Tuesday, December 13, 2011

Discussions with a big builder's sales guy

I was very ambivalent about posting this, but I am just pretty pissed how these big builders get away with semi-legal properties.

Me:

Do you still have any big 3 bedrooms on sale? What is the current price?

Is there katha for the land?

Sales VP:


S****a C*****c is completely sold out. I can offer you big 3bhk of 2100 sft.
in S*****a C******on. There are only two flats available in 3rd & 4th floor
facing the swimming pool. Total will be 1.1 cr. (app) all inclusive.

For every project there is a Khata.

Me:


OK.

Is this a "A" Khata or a "B" Khata? My lawyers forbid the "B" Khata saying that is illegal.

Sales VP:

Sir, to keep you updated S****a is not related to any illegal documentation. Our property documentation is done by Mr. Anup Shah's law firm, one of the biggest lawyer of the country. Moreover our all projects are approved by SBI, they have their own panel of lawyers without whose confirmation SBI don't approve any property. Also S****a C****n I is ready to move in & people has started shifting now.

I really don't know after staying in a S****a Flat also how come you are not confident of the builder. 99% of the S****a tenants end up buying in S****a only. We are the largest brand of South India and we are known for our transparency in clear legality of the documentation, doubting us is like doubting the engine quality of a Mercedes Benz car, for what they are famous in the world.
If you & your lawyer has still doubts, then you are most welcome to our office, there you can meet our legal team and clarify your doubts.

Me:

I saw apartments come up for sale in L******er and J*****ne and both have "B" Katha. The general consensus amongst lawyers (I talked to a SBI lawyer as well) is the "B" Katha is not correct.

Why is that other than Q*****z and one other property, no other S****a property in Bellandur area has a "A" Katha?

There is a lot of discussion and angst amongst S*****a J******ne owners in the internal mailing list about the lack of this "A" Katha. I am curious to know why Jasmine does not have appropriate Katha for the land.

I like living in a S*****a community, but I need to know why these properties only have a "B" Katha.

Sales VP:

As I told in the last mail you are most welcome to our office to have a detail discussion with our lawyers about all your legal clarifications.

Also to keep you updated majority of the. S*****a J*****ne residents have bought 2nd/3rd time in S*****a only. I have clients in J*****e block 1 who have bought three times in S*****a and also referred so many of their friend & relatives for S*****a only.

Me:


OK. Fair enough.

If I have to infer what you say, the land is all legal, but there are other things that have caused the "B" Katha. I will reach out to your legal department when I need help.

Do you have a pointer to your legal department?

For the record, I love S*****a J*****e.

Sales VP:

You can come to our office & meet Mr. Shivraj,from the legal time. But the main concern is C*****c is sold out , in C*****on only 2 flats are left. By the time you finish all your verifications there will be nothing to buy. Immediately block a flat first and then do all your queries.

Me:

Not really interested in C*****on. Don't like the location.

There are plenty of resale properties available in the existing S*****a properties, including C*****c. I am not in a hurry to rush and buy anything without proper legal checks.

Thanks for your help. I will take the help of Mr. Shivaraj as the need arises.

Sales VP:

We don't deal with resale as per our Company norms. Please let me know only if you are interested in new S*****a Property.
Mr. Shivaraj can only help you only if you are a buyer of our property directly from S****a.


And thus it goes. Unless the original buyer insists and gets clear documents and title from the developer, there is no chance in hell that you will get all the documents from the developer during subsequent years. And yet, people buy and sell properties worth many Crores.

144 comments:

Anonymous said...

http://blogs.wsj.com/developments/2011/12/08/how-speculators-poured-fuel-on-the-housing-fire/

samix said...

Anon above, if your police and security system are such that political dissenters, whistle blowers, activists are murdered in bright daylight in front of a crowd in gala fashion with swords and daggers, then you will also not use names, I feel that the author is brave enough to even put this discourse on the net.

san said...

Ah, the brave chicken caller goes Anonymous on the internet. Brave.

Anonymous said...

@San,

Would the plot of land that you sold (whose proceeds you now wish to use to purchase the new apartment) pass muster with respect to title integrity?

Is that something you think about while sleeping at night?

san said...

@Anon

Absolutely. I had a pretty anal conservative lawyer go through the title check when I bought it in 2004. I had his report.

I had a second detailed legal opinion from the bank I borrowed money from. (I have been unable to obtain any legal opinion for any of the 3 properties I have tried to buy).

When I sold my land, I gave not one, but two of the legal opinions. My purchaser used his own lawyer to verify the documents. Also his bank did a cursory check of documents before loaning him the money.

Ignoring the banks, two independent lawyers cleared the documents.

I can sleep peacefully at night knowing fully well I didn't con anyone.

I am disappointed not many or showing the due diligence I showed.

I regret having sold the land. I didn't realize what I was getting into. I assumed other than a minority of land, there would be clear titles available.

san said...

@Anon

Also, when I sold my land, along with the two legal opinions, I ensured I gave the official BDA approval letter with BDA sanction plan, BBMP katha and extract, property tax receipts of all the 8 years I owned it, mother deed document of the survey number.

Shit, since I knew some sites had a legal dispute, I was forthright and explained it to the buyer what was going on (based on what I read in the mailing list) and even recommended he speak to those people first.

I introduced the buyer to my neighbors who have built their homes there and make sure he was happy with the purchase.

I don't know - I am offended by your question. I don't know if that was your intention.

I expected other sellers would show the same courtesy to a buyer. I don't see it. Hence the angst.

Rustomjee said...

San: Very nice articles. I recently bought some land in West Bengal and the documents were impeccable. I haven't had such luck in Bangalore.

I think this has a lot to do with "easy money". In a state like WB, which hasn't seen much capital inflow, the level of corruption is not so high, and every Tom, Dick and Harry does not think that he can become a millionaire the next day. Unfortunately, that is not so in Bangalore. In my own experience, titles in Karnataka are clearer in smaller cities like Mysore, Mangalore or Hassan.

I don't see a compelling reason to live in Bangalore/Mumbai and pay a premium for it. I need a property to live in, not to write a check with. I have found many cities in India, where the real estate is affordable, and the quality of life is much better (less pollution, traffic etc.). My advice to all you "aashiana" hunters is to look for a home, not a house. There is no "home bubble" in Bharat, but a massive "housing bubble" in India!

Anonymous said...

Yup, housing bubble combined with Gold bubble, Rupee bubble, stocks bubble, salary bubble etc. Bubbles across the board in everything you see.

aam aadmi said...

@Rustomjee

Spot on. But I feel that most people buy houses under peer pressure or wife pressure(which is basically peer pressure)

san said...

@Rustomjee

Yeah, I hear that things aren't this bad in other states as well.

san said...

@Rustomjee

Yeah, I hear that things aren't this bad in other states as well.

Puneite said...

I have been saying this all along - the only reason why Mumbai and Delhi are sought after is purely because of inequitable amenities and money spent on tier 1 cities by the govt.

Many industries exist in Mumbai solely because it has international Airport and 24x7 electricity and no problem of sewage/effluents or garbage because people just dump it in the sea. So the Navi Mumbai International Airport should completely nullify the need to live in Mumbai unless you work for the ports or for the financial market or for the mantralaya

The central government is apathetic to all cities but Delhi region. The state governments are apathetic to tier 2 cities in their own states. The Civic government is apathetic to fringe suburbs within city limits.
The Nagar Palika's are apathetic towards villages adjoining the small towns.

This kind of central planning is the complete opposite of what should have happened where individual communities become self sufficient. (Gujarat is leading by example in this - Maharashtra Kerala and Tamil Nadu have better tier 2 cities out of geographical consequence. Maybe things might change radically due to spread of technology and abundant Nuclear power

Anonymous said...

Rupee is 54.26 now. Sensex is in a freefall. Layoffs are looming.
RE has nowhere but to go down by 70%.

Anonymous said...

Proceed with caution - builder has been borrowing money in the short term market at 3%/mo rates..

aam aadmi said...

Economy in a free fall. I am tempted to say to my acquaintances, I told you so.

Anonymous said...

What happens now? Forget RE. RE's crash is now inevitable (just as everyone on this board predicted).

The real question is: When do the layoffs begin?

polt said...

http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html

Ambrose Evans Pritchard (the writer of the above article) is generally prone to alarmism and hype, but this time the data backs him up.
I liked the "Bloody Ridiculous Investment Concept (BRIC)" :))
Not sure about Russia, but B,I,C certainly seem to be slowing down.

Anonymous said...

@Anon - "The real question is: When do the layoffs begin?"
Watch the financial sector closely. As investment and loans dry up, banks will be the first to shed staff. Already M&A activity is down to record lows here in India.

Anonymous said...

Layoffs have been on, and on the sly. Nomura laid of 50 in India, deliberating possibility to shut shop. Their no. 2 has quit.

HSBC is planning. Morgan Stanley, JP Morgan, StandC.

Brokers have been laying off for the past 2 months. What more proof does one want. When it become public/or when press follows it up, it would be at the peak lay off session.

Anonymous said...

"Economy in a free fall. I am tempted to say to my acquaintances, I told you so."

Be patient. The fun will begin when RE prices decesively start falling in nominal prices\. That is when your gold-plated bragging rights begin.

It would be fun to see the expression on the faces of all those idiots who said "It's different this time."

I'm still waiting for that day. He who laughs last laughs the loudest.

Anonymous said...

@San

"Unless the original buyer insists and gets clear documents and title from the developer, there is no chance in hell that you will get all the documents from the developer during subsequent years. "

The owner's association should have custody of the documents after handover of the properties no? It is usually the case that the owner's association supplies a file containing the necessary documents to prospective buyers of resale units in a community.

Anonymous said...

@San

"I regret having sold the land. I didn't realize what I was getting into. I assumed other than a minority of land, there would be clear titles available."

Don't be a greedy tool. You were fortunate enough to sell your land at around the very peak of the Indian RE bubble. Selling at the peak of bubbles is like winning a lottery. It looks like you're now looking a gift horse through the mouth all the way up to its rectum.

If you want more value for your money, wait for a while for the housing crash (which is already underway) to develop. You will then find great bargains, both with good and bad titles.

I hope this helps.

Ankan said...

Interesting post and thanks for sharing.

Anonymous said...

Where are RE prices falling? just air talk or post something evident.

Why would there be layoffs? India is labor cheap country, with huge population with lots of disposable income. Laws can be ignored with flip of a coin. India in a way is somewhat more free market country... one can do whatever it wishes with money, influence and might.

So why would India RE fall?

san said...

@Anon

Yes, but what I found is huge chunks of original documents are missing with the associations and if they are not careful up front, it is difficult to get it from the builder again.

@Anon2: "Don't be a greedy tool" :).

Think about it from a clear legal title POV. I am not greedy about further appreciating value. I know it has peaked and that's why I sold.

From a clear legal title POV, I feel every now and then I sold it in haste. That's all.

Anonymous said...

"Laws can be ignored with flip of a coin. India in a way is somewhat more free market country... one can do whatever it wishes with money, influence and might"

Sorry. This is not what a "free market country" means. Otherwise, Haiti or Somalie would be booming right now.

Free markets are supported by private property rights, sound money, impartial and efficient justice systems, good infrastructure and public works. India regrettably has none of those things. In such circumstances, it had NO BUSINESS blowing up a housing bubble where housing became more expensive than advanced countries like the US.

India is going to get a richly deserved comeuppance for its years of profligacy leading up to 2011, especially in housing.

Now the only thing left to do is to sit back and enjoy the show. And remember, the longer the party, the longer the hangover.

Anonymous said...

@Ankan,

"Interesting post and thanks for sharing."

Are you an idiot or do you just pretend to be one?

Anonymous said...

READ this interesting blog

www.ksmfinanceindia.blogspot.com

skeptic's ghost said...

Stagnating prices and falling rupee is same as falling prices in INR.

However those who saved in INR will suffer more than those who have ready possession homes in Good neighborhoods.

I can still bet that none of the prices for fully ready houses are going to budge. Whatever correction possible will only come via depreciated Rupee, lower interest, or long time stagnation.

Anonymous said...

Some Anon blogger wrote

"Rupee is 54.26 now. Sensex is in a freefall. Layoffs are looming.
RE has nowhere but to go down by 70%."

DREAM ON!!! Rupee is likely to reach 60 for $ by mid 2012, layoffs are also likely but real estate prices are not going to budge. Here is why:

Thanks to Anna Hazare, huge amount of money is flowing into India through Hawala and this flow is going to be steady in 2012 finding its way to real estate. By the time wiki leak discloses Indian deposits in foreign countries, nothing will be left.

Anonymous said...

"Thanks to Anna Hazare, huge amount of money is flowing into India through Hawala and this flow is going to be steady in 2012 finding its way to real estate."

If huge amounts of money is flowing into India, then INR wouldn't be at 54 to the dollar. The fact that the INR is crumbling is proof that any funds coming into India are dwarfed by the funds heading for the exits.

Anonymous said...

"I can still bet that none of the prices for fully ready houses are going to budge. Whatever correction possible will only come via depreciated Rupee, lower interest, or long time stagnation."

Prices are predicated on the velocity of money and land costs. When the velocity of money falls, the value of property will correspondingly decline. Also, if the Builders go bust, then the demand for land will also fall off a cliff. This will result in a corresponding reduction in prices.

I'm afraid the era of "sales may go down, but prices will never go down" is decisively over. In any event, RE has already crashed by over 30% in real terms in a span of less than 4 months.

And it's just beginning...

Anonymous said...

Anon above,

Please help me understand..."in real terms", what do you mean by real?

You mentioned: RE has already crashed by over 30% in real terms in a span of less than 4 months.

Also, elaborate "And it's just beginning..." What makes this as a beginning, I think India has lot of space for hot air, can at least blow up 50% more.

KSM said...

This is just a beginning.

Now just search in google with a word real estate correction and you will find much more articles in main stream media than few months back

IT IS JUST A BEGINNING.

MAFIA HAS TO EXPLAIN WHY MANY APARTMENTS are vacant/unoccupied in many leading builders buildings and yet they claim shamelessly that all are sold out...

KSM said...

The big set of speculators not yet realised that this realty bubble is losing steam.

When they realise they will stampede towards the exit and will make job easy for poor souls waiting for correction.

I AM COUNTING ON THEM.

Anonymous said...

http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html

China’s credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC’s dream that is at last coming down to earth with a thud.

Pawan said...

If there is one thing people will learn in this correction is that India is no different from any other country. So a housing bubble exists here just like everywhere else. Don't believe me? Google 'afghanistan housing bubble'.

Anonymous said...

"China’s credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC’s dream that is at last coming down to earth with a thud."

There is one important difference between China and India. In China, public authorities (and due credit goes to them for avoiding an even bigger disaster down the road) took active steps to deflate the bubble. These steps were significant, although they did not address the root cause of the problem (China like India has strict curresncy controls, leaving domestic savers with limited investment choices : finicky, manipulated stock markets that can destroy your savings overnight vs. brick and mortar something you can actually touch and feel - most people chose the latter).

In India on the other hand, everyone from corrupt politicians to venal bureaucrats to the builder-mafia have a vested interest in keeping the bubble going for as long as possible.

China is light years ahead of India in sound governance and civil institutions. It is an insult to China to even be mentioned in the same acronym (BRIC) as India.

Anonymous said...

@Pawan

"Don't believe me? Google 'afghanistan housing bubble'."

What happened in 2008 was that the bankster and hedge-fund mafia simply transferred the housing bubble from the developed world (USA, UK, Spain, Dubai, etc.) to the developing world. Today every filthy third world city on the planet from Mumbai to Mombasa has a housing bubble.

Your article says it all. Kabul is the very definition of a donkey-powered third-world sh*t hole, yet a house there cost $22,000 per month to RENT. After the recent correction, rents are "only" $10,000 per month. Thank God for that!

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

@Anon - "In China, public authorities (and due credit goes to them for avoiding an even bigger disaster down the road) took active steps to deflate the bubble."

Here the bubble will be deflated due to the incompetence of our government. Growth is down, Cash is fleeing the country, equity is down and the rupee is weak(ening).
Markets can stay irrational for a while and support exuberant asset prices. But eventually fundamentals reassert (mean reversion) and no govt can do anything about it. The full force of a dovish Fed is unable to prevent a continuing fall in US prices. Here we have a hawkish RBI.

Time to revisit this graph. http://en.wikipedia.org/wiki/File:Stages_of_a_bubble.png
Where are we? My guess is fear.

Rustomjee said...

@Polt: You are right.

2008 - bull trap
2010 - return to "normal"
2011 - Fear
2012 - Capitulation

I am looking forward to 2013 - many others have also predicted a huge Real Estate Crash in India, in the year 2013. It matches up very nicely with the graph. 2012 is when most clever people with try to "cash out" with profit in the hand. 2013 sellers will make huge losses.

2014 wil see the end of the real estate bubble and the Congress givernment.

Pawan said...

@Polt,
Looking at this chart, two things suddenly become very apparent:
1. The fall is very swift when it comes.
2. Valuations end up below the point where the whole mania started (and below the mean).

If RE is at fear then equities are at capitulation. Gold is may be at enthusiasm stage.

Ankan said...

Thank you so much for sharing this post.

samix said...

China is light years ahead of India in sound governance and civil institutions. It is an insult to China to even be mentioned in the same acronym (BRIC) as India.

wait...didn't Obama and Hillary tell us that we are the next superpower ?

Anonymous said...

Never seen a bunch of guys gloating over the impending downfall of their own economy. No wonder the whole world calls you guys DK-Boses, wherever you go!

Anonymous said...

@Samix

"wait...didn't Obama and Hillary tell us that we are the next superpower ?"

If you want to make investment decisions (or indeed any decisions) based on what Obama's or Hillary's views, be my guest.

These people haven't been right about ANYTHING. They are CLUELESS.

samix said...

anon above, true, I was just being sarcastic...

Never seen a bunch of guys gloating over the impending downfall of their own economy.

The common man has been plundered raped and pillaged by a few elites in India, we are basically hoping that the life will come full circle for these people, and will act a shocking eyeopener for the sheep.

Anonymous said...

I would rather have an economy in bubble than one where people are losing jobs, there is more poverty, spending become tight-fisted and the world is going to hell... Unless someone figures a way to deflate such bubbles without causing too much pain. Call me utopian but deflating bubbles are painful - and do not affect just those who caused or benefited from them.

I would rather not be able to afford "buying" a house than not have enough income to be able to pay high rentals.

All this gloating about waiting for the crash to buy a house will not hold when you realise that your business has dried up or that you may not have a job next quarter.

Pawan said...

@Anon above:
I would rather have an economy in bubble than one where people are losing jobs.

The world has enough for everyone's needs but not enough for one man's greed. Unfortunately, greedy people do exist and being greedy isn't considered a crime like being violent is.

Anonymous said...

@Anon above.

http://www.dltk-teach.com/fables/grasshopper/mstory.htm

You talk like Grasshopper in the the story.

Cry foul when you lose. Good one!

Anonymous said...

@Anon above...

Do you even read complete posts and understand the context??! What kind of retard are you?

"Deflating bubbles are painful - and do not affect just those who caused or benefited from them."

The post above - if I had to take your silly story link as the analogy - is referring to the hard-working ants who will also be affected by the crash in the economy!

Get back to work - you are not doing a good job understanding these posts.

Anonymous said...

Anon above:

I'm sorry but I'm retarded. I'm getting back to work. Thanks for reminding me.

Don't be angry. Have a good day.

Anonymous said...

No one's angry with you!

Good you understand... we all need to roll up our sleeves and get back to work.

I, for one, do not want any person who puts in long hard days, to take care of his family and its future, to suffer because a bunch of morons at the top made stupid decisions!

samix said...

I would rather have an economy in bubble than one where people are losing jobs, there is more poverty, spending become tight-fisted and the world is going to hell

I am all for people leading good lives, but the problem is that all the prosperity that you see around you is built on rapid expansion of credit and central bank money printing.

The powers that are have dragged on and will drag on the bubble for as long as possible, the time when bubble bursts are times when the bubble can be sustained no longer.

This is why we(me/Dhiman/others) keep saying that money printing and unbridled credit distort the market place by making the common man think that this prosperity is here to stay forever.

jay said...

I would rather have an economy in bubble than one where people are losing jobs, there is more poverty, spending become tight-fisted and the world is going to hell



That is wishful thinking and pretty bad idea to boot. People who own a small piece of land ( not even a big land holding) in some crap hole small town, becoming millionaires just because of it and being able to purchase the services of well trained , well educated workers around the world is not what I wish for.

Anonymous said...

"All this gloating about waiting for the crash to buy a house will not hold when you realise that your business has dried up or that you may not have a job next quarter."

That's the whole point. Just like cancer - have to kill/remove bad cells, along with that few good cells will also be killed. But POINT is - bad cells have to killed/removed.

Desi Babu said...

It's interesting to see the discussion here - pros vs. cons on what if the crash comes, are people being "traitors" by cheering the bursting of the bubble?

Real estate is just another business, and in business, if the prices are dictated by demand and supply, a healthy equilibrium is attained. If not, bubbles are formed, like the one we currently have. If it collapses, I would cheer as an investor, as a key part of the economy will be returned to healthy levels.

Who stands to loose?

#1 Aam aadmi: Someone who bought a 3BHK for 10lakhs, and thinks it's worth a crore today, if the prices fall back to 50 lakhs, he loses nothing, unless he has somehow leveraged himself and taken out another loan, like 2nd mortgages in the US. Then he is #2 on this list.

#2 Speculator: If you took out a loan and heavily leveraged yourself to buy a property and the bubble collapses, you will loose your 20% down. If you already made much more than that in previous speculative bids, you can eat the loss, we all do. If your bank has to clean up after you, who loses? The taxpayer, and the shareholders of the banks with NPAs. Happens all the time!

#3: Builders, politicians, babus, mafia etc: In the history of the world, people in power have never ever lost. You will end up subsidizing their losses through taxes and inflation. Like my dentist says, your tooth will come out, and you won't even feel a thing.

So, when the bubble finally collapses, the prices will come down. But again, the people who will pay for it, will be the average taxpayers. Like you and me.

So, heads they win, tails you lose.

Congratulations!!!

Anonymous said...

"So, when the bubble finally collapses, the prices will come down. But again, the people who will pay for it, will be the average taxpayers. Like you and me."

I have a problem with paying for somebody else's mess! Most people who have disagreed with the views above are also among the ones who will pay for it - they just don't realize it. The money that goes to clean the mess could have been used somewhere else. And I don't like the idea of "good cells" being killed as collateral damage to finish the bad cells - because the problem here is that when a bubble bursts it kills more "good cells" than bad ones! Anon above needs to realize that bubble bursts are not like "treating cancer" - they are like "killing the human being"! Stuff gets reset.

Bubbles are created - either that or they are not controlled when they happen. Good governance (as against 100% free markets) should be able to address this. But human beings are wired to be thrill-seekers... we let them fester and not let good sense take over. I plead guilty to this as well.

KSM said...
This comment has been removed by the author.
DhImAn said...

One thing I see time and again on this blog from several people is ingrained beliefs. They believe for instance that an authoritarian government is necessary, or that India is somehow different and that real estate prices will never collapse here.

If you have the time, I recommend reading The belief engine - a masterful treatise on beliefs in general.

Read this, digest it and then think critically about what you believe. Does it have basis in sound logic and reason? Does it have parallels in history?

Keep in mind this quote from Bertrand Russell:
"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts."

Anonymous said...

To all you morons in this blog :
Housing bubble is only for you morons who cannot see an oppurtunity and take advantage. What makes you think that because you were good in mathematics in your school and working in a MNC that only you have to earn goood money and everything else should be available at throwaway prices. Instead of wasting your time in this blog, go and make use of an oppurtunity and make enough money to buy a house.

Anonymous said...

It is a slow day in a little Greek Village. The rain is beating down and the streets are deserted. Times are tough. Everybody is in debt. Everybody lives on credit.

On this particular day a rich German tourist is driving through the village. He stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the taverna.

The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.

At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything. However, the whole village is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works!

Anonymous said...

Very interesting.

But u see the hotelier loses his $100 if the traveller had stayed.

So its one more client lost for the hotelier. He didnt get the $100but still he has to pay the maintainence for that room.

As you can see most of these are related to no physical work so this works. As long as services are involved losses dont make a difference.

But RE is physical so losses there wont vanish. someone has to lose there.

Its like a lawyer who charges $100 for consultation per hour. If after1 hr the client doesnt pay, it will make no difference to him cuz he has made no real physical effort.

Anonymous said...

Also as u can see, the invisible dollar wud have caused mental pressures for all those who were waiting for their money.

So its safe to say that there are loses involved. just that its just changed its form frm physical to mental cuz eventually mental pressures will affect ur health and u wud have to pay the doctors to get treated.(see the phrase "times are tough")

Pawan said...

go and make use of an oppurtunity and make enough money to buy a house.

As someone wiser than you said, 'No one makes money in a bear market. The one who loses the least is the winner'. That is what we are trying to do - not lose our hard earned money.

Anonymous said...

Pune property prices are rising up....there will not be any housing bubble as said. This is just a rumour spread by those who were not able to catch the bus on time.....

Can you explain how will the property market crash in detail?

Anonymous said...

anon above,

wait and see...we are so near to it

Anonymous said...

To cash in on the rupee depreciation, non-resident Indians (NRIs) are making a beeline to buy property in India. Most developers Business Standard spoke to claimed a 25 to 30 per cent spurt in sales to NRIs over the last two months.

Since August, the Indian currency has fallen by around 20 per cent against the US dollar. According to real estate companies, brokers, analysts and consultants, this has triggered a substantial rise in the volume of property-related enquiries from NRIs. The actual deal numbers have also gone up considerably. Many NRI buyers are even buying multiple units for investment purposes.

Anonymous said...

http://www.business-standard.com/india/news/nris-onproperty-buying-spree/458868/

Anonymous said...

RE in India especially is a rigged market.

You are assuming the property prices will crash because builders will have to liquidate to pay off loans. That may be true but the discounts won't become available to the retail customer. The big fish with all the right political connections will simply swallow the small fish.

And you should all know by now that the big fish have infinite staying power.

DhImAn said...

And you should all know by now that the big fish have infinite staying power.

See my earlier post about beliefs.

You believe this, and so do others. How do you know that it is really true?

Smart money enters and exits sectors as it sees fit.

See, there is no money to be made on buying something. The only time money can be made is when you sell it.

Smart money will sell far before lemmings like you ever will; ensuring that you will be left holding the bag.

Til' then, enjoy your beliefs. The smart ones will enjoy their money (that they didn't sink into RE).

samix said...

Dhiman said:
See, there is no money to be made on buying something. The only time money can be made is when you sell it.


Good point Dhiman.

Pawan said...

(NRIs) are making a beeline to buy property in India

I wonder why would they buy here when property in US and developed world is selling 50% lower from peak? I know lots of people in US and AFAIK, only one has bought property in India and that was like 5 years back. I really doubt if these stories are true. There is no way to independently verify the claim of these builders.

This article also claims that some are buying multiple units. If that is true, then as Dhiman says, they will want to sell at some point. I am waiting for that day.

Anonymous said...

I think the original poster is missing the point about Kathas. Whay do you call Katha 'B' 'illegal'? It turns out that neither the buyer nor the seller calls the property illegal, it is the government that calls the property illegal.

The goverment has failed to protect it's property from encroachment and is peeved. It has failed to protect it's possession on the property and has entered into a 'mandavli' with the occupier....i'll give a paper saying that you are in 'illegal' posession...just pay me some taxes (protection money). That does not make the property illegal in the eyes of law.

Most law systems recognize something called squatter's rights. So even if somebody has grabbed land brazenly, he is 'legally' the owner for all practical purposes. Posession is 9/10ths of the law.

I think you are being very anal about your property search. Buy the property you like at the price you like. You will be on a strong footing legally till you are in posession of your property. Think of Katha B as a proof which will bolster your property ownership should the state/govt take you to the court of law....which I doubt it will...even if it does, you will be having the advantage of posession.

samix said...

Anon above I have been to courts with respect to property matters, possession does not matter. We were on the verge of being kicked out of our won house which was funded by a National Bank, until God had mercy on us and turned the case in our favor.

We fell for the same mentality, that if a National Bank is funding our home loan, then it cannot be illegal or in jeopardy. Though the court ruled that the house title is our's to keep, then entire stretch of land where the building has been constructed is still under litigation.

polt said...

@Dhiman - "smart money will sell far before lemmings like you ever will; ensuring that you will be left holding the bag"

My guess this has already happened in the equities market. RE and debt market will probably follow.
The great indian carry trade (borrow in $/Euro/Yen at o.5% invest here at 8%+) by the private equity and hedge funders is likely ending.

aam aadmi said...

Cabinet clears Food Security Bill.

Aamdani Athanni Kharcha Rupaiyya

Start making plans to hedge against further Rupee devaluation

san said...

@Samix

Sorry to hear about your experience.

@Anon above Samix

Yeah, I hear you man. I am anal alright. But I am a middle class self made person who slogged for every penny I have saved. I play it by the rules and unfortunately, lived far too many years outside India - lost my "nativity".

It's clear to me that if I continue to be so anal, I won't be able to buy anything here, but that may not be a bad thing after all.

Anonymous said...

A month back, I predicted the free fall of Rupee against $, and wrote a small piece in this blog. Officially Rupee is at 54.30, but $ has been selling at 58 in Bhendi/Chira bazar, and there is a waiting list. Some people are prepared to pay 60~61, if they can get hold of the cash immediately. I dont have to tell you guys what this means. Hundreds, if not thousands are going to flood the real estate as this is seen as the only viable asset to hold on in the current circumstances

RBI is surely intervene, but this may hold the Rupee for some time, only delaying the free fall. Govt was banking on FDI in retail sector, but as all of you know that this can not happen due to political disagreements.

Hoarders have replaced gold with $.

Hard days are ahead. If you have surplus money, try to buy $. I've unconfirmed news that dralers in bandra-kurla and Kalina are selling US green back at 55, which is a good rate


Foreign Exchange Dealer

DhImAn said...

Hundreds, if not thousands are going to flood the real estate as this is seen as the only viable asset to hold on in the current circumstances

This may well be, but it is a losing bet as well. You could take a crore, park it in real estate, and watch it stay more or less the same while the dollar continued rising; tell me - does it make more sense to queue up for the dollar or for real estate?

For all its ills, the USD is a currency - i.e., fungible, portable, easily hidden and so on; buying a ton of RE gets you noticed immediately by the local goons and that includes the tax goons.

So if you're telling me that because the INR is set to fall against the USD, real estate is a good play, then sorry, I don't follow your argument.

Hoarders have replaced gold with $.

Again, it may well be that some people have replaced gold with USD. These people are not hoarders. Hoarders, by definition, don't let go of their gold holdings.

The people who shunt in and out of a sector are speculators. They make their money by entering and exiting sectors that they see will rise or fall respectively.

In my view, there is nothing wrong with that at all, more power to them. But calling them hoarders is far off the mark.

Hoarders are what some people call "old money". These are families, notably the royal and other rich families of Europe and elsewhere, who have such inter-generational wealth that they don't really care for these temporary fluctuations in the price of anything.

Anonymous said...

I wonder if these highly paid MBA financial scammers will be able to save their jobs in Mumbai. What the fuck will they do when there is no buying in stocks and only selling. Salaries have skyrocketed in finance with people getting 2-3 crores per year including bonuses. This party should definitely get over.

RE bust is coming next. Young generation who got it too easy will be shocked at what is coming. Money never comes easy. Time to pay it back.

skeptic's ghost said...

In spite of fall of Rupee - the McManmohan government is on a Social spending spree - Uncontrollable subsidies on diesel and LPG,
Farmer loan waiver. Air India Bailout, 6h pay commission, NREGA, and now food security.

So the free fall predicted here of INR could become reality (which would automatically become collapse in the $ value of homes).

But will not help any bit for people who saved in INR.

Anonymous said...

"RE bust is coming next. Young generation who got it too easy will be shocked at what is coming. Money never comes easy. Time to pay it back."

8:48pm has got it right. If you graduated in the late 90's, then you've known nothing but continuous, unremitting prosperity for over a decade. You have never really been exposed to the business cycle. This was a "normal" that never really was. It was a superlative bubble of gargantuan proportions manufactured by an atrociously governed third-world country that produces little to nothing of real value. China makes iPads, iPhones, PCs, Playstations, Plasma TVs and Smart phones. What does India make that is in demand internationally? Oh yeah, minimum-wage paid, third rate BPO slaves with fake American accents and an obnoxiously obsequious servility to "De (white) Man" and third-rate software that has a lifecycle of 6 months tops.

The idiots who levered up and bought 1 Crore flats on the assumption that the good times will never end have a richly overdue comeuppance coming due to them.

I'm afraid it's time to pay the piper and the piper has already mapped the route to the pier.

Pawan said...

@Skeptic,
Very true. Today Morgan Stanley has predicted that fiscal deficit is going to reach 9%. That will lead to further devaluation of India's credit ratings, Dollar outflow and increased interest rates. We will be squeezed from all sides.

Pawan said...

The Shine Is Off Asian Properties:

http://online.wsj.com/article/SB10001424052970204336104577096023415790572.html?mod=ITP_moneyandinvesting_0

Anonymous said...

@Pawan

Isn't it interesting how there isn't one word about India in these "Asian" articles in the Western media? Aren't we like the second biggest economy in Asia (ex Japan) or something? Aren't we part of the vaunted BRIC? Regardless, there is absolutely no coverage of India in the Western media (CNBC, WSJ, Forbes, etc.). I think the West doesn't understand India (just like they don't understand Afghanistan or Iraq).

Anonymous said...

INDIAN RUPEE FREE_FALL

CLSA cuts India growth target, says rupee could fall to 60

http://profit.ndtv.com/News/Article/clsa-cuts-india-growth-target-says-rupee-could-fall-to-60-294351?pfrom=home-business

These are my 3 predictions for 2012

1. Attack on Iran and disruption of oil supply

2. US/ Western Europe sliding into recession

3. Political unrest in India

It is hard to say how much the Rupee is going to depreciate, but my best guess is by end 2012, the value is going to be 70-75 range.
The domestic slowdown in real estate is going to be offset by NRIs or Local Indians bringing in their stash and investing their money in real estate. It is increasingly becoming tough for Indians to maintain their offshore holdings because of the changing laws and these guys dont want to be caught with their pants down.

Next stage - Egypt like Tahrir Square in major Indian cities


Foreign Exchange Dealer

Vik said...

Foreign Exchange Dealer,
Would you like to become a contributor to the blog. You have some interesting insights which the community as whole will benefit. let me know. you can send me your gmail address and I can add you. If you prefer to remain anonymous create a new id and post it
Vik

Anonymous said...

Just a matter of time before NRIs get sick and tired of Indian treatement from the moment one steps off the plane to the moment they leave. NRIs send more money to India than FDI. IF NRIs get tired of sending money to India, then rupee is bound to go much much lower.

Anonymous said...

anon above,

You are absolutely right about who send forex to India...what do india sell to the rest of the world on a competitive basis? its always the low price service offering and it can only take you that far....give me one thing that attracts foreign capital to India, now that the India shining story is over.

NRI_In_Trouble said...

Vik,

You can add me: My ID is Tandon.In.Boston@gmail.com.


PRECIOUS-Gold weakens after Fitch downgrade warning
Mon Dec 19, 2011 2:18am EST

* Silver falls more than 3 percent
* Gold to drop in Q1, far from retesting record high -poll
* Coming up: U.S. NAHB housing market index, Dec; 1500 GMT

(Adds details; updates prices)
By Rujun Shen

SINGAPORE, Dec 19 (Reuters) - Gold prices fell nearly
1 percent on Monday, extending last week’s loss, which was the
biggest in nearly three months, as rating agency Fitch’s warning
on downgrading France kept investors on the edge about the
situation in Europe.

NRI_In_Trouble said...

Why would NRI remittance slow down:

--NRIs are not sure in many cases if they would have a project in the next 6 months or so.

--Visas are getting harder for all of US/EU.

--Many NRIs are upside down in their RE investments in US/EU. Only Australia/Canada/HK/SIngapore NRIs are okay for now. They are also sitting on a major bubble about to crash in the next few months.

--Central banks are shorting Gold and buying DOllars. NRIs would keep their USD and not convert it to some toilet paper.

--Indian banks are insured only for 1 lakh rupees. If a bank closes, all the money will be wiped out from the account and GOI will give back only 1 Lac. Be careful before you make investments.

--IRS is getting very strict and is getting data from almost all banks about NRI/NRE/NRO accounts. Tax/Penalties are soon going to be slapped on many people cheating and stealing money from IRS.

Many more reasons later. Gotta clean the bathroom.

Anonymous said...

Market participants who notice bubble formation can be divided into two camps:

1) Those cognizant of the danger will get out of the market;
2) Those who try to capitalize on the parabolic price blowout, assuming they will be able to sell before the final collapse.

Most people fall in category 2.

Sir Isaac Newton offers a spectacular historical example of category 2). He made lots of money during the South Sea Bubble and sold before it collapsed. But then during the dead cat bounce phase that followed, he bought some more, and subsequently lost his shirt on the second, final collapse.

Anonymous said...

With dollar shining, NRIs on a property-buying spree!

http://www.rediff.com/business/slide-show/slide-show-1-with-dollar-shining-nris-on-a-property-buying-spree/20111219.htm

Builder lobby is hiring journalists to boost property sales!! No NRI will pay $200,000 for property worth $10,000. NRI's aren't fools.

Vik said...

I had pointed this out last month as one of my friends was contemplating the thought on similar lines. To those who would like to buy this could'nt come at a more sweeter time. However hope NRI's learn the lesson from their adopter land and do not over-leverage

Anonymous said...

Property boom.. my foot.. People would be scurrying everywhere to buy eseential food items and fuel. property seems to be the last resort.

I am a realty bear for the last 5 years but now i truly believe my convictions are right. Its not just realty but the economy which is going to get crippled.

If the food security bill comes up, we would see fiscal deficit becoming 9%, india bonds converted to junk, external investors fleeing, seeing a 100 % increase in food inflation in a single year on account of rupee devaluation as well as supply constraints.

Rupee should hit 70 because our government is worse off than the US because we are just printing money and doling out freebies without adding value. i have not heard of a single initiative which spells investment. all i hear is subsidy and expense.

China is facing a realty decline and growth cut because 50% of their new investment was infra driven whereas in our case we have nothing to moot. No matter whatever black money we have the value is going to get eroded because there is no worthwhile investment to make. The only way people can make money or stay afloat is to invest in oil futures and commodities.

Really in a bad mood today as i feel our banks will collapse and i will lose all my FD amount and there is nothing much i can do abt it as we are in a failed economic system. Convert to dollars and run if you can.

Unnati Aranya Apartments Noida said...

Excellent post.This was actually what I was looking for, and I am glad that I finally came on this website! This for sharing and keep up the good work…
2BHK apartments in noida
2BHK apartments noida
3BHK apartments in noida
3BHK apartments noida
4BHK apartments in noida
4BHK apartments noida
2/3/4BHK apartments Noida

aam aadmi said...

@Anon at 9:24
Really in a bad mood today as i feel our banks will collapse and i will lose all my FD amount and there is nothing much i can do abt it as we are in a failed economic system.

When was the last bank collapse in India(don't talk about failed cooperatives) ? They don't happen here, government always rescues banks, your money is safe, the value of your wealth, not so much.

It would be a good idea to convert a percentage of your wealth into precious metals, you are hedged against both dollar devaluation as well as rupee devaluation.

aam aadmi said...

I don't know about others but I see riots in the future. RE will be the least of our worries.

It all depends on one magical substance Oil India doesn't have any and without it you can't run an economy. It's easy to talk about Rupee at 70 or 80 but will common people be able to drive scooters at that price. No tempos for businesses, no trucks, economy will come to a grinding halt.

Pawan said...

http://www.bloomberg.com/news/2011-12-19/sanya-home-bubble-pops-as-property-curbs-deflate-prices-in-china-s-hawaii.html

Pawan said...

aam aadmi
It all depends on one magical substance Oil India doesn't have any and without it you can't run an economy.

Not correct. Gas is replacing Oil in a small way and if govt. deregulates diesel prices, you will soon see all vehicles running on gas. India has huge gas reserves said to be 12th largest in the world. If there was no CNG and subsidized diesel, what would happen to car sales in India? Govt. is providing stupid subsidies on fuel and we know subsidies always lead to wastage.

Nuclear and solar power needs to be tapped to reduce dependence on Oil and Coal and will happen in due time.

aam aadmi said...

@Pawan
http://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_proven_reserves

India is at number 26 not 12th and the share is a measly 0.6%. Even if we assume that you can run every car and truck on NG how much do you think it will cost to build the infrastructure to do that. My guess is decades.

The point is, we don't have time and we need to start now, it's a security threat bigger than anything we ever imagined.

samix said...

aam admi, just a thought to chew on... "after the bust of the credit bubble around the world, no outsourcing and all, probably for years, if not decades at-least, we will not need so much oil and gas"

samix said...

With respect to NRI's pouring money into real estate, I am an NRI(Middle East), I cannot talk about everyone, but personally I would not be comfortable in putting money in Indian Real Estate, because I feel that it is still overpriced.

I hope other NRI's on this blog would also quote their preference about buying RE in times of a falling rupee.

Pawan said...

@Aam aadmi,
You may be right. I was reading a different source for the gas resources data.

aam aadmi said...

@samix
after the bust of the credit bubble around the world, no outsourcing and all, probably for years, if not decades at-least, we will not need so much oil and gas

You are right, but that's not a happy thought, our economic system is not designed for a contraction.

And ironically low prices will damage oil production for years to come, no more exploration, no new oil rigs, no new investments, the list goes on till decline catches up with demand destruction and then we are in a worse situation.

I follow the energy situation religiously, came across RE as a side interest. The situation is a lot worse than governments would have us believe.

Anonymous said...

"With respect to NRI's pouring money into real estate, I am an NRI(Middle East), I cannot talk about everyone, but personally I would not be comfortable in putting money in Indian Real Estate, because I feel that it is still overpriced".

The only time I'm buying a property in India is when prices fall below the US (I never thought I would type that sentence). Today you can get a 3 Bed Room house in the US in cities like Atlanta, Houston and Dallas for around US$75,000. This is how much I would expect to pay for a nice flat in the MIDDLE of tier-one cities in India.

Until prices come down to this level (i.e. around 40 lakhs for a NICE flat in a NICE neighbourhood in the CENTRE of the city), you can count me out. Even if you think I'm dreaming and prices don't come down to those levels now, I know that they will eventually find their way there one way or the other (either through INR depreciation or a fall in nominal prices or a combination of both).

As I don't have my savings in INR, I can afford to wait for a long, looooooong time, even 2 to 3 decades if necessary.

Anonymous said...

If sensex dips below 15k, it will result in HUGE FDI outflows, since it is a psychological level for many foreign investors.

Looks like we are very close to that (one week away). 2012 will start with a few bubbles bursting. Sonia is trying very hard to make the rupee worthless any way. I am wondering how she is hedging the Gandhi family's ill gotten billions?

Anonymous said...

So who is selling RE for less? Anyone... or only talks? I understand for NRI RE has discount of 25%, what about locals?

Anonymous said...

If people are not selling for les doesn't mean the prices are not going down. One can price their flat for whatever they want, it should sell also at that price.

Banks are also not giving loans easily nowdays.

I've seen in Delhi somone listing 1.1 crore flat and final negotiated selling price to be 95 lacs. Drop of 15 lacs. Roughly 10%.

Anonymous said...

"If people are not selling for les doesn't mean the prices are not going down. One can price their flat for whatever they want, it should sell also at that price.
"

Bullseye.
This is the problem. In the newspapers the property prices are the average of those listed on magicbricks.
As you rightly said, people pick up these prices which are NOT A true reflection of the actual sale price and then they inflate it.

THE MAIN CAUSE IS MAGICBRICKS AND THEIR AVERAGE PRICING. TIMESOFINDIAs property rates are picked by everyone hence these mad rates.
Someone shud stop this and only quote actualy sales price then we may get a true picture which shud be around 20% less than the prevailing market price

Anonymous said...

@Anon - I've seen in Delhi somone listing 1.1 crore flat and final negotiated selling price to be 95 lacs. Drop of 15 lacs. Roughly 10%.

I don't consider 95lacs as drop. It's not even close. Just like buyer has strategy to buy and negotiate, sellers have theirs too. 1.1 crore was meant to be sold at 90 lacs to 1 crore price.

So where is the decline? Sorry for being impatient.

Pawan said...

So who is selling RE for less?

No one. But I am observing that suddenly there is a deluge of properties for sale on property sites. It may be my perception only but suddenly I am seeing more of the kind of properties I would like to buy (not at the offered prices though). You may confirm it by running queries of listed properties on magicbricks for last month, 3 months and 6 months and comparing the numbers.

More the sellers, better for buyers.

Anonymous said...

"I am wondering how she is hedging the Gandhi family's ill gotten billions?"

I hope she didn't invest in Italian sovereign debt.

skeptic's ghost said...

Looks like Indian Baboo(n)s goofed up its export numbers by 9 billion US$

http://indiatoday.intoday.in/story/government-admits-mistake-in-export-figures/1/163655.html

We all know that street inflation is higher than what the Consumer Price Index guys churn out

This sets a bad precedent - what if the fiscal deficit numbers are actually much higher? - How much systemic instability does India have that is being hid.

This is verbatim from Sonali Ranade's article in the Daily times

"India runs an annual current account deficit in goods and services of the order of $ 165 billion. That is roughly 10 percent of its GDP. This deficit is made up by FII inflows of about $ 30 billion, invisibles including labour remittances of about $ 90 billion and FDI of about $ 20 billion. That still leaves a gap of $ 25 billion. In 2011, FII flows have been negative and may remain so for the first half of 2012. FDI flows may be likewise negligible absent reforms. India thus faces $ 55 billion shortfall in inflows on the current account. On the other hand, India has some $ 100 billion of loan servicing obligations in 2012, all to be met out of reserves of some $ 300 billion"

Are we even sure to believe these numbers - one thing is sure - we Indians have about 1 trillion worth of ugly Gold stashed worn around our necks and wrists

aam aadmi said...

Skeptic
Thanks for that info.

Are we even sure to believe these numbers - one thing is sure - we Indians have about 1 trillion worth of ugly Gold stashed worn around our necks and wrists

Hey it's the only guarantee citizens have against a fooling bumbling government. What else is out there? Why would anyone in their right minds buy Indian Govt bonds is beyond comprehension.

Anonymous said...

"Are we even sure to believe these numbers - "

If you are disposed to believe any numbers out of the Indian government, I have a lovely marble palace in Agra I would love to sell you.

Anonymous said...

Indian Realty to see US$5Bn worth of PE Exits @ http://www.moneycontrol.com/news/business/india-realty-likely-to-seeto-365-bn-pe-exits2012_636775.html#toptag

Anonymous said...

So much PE exists and FDI withdrawal from India... where will this money landup in... some bubble somewhere will be formed.

jay said...

People fucking dont even look at most common stats available to everyone. And somehow think india has no issues.

Debt gdp ratio of indian states.

http://www.rbi.org.in/scripts/PublicationsView.aspx?id=13168


The basket case of USA, california stats
http://www.usdebtclock.org/state-debt-clocks/state-of-california-debt-clock.html

Anonymous said...

Here is the story of India -

The demand is calculated based on upward mobility and population - but most of the populated classes live in slums or very poor villages with little or no meant to even reach lower middle class -

Urban Example - Mumbai look at the satellite picture of Deonar slum

here

A quick calculation of the number of rooftops in each square (the slum has about 100 square streets) told me that it has 250*100 hutments - Each hut houses probably 3-5 people so this complex alone houses

4*100*250 people i.e 1 lakh people

- there is no way you can build houses for 1 lakh people even if that land is acquired and singaporean condos are built (forget the fact that the people living there are not going to afford buying anyways).

We all know the rural example - travel from Delhi to Lucknow - you wont see single shop with a tubelight - they can barely afford a light bulb.

The leverage asserted by analysts based on expected growth is all but phony -fastest (quasi) legal path to upward mobility in india has been one of the 3 - join government job that gives you lot of bribe money, go abroad and earn in currency that converts to better rupees OR inherit a business (or open one if you can) and hope that some windfall will bring lots of untaxed wealth.

Slum dwelling and rurally impoverished India is never going to achieve either of the 3 with the given infrastructure and crony dysfunctional vote buying government.

the insane leverage factors citing fundamentals that the builder mafia used to con investors is going go bust -

However I doubt this bust will result in fall in ready to use property - in fact there will continue to be a shortage of it -

Land prices instead of falling might exchange hands from one speculator to another to another - its like catching a slow motion knife with little warning

Anonymous said...

Anon above:

It is the affordability that will cause the crash and not shortage.
Once layoffs begin, even salaried people cannot afford these houses. I'm already seeing a big drop in comapnies visiting campuses for recruitment. Layoffs and salary reductions are coming. There is always shortage. See what happens when India is downgraded and no loans are available plus the builders are running around to save their assets.

Anonymous said...

What is the policy / law on bankruptcy and foreclosures in India?

Also, India has a different culture. The individual is backed up by not just his/her income but multi-generational wealth in form of parents/grandparents and even uncles / siblings in some situations stepping in.

Not to forget the wink-wink / nod-nod dowry system that is still alive and well.

Owning one's own house is #1 goal and ultimate status symbol. Individual (and families) are likely to suffer through a lot of austerity in other areas before they voluntarily give up on this asset.

What do you guys think?

NRI_In_Trouble said...

Anon above:

Once the masses realize that there is no more appreciation going to happen in RE, they will stop buying. All the investors will become sellers. That means inventory would rise by 40-50%% as more than hat percent people are speculators in RE buying in India.

Once the inventory increases, it would out a downward pressure on prices. Even if people who can hold will not sell, the prices would still fall. It is a matter of time but when it happens it happens rapidly. Buyer sentiment becomes seller sentiment.

Sell...Sell...sell

Anonymous said...

"Owning one's own house is #1 goal and ultimate status symbol. Individual (and families) are likely to suffer through a lot of austerity in other areas before they voluntarily give up on this asset."

Didn't the same cultural aspects also exist in China, Singapore and Japan, each of which went through their own housing bubbles?

Anonymous said...

News for you all

Today's forst page news in Chandigarh edition of Hindustan times

Property prices to fall by 25-30% in NCR - Mumbai

http://epaper.hindustantimes.com/PUBLICATIONS/HT/HC/2011/12/21/ArticleHtmls/PROPERTY-PRICES-MAY-FALL-20-30-BY-MID-21122011001042.shtml?Mode=1

shailesh said...

Anon 5:14 PM

You pointed the grim reality of Mumbai. They say about 60% to 70% population lives in slums. Considering the population of 15 million, you are talking about 10 million in slums. Considering 4 per family, there are 2.5 million families.

Governments response to housing issue is amazing. MHADA is supposed build low income housing, and they build few thousands of them. These are given by lottery, which is rigged as you know it. Few thousands can never satisfy 2.5 million requirement.

The basic issue is developable land around mumbai. Due to geographic location, Mumbai can not expand in all 4 direction first. On top of that the areas that can be developed are ignored to the fullest. Navi Mumbai was planned in 60's, and no infrastructure was built till 90's. The need is to build 10 Navi Mumbai's today, but what we are building .... Huge Sky bridges across the ocean. Most population don't drive cars to use this bridges and highways. Most take Local trains, where there was no additional lines created in last 60 years.

The need today is to build large amount of suburban railway lines connecting distant areas like Virar, Kalyan, Panvel, Alibaug etc... Another need is to provide incentive to business to relocate to faraway places. This would provide much needed affordable places near work. Morons at Government do not understand such basic issue, what kind of planning one can expect....

Anonymous said...

Like the bears here, the investors can be found here. Amazing that most of the people are 'investors' looking for appreciation and not people wanting to settle in. Is this normal ? Hope these a******* get burnt badly to restore some sanity.

Have we never had a real estate crash in India so that people keep repeating the RE can never go down ? Even after seeing what's happened in the US and whats happening in China, this line still gets parroted.

Ganpati Bappa said...

Crash kaab aayega ji? Doorbell bajake aayega kya?

Aur agar naha aaya to aap sab bhai log khaali time mein kya karoge, doosri koi hobby-sbhbby hai kya aapki?

Pawan said...

@Ganpati Bappa
doosri koi hobby-sbhbby hai kya aapki?

Timely question Bappa. I was thinking about it myself yesterday (down with fever and in bed).

I have people in my office who go hiking, cycling, have interests in music, Art of Living, cars etc. Some of these people own homes, some don't. They hand out in the respective online and in-the-real-world communities and seem pretty happy. I was wondering if I am a sucker to spend my time on a RE blog? Damn it! There are so many better things to do in life and I will start doing those things. Let it be my new year resolution!

Ganpati Bappa said...

Pawan Ji:

Life is much more than waiting for a crash to happen. Go out, enjoy, have a good time. You could also be religious, come to my temple and pray to me. But, don't donate any cash or gold, the priests pocket it all. If you feel like doing something for me, go feed an elephant some nice and ripe bananas. So, may be, take your kids to a zoo; to find the elephant.

Don't waste your time here. Be happy!

shailesh said...

http://www.firstpost.com/business/dont-weep-for-realty-we-need-to-unleash-a-lokpal-on-it-162894.html

Very true

shailesh said...

http://www.firstpost.com/business/dont-weep-for-realty-we-need-to-unleash-a-lokpal-on-it-162894.html

Very true

Anonymous said...

Referring to http://www.firstpost.com/business/dont-weep-for-realty-we-need-to-unleash-a-lokpal-on-it-162894.html

The author does have some valid points though I obviously do not agree with him on everything.

Here's 3 reasons RE in India will not crash for the foreseeable future. 10-20% drops do not constitute a crash for an asset that has been appreciating close to 10-20% YoY for the last 6-7 years.

- Inflation, INR needs to appreciate significantly so that less rupees buy more real goods (material, power, labor, land) the main variable cost ingredients of built-up RE. The trend has been going in the exact opposite direction with INR depreciating in value.

- State owned banks (i.e. major lenders to several projects) can hold property on their books forever without need to liquidate. In US it is a quasi-government agency like Fannie and Freddie. In India there is direct government involvement through these state owned banks. In effect, GOI like many global governments around the world IS the lender of last resort if any builder goes bust.

- Political influence. This like the prior point is true for both West and East as well. There is huge political pressure to keep up housing asset values. A housing crash will have a ripple effect on the entire economy and is a sure way for people to feel bummed if not outright revolutionary and vote out the ruling elite. In India it's doubly true since many of these political elite themselves are neck deep in RE dealings.


Barring a fundamental change in RE sector (i.e. introducing transparency, removing black money and political meddling) it is highly unlikely for prices to drop significantly in a rigged market. Counterintutive facts on the ground such as "low demand - high prices" is precisely the indicator of such markets.

DingDing said...

@anon 6:18

and yet oecd realty markets have either
collapsed or in process of collapse !

i find it amusing that depreciating rupee is repeatedly made out to be cause of the current stagnation / appreciation w.r.t realty

One only has to look at the past to disprove this.

Anonymous said...

Anon @6:18

You should not be preaching here but buying some more RE and flats for yourself and your relatives since you belive in your theories.

I would never buy or buy when prices drop by 50% or more in the coming years. You buy and be happy and I would wait for you to get whacked by you rown family and friends who you advised your BS.

Anonymous said...

THE ONE AND ONLY ANSWER IS THIS IS PLANNED......RAHUL SONIA WANT TO SOLD THE NATION TO WORLD BANK IN NAME OF RECESSION BLA BLA BLA...GOOGLE OUT "NEW WORLD ORDER" YOU WILL UNDERSTAND THE GAME

JAGO BHARAT JAGO.....BHARAT MATA KI JAY

Anonymous said...

Boss, please refrain from putting the same old Banglore story of yours. It is damn boring yar... The blog is about housing bubble. IF the property is not legal then dont buy it, why are you dying to buy one...

Anonymous said...

Interesting story
http://timesofindia.indiatimes.com/city/mumbai/Share-broker-hounded-to-death-by-4-investors/articleshow/11287123.cms

4 guys give a broker 13 lakhs and expect it to grow by 20% in 3 months. The broker returns the amount but gets killed becuase he could not generate profits

Cant imagine what will happen if the RE bubble bursts.

Ankan said...

Nice and informative blog, Thanks. Keep on posting like this.

chethran said...

Thank you for the info. It sounds pretty user friendly. I guess I’ll pick one up for fun. thank u


Villas in India

Ankan said...

Very nice post ! Very helpful. Thanks for sharing.

Kanksha Mehra said...

Ownership of a luxury homes is no longer just a dream today. Ask our help for buying a luxurious property in Ambernath which will not cost you a fortune. We will work with you step by step for all your property needs.