Thursday, February 16, 2012

Smart money is moving out of realty; so why should you buy?

Article Link

If you are a home buyer waiting for property prices to fall before buying, here’s a counter-thought: the big investors are actually moving out of real estate.

One signal came last week when Deutsche Bank asked the Mumbai-based Lodha Group to return its money with a clean profit. The group forked out Rs 2,542 crore to the bank to enable it to exit its investment.

According to a Business Standard report, apart from Deutsche Bank, there are at least six other private equity and property funds that have exited. Among them: HDFC Property Ventures (two investments of Rs 715 crore), Kotak India Real Estate Fund I (Rs 575 crore), Indiareit Fund (Rs 500 crore), India Advantage Fund Series I (Rs 305 crore) and Trinity Capital plc (Rs 120 crore).

That’s a cool Rs 4,700 crore-and-odd opting out of real estate . The problem is fly-by-night “investors” are realty’s big mafia – keeping prices unreasonably high and preventing actual users from buying. This is also one reason why the Deutsche Bank’s are running away.

156 comments:

DingDing said...

uhh shailesh !!

what are you on about ?

to bail them out ofcourse !

Anonymous said...

India doesn't have money to bail them out. It will be next Greece. All the optimistic party is going o get over soon. Re will go down by 60% or so.

Anonymous said...

Smart money has profited tremendously from RE while the mango man has been left holding the bag.

DB pocketed a cool 55% profit on their investment.

These profits don't just come from thin air. The builder must pass on the borrowing cost to the buyers. They are not in the charity business...

I have no doubt that if push came to shove the builder will sell the buyers down the river and leave their projects unfinished and dissolve their business.

Good luck trying to recover your "investment" in such a scenario.

Anonymous said...

Wonder what rates Lodha paid to raise capital and pay off D-Bank.

Anonymous said...

Wonder what rates Lodha paid to raise capital and pay off D-Bank.

Nothing to wonder. Ever talked to builders? They have enough funding through NRIs, local businessmen, Black money through different channels. Bank are just front smiling face to show something on books. Inshort builders don't need Banks, but Banks need these builders.

Moreover, why accuse builders? What about end sellers - they are the one pushing all to new limits.

Anonymous said...

I have no doubt that if push came to shove the builder will sell the buyers down the river and leave their projects unfinished and dissolve their business.

Agreed. To add, people are used to that, they are living happily on rent and eventually buy at some other place... eventually they forget what happened to them.

Anonymous said...

March 2012 - HDIL, DLF and Unitech have to pay up a huge interest and part of their Debts.

Anonymous said...

March 2012 - HDIL, DLF and Unitech have to pay up a huge interest and part of their Debts.

I keep hearing this past 2 years, nothing happened, So now what ? Do you know what can happen by law in India (if any) ?

Anonymous said...

Re will go down by 60% or so.

With predictions like this, you should be trading in the futures market and enjoying the riches.

The rest of us have to live in the real world.

Anonymous said...

@Anon - "They have enough funding through NRIs, local businessmen, Black money through different channels. "

Not sure what your point is. All money (black or white) has a cost (interest rate). No one is going to give you money without demanding a return.

Anonymous said...

Not sure what your point is. All money (black or white) has a cost (interest rate). No one is going to give you money without demanding a return.

Name of the game is 'Confidence'. As long as these elites have confidence on safety of their assets and even nominal returns is good for them. These elites have enough to keep aside and forget these investments for long term.

Anonymous said...

I just read that NRIs and PIOs don't have to report to the government about their property transactions. This is a good opportunity for the H-1B vultures to invest.

Ajit Dayal was right. The Indian government is committed to keep this bubble going. It's like the Fed in the US.

It will all end in disaster. But greedy NRIs should definitely invest rather than just call for calamity in India.

Why do you even bother about India? You and your children are never coming back. Just stay away.

It's sad that we don't have a debate among people from India about this. It takes greedy (and some genuinely concerned) NRIs to bring up this discussion.

Anonymous said...

NRI money flowing into India is the boot against the neck of ordinary Indians.

How does some guy earning in Rupees compete with someone earning in Euros, Pounds or even Dollars? Not a chance in hell.

Anonymous said...

How does some guy earning in Rupees compete with someone earning in Euros, Pounds or even Dollars? Not a chance in hell.

That's what they make you believe. Reality is 'Disposable Income'. Indians have very high disposable incomes, this forms base to encourage spending. Don't go solely by earnings or spending, go for the difference. Indians (and other Asians) are cash rich.

Many earn less in INR than counterpart in USD. But in INR spending is cheap (cheap labor) and hence have more purchasing power.

Let me correct your statement. How can one compete against one earning in USD/EUR and spending in INR.

Anonymous said...

This is a slave nation and will remain so another thousand years. Those who appease the masters rule the nation.
This is reality. Pakistan is in worse position than India. Bangladeshis are beggars so no need to bring them in picture
So who is the master ? Ask yourself and you will find the answer

Fair skinned people rule the world. This is a fact. Even in India , it is true

Every nigger wants to become a white person. every madrasi whishes that he could be a punjabi.

Anonymous said...

@Anon - "As long as these elites have confidence on safety of their assets and even nominal returns is good for them"

Unlikely. Shadow capital is more expensive than banking capital. There were quite a few articles in the news about how builders were paying 30%pa to rich Gujaratis last year.
The financiers know the banks have closed doors to the builder and so will extract their pound of flesh.

Anonymous said...

I found this blog and came here with the thesis that India has a big housing bubble. It's not as massive as it was in the US (or Australia now) but that it won't end well.

But after watching all these greedy NRIs wishing ill for India and salivating at the prospect of buying Indian assets for cheap, I am hoping that this is not a bubble but part of a growth pattern. After all, who would have thought that a poor country like the US would someday become a superpower.

It's time to treat NRIs like foreigners. They have no loyalty to India. They love money and would wish ill for India at the drop of a hat.

Enough already!

PS: I still think that India will see a prolonged slump in the property market but any bust will be triggered by a bigger bust in the US and Europe. So these NRIs will get nothing.

Jesse Colombo said...

Hello Shailesh,

This is Jesse Colombo, writer of TheBubbleBubble.com. I love your blog posts and I enjoy linking to them in my articles. We share very similar views on the Indian housing bubble.

I'd love to chat further and share bubble info - feel free to email me at jesse - at - thebubblebubble.com

Nice to meet you,

Jesse

Anonymous said...

Does anyone know why Pune builders are taking out full page ads in Bangalore newspapers advertising properties?

Are there no buyers left in Pune?

Anonymous said...

Does anyone know why Pune builders are taking out full page ads in Bangalore newspapers advertising properties?

Are there no buyers left in Pune?


Same reason these builders are going to Australia/Canada/UK/USA/MiddleEast and publishing on Desi TV and other desi media.

Go where money is....

Pawan said...

http://in.finance.yahoo.com/blogs/economaniac/rapidly-deteriorating-fiscal-situation-061046988.html

Fiscal situation is bad but RBI may print to make up for it. What does that mean? Inflation or hyper-inflation? What is your opinion guys?

Anonymous said...

Pawan, it means more growth story. Credit expansion always describes growth story but underlying current may be different.

Look at USA, almost everything is bought on credit/loan. Infact you cannot live with credits!! Yes they have been doing for years and they are most so called rich country with lost of debt slaves.

India is catching up fast. Yes India will be superpower. All they have to do is put ultra strong financial default laws and create lots of debt slaves.

Anonymous said...

@Pawan

Thanks for the link. Tells me that 15%+10-12% = 25-27% monetary inflation. Which in turn implies hyper inflation..

It also implies that Rs/$ currently being around 50 is going to go up by 12.5 rupees (25% increment) which means Rupee/$ at 65 or more...if you factor in negative sentiment and also the fact that this article does not include other spending such as 56K crores on defence and other such miscellaneous expenses..

I am now convinced that Rs/$ is going to be a minimum of 65 - 70 in another year or two..

Stay away from India is what I would say. Also a massive stock market crash is on the way, across the world.

Anonymous said...

There is a global depression. Asset prices are falling all over the world. The only thing keeping them up in nominal terms is money-printing and monetary easing. But that's not enough as fiscal stimulus is the only way to put money into the pockets of tapped out consumers.

What Bernanke and Central Bankers around the world want to avoid is a serious economic depression like that happened with the Great Depression.

So, expect asset prices to move sideways and yes, volatility will be very high. I am definitely staying away from all kinds of assets and just concentrating on keeping my job and ensuring that I can pay my way through this disaster. I am not getting greedy and speculating.

Good luck to all the greedy speculators.

polt said...

@Anon - "Which in turn implies hyper inflation"

If that is true, it is not good for RE. Contrary to popular opinion, RE does not hold value during very high inflation. The reason being lack of credit.
The 'India has black money' argument does not hold either. All the black money cannot make up for the amount of money that a fractional banking system can create. One only need see the money supply charts for India to know that the M4 dwarfs the physical cash that is available.

In 2008, the govt staved off recession through a stimulus and tax cuts. This time the tank is empty, there isn't anything left to spend.

Anonymous said...

There won't be any hyperinflation.

It's a bust.

Anonymous said...

I would agree with Anon above..things seem to spiraling out of control. UPA seems clueless and RBI seems hapless. Conclusion, we are headed for a disaster. Everyone pls. make sure that you have provided for safety.

Anonymous said...

Bailout is no more an option, it is rule now.

So start living with bailouts and printing presses. This is true for every country... Greece, USA, India.. etc.

All asset prices are going up now... wait and watch. Keep accumulating debt at low interest rates for long term.. these debt will turn into huge profit when markets can no more afford bailouts.

RealityFool said...

@Polt

// RE does not hold value during very high inflation //

People who bought houses now for living purpose are smart. They have converted their work to house.
They can wait and convert back to currency when dust settles.

but the people who converted their work to currency(INR) and waiting for crash are doomed. Currency will loose purchasing power and they will have no way to get back on their life.

So one should either store his value in Gold or Land going back to our ancestors way of storing wealth

Anonymous said...

^ tell that to the millions who lost their home and entire life savings in the US bubble. If you bought the house with 100% cash, then you can live in it. But if you bought it on a loan, you are basically scre-wed.

Just because you can see and touch the house, does not mean it is safe.

Anonymous said...

^ tell that to the millions who lost their home

Why did they lost their home? Just because house price decreased does not mean they lose their house. Infact interest rates are very low... why did they lose their house?

It is that they didn't buy house to live in, they bought to encash - to make money faster. All they could do is afford payment for short term. Plan was to buy, flip to another sucker. Many got caught at end of the bust, were left holding bag... and that's when they lost 'house'... it was never their home!

Anonymous said...

@Anon - "Plan was to buy, flip to another sucker."

And the investors here in India who own about 50% or more of the apartments have a different objective ??

Anonymous said...

yawn yawn... while agreeing with most comments, i must say that have been hearing this for the last so many years..yet, nothing happens!! why??

Pawan said...

http://www.moneycontrol.com/news/cnbc-tv18-comments/mum-drops-to-no-15worlds-most-expensive-office-ladder_671771.html

Anonymous said...

@Anon - "i must say that have been hearing this for the last so many years..yet, nothing happens!! why??"

Stock market bubbles tend to be shorter (the recovery also tends to be faster). RE bubbles can last for several years and the aftermath can also be long.

For example in the US, the Dow is now at pre-crash 2008 levels, but home prices are still falling.

The early sign of an RE bubble burst is usually a drop in sales. In China, India, AU this is certainly true.
There has never been a case where govt was able to prevent a house price correction once it has started. They can give temporary bump ups by reducing stamp duty/lowering interest rates/increasing tax deduction. These simply lower the govt revenue and do not achieve much.

It will be the same here.

Anonymous said...

^ tell that to the millions who lost their home

Why did they lost their home? Just because house price decreased does not mean they lose their house. Infact interest rates are very low... why did they lose their house?

---------------------------------
When people buy the house on loan for 30 years, they assume that they will have the job for the next 30 years. When they buy the house on top of the econmic cycle everything is rosy. So they buy the maximum house they can afford.

But when the economy tanks, people lose jobs, their business will be slow. So they wont make as much as they did. If people don't earn for 6 months. they can not make payments anymore.

In India, how many people do you think will make the payments if they dont have the job for 6 months let alone for one year?

Anonymous said...

Anon @11:10.Thanks for the education. While I support your thoughts, i am afraid India is different. It is the next superpower and there will be no RE crash here due to black money. Amen!

Anonymous said...

Anon above:
Looks like you need to be educated more. In fact, if India is different, wtf are you doing on this blog. Go and buy more flats and enjoy the prosperity. Your sermon about how India is doing is not needed. Let alone being a superpower, India has more than 80% people below poverty line and go hungry. Stop dreaming too high and wait for the next fall which will last for a decade.

Anonymous said...

anon above. looks like you missed the satire bro. go get some education yourself!

Anonymous said...

Anon above

Your are right. Super man and super power doesn't follow rules of nature. Super man wears under garment on top and in India when demand for RE goes down prices go up.

Anonymous said...

India bubble is bursting now big time.

Anonymous said...

Remember with an apartment you have to pay HOA dues for ever . At least with a house, you only pay taxes . Increasingly I think the guy in the village with a few acres and a few cows may be the happiest. Of course even they want more money and take huge loans -sigh.

polt said...

20% of FCCBs due for redemption likely to default in 2012 -
http://economictimes.indiatimes.com/markets/analysis/20-of-fccbs-due-for-redemption-likely-to-default-in-2012/articleshow/11991347.cms

Likely that even rupee denominated debt will see defaults.


On the other hand, surveys show that average salary hike will be about 12% !!

So are companies in distress, or are they buoyant enough to pay 12% hikes ?

aam aadmi said...

@Polt
World is a complex place. How do you explain Apple's record profits in a worldwide recessionary environment?

My take is that MNC's are milking the wage arbitrage between east and west to the hilt and it's this difference which is filling their coffers, recession or no recession. As L&T chairman Naik once remarked, IT companies manage to get a PAT of 30-40% on the back of Rupee Dollar arbitrage. How are companies like mine supposed to compete for talent in such an environment?

There is still some distance to go before wages in India and China reach a level where it's no longer prudent to do business. Of course by then these MNC's will find new places to camp like Africa.

Anonymous said...

All that has to happen is credit crunch.. deflation. Things will fall in it's place. Unfortunately, world elites have learn from western countries to sell everything based on fear... starting with insurance.

Ya many will cry, crib and make huge losses. Well that's what it must be to correct system. Doctor had to ampute leg to save soul - it must be done - so be it.

skeptic's ghost said...

Citi exiting HDFC stake

http://www.bloomberg.com/news/2012-02-23/citigroup-to-exit-india-s-housing-development-with-2-1-billion-stake-sale.html

Also Telenor and Etisalat who were bitten by the 2G scam have exited -

Indeed international players are suffering under the ignoramuses in our establishment both private and public.

Economist PM McManmohan is mum as usual on the debacle in Coal India Ltd, Air India, Kingfisher, Lack of electricity generating equipment, crumbling infrastructure. Our once lethargic bureaucracy is now scared shit of corruption investigation and instead of cleaning up their act for benefit of the nation that hired them they are timidly waiting things to quiet down and get back to old days of graft and Swiss bankery.

Elections are on us - party doesnt matter - vote out incumbent till you are satisfied, that is the only way out.

Anonymous said...

Elections are on us - party doesnt matter - vote out incumbent till you are satisfied, that is the only way out.

Most valuable and practical advice ever heard. but who will put this inside the brains of poor people who Awe on rich and small grafts.

Anonymous said...

Unfortunately in India caste and community card works better than development and progress. As long as it is true India will remain third world country :( some people may not like it but you can't change fact. If Mayawati can become CM of UP, most populous state in India there is no future. What you will see is waste of money on her statues and her master's statue.

Anonymous said...

http://timesofindia.indiatimes.com/business/india-business/Average-salary-of-Indian-CEOs-up-30-to-Rs-2-crore-Report/articleshow/12010688.cms
You guys may predict gloomy days for real estate, but there are people who can afford the overpriced home. Builders know it, Investors know it and develops know it.

Your comments please

Anonymous said...

@"India will remain third world country"

Definition of 3rd world is a small elite class, huge underclass and small (practically non-existent) middle class.

India WAS a 3rd world country some 30 years ago. Now we have a huge middle class that has all the modern conveniences that here-to-fore were reserved only for the well-heeled.

Anonymous said...

@Anon 6:05

There is huge disadvantage for average buyers.

The CXO's, politicians etc. are a rarified bunch. They have access to the proverbial "easy money".

Now it is all well and good if these people "invest" in things like "art", cars or even engage in buying/selling sport teams etc.

But when the "easy money" starts sloshing around in necessities like food and shelter (via RE) things can get bad in a hurry for the rest of us. Not to mention the same money buying influence with civil servants etc to further the agendas of these chosen few.

I don't think your average middle class family is speculating in RE. The only reason this buyer is overleveraged is because they have no other choice, life happens, you have kids, kids marry etc.

The collateral damage will be huge which is why none of us should wish for a crash.

The solution is to remove this "easy money" from the market.

polt said...

The Canada bubble is bordering hysteria now. People staying up all night in the cold to apply for a property !!
http://www.greaterfool.ca/2012/02/22/crazy-anxious/


BTW, www.greaterfool.ca is a well written, amusing blog on the RE bubble in Canada.

Pawan said...

@Polt
I would love to see comments from 'we have a huge and growing population' theorists on this Canada insanity. Canada has the least per sq. km. population in the world and they are going berserk for property!

Anonymous said...

@"Canada has the least per sq. km. population in the world and they are going berserk for property"

Many immigrants in Canada since getting work permit / citizenship is much easier than US.

Also, less racist attitudes towards immigrants than in US coupled with good paying blue collar jobs in energy industry.

Immigrant mentality to produce anchor babies and get settled ASAP may be contributing to keeping the bubble inflated longer.

In US, states like Arizona are actively driving out immigrants (legal and illegal) by harsh laws and discrimination.

When downturn hits Canada, I wouldn't expect different treatment.

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Pawan said...

http://www.cnbc.com/id/46428574/Priciest_Cities_to_Rent

This link shows that people are paying anywhere between 25% to more than 50% of their income in rents.

Would you guys say this is gonna be the case in India too? Is it that rents are going to rise high enough to make price to rent ratio good?

Anonymous said...

Why are you people worried about canada. It is like street guy looking at ambani brothers assets fluctuating and rejoicing. I believe that canada has more energy resources than the entire middle east and the population is pittance.I guess, the people writing about canada are those whose visa applications are rejected

Let us worry about our problems. In Mumbai itself, people are consuming sub standard food as commodities have become so expensive. 70% of populations shit on any available empty space including school grounds and parks, as govt has no money to build toilets. Yet again and again, I hear people in this blog talking about japan, canada, america etc etc and taking pity on them

Wake up guys. Look around your surroundings. Look at our overcrowded trains, dilapated buildings, look at the contaminating bhelpuri with urine that you guys happily consume

It is high time that we come out the cinema world. Life is no cinema

Anonymous said...

@Anonymous 3:09

This is the popular Psyche. There is no harm in talking about more prosperous countries. As you said, life itself is a cinema. During cinema, people become very close to sha rukh khan, aishwarya rai etc etc and live in their world. Same with housing problem. Most bloggers here dont have a own home but try to buy one, one day. Just like cinema, they are imagining themselves as japanese, english etc and shed tears when they hear negative news about such countries

If one starts amalagamating in the surrounds in mumbai, calcutta , he will end up in depression

dreams are better than depression, my friend

Take it easy

aam aadmi said...

@Anon above
It's the age of globalization. If things blow up in Canada and US you can rest assured that this shining India which is actually the result of Foreign Dollars flowing into India as a result of liberalization will also stop and we will go back into the 70's with twice the population and half the natural resources. And not to forget a restless middle class which will do anything to ensure that things go their way.

If you are looking for the explosion, look for the trigger not the bomb.

ContractorBhai said...

Here's one biased news from today's Economic Times.

Title says "Realty prices to stay high as demands rise"

http://economictimes.indiatimes.com/markets/real-estate/news-/realty-prices-to-stay-high-as-demands-rise/articleshow/12011521.cms

Anonymous said...

Would you guys say this is gonna be the case in India too? Is it that rents are going to rise high enough to make price to rent ratio good?

Yes. But that will take 2-3 years. But be assured once that rents rise sharply, price of ownership will rise too. If earnings are not increasing (and it will NOT), god help you in your day to day expenses.

Anonymous said...

Guys have you heard about Kripa Shankar Singh. He was head of congress patty in Mumbai region. PIL has been filed against him in dispropotionate wealth case. He has accumulated 340 crore of know wealth from unknown sources of income less than 20 years. He suppose to be pimp for higher ups. Now imaging if this guy by just pimping can make 340 crores , how much money others have made in 30 - 50 years.

This smart money will chase and go where ever it get returns and nothing to loose in any case.

Anonymous said...

how much money others have made in 30 - 50 years.

how does that matter? what matter is Indians are easy going on politicians, goons. They are timid and will be leaving on blessings of these rich riches in whatever way. General public need to get up their lazy ass and vote out people who feel are not doing their job... chose lesser evil.

But most riches are busy chewing and spitting paan, thinking how to con another person for his benefit. If you are not thief/cheat in India - you are a sucker and loser... like it or not.

People will opportunities move to other developed world (lesser evil)... People with no opportunity to avoid/escape have to fight this battle or join the dark forces.

Anonymous said...

The most overvalued RE markets in the developed world

http://www.businessinsider.com/the-most-overpriced-housing-markets-in-the-developed-world-2012-2#canadas-home-prices-are-overvalued-by-54-19

At the top of the list are Belgium/Canada/Norway.

I wish we had similar data for India.

Anonymous said...

somebody in this blog stated that fractional banking creates more thin money than black money. True! As long as fractional banking is in play, we are NOT going to see any correction or rather just 5% ~ 10% correction at the most.

What is opinion on fractional banking? I don't think this is going to stop.

Pawan said...

People will opportunities move to other developed world (lesser evil)... People with no opportunity to avoid/escape have to fight this battle or join the dark forces.

Bang on! For a while talented Indians living abroad and those who could have gone abroad thought that India is changing and the reverse brain drain started but the rampant corruption will change everything. And then we will be back to the dark ages for another half a century. I really do not see any light at the end of the tunnel.

I am a software engineer and work in a very interesting startup with some exceptionally talented people. However, I see that a lot of them are getting frustrated with the real estate un-affordability and the general lawlessness. I can bet any of these guys can easily get a job paying 125K-250K USD. How long would they bear this nonsense? If not US, some other country will have the sense to respect such talent. Just a matter of time.

Anonymous said...

However, I see that a lot of them are getting frustrated with the real estate un-affordability and the general lawlessness. I can bet any of these guys can easily get a job paying 125K-250K USD. How long would they bear this nonsense?

Here is why these people are still in India, because many don't know their worth/value. Culturally, India is socialist and capitalism is not practiced.

Many just believe what upper hierarchy tells them what they are. Hell, if they are worth 250K USD what are they doing with 25K USD in India ?

One should position themselves wherever the opportunities are. That is 'real' growth.

Anonymous said...

Anon 8:43

Your cut & Paste article is bullshit. I've visited canada several times and here are facts

1.Canada median household income $70000 p.a

2. Average home price (detached with front and rear garden ) 2500 sq. ft living space, 2 separate car garages ranges from $250,000 to $ 300,000

3. Mortgage interest is 2.5% p.a

4. Health care is free , Hospitals free

5. Schools are free upto secondary. Elementary students are provided with books/stationary free

6 Every child gets a stipend from govt irrespective how wealthy you are

7.Disabled people get $1000 a month

etc etc

The real estate is not overpriced at all.


However, there are houses in certain areas off toronto that cost anywhere between $10 million to $25 million. I heard That in a upcoming toronto apartment building, flats are priced $25 million each (125 crores). Of course, these are overpriced. But 95% of the real estate is within the reach of common person

Compare this with our city Mumbai, then you realise where the bubble is.

Newspaper reporters have to write something for a living but their reports are not always factual

Anonymous said...

@"I really do not see any light at the end of the tunnel."

The grass is always greener on the other side.

Indian and Chinese are oldest civilizations that are not only surviving but thriving.

Or would you rather be Greece?

Instead of aping the West, we need to forge our own path forward and build a society that reflects our own ideals and heritage.

The Western economic model for growth has always been based on human and environmental exploitation (colonization -> slavery -> sweatshops) and has failed miserably.

Anonymous said...

we need to forge our own path forward and build a society that reflects our own ideals and heritage.!!!!!

yeah right. We have been doing it from time immemorial. We have great leaders like Laloo, Mayawati, yeduveerappa, Raja to mention a few. Our own ideals are corruption, nepotism, caste, religion, slavery to mention a few. With this sort of ideals, have we achieved anything ?

What India needs is a strong ruler who can enforce the good ideals. We are yet to see such a person. It is high time that we outsource our country management to a foreign power like Britain, Portugal or France until such time that the rule of law is established. Remember, these countries were as corrupt as we are today, but good management prevailed and they are prosperous know.

Anonymous said...

@Anon 10:53 AM

Which is precisely why this is not sustainable.

The incentives you've highlighted are attracting hordes of immigrant populations that will rapidly multiply and overwhelm the locals within a few generations.

This is same problem Europe is facing from Africa and US is facing from South America.

skeptic's ghost said...

@Canada bubble

One should note that since the oil sands and shale fracking was discovered in Dakota and Alberta, Canadian and US oil companies are raking in way too much money - Even taco bell employees there are making $25 an hour -
That is partly why Canadian housing market is booming as the money has nowhere else to go in their 0% interest regime (investments are still considered risky)

Anonymous said...

@Anon - "The real estate (in Canada) is not overpriced at all.

See
http://www.macrobusiness.com.au/2012/02/canadian-bubble-trouble-leith-van-onselen/
and
http://www.economist.com/node/21546057

Should we rely on your anecdotal observations or on hard statistical data ?

Anonymous said...

Also see
http://theeconomicanalyst.com/content/house-price-rent-ratios-canadian-cities-alarming-levels

If it is indeed a commodity led growth in home prices, why haven't rents increased in the charts?

A similar argument applies in India. If there is indeed a shortage of housing and plenty of money to go around, why have rents mostly tracked inflation whereas home prices have grown at double digit rates ?

In any case, I will stop here. This is an Indian bubble site. Feel free to purchase in Canada.

aam aadmi said...

@Anon above
I have been in Bangalore for some time now, rents are actually growing below inflation. What cost 12k five years back costs 15-16k now. (CAGR of 5-6%) But the same apartment that cost 25L five years back costs 65L now. But people still refuse to believe that it's cheaper to live on Rent.

The only reason I'd take a mortgage is to save taxes, otherwise it has no meaning.

polt said...

@Aam admi -
" I have been in Bangalore for some time now, rents are actually growing below inflation. What cost 12k five years back costs 15-16k now. (CAGR of 5-6%) "

Second this. In north Bangalore, where I stay this is certainly true for many apartments.
I have friends in east Bangalore on and just off the outer ring road (opp Intel, AOL, JPMorgan, etc). There too rents have fallen below inflation, in spite of the rental agreement mentioning a 10% increase yearly. This is rarely honored.

Pawan said...

http://articles.economictimes.indiatimes.com/2011-12-30/news/30573085_1_home-loan-disbursals-smaller-cities

2 months old article but interesting. SBI has disbursed 10% less loan amount this year so far. Coupled with the fact that property prices are higher by 20%, this means that home sales in big cities are down by more than 30%. Would be interesting to see where the year end numbers finish.

Meanwhile there was a report in TOI that in NCR 75% projects are delayed.

Anonymous said...

Citigroup Exits Investment in Indian Mortgage Firm With $1.9 Billion Sale:

http://www.bloomberg.com/news/2012-02-23/citigroup-to-exit-india-s-housing-development-with-2-1-billion-stake-sale.html

Anonymous said...

Seems money is starting to exit from Indian RE.. but where to? somewhere new Bubble must be in making.

Anonymous said...

I have recently started following this blog.
While I do believe that the Indian Real Estate is overvalued by at least 50%, what surprises me is that the sector seems to beat all predictions of a downturn.
It is almost like the laws of economics do not apply here. And neither does common sense!!!

Pawan said...

It is almost like the laws of economics do not apply here. And neither does common sense!!!

May be there is a gap in our understanding. I raised this point in an earlier post that in most Indian cities the rent to take home pay is still about 20%. In places like NewYork however, people are paying 40-50% in rent. So may be we have cheap rentals. We might see a period where prices don't rise for 5 years but rents double in the same 5 year period. Then we will have a reasonable price-to-rent ratio.

Anonymous said...

now what??
http://money.cnn.com/2012/02/24/news/economy/double_dip_recession/index.htm?iid=HP_LN

polt said...

@Pawan - "We might see a period where prices don't rise for 5 years but rents double in the same 5 year period. "

Places like Mumbai, NCR have 3-4 years of unsold inventory. So supply of homes too is going to increase.

Other countries have data on new household formation. If that rate is greater than rate of homes being built, then prices/rents can go up.

Getafix said...

@Pawan: "We might see a period where prices don't rise for 5 years but rents double in the same 5 year period. Then we will have a reasonable price-to-rent ratio."

Does this mean that apart from the disconnect between rents and prevailing prices, everything else makes sense???

Pawan said...

@Polt
Places like Mumbai, NCR have 3-4 years of unsold inventory. So supply of homes too is going to increase.

I am not counting on it. Steel companies are seeing a big dip in sales. Not sure if it is because of exports dipping or domestic cuts but that may mean oversupply is now - in future it may only improve.

@Getafix
Does this mean that apart from the disconnect between rents and prevailing prices, everything else makes sense???

Everything else can mean a lot of things. Please be more specific.
In any case is there another objective valuation parameter to look at other than price-to-rent?

aam aadmi said...

We might see a period where prices don't rise for 5 years but rents double in the same 5 year period. Then we will have a reasonable price-to-rent ratio

Possible, but far fetched. Would require some kind of artificial constraint on building houses. NY is congested and zoning laws are tough, which means very little new available housing. In India zoning laws are non-existent.

However I do see a rise in rent in the core areas of a city as oil touches $150/bbl and private transportation goes out of reach. Within US as well you will see people moving out of the suburbs and back to the cities, a reverse of what happened in the 50's and 60's. So NY will probably stay a costly city for quite some time.

Anonymous said...

@"NY will probably stay a costly city for quite some time."

Ditto for London, Mumbai, Tokyo, Zurich, Washington DC, New Delhi, Frankfurt etc.

What do all these have common besides being "big" cities?

High finance and politics = lots of individuals with access to easy money => Stratospheric RE prices.

aam aadmi said...

@Anon above
Ditto for London, Mumbai, Tokyo, Zurich, Washington DC, New Delhi, Frankfurt etc.

Not really, I didn't say anything about other cities, it really depends on where the city is located.

NY is an old city and for a reason, it has plenty of water resources at it's disposal, an open harbor, access to waterways for transport, a working public transport system and lot of farmland around it, look at some of the other cities in US. Phoenix, Las Vegas, El Paso. These will be dead places within the next twenty years due to rising fuel prices and a prolonged drought in the US South-West.

Pick your cities with caution. Have you seen the underground water scenario in North India, apparently the shortage is visible from NASA satellites. And it's only one of the three places in the world, the other two being NW China and Sub Saharan Africa, so as I said pick your cities with caution.

When the environment dies so do cities and villages, it doesn't matter if there is black money or white money or grey money.

Anonymous said...

History of Oil Prices: WHat does it say???

Since 1860 on to 1974 the price of oil was very stable at around $2.00 a barrel.
Then the OAPEC oil embargo increased oil prices from around $2.00 to $12.00 a barrel.
From 1974 to 1979 was around $14.00 a barrel.
From 1979 to 1981 the price per barrel increased sharply from $14.00 to $39.00 a barrel.
From 1981 to 1985 price decreases from $39.00 to $28.00 a barrel as world supply goes up.
From 1985 to 1986 the price plunges from $28.00 to $11.00 a barrel..
From 1986 to 1999 the price fluctuates between $11.00 to $18.00 to $14.00 to $20.00
From $20.00 to peak in 1991 of $33.00 with first Gulf War
From 1991 to $18.00 to $20.00 to $16.00 in 1992...
From 1992 at $20.00 to 1994 at $13.00..a barrel
From 1994 at $13.00 to 1997 at $24.00...a barrel.
From 1997 at $24.00 to under $10.00 in 1999 for a barrel..
From 1999 at $10.00 to 2001 at $30.00 a barrel..
From 2001 at $30.00 to 2002 at $16.00 a barrel..
From 2002 at $16.00 to 2003 at $33.00 a barrel..
From 2003 at $33.00 down to $25.00 in 6 months..
From 2004 at $28.00 to 2005 at $60.00 a barrel..a back down to $33.00 a barrel end of 2005.
From 2005 at $33.00 to 2006 at $68.00 a barrel
And in July of 2008 a peak of $147.30 a barrel .

aam aadmi said...

I track the energy sector very closely and lately it's been flashing red.
Contrary to what people think, we do not have an energy crisis, there's plenty of energy still left in Coal, Nuclear and Natural Gas. The problem is that we have a liquid fuels crisis.

Petroleum has a niche place in our economy and it's function is not easily replaceable, if anyone tells you that we can replace all transportation with NG or electric within a year or two they are smoking hash. We will need trillions of dollars in money and two decades in time to transition from oil to gas and other energy sources for transportation. Time which we don't have.

This is an RE site so I don't want to write anymore, suffice to say that this is one thing that will affect everything including RE in the near and far future.

Pawan said...

@aam aadmi,
Your take on water scarcity is bang on! One can expect water riots in a couple of decades in north india. However, things will be equally tough everywhere. Already north indians moving to Pune, Bangalore are a hated lot. And as we run out of natural resources, things are only gonna gwt worse.

Ankan said...

The article is really informative and useful.

AnonymousLulz said...

Indian state run banks to run upto Rs 100 billion losses via 2G scam -

News for the suckers who were assuming their life savings in banks were safe ...

http://www.indianexpress.com/news/banks-to-suffer-losses-on-2g-loan-exposure-moodys/917373/

Anonymous said...

Have you seen the underground water scenario in North India

The silver lining is that overdrawn water tables can be restored.

However, once you've pumped/leaked noxious chemicals in these pristine underground reservoirs you're going to be stuck with them forever.

Essentially your are fracked.

But when have such piddly things such as the "environment" stopped the greed of man.

The plans for colonization of another planet have probably been drawn up somewhere in the recesses of the Pentagon.

aam aadmi said...

@Anon above
Underground water comes in two types...confined (also called a fossil) aquifier and unconfined aquifier.
India has the latter and thankfully it's rechargeable. Once the excess water is used up the rate of draw is limited by the rate of replenishment which is very slow and it cannot support the massive North Indian population. We are essentially borrowing from the future here.

US and Gulf Countries OTOH have the first type and they are depleting it at a massive rate.
US Mid-west and South-West are truly in a thick soup here, once that water is depleted and the Colorado runs dry, most of it will return back to desert. It will probably happen within our lifetimes.

Anonymous said...

We pay international price for oil import and work for a pittance paid by arab countries. How stupid can we get? Sheikhs have great time getting pampered and support against us using neighboring Islamic countries using terror funds. We instead need to join US and Israel in finding alternative energy and get mukti from these dependency of oil forever.

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

USA, UK, Ireland, Iceland, Spain, Portugal, Greece ...
AU, Canada, China and now Taiwan

http://www.macrobusiness.com.au/2012/02/taiwan-bubble-set-to-burst/

But wait, India is different . We have elephants and tigers, gods own country. How can anything happen here :)

BTW, Jeremy Granthams latest quarterly letter is as always worth reading. - http://www.gmo.com/websitecontent/JGLetter_LongestLetterEver_4Q11.pdf

skeptic's ghost said...

@ polt sir

Japan first then
USA, UK, Ireland, Iceland, Spain, Portugal, Greece ...
AU-NZ, Canada, Dubai and Taiwan
bubbles have fizzled out

All above have busted bubbles

India's, China's (and maybe more bubbles in Brazil, Pakistan, Nigeria, etc) havent still imploded/burst.

But There is a difference - its demographic. the Housing market isnt seeing new entrants in the former, the latter has a long backlog of wannabe homeowners.

Anonymous said...

@Skeptic ghost:

I think difference is demographic, but on which side of fence the buyers are put to.

Before Bubble: 'the latter has a long backlog of wannabe homeowners.'

After Bubble: 'the Housing market isnt seeing new entrants in the former'

polt said...

@skeptic- I fully agree with the anon comment above.

During the bubble, the common argument is that the rate of household formation is more than rate of new houses, so prices will rise. The other argument (also demographically related) was that immigrants and foreign buyers will keep the markets afloat.

If there really is such a great demand for homes here in India, why have rents stagnated while prices exploded?

Its simply an old fashioned credit fuelled bubble, just like it was in the other countries. We are NOT different.

skeptic's ghost said...

@polt & anon - True that

I haven't denied the bubble - I am arguing as to how long it will take to deflate -

I have always held that only a massively destabilizing black swan event will crash the prices. We will just see a long drawn stagnation on the housing front

Which again isnt good news for people saving in INR hoping prices will crash.

Anonymous said...

@"If there really is such a great demand for homes here in India, why have rents stagnated while prices exploded?"

Rent market is folks who are in genuine need for shelter.

RE market is some of the above i.e. renters who wannbe buyers but in addition to that you can add flippers + investors + black money launderers + 2nd/3rd home buyers etc.

Anonymous said...

I have always held that only a massively destabilizing black swan event will crash the prices

Agree. Ideal black swan would be a sea change in political situation and removal of the corporate-politician nexus which breeds corruption.

When Prime ministers and Chief ministers are on the take it's hard to blame "chaprasis" for the disease.

polt said...

@Anon - "you can add flippers + investors + black money launderers + 2nd/3rd home buyers etc."

Yes, but this demand is not sustainable. Eventually, the market will see that the underlying cash flows (i.e. the rents) do not justify the price and the investors will exit.
Secondly, why are 2nd/3rd home buyers buying if expected rents are so low?

Same thing happens in stocks. You buy initially on expectations of capital gains and high earnings in the future(current example is Facebook p/e ratio is 100+). But after a while if the earnings are weak, the values come down.

Anonymous said...

I don't know exact psychology of these buyers being of modest means myself.

In my 30+ year old society ~20% flats are lying vacant, locked and owners are residing overseas. Some of them visit occasionally (every few years) and I ask them if they want to sell.

The common response is "I don't need money so why should I sell."

Needless to say, renting is completely off the table for the same reasons.

I think this is some psychological connection with India that NRIs latched on to which they don't get by simply holding an Indian bank / brokerage account. :-)

Pawan said...

Anon 9:37
You answered the question yourself. Those NRIs visit once in few years means they bought at the bottom. Has any NRI bought in 2011 in your society? Or a nearby one?

If I had bought Sensex then at 3000 I would also not worry about selling it even at 8000. But if I bought at 21000 then at 15000 I would be pissing in my pants.

Anonymous said...

@Anon - "The common response is "I don't need money so why should I sell."

Easy to say that when prices are rising. When they start to fall, the thinking will change - "If I dont sell now, i will lose the gains".

Pawan said...

GDP growth at 6.1%

http://www.moneycontrol.com/news/economy/gdp-grows-61dec-qtr-slowestover-2-years_674687.html#toptag

Anonymous said...

In Colaba there hasnt been a residential transaction in two years except may be a few exceptions. Residential rates at between Rs.25K to Rs.40K depending on sub-area and building. My building has over 40% empty flats and nobody is selling and if at all asking for astronomical rates. `

Anonymous said...

The reason NRIs hold onto flats in mumbai is low carrying cost. why sell when monthly costs are minimal, taking money out of india is a hassle, providing details to foreign government about source of money is a hassle. If India had significant property tax, then a lot of NRIs would sell. A lot of NRIs from US have flats so they can visit mumbai whenever they want, kids can visit without burdening relatives, and older NRIs start spending winters in mumbai rather than harsh US winters.
All this would change if flats were readily available for monthly rent in mumbai.

aam aadmi said...

You have these empty NRI houses everywhere. They don't rent it because it's too much of a hassle in India to settle a dispute with a renter or for that matter anyone. Though I've seen quite a few NRI's renting it to bachelors, because they know they will move out soon enough.

Anonymous said...

@"The reason NRIs hold onto flats in mumbai is low carrying cost. "

The reason people held onto empty flats is that the capital gains exceeded anything they could anywhere else. Rental yield was immaterial. Just like the Chinese who are holding on to millions of empty flats without even renting it out.

Once the easy money stops, this too will stop.

Anonymous said...

I know NRI in USA they holded to flat in Santacruz, Mumbai for a long time. They hardly visited and never rented flat.
When prices when south (1990's) they said there is no point holding to flat, they sold it.

Many never read and understand history, hence it is said history repeats itself.

I will gladly rent as long as my rents are super low. Rents rise, I will see to it my earnings also raises. Unfortunately India doesn't work that way - there are way many poor people who will work for peanuts and live dog's life. Sure India shining.

Anonymous said...

NRIs hold onto flats because there is hardly any monthly cost, maintenace is insignificant when compared to USA or price of flat in mumbai. my $700k property in US demands an annual property tax of $12000. Holding cost is too high in western countries as opposed to mumbai.

Anonymous said...

@Pawan: "Those NRIs visit once in few years means they bought at the bottom. Has any NRI bought in 2011 in your society? Or a nearby one?"

The NRIs I know of are well into their 40's and 50's When they (or maybe their parents?) bought it was an under-construction property.

Newly minted NRIs of today are doing the same except nowadays the sheer numbers are staggering due to the IT boom and globalization in general.

I don't know if our society will appeal to youngsters since it has no amenities, limited car parking and aging demographic. In a way it's a blessing since we do tend to prefer our peace and quiet low-cost lifestyle ;-)

What I was trying to point out is the split-personality of an NRI that has existed since as far as I can recall. Indians who leave struggle mightily to get that overseas citizenship or permanent card. Yet, they also want to try and maintain a pseduo-permanent Indian connection via their real estate holding and the most common way is to do it in the form of a flat.

In my observation, whether any NRIs of my generation sell RE seems to be more related to if they need money overseas (e.g. their business/job is not going well) rather than the ups and downs of the Indian markets.

Whether this behavior holds true for the new breed NRI remains to be seen.

Anonymous said...

One simple reason why most people including NRIs buy is that the RE prices were going up and it was a good investment. Once that sentiment is broken, all these buyers will become sellers as no one wants to catch a falling knife.

NRIs do not have that much money that is needed in todays RE situation in India. They are themselves trying to save their jobs in the bad economy in US and EU and Middleeast.

Most people investing from abroad are people who are stealing money abroad by not paying proper taxes like Gujju Motel people, shopkeepers, restaurant owners, mostly people who deal in cash and move their stolen wealth to safe heavens. Second group is of thieves in India who steal from India and then route it back through Mauritius etc. routes back to India as NRI money. Normal "shareef" NRIs were done buying around 2008-9 when prices were still reasonable.

Btw, Gold is down $100 per Oz today. Looks like BB doesn't want to do QE3.

I think the election results on Mar5 in India would have a significant impact on Sensex as UPA will come in a vulnerable position.

RE in India has to fall by 50% or more. Either it falls in the next few years or it takes 10 years slowly going down 5% each year, but RE appreciation is completely OVER.

Stay Cash.

Anonymous said...

I reads this blog since many months. Many writing copied from paper, about other country like america, but no one writing what is real. Finally all saying that price comes down by 50% and real estate finished.I can not understand all this.

I stay in chawl in bandra. All say that my two room will sell for 3-4 crore. I am waiting, waiting, no luck so far. Like me many wait and think that they are shet. but no one has 500 rupee

is anyone here know real thing ? is peoples fool us ?

Anonymous said...

Anon above:
You say it yourslf. Noone has roo rupees and talk about 3-4 crores.

Sab baat karen unchi.

Reality is that the the sellers haven't gotten the memo that they are screwed. Masses don't have money they are thinking. Majority of the country doesn't steal money unlike the 8-10% who are rich.

I would not be surprised if there is a mass OWS type movement in India soon. There could be riots once RE really falls to 2002 levels and many stupid people committing suicides.

Anonymous said...

Being an NRI I do see the price are way jacked up even after factoring in discounts. The only cheaper options are on outskirts which are of no use due to lack of proper amenities. I know at least 20% of NRI's who migrated to US in mid 90's and early 20's who have multiple flats/plots. Some even have 5 or more as prices were cheap compared to now.

Anonymous said...

How would NRIs sell them and bring the money to US? Black money is not easy to move. For them all the appreciation is useless. If they use Hawala, they will be caught and very strict punishment for Hawala. Basically, easy come easy go.

Anonymous said...

It is supposed to be investment properties, to be rented and used later during retirement days.

Anonymous said...

It is all in mind. We NRI investors will not get anything out of them other than either a tenant or someone from our family will dupe us. Moreover, all earnings over $10K in investment have to be reported to IRS now. If we die abroad, it is already gone. We will never live in India. It is just for our false security and to tell people that we are rich and have RE in India.

I guess, these NRIs should buy more flats in India. Good for India.

Btw, I've one small apartment in Delhi and I've given it to a family member who is not doing well to live. I never wanted to get more and I'm happy that way. Even one is hard to keep up with.

Anonymous said...

Lots of NRI's are coming back specially after citizenship. Some with GC due to aged parents who need care. The rental income of properties bought in 2002~2006 are fetching more than 8% PA. Usually parents take care of the income and maintenance, in some few cases the RE agency. Almost all the investments are in prime location close to CBD area.

Anonymous said...

"Lots of NRI's are coming back specially after citizenship."

This seems absurd or a typo.

Why would one come back after acquiring overseas citizenship? What is the point of acquiring said citizenship then?

Anonymous said...

That is foolishness. The rental returns are not more than 1%. Moreover even if it is 8%, on the amount they invested in 2002, they can very well sell it and get 10% in banks for a 10 times price of 2002. A 10 times increase for their returns.

Anonymous said...

Some with GC due to aged parents who need care.

In US, the NRI trend is to bring aged parents who need care into the US (after sponsoring their GC ofcourse) and that way they become eligible for free medical care.

Also, having parents around means saving on day care and maid/cook costs since parents can do these things around the house. Feel sorry for the old folks who are complete misfits in this culture.

You see them all over, Sunnyvale/Santa Clara, grandpa and grandma in ill-fitting "western" clothes pushing the stroller round the block in the morning and evenings.

It's hard to get uprooted this late in your life I suppose.

Also, atleast one person I know had his parents file for bankruptcy after they availed some expensive medical treatment. Even I'm not sure how he pulled that one off.

Anonymous said...

Using aged parents for daycare is ridiculous. They have invested their petty savings and tons of efforts to bring us up. We should be ashamed of saying so. If they do it the way they like it is different. Medically they are huge liable compared to them staying in India. Keeping money in bank is not worth compared to real estate asset. When kids grow they each have house in prime location and spare one for retirement savings. Lots of people have lost 401K huge amount and in housing in US. Education will be a liability as tuition fees are huge expense. India is cheap comparable, what difference does it make for us desis if we educate in India. We are anyway able to compete with them in jobs and above all feel a sense of belonging in India and not be a confused desi.

Anonymous said...

NRI's with US citizenship will have to forego the ancestral properties which are in crores like farmland turned into commercial/residential properties. To earn that kind of money them have to slog with limited career growth in US. Doesn't sound encouraging, specially when it comes to food, culture and above all a sense of belonging.

Pawan said...

Reality is that the the sellers haven't gotten the memo that they are screwed. Masses don't have money they are thinking. Majority of the country doesn't steal money unlike the 8-10% who are rich.

Exactly. Who has this kind of money. Today I took a different route to office and saw a fully finished apartment building on my way. Checked the price later on Internet and found out the asking price to be 2 Crores for a 4 BHK. There is no way I can buy it even if I wanted to!!!

However, as someone mentioned on the blog, saving in rupees is also a bad idea. May be it is time to load up on physical gold.

jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

jainhousing offers cost effective flats for all the class peoples

jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

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jain housing said...

jainhousing offers cost effective flats for all the class peoples

jain housing said...

jainhousing offers cost effective flats for all the class peoples

Anonymous said...

Jain housing owners will be jailed and their ill gotten gains will be confiscated or worst

aam aadmi said...

@Anon above
LOL

Meanwhile in the real world http://www.moneycontrol.com/news/cnbc-tv18-comments/no-takers-for-dlf-mumbai-land-parcel-stock-slips-45_675327.html

Seems like DLF wanted 4000 crore for it's 17 acre plot in Mumbai but people are only willing to play less than 2000 crore. I am betting that it's something like 1200 crore, the press is being nice to DLF.

BTW that price (4000 crore) comes to around 23k/square feet, and looks like the offered price is in the region of 10k/square feet.

alphasmurf said...

Watch this to know whats going on in the world. http://www.charlierose.com/view/interview/11957

This is Ray Dalio, Chair of BridgeWater Associates - talking to Charlie Rose.

Worth a listen in. 36 minutes long. Listen to the whole thing. Again, listen/watch the whole thing.

alphasmurf - click this name to visit the video said...

Watch this to know whats going on in the world. http://www.charlierose.com/view/interview/11957

This is Ray Dalio, Chair of BridgeWater Associates - talking to Charlie Rose.

Worth a listen in. 36 minutes long. Listen to the whole thing. Again, listen/watch the whole thing.

polt said...

Please watch this 3 minute interview with Robert Shiller (co-creator of the Case-Shiller House Price Index).

http://www.fool.com/investing/general/2011/12/23/robert-shiller-on-why-home-prices-could-fall-for-s.aspx


The insightful part comes towards the end. A home is a 'manufactured good'. And technological progress will make home building cheaper.

polt said...

Also I think the DLF failed sale is the first of many to come. Home prices here are high due to astronomical land prices (in some cases 90% of the final cost). This cannot last.

Leveraged land speculators will get burned.

Anonymous said...

No matter what happens, Worst many may do suicide for not making enough to meet ends meet (god forbid) but hardly anyone will sell RE for significant loss. If you look at history people have cheated, looted, died but never sold gold or RE, rather was passed to next heir.

Bottomline: RE prices are not coming down significantly. So plan accordingly.

DingDing said...

@polt


Telling that to jackasses who consider consumeables as assets and capital/productive goods as liabilities is one thing making them understand is whole different ball game.


It is pernicious myth perpetrated by the media for enslavement.

Change as they say is never voluntary !

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