Friday, January 06, 2012

Ignore warnings at own Peril

Article link, Emerging Markets

The collapse of the emerging markets, especially China, India, and Brazil, will have a huge ripple effect on the rest of the world’s economies, and will plunge most countries back into a global recession.

It is our view that emerging market growth has reached an unsustainable level and that a slowdown is taking place. A slowdown is generally not such a calamitous situation, but with expectations for China, and emerging markets at such extremes, the failure to meet or beat these lofty forecasts could mean big shocks to global economies and stocks.

Emerging Market Warning Signs

  • Surging inflation that threatens sustainable growth
  • Soaring money supply that fuels bubbles in stocks and real estate
  • Credit bubbles
  • Massive and understated loan exposure
  • Tightening monetary policy that could “put the brakes” on the economy
  • Inverted yield curves that usually appear before recessions
  • Real estate bubbles evident in ghost towns and empty malls
  • Overconfidence buying at auctions
  • The infamous “skyscraper indicator”
  • Fraudulent companies that have attracted investment from around the world when they are nothing but “shell” companies with unproven financials
  • Most importantly: The stock markets of China, Brazil, and others have been deep into bear-market territory in 2011 – down between 20 percent and 30 percent from their peaks
  • 91 comments:

    shailesh said...

    THE EASTERN SHOCKWAVE

    Neither Jim Rogers nor any other guru will give us a scenario where the coal-fired Asian Locomotive runs out of steam even faster than the oil-starved Western Roadster. The conventional analysis, among Doomsters like everybody else, is that Asia will suffer less than the OECD countries when the funny time playacting stops, and sales of Donald Duck flashlights at any low price are even worse than Greek debt bonds at any high rate of interest.

    To be sure, Jim Rogers admitted that China and India already have inflation. He did not say the ways they are trying to solve inflation without killing their growth machines are exactly like the ways which OECD countries have tried, and failed, from as far back as the mid 1970s. Asian economies are slowing down and the rate of fall, measured any way you want, is much faster in real terms than the spreading slump in OECD countries. For China and India, the money gauges used to report and analyse their declining growth are much further distorted by "underlying inflation" than the OECD case, where this problem is already massive.

    The Asian slowdown is undercounted with the wrong metrics, and moving much faster than guru analysts like to say.

    Pretending the Asian slowdown isnt as bad as it really is first needs us to believe the Chinese real estate bubble is not collapsing. How fast this can happen and how much damage it will do has a real world test bench, well analyzed with all the details: Spain. The latest government data from 70 Chinese cities shows the average price of property has fallen at double-digit annual rates for the second straight month. For Rogers however, only parts of the Chinese real estate market have popped, and he says this only concerns a part of the country - urban coastal real estate - in a country where 80% of the people live at less than 80 kilometres from the coast, and the Hong Kong bubble economy is 100% coastal !

    For various reasons India's real estate bubble is downplayed, but its implosion menace is at least equal to China's. Indian real estate business is a cesspool of corruption that stretches to the highest levels of government. Public housing is perhaps the worst, most threatening bubble in the subcontinent's bubble economy - driven by India's massive population and high population density, and feeding a huge web of chief ministers, army and airforce generals, high level bureaucrats, land holders and the overheated financial sector. One result is especially sombre: industry fundamentals are unknown because valuations have no real meaning anymore. The second result is totally predictable:

    Indian real estate investment is now the most difficult investing task on the stock markets and even hardened fund managers are now bailing out because the risk of almost unlimited losses is too high. How far down the bubble goes is anybody's guess, but 90% is a figure many Indian analysts throw around.

    skeptic's ghost said...

    In my opinion the RE bubbles are of 2 kinds

    1)
    Bubbles in US, Japan, China, Poor Europe (PIIGS) was fueled by top down credit and massive construction spending driven by large corporations and government.
    The US bubble was aggravated by subprime lending practices as the banks sold off toxic loans to investors using derivatives(i.e. the retirement savings and bond markets). China's bubble is also backed by same top down approach where their cities have borrowed massively selling bonds (backed by their communist government instead of investors)
    In this type of bubble there is a glut in both commercial and residential real estate and as easy credit dies all the entities are no longer able to maintain cash flow.

    I call this the Credit Bubble

    2)
    India's bubble (also bubbles in Pakistan, Nigeria, Kenya, Bangladesh, Brazil?) is driven by false throttling of supply by a near sighted government and crony capitalism of politicians with small time builders. In India there hasnt been gigantic construction - maybe pockets of Gurgaon-Noida and Suburbs of Mumbai - but the remaining places occupancy is more or less there in terms of people living as they have no other place to go - pricey apartments or slum hutments.
    Land is plentiful, but priced out from regular construction activity by speculators, but construction industry itself is tightly controlled so that supply never exceeds demand.
    Note that in these countries commercial Real estate is already toast

    I call this the Slum bubble

    I still think that the Slum bubble countries will be more resilient to shocks in the global market as the money behind them is not leveraged out in the open market and resold to investors.

    Any thoughts on this?

    Anonymous said...

    I agree with skeptic's comment.

    Anonymous said...

    skeptic's ghost:

    which will leave you in a better shape? Losing the money you borrowed from some sucker or your hard earned money? Atleast in case of US they overbuilt and some
    europeans bought lot of mortgage securities and lost. At the end of it US has something to show.

    In India, not much was built and only the price increased for the exiting land/home.

    Anonymous said...

    So prices for Indian real estate can keep rising because supply is kept low... how can price of one necessity rise and keep all others low? Rents also can rise in this theory? So many cannot buy or rent, then what happens to labor force - that too decreases... there goes growth into drain.

    It's coming fast, very fast. Good for people with skill and that can provide service at higher rate. SAME PEOPLE HAVE TO PAY... enjoy.

    Ask any mumbaikar, for a week to go without maid that washes cloths, cleans room-bathroom.

    shailesh said...

    Everyone here seems to be comparing US bubble with Indian one and somehow comes with argument that we are different. I lived through US bubble, and can tell you, it never ever got as crazy as Indian bubble. Look at this chart,

    US Home appreciation in bubble years

    Out of 50 states, only in 8 states, prices grew 80% over 8 year period. That is not even 8% annual gains. Even in most land starved areas of NY and CA, prices only doubled in those 8 years.

    Coming to Indian bubble, in City like Mumbai, central areas like Parel etc.. which used to be Rs 6000 per sq ft in 2004 are asking now Rs 25000 per sq ft. That is 400% appreciation in last 7 years. Even in far away suburbs of Thane, Kalyan, Vasai, Panvel etc... prices have appreciated at least 300%+ in last 4 years. There is genuine increase in demand due to wide spread availability of Mortgages, which was not the case prior to 2002. Also there has been significant increase in salaries for some professionals, But no way those 2 factors can justify price appreciation. There are 2 main factors,

    1. Land scarcity artifically created by Builders and Government babus, and lack of infrastructure.
    2. Large scale speculation. They say in Mumbai, almost 60% new homes are with investors, not end users.

    So finally, it does not matter how bubble got formed. The final result is still a BUBBLE.

    skeptic's ghost said...

    IMHO There are 2 main reasons why rents dont rise in India -

    1) Kids/youth especially from the middle class dont leave homes when they are 18 like they do in western countries or Japan - thus the housing market is bereft of newer generation.
    Many stay in Hostels or stay PG.
    Only recently have degree students started renting places to live. This reason is more cultural - in Western countries after 12 years you are tired of your parents like you should be and want to live alone get some privacy and enjoy life while working and studying -
    India has neither of these concepts. Also most Indian families hound their daughters and treat them like farm animals - so 1/2 population of young women will never live on their own and rent/buy



    2) Rents are not rising because people stay in slums where in one room 5-6 people are crammed. Same for small 1BHK apartments where families of 5-6 sometimes stay.

    So in a way this illegal and shared housing has absorbed the excess demand from the regular rental market.

    Had all those people left the slum/chawl/MHADA/DDA/KHB blocks/parents houses/PG and moved to rent in good apartments, the rents would go up by the addition of these people to the market.

    skeptic's ghost said...

    Continuing my own comment -

    the primary reason why the US housing market hasn't picked up in 4 years (and still not going to) is that more and more American children are staying with parents/relatives (here) in US until the age of 26
    This has driven out many new starts.
    US used to have strict rules that if you have 2 kids you should live at least in 2 BHK till they are 9 yrs old and in a 3 BHK when any of them reach age of 10. - But lately no one is enforcing this rule.

    Japanese housing market didn't pick up from social delusion from value of owning a home after 1989 collapse.

    Bottomline is that "housing bubble" (not property bubble) has as much to do with emotional, cultural and social background as economic.

    Puneite said...

    @Shailesh - in 2004 1 tola Gold was ~Rs 5000 Today it is ~Rs 28000.

    This corresponds to the price of property too. So in a way either Indians have inflated the Gold bubble in tandem - or the RE bubble is a consequence of making Gold the real safe haven for wealth

    I guess RE has been in tandem with INR value of Gold because like gold it is a place to park your money for fear of currency being decimated.

    shailesh said...

    House price indexes since 1970

    On more comparison, look at the prices in all Eurozone, US & Japan from 1970. Everyone is scared of Eurozone going down drain. But just think, prices in India went 400% in just last 10 years. It took 40 years in Belgium. US is only at 200% in 40 years.

    The challenge I have with all bubble naysayers is, when prices go up 400% in 10 years, and is highest compared to all other bubbles in recent history, still they can say there is no bubble ??? When such a bubble will pop, will there be no effect ? They give all reasons on India is different, tell me in which way? Japan has much higher density as country compared to India, still is not immune to bubble and bust.

    shailesh said...

    @Shailesh - in 2004 1 tola Gold was ~Rs 5000 Today it is ~Rs 28000.

    I don't think Gold and RE are comparable. One is liquid, driven by world prices, not influenced by currency fluctuations.

    This corresponds to the price of property too. So in a way either Indians have inflated the Gold bubble in tandem - or the RE bubble is a consequence of making Gold the real safe haven for wealth

    Though Indian's buy gold, I think they don't influence price of gold. Lot of things are purchased and sold on derivative market in world, where there is no real exchange of gold. Gold went up as hedge against Financial crisis, not because Indians bought more. In fact, Indians are buying almost 25% or so less gold.

    I guess RE has been in tandem with INR value of Gold because like gold it is a place to park your money for fear of currency being decimated.

    I think that is psychology of most, which has resulted in speculative bubble. It is true initially, but once mania takes over, all logic is thrown out of window.

    skeptic's ghost said...

    @Shailesh -
    Indians and Chinese families have heavily being buying gold. - Some people have estimated that Indians own about 1 trillion $ worth of Gold. Isn't it obvious that the commodity traders longed Gold assuming Indians and Chinese would keep buying (the same way China hoarded Iron Ore and other commodities for its 2008 Olympics creating worldwide shortage)

    I still think that Gold bubble is in tandem and feeding into RE bubble and which feeds other commodity bubbles and this continued (or is continuing) viciously. In reality neither are real safe havens unless of course there is a big game changing war.

    Anonymous said...

    One side-effect of the bubble years in US was POOR QUALITY of the construction. Reputed builders were using shoddy materials and craftsmanship and there were plenty of lawsuits.

    I shudder to think about all the high-rises that have been built in India. In Gujarat earthquake, 50-60 year old houses were left standing whereas buildings a few years young were reduced to rubble.

    Even in a country like China (industrial manufacturing-wise) there have been well-documented cases of newly constructed buildings falling apart within few short years.

    Desi Babu said...

    For all my friends on "Imdia's Housing Bubble", who take an interest in the 2012 doomsday and the collapse of all bubbles in a financial "Armageddon", here is a new year's gift.

    A short story that I wrote for all of you -- The Useless Dust

    Peace!

    polt said...

    @Skeptics Ghost - " So in a way this illegal and shared housing has absorbed the excess demand from the regular rental market."

    I disagree. Why did this not absorb demand from home buyers? They too could have shared and lived in cramped homes.

    Generally for assets (with the sole exception of gold) prices move in tandem with earnings over a long term. During short periods of irrational exuberance or credit bubbles, prices rise much faster than earnings. Eventually the ratio reverts to long term mean. Either prices fall or stagnate till earnings catch up.

    Here in India, the stock market has corrected and is now trading at around 15 times earnings.

    For homes, earnings (rents) ratios are low. So either rents have to go up or prices have to come down. We will likely see a mix of both.

    Read irrational exuberance, this time is different, or the classic "Extraordinary Popular Delusions and the Madness of Crowds". During a bubble very few actually can sense a bubble. Every bubble had a perfectly rational sounding reason(s) for justifying it. Once it bursts ...

    Garage said...

    Real estate business is a cesspool of the corruptions stretches to the highest level of government.Real estate price is depends on the market.

    Anonymous said...

    the arguments made by indian real estate owners ,speculators is almost the same as they were made by foreigners.re cannot come DOWN bcoz black money,location, shortsightedness blahblahblah
    look what happened
    the whole western system is in tatters.
    as of gold-IT IS NOT IN A BUBBLE
    IT IS ONLY THE METAL PRICED IN DOOMED FIAT CURRENCY REFLECTING A FAILED SOCIALIST SYSTEM AND NOT SPEC MONEY INFLATING IT.

    INDIAN RE IS DOOMED.SMART MONEY IS LEAVING THE SECTOR AND OFCOUSE THEY WILL NOT TELL U.

    skeptic's ghost said...

    @Polt - I am not denying that India RE is in a gigantic bubble - but when you want reversion to mean you probably mean the following -

    EMI*60 = 80% cost and EMI = 30% of expendable household monthly income assuming constant interest rates

    Price per sqft = 200 or 220 times rent per sq ft

    These equations have already been met for many of the buyers whose incomes are in USD/EUR/GBP/Rials-dinars/ or when compared to gold. Add to this the fact that most middle class family kids who were born in the 80s (India's 2nd baby boom) are now either earning large salaries in India or are making money working abroad. For most such families with 20somethings raking such large salaries there is very little risk of default as they have their entire lives ahead of them.

    Then how do people on this blog seriously think that the prices will revert to 2005 prices without a crazy black swan event like an all out economy crippling war/catastrophe? I would say that prices will not even scrape below 2008-early 09 prices.

    Anonymous said...

    Ghost:

    Your theory is full of errors and is all theoretical. Bust is coming and will come. You don't believe it, go buy more flats and you shouldn't be even here.

    I would buy only when it drops by 50% or more. Not to 2008 prices but to 2004 prices. Otherwise, I'm a happy renter or I'll stay with family and stay cash.

    polt said...

    @Ghost - "These equations have already been met for many of the buyers whose incomes are in USD/EUR/GBP/Rials-dinars/ or when compared to gold."

    Fair enough, but the number of such people I think is quite small. As is the number of folks with high incomes in India. A lot is made of high incomes in IT/Finance, but the actual number with say 18L+ incomes is limited.
    I posted recently about how prices in the fairly prosperous city of Chandigarh are down by 35% over the last year. One would expect the Punjabi emigrant population to prop up prices, but that has not happened.

    "prices will revert to 2005 prices without "
    This may not happen in nominal terms, but quite possible in real terms.
    In nominal terms, my guess would be 2002 prices + inflation + say 2% pa. i.e a nominal growth of about 10%pa. I chose 2002 because that's when the NDA started our credit bubble through low interest rates .

    So over 10 years we should have had about a 159% increase.

    Anonymous said...

    Now even the finance minister is conerned about the bad loans made by the banks. Expect belt tightening here

    http://www.livemint.com/2012/01/06221123/Bad-loans-growth-faster-Mukhe.html?atype=tp

    Pawan said...

    @Skeptic,
    Rents are not rising because people stay in slums.
    Not really. In my office, I know young couples with no kids living in 3BHKs because there are no 1 or 2 BHKs available.

    how do people on this blog seriously think that the prices will revert to 2005 prices without a crazy black swan event
    I don't think we are going to 2005 prices. I talk in terms of emi-to-rent ratio which should come to 2.5-3.0. Anything more than that is very difficult to sustain. If rents go up 10% every year and prices stay where they are, we may reach this emi-to-rent ratio in 3-5 years for some properties. Which means property prices should not go up for the next 3-5 years.

    Anonymous said...

    There is an interesting post on Seeking Alpha related to this topic..
    "Why India Is Not A Meaningful Alternative To Investing In China"
    http://seekingalpha.com/article/317303-why-india-is-not-a-meaningful-alternative-to-investing-in-china

    shashankRao said...

    Gold prices are going up not because of consumer demands. They are going up because Central banks across the world are buying them.

    Reserve Bank of India bought 200 tons of Gold from IMF in 2008-2009 (after Lehman brothers and just before QE1 begins) when price was $1024 /ounce. Later many Central banks including from China bought tons and tons gold from the Market to hedge the QE1 effects i.e. massive currency printing.

    Noone was sure then in 2008 what was going to happen the world economy, so Central banks across Globe hoarded lot of Gold.

    Now that things are being stabilized or under control, time has come for Central banks to offload the Gold. I think RBI will be the first to start that cycle. India needs Dollars so they have no option but to sell Gold to control depreciating Rupee, else India will face massive inflation due to Petrol/Gas becoming expensive on the face of rising Dollar.

    Dollar is going to go down. I would not listen to what Companies like Merryl Lynch or JP morgon publishes GOld forecasts news articles. I smell it a manipulation in in effect. Don't forget they have hired MBAs paying them jaw dropping salaries in the past. We need to keep in mind that these companies are not charity organization. Do you really believe they publish forcast/analysis news to help us???


    Major world economies like US, Japan, Germany, UK etc have started doing good. Lehman brothers collapse aftershock has been absorbed successfully by the World. Going by the job market reports, things are really looking bright in the US. Recently a friend of mine got a job(IT) in NJ for 120K when he has not completed even 1 year in the US. He was making 60k in a desi company.That US company sponsered his H1 and even gave him signing bonus. Is not

    Gold has not go down. I am putting some of balances in NRE deposits. I will make more money there than buying and then renting out the same property worrying about the tenents all the time.

    Disclaimer: My analysis is based on my limited knowledge.

    shashankRao said...

    In the above post I mistakenly wrote 'Dollar is going to go down' It should be 'Gold has to go down'

    DingDing said...

    @shashank rao

    "Major world economies like US, Japan, Germany, UK etc have started doing good."

    how did germany / japan / uk enter that list.

    As for US i it is one qtr that too the holiday season !

    there has to a better perspective than your friend getting a job of 120k !

    Pawan said...

    Well Ding ding, Shashank may be right. Refer to the following article:
    http://economictimes.indiatimes.com/opinion/comments-analysis/dollar-regaining-ground-against-currrencies-of-nations-with-large-current-account-deficits-high-inflation/articleshow/11418334.cms

    Pay and benefits between 2005 and 2010 rose 19% annually for the average factory worker in China while the cost of employing US labour increased by only 4%.

    DingDing said...

    dollar gaining ground has nothing to do with economy doing good

    while i do agree that dollar will here on strengthen considerably

    as for germany

    http://www.bloomberg.com/news/2012-01-06/german-november-factory-orders-decline-more-than-forecast-on-weak-demand.html

    let's not even get into rest of the europe !

    as for as US one needs to patient for the holiday blues to set it in prior to any prediction !

    ECRI has already predicted a mild recession at the least

    as for as jobless claims mish explains them very well.

    as for as japan the less said the better

    samix said...

    Just read somewhere that now NRI income will become taxable in India, if the NRI spends more than 60 days in India.

    I think India is going really broke, that they are not slaughtering the hen that lays foreign exchange eggs.

    This may have a big effect on Real Estate ?

    Pawan said...

    @Ding Ding

    Does the US need China/India?
    NO

    Do China/India need US.
    YES.

    US can be replaced with EUROPE also in the above to a large extent.

    If you read the article I posted, it says that by 2015, it might be cheaper to manufacture certain stuff in US as compared to China.

    India/China can keep devaluing their currency but I am not sure that is the way to prosperity for any country. And then the US can devalue USD - QE3, QE4...

    One can argue that the Indian RE bubble is sucking up precious capital which should have gone into improving the competitiveness of our manufacturers. The Japanese made the best cars and beat the US car companies in the US itself. Our manufacturers could do the same. But if you make the best homes, you still can't export them. The whole Indian boom rides on IT which seems to be the only sector that is globally competitive and brings the dollars. Imagine if we had 20 such sectors. We could be years ahead of China.

    aam aadmi said...

    @DingDing

    It's a matter of perspective, Western economies are stagnant so everyone feels as if they have lost everything, for countries like India there's this fruit called "economic superpower" at the end of the road which is driving everyone nuts.

    Hence the plethora of self congratulatory titles like emerging economy, rising power etc etc. The reality is that it takes more than just GDP growth to make a developed nation, look at our country, it's fractured and is full of religious nuts, no matter how much money you throw at it it's never going to be a superpower.

    There's ample evidence to suggest that our social indicators have become worse in the past 15-20 years since economic liberalization. Hell even Bangladesh is leaving us behind in the UNDP index. People on this site see the reality and say as such though sometimes exaggerated.

    aam aadmi said...

    contd...

    my two cents says that no matter how hard we try we will never get to Italy's or Greece's standards, US is a far call.
    The US may undergo decline but even in that state it remains a formidable power unlike India.

    A country is the sum of it's people, that statement in itself says a lot about India.

    Anonymous said...

    Who knows. Once upon a time , China and India were the center of the world economy-when America did not even exist. Maybe India and China are just going back to their formner roles and the west has to adjust.

    These things take decades or centuries to play out. But under current conditions, we seem to be in a massive bubble. Our rates are equivalent to US house prices-minus the income and social net.

    Pawan said...

    Maybe India and China are just going back to their formner roles and the west has to adjust.

    India and China will together have 3 billion people in a few decades. The world does not have enough resources for 3 billion people to live lavishly. 10% of these can sure have a good life but that won't make these countries great.

    Anonymous said...

    Anon at 9:33

    India once contributed around 25% of the world's GDP at one time. India and China'a dominance was mostly because of the commodities. Technology and innovation drive todays worls.
    India does not have the infra for that. So going back to good old days is just a pipe dream.. We just have to content with the 1% we contribute now.

    Ankan said...

    Great post..enjoyed reading.

    Anonymous said...

    70% of 75L flats unsold: Report

    http://www.knightfrank.co.in/en/news/15-12-2011/70-of-75l-flats-unsold-report

    aam aadmi said...

    India and China will together have 3 billion people in a few decades. The world does not have enough resources for 3 billion people to live lavishly.

    Exactly. That's the whole point. India and China are coming to the party when the glass is half empty. We are running out of resources and people have the guts to think that we can live like the Americans.

    Someone needs to tell this to Indians.

    Pawan said...

    @aam aadmi
    We are running out of resources and people have the guts to think that we can live like the Americans.

    Paradoxically, this means more and more people will compete for less resources and anyone desirous of even a decent lifestyle will have to pay for it. RE is expensive for the short term but over a longer period, RE, power, food, water, good schools and healthcare will all remain expensive and affordable only to the top most earning people of the society.

    However, to assume that some people can live in affluence with poverty all around is a myth. Someday it will bring very tragic consequences - famine, social unrest, war - anything and everything is possible.

    DingDing said...

    @pawan ...

    the entire IT boom is pure hokum, i mean what is the USP of indian IT industry
    do we create products ?
    do we have technology platforms ?
    do we have innovative ideas ?

    ans to all of them a big fat "zero".

    only thing indian IT industry has to offer is labour arbitrage, with no end in sight where efficiencies might be developed ...

    suits who have no understanding of production aspects and idiotic software engineers with few lines of code experience thinking of themselves as gods on a/c of piddly dollar earnings !

    as for as achieving greek standards worry not they soon will be same boat as us !
    unless we decide to outdo them

    Pawan said...

    Population: The Elephant in the Room

    http://www.paulchefurka.ca/Population.html

    Pawan said...

    @DingDing
    the entire IT boom is pure hokum, i mean what is the USP of indian IT industry

    If IT is a bubble, MBA salaries are a baloon. Infosys pays 60-100% more to MBAs (calling them analysts) as compared to engineers at the same experience level.

    aam aadmi said...

    @pawan

    Paradoxically, this means more and more people will compete for less resources and anyone desirous of even a decent lifestyle will have to pay for it. RE is expensive for the short term but over a longer period, RE, power, food, water, good schools and healthcare will all remain expensive and affordable only to the top most earning people of the society.

    Yes natural resources are bound to get costlier in the long term.

    As far as RE goes it depends on what kind of RE, fertile farmland will be in high demand and so will be prime RE in cities with access to utilities, RE which depends on a private car and private water connection(like the US suburbs or Gurgaon/Noida) are going away.

    Though this does not contradict my opinion that there will be a correction in RE in India. Even with the current population pressures, RE is wildly overvalued in India. Nothing justifies a property in Mumbai fetching more than it's counterpart in Florida.

    Pawan said...

    @aam aadmi
    RE which depends on a private car and private water connection are going away.

    Not sure about this point. If you pay for (private) water, there is a chance you still get it. On the other hand if you depend upon govt. provided water, you may not even get it.

    Rahul said...

    Real estate prices are infalting far beyond the reach of common man, because of high expectations, artificially created for the value of property in future. People don't even know to evaluate the cost for property and on what basis they are charged, such huge price for the purchase.

    Two beneficieries of this game are, Real estate developers (thats why n number of companies are getting populated like mushrooms in this business - HUGE profits in SHORT time) & BANKS (they cant keep thier money ideal without financing, as they too have high targets for loan disbursement every year. Sales pressure again on them too!!)

    Poor victims are people who have fat salary packages, and doesnt even know whether the money they spend (even several lakhs to a crore) are worth buying it. Mainly for tax saving purpose, & for investment they are ready to spare huge amount of EMI's to be paid almost through out their life. Anytime, if recession hits and their fat salary job will be under problem, then they will feel the real heat on them and the stress on their economics. Guys! particularly salaried ppl, pls think twice or thrice and plan for your investments, so that your hard earned money need not get trapped into hands of real estate inflation!!

    Anonymous said...

    Fat salaries are to stay in India. They were and will. With offshoring basically people in India are benefiting from high salaries with low cost of living. Outsourcing is here to stay and so will be high salaries.

    Once the culture of hire the best and fire the rest, also put automation for higher productivity gains is implemented by MNCs All nonsense saga of Indian high flying attitude will come to halt. Cheap labor and easy gains can take one only so far.

    Regarding Indian work culture - lesser said better it is. They are way behind world... I would say comparatively in stone ages.

    RE prices can rise to heaven but heaven is more than RE. Clean water, air, roads, health are more important than only RE. Mumbai has Rs. 1.5+ crores worth RE next to garbage dump and yet people buy it.

    Anonymous said...

    http://timesofindia.indiatimes.com/tech/news/outsourcing/Indian-IT-How-Bangalore-is-getting-Philippined/articleshow/11437190.cms

    Anonymous said...

    Guys March 2012 is going to be important for Greece.If Greece defaults the global economy will worsen and this will be worse than 2008. The coming economic sanctions against Iran will make things difficult for India on the oil front. Already Turkey has refused to bail out India on the payments situation. So the next few months will be crucial.

    http://www.upi.com/Business_News/Analysis/2012/01/05/Economic-Outlook-March-is-haunting-Greece/UPI-66051325774709/?spt=hs&or=bn

    Ankan said...

    Thank you for the great list..

    punter said...

    Lot of smart money folks here...

    Can anyone hazard a guess when GOI will have to bail out HDFC?

    Do you guys even know who are writing synthetic derivative puts on it?

    god bless...

    Cool Head said...

    @punter
    Do you have any info about the HDFC thing, if so enlighten us. A large number of people may have deposits in HDFC and HDFC Bank

    Cool Head said...

    Sahara's Real Estate projects seem to be in trouble. Read link below and also the article in Outlook Business.
    http://www.firstpost.com/business/as-sahara-seeks-sc-help-the-question-is-wheres-the-money-178858.html

    samix said...

    bailing out HDFC will be something new for India, Indian tax payer money used to bail out a foreign bank.

    Anonymous said...

    "Can anyone hazard a guess when GOI will have to bail out HDFC?"

    I do not see this anywhere in the mainstream news.
    Why is there talk of a bail out?

    polt said...

    Interesting chart of NY real estate.
    http://www.ritholtz.com/blog/wp-content/uploads/2012/01/Miller100yearsNYre.jpg

    City wise, NY has lots of parallels with Mumbai(finance, entertainment, advertising, port, island, etc).

    Over a 100 years, prices rose at around 5%pa, rents at around 4.7%pa.
    Mumbai likely will follow a similar pattern i.e. prices and rents will rise in tandem over the long term. Currently, prices have risen faster than rents. So we can expect a catch-up/correction taking place.

    Ankan said...

    great post..enjoyed reading..

    Anonymous said...

    @Polt
    City wise, NY has lots of parallels with Mumbai(finance, entertainment, advertising, port, island, etc).

    Pls refrain from comparing NYC to garbage Mumbai. NYC is one of financial hub of world. NYC has capability of maintaining Central Park which is center of city. NYC runs 30% on tourists (visit Times Square any day rain or shine). To maintain affordability it also outsources lot of work to other cities and other countries.

    Mumbai.. hmm. I am thinking.

    Latest Bollywood News said...

    Niceeeeeeeeee Post

    polt said...

    @Anon "Pls refrain from comparing NYC to garbage Mumbai."

    A 100 years back NY had many third world characteristics. Many areas in NY were overcrowded with immigrants, city was polluted/dirty, sewage was dumped untreated into the river, ethnic rivalries, etc.

    I am not saying Mumbai today is as good a place to stay and work as NY, but in 50-60 years it could be.

    Anonymous said...

    @Ankan,

    Weather you are pretending or not, either way you are the most stupidest person I have ever witnessed

    Anonymous said...

    @Polt

    Indian civilization is far more older than western civilization. 50 ~ 100 years to catch up with modern civilization.. really ? Think in this way - western civilization developed at greater pace then Indian civilization. What takes an India to come up with in 50 years, western countries will do it in 1 year... so your Indian 50 years to catch up is really like 250 years.

    Don't believe me? check out all technical innovations and the pace world is advancing.. India is just mere user and not innovator.

    Lately heard of Samsung and LG making OLED TVs? Even other Asian countries are pacing forward. What ground shaking global product did India release ? yeah.. RE prices. ;-)

    Anonymous said...

    Fake currency worth Rs six crore seized in Delhi

    http://timesofindia.indiatimes.com/india/Fake-currency-worth-Rs-six-crore-seized-in-Delhi/articleshow/11464416.cms

    India is infested with black money and fake money. As long as fake money is not discovered it acts as black money. RE gives platform to convert fake money to black money to white money.

    I have heard arguments on this forum that any money is money. Is fake money (converts to black money) is still money?

    God only know how much is in play really.

    ShashankRao said...

    Gold prices are going up again. Is it not a clear case of manipulating the market?

    People should stop believing Gold forcast reports being published in leading news papers/site.
    According to recent Morgan Stanley report published recently,Gold will again go up to 2000.

    Today I read that MHADA is going to sell apartments for 3 Crore. Super super rich people already have 5-10 flats. I am wondering who are these neo-rich who is going to buy these apartments.

    Pawan said...

    @Shashank
    Today I read that MHADA is going to sell apartments for 3 Crore. Super super rich people already have 5-10 flats. I am wondering who are these neo-rich who is going to buy these apartments.

    Your wonder will turn into horror when you will see all the apartments snapped up in 2 hours flat. Do report on how it goes.

    Preeti said...

    Where the hell is Bindas Bhai, he is the one who can guide us.

    Anonymous said...

    Maybe India and China are just going back to their formner roles and the west has to adjust.

    It has started. Today I read that India eradicated polio. Just imagine where we will be in another 100 years!

    Anonymous said...

    http://www.nytimes.com/2012/01/13/business/transcripts-show-an-unfazed-fed-in-2006.html?_r=1

    US Fed meetings in 2006:

    The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”

    Anonymous said...

    "A 100 years back NY had many third world characteristics. Many areas in NY were overcrowded with immigrants, city was polluted/dirty, sewage was dumped untreated into the river, ethnic rivalries, etc. "

    Oh please. Your rank ignorance shows. For all its faults, New York in 1912 was a FAR more civilized, FAR more cleanly, FAR less corrupt, FAR less stinking place than sewer-city Mumbai in 2012.

    Please stop comparing NYC to filthy Mumbai.

    polt said...

    http://www.americaslibrary.gov/es/ny/es_ny_museum_1.html - on immigrant housing in NY "
    Each apartment had only three rooms: a living or "front" room, a kitchen, and a tiny bedroom. Often seven or more people lived in each apartment. Not only was the tenement crowded, but also, until 1905, there were no bathrooms inside the building. "

    On corruption - http://history1800s.about.com/od/thegildedage/a/tammanyhall01.htm


    So please read up some more and clear up the delusions that you have about NY and possibly other western cities. Paris too was a shithole till most parts of it were rebuilt by Baron Haussman, though this was earlier.

    In any case, my point was that RE in Mumbai will follow a similar trajectory. It was not whether Mumbai is a 100 years behind or more. Maybe it is more ...

    Anonymous said...

    This blog has lost its charm. I am sick of reading comparison between india and western countries. We are what we are. Why compare ourselves with aliens. 100 years back, new york was a shit hole, says POLT. We are better off than them now. What a twisted logic!!
    The local level happenings related to real estate make interested reading. Why dwell on outside the subject.

    Anonymous said...

    @Polt:

    Are you on drugs?

    "Each apartment had only three rooms: a living or "front" room, a kitchen, and a tiny bedroom. Often seven or more people lived in each apartment. "

    What you have described is some kind of heaven compared to Mumbai standards. In case you haven't noticed, most people don't live in "apartments with three rooms" in Mumbai.

    Anonymous said...

    @Anon above and for the morons in this blog with similar attitude

    Mumbai is a shit hole eh? and we are way behind western countries?
    So what the F**K are you doing to change it other than cribbing about it in this blog and taking out your frustration of not able to buy a house because of your incompetance. If you can change something please do so else SHUT UP!

    polt said...

    @Anon - "100 years back, new york was a shit hole, says POLT. We are better off than them now. What a twisted logic!!"

    I never said that !
    I am merely trying to draw parallels from Western cities since we do not have reliable data for our own country to draw conclusions.

    For example, a lot is made of population density in Mumbai. As per Wiki the current density is 20500/sqkm. Look at this chart for NY - http://www.demographia.com/db-nyc-ward1800.htm. The units are per sq mile, but in 1910 NY had some density ranging from 8000/sqmile to 400000/sqmil in some areas.


    @Anon - "most people don't live in "apartments with three rooms" in Mumbai."
    Does not change my thesis. NY was a crowded, not so desirable place some time back. Mumbai is today. Both were/are centres of commerce.

    If you think RE here will follow some other trajectory, state that point and justify it. Pointless to indulge in off-topic contentions about how much better NY was.

    polt said...

    The land bubble continues in India. Parsvnath paid 200cr for 1.2acres in 2008 and now expect 800cr. Will be interesting to see if this goes through.

    http://economictimes.indiatimes.com/markets/real-estate/news-/parsvnath-eyes-rs-800-crore-from-sale-of-prime-land/articleshow/11481954.cms

    Anonymous said...

    Spoilt brats fighting over iPhones. 2012 is indeed the end of human civilization. There is no hope for this planet.

    We're all barbarians now...

    Anonymous said...

    S&P downgrades credit rating of France, Italy, Spain others - Wow, they are still better off than India at BBB-. India's downgrade was due to India's slowdown and interventions to exchange rate of Indian Rupee with USD. President Obama and Federal Reserve are concerned with RBI and FM Pranab Mukherjee and probably list India as a currency manipulation country. FM Pranab Mukherjee had raised interest rates 13 times over a short period and was still unable to curb the dip of Indian rupee. Then, he had to use other fiscal and monetary measures by selling USD in India's reserves and then to use administrative procedures to stop all MNC's in India from taking forex contracts positioning on their liabilities. This puts a halt on Indian Rupee further dip temporarily and stabilize. However, the free fall of Indian Rupee is yet to come soon. S&P downgrades of EU countries did not come as a shock as India who self claimed of double digits of growth needs to readjust their figure to single digit highs. India is truly shining.

    Anonymous said...

    http://economictimes.indiatimes.com/markets/real-estate/news-/bangalore-real-estate-market-plunges-by-7-in-q3-fy-2011/articleshow/11452960.cms

    Anonymous said...

    Cuffe parade, Miumbai

    http://r1.iad23t04.c.bigcache.googleapis.com/static.panoramio.com/photos/original/4355560.jpg?redirect_counter=2&st=ts&ir=1

    The link shows a photograph of cuffe parade, a posh area of Mumbai where billionaires and millionaires live. Average price of a multistory flat is $2000 sq.ft built of area.


    Would any of you from US live in this place if a free flat is allotted to you. Your comments please.

    I stayed in oberoi hotel last October and during my first morning strolls, I found people, men women children alike, defecating everywhere. It was so disgusting that I had to move to a different hotel where the situation wasn't much better.

    Is India Shining. I hope the indian missions abroad include the above photograph in their brochures so that NRIs and Tourists are forewarned

    polt said...

    "Would any of you from US live in this place if a free flat is allotted to you. Your comments please."

    I do not understand the intent of this question.
    People move to Mumbai for a better job/career/earnings/life. From the IIM grads who move there to work for Goldman Sachs to the migrant worker from UP/Bihar who works on construction projects, the reasons are fairly similar.
    No different from Indians who migrate abroad in search of a better standard of living/earnings.

    Mumbai might seem unpleasant to a lot of us, but for millions of poor folks it offers a lifeline and they rightly (and rationally) take it.

    aam aadmi said...

    I don't find any logic in comparisons between India of now and western countries in the past. 200 years ago, land/water was abundant, fuel cheap and a social revolution had already taken place in the west.

    India has none of the above right now, exactly why are we comparing them.

    Anonymous said...

    http://mobile.bloomberg.com/news/2012-01-11/india-s-skyscraper-boom-matching-china-s-may-signal-bubble-barclays-says.html

    Anonymous said...

    http://business.blogs.cnn.com/2012/01/12/skyscraper-index-china-india-barclays/

    Anonymous said...

    Last 2 articles are worth read

    Anonymous said...

    http://www.business-standard.com/india/news/navi-mumbai-airport-faces-land-hurdle/461089/

    This is what I call craziness. There r simple options like going to a site which is fully owned by government. Why spend 20 carore per acre.....

    Anonymous said...

    @Anon above

    This is what I call craziness. There r simple options like going to a site which is fully owned by government. Why spend 20 carore per acre.....

    Are you from India? Do you live in a shell? All this is game - Airport will be made way over budgeted and over timeline. Why? so that many levels money is made. E.g BWSL.

    Anonymous said...

    While we're talking about a bubble, the idea that India / China will one day become like the West is the biggest bubble of all.

    The reverse is happening, i.e. Western economies are resembling India / China. In US this will be due to uncontrolled immigration from Mexico/South America. In Europe it is from Africa and Middle East.

    These trends are already in motion.

    Anonymous said...

    http://www.business-standard.com/india/news/navi-mumbai-airport-faces-land-hurdle/461089/

    That's interesting. Farmers are demanding Rs 20Cr/acre.

    Works out to be around USD 91/sqft for undeveloped land somewhere far from main city in India when bought wholesale.

    For fun I ran some numbers on this property I know in California. It works out to be ~ USD 85/sqft in the center of one of the good cities in CA with all infrastructure & structure in place, residential zoning, clear title and retail price.

    Go figure!

    Pune Ite said...

    Agree with Aam Aadmi, for cities like NYC or even Shanghai go to Google earth and look at how well they are laid out, with freeways, proper lanes on road intersections, parks, zones for various types of RE, etc
    Cities like these were designed and developed from the ground up not ad hoc like Indian cities where there are barely any straight roads or working traffic control.

    India represents human greed at its worst - with an unsustainable booming population based on Natural gas fertilizer and diesel powered hybrid seeded, land destroying agriculture and imports.

    Even in villages outside Hyderabad, Bangalore, Ahmedabad and Pune (India's largest 4 non metro cities) land rates are minimum 2000rs per sq ft (88 lakh per acre) at lease upto 30 kms from nearest city landmark.

    What else can one expect when the nation keeps adding 200 million population in a decade, while life expectancy keeps on increasing -
    There has to be a calamity or epidemic or war to wipe out the people and zopadpatti bubble before the burst of the RE bubble.
    Maybe a Malthusian crisis is inevitable where the entire world will face famine by failure of some important crop.

    Sorry for such doomsday predictions - after all its 2012.
    Politicians will not let prices fall. Only distress sale property prices will show any correction.

    There is still a chance to fix it in a democracy - keep voting out incumbent till you are satisfied - and make sure electioneering isnt that corrupt. Sadly people keep voting based on narrow minded self preservation - rather than change and optimism

    Sunworld studio apartments said...

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