Wednesday, December 07, 2011

Third time unlucky.

Originally posted in R2IClubForums.

I am back to entertain you all with more amusing stories of Bangalore Real Estate.

After ReddyGate and CEOGate, one thing was very clear to me. It's very difficult to get the correct legal documents for a resale property. So I decided to narrow my attention to under construction brand new properties. I mean the builder must be eager to sell these, right? The project is progressing well and some blocks have been built and some others are coming up. The project is scheduled to end by Fall 2012, so give or take 6 months, by Summer 2013, the property should be ready. [Yeah, I know the risk of the project never being completed, but at this point I would buy it if the legal papers are clear and live with *that* risk.]

I went with this mid-tier builder who is building their first "villa" project. They have coined this new term called "villament", it's essentially an apartment, but with fewer floors. So instead of a 10 story behemoth, these things are 1x two story apartment built on top of another two story apartment. So there are totally 4 floors split between 2 apartments. I had seen this property way back in August and I couldn't agree on a price. We went back and forth on the price and we settled on a price, just in time as CEOGate was winding down.

The one thing you hear in Bangalore Real Estate - if a project is blessed by "State Bank of India", it's golden. SBI is the top tier bank of the lot and supposedly they have the most anal lawyers in town. If they clear a project, it's absolutely clear. There's nothing to worry.

This project was approved by SBI. Further to that, State Bank of Travancore approved it, so did Corporation Bank, HDFC Bank, Axis Bank, ICICI Bank and the lot. Hell, my bank loan got approved pronto since this was a pre-approved project.

Easy peasy I thought. Finally I can be done with the Real Estate mess in Bangalore. And then it started.

Since this is an apartment type deal, you own a small portion of the undivided share of the land. Since this property was 3 acres and 108 apartments, they divide the undivided land and you have the ownership of it. What this also means is that your lawyer is now going to check the land for all the 3 acres and make sure it's clean. If it is a "villa", typically they verify that one survey number where your property is located. [Typically, big projects are split across multiple survey numbers.]

I tried to find a lawyer who is aware of the intricacies of the project. One of the learnings I had from the past is when a lawyer starts digging up past history, often there are documents that are difficult to "trace". Giving the benefit of doubt to the developers, people quit, they misplace documents and it's a chore to find them. So I thought if I find someone who is aware of the legal issues, things would be easier.

I joined the Yahoo Group of the owners of the "villas" and asked them who used a lawyer to verify the land. Of the 30 odd people in the mailing list, not one had used an external lawyer. They all depended on the fact that the bank they borrowed money from clearing the land. Since the land was cleared by the bank, they assume the land and the project should be clean.

I had little choice but to go with the lawyer I have worked in the past.

This developer gave us a file containing of all the latest sale deeds and "katha" of the 3 different survey numbers. My lawyers went through this and came up with a list of documents that have to be investigated. Each of the survey numbers had 7-8 portions of land parcels and each land portion had multiple buyer and seller. The lawyer said this land is very "fragmented" so he needs to spend a lot of time.

Every land sale deed comes with what's called a "Mother Deed", which lists the history of the land. Typically any developer hands over the mother deeds along with the latest documents to a lawyer check. This developer refused to hand over these documents to my lawyer stating that the originals are mortgaged with SBI (since they pledged the land with SBI and borrowed money against it) and they only have one copy. They refused to make further copies of the documents.

So I beg my lawyer to send a person over to their office. Five such visits and nearly 20 hours of pouring over a few thousand pages of documents, my lawyer goes back in time for all the three survey numbers and investigates all the purchase and sales of the lands.

At the end of it, he lists about three dozen gotchas in the land. A few listed below for a sampling:

- Survey number "C", which forms nearly 50% of the apartment land was acquired by the Government in 1992 for "hitech" purposes. All the land was an agricultural land to start with and it was converted to "industrial" purposes when this happened. In 2007, apparently this document was converted to "residential". The developer had no documentation available for either the conversion to "hitech" land nor has documentation for conversion to "residential". When we asked about it, they said they have applied to the Tahsildar for this and they will get back to us. It's pretty bizarre that there isn't clear paperwork for a majority of the land, as late as 2007.

- There exists a middleman (John Doe) who has been the GPA owner for many pieces of the land in this lot since 1990. He has been the buyer and seller of this land many times over from 1990 to 2007. In 1995, on a single day, many sites were registered. All the sites were sold by John Doe. The GPA number mentioned in the sale deeds is different from the GPA provided to us. The original GPA, of course, is not traceable.

- When a piece of land is sold, the sale deed mentions the site number, and boundaries. The boundaries would say something like "bounded in the east by site x, in the west by site y, in the south by site z and north by 30 feet road". Now, when the sale happened in 1995, for ALL the sites, the boundaries are the SAME. The site numbers differ, but the boundaries remain the same. This is as if the same site was sold many times over on the same day.

The typical answer given by the developer for such cases is that this is a typographical error. While reasonable, the Government provides a solution to fix it. You can apply for a "rectification deed" and correct the errors in the sale deeds. This developer has not done it so far and refuses to do this since it's too late to do the changes.

- None of the original sale deeds for the 1995 sale is available. All that exists are certified copies of the sale deeds. The excuse given here is that the originals were lost. If that is the case, then the process is to file a police complaint, post an ad in the newspaper regarding this and save those as reasons to go with a certified copy. Of course, none of this is available.

Depending upon the lawyer you use, they either check 30 years of land documents or some go as back as 60 years. Here, I was getting stuck with improper documentation within the last 15 years.

The developer is unwilling to fix any of the errors in the sale deeds. I may get to see the RTC for the Government acquisition and release, but even that, we aren't sure.

But I wonder, how is this possible? These are obvious errors that SBI should have caught. So, what gives?

To cross verify, I find a lawyer who works often with SBI to approve these types of documents. He goes over the list of questions and confirms whatever my lawyer has raised are all valid questions and there's nothing out of the ordinary. When I ask him how SBI would approve such a project, all I get back is a smile and an answer that says "anything is possible in India".

I don't understand why the buyers in India don't go for an independent legal opinion when it comes to Real Estate. Shouldn't these things be caught up-front before 90% of the project is sold out? Isn't that the only way you can get a Real Estate developer to fix these wrongs before it's too late?


Anonymous said...

Indian Land registration and maintenance process is big mess. On top of it, every land parcel is broken into multiple ownership over generations. I have heard cases, where even after 60 years, old owner came back with legal stays. Until we computerize and provide legal strength the whole system, it will remain mess.

shailesh said...

Investors corner 55% flats in Mumbai

In 2008, nearly 45 % of investors had bought houses; this slipped to 22 % in 2009, and then shot up again to 43% in 2010 and 52% in 2011 - the highest in the past several years.

“All the affordable housing schemes have been plagued with investors,” said Pankaj Kapoor, managing director of Liases Foras. “Several buildings in the Mumbai Metropolitan Region are lying vacant. On the other hand, needy people are living on the roads, and sometimes in slums. The investors have ruined the present real estate market.”

“Excessive capital is creating ripples in the housing industry,” he added. “As per the logical current market circle, the capital pushes the prices of land up, and subsequently property prices push consumers away, while investors with surplus money are roped in to sustain and inflate the market. The government need to break this well-planned circle to bring down the present exorbitant housing prices.”

Real estate experts say that regional property purchase policies need to be implemented strictly, and local residents should be banned from further owning more than one house.

“Additional tax should be levied in cities with high prices. Lending for third or more home purchases should be strictly restricted,” said Kapoor He added that in India, the income tax exemption for the first-property buyer is limited to Rs 1,50,000 on home loan interest, while to investors buying their second or third property, the entire interest amount has been exempted.

Anonymous said...

The Tax should be 1% per year on the RE assessment. If a property is worth 1 crore, the tax should be 1 lac per annum. In the worst case scenario, it should be at least 0.5%, i.e. Rs.50K per year.

For a RE worth 4 crores, the tax should be 4 lacs.

I don't know the current tax rates in Mumbai or Delhi, but this is what it should be. All the money GOI can make is going away.

Another point is the black and white component. If the RE is registered at 25% of the market value, the tax should be at least 2% of the registered value. This will take away air from a lot of investors and get money to states for their projects.

DhImAn said...

If you have to pay a tax in perpetuity for something that you own, then do you really own that thing?

Before you go spouting off about 1% tax and so on, go do some frickin' research about fee-simple and allodial ownership of land and realize how anything but an allodium is slavery, pure and simple.

Anonymous said...

The author of 'Third time unlucky.' seems to be a NRI. He mentioned about fall season in Bangalore. Well, south india has just three seasons, monsoon-winter-summer.

In Bangalore, no builder can get away by cheating people. This is also true in other parts of Karnataka. If a document is cleared by Bank, you can rest assured that it is clean. AS for lawyers, there are thousands of them any every street corner of Bangalore and they find discrepancies in any document, including your birth certificate.

For your own satisfaction, it is worth getting a second opinion from a lawyer, but one should approach a reputed law firm even though their charges are high, instead of relying on street corner urchins.

I have heard/come across frauds related to buying /selling home but rarely heard any big builder cheating people

Bangalore resident

san said...


The author is a resident Bangalorean. It is a fallacy that the Bank legal audit is enough. The motivations of the Bank who loan you are very different from your motivations.

I used two lawyers in this case. One of them is a lawyer used by top tier IT firms and top tier builders like Prestige etc to clear their own properties.

The second lawyer is actually in the panel of lawyers for SBI and State Bank of Mysore.

That covers both ends of the spectrum.

The bank's motivation is simple. Can they extract the interest from you? If the property fails downstream, they can write it off in their failed portfolio and walk away. YOU, the buyer doesn't have that luxury.

It's YOUR responsibility to hire a competent lawyer to safeguard your interests.

It's childish to assume that I went with a street corner urchin. Please read my other two experiences as well. I go with reputed lawyers who deal with professional companies and do a thorough job.

Anonymous said...

As someone living in Bangalore, I support the contents of this article. Bangalore has too many shady deals in real estate, too much encroachment of government land, and too many land sharks. When challenged, they light the municipal record rooms on fire, as it recently happened.

Small towns in Karnataka, or even more traditional places like Mysore, Mangalore are much less corrupt, since they do not have the "easy money" of IT, that has fueled all this corruption. Many states in India have realatively clean land record system. Money fuels corruption, avoid Bangalore if possible, or be prepared for eviction when records eventually become computerized.

REBear said...

Rather than trying to bottom fish Indian RE, try saving your job and hide precious metals at safe locations. Reason:

UBS advices buying guns, Tinned food, and precious metals on Eurozone breakup .

Anonymous said...


Why do you post links and articles from nut cases.

REBear said...

@Anonymous at 9:56 AM

By your logic, even the UK embassy officials have gone berserk for warning of riots.

Prepare For Riots in Euro Collapse warns British Embassies

Anonymous said...


Even US Feds Fisher is warning of riots.

I think Indians are living unaware of what is coming. Very optimistic in their own cozy world.

It is very simple that RE bubbles across the world has caused debt issues with countries and going bankrupt. India is on the same course. The result would not be any different but even severe.

Anonymous said...


Most RE in India is free hold and residents should be charged proper tax. What allodial are you talking about? RE is transferred the same way as other countries as inheritance.

Anonymous said...

Below is a report from Credit Suisse about India. I think they should worry about EU first. If S&P downgrades the whole EU countries, hell will break lose and Sensex alongwith All world markets will drop by 20% in 4-5 days. Rupee may easily reach 57 level in this happens. Will find out in the next 24 hours.

MUMBAI: The Sensex is likely to rule between 13,200 and 14,400 points and the rupee may touch Rs 54-55 by June next, Credit Suisse India has said in a report.

"We remain bearish on the overall market, with downside risks to both multiples as well as earnings. The Sensex is likely to fall in the range between 13,200 and 14,400 points and the rupee may touch Rs 54-55 by June 2012," Credit Suisse India equity strategy head Neelkanth Mishra told reporters here.

Anonymous said...

@Anon above,

You are on to something here. India, with a per capita income one-thirtieth of the US managed to recklessly blow up a housing bubble that made RE here more expensive than advanced countries like the US.

I fear that what is coming in India is going to make the likes of Greece, Italy and Spain look like child's play.

One wild card here is Gold. Indians have massive Gold holdings and if the value of RE falls dramatically relative to Gold (for e.g. Gold may simply appreciate while nominal RE prices remain the same), a lot of Indians will use that opportunity to cash in their Gold to buy the RE that was so far unaffordable to them and that will drive up RE prices again.

Anyone have any thoughts on the likelihood of the above scenario?

Anonymous said...

"If you have to pay a tax in perpetuity for something that you own, then do you really own that thing?"

In the US and in most countries in the world, you have to pay property/municipal tax on all property that you own for perpetuity. That doesn't mean that you don't "really own" that property. The tax is the price you pay for the state to provide the required amenities for your property, such as roads, transportation links, infrastructure, water lines, etc.

Also, everyone pays taxes in one form or another to sustain their ownership of many kinds of assets, including Motor Vehicles.

Anonymous said...

Anon @12:18

If there is a crash in RE and India fares worse than Greece etc., expect Gold to go back to $500 per ounce. Gold itself is in a bubble and will crash. All commodities will crash. Indians holding gold will make no difference. It would be just blood on the streets.

Anonymous said...

Anon @12:21

You are right. I was telling earlier that 1% tax rate is what is needed. Unlike US etc., there are a lot of services Govt. provides even schooling.
Dunno what is DhiMan's point?

Anonymous said...

"If there is a crash in RE and India fares worse than Greece etc., expect Gold to go back to $500 per ounce. Gold itself is in a bubble and will crash. All commodities will crash. Indians holding gold will make no difference. It would be just blood on the streets."

Thanks for your response. However, your response suggests that INR will actually spike up against Gold. How do you see this happening especially given what is happening to the INR right now?

I'm no RE bull, but even I concede a simple truism that "the INR always goes down". I don't think that is disputable. There has never been any significant period of time where the purchasing power of the INR has gone up. Please feel free to correct me if I'm wrong.


Anonymous said...

Anon above:
INR will go to 70 or higher. Does that answer your question.

Anonymous said...


I saw a news article link above that talks about investors latching up 45% of flats in mumbai. If that is really true, rest assured we can look forward for a huge correction in RE.

These greedy lot will try to sell enmasse, if there is panic, which will cause further damage.

Similarly anybody know how much of bangalore properties are acquired by pure investors in past couple of years?

Because I could see no light in many of the flats while passing through them on night. Is that normal?

Typically we assume a property completed 1-2 years ago, should be occupied fully. That is not the case even in bangalore.

Any idea?

Anonymous said...

MMS's plan to let in foreign retailers was to prop up dwindling dollar reserves. Unfortunately this is suspended, the results of which are too apparent. This is one of the causes for Rupee slide and FDI migration.

As for real estate, a massive crash is likely as banks may have to adopt stringent control to stay afloat. This may mean coming hard on non performing loans

san said...

As someone who is currently in the Bangalore market for somewhat high end properties (1.2 - 1.4 Cr), I can tell you one thing though.

For that market, speculative investors have vanished. Properties stay in the market for months without being sold, if something is amiss. Properties with clear legal titles eventually sell.

That is the other reason one should be extremely careful when buying Real Estate. At these prices, when you sell, you are going to find it difficult to find a buyer if the titles are not clear.

san said...

@Anon at 9:35 AM

I am being guided by Native Bangaloreans here. They absolutely advise me against buying anything that is not legally clear, particularly in the outskirts where it is either SC/ST land or Agricultural land.

The problem will arise when you sell, particularly these high value properties.

DhImAn said...

In the US and in most countries in the world, you have to pay property/municipal tax on all property that you own for perpetuity. That doesn't mean that you don't "really own" that property.

In the US, if you don't pay your property tax, you get kicked out of your "own" property.

When I own a computer, or a book, do I get to lose it if I don't pay a tribute to an overlord? So why then should a tribute be required to hold land?

Allodial vs fee-simple are two ways of legally owning land; fee-simple acknowledges that the land is not yours; you merely own the right to use it as long as you pay the fee.

You advocate a 1% tax, but you don't know what you are saying. What you are saying is that you want to disown your own property, and pay tribute to an already thieving state for the mere right to use some land.

When the land is residential, i.e., produces nothing, this amounts to nothing less than slavery.

Today, you can't earn anything without paying the overlords (income tax), you can't trade anything without paying the overlords (sales tax), you can't move anything from one place to another without paying the overlords (octroi, toll), you can't import anything from outside the country without paying the overlords (customs duties) and now you go ahead and say that we should not even be able to live freely without paying the overlords (property tax in perpetuity).

You may be blind, but those who have eyes can only see this as advocating slavery.

The western world is a dying, if not already dead entity. Let India not ape it. When I and others warn of what happened to the west, we don't do it to gloat over what will be India's fate; we do it so perhaps a timely warning may avert it.

Anonymous said...

Guys expect a 30% cut in next two qtrs in Mumbai. Just hope that RBI does not reduce the interest rates

Bindas Bhai

NRI said...

hmm. I am surprised that Bindas Bhai is expecting a 30% cut who used to say that RE can only go up. Wonder what changed?

NRI said...

Just received this from Sobha Builders, Bangalore. Guys, stay tight. It's has started.

This is the best time for NRI to invest in the Sobha Developers Bangalore.
- Source ET-25th NOV-2011
Depreciation rupee, fallen 14% against the US dollar since the end of July, has made homes in India 14% cheaper than before in dollar price terms. Add to that a 10.5% additional discount (Sobha FPV 10.5%) on full down payment, and it’s like a discount of 24%. Result: for an NRI, a property that costs Rs 1 crore could be bought for just Rs 76 lakhs.

Pawan said...

You may be blind, but those who have eyes can only see this as advocating slavery.

Agree 100%. And sometimes when I am not in an angry mood, I actually like the people who don't pay taxes to the govt. and feel bad on my own inability to do so.

I mean what services does the govt. provide us with the tax money we pay it. We don't use mass transport and use railways as sort of last resort. Neither do we go to govt. hospitals or send our kids to govt. schools. Most of us have our own power backup, water purification systems and private security guards.

Other than protecting our borders and spending on it, where does our money go?

Pawan said...

Municipal Corporation of Delhi has demanded an increase in property taxes. (

Anonymous said...


"When I own a computer, or a book, do I get to lose it if I don't pay a tribute to an overlord? So why then should a tribute be required to hold land?"

The state does not provide services to maintain your computer or book, whereas the state does provide services such as roads, transportation, utility connections, (and in the US, schools) etc. relating to your land for which you pay property taxes. This is the difference (one that you conveniently ignored in your post).

I agree that all the taxes that Indian and Western governments have placed on their societies greatly inhibit freedom, restrain progress and diminish human productivity. But the West (as hopelessly taxed and regulated as it is) can't shake a candle to India when it comes to such things as octroi (free movement of goods within 99% of Western countries), customs duties (100% on luxury cars in India?), etc. Further, the West's bureaucracy is far easier to deal with and less corrupt than the stifling bureaucracy that benefits our Babus.

I agree with many of the things in your post. But most of the things stated there are for a different debate.

BTW, a fee simple is not a lease, it is an estate in the land. In theory, when there is no successor to inherit your land, the land "escheats" to the Crown, which remains the ultimate owner of the land. This doesn't change the fact that you (for all practical purposes) "own" the land. If you don't pay property tax or even income tax, the State has every right to come after you for all your assets (not just land) until such assets satisfy the tax obligation.

Anonymous said...

Sensex Plunges 350 Points, further downside, as claimed by technical investors:

samix said...

Dhiman I agree with what you have written but unfortunately when I raise these issues with my Indian counterparts they just can't get it, they are indoctrinated with the socialist/Keynesian ideologies to the core.

My two cents on importing and exporting stuff and money remittances, generally I should expect to do whatever I want to do with my money after paying tax, burn it, bury it remit it or whatever, but our overlords tax us(when they can print it anyways) and then prohibit us from even doing with our money what we want to do.

Same with land ownership, as they say communists don't let you own land, the socialists allow you to own the title of the land and then tax you dry!

With respect to restricting the number of houses a person can hold etc, these laws will be all be useless because the system itself is flawed, do you know that such rules already exist for Government employees that they cannot own a house if they are living in government quarters and many, and with respect to affordable housing schemes there already exist laws that prohibit ownership of extra flats elsewhere if you are part of these affordable housing schemes, the problem is the obfuscation of market forces by government intervention and unbridled money printing, this needs to be solved.

Ankan said...

Nice site. Good information.

Anonymous said...

There are ample buyers in market with cash on hand to grab if RE becomes affordable.

If interest rates go up and/or RE goes down, people with RE will cry foul... and you know... there will another blog how poor Indians lost money.

In a 'real' game, there are winners and losers. There is no win win.

Anonymous said...

I don't get it, why are you all anti-investors. They are risking their capital on speculation in investments, or are you all anti-capitalists. I hope none of you got a job that was outsourced from a foreign country.
The bottom line, things self-correct, money is made when things are out of whack (like now). Let foreign investment increase and allow them to build, see how quickly markets corrects itself.

The socialist mindset in India has to die.

Anonymous said...

"Result: for an NRI, a property that costs Rs 1 crore could be bought for just Rs 76 lakhs."

You gotta love that "just" in "just for 76 lakhs".


Anonymous said...

"I don't get it, why are you all anti-investors."

Everyone expects their earnings to sky rocket while every other parameter of prices in market should remain same... can't have it both ways. Indians want to be socialist when it comes to taking, but capitalist when it comes to giving.

Also, here investors are manipulators. They are non-productive contribution kind of sleeping partner.

There are few things that should be affordable and be kept away from so called investors. such as health, education, agriculture and real estate.

Go speculate on iPad, computers, stocks... see how it works. Betting on necessities is like holding someone on ransom.

For e.g. someone dear is very sick, you goto a doctor. Doctors say deposit 50 lacs or he can't operate.. what are you going to do?

Another example: There are few shops locally. these few shops decide to sell milk for 4 times the price... What do you do for your child?

Therefore regulation exists and if not or if not implemented.. there will be blood on streets... one take it upto some level... I believe India has more room.. why? because people are ready to live in slums, like to blame on govt, anti-capitalist, are into non-productive, non-innovation business. they sub consciously are OK to be treated like slave.

Anonymous said...

"You gotta love that "just" in "just for 76 lakhs".

What really happened in previous years is that many upgrade their small flats to bigger flats and taking on loans majorly in range between 10 lacs to 40 lacs. But now people who bought these for 10 lacs to 40 lacs want crores for it... and they are not finding any buyers... therefore this puts pressure on sale for upgrade flats.

I like to see what happens in next 1.5 years. Let the match begin.

So called Investors... are you listening? Have capacity to hold and pay your EMIs... good luck.

Anonymous said...

@Pawan, Polt, DhiMan,

Can you comment on my remarks re: Gold prices and RE in my 12:18 post above?


san said...

To the Sobha example, since I was dealing with Sobha classic.

Recently the BBMP raised their property valuation guidelines. Sobha raised the prices of Sobha Classic by 10-15% from Oct 1st.

Sure, they will give you a 10% discount on that. Why not?

You must be an ass to put down 100% before a project is completed and is ready to move in.

But there are suckers everywhere, so why not!

Niel said...


"IT sector may hire less and reduce pay hikes; attrition to come down"

Niel said...

My Family friend had old houses on a piece of land in Andheri-Jogeshwari area. 6 months back they took loan from market(very high rate) started construction of 9 floor building. They have already raised 4 or 5 slabs but still there is no booking. I think he is asking for 12k rate.
He is still sticking to the point that Prices will go up and hence no need to bring down rates. There were 1 or 2 leads which offered 9k, but he rejected.

Anonymous said...

Prices finally crashing in India.
This you find out when you put your house to sell and what buyers quote if you find any.

polt said...

@Anon - "a lot of Indians will use that opportunity to cash in their Gold to buy the RE that was so far unaffordable to them and that will drive up RE prices again. "

I would say this is unlikely.
1. No one wants to catch a falling knife. If (it's a big if) sentiment turns against RE, then people will simply stay on the sidelines. In the US, price/rent ratios in many places are now reasonable by historical standards. But sentiment is still negative and prices therefore are still falling.
2. I personally think gold is in a bubble.
3. More than gold holdings, it will the ease/cost of credit and the job market that will determine the RE prices. In 2008, folks had gold, but credit was hard to come by and there was much talk of layoffs. RE crashed by about 30% in just a few months.

Anonymous said...

Awesome work dude. I salute your stubborness and refusal to become another "chump." I tried desperately to convince my parents to do the same, hire an independent RE lawyer before jumping in to buy a new apartment from a "reputed" builder.

But in India "Ram bharose" mentality is pervasive especially in Real Estate.

The old English proverb "Penny-wise, Pound foolish" is alive and well in India. My parents will haggle with a vegetable vendor over a few rupees, yet they gladly forked over tens of lakhs to this "reputed" builder.

Now I'm just hoping there are no issues down the line. Ram bharose...

Anonymous said...

"2. I personally think gold is in a bubble. "

A bubble when measured in what? INR? USD? CHF? What?

Anonymous said...

The old English proverb "Penny-wise, Pound foolish" is alive and well in India. My parents will haggle with a vegetable vendor over a few rupees, yet they gladly forked over tens of lakhs to this "reputed" builder.

Well said! I have also seen a lot of people trusting someone blindly because he is acchhe ghar ka ladka hai!. I guess if your family has been in business for 30 years, I can write you a check with my life's savings. Then, you can disappear with 10 such checks, and start a new accha ghar in a different country..

san said...

"Penny-wise and pound foolish."

Man, talk about it.

I have a colleague who has bought a 2.75 Crore villa with the #1 builder in Bangalore.

I asked her which lawyer she used. I *assumed* she used a lawyer. She said they didn't use a lawyer because:

1) They saw the papers and they looked ok.

2) The builder is the best in the city.

3) The bank approved the loan.

Then I asked her if everything is being constructed appropriately.

Turns out 1/3rd of the villa project was built on disputed land, so at first there was a legal notice in an area stating it was under dispute.

This was followed by the builder stopping construction of 1/3rd of the properties. Luckily, my colleague's property was not affected. They raised a high wall segregating the disputed land and abandoned the disputed area.

Now the 50 odd people who paid money in the disputed area - the developer said they would be suitably compensated, which typically means in the next project they launch, they would get a comparable villa.

My jaw hit the floor when I heard it - these are things the lawyer catches. To my colleague, of course, this proves how genuine the builder is - since even if crap hits the fan, they will be allotted another villa later on.

And thus goes life in Bangalore. I can't wait for this RE market to correct itself. I see it's doing it already. Speculators are getting weeded out.

Pawan said...

Can you comment on my remarks re: Gold prices and RE in my 12:18 post above?

I don't think anyone will sell their gold to buy RE specially when it starts to go down.

Pardon me for the language but most speculators (calling themselves investors) are like dogs - they like to chase what's getting away fast.

DhImAn said...

For e.g. someone dear is very sick, you goto a doctor. Doctors say deposit 50 lacs or he can't operate.. what are you going to do?

Go to the police, pay them a bribe, then go to the court, pay the lawyers and associated babus their bribes. This will get your case in the queue for a preliminary hearing in a year, as opposed to the usual five.

Oh wait. You have someone dear who is very sick? Not anymore.

I hope you see that laws, regulations and government are not the answer to your dilemma.

The answer is more free market competition. If there are enough good doctors around, then someone will figure out that honesty is better, do the surgery for a reasonable price and eventually put that SOB who blackmailed you out of business.

It's the same thing with autorickshaws, to give you a less extreme case.

Let's say we remove all permit requirements - anybody who has a license and can buy or borrow an autorickshaw can immediately start plying.

This would cause an initial inrush of new autos, some good, some unscrupulous. But this extra supply would drive prices down; there would be five autos willing to take you where you want to go as opposed to one who demands "half-return" or some other exorbitant amount.

Soon, there would be scams - some auto guy promised to take you wherever for Rs 50, but midway, on some desolate stretch, fakes a breakdown, and demands Rs. 100 more.

This would be then countered by people trying to capitalize on service - you'd get to have people who give you their mobile number, their credentials and so on to assure you that they won't scam you; these folks would then build up reputations and eventually big businesses and prosper, driving the scammers further out of business.

By not interfering in a free market, you let the forces of innovation and feedback balance themselves out.

By interfering, you invoke the law of unintended consequences, inadvertently shooting yourself in the foot.

Keep in mind, a government big enough to give you everything you want is big enough to take away everything you have - this was said by Thomas Jefferson.

DhImAn said...

I don't think anyone will sell their gold to buy real estate either; even though this may be a good play. The idea is to buy low and sell high, so it may make some sense to exchange some gold for RE, but as Polt said, nobody wants to catch a falling knife.

FWIW, I agree with you, Samix. People live in opaque bubbles, wear rose colored glasses and think that nothing's ever going to change their world (hat tip to the Beatles).

And yet, inevitably their world will get rocked.

DhImAn said...

BTW, a fee simple is not a lease, it is an estate in the land. In theory, when there is no successor to inherit your land, the land "escheats" to the Crown, which remains the ultimate owner of the land. This doesn't change the fact that you (for all practical purposes) "own" the land. If you don't pay property tax or even income tax, the State has every right to come after you for all your assets (not just land) until such assets satisfy the tax obligation.

And this is not slavery?

The concept of ownership of something means that the right to that thing is yours and yours alone, and that nobody else can claim right to it.

If somebody can "come after you" and do whatever, then someone else has a claim to "your" property, which by definition then is not yours.

If such is the case for what you earn, for what you sell or buy, for what you move and for where you live, then tomorrow such will be the case for your daughter, your wife and your mother.

Some overlord will say - you didn't pay some arbitrary "taxes", so guess what, your daughter pays it off by "working" at the overlord's home.

Freedom and taxes are the exact opposite of each other; if you advocate one, then you necessarily advocate the abolishment of the other.

DhImAn said...

As for government providing services - if it legitimately wants to do so, let it compete as a business in the marketplace, without the use of force to enforce a monopoly.

Let it privatize the railways, for instance, and let it try to make IR competitive with private operators.

Look at schools, airlines and telephony, just to name three things where there is private competition, and tell me how Air India, government schools and BSNL are doing.

That's right; government "services" appear indispensable only because a priori, they are monopolistic and without a competitor. As soon as a competitor comes along, none of those services becomes an essential part of government anymore.

So - maintenance of law and order, or roads or whatever - consider what happens if it is privatized. Actually it is - toll roads are far better than regular ones (even though the toll goes to the govt.) and private security at hotels and elsewhere is more effective than the slumbering police department.

So please, don't give me that tired old argument about govt. collecting taxes to provide a service. Let me be free, free to choose whether or not I want that service in the first place, and how much I want to pay for it.

Anything else is bondage, which is a fancier term for slavery.

Anonymous said...


sorry to hear about your friends plight. Fighting a case against the builder is of no use as the bureaucracy that you depend for help like judiciary, land dept, police are already in his pocket.

There is a hope to get justice and your money back. That is by approaching a NGO for help. I suggest that your friend approach 'Karnataka Rakshana Vedike' , a NGO that helps people to get justice. Even the most powerful people in Karnataka, that includes the govt and police, can not go against the judgement passed by this organization. The fee is minimal, a one time payment that has to be paid after you get the desired results

Wish you all the best


Ankan said...

Thanks for your nice blog posting.

aam aadmi said...

You can't privatize law and order. Security to the highest bidder, are you crazy ?

Govt however inefficient maintains a semblance of order in the society by monopolizing violence. Without the state you will have bunch of armed thugs roaming everywhere terrorizing people.

Anonymous said...

DhlmAn: I found a few marbles on the street, are they the ones u lost?

Anonymous said...

When I see a city like mumbai, there is so much buildable land that thousands and thousands of flats can be put up quite easily. Allow free market, foreign builders to build in mumbai and see how quickly prices come to reality.
Look at the concept of malls, customer went from being at the mercy of store owner showing what they want to you picking what you want without the hassle. Same thing happening across entire retail sector, not fast enough, but happening.
Anyone looking for government to force builders to hold prices down is just asking return of 'hindu rate of growth'.
Free the market, you will flourish.

Anonymous said...


You are going crazy. Law and order is needed. Cannot privatize everything. You saw what private banks did as soon as Glass Steagal act was repealed in 2000. They caused the biggest mess worldwide for their own profits.

Anonymous said...

Anon at 7:01 AM

The Glass Steagal act repeal was just one part of the problem. The bigger issues were the Govt. owned (guaranteed?) entities Freddie Mac & Fannie Mae and, the bailout executed, once again, by the Govt.

While I don't totally agree with DhimAn, bigger govt. is rarely the answer.

Anonymous said...

"You saw what private banks did as soon as Glass Steagal act was repealed in 2000. They caused the biggest mess worldwide for their own profits."

And they would have been punished by the free market (which pushed the banks into bankruptcy) if the government had just butted out and done nothing. It was the GOVERNMENT that bailed these wretched banks out when they richly deserved to fail.

Anonymous said...

Some anonymous has written about 'Karnataka Rakshana Vedike' in this blog . Just to enlighten you, this is a racist organization, umteen time venomous than shiva sena, and if you are not a local kannadi, they wont help you. On the contrary, they will make your life so miserable that you will never set foot in karnataka.

If you face problems, approach a reputed lawyer. Dont even approach this type of groups for solutions. Some of these are headed by notorious gangsters from Mangalore, birth place of Indian Mafia equivalent.

GSM said...

I hope you see that laws, regulations and government are not the answer to your dilemma.

Well, this may work when there is law enforcement but not in India where practically anybody can get out on a bail. Did we see what happened in 2G when there was a little bit of discretion was allowed. First we need to fix law enforcement and then talk about deregulation.
Unfortunately, MMS only shouts deregulation never law enforcement, he just cannot connect the dots.

The answer is more free market competition. If there are enough good doctors around, then someone will figure out that honesty is better, do the surgery for a reasonable price and eventually put that SOB who blackmailed you out of business.

The problem will not be solved overnight. When you don't have enough doctors around and deregulate where doctors can charge anything for their service hoping to bring supply, initially costs go up because of speculation and lack of doctors. Only after a few years when everyone jumped to become a doctor because it is lucrative, there are many doctors to compete and you have a choice and that solves the problem. What about your dear one who is sick until then? Is the initial few years acceptable socially or "politically"?

Pawan said...

RE boom is coming again. India is again flush with funds!

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DhImAn said...

You can't privatize law and order. Security to the highest bidder, are you crazy ?

Umm, isn't this the case right now, even with government providing "law and order"?

Try going up against some rich or powerful person in a court of law and see who wins.

Why is there this nepotism and corruption?

Because there is absolutely no incentive to not be corrupt. In fact, all incentives favor corruption.

You can never root out corruption or a lack of law and order by more repressive and monopolistic government. That's like saying that the antidote to being bitten by a cobra is to get bitten several more times by more cobras.

The only way it will work is if there is an incentive (profit even) to carry out justice correctly.

Incentive comes naturally when there is competition. You either provide proper law and order and justice, or you lose in the marketplace and starve.

The point is simple. Take away the monopolistic powers of government and everything resolves itself.

How you do it is another matter, one could do "soft starts", easing in newer privatized systems to minimize disruption, or you could kick the can down the road until the sh*t hits the fan.

Change will come, this much is certain.

DhImAn said...

DhlmAn: I found a few marbles on the street, are they the ones u lost?

I guess what I say is often taken as so outrageously extreme that I get these reactions from people.

Let me engage you briefly in a little reminiscing exercise.

Do you remember, in college, there were some teachers who were very strict about attendance, about paying attention in class and about doing everything on time? Every student hated those sons of bitches and complained about them, kept names for them and so on, but nobody really had the guts or desire to go against them, right?

Do you recall that there were some other teachers who were always smiling and friendly, and kids always went to their classes, they never had an attendance problem, even when they said that they'd give 90% attendance to everybody regardless of actual attendance? These teachers never had a discipline problem either - kids would simply sit and listen in class, even making jokes and having fun.

Can you think back and answer why this was so, and whom did you learn better from eventually?

Did the discipline, law and order and everything the first set of teachers do help or hurt the students?

The thing, you see, is that the first set of teachers were mediocre, if not outright weak at their subjects. They had to rely on terrorizing the students to get respect, and of course, that wasn't really respect.

Government is like this first set. It is mediocre, if not outright poor at its job, so it has to resort to terrorizing its citizens to maintain a semblance of "law and order". Of course, that law and order isn't really that.

It is merely a sham to hide the rot within.

Anonymous said...


All perfectly valid, bang-on points re: the monumental scam that is government. However, the topic we were discussing was whether you “really own” land when the government levies a “tax” on the property.

Perhaps in the perfect, idealistic, anarcho-capitalistic, Rothbardian utopia you have in mind, that might be a form of slavery, unfortunately such pure “market driven” societies don’t exist anywhere on the planet (indeed they have not existed anywhere in history). As a matter of sheer humdrum reality, property taxes are levied on property in all the civilized nations of the world. That fact alone does not mean that you don’t “own” your land.

Also, while I agree that government involvement in the economy must be kept to the barest of the barest minimum, there are certain areas where coercive monopolies are not a bad idea. Think about water supply, sewerage, roads/highways and land title registration. There would be absolutely chaos if these were left to a free market. Can you choose which water company will supply water to your house? If there are 26 private water companies, will there be 26 water networks below the streets? Ditto for sewerage. It’s not like you can choose a different sewerage company like you can choose a different mobile operator for your iPhone subscription. The logistics involved are vastly different. Also, what about roads and highways? Can you choose between 12 different highways to take you from Bangalore to New Delhi, each one run by a different toll operator? Do you know what the country will look like in such a situation? Finally, what about land title registries? How do you privatize that? What will make someone accept the authority of one private land title registry over other? What if two competing private land title registries register different owners for the same property? Who is “correct”? Who decides? And on what grounds? Do you start to see the problem?

Again, government is a nefarious scam that benefits a powerful elite and their rentier client class. Very few individuals in human history (including yourself) have successfully figured this out. That said, government is also a necessary evil because certain core functions have to be performed through coercive monopolies for societies to function. The threshold where this minimal level of involvement should optimally end and the private sector should begin will continue to be the subject of heated debate.


Anonymous said...

Excellent observations Pawan. I think in the coming days and years, billions of dollars are going to be invested in real estate and the likelihood of slump is fat fetched.

MMS is buying time until the questionable swiss/offshore are liquidated and then show his middle finger to Anna/Advani likes . The rate at which the money is flowing into India, this might take couple of year.

Indians have realized that the safest place to park their money in India. In this global/IT world, the safe heavens that used to be are no more safe. Therefore, the clandestine money is going to find its way to real estate. This phenomenon will continue for 5-10 years,before stabilizing. Therefore, dont expect any slump for another decade

Anna may achieve his goal, but by doing so, he is going to make lower middle class and middle class to live in zopdas

Those of you with high skills, it is time to think of migrating to greener pastures

Anonymous said...

Anonymous Above

Its clear. You are goin straight to hell along with your views and support for the corrupt govt.

We dont care for people like you. Support all you want and join and rot in hell along with them.

Enjoy your time on earth. Reap all pleasures of corruption. So how many years will that be? 50-60?

People remember and pray to saints. People abuse sinners. I dont need to tell you what your eventual end wud be.

I pity and laugh at people who make money on earth and think they have everything.

Anonymous said...

"I pity and laugh at people who make money on earth and think they have everything."

Well, enlighten us then. What else is there? Please tell us because you seem to be uniquely endowed with special knowledge (which the rest of us are blissfully unaware of).

Oh and please submit your proofs along with your ramblings.

ksmuthusamy said...

China finally understood that to develop their economy they need to control their spiralling property (RE) prices. They are taking steps in the right direction. some sort of sanity is restored there.

Stock market is also not hugely over valued in China although still china grows over 8-9 percent.

On the other hand, mother India and its corrupt politicians does not acknowledge that the spiralling Real Estate causes such a sickening effect on inflation and economy. so far there was no meaningful discussion started in India about these menace.

Those whoever purchased apartments in the past few years also does not want inflation to come down. They are worried about their cost only. Based on that strength market gamblers are muscle flexing the reserve bank of India to cut rates even without any meaningful improvement in Inflation.

Shamelessly govt is looking for base effect to see the moderation of inflation which is very pathetic
(to be continued)

ksmuthusamy said...

Now RBI Governor is facing the music. Eventhough they knew the real reason they are unable to raise their voices against their bosses.

congress leaders ( It is rumoured that Priyanka Vadra has stake in DLF) has huge stake in RE. Almost all the leaders have stake in RE. They are trying hellbend to save their asses.

Unfortunately, nothing is going to work for them as they cannot change the nature laws. If USA could not avoid their collapse in RE few years back, such a weak economy (with heavy import bill) like India how can avoid this?

Anonymous said...

Our politicians foolish designs started to hurt the economy. Here it is to be mentioned that top CEO's of India's top companies also has to take the blame.

They foolishly talk about the ineffectiveness of RBI's policy on interest rates. Bull Shit.

When you raise interest rate by 0.25 percent every 2 months for 100 years also you cannot control the inflation.

India should have risen the interest rate at 0.5 percentage at three instalments last year itself.

They took everything for granted. FDI for granted. Now it is hurting them. No Money.Fiscal Deficit.Rupee deceleration

Now the shameless corporate creatures like Deepak Parekh and likes are shamelessly shouting for rate cut. With rupee fast losing its value how you can cut the rate?
I simply cannot understand how creatures like Deepak Parekh and K.V.Kamath are handling/handled banks? ( May be it is their luck that they handled the banks at boom period, but it is also rumoured KV Kamath screwed ICICI bank before leaving)

are baba, where is the need? You claim you make profit. Then why bother?

We need to allow the economy to cool. Otherwise all will go down to drain.

(to be continued)

ksmuthusamy said...

The data coming out for the past few months are encouraging for the real economists who wants orderly growth for sales down
RE growth slows down.

This slowing trend needs to be pick up.

India cannot afford to print money like US or Europe. If we start printing Rupee like them, then Rupee will further decelerate. Only option is breaking the backbone of RE sharks. Then all the land mafia and other poachers money will come out. Hoarders will come out.surely inflation will come down.

Our relative underperformance is clearly documented and it says India is worst performing BRIC as well as Asian economy. You need not have Einstein's brain to find the reason. It is RE. RE. RE.

Aam Janta who bought RE may not like this comments. But unfortunately 2012 will be the Realty Realty Check for RE sharks.

The news about the 50% purchase of Mumbai flats for the past 2 years by the Investors (Speculators), gives comfort to the people who are expecting correction. Becos when the fall starts, this lot will try to sell and come out thus will contribute to accelerate thr fall.

Now all many of you know, new airport side RE madness in Bangalore died down.

Also many of you would knew that, RE madness in small towns ( I have observed this in TN) has also watered down.

Now we are waiting for this things to hit the mainstream media like iightning. That will come with the fall of Sensex and Nifty.

(The previous comment was mine -although it says anonymous)

jay said...


Corporation profits unlike GDP are not inflation adjusted. If you get that into your head you would understand a lot about how this game works.

ksmuthusamy said...

Very Very Interesting Article

Anonymous said...

wiki had published in 2006 that Gandhi family had an estimated $2 billion in swiss bank. Now, the same sourcr says that they have no account in swiss bank.So, where did the $2billion go. DLF ? or some other real estate company ? no one knows. Definitely that money can not vanish in thin air. The best guess is that it is invested in India.

Anonymous said...

"Very Very Interesting Article"

Quit spreading alarmist nonsense. India is a very strong and wealthy country. The people in the cities are all rich owning houses worth Crores. Even flats/apartments cost more than several Crores each in Indian cities. Real estate prices in Mumbai is more expensive than Manhattan which means that India has a vibrant first world economy (First world prices = first world economy).

Again, please take your alarmist fear-mongering elsewhere.

Anonymous said...

This article is a better reflection of reality:

"Huge buying demand exists in real estate market"

So much for any "correction" in RE prices. Suckers!

Anonymous said...

Residential realty hit by crunch, 36% projects delayed

Anonymous said...

Both the Anons above:

Seems to be the same person.

If you are so confident, why are you here on this blog. You should be partying and buying more RE. If prices are like First world country, why do people scream bloddy murder when Aloo-pyaaz goes up in price.

I would suggest that you buy more and be happy. We don't need your advice. Keep it for your family and friends who will thrash you at a later time when prices fall by 50% in the coming years.

Kannan said...

San.. you are the one who asked Adarsh Palm retreat some time back.. may be an year?

Anonymous said...

one of the reasons why these banks were downgraded

san said...


Yes, I had enquired Palm Retreat. In the meantime, Adrash announced that 4 out of the 8 towers that they were building were on disputed land. They removed the 4 towers. They kicked out people who got in early and paid less money.

Half the land in Adarsh Palm Retreat is on illegal land. Tread carefully there.

Kannan said...

I would suggest some BDA Layouts.. I see decent apartments/houses that should fit your budget...the place where i live is very nice.... Kasturi Nagar.


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Can you please share the name and address of the lawyer with me please ? is my email id . Am planning to buy and looking for a good lawyer to verify docs in this mess ...

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