Full marks to Sushil Kumar on winning 5 crores on the Kaun Banega Crorepati show. The builders have atleast one person who can afford to buy the priciest real estate in Mumbai or Delhi. If only there were more winners Mumbai realtors would use the KBC story to drive up prices to even more ridiculous levels
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Even he cannot afford it here
He is moving his base to Delhi lol
Seems like mumbai builder ka 'bakra' haath se gaya
But i see a lot of bakras on this blog who brag about how rates will ever increase and never come down.
He would have to pay a tax of around 40% plus other duties...totaling to a cut of around 45%+
Which means he would have about 2.6 crores in hand. Which mean he can probably buy a puny 2 bhk house for 1.5 crore or so after all duties and builder impose on him.
After which he would probably have around 1 crore which he can put in FD or equivalent to get 8% or 8 lacs/annum...with principal eroding to inflation in the next 5 years he would have nothing...
8 lacs/annum means after income tax equivalent to 50 thousand rupees/month. After paying maintenance and parking and grocery bills he would have nothing in his hand...no car he can buy, no 5 star restaurant he can go to etc...
So his 5 crore is worth not much as you can see. In another 5 years if he does not have a secondary source of income, he will be forced to sell his house and end up on the street!!!
A lot of people are saying that India's black economy don's are the one who have propped up RE and they will prevent it from falling. I think we are confusing cause and effect.
These people did not start the boom. They could not have. They joined the bubble when they saw it inflating. India's growing economy is giving an opportunity for a lot of people to generate a lot of undeclared income. This needed to be invested somewhere. Earlier also, I mean in the 80s and earlier, people used to buy benami properties, gold and whatever could be bought to retain value against inflation. RE bubble sucked up all this money since it looked like the best thing to everyone. And trust me, all this black money will not be able to sustain when the bubble pops. The size of our economy is around 1.5 trillion USD. US government printed double that amount under QE1 and QE2 and still the housing prices kept falling.
Why should one not invest in RE:
1. Interest rates are up - and inflation does not look like it is going down.
2. Circle rates (minimum white amount to be paid for any RE transaction) are up more than 100% in Delhi in last one year. People who bu 1 Cr. property with cash show their white income as 2L per year. They can not pay 50L white without alarming the Income tax guy.
3. Reversion to mean. RE is at historic highs and it can go into another orbit but the fall from there would be even faster. No point punting now if you waited out the last 5 years.
Why should one invest in RE:
India can get huge inflation where all paper assets lose value. RE will crash too but won't become worthless as paper.
RE prices can move into stratosphere. When everyone thinks prices will correct, they may go another 50% up (though I personally believe that has happened last year already).
Bangalore crash has started!!!
The number of apartments for sale has significantly increased W-over-W in the last two weeks. At this rate, the prices will drop by at least 20% by December. After that, a more dramatic fall will come unless they lower the interest rates. If they keep the rates fixed or make another increase, BLR RE is royally fu***d!!!
68% flats in Mumbai cost over Rs1 crore
The firm said a whopping 36,000 flats have not been sold as 30% of flats in Mumbai cost between Rs50 lakh and Rs1 crore; 38% fall in the Rs1-2 crore bracket while the remaining 30% cost over Rs2 crore. These include 2BHK and 3BHK apartments in posh areas of the city.
The average price of a flat in greater Mumbai (city and the suburbs) is Rs2.34 crore, up from Rs2.14 crore last year. The figure for the Mumbai metropolitan region (Thane, Panvel, etc) is Rs1.4 crore compared to Rs87 lakh last year.
“The average cost of a flat was Rs27 lakh in 2001. It is almost Rs2.34 crore now. Flat prices have gone up ten times in the past decade. There were 55% slums because of unaffordable houses 10 years ago. The figure is now 70%. If the prices do not come down, more slums will mushroom in the city,” said Pankaj Kapoor, managing director, Liases and Foras.
And we want to call India developed country and ask people to pay unreal prices...
A case of rise and sprawl
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“These cities are going to start collapsing under their own weight,” Jahangir Aziz of JPMorgan, says of India’s 10 biggest conurbations. “Local governments are in a state of denial – they don’t accept that these cities are in such a state that within a short period of time it will become almost impossible for them to do any business. Business is there now only because there is a very huge cost of moving out.”
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Cities are also short of officials to develop and implement urban improvement plans. India currently produces just 300 qualified city planners a year, most of whom join the private sector. Mumbai, India’s business capital, for example has not a single qualified urban planner in its municipal government, according to Mr Revi of the IIHS. As a result, cities have struggled to use even the limited funds available. “We don’t have projects chasing money,” says Mr Nath. “We have money chasing projects.”
EMI isn’t the only thing hurting: real issue is overpriced realty
Many Desi people in USA started buying house in USA instead of India. When I spoke to these new house owners, they say they had two choices
4% interest 30 years fixed + housing market bottom
Vs
12% interest floating + Market peak
and they chose to invest in USA as it may appreciate then the one in India.
If this trend continues USA NRIs are out in the game
However following players will still be playing strong.
1. Black money holders (politicians,Govt employees,business owners)
2. Speculators
3. Both husband and wife working
4. Middle east/Other NRIs
However my top ten reasons to housing bull market remains same
1.Black money economy
Black money can only be stored as GOLD & LAND for later usage as there is no other place to store the wealth.
Black economy does not need return on investments. Store of the wealth is high priority.
2.Job opportunities
This will increase one more decade in India till Chinese and other people learn English
When there is recession in USA and EU, Corporates will go for cost cutting and that means
more offshoring
3.NRIs and Working Families
NRI people will spend time to collect coupons for shopping cheap groceries but not when buying a home.
Both husband and wife are working and have a disposable income. This trend is increasing.
4.Pressure on white economy
Due to high inflation money is losing value very quickly.
Common man is pressured to store his wealth in GOLD or LAND
5.Owning a house is a measure of success . Everybody is doing it, I don't want to be left out.
6. People do not know the value of money.
Comparing a house in India
near a slum,
with no access to park
and no proper drainage to handle the rain
and no access to proper road to
Other countries house price is possible only for NRIs.but not for the common people.
People will compare the average price in US and India and not the amenities. This Apple to Orange
comparison blinds people
7.It will never happen to me attitude
Indians do not wear seat belts,helmets or life jackets because accident will never happen.
People have optimism as opium which blinds their eyes.
8.Real estate is where most of the blue collar jobs are available.
Govt will not let it down. you see USA is reducing the interest to 3.9 for 30 years loan
9.People who made money in Real estate is putting back their earnings to store the value
10. Only 3% of population is paying income tax. Rest all are involved in blackmoney.
@Krishna,
You may well be right! In that case buy stocks of companies that produce steel, cement, ply, bathroom fittings, white goods, cars etc etc. They are available at cheaper valuations compared to RE and hence will grow faster.
I am doing the same.
If you think about it, India and the world in general is suffering from some comedian's distorted idea of growth. Food and medical costs have become costlier but car and cameras have become cheaper.
Now get a BMW for free by booking a flat in China :
http://www.ft.com/intl/cms/s/0/19ffdfd0-0a21-11e1-8d46-00144feabdc0.html
Krishna,
What you are saying essentially is that "This time is different". I disagree. If I had to bet, I would bet that this time is no different. We will follow the same path that other countries have trodden.
October car sales in biggest fall in over a decade:
http://in.reuters.com/article/2011/11/09/idINIndia-60408620111109
@Pawan,
Likely that sales of high ticket items like homes would have fallen more. Investors may still be buying, but my guess would be end-users are staying away.
Will we also see cars being offered here ? (an implicit discount so as to keep previous buyers happy).
@Polt,
See this: http://in.reuters.com/article/2011/11/09/idINIndia-60406720111109
If this is even remotely true then stop dreaming about RE - start worrying about one's job!
oh no, does this mean an end to the perma growth cycles !!
no wait let's print more that way we can continue GROWING !
I seriously believe we are nearing the end of the hype cycle and as somebody pointed out its going to be painful period for the next 2-3 years.
Government revenues have dried up and IT collection is much lower than what they had aspired for. a big chunk of state revenue comes from land,house registration as well as vehicle registration which too is in a slump. all these would lead to lower investment by government leading to lower unemployment.
government cannot print money as our fiscal deficit sucks. our trade gap has been widening a lot and its time before our bonds become junk rated by S&P. In addition to this rahul baba wants to give free food for 75% of indian population costing 125,000 crores . now where will they get this money is a big joke.. in short, as indians we just dont have any options to park our money. real estate being illiquid is not a great investment vehicle. probably CHF.
car sales down
fiscal deficit high
oil prices record high
inflation not coming down
global economy down
Banks NPA increasing
Highest Interest rate
Now if these indicators do not point to a crash what will..
eventually the black money would get suckered in lose value.. but how will the money enter without being noticed. GOI needs revenue and it can come only by VDS of black money...
H
If oil prices don't come down in next 1 year I don't see how the economy can survive. The govt is incurring an Rs8.5 loss per liter of diesel and diesel consumption is growing at 8.5% every year thanks to the price disparity between petrol and diesel.
You are probably looking at another rupee devaluation similar to the early 90's, the best bet at this point would be to hoard imported items like gold and silver.
The cost of living in cities is skyrocketing! Expenditure on even normal things such as vegetables and other staples is out of control. I am a renter so I havent seen that part of my expenditure go up. I shudder to think what would be my situation if I had to deal with a higher EMI together with this expense
Moodys downgrades the whole banking system in India. Either Moodys is wrong or Indian banking system is all negative. I think Moodys has been late in calling their calls and they should have come forward with this 2 years back. Indian banks are massively leveraged with hope from GOI/RBI to print money and give it to them. These highly educated fools running the Indian system do not understand that it would kill the ruppe and cause hyperinflation. The degrees of these fools should be forfeited who are/have destroying the inner fabric of banking in India. Big scam everywhere.
"If you think about it, India and the world in general is suffering from some comedian's distorted idea of growth. Food and medical costs have become costlier but car and cameras have become cheaper."
This is purely the government's meddling in the economy. Agriculture (i.e. land) and health care are highly regulated while cameras, iPods, Plasma TVs, cars, etc. are not regulated or only thinly regulated. That is why prices for the latter keep decreasing year after year, while prices of the former keep increasing year after year.
In the US, the two fields where the gummint has dipped its grubby hands into the heaviest (education and healthcare) have ever-increasing prices year after year after year, even in the midst of recessions and depressions. Whereas the free market always tends to reduce the price of goods and increase quality year after year (e.g. cameras, iPods, Plasma TVs, laptops, Blackberries, washing machines, etc. )
Do not compare US (or China) to India - especially in urban infrastructure - India's lack of urban infrastructure planning is indeed appalling
- most cities have NOT built single freeway (for uninterrupted driving) or Turn lanes so that turning traffic wont stop straight traffic
- all cities lack water supply and drainage facilities in new suburbs
- All cities have reckless and archaic public transport systems and the new Metros will soon get overcrowded as people are left with little option
- Air and water pollution especially on roads is horrendous due to mixture of factors
- Traffic accident mortality is very high - especially for two wheeler drivers
- Garbage collection is in tatters, with almost no management by civic authorities
- Schools are either overfull or overpriced - kids have to be sent to coaching classes all the time
- No zoning whatsoever - and lack of discipline by residents (incessant honking on roads, Dog owners dont clean dog poop, breaking traffic lights as a rule, throwing garbage on streets even if dumpster is 15 feet away)
- Spitting, urinating, loudspeakers, loud azaans, loud baraats, loud drums, no permits for anything no rules and regulations.
Indian cities run IN SPITE of such godforsaken behavior - even emerging African cities have better civic planning an infrastructure, Just use Google Maps satellite view and check for freeways, junctions, traffic lights, jams, city zones and planning.
The only way out to fix this in a democracy is to throw out the incumbent repeatedly - so you guys have a vote in municipal elections, state elections, Lok Sabha elections - do your duty and keep voting out the incumbent at every stage - only then things will improve.
"in short, as indians we just dont have any options to park our money. real estate being illiquid is not a great investment vehicle. probably CHF. "
A question for all the experts here: HOW DOES A RESIDENT INDIAN LEGALLY CONVERT INR TO CHF?
@anon above
I think the only legal way to do this is without middle men is - Buy lots of pure Gold jewellery - wear it and travel to Switzerland/safe haven wearing it saying its personal item (that ways you dont have to declare it)- and sell it there and stash it away in their account - repeat every x months. Basically Gold becomes the intermediate currency for conversion.
Many people make a real pair and fake pair and switch on way back to avoid trouble.
But what took us by surprise was the ranking of Indian bonds on Blackrock Sovereign Risk Index. The index suggests that Indian bonds are amongst the 10 riskiest in the world. So much so that they are pretty much in the same league as bonds of Spain, Argentina, Hungary, Italy, Ireland, Venezuela, Egypt, Portugal and Greece.
Now, we understand that the Indian economy is currently not in the best of health. Lingering inflation problem, high fiscal deficit and slowing GDP growth have taken a toll on the country's sovereign rating. The country remains vulnerable due to its dollar linkage and dependence on oil prices.
Agriculture (i.e. land) and health care are highly regulated while cameras, iPods, Plasma TVs, cars, etc. are not regulated or only thinly regulated. That is why prices for the latter keep decreasing year after year, while prices of the former keep increasing year after year.
It is not as simple as it sounds. First, when agriculture or healthcare is deregulated it will lead to a massive bubble where the prices sky rocket first because of the frenzy that is created until the bubble is burst which may be more than a few years (read housing in India today). Once the bubble burst, yes they become affordable to everyone and then year after year it can only better. But the question is weather it is politically/socially acceptable to see a lot of people wiped out because of competition and for during the bubble years for the Govt to turn a blind eye on the affordability. (You can live without a camera or iphone for few years to wait for it to become affordable but can you wait skipping food or healthcare?. The Govt has no problem seeing Nokia wiped out because of Apple IPhone, Can it do the same politically if small farmers in millions are wiped out because of large corporates entering agriculture?)
"First, when agriculture or healthcare is deregulated it will lead to a massive bubble where the prices sky rocket first because of the frenzy that is created until the bubble is burst which may be more than a few years (read housing in India today). "
This is foolish nonsense. When things are de-regulated prices FALL, not increase. When Telecom was deregulated for instance, service standards and quality improved and real fees declined.
Also Indian RE reached mega-bubble proportions without any de-regulation. De-regulation would actually be good for the sector and would bring down prices.
There is difference between land and telecom service sector. Land is finite. It cannot be produced in factory and sold. Due to technological advancement prices of goods travels to south. Don't compare land with factory produced devices,
@Anonymous above.
Land is NOT finite, it is as good as infinite. Have you not heard of the 115 storied tower coming up in Mumbai now? This is an example of how a "finite" land can be made infinite. FSI will always be increased to make land infinite
Wonder why do they call India a developed nation!
Very impressive.
This is a fantastic list of blogs.
From the last 2 years at least there was an artificial demand for real estate because 55% were investors and 45% end users. Presently 80% are investors and are looking forward to book profits. As soon as the news of realty price fall start rolling, there will be cascading effect of distress sale. Today no body has money because he is already fully invested. Just think who will buy the property when distress sale takes place. In a stock market one can see the effect of distress sale in one or two days, but it will take around 3 months to see the effect of distress sale. And the countdown to 3 months have bugun
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