Thursday, February 09, 2012

Mumbai placed at 199 in list of 200 cities by per capita income

Read a report from Brookings Insitute.
Article Link

Top 3 Cities
1 Hartford North America 75,086
2 Oslo Western Europe 74,057
3 San Jose North America 68,141

Bottom 3 cities
198 Alexandria Middle East and Africa 2,248
199 Mumbai Developing Asia-Pacific 1,990
200 Cairo Middle East and Africa 1,989

So the question is: We have lowest per capita income, but highest real estate prices? All RE Bulls are immediate to compare Mumbai with New York, London, Tokyo, Singapore and Sanghai. While our income is just $1990 per capita. Are these BULLS cracking something???

52 comments:

Anonymous said...

Shailesh,
Spot on. The whole country is on dope right now. They think RE prices will never correct. Easy money for everyone without putting any effort. Easy come and easy go.

Mumbai folks are waiting for a shock of their life, in fact all metors in India. They will never come out of this shock once it is realised at least in this lifetime as it was based on total lies and fraud of bankers, politicians and builders.

Anonymous said...

Japan took almost 22 years and are still in shock, US it is 5 years now and EU will take next 10-15 years rebuilding. India, Australia, Canada, China Singapore etc. are toast for the next decade.

polt said...

@Anon - "They think RE prices will never correct. "
This by the way generally signals the peak of a bubble :)

Price to rent ratio (yield), Price to average income ratio (affordability) are way above historical trends for most Indian metros and second tier towns too.

All bubbles end. This one will too, irrespective of the 'this time is different' arguments provided by the bullish posters.

In this chart (http://en.wikipedia.org/wiki/File:Stages_of_a_bubble.png), my guess would be we are at the 'Return to normal' stage.

Deficit is up, inflation is high, interest rates are high, GDP growth is down and heading downwards, sentiment is poor. A perfect storm in the making or just a breeze?

Pawan said...

First signs of sanity coming back:

http://www.indianexpress.com/news/Adani-to-exit-realty-business--to-focus-on-mining--ports---power/910251/

Anonymous said...

It is indeed on dope.

This is the reality for low cost housing:
http://economictimes.indiatimes.com/markets/real-estate/realty-trends/low-cost-housing-a-byzantine-maze-of-government-approvals-plague-the-sector/articleshow/11831122.cms

I visited a local branch last week in Bangalore and the manager was literally pushing me for housing loan saying that prices are always going to go up.
Why are people so lachaar in India?

Anonymous said...

So wait: Marine Drive, Nariman Point, Malabar Hill, Nepeansea road lumped together with Dharavi!

This is why per capita is a crap statistic for developing economies since it doesn't take into account the greater diversity as compared to Western countries which tend to be more homogenous.

But if you want to cherry pick your statistics how about the very first line in the report that makes the startling observation:

Ninety (90) percent of the fastest-growing metropolitan economies among the 200 largest worldwide
were located outside North America and Western Europe. By contrast, 95 percent of the slowest-growing
metro economies were in the United States, Western Europe, and earthquake-damaged Japan


Having lived in the West, I can tell you that the Western economies are all about fluff. Financial gimmicks and public offerings (aka hunting for greater fools) of highly dubious "hi-tech" ventures is what the "smart" covet out here. Ofcourse the marketing spin would have you believe that US is all about "honest hard work".

Nothing concrete is being produced here. India on the other hand has a strong (and growing) industrial presence. And barring a few bad periods of foreign rule we've always been a self sufficient agricultural society right from the Indus valley days.

Narrow minded "techies" look at our lack of a Facebook or a Google and wonder what the hell we're producing. Well, let me remind these frogs in the proverbial well than 90% of the human population could care less about where you stuff your big data and what stroke jobs you get from your social network.

The biggest "innovations" in IT are complex financial algorithms, and esoteric hardware to enable high frequency trading (once again to scam the many for the benefit of the few.) Did I mention IPOs(i.e. wealth transfers from the many to the few)?

These gimmicks, er hi-tech innovations, have all but ruined the middle class and handed over fabulous riches to the bankers and their enablers.

Let us pray that we're spared this hi-technology.

Anonymous said...

@Anon - "the greater diversity as compared to Western countries which tend to be more homogenous."
See
http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth

UK/USA/Denmark/etc are worse than India.

Ankan said...

Very fantastic info can be found on this blog..

Anonymous said...

Higher Gini coefficients signify greater inequality in wealth distribution, with 1 being complete inequality and 0 being complete equality.

India 0.669
USA 0.801

As above points out India has more equality in Income compared to USA.

shailesh said...

Well, there are people who pay this kind of amount to live in a specific building....

India's highest deal for a flat: Rs 1.11 lakh/sq ft

Anonymous said...

Regular follower of this blog. Am visiting the US right now. Superficially everything seems ok but underneath things arent. I suspect that the thin veneer of so called growth is about to disappear. I see a deeply indebted society loading up the credit cards once again. God knows what this is going to mean for US economy and Indian economy in the medium to long term.

shayna said...

@Anon 10:37pm, In one breath you give the example of Cuffe Parade, Marine drive being compared against Dharavi and in the very next breath you claim that the west enable Tech-Industries are not sustainable.
A few years back one of Narayan Murthies family members bourght a flat in the iconic Samudra mahal for a whooping 22lakhs. Most of the 1G, 2G and 3G scamsters live in these tony suburbs, so do many other novieu rich who have made their millions on the back of this very Tech boom.
Homogenity or Inequality, the Indian populace is very volatile because of the lack of basic civil structures i.e. Rule of the law. In the event of a social, civil breakdown this very populace can turn ugly. I remember reading about the security scenario in Rio De Janerio - Brazil, where the gated communities were surrounded by FAVELAS (Dharavi) and the residents of the gated comm had to travel in and out of their complex in Armed buses. I have studied in SIES in Sion, which is borderded by Dharavi and Koliwad-Antop hill, all the gujus there live a harassed life but they continue to live there (we never read about sexual abuse in these localities do we) and i've seen first hand how the slum dwellers eye the women there. Not mention the maids from the slums working in the apartments, the men jump them only to find they have been gifted with AIDS!!!

Mumbai is on a slow decay, the only hope lies in the development of Gujarat, Bihar and UP. When you will see reverse migration by the Gujju elite and the Bhaiyya labours.The ghatis have lost the plot big time.

@Anon 5:16, As an aviation consultant i get to travel around the world. I was in HKG and then China in the months of Dec-Jan, rest of my family of 3 brothers and parents live in USA. I reside in London and am from Chembur-Bombay. In my opinion there is no place like USA atleast in our generation and forseable future. The citizen of that country are well looked after and they have plenty of opportunities to succeed. If you happen to live in the cities, specially the ghettos i.e. Queens in NY you will only see a depressing picture because most of the people living there are illegal immigrants or illegals turned legals living off the illegals. HKG was a depressing cluster of skyscrappers where the GORAS were revered and they had a good time whilst the locals were grinding their backsides for them, china was exactly the same.

Anonymous said...

A few years back one of Narayan Murthies family members bourght a flat in the iconic Samudra mahal for a whooping 22lakhs. Most of the 1G, 2G and 3G scamsters live in these tony suburbs, so do many other novieu rich who have made their millions on the back of this very Tech boom.

I think you misunderstood because I think we are on the same page. What I meant is India should be spared this hi-tech craze as it does not solve any of our fundamental problems. This is why there is hardly any software market in India though we produce a lot of IT services for the rest of the world.

Same thing with China, there is barely a local market there for all the disposable crap they produce. It was enlightening to see that video of a Foxconn slave, er worker, who assembles IPads for a living yet has not seen the finished product! Totally unreal...

We have basically enabled rampant fraud on a global scale where the very few have benefited at the expense of the many.

You and I cannot move billions of dollars at the stroke of a few buttons yet we have to pay the price for the shenanigans of the elite in terms of higher prices of necessary commodities, rampant speculative bubbles in everything from real estate or oil or corn.

Basically, at some stage humanity reached a fork in the road and seems to have taken a wrong turn.

1st was when OIL was discovered and we choose to go down the path of polluting the environment making our entire lifestyle from cradle to grave dependent on it.

2nd was when the technology industry enabled global connectivity and electronic money (aka hot money) to be transacted within microseconds.

This has given huge asymmetric advantage to the very few (mainly those who were already privileged to begin with.)

Anonymous said...

RE: "You and I cannot move billions of dollars at the stroke of a few buttons..."

This is the Superman argument.

Basically it goes like this: If we want an utopian paradise, we need to be able to trust the few people whom WE have collectivly bestowed vast amounts of power to use it responsibly and impartially for the benefit of the many and punish those who only act in self-interest.

In reality, we have the exact opposite. i.e. The more power a human gets the more they begin to act in their own self interest.

We may have 0.1% of the population who are truly Supermen and Superwomen. If we're lucky, we probably have (or will) encounter one in our lives. A person who is truly righteous and incorruptible. Who holds himself/herself to such high standards that they are truly worthy of our reverence but then by definition these are the kinds of people who will never ever voluntarily seek positions of greater power!

Instead the majority continues to hope for a Krishna, Jesus or Mohammed to make a comeback...

Anonymous said...

@shayna "The citizen of that country are well looked after and they have plenty of opportunities to succeed."

Here's a metaphor for the US:

In a test of top performing highschool students from the developed economies of the world after the test a survey was given to the students asking them how they think the test was (i.e. easy / hard etc.) and how they performed on it.

Only the students from USA thought test was easy and they expected they did great on it.

And yet when the results came out US students actual performance was near the bottom of the rankings.

While there is no doubt that US citizens are well cared for (as you put it) here's another word for them "consumers" or as I see them "mind-slaves"

Watch as the US uni-laterally goes into war with Iran and the "mind-slaves" are sold a story about how it's all about "freedom" and "evil" dictators.

Please refer to my previous post on power and responsibility. Nothing new here, we all know the adage "With great power comes even greater responsibility" And IMO, US has been the most irresponsible nation in my lifetime.

Anonymous said...

Instead the majority continues to hope for a Krishna, Jesus or Mohammed to make a comeback...

Krishna, Jesus and Mohammad tried to change the savages around them into civilized beings. Can we say that their followers today have stopped being savages?

After every thousand years or so, humanity regresses back to savagery and a new messiah is born. So, praying for one is not too bad really. May be, he is the kid in your neighborhood that you found to be too cute yesterday!

Anonymous said...

Big rumor : Greece defaults Monday. Tuesday: only God knows

Anonymous said...

Big rumor : Greece defaults Monday. Tuesday: only God knows

Sunday to Saturday: Greece can default, USA can run printing press, Crisis in MiddleEast. BUT India Shines any given day of week (immune to all worldly issues)! :-)

RE will get more expensive because India as emerging market has higher returns on RE investments, Banking, labor force, etc....

Anonymous said...

why is dance india dance judged by 2 christians, how can they relate to hindu details in classical india dance

Anonymous said...

I am about to purchase a property in Bangalore and I am looking for an assessor, who would be able to measure carpet area, SBU etc, compare to prevailing rates and give me a report on the "true" value of the property before I make an offer. It is possible to hire such people in the US, with a background in survey/real estate.

Do such people exist in India?

Anonymous said...

This is probably irrelevant to this blog. Anyways,am shocked to find out the percentage of taxpayers in India.
Just 3% compared to 45% in US.

http://www.onemint.com/2011/01/19/number-of-income-tax-payers-in-india-and-us/

shayna said...

@Anon 11:00am, To start with its easier to reply if you have a name.

Ref your reply about the level of education in USA. There was a very profound statement of Ratan Tata recently (<yr back) saying ''USA has created most of the life changing inventions of our life-time'', so there you go mate. With due respect, ''Ignorance is always bliss'', hence indians are the most happy lot living in the delusion of their own ancient grandeur.

If Iran is not controlled and they get the bomb, in our lifetime Pakistan will be heading for us with everything they have. Its the case of a lesser evil here.I have lived and worked in Dubai, the most liberal society in the ME, believe me this lot only understand the language of power. In todays newspapers, A saudi journalist was deported back from malaysia(u know the major comm there) as he was fleeing the death sentence for twitting about the prophet..........guess what they will do to you apostates.

I don't want to sound too prejudiced here, but you mentioned Iran, i believe India has most elements of its ancient past thanks to the British colonisers who restrained the Nawabs and the Shahenshahs. One look at Afghanistan-Bamiyan will tell you what i mean. These guys are barbarians, the arab spring has been unleashed to show this side which was hidden under the modern global economy.

To my other friens who have been quoting income-tax figures etc an excellent article by my fav indian journalist http://www.business-standard.com/india/news/do-gooder-economicsthe-lokpal/460973/

He subtely accuses the congress (though ne mentions others too) for indias woes and the fact that the 3 non-congress states i mentioned above are leading the path to progress will dawn upon most Indians soon. For the better of this nation.

Back to RE, the prices in Mumbai are normalising and will do so further. Holistically speaking i feel whats happening in mumbai is good for rest of the country in the sense that alternative areas are being developed with the same levels of services offered as in Mumbai i.e. GIFT in Ghandhinagar or the DEWAS airport area in Gujarat, Bihar has a summit on in the coming week on spurring further growth, TN wants to be the most prosperous state in India Chennai, Coimbatore, Trichy, Salem and Madurai are working mad to grow better than each other. Had mumbai been attracting the same level of attention that it had in the past, these areas would not have seen/realised their growth potential. At the end of the day the inherent value of any commodity lies in its utility, if a Techie or a broker can create same or better value whilst based in any place other than mumbai than why would you come to mumbai and pay these exhorbitant prices. Having said that mumbai still stands tall over rest of the country in terms of lifestyle offerings, obviously, and that will demand a slightly better valuation.

Anonymous said...

@shayna above. Thank you for the link. very nice reading. hopefully something would be done. people will not keep quiet much longer.

Anonymous said...

I remember during the Japanese boom, when the grounds outside the Imperial palace was supposed to be worth more than the entire state of California. The fall was equally spectacular.
The US itself had a massive bubble starting 1985, where prices almost tripled in under 5 years and then collapsed. The recent US bubble was worse. Now it is India and China's turn. of course the arguments are all the same-it can't happen to us-we are different. Nope we ain't different.

Anonymous said...

If the builders are making more sales than their interest commitments then why is this situation happening?
DLF Debt
HDIL Debt

Further, can someone explain why is the govt. giving stimulus to boost sales?
2012 Budget policy

We had the govt. trying to boost sale by lowering interest rates. Now that RBI is refusing to do that..and the NPA threatens to kill some banks, the govt. is going the other route and trying to stimulate by increasing tax deductions!! Also, how does this not increase the fiscal deficit? I think rupee/dollar is headed to 65 and beyond!!

Pawan said...

can someone explain why is the govt. giving stimulus to boost sales?

1. Personal reasons: Politicians and officers are hand-in-glove with builders. Politicians and officers can make money only if builders keep making money so they must look after the interest of the builders.

2. Political reasons: Real estate is a big employment generator. For each house built and sold, there is sale of cement. steel, white goods and lots of people get employment. If not for RE, these people would be jobless and vote the govt. out of power.

3. Economic reasons: Every activity pertaining to point #2 is taxed and govt. makes money out of it. Cement, steel and white goods companies pay VAT, sales tax, octroi etc to govt. We pay registration charges etc. Since very few people in this country pay direct tax, the govt. can make more money only through indirect taxes.

Anonymous said...

@Pawan:

2 and 3 both seem to be classic broken window fallacy..Which actually may rebound pretty badly. People like MMS should know better than to make policy decisions on the basis of broken windows..

And point 1 does not make sense. If I was a politician, by this time I would have extracted my money and put it to some other use. Its very clear that prices are too high and buyers are keeping away. So a sign of a top and therefore very risky situation..

Pawan said...

Now it is India and China's turn.

That seems to be the case. In China, govt. stimulus was used in building economically unviable roads, bridges and whole cities. In India, govt. gave indirect stimulus by keeping interest rates low to encourage a house building boom.

In both these cases, note that it does not matter that the houses sell. Actual sales provides money to the state govt. in form of registration charges and importantly frees up capital for the builders. As long as developers keep getting easy capital, there is no need to sell. Central govt. loses nothing and gains everything in the process.

Now question is, how long can easy money flow without causing the system to behave abnormally in some area? Inflation is one ill-effect and it is not going down anytime soon. IIP numbers show that GDP is slowing down. Fiscal deficit is huge and growing. Tax collections have fallen. Add to that the ZIRP policy of FED and now ECB will make energy (amongst other commodity) prices higher. So out of this heady cocktail what will come out?

Options are:
1. Stagflation.
2. Social unrest.
3. Political instability.
4. All of the above.

May be there is another option:
5. Rabbit out of hat?

If govt. increases housing loan interest payment tax free limit to 3L, it will not benefit the prospective end-users one bit (existing one's benefit). It will only cause prices to go up. FED's ZIRP failed to keep RE prices up and now we are seeing the same in India, China. Lets see how long things hold up.

Anonymous said...

Prices down by 40% in some rich AU suburbs.
http://www.heraldsun.com.au/news/more-news/richer-suburbs-feeling-the-pinch/story-fn7x8me2-1226268198456

The telling comment was this "The upper end of the market, due to volume (of sales) and the type of homes in question, rises and falls faster".

It will be the same here.

polt said...

24 year old MBAs expecting a 24L salary in finance should read this long but worthwhile article.
The End of Wall Street As They Knew It - http://nymag.com/print/?/news/features/wall-street-2012-2/

Easy money in finance has ended. Mean reversion !!

This btw is not restricted to wall street. I-Banks in London, HK, AU and India are all shrinking staff numbers.

Easy money will end elsewhere too. The days of buying a leveraged house/land and sitting back and enjoying double digit gains are over.

Anonymous said...

@shayna, Ratan Tata and other cheerleaders for the US

http://www.usdebtclock.org/

Enjoy the countdown to extinction!

Greece is the trailer, the main attraction is going to be when the interest rates reset on US debt.

Even Somalia would be a "great" country if they borrowed 49000 dollars for every man, woman and child in the country.

Anonymous said...

This article mentions that prices in Punjab have fallen 15-20% in just 6-7 months.

http://economictimes.indiatimes.com/markets/real-estate/news-/punjabs-realty-sector-likely-to-miss-revenue-target-for-fy12/articleshow/11874904.cms

Anonymous said...

15-20 percent is what they say. It is more like 35-40 percent. Nothing is selling Punjab now at old prices. RE that became 15 times in the past 6-7 years is coming to normal by price correction. Once is drops like 60-70 percent, that could be the right price.

Anonymous said...

Unitech hit by fall in demand for houses

Anonymous said...

@Anon - "It is more like 35-40 percent."
This might be true. When prices are rising, the gains are exaggerated. When they are falling, the losses are understated. The print media gets a lot of ad revenue from the RE market.

I think it is simply a question of time before the correction starts in other cities. Tier 2 cities like Bhopal, Patna which do not yet have large industries,service sectors will see the biggest falls. The prices here had gone up merely on sentiment without any support from economic fundamentals.

@Anon - "Unitech hit by fall in demand for houses"
Their stock price has already fallen about 95% from its peak value a few years back. The market has seen this coming.

Anonymous said...

Copied frin indian express:

If you are buying a flat in Poona, watch out
SUNIL SALUNKHE writes from Poona: Just wanted you and your friends to know about the experience of 60+ of us (mostly IT people) with Goel Ganga builders. They are, so to say, prestigious builders but they have cheated all of us.

Here is the story in short.

Most of us booked flats in their Akashganga project at Wakad around 6-8 months back at a rate of Rs 1,250-Rs 1,400 per square foot. They started the building work a little behind schedule, but work is on. However…

However, as the prices in the Wakad area have gone up in the last six months (it is now hovering around Rs 2,000 per sq ft) they have become greedy and are asking all of us to cancel booking citing various reasons.

Those who have completed the registration formalities also are being asked to cancel.

Either they are saying that the project plan is not sanctioned (it is not sanctioned for the 5th, 6th and 7th floors, but it certainly is till the 4th floor) or they are threatening that it may not get sanctioned.

A different ploy is being used on those who have bought in the first, second, third and fourth floors. They are being told to make full payment in the next two weeks or to cancel their booking. And this, despite the building work still being stuck in the basement parking area.

Obviously, no bank is willing to disburse the full loan amount so this is clearly the builder’s ruse to kick people out.

At this time if any of the 60 people want to get out of the project and book somewhere else, they will lose the price advantage. Some of them may not be even be able to afford the bank loan because of the price differential and hence won’t get house of their choice.

We are trying our best to ensure that they do not succeed in gypping us. But I thought all others who are in the buy mode across the country should be warned of such unscrupulous practices of builders and developers.

Anonymous said...

Looks like there would be no interest rate cuts by RBI in April the way Stocks are performing.

Once again the Sensex gains are too good to be true. RIde it while you can.

Anonymous said...

even if the builder is not able to cancel the bookings for these lower floors, they might try to pull back on the quality of construction to save costs. its a double edged sword. without any regulation in the RE sector, things would continue to be like this.
Does it make any sense to have Indian junk RE much much more expensive than US RE?

Anonymous said...

Even if it is not Junk, it cannot be priced more than EU/US where per capita income is 15-20 times more than India.

Anonymous said...

@Anon 5:03PM

ye sab kaunse saal ka bakwas cut and paste kiya hai re tune?

Anonymous said...

be careful, be very careful.

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/63-ncr-home-projects-running-late-by-4-years/articleshow/11906891.cms

the last 1 year has seen unforseen inflation in India

Anonymous said...

http://en.wikipedia.org/wiki/File:Stages_of_a_bubble.png

shows the bubble lifecycle.
can anyone tell where we are currently ??

RealityFool said...

http://timesofindia.indiatimes.com/city/coimbatore/Woman-commits-suicide-after-killing-daughters/articleshow/11906460.cms

Family cant afford to buy the house worth 9 lakhs!
Wife goes mad and commits suicide!

Peer pressure is too much in India!

Anonymous said...

One explanation for the high prices is that there is a supply constraint and there indeed is one. It's difficult to understand from an American perspective. You have to be here to see how much the demand is and how there are thousands of barriers to delivering for those needs.

But it's only one explanation. Another was the credit boom, which is gone now.

I also think that Indians are becoming more consumption oriented. People are pledging their gold to buy trinkets. It's sad but what can I say. I try my best to make people think. But they are too taken in by their own outsize dreams.

This won't end well.

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Anonymous said...

Its a great time to buy in US. I am buying a 2bed 2bath condo in San Jose for $250k... thats equal to 1.25 crores. I can rent it out for $2200/month easily. Thats about 1.1 lac a month. Which property in mumbai will yeild that kind of rent. Meanwhile I had purchased 2 flats in Andheri for 20 lacs each. I just got rid of one of them for 1.75 crores!! I am using that money to invest in real estate in US.

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