flats divided by the total inventory.

“In every city except Mumbai, there were several new launches in the affordable housing sector. That’s why the average prices have remained stable,” said Pankaj Kapoor, CEO of Liases Foras. He pointed out that even though there were a lot of new luxury residential projects in Gurgaon, the affordable housing stock in Noida and Greater Noida went up from five million to 105 million sq ft in the past two years. “This sort of an equilibrium ensured that average prices in overall NCR do not register a steep increase. In case of MMR, even the new launches in the peripheral areas of Navi Mumbai and Thane were mostly for the luxury segment, both in terms of sizing and pricing,” said Kapoor. He added that the current stock of unsold houses in MMR will take at least 40 months to be cleared at the existing absorption rate. A healthy market doesn’t take more than 8-10 months, which was the case in June 2009.

shailesh said...

All signals turning red for shaky real estate sector

polt said...

"Mumbai Property sales in the Mumbai Metropolitan Region (MMR) have plunged by 60 per cent between June 2009 and June 2011"

If this is indeed true, expect a correction. No amount of black money, etc can sustain an irrational market for ever.

Anonymous said...

I laugh at people who think the Lok Pal will be able to do anything. Mainly because, I don't think the "strong" Lok Pal bill will be ever passed!

The government wanted to get the "Anna-mobs" out of the streets, and the succeeded. What next? Honestly, you think they are going to pass the bill with Laloo Prasad Yadav on the standing committee, do you?

If anything will be passed, it will be the wind that Laloo generates - after ten aaloo paranthas and a nice afternoon nap. In Lok sabha.

Anonymous said...

Democrazy is mob rule. You can create a mob for any reason.

samix said...

Democracy is a crazed and failed idea.

As one famous quote by a smart man goes, "I can tolerate democracy with one fool for one learned man, but two fools for one learned man is too much"

if an issue is put to vote with respect to rocket science and if 10 drunkards vote against 2 rocket scientists the rocket scientists will lose, can it get more absurd ?

Anonymous said...

Yes block voters like minorities is a drag, which can only be countered by majority block voting. Untimately the media education and intellectuals are responsible to create awareness about the true direction of country.

Pawan said...

@Samix,
Democracy is a crazed and failed idea.

And what's your alternative?

Lokpal won't achieve anything
So what will?

Criticizing others is very easy but these people are at least trying. What are we doing? B$hixxing from our computer desk?

aam aadmi said...

@samix

Problem is not with democracy, it's with the concentration of power. Democracy works well when it's at a small level and there is a direct contact between leaders and people.

What is practiced in India is not democracy by any stretch of imagination. Concentration of power is also the reason socialism failed and capitalism is doomed to fail.

samix said...

@aam aadmi, yes I agree with you.

@pawan, The alternative is a revised form of democracy where not every tom dick and harry is allowed to have a say, with every idiot allowed to occupy public office.

Rather, the once who aspire to occupy ministerial positions should qualify just like the IAS, IPS etc and should be made to undergo trainings, and their office should be relevant to their training.

similarly not everyone should be allowed to vote just because they have managed to breathe for more than 18 years, rather voting should be a privilege that should be accorded to the one's who have proved worthy with some examinations and trainings.

Also not all those who have been accorded the privilege to vote should vote on every topic, rather their vote should be restricted to their field of expertise.

We follow all of these above points in our everyday business dealings, in the house or in the company where we work, we do not make investments just depending on majority vote, neither we take big decisions on our life based on majority opinion, but everyone starts supporting the majority idea
when it comes to running the country, why ? is running the country any easier ?

Pawan said...

@Samix
The alternative is a revised form of democracy where not every tom dick and harry is allowed to have a say

I used to think the same when I was a kid but no more. It is a dangerous line of thought.

Education gives you neither character nor common sense. Example - Harvard educated P Chidambaram and a well known lawyer Kapil SIbbal.

An educated and well respected man can be coward to the core. Look at our PM.

Do you think these people can run the country any better?

Parliament is a body where every group should have sufficient representation - whether they are illiterate farmers or brave soldiers or doctors or lawyers. That is democracy.

No system is perfect - we have to make it work. RTI was the first step, lokpal is next and finally electoral reforms with state funding of elections and right to reject and recall. Step by step, we are getting there. In 20 years, we will be a much better democracy.

Anonymous said...

it is the educated, rocket scientist that is doing the cheating. He is so smart, he is outsmarting the 90% of the regular brain humans.

Anonymous said...

Chinese Real Estate: A Housing Bubble to End All Housing Bubbles?
Posted in Mortgage Rates
September 2, 2011

The U.S. economy is still reeling from the effects of the 2007-2008 collapse of the housing market. European economies, including those of Spain and the UK, were also hard hit from the same housing bubble syndrome. Back in the early nineties, Japan’s economy, then the fastest growing major economy in the world, suffered a similar collapse, one from which it has yet to completely recover.

Chinese real estate is the latest housing bubble candidate some prominent international investors have been warning, the bursting of which would dwarf all those that occurred previously. Will excessive debt creation, leverage and rampant real estate development and speculation derail the Chinese economic miracle?

How the Chinese Housing Market Became a Bubble

Growing at double digit rates since the late eighties, China has emerged as global economic power. While manufactured exports have been the engine for China amassing over $2 trillion in foreign exchange reserves, Chinese real estate and property development and investment have been the principal outlets for the savings of increasingly affluent, predominantly urban, Chinese.

Yet despite spectacular growth in housing supply, owning their own home remains increasingly out of reach for the vast majority of Chinese. Rampant real estate development and speculation have led to the building of entire “ghost cities” that are nearly, if not completely, vacant. As many as 64 million Chinese apartments are vacant, according to some estimates.

Anonymous said...

Absolutely - also with more awareness - now the genuine buyers should avoid paying black money to any seller - builder/investor/speculator. If that means paying more taxes then be it. This will help reduce the home prices as creation of black money will be in check.

Anonymous said...

Looks like Indian Sensex is on dope. The investors are getting out our of stocks everywhere in the world except Indians are buying. We in India are in out own world. When news is negative, we brush it off saying it is a outlier and when it is positive, we buy. Maybe GOI has funds allocated to keep buying stocks to keep the Sensex propped up unlike the bubble in RE.


I think it is all going to end really bad. Sensex should drop by 500-600 points this week if it is in line with world.

Anonymous said...

"The investors are getting out our of stocks everywhere in the world except Indians are buying. We in India are in out own world. When news is negative, we brush it off saying it is a outlier and when it is positive, we buy."

Precisely. This is why asset prices (including RE prices) in India NEVER fall. There is only one thing Indians fear more than falling asset prices (which again, NEVER happens - especially when measured in Rupees) and that is having the purchasing power of money whittled away by INFLATION.

This is why Indians bought real estate like coke when the rest of the world was selling in 2009. This is why the Sensex came roaring back to 20,000 just months after the deflationary events of 2008. Even witness the latest pullback of the SENSEX where the index is bouncing back day after day with RELENTLESS momentum.

GET THIS INTO YOUR HEAD ALL OF YOU: ASSET PRICES WILL NEVER FALL IN INDIA.

KAPISH?

Anonymous said...

Are u drunk sir? Or just started following index? Index went up from 4k to 22k and went back to 9k. From 9k it zoomed back to 22k and now trading at 16 k. Stock markets are cyclic and traders and investment bankers make money in cyclic market, not traditionally one directional market.
So wake up from your dream and start leaving in the real world. FDI has been driving force for Indian market since turn of century and they are the one who turn market up and down. Indian mutual funds are spectators. When 1-2 billions $ invested in market, it jumps by 600-700 point in one day similarly it goes down when reverse happens.

Anonymous said...

"Are u drunk sir? Or just started following index? Index went up from 4k to 22k and went back to 9k."

Read my post again, I meant that the Sensex came roaring back after 9k. How long did it stay at 9k? How long did house prices correct in 2009? 20 milliseconds? You're a tool if you believe that the Sensex is going to be at 16,000 for long.

Asset prices have never gone down on a sustained basis in India. Never have, never will. Even depreciating assets (like motorcycles and motorcars) are sound "investments" in India because over the long term, their nominal returns will still be positive.

Anonymous said...

Has anyone ever used this firm, Heraldland.net:

http://heraldland.net/oldwebsite/promotion/english.html?gclid=COXZwrP2hqsCFYYmtAodUEM90A

They purport to sell plots of land in London (London!) from as low as $23K (i.e. a laughably low INR 10 lakhs).

They advertise heavily on the Internet but strangely I have not been able to find any forum discussions or end-user review of their products anywhere on the Internet (and I have googled hard for such information).

Has anyone else come across these ads from Heraldland? Has anyone else thought along the same lines as above?

Any thoughts/comments appreciated.

Anonymous said...

Asset prices have not deflated?


Just look at the RE stcoks on BSE and they ae the depressed level for the last 2-3 years while rest of the market recovered.

Who says asset prices remain elevated in India?

Anonymous said...

I think "Big Fools" are those people who are too optimistic on the false growth and easy debt India's growth story.

If they are too optimistic, please buy more RE and Stocks. I'm shorting everything I've in India as it is too good to be true. I hope sanity comes back to markets and RE prices. If not, I'll be happily renting.

Jai Hind.

Anonymous said...

Interesting thing is that there is no difference in the way RE bubble formed all across US and EU. Then it burst. Still countries like India and many others don't learn even one bit to control it in their countries. They will have to suffer the same way US/EU are suffering and even worse as speculation has been at greater extents in these countries. It is just a matter of time. I doubt the intelligence of people running all these countries. It is written all over the wall but they try to come up with excuses that why they are different.

Anonymous said...

Housing prices firm up across Indian cities:

http://articles.timesofindia.indiatimes.com/2011-09-05/india-business/30114958_1_housing-prices-nhb-residex-property-prices

"Bhopal leads the pack with a gain of 34.13% followed by Faridabad which has witnessed an increase of 33.33%. Housing prices in Kochi have risen 24.42%, Surat 16.41%, Delhi 16.67%, Chennai 13.76%, Hyderabad 9.6%), Bengaluru 4.5%. The financial capital Mumbai has shown an increase of only 3.4% followed by Ahmedabad 2.4%, Lucknow 1.9% and Pune 1.35%."

Got stupid?

Pawan said...

"Bhopal leads the pack with a gain of 34.13% followed by Faridabad which has witnessed an increase of 33.33%.

Let's face it - these are not tier one cities. And they are going up like crazy. It is just like the last phase of a bubble where large caps have gone so up that they can't go any higher and then traders focus on the second and third grade small and mid caps stocks and push them higher.

Why will someone buy in Gurgaon or Noida over Delhi? Because Delhi is unaffordable.
Why would anyone buy Faridabad and Manesar over Gurgaon? Because Gurgaon became unaffordable too.

Keeping your head when everyone is losing theirs is not easy but then why should it be?

Bangalore Property said...

A typical wish for housing in bangalore revolves around 2 to 3 bhk homes.I had read some good comparisions which cleary swings wellworth city way.Reall plush greenry and superb location,it really gives a chance to enjoy world-class living like never before.

Anonymous said...

@Polt, Pawan,

Any views/comments on the company listed in my 1:30PM post. Have you ever come across that ad/company before?

1:30PM

polt said...

@anon,
No, I have not heard of that firm. But I do recall reading in the FT about another land-bank firm that went under a few weeks ago. If you ask me, you should stay away from this one.

polt said...

Saw the small print - " The products of Herald Land are not to be marketed to persons in the UK or the USA and as such does not fall under the jurisdiction of the FSA, or the SEC."

Definitely STAY AWAY !

Anonymous said...

@Polt

"Definitely STAY AWAY !"

Good call.Didn't see that annotation at the bottom.

Thanks.

aam aadmi said...

LOL. Stocks are going up again, welcome back to the growth story.

I wonder what it will take them to see the reality, maybe a 150$/bbl crude will put them in their place

samix said...

@pawan even if we agree on your points, still the system fails us because the common man is never involved in the decision making process.

Neither are we involved in drafting bills neither do we vote on them.

We are not consulted before any decision taken by the governments with other countries, the treaties that our country signs with other countries are never put to vote to the common people.

Important positions are always appointed, important policies are only decreed, do we vote on the rate of tax or the RBI policies when they affect us so closely, and so many other things.

Was there any referendum when the manmohan singh government did their version of QE ? the sector where they pumped the money ? the people who got the money ?

We all know that policies are drafted by bureaucrats and they are the one's who make and break all the decisions, do we elect them ?

The common argument that we get is that in the next elections the people can vote out the culprits, but unfortunately by then the theft has been committed, monies have been transferred and the country reduced to ashes.

In short according to me, the current form of democracy only gives the masses the illusion of power.

Pawan said...

In short according to me, the current form of democracy only gives the masses the illusion of power.

Absolutely true! That's why RTI, Lokpal and electoral reforms are needed.

Lets keep our skepticism aside for a while and embrace the changes being demanded by civil society. After all, what is there to lose?

samix said...

Obama announces QE3

In a bid to spark economic growth, President Barack Obama announced Thursday a $447 billion package for creating jobs.

http://finance.yahoo.com/news/Oil-below-88-after-Obama-apf-744535119.html?x=0

Anonymous said...

Real estate never falls in India. It's different here. Sales may go down but prices won't go down.

Look at asset prices falling across the world but RE prices have barely budged in India. As I said, this is not a bubble and this time it's different. Demand greatly exceeds supply.

I hope this helps.

Anonymous said...

If sales goes down, sooner or later prices too will go down...as agent smith would say, that's the voice of inevitability...

shiva said...

"Demand greatly exceeds supply. "

The supply has not and can not cope up with the rising demand, at least in Mumbai. There are lot more moneyed people im Mumbai currently living in substandard homes and are content with their living standard but the same cannot be said about their children. This hidden demand can not be be met with any sort of construction boom in the near future. Therefore, we may not see ant price falls at least in the coming 109 years

Anonymous said...

current price level is not justified. let's compare Cupertino, California and Jayanagar, Bangalore.
Both are very nice places to live with good schools and job opportunities. Currently 6000 sqft land and 2000 sqft in Cupertino goes for 5 crores. A 4000 sqft plot in Jayanagar (50x80) goes for 5 crores. Both towns have no room to grow.
Education is not free in India. Infrastructure in India is no where close to US infrastructure. Quality of life in US is better as well. No corruption atleast at grass root level. Commute in Cupertino is lot better.
When prices in Cupertino are coming down, what makes Indian cities different. If you cite US economy, it will hurt Indian economy as well. So Indian cities are definitely over priced.

Anonymous said...

Correction :
Ref. above

Therefore, we may not see any price falls at least in the coming 10 years

Shiva

Anonymous said...

@Anonymous computer coolie 2:46PM

Your comparison does not make sense. I too lived in California and the living conditions are totally different. Jayanagara suffers from chronic water shortage as well as electricity cuts and sanitation. Prices are high in India because of over population and lack of land. These things do not apply to US cities.



Shiva

Anonymous said...

Shiva, that is exactly my point. Cupertino and Jayanagar are considered premium localities. There is no vacant land in Cupertino either and most indians want to live in Cupertino because of good public schools.
Most of US population is concentrated along east and west coast.

Anonymous said...

If this is a bubble, then there is a bubble in the entire developing world. No one has satisfactorily explained this or even analyzed this. There is now a housing bubble across the entire developing world from Brazil to Nigeria to Sudan to Kenya to South Africa to Pakistan to India to Bangladesh to Malaysia to Singapore to Vietnam to China to the Phillipines.

What has caused this housing "bubble" throughout the entire developing world? If this is a bubble, why didn't it burst along with the developed world's bubbles in 2008? And if there is such a bubble, why is India unique in having a bubble? Shouldn't the bubble burst in other places as well?

I'm afraid there are too many things I don't understand about the present economic situation.

One thing is clear, nothing can be said with too much confidence.

Anonymous said...

Well

All this construction and boom you are seeing is black money invested.

So all this u see is black money getting converted to buidings.
That is why sales are so less.

Now one day black money will disappear. Then what?

No more construction. Rates have to come down. im waiting for that day. Until then ill rent.

Even Rents go up 10% every year but thats ok. Even FDs give 10% a year. so im happy with this life until i get the money to buy my flat :)

Pawan said...

If this is a bubble, then there is a bubble in the entire developing world. No one has satisfactorily explained this or even analyzed this.

I agree. I raised the same Qs earlier when I mentioned that Gold and Stocks are also up 5-7 times in last decade in India so why don't we say Gold and Stocks are in a bubble. Why only RE?

From last year, when RE prices in Delhi and Gurgaon looked insane, they have gone up another 50%. Someone somehow has the money to buy RE even at these prices. Anyone who bought something for 1.25 crore last year, has an asset worth 1.75 crore in hand. Now even if prices correct by 50L, you still get to the prices a year back. And I am sure as soon as price is down by 25L, lots of folks would jump in.

Interesting thing is that people who are flipping properties real fast will never lose. They don't hold anything long enough to lose. The only loser, if any, would be end users who will buy once and hold on for their lives.

Even if there is a bubble in all of emerging world, it will take years to deflate. So if you want to buy at sane prices, wait for another decade. In real terms you may get RE cheap then. In nominal terms, I don't see a chance.

shailesh said...

Some reasons,

1. Too much money chasing too few projects.

2. Lack of developable land. One needs basic Road, Water and Electricity near Urban areas for development.

3. Increase in Income. Lot of 2 earner families. Additionally, people in IT, can earn / save a lot of money on international assignments.

4. Increased leverage. Earlier builders were leveraged, now even Investors are leveraged. This leads to again too much money chasing too few projects.

5. RE is not as liquid as Stocks and Bonds. That results in significant lead and lag time.

6. You only need few transaction to increase the market price levels. Most of the time, RE is purchased with emotions attached, unlike Stocks or Gold. Hence there will be always someone making buy decision. Every transaction resets the price.

7. Lack of transparency. It is not possible to verify price paid by any buyer. This leads to lack of information for many. So even if bubble is bursting, not many people will now right away.

This music will keep playing and dance will continue. When will music stop, no one knows. Affordability is out of window. This is exactly what happens when there is bubble. California was un-affordable in 2006 and 2007. Today it is starting to look affordable, even compared to Jayanagar....

shailesh said...

One of the better analysis...

Real estate, unreal times

There is no intrinsic reason why land values could not fall in India. It happened between 1995-1998 in several upmarket areas in Mumbai and Delhi. There’s a bigger cushion against default than in the US. The official price of most Indian real estate is less than the actual price. People often pay black cash components and that means greater commitment to mortgages.

However, consider the case of recent mortgages. In these, the borrower has incurred less sunk costs and the lender has correspondingly larger exposures. Somebody who bought a house in early 2011 has since seen a hike in interest rates. If the value of the house falls sharply in the next 6-12 months, it may make sense to default. That would mean huge write offs for lenders. In this scenario, one sharp short-term correction in real estate values could trigger higher default rates. In turn, higher defaults could create a crisis for over-leveraged and cash-strapped players in the financial, construction and developer sectors.

It’s still a low probability scenario. But the chances of it are rising. If it does happen, it would hurt more than an equity bear market. Diagnosing it early would also be very difficult, given a lack of reliable sector data and the opacity of balance-sheets of operators across this value chain.

While most analysts publicly ignore this possibility, nervousness about it could be one reason why the real estate sector has continued to lose ground. It’s been beaten down but it could take a further beating. It’s not yet time to buy into the sector.

samix said...

@pawan, this is what I was proposing and it already exists in switzerland

Frank Suess: At the core of the Swiss system is the concept of a direct democracy. It allows Swiss citizens to vote directly on government decisions via initiatives and referendums. Every three months, we vote on specific issues and laws. Thus, contrary to all other democratic systems that I am aware of today, we do not merely elect our representatives to Parliament. We actually have the right to accept or reject the ideas and laws they propose. That creates a whole different level of control and accountability.

Pawan said...

@shailesh
One of the better analysis...

Thats for real-estate stocks not finished product.

Gopal said...

Hi everyone:

While a lot of articles and media often quote Knight Frank, Liases Foras and other research companies and the Per Square Rate by area, is there any data on Actual Prices paid by the end user (or investor)?

Is any data available for trends of Actual prices paid?

Or is such data impossible to get given all the black money involved?

Thank you.

Anonymous said...

http://www.business-standard.com/india/news/home-sales-takebig-knock-set-to-worsen/448816/

Pawan said...

If it gives any solace:
http://www.heraldsun.com.au/news/more-news/agents-dump-sellers-over-dream-2010-prices/story-fn7x8me2-1226133874621

Anonymous said...

why are some peoples chaping videsi links in desi blog. what has vides has to do with us. If not happy, go live in vides
Please write about Mumbai, Delhi, Madras, Pune real estate. No use knowing america, london, singapore

Raheja asking 15500 per foot in new malad complex. it was 12500 in May. 25% in 3 months. He say that in december rate maybe 17000. I have money but not sure what to do. is he fooling . is it good to wait.

Anonymous said...

Anon above:
You are a big choot.

--Have you heard about Globalization?
--Have you heard about printing of massive money by central banks all around the world?
--Have you heard about maasive debt Govts all around the world have taken to fuel this bubble?
--Have you heard about John Maynard Keynes?

If not, go and read about above before you say "do not throw videsi news here".

Do you know how much GOI borrows to pay these high salaries of a bloated Government?

My take is RE in India will fall by 60% or more in coming years. If you have other ideas, be my gues and buy as many flats as you can. I would only suggest that don't be too optimistic about your job as massive layoffs are coming and salaries to be reduced by half.

US/EU have had their share, Asia/Aussie will be next to suffer for 10 or more years.

Anonymous said...

Someone asked why Sensex is not falling as much as compared to other countries in the same percantage ratio:::

The answer to that is GOI is still printing masive money and is buying itself in the stock market through mutual funds of govt. entities like SBI, UTI etc. You would see many time in the last 30-45 minutes market goes up and that's when these buying kicks in.

It is all a rigged game. The same is happening in other countries but is is very high in Indian stock market.

GSM said...

Raheja asking 15500 per foot in new malad complex. it was 12500 in May. 25% in 3 months. He say that in december rate maybe 17000. I have money but not sure what to do. is he fooling . is it good to wait.

36% increase in 6 months!! and if the bet is leveraged on a home loan at 12% interest, the profit is 400%. I don't see why anyone of us in the blog have to work hard everyday. Just flip RE and live like a millionaire!!!

Anonymous said...

@Anon
Ask Raheja how many flats have been booked (ask for hard evidence).

aam aadmi said...

Anyone buying RE at such inflated prices is a fool.
The global party is over. Euro will crash within the next two years and by the looks of it Rupee will drop to 50 levels, this will mean a combination of high inflation in a low growth environment, the worst possible combination.

Best of luck for a high growth future

aam aadmi said...

If someone is hell bent on making money I guess trading agri commodities is the best places to start now

Anonymous said...

Today, i go to Raheja office to make more enquiry. I go with my lawyar who also dealing real estate.The Raheja manager said that rate is fixed and not i rupee discont can be given as many people in line. 50% cash or cheque without writing payee name must bring before sign any paper. This offer is only valid up to sept 20 because my lawyer is his friend. Rate is 15500 on 9th or 10 floor. 2 bwdroom 1050 foot flat.

Anonymous said...

"Today, i go to Raheja office to make more enquiry. I go with my lawyar who also dealing real estate.The Raheja manager said that rate is fixed and not i rupee discont can be given as many people in line. 50% cash or cheque without writing payee name must bring before sign any paper. This offer is only valid up to sept 20 because my lawyer is his friend. Rate is 15500 on 9th or 10 floor. 2 bwdroom 1050 foot flat.
"

Hi, I am interested. 20 Sep is the last date right? Ok email me quickly and ill be ready with all these things. Cant wait for a price fall forever. Please email me at

fcuk.raheja@patience.pays.com

:)

Anonymous said...

"Hi, I am interested. 20 Sep is the last date right? Ok email me quickly and ill be ready with all these things. Cant wait for a price fall forever. Please email me at

fcuk.raheja@patience.pays.com"

Hahahahaha!!! Brilliant repartee!

We need more posts like this to counter the paid shills. LOL!!!!

Anonymous said...

"My take is RE in India will fall by 60% or more in coming years."

60% in real terms or nominal terms?

ShashankRao said...

I dont get it when people justify high RE prices are because of demand not meeting supply.
If one look around whole Mumbai city, you would find only fraction of the Mumbai land has high rise building. The famous South Mumbai areas like Marine Drive/Colaba/Fort/Grant road have mostly 3-4 story buildings. And not to forget many slums like Dharavi are occupyng large tract of land.The is enough land in the Mumbai and enough space in the air to build high rises that are slowly propping up. RE property rates are surely going to come down.
Times Of India routinely publishes stories about high ticke sales. To me they are nothing but builders sponsered ads to show the market that RE market is still 'HOT'

Pawan said...

Guys,

See this http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=16321&cat_id=2

This is insanity if nothing else. When equity markets, which are a reflection on country's broader economy and sinking by the day, PE players are trying to milk RE developers demanding 25-40% returns per annum. Obviously for such returns to be generated, RE must go up by a higher amount every year. This is a situation similar to riding a tiger. Developers cannot cut the ticket price and at these prices sales won't happen!

Expect some fireworks soon!

polt said...

>"I dont get it when people justify high RE prices are because of demand not meeting supply."

I agree. Firstly, our population was growing faster in previous decades than now. How come we did not exponential price gains?

Secondly and more basic, the potential home buyers aren't exactly homeless. They are staying somewhere. It might be small or not to their liking,etc but its still a house and not an abandoned large sewer pipe. In the absence of easy credit or due to high home prices or due to economic uncertainty they can simply chose to continue staying in their present home.

Also note in many cases that when they buy a new house, they leave behind an empty one. Unless of course they were staying with parents/relatives,etc and actually creating a "demand" for a new house.

Anonymous said...

Everyone,

Please note that MagicBricks is owned by the timesgroup so you will never see property in a bad light. THAT IS GUARANTEED!

Ok, now everyone sees the market rates on Saturday - Property Times.
Look at the disclaimer below. These are based on property prices on MagicBricks!

So what does that mean?
It simply means that there is no sense in these prices. Suppose i have 10 properties at 20000 and one moron posts his price at 50000
the average for that area naturally goes up 2-3%.

So PLEASE KEEP IN MIND that all these rates are complete whitewash. As my dad says, "People are quoting rates as they come out of their mouth" lol

Its a simple theory. Let us quote a rate which seems unreal. One fool will come along and buy. In india there are plenty of fools but people on this blog seem to be smart. So dont worry. :)

We will eventually get the house at the rates we wanted.

I am amused to see so many developers begging to buy their flats. Consumer is king, he really is.

aam aadmi said...

Hahaha Petrol went up by Rs 3 again. There goes your inflation out of the window

Anonymous said...

Transferring our productivity/profits to Arab sheikh. Need an alternate engergy source.

Anonymous said...

"Hahaha Petrol went up by Rs 3 again. There goes your inflation out of the window"

What does 3 Rupees matter if you're a Crorepati? Everyone who owns a house in any Indian city (including 2nd tier and 3rd tier cities like Pune, Ahmedabad, Coimbatore or Chandigarh) is now automatically a Crorepati. That's all you need to do: just buy a house and you get instant access to unearned wealth. 3 Rupees doesn't make or break house-owning Crorepatis.

skeptic's ghost said...

Uncle Bernanke, Geitner, Sarkozy and Merkel today agreed to rescue India-like corrupt Greece by Chapaoing more US$ and Euro - Guess who bears the brunt of the inflation caused by this - people who save money - in China, in Asia, and some people in Europe /US - saving money makes sense where money supply is limited - that has ceased since 1998 after the dot com bubble started - (paper) money is just a number - its an output of computer program or excel sheet that coolie programmers of Goldman sachs & cronies or the Fed, ECB, Central banker baboos come up with.


Only war/ natural disaster will bring down RE in overpopulated emerging markets

Anonymous said...

3 rupia prtrol increase not big thing. Big thing is house price. Price increase everyday. Last year we stop milk busness and sokd tabela land one muslim builder in Jogeshwari. He gives us 8.5 crore and we 3 brother share. Now this builder clean the place, make fence and sell to one rajastai buider for 21 crore rupia. In one year he make 12.5 crore. We dont know what coming up there but we made big, big mistake.

Home price everyday increase. I search malad area and price start from 8500 for foot to 15500 for foot in good building.

Pice will increase in short time. It is bettar to buy now, but dont buy with loan money. If not have cash, dont buy.

I am intrest in kandivili and borivili area. If anyone know good place, please write. I am not trusting lawyar or agent, as mine came to know today is 420.

Best wishes

Anonymous said...

As long as money printing goes on worldwide, RE prices will remain strong. CHF was the last reliable fiat currency and now it is gone. Gold is hopelessly expensive but will probably keep going up because...well...everybody, I mean everybody including the shoe-shine boy expects it to keep going up (much like Indian RE really).

Cash? negative real interest rates at the banks.

So what is a saver to do? Solution: Don't save. Spend on vacations, luxury cars, furniture, girlfriends/boyfriends, etc. Better still, get yourself an education by teaching yourself useful life skills.

Or purchase useful non-perishables in as large quantities that you can afford. These include: Ghee, Honey, Sugar, Wine, Whisky, Champagne, Shaving Razors, etc.

If you're more adventurous, leverage up as much as possible and buy assets.

I'm afraid the Central Bankers of the World have jinxed the world with moral hazards and recklessly speculative behaviour.

You can run but you can't hide.

skeptic's ghost said...

@ last poster - You can spend and enjoy if you are single or you are married without kids - the moment you add your kids to the equation everything changes - So long as people posting here are single or recently wed- they can enjoy but others need to be careful about the path they choose to invest their money -

Stocks, MFs, bonds and FDs are not going to add to your wealth the same way they used to a generation ago. Nothing makes sense in the Market - which reacts in totally unexpected ways as computerized algorithmic trading defies human logic and speed.

I have been reading this blog since 2006 (and before it this was being discussed on forums) and carefully bought my house in the dip of 2008-09. By then I had realized how governments will keep bailing out failed banks and thus the builders/promoters of businesses whom these banks lend money to.

Indian population boom does not actually imply there is shortage of land - there is plenty of land, what lacks is civic infrastructure as babus+netas have become unrealistically corrupt along with their crony capitalist seths and crony bankers.

Honest working class population has been repeatedly hoodwinked - especially by the 2 McManmohan administrations - besides that
the commodity price hike is completely due to Goldman Sachs and friends who are speculating on derivatives with long only call aided by Bernanke's and ECB's printing presses of money borrowed from Surpluses in China, Taiwan, India, SE asia & Oil producers.

Common cyclical business model does not work when things are so complicated - Every party in the process looks for their own interests and will do anything possible to stave off losses -
The losses are handed down via inflation to the common man.

Jai Ho - Aicha Gho - Keep watching the show

aam aadmi said...

@Anon at 1:19

As long as money printing goes on worldwide, RE prices will remain strong. CHF was the last reliable fiat currency and now it is gone. Gold is hopelessly expensive but will probably keep going up because...well...everybody, I mean everybody including the shoe-shine boy expects it to keep going up (much like Indian RE really).

The more they go against the nature the harder the fall, I used to be in the sceptic category earlier, now after seeing the response of authorities to any crisis I am in the doomer category, this will only end in a war and an economic catastrophe.

samix said...

I think you guys should see through the MSM propaganda and approach gold with a fresh perspective. Remember the only monetary asset that the goldmans of the world and governments cannot print/dilute and manipulate is none other than gold.

The world has always been on some type of a gold standards for the past 5000 years, full(US dollar, pre 1971) ,partial(Swiss frank, pre some decades), never has human society every been on a purely symbolic currency ever before in their history.

What can I say, the choice is yours.

Anonymous said...

"Remember the only monetary asset that the goldmans of the world and governments cannot print/dilute and manipulate is none other than gold."

If you think that governments and goldmans aren't manipulating gold, I have a palace in Agra I'd like to sell you.

"The world has always been on some type of a gold standards for the past 5000 years, full(US dollar, pre 1971) ,partial(Swiss frank, pre some decades)"

I'm afraid there are many inaccuracies here. Many societies used sea shells as currency for centuries. Others, like ancient Mesopotamia, used wheat as the currency. Copper was used as a currency in Cyprus. Other societies didn't use currencies at all and instead relied solely on barter transactions.

I'm afraid Gold doesn't interest me at all. Yeah gold went from 1400 to 1800 in less than a year. How is that more interesting than a stock going from $1.4 to $1.8 within the same period?

No stock would ever make news for going from $1.4 to $1.8. Yet, in terms of investment growth it is exactly the same as Gold going from 1,400 to 1,800.

samix said...

If you think that governments and goldmans aren't manipulating gold

you are right, they are manipulating gold, what I meant by manipulation was printing up more gold, indeed they can sell as many paper gold as they want, but their bluff will be called the moment people demand delivery.

I'm afraid there are many inaccuracies here. Many societies used sea shells as currency for centuries. Others, like ancient Mesopotamia, used wheat as the currency. Copper was used as a currency in Cyprus. Other societies didn't use currencies at all and instead relied solely on barter transactions.

The periods that you mentioned did exist and people did use barter, but for most part of human history we have been using gold for commerce, who says so ? not me listen to what charles de gaul has to say

"Betting against gold is the same as betting on governments. He who bets on governments and government money bets against 6000 years of recorded human history."


Gold is not for speculation and to make a quick buck, for that you have stocks etc. gold is for long term wealth preservation, for the day when most currencies become nothing more than paper.

Because stocks, bonds and other paper are all denominated in some currency, whereas gold is not denominated in any currency except its own grammage and fineness.

GSM said...

you are right, they are manipulating gold, what I meant by manipulation was printing up more gold, indeed they can sell as many paper gold as they want, but their bluff will be called the moment people demand delivery.

By the time people understand difference between paper and physical gold, there would be a currency crisis. For all the gold bears here, to find out how precious gold is, try find out how many jewellers can deliver you 500g of pure physical gold on the same day.

Anonymous said...

Gold purchasers who buy with INR and US$ will do well. Those who buy Gold using Reals, CHF, EURs, Yuan or AUD's will get slaughtered.

samix said...

anon above why would they get slaughtered ?

GSM, good point.

Anonymous said...

"anon above why would they get slaughtered ?"

Well, because I don't think that Gold will go up that much against currencies like CHF, EUR or AUD. I think the most flawed currency in the World is the USD and that it will eventually take the US down with it in a giant ball of inflation. The INR is dirty-pegged to the USD and that does not seem to change anytime soon. As the USD goes so will the INR. Both these currencies will eventually fall against Gold dramatically.

As for Europe, they already have a Gold standard: the Euro: in the sense that Euros cannot be printed out of thin air in response to any perceived crisis. This is actually a good thing and the EUR is actually one of the last honest currencies standing. Greece and the other PIIGS would love to get rid of their debts by printing Euros. Only they can't because the EUR printing presses are in Frankfurt and under the grim, watchful, inflation-fighting gaze of the European Central Bank. This is of course unlike the USD which can be printed in seemingly unlimited quantities at will while the government cooks the inflation figures to show zero inflation.

Eventually, the rest of the world will decouple from the US and let the US stew in its own pot of excessive socialism, inflation and government regulation managed by leaders who've never held a single productive job all their lives (think "community organizers").

GSM said...

As for Europe, they already have a Gold standard: the Euro: in the sense that Euros cannot be printed out of thin air in response to any perceived crisis. Greece and the other PIIGS would love to get rid of their debts by printing Euros.

Before even anything happens to dollar, Euro would have broken apart long time. Euro concept in itself is fundamentally flawed. There is no way net export economy(like Germany) and a net import economy(like Greece) can have the same currency and exchange rate. And all that with a rider that weak economies cannot devalue their currency when the debt become unsustainable. The result is what we are seeing today. And it can only end with countries reverting to their own currencies and with the lending banks taking a haircut.

Anonymous said...

"There is no way net export economy(like Germany) and a net import economy(like Greece) can have the same currency and exchange rate."

Why not? Alaska is a net exporter while Connecticut is a net importer, yet they have the same currency and exchange rate.

What is important is that the Greeks restructure their economy by cutting wages and benefits after forcing haircuts on their lenders. Paying their debts away with printing Drachmas isn't going to solve their economic woes. If Greece leaves the stability of the Euro and reverts to the Drachma, it will visit upon itself an economic crisis that will make the current situation look like a pleasant stroll through the park.

Countries cannot print their way out of trouble, no matter how tempting it may sound. And things have never ended well for the countries that attempted to print their way out of debt (Weimar Germany, Zimbabwe, etc.).

The debt-ridden Western world badly requires austerity and restraint in government spending. To the extent that the Euro is forcing such restraint on its member states, that will only benefit the Euro zone's economies in the long term.

Euro is going to be with us for a very, very long time. Corrupt Greeks will not leave the Euro. Not because they're not stupid enough to want to try, but but they're not courageous enough to contemplate the alternative.

GSM said...

The debt-ridden Western world badly requires austerity and restraint in government spending.

Austerity never works especially in an ageing population where old people are dependent on social security. Didn't we see austerity imposed in Greece Bailout #1 of 110B Euros and an year later we back to square one or worse. What we need is an expansion in money supply with expansion in goods and services. If the households are in a deleveraging mode shrinking money supply, it needs to be offset by Govt borrowing and that is not possible with austerity. But unfortunately, whatever increase in money supply, it is going into bailouts black hole ensuring that there is none available for productive purposes.

Anonymous said...

"Austerity never works especially in an ageing population where old people are dependent on social security. "

Then that's a good reason to get rid of "social security" and return to the Asian model where children (and not the state) take care of grandpa and grandma. The problem with Europe is that the state has usurped much of the role of the family and that really is the reason for this crisis. If you look at the PIIG countries, they have the lowest birth rates in Europe. This is at the very core of the problem. Fewer children = Fewer new taxpayers for the Gargantuan welfare state.

"What we need is an expansion in money supply with expansion in goods and services. "

One doesn't necessarily lead to the other. America has been expanding its money supply like gangbusters without a pipsqueak uptick in productivity or "expansion in goods and services". Japan has been "increasing its money supply" for the past 20 years and a fat lot of good that did for it. Zimbabwe also raised its money supply and became a tinpot basket-case in the process. Sorry this whole Keynesian claptrap of stiffing savers to help the over-leveraged is not working (except for perhaps over-leveraged banksters and their CEOs).

GSM said...

One doesn't necessarily lead to the other. America has been expanding its money supply like gangbusters without a pipsqueak uptick in productivity or "expansion in goods and services". Japan has been "increasing its money supply" for the past 20 years and a fat lot of good that did for it.

Well thats my point. Both America and Japan bailed out their financial institutions with the new money printed. If only they were not bailed out, the same money supply could have helped in other sector of the economy where there is a real problem (like say renewable energy) and that wouldn't be inflationary as that money would be chasing something new. More importantly it would have bought supply to a real problem while creating jobs and growing the economy.

Anonymous said...

"If only they were not bailed out, the same money supply could have helped in other sector of the economy where there is a real problem (like say renewable energy) and that wouldn't be inflationary as that money would be chasing something new."

The problem is that governments do a terrible job in efficiently allocating capital. The Obongo administration spent billions on "Green Jobs" without putting nary a dent on the unemployment rate. For instance, Obongo "invested" over 500 million dollars in this solar power company called Solyndra which swiftly went bankrupt soon after the cash "investment".

Keynesianism has utterly failed. It has plunged the entire Western world into bankruptcy. The US government is broke. It has no money of its own. Any capital that it gets has to be redistributed from the private sector where it would otherwise be efficiently utilized.

Jobs are best left with the private sector to create. Governments may be able to create "jobs" but they can't create purchasing power. For instance everyone in the Soviet Union had jobs but what they lacked was purchasing power. When they came out of their offices and factories, they couldn't buy anything with the Roubles that they had earned over the past month. It is only the private sector that can create lasting prosperity and jobs. "Green job" czar posts headed by vapid ideological cronies is not going to do much to help.

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