Wednesday, April 11, 2012

Mumbai is the world's least affordable home market

Article Link

Bloomberg research shows a 100-square-metre luxury residence in Mumbai costs about $US1.14 million, or 308 times the average annual income in India, based on calculations from a housing index compiled using 63 markets by Knight Frank LLP and income estimates of the US Central Intelligence Agency for purchasing-power parity in 2011.

“There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development,” Bailey said in an e-mailed response to questions. “In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”

This guys have no clue on why prices are so high in Slumbai. It is politician, builder, mafia nexus which does not let prices down and does not create infrastructure to increase land supply.

263 comments:

1 – 200 of 263   Newer›   Newest»
shailesh said...

Why Is Mumbai the Most Expensive City in the World for Locals?

So one living in Mumbai pays higher amount than New York, and works for $10 an hour call center job... Go figure...

Anonymous said...

http://www.dnaindia.com/mumbai/report_builders-blame-sluggish-market-for-overshooting-deadlines_1674705

Anonymous said...

Shailesh....10 dollars an hour????that would mean the guy makes 80 dollars a day i.e INR 4000. Taking 26 working days a month...thats 104,000 a month...which call centre pays that. as far as I know call centres pay between 15-40 K a month

samix said...

http://www.tehelka.com/story_main49.asp?filename=Ne280511Coverstory.asp

Very good articles on land scam in Maharashtra by Tehelka.

Anonymous said...

Does any one have a clue about why so much agricultural land is suddenly on the market? I am talking 200-300 acre parcels, costing more than 100 crores each! To top it all, the sellers are asking for payment in all white!!!

Are some "big bucks" people trying to cash out of their holdings? Is there something coming that we don't yet know about?

Real Estate said...

The National Capital Region [NCR] of Delhi is a major attraction for the property buyers due to the region being closer to the main capital of the country. Investment in the properties in this reason particularly increased manifold once the globalization of the Indian economy started few decades ago. Now, Delhi/NCR is the home for larger number of multination companies that have successfully set up their Indian operations from here. The trend of steady growth of investment in the properties in Delhi NCR continues both in residential and commercial properties.

Anonymous said...

@6:23PM
@11:19PM

India is not the home to Call Centres anymore.

- "Philippines OverTakes India as Hub of Call Centres"
http://www.nytimes.com/2011/11/26/business/philippines-overtakes-india-as-hub-of-call-centers.html?pagewanted=all

And here's a recent article on Hindu Business Line:

//Guess which developing economy has better communicative proficiency in business English than India's? The Philippines. The annual Business English Index ...//

http://www.thehindubusinessline.com/features/article3290981.ece

Anonymous said...

Much of what's created the RE bubble in India is the "wealth effect" caused by the massive increase in Indian household wealth due to the global increase in gold prices.

Since gold ownership is very high in India, what this has meant is that the speculative activity in Gold has transferred enormous amounts of wealth from hedge funds and other Western investors directly to the Indian household. Indians may not earn a high per capita income but they have massive amounts of valuable gold holdings. One bubble (Gold) feeds the other (Indian RE).

If you see a graph of Indian RE prices overlaid by a graph of GLD, you will find a strong positive correlation between the two.

If you need RE prices to fall, you need to cut off the head of the snake (Gold prices).

INDIAN RE PRICES WILL NEVER FALL UNLESS THERE IS A MASSIVE DECLINE IN GOLD PRICES.

What are the chances that GLD will fall in Rupee terms? Next to zero.

DhImAn said...

If you see a graph of Indian RE prices overlaid by a graph of GLD, you will find a strong positive correlation between the two.

Correlation does not imply causation.

Anonymous said...

"Correlation does not imply causation."

I never said that it did. I was simply presenting the graph as a piece of evidence to support my hypothesis.

People here are constantly wondering how a third world population with a per capita GDP of $1700 per annum is able to afford half a million dollar apartments. I proposed that one reason is because there has been a massive transfer of wealth from the West, China and Japan to India due to the speculation in the Gold markets.

DhImAn said...

I never said that it did. I was simply presenting the graph as a piece of evidence to support my hypothesis.

Yes, you said it - "Much of what's created the RE bubble in India is the "wealth effect" caused by the massive increase in Indian household wealth due to the global increase in gold prices."

Your "hypothesis" is that surging gold prices caused a surge in RE prices, and you presented a correlation to "prove" it.

That's like saying wet sidewalks cause rain; you're using correlation to establish causality, a capital fallacy in logic.

If you thought this through, you'd see the rise in all prices as a weakening of the currency - and this is the real and visible cause.

The invisible causes, but no less real, are of course cheap credit, profligate governments and fiat money. As long as you don't understand that, you'll stay stuck in the "wet sidewalks cause rain" hypothesis.

You'll believe that real estate will never come down (it already has in real terms) or that gold is a "snake" (it is the only financial asset which is not simultaneously someone's liability) until such day that the real estate crash does happen, visibly and catastrophically.

Sadly, by then it will be too late.

aam aadmi said...

People sell gold to buy apartments???

This is a revelation to me. Most gold loans tend to be small, hardly enough to finance RE purchases.

What is behind RE boom in India? No idea, there are several factors I guess, Black money, outsourcing, export boom to the west etc etc. The story also differs from city to city.
Just to give an example...
Mumbai has a lot of 'old' money and a large underground economy, Bangalore has a lot of 'new' money and comparatively smaller underground economy.

This is also reflected in the RE prices, Bangalore's growth has been slow and steady as compared to Mumbai's.

Anonymous said...

"Yes, you said it - "Much of what's created the RE bubble in India is the "wealth effect" caused by the massive increase in Indian household wealth due to the global increase in gold prices."

Yes, that is my hypothesis for which I presented as one piece of evidence the fact that there is a high correlation between Gold Prices and Real Estate prices (the correlation supports my hypothesis). I never said that this was sufficient evidence by itself or that causation could be assumed as a matter of fact.

"Your "hypothesis" is that surging gold prices caused a surge in RE prices, and you presented a correlation to "prove" it."

Again, I did no such thing. It is one piece of evidence that I presented which supports my hypothesis. I nowhere argued that this was conclusive and determinative evidence. Specifically, I never said that this correlation by itself established causality. That would also be an example of circular reasoning (assuming what I'm setting out to prove in the first place).

"If you thought this through, you'd see the rise in all prices as a weakening of the currency - and this is the real and visible cause."

You are correct...up to a point. The current price of Gold has overshot its value as an inflation hedge. In other words, the rise of GLD from 2002 up to now far exceeds the price level GLD should be at accounting for inflation. Gold prices have risen by a factor of 8 since 2003 (surely no one here is arguing that rent, food, petrol or even RE proices have increased 8 times since 2002).

"The invisible causes, but no less real, are of course cheap credit, profligate governments and fiat money. "

Agreed, with the caveats stated above.

"You'll believe that real estate will never come down (it already has in real terms)"

I never said RE won't come down in real terms. In real terms, Indian RE will sooner or later collapse (it already has - in EUR, CHF or SGD terms, RE has already sunk 20% in the past year alone). But this is not helpful to the vast majority of Indians who don't (are not allowed to) hold their savings in foreign currencies.

"or that gold is a "snake" (it is the only financial asset which is not simultaneously someone's liability) "

I'm not saying that Gold is a bad investment, just that it is insanely overvalued. Whether you like it or not, the stellar increase in Gold prices has created a massive wealth "effect" in Indian households which let them splurge their income on things like imported cars, fancy vacations and RE at any price.

Anonymous said...

"People sell gold to buy apartments??? This is a revelation to me."

I never said that. I said that GLD's high price creates a wealth effect in Indian house whereby families don't mind splurging on that luxury car, flat or house because they feel much richer than their financial circumstances would otherwise suggest.

The entire world had a housing boom throughout the 2000's. Then in 2006-08, the house bubbles in the Western world all burst.

BUT, after a momentary pause, the RE bubbles in India, China, Australia and Canada kept going thunderingly higher and have even exceeded the 2007-08 levels.

I think we have to carefully analyze what is unique about these 4 countries (India, China, Australia and Canada) as this is something that is largely being ignored by the international press and media.

In my opinion, what India, China, Australia and Canada have in common are one or more of two things:

1. A large Asian population with large private gold holdings and a natural affinity to Gold;

and/or

2. A strong natural resources sector in the precious metals/gold space.

DhImAn said...

I said that GLD's high price creates a wealth effect in Indian house whereby families don't mind splurging

So let's say you have gold. You feel rich. You decide to splurge. Then what happens? How do you indulge your splurge-lust?

If you aren't selling that gold (people aren't) - then the only other way is for someone else to lend you money so you can spend.

Ergo, cheap and readily available credit.

Ergo, mania, bubble and so on.

Now why bring gold and a so called wealth effect (a nice euphemism for what is really a delusion) into the picture? Any Joe Blow can go out and get credit easily - yes, in India. I know, I tried and it is trivially simple - just show your last three payslips.

When people measure prices as EMIs - you know you're in a bubble.

This is Occam's razor - the simplest explanation. Don't need to invoke gold, snakes and so on.

polt said...

@Anon - INDIAN RE PRICES WILL NEVER FALL UNLESS THERE IS A MASSIVE DECLINE IN GOLD PRICES.

Sorry, but this is not true. No causation, not even correlation. See
the data here - http://www.nhb.org.in/Residex/Data&Graphs.php. Even Kochi, home to Gulf cash. (which by the way refutes another inane argument used by the bulls here - 'NRI cash will prevent RE from going down :)'
And the data is in nominal prices. Real returns are worse.


This was an old fashioned credit fuelled bubble. And like it has in other old fashioned bubbles, mean reversion will kick in. (if it has not already)

aam aadmi said...

Nice term wealth effect...care to explain in detail what is it and how does it play out.

The fact is that gold is now higher than ever, it has stagnated for the past one year or so but is still at record highs, still all builders are hard pressed for cash and inventories are piling up. If there was such a wealth effect as you claim, why is there a liquidity crunch and why is everyone begging Subbarao to cut rates ?

The fact is that though India has a lot of gold collectively, maybe the largest in the world. Our individual purchasing power is nowhere close to people in developed countries. There is absolutely no evidence to suggest that we have become sone ki chidia once again due to rising gold prices. RE is a bubble and it will fall along with a worldwide recession.

Bernanke has sustained the world economy for so long with ZIRP and QE. Now with inflation sky rocketing that party is coming to an end, we will get to know the meaning of irrational exuberance then, just like 2008.

DhImAn said...

Nice term wealth effect...care to explain in detail what is it and how does it play out.

This was a euphemism coined in the good ol' days of the US real estate bubble.

It worked like this: Say you were broke, i.e., had no money to spend to buy even a cheap-ass cd player. But you had great dreams (read delusions of grandeur) and wanted to make them come true.

So here's what you did: you "bought" a house for say USD 400K, with say zero down (you're broke, where are you gonna get a down payment from?) and some low (but teaser) interest rate, say 7%.

At the beginning, your equity in the house was zero, but say after one year the house is worth USD 500K. Now voila, your equity in the house is USD 100K!

Banks then let you borrow against this equity - by granting you a line of credit - called a HELOC (home equity line of credit), at higher interest rates.

Your monthly payment increased, but you could buy upto USD 100K of stuff that you could otherwise not afford.

Then the house went to USD 600K, you sold it to the first sucker, and you now have USD 200K where you had nothing before.

This precipitated an effect wherein people went out and spent money - from their savings, or retirement funds, or even from credit cards, because they felt wealthy, because they could "unlock" their equity in the house at any time.

This was a simple delusion of having money - leading to spending - and was infamously dubbed the "wealth effect".

The distinction is subtle - if you borrow and spend money it is deficit spending; if you spend your own money because you feel invulnerable it is the wealth effect.

In truth, you're spending - either borrowing from someone else, or from your own future self.

We all know how this hogwash turned out in the US, and now we have people lapping up the very same garbage as if it were the nectar of the gods.

It doesn't take a genius to guess how this will end.

Anonymous said...

@Dhiman,

"Now why bring gold and a so called wealth effect (a nice euphemism for what is really a delusion) into the picture? Any Joe Blow can go out and get credit easily - yes, in India. I know, I tried and it is trivially simple - just show your last three payslips."

Agreed, but you explained the wealth effect so eloquently in your subsequent post, so I'm not sure why you're bringing this up. Despite the easy availability of cheap credit, Indians tend to be very financially conservative. So what is causing all these typically cautious and prudent Indians to go "all in" and take on enormous amounts of debt like Americans and Canadians? Something must have happened to have given them that confidence. I propose that that is the large increase in GLD valuations over the past decade that has tremendously increased the wealth of Indian households in REAL terms.

Anonymous said...

"This was an old fashioned credit fuelled bubble. And like it has in other old fashioned bubbles, mean reversion will kick in. (if it has not already)"

Great, so explain what is so different about Australia, Canada, China and India.

Anonymous said...

"Bernanke has sustained the world economy for so long with ZIRP and QE. Now with inflation sky rocketing that party is coming to an end"

According to Bernanke, inflation in the US is 2%. If you think rates are going up anytime soon in the US, I have a map showing the precise location of Atlantis that I'd love to sell you.

Anonymous said...

"It doesn't take a genius to guess how this will end."

Care to give a precise timeline. Within how many years do you think this will play out? After how many years will you admit that you are wrong?

We've been hearing this nonsense on this blog for the past 5+ years, non-stop. Even the board's administrators have given up on the bubble theory and are figuring out how to make money from the system.

RealityFool said...

//According to Bernanke, inflation in the US is 2%//

According to Bernanke,According to the Govt is the key. Do you know how the inflation is calculated ?

Rates are kept low with the operation twist to boost the economy.

If they increase the inflation rate, Govt has to pay more to senior citizens..

RealityFool said...

// Care to give a precise timeline. Within how many years do you think this will play out? After how many years will you admit that you are wrong? //

Experts can say ,Dont drive too many vehicles and control the c02 emission. Now you are free to ask them, Give us the timeline then I will believe you.

After all the gentlemen put some time to educate you kind of people to open the eyes. but who cares.. life/greed will go on.

Go ahead and put your future 30 years, and current youth as a mortgage and rot in modern day slavery!

Anonymous said...

"Go ahead and put your future 30 years, and current youth as a mortgage and rot in modern day slavery!"

Nothing as dramatic will happen. In 30 years time the Ruppee won't be worth the paper it's written on. I'll be paying off the mortgage with massively depreciated money. This is how the game is played and this is why people accept high asset valuations and massive leverage with impunity.

If the past 10 years is any guide, debtors are richly rewarded in the current global environment while savers are shafted.

samix said...

If the past 10 years is any guide, debtors are richly rewarded in the current global environment while savers are shafted.

True, but if and only if there is no sudden crash and job losses.

Ragu said...

// I'll be paying off the mortgage with massively depreciated money.//

This Keynesian game played well in last 20 years. Debtors are rewarded and savers are punished.

Income front

It worked well because the Indian salary is below US salary.
Now US salary is not going up and stagnated for years.
So Indians have a limit on earning.Once that threshold is reached India cannot generate more income.

Greek people earned more money than their German counterpart in common currency.
Look at them now.


Depreciating the currency

India cannot do that anymore. Why?
We are more dependent on oil in last 2 decades.
This dependency will increase.
Govt will have to pay more to import more oil and that means food price inflation which will kick the Govt out.
Politicians will not dare to do it.


Coming decades are going to be challenging one.

skeptic's ghost said...

Mass deleveraging is inevitable -
however expecting real decline in home values (ready to live and in decent neighborhoods) like it happened in 1997-2001 is not going to happen in India in INR terms this time -

Whoever said that this blog is saying nonsense is right. The correction was just the small blip in end 2008-mid 2009 and whoever bought that time have now almost paid off half their loans.

Only a big gamechanging disastrous event will bring some prices down (not sure about non housing RE)
It comes down from speculating the black swan event now -
Greece, Spain, China, Iranian war, Korean war, etc - These things are not under control of India's policy makers, markets, speculators, buyers, sellers or lenders

Anonymous said...

//Depreciating the currency
India cannot do that anymore.//

And if they don't, exports will be affected.

And I wonder though, if India faces some real trouble, would the world come for our rescue as they did for the Greece? (hint: no)

Anonymous said...

"Greece, Spain, China, Iranian war, Korean war, etc - These things are not under control of India's policy makers, markets, speculators, buyers, sellers or lenders"

If you think "Korean war" is going to bring down house prices in Mumbai you are clueless about how the Indian economy works.

Anonymous said...

"And I wonder though, if India faces some real trouble, would the world come for our rescue as they did for the Greece? (hint: no)"

India is not Greece. We are like the US. We have a printing press. Greece doesn't. We can pay off all our debts overnight if we want to.

ambush said...

Yes! there is definitely a bubble in the real estate market. Even in a city like trivandrum a flat sells for 60-65 lakhs and yields about 1.5 laksh pa in rent. That is a P/E of 40. In any terms its overvalued. But i think the real estate can go uptp P/E of upto 70 before crashing. Why?

Because Indian people are savers. The possibility that real estate could crash is pure blasphemy to them. There hasn't been a The rich (be it with black or white money), will continue to invest in real estate inspite of low returns. Its only when there is sustained market slump -- like when a property is in the market for too long without getting a buy, or when there is a sudden liquidity crisis, the prices will crash. The first scenario is quite optimistic. The second one will be more drastic.

The second senario could happen fi there is a market crash -- remember the stack markets too are overvalued by any global standards. Such a crash could cause liquidity crunch on business owners, and they could put out large number of properties on the market. If that happens there will be a huge crash. This is not far fetched. The asian tigers went through a stock bubble and subsequent crash in the 80s and 90s. Right now India and China are the hot destination for foreign investors. Its only a matter of time before history repeats.

Coming back to the 70 P/e ratio. These levels were not unheard of in the asian bubble. So i think it is going to happen in India/ China too.

Now, about the correlation between gold and housing. The hypothesis can easily be reversed. The price of housing in rupee terms have more than kept up with that of gold. So, you could say that its the wealth effect of millions of house owners in India thats keeping the gold prices inflated. After all India and China is the prime force behind Inflating the gold prices.

Anonymous said...

>Great, so explain what is so different about Australia, Canada, China and India.

Not sure what you mean. AU prices are down 5-8% over the last year in nominal terms.
In Canada, sales in the two biggest markets (greater toronto and vancouver) have fallen double digits. This in most cases is a precursor to eventually falling prices.
China, govt itself is pricking the RE bubble.
India, mixed bag. As the residex data indicates.

These 4 countries are in no way different. Same story. Ending will be the same.

ambush said...

Indians split their portfolio between gold and real estate. Both are in a bubble. Lot of people are going to loose their saving. One positive thing about the bubble is that people are more cavalier about their their disposable income. Since a person with a house in a city is a corepati, they are willing to spend money on finer things.

DhImAn said...

We are like the US. We have a printing press.

Hmm, and yet the bubble happened and collapsed in the US.

So if you were trying to say that we are at least as screwed as the US then I agree.

Anonymous said...

//Since a person with a house in a city is a corepati, they are willing to spend money on finer things.//

If and only if, the bubble collapsed half of these people would be broken with little to no saving. Banks of course will be bailed out.

Anonymous said...

"Sector Snap: Outsourcing companies decline"
http://www.businessweek.com/ap/2012-04/D9U460LG2.htm

aam aadmi said...

According to Bernanke, inflation in the US is 2%. If you think rates are going up anytime soon in the US, I have a map showing the precise location of Atlantis that I'd love to sell you.

Yes I am aware of that. Number manipulation works in autocracies, not in places like US.
Rick Perry already talked about charging Bernanke with treason, how long do you think they can play this game? It's obvious that inflation is high, no matter how you twist the numbers. You keep at this game for too long and you will find yourself hanging from the tallest lamp post in town (metaphorically)
You cannot fool reality for long. People can tolerate and laugh away a deflation but an inflationary scenario makes them mad.

DhImAn said...

Yes I am aware of that. Number manipulation works in autocracies, not in places like US.

Unfortunately, number manipulation is the norm in the US and most other countries on this planet. If you doubt me, look up "hedonic regression", or John Williams' Shadow Government Statistics.

Your statement is in error - but that is because you believe that the US is not an autocracy.

Pawan said...

If you guys missed it, here is one of the most important news of recent times for RE:
http://www.caclubindia.com/reader/frame.asp?rss_item_id=60566

DhImAn said...

Despite the easy availability of cheap credit, Indians tend to be very financially conservative.

Because Indian people are savers.

It seems some of you are suggesting that because Indians are savers, we have some inherent advantage and that we won't screw up like people of other countries have done.

Unfortunately this is not true - Indians are as stupid as the rest of the world, if not more so in many ways.

We have blind adulation of power and authority, a mentality that blindly apes the west and our lust for power and money is far worse than that of people from most other nations.

We are also available for sale rather easily.

We may not appear to be gullible on the surface but if that were true, we wouldn't be falling victim to every scam that comes along.

Every corrupt politician has made his money off the back of the gullible fools that we are.

So please - we will lose our shirt - and probably our undershirt too when the time comes.

No bubble can go on forever, because someone must stand to make enormous profits from a collapse (and don't tell me you're so gullible as to believe that no vested and very powerful interests have any short interest in all of this).

One should not predict the what and the when at the same time - and I freely admit to having no clue about the when part.

The what part is certain. We will be this (making sign of thumb nearly touching forefinger) close to financial ruin. Nobody can tell you when.

So, enjoy till the party lasts, but don't sound off like a gullible fool that the party will never end.

aam aadmi said...

Your statement is in error - but that is because you believe that the US is not an autocracy.

And who's the autocrat? Bizarre conspiracy theories sound nice but are rarely true.

The truth is that there is no single conspirator or even a group of conspirators in all of this, it's how human nature is, we see easy money and we all gun for it, and not just money, this applies to everything
We see a pristine lake, we put pipes in it and drink it till it's dry and then dump our shit in it.

Bureaucrats want to prevent violent disruptions in society because their jobs depend on it, so they indulge in all kinds of methods to preserve status quo(including but not limited to printing money) and in return people think that bureaucrats and politicians are out to exploit them. It's a typical tragedy of commons that has been played out many a times in history.


Everyone wants to save their neck, this is no different.

BTW I think you and I agree on the effects, it's just the causes we disagree about.

DhImAn said...

And who's the autocrat? Bizarre conspiracy theories sound nice but are rarely true.

Here's a link to an interview with Doug Casey. From the seventh paragraph (Doug is speaking about taxes, and I quote), "The first thing is to get a grip on who owns the moral high ground. The state, the media, teachers, pundits, corporations – the entire establishment, really – all emphasize the moral correctness of paying taxes. They call someone who doesn't do so a "tax cheat." As usual, they have things upside down.

Let's start with a definition of "theft," something I hold is immoral and destructive. Theft is to take someone's property against his will, i.e., by force or fraud. There isn't a clause in the definition that says, "unless the king or the state takes the property; then it's no longer theft." You have a right to defend yourself from theft, regardless of who the thief is or why he is stealing.

It's much as if a mugger grabs you on the street. You have no moral obligation to give him your money. On the contrary, you have a moral obligation to deny him that money. Does it matter if the thief says he's going to use it to feed himself? No. Does it matter if he says he's going to feed a starving person he knows? No. Does it matter if he's talked to other people in the neighborhood, and 51% of them think he should rob you to feed the starving guy? No. Does it matter if the thief sets himself up as the government? No."


It's a bit long and involved, and I recommend you read the interview in its entirety.

The mere establishment of a state is the establishment of autocracy. Democracy is an illusion; you're merely choosing which of a bunch of looters and torturers gets to loot and torture you today.

The fact that the state has coercive power - to make you do anything against your will (even when that action hurts nobody) - implies an autocracy.

Merely cloaking the mechanism of control and subjugation with the "nautanki" of an electoral process doesn't change its true nature.

There is no conspiracy theory here. If you just open your eyes to reality, you'll see the whole show for what it really is - a sleight of hand.

To what end, you ask - and I reply - is there any other end that man craves about other than wealth and power?

Anonymous said...

The ever interesting but alarmist AEP on the bubble in Brazil -
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9205775/Swimming-naked-in-Brazils-bubbly-waters.html

Some of the parallels with India are uncanny -
" A good slum is worth a four-bedroom house in Arizona - if you can prove ownership. "

"100pc mortgages ... has a strong whiff of Fannie, Freddie, and America’s subprime. "
Even in India, a lot of home buyers take a home loan and fund the downpayment through a personal loan, i.e. zero-equity mortgages.

Pawan said...

Infosys freezes salary hikes:
http://timesofindia.indiatimes.com/tech/news/software-services/Infosys-freezes-salary-increments/articleshow/12660476.cms

Anonymous said...

I think it's HIGH TIME that this blog is shut down!! The editors have been churning out this bubble B***S*** and gullible readers (like me) have been rendered homeless by waiting on the sidelines thinking the prices would drop.. Looking back I think I am the greatest FOOL around having believed in all this BUBBLE C**P

DhImAn said...

Looking back I think I am the greatest FOOL around having believed in all this BUBBLE C**P

Chillax, dude. You're doing a financially sound thing - if you have a crore lying around, then it is earning you about Rs 80,000 per month interest, of which you're maybe spending Rs 20,000 on rent. Go enjoy your Rs 60,000 every month on every vice known to man.

Or, if you don't have a crore lying around, then you are debt free - you are neither borrowing from your future, nor from your children's future to pay for a perceived benefit (owning a matchbox flat).

So what are you complaining about? If anything, this blog has put you in a financially better position than the other millions of debt slaves.

You should be happy. If you're not happy, look elsewhere for your source of misery - like your innate desire to follow the herd, or to conform. If you wish to fuck yourself financially because of peer pressure, then by all means, go fuck yourself.

No Gain said...

DhImAn said... You should be happy. If you're not happy, look elsewhere for your source of misery - like your innate desire to follow the herd, or to conform.

________________________________

Thanks to my mad desire to be non-conformant (and thinking that prices are unsustainable and would fall AND ppl around me buying RE were fools), today, I don't have a roof over my head which I can call my own. Talk abt robbing my kids future by being in debt, I think they will love the stability that come from a permanent home.

Dear DhlmAn, dude, you also missed that the point that many (like me) also lost not just the peace that come with home-ownership but also the wealth that would have come from RE price appreciation, had we invested in the past!!

I'd be happy to be proved wrong if there's EVEN ONE FELLA on this blog who lost money having invested in INDIAN RE, EVER..

real estate mumbai said...

oh...i don't know it...really good and informative article.

aam aadmi said...

The mere establishment of a state is the establishment of autocracy. Democracy is an illusion; you're merely choosing which of a bunch of looters and torturers gets to loot and torture you today.

How would you like your torture then, if not at the hands of govt then perhaps in the hands of thugs in a lawless land? Look I am no fan of democracy or rather to put it properly, universal adult suffrage. It ensures the rule of average, which in India happens to be pretty low. It's more suited to a population which is educated and can think on it's feet like Germany.

But then it's the best alternative you have in a fractured society like India.
As far as Dough Casey and his ilk go I've heard them thoroughly and to be frank they don't add anything to the discussion beyond the 'buy silver, buy gold, govt is a tyranny' recycled argument.

They fail to notice that violence levels are at a historical low in the world, you want to live like a free citizen, fine, no public services for you, no cops, no publicly funded infrastructure. Buy a gun and settle all disputes yourself, would really like to see how long that lasts.

I agree that govt becomes autocratic at times but the fact is that the modern state and it's monopoly on violence has brought unprecedented security and safety to the world. No amount of ideological blabbering can deny that.

DhImAn said...

I left home when I was 18 to go live in a hostel - why should I expect any different for my kids? They will go where their destiny takes them, and I realize that that they could go far, far away from where I may have put down my roots.

Certainly this happened to my and my wife's parents and to the parents of countless of my peers who left for abroad or even different cities in India.

Those parents are in a pickle today - they would like to live close to their kids, but to do so would mean giving up on their roots that they so lovingly put down only a few years ago.

What makes you think that the same won't be your plight rather soon?

I am in your boat too - but I know of much better uses of money than RE. For instance, my kids' education. Then someday, they'll settle down somewhere, and I'll go live near them - if I am still alive then.

Meanwhile, some idiot is giving up on the tremendous opportunity cost of a crore rupees to provide me with cheap housing, in the hopes that his kids will come live in that flat someday when he too knows that ain't gonna happen. Oh, the irony.

Buying RE doesn't fit into my plans, and I feel fine. I may not belong to the crorepati-in-name-only club, and my peers may think of me as rather strange, but I feel relaxed - at peace really, because of the feeling of not owing anything to anybody.

DhImAn said...

How would you like your torture then, if not at the hands of govt then perhaps in the hands of thugs in a lawless land?

Not having an oppressive form of government is what I ask for - not lawlessness. There is a distinction.

But then it's the best alternative you have in a fractured society like India.

India was, until very, very recently - a non-existent country. It was a collection of kingdoms - and was never ever democratic. The supreme law of the land was Dharma - ethics (at least until the rot set in.)

If anything, I'll argue that western style democracy is precisely the wrong form of government for a diverse country like India.

As far as Dough Casey and his ilk go I've heard them thoroughly and to be frank they don't add anything to the discussion beyond the 'buy silver, buy gold, govt is a tyranny' recycled argument.

Really, what else is there in the "discussion"? What do you want to add?

The entire rigmarole is to hide just this much: there is only one valuable thing worth hoarding - a certain barbarous relic.

Another statement from that interview is that the cost of government day is August 12 - or that government consumes 61.42% of national (US) income. Tell me, two thirds of your labor is being taken from you; is this not slavery? When is it slavery? When 90% is taken? Or when it is taken by physical violence?

They fail to notice that violence levels are at a historical low in the world

Ah, the peace on the plantation argument. No other slave may violate you, but the master may ravish whomsoever he pleases.

That is your idea of peace?

If you really think you are not a slave on the plantation, try raising your voice at the masters - try insulting a cop, for instance. After all, the cop is a servant of the people, right? He is technically your employee, since your taxes pay his salary. So try telling him to fuck off next time you get pulled over.

Lets see how that goes.

The simple truth of the world today is that there are two classes of people - the controllers and the controlled. We belong to the latter, and the former have done such a fantastic job of brainwashing us that we think that we won't even survive without them.

Give me a break.

aam aadmi said...

Ah, the peace on the plantation argument. No other slave may violate you, but the master may ravish whomsoever he pleases.

That is your idea of peace?

If you really think you are not a slave on the plantation, try raising your voice at the masters - try insulting a cop, for instance. After all, the cop is a servant of the people, right? He is technically your employee, since your taxes pay his salary. So try telling him to fuck off next time you get pulled over.


I never mentioned slavery. I don't know where you got that idea from. Well in case you are hell bent on discussing that topic, here are my two cents.

1.Is debt a slavery, yes.
2.Do I have debt, No.
3.Is anyone forcing me to take debt. No.
4.Were people forced to be slaves when the modern state didn't exist. Yes.
5.Are civil liberties better or worse today. Undeniably better
6.Did the concept of civil liberties exist before the nation state came into being. No
7.Can I shout at a police officer. Maybe. Depends on the situation. At least I can argue with him.
8.Can I shout or even argue with a thug in an anarchist land. No. I'd be killed immediately.

Here's a quote from steven pinker to get you out of your anarchist fantasy land.

As a young teenager in proudly peaceable Canada during the romantic 1960's, I was a true believer in Bakunin's anarchism. I laughed off my parents' argument that if the government ever laid down its arms all hell would break loose. Our competing predictions were put to the test at 8:00 am on October [7], 1969, when the Montreal police went on strike. By 11:20 A.M. the first bank was robbed. By noon most downtown stores had closed because of looting. Within a few more hours, taxi drivers burned down the garage of a limousine service that had competed with them for airport customers, a rooftop sniper killed a provincial police officer, rioters broke into several hotels and restaurants, and a doctor slew a burglar in his suburban home. By the end of the day, six banks had been robbed, a hundred shops had been looted, twelve fires had been set, forty carloads of storefront glass had been broken, and three million dollars in property damage had been inflicted, before city authorities had to call in the army and, of course, the Mounties to restore order.

Somehow I feel that no matter how much evidence or data I present to you, you will not be convinced. There is more civil liberty now than there ever was in the history of the planet.
There's also probably more surveillance than ever in the history of the planet, but that's the result of technology not some conspiracy.

aam aadmi said...

You really think that India was some model utopia before it was united into one modern state?

Well I have some facts for you. You really need to get out of your fantasy.
India was just like medieval Europe at that point of time, neighboring kingdoms frequently fought wars. Average life expectancy was not higher than 25-30. Diseases were rampant, robbery was a regular affair for travelers and Dacoits and Robbers had a field day in the hinterland and villages. Dalits were repressed and women had no rights to speak of. Sati and child marriage were also widespread.

Is this the 'Dharma' you are looking for?
However as I mentioned in my previous post, you seem to be immune to evidence.

Anonymous said...

@Anon - "I'd be happy to be proved wrong if there's EVEN ONE FELLA on this blog who lost money having invested in INDIAN RE, EVER.."

It is because they read this blog that folks do not lose money :). So you will not find anyone here.

Anonymous said...

http://www.economist.com/blogs/banyan/2012/04/indias-economic-reforms

DhImAn said...

There is more civil liberty now than there ever was in the history of the planet.

Okaaaay - if you say so. Whatever.

There's also probably more surveillance than ever in the history of the planet

Why? Why is this so? If people are all peaceful, crime is at all time lows, things are just hunky dory, then why is surveillance at an all time high?

You really think that India was some model utopia before it was united into one modern state?

No. There was no India prior to 1947. Post 1947, the political entity called India has not been a utopia; of course not.

Did a utopia exist at one time on or near the current geographical boundaries of what is currently India?

Who knows, but some things are startling enough - like Panini's grammar - that one has to rethink what one knows. You don't invent context free grammars and shorthand descriptions thereof unless the right economic and political conditions exist. Look up the Panini Backus Form. The math required for such an endeavor is quite ummm... advanced.

The point is, just as Sherlock Holmes said - to a logician, looking at a drop of water is enough data to postulate the possibility of the existence of the ocean. To me, looking at something as awesome as the Panini grammar is enough to postulate the possibility of the existence of at least frickin' civil liberties at that time, if not an outright utopia.

Like it or not, that evidence is staring us all in the face, and we are choosing to not see it.

I'd recommend to you to not simply believe whatever you've been taught at school or college. History is written by the victor; in the case of India, primarily by the British - who had huge interest in vilifying the real history.

Look at hard data - only one example of which is the Panini grammar - and tell me, how come that came to be in a lawless land with no civil liberties, where everyone was afraid for their lives and where everyone died of poverty at 25.

That is the essence of whatever I've ever said here on this blog or elsewhere - put aside all prior bias and start afresh with some solid data points - you'll see everything clearly.

DhImAn said...

And oh by the way, I know that most people on this blog don't care about my rather arcane digressions.

Most people would rather just be told - buy now (or don't buy) - and believe in the tea leaves or the tooth fairy who will make sure you become a crorepati.

I don't do sound bites. That's why I sign my posts; don't read them if you'd rather have something else.

polt said...

Some sane words from housing guru Shiller
http://www.businessinsider.com/robert-shiller-housing-is-not-an-investment-2012-4

Applies to India as well.

aam aadmi said...

Okaaaay - if you say so. Whatever.

That attitude doesn't help. I did not make that statement out of thin air. It's backed up by strong evidence. Read Steven Pinker's book "The better angels of our nature" where he presents graphs about violence and other things through the ages, going on to show how we have made tremendous improvement in the past two thousand years.

Here's the TED video
http://www.ted.com/talks/steven_pinker_on_the_myth_of_violence.html

And if Sherlock Holmes and Panini's grammar is all you can quote for evidence I have nothing more to say. Going by that yardstick the 1400's and 1500's were peaceful golden ages if we just see the paintings from renaissance era.

Anonymous said...

http://economictimes.indiatimes.com/news/economy/indicators/india-has-50-chance-of-becoming-emerging-miracle-economy-ruchir-sharma/articleshow/12671626.cms?curpg=1

aam aadmi said...

@Polt
Thanks for the link.
Very true. People confuse everything for investment nowadays, housing, education, insurance. You name it.

They are investments, but not in the traditional sense, they don't give returns that can be measured on the books, they provide peace of mind and prosperity and should be looked upon as such.

DhImAn said...

That attitude doesn't help.

I apologize. That didn't come out right. I meant that in the context of your next statement about surveillance.

Don't you see that liberty and surveillance are antithetical to each other? That the existence of one precludes the existence of the other?

As for Panini - I knew you wouldn't understand or appreciate the argument. Most people don't. That's OK.

Perhaps this will help: Panini invented a form of notation for a context free grammar - the next time that would come in handy would be some five to eight thousand years later, to design computer languages.

That's not quite in the same league as the scribblings on canvas that the renaissance paintings are - compared to the sculpture of India. Go see Konark, Ajanta, Ellora - don't see pictures - they can't capture the awe of standing under 10 tons of rock that was sculpted with no errors. See Angkor Wat.

Keep in mind that I didn't compare art with art - I simply couldn't care less about art in this context.

I was talking of a mathematics whose applications we've only properly begun to appreciate in the last 50 years. It had no business existing 5000 years (or more) ago, especially in a society with no civil liberties, no security and a life expectancy of 25.

To me that's a logical conflict - tell me, how do you resolve it?

DingDing said...

Logical conflict is only contextual.

As we and all operate under a bounded context leading to a "bounded rationality"

familiar downfall of humans everywhere across civilizations !

DhImAn said...

Dingding - unbound it then.

DingDing said...

http://en.wikipedia.org/wiki/Herbert_Simon

DhImAn said...

That Ted talk by Pinker is so full of disinformation that one has to question the man's intelligence or his motives.

For instance - according to him, ten thousand years ago everyone was a hunter gatherer, and yet somewhere in the world, someone was inventing a context free grammar notation. And please don't tell me that that was 10,000 years ago and Panini was around only 5000 years ago. That estimate of Panini's time is just that - an estimate, not to mention the "Genesis bias".

For all analytical purposes, like I said, the mere existence of something like CFGs at roughly the same time period as what Pinker thinks mere hunter gatherers existed disproves much of his prattle.

Second, the brutality that he describes is in all places except historical India. Of course the middle east and Europe were brutal. Of course violence has declined there. Does that prove that this is the most peaceful time on the planet? That is the same mentality as calling the winners of a backyard game of baseball the "World Champions".

The truth is, if you view ancient Indian history in a more unflinching logical light, you'll see how it has been deliberately sidelined, since it does not fit in with the neat western theories of anthropology and sociology, and most importantly, Genesis and other (western) scripture.

Does this have relevance today and especially on a real estate blog?

I say yes - people are being misled today in exactly the same manner by western trained economists, specifically Keynesians to believe in what will utterly and completely destroy themselves.

In order to see this deception, it is instructive to study our own selves, hence my digressions. I appreciate you taking the counterpoint, it serves to hone my arguments. Thank you.

aam aadmi said...

@Dhiman
You keep inventing stuff. Panini existed circa 400 BC not 5000 years ago and Pinker is an Atheist and a Scientist, he is not the kind of guy who believes in genesis, all his graphs are real and have sources and are researched, if you think it's disinformation you can mail him and I am sure he'd be happy to reply, I can't say the same about you though.

No one is denying the cultural achievements of ancient Indians but to say that we were 'different' amounts to romanticizing and does not stand up to facts.

If you don't have sources for your data please don't argue, anyone can make fantastical claims. Talk is cheap, providing evidence is hard.

And I don't know how you mixed in Keynesian economics with my arguments. If anything it's my POV which says that Indians are not special, no one is special, all humans share the same genes and same vices.

Nuff said.

aam aadmi said...

One more thing, you keep talking about Panini's achievements and Ajanta, Ellora. They are great achievements sure but I am not sure how it makes us a super species.

Have you heard about the Phaistos Disk. Carbon dating puts it's age circa 2000 BC. The time of Rig Vedas and it's the oldest known printing typeface known to man, which means that printing was invented much before Gutenberg's time or the Chinese. However it doesn't make the creator a super race neither does it make them special, then there are the huge statues on Easter Island, erected without any bulldozer. Hammurabi's codified laws, the irrigation system in ancient Babylon (7000BC) etc etc...I could go on and on but you get the point.

We are not special, civilizations come and go all the time, ours will also go at some point.

We aren't even the oldest civilization for christ's sake. That honor goes to the San people of Africa, who have continued the same traditions for past 40,000 years.

Get over your love affair with Ancient India.

Anonymous said...

DhImAn, I think you should read "Guns, Germs and Steel" by Jared Diamond.

He explains how different continents developed at different speed after the last ice age ended around 12000 years ago.

His research stops at 1500 AD with suggesting that Europe and Asia were better off than others because of nature.

You can also read "wealth and poverty of nations" by Landes which starts around 1500 AD and explains why Europe pulled ahead of Asia during the last 500 years eventhough the Asians were better than Europeans at that time.

aam aadmi said...

Subbarao cuts rates...
Great...more liquidity is exactly what we need at this point...some fools never learn. More inflation in the offing.

Anonymous said...

Why this debate about when Panini existed guys?

Go to an Italian restaurant and order a Panini. You will get it fresh, not from thousands of years ago...

Anonymous said...

I thought Dhiman was just a bit zany with a rebellious streak. But now I get it, he's certifiable.

Looks like he's had one Panini too many and that has caused intellectual indigestion.

Anonymous said...

Subba Rao has sacrificed inflation for growth.

DhImAn said...

Panini existed circa 400 BC not 5000 years ago

By whose calculation? Read this. Max Muller dated the vedas to 1200BC because that fit in with Genesis.

Pinker is an Atheist and a Scientist, he is not the kind of guy who believes in genesis

Perhaps not overtly. Perhaps even he does not know his biases. In any case, why is there not just one mention of India in his talk, and the violence therein (or its absence) over the last say 10,000 years?

Surely when you talk with such authority about violence being on the decline in the entire world - it would do you some merit to not conveniently exclude the oldest civilization from your hypothesis.

Bad or incomplete data leads to bad theories - and your friend Pinker can't count completeness amongst his theory's virtues.

They are great achievements sure but I am not sure how it makes us a super species.

I didn't say so. You did. Don't put words in my mouth.

Fact is, you hijacked the conversation - I was only ranting about authoritarian states and the loss of liberty which is absolutely true by the way; and you go about making claims like the state is good and violence is at historically low levels.

You cite a man whose research is so incomplete as to be a complete joke. I point out that this is a common Western malaise when viewing the history of India, and you go off on a tangent about something I never said (super species).

Get over your love affair with Ancient India.

And why should I do that? Is it so unnatural for me to respect and love my ancestral land and my forefathers who achieved all that? Americans glorify people like the "founders" - and that's OK, but I say two good things about Panini and get flamed?

Truth is, if you don't love your own ancestors you are displaying a Western brainwashing not unlike that of most of today's Indian "intelligentsia". Congratulations.

We are not special

Great political correctness on your part to be sure; but it takes intelligence to recognize that which is special in us, and it takes courage to say it out loud.

Furthermore, saying we are special does not preclude others from being special also - only self loathers imagine it to be so.

To anonymous - yeah, perhaps I'm certifiable, but I'm not a coward who posts anonymously.

Anonymous said...

Panini is closer to me than Galileo. VEDAS are closer to my heart than any other ME culture. Wonder how much Europeans are brainwashed by ME beliefs. Keep up DhlmAn.

Anonymous said...

Sorry ME stands for "Middle East".

samix said...

ME brainwashed by European beliefs ?

Anonymous said...

Ok guys back to the housing bubble. RBI has cut interest rates by 50 basis points. Business Entertainment Television channels such as CNBC are expecting Property prices to rise and demand to pick up.
did I use the word entertainment? awww my bad

DhImAn said...

Or perhaps the law of unintended consequences will kick in and demand will actually fall, since people will wait for interest rates to fall further...

Anonymous said...

"To me, looking at something as awesome as the Panini grammar is enough to postulate the possibility of the existence of at least frickin' civil liberties at that time, if not an outright utopia."

Did it ever occur to you that the aforesaid "frickin' civil liberties" might be reserved solely for the classes of privileged elites whom Panini belonged to?

You've said some pretty idiotic things on this blog, but pointing to a grammarian's treatise on a particular language for the proposition that "utopia" must have been extant during that time is way up there in the scheme of rank idiocy.

DhImAn said...

Did it ever occur to you that the aforesaid "frickin' civil liberties" might be reserved solely for the classes of privileged elites whom Panini belonged to?

Who told you so? Who taught you all about the evil caste system? About the brown man's inherent inferiority and how he must strive to meet that universal european ideal?

A western education, no doubt.

An education that makes it impossible to learn critical thinking?

How do you know that what you think is true is really true?

I ask that question in a very general way too - like how do you know that real estate prices will never fall? Or like how did "everyone" know 500 years ago that the sun revolved around the earth? That's not a rhetorical question, btw. I really am asking "how?".

Yeah, Panini was "some grammarian" like Einstein was "some professor".

You sound intelligent, but I wish you had some critical thinking skills and refrained from that refuge of the ignorant - ad hominem attacks - then perhaps we could take the debate to the next level.

aam aadmi said...

Subbarao just caved in, if there wasn't so much pressure on him he would have kept the rates high.

Bravo Subbarao for not acting like Bernanke and ilk and giving savers the chance to keep their head above water for some more time. I think interest rates should be something like inflation + 2% and this should be automatically enforced.

Leaving it as a tool creates too much trouble.

Anonymous said...

Yes, look at the way they treat white skin.. they are worse than us

ambush said...

We have blind adulation of power and authority, a mentality that blindly apes the west and our lust for power and money is far worse than that of people from most other nations.

Our blind adulation of power and authority is not something new and infused by the British to our psyche. One only need to look at the the adulation the South Indian show to Sanskrit. The way Sanskrit was adopted as a prestige language over Tamil (or for that matter, how the Tamils accepted the brahminical system), is evidence for the fact that bending knees to power and authority is not new to Indian cultures.

India was, until very, very recently - a non-existent country. It was a collection of kingdoms - and was never ever democratic. The supreme law of the land was Dharma - ethics (at least until the rot set in.)

What does that mean? That there was no taxes in Ancient India?
That there was no Autocratic state. I would like to see some evidence on how it was any different from other autocratic regimes.
Great progress were made under autocratic rules. Infact, it could be said that any progress in the last 1000 years have come under autoratic system. Brilliant people don't put off their birth for apt political climates. There is no rationale in saying panini lived during better political climates.

ambush said...

I would say you have a "Dharma bias"

Pawan said...

http://www.nytimes.com/2012/04/16/us/more-us-children-of-immigrants-are-leaving-us.html?pagewanted=all

Anonymous said...

RBI is an utter failure. They have completely failed to reign in inflation, prop up the sinking rupee or prick the housing bubble.

Bloody buggers. A pox on their houses.

Filthy criminals!

SKG said...

Ok... Since i have been reading this blog and comments for last 3-4 yrs now i have found something A link to article which I believe explains a lot (including comments like blogs owners went themselves to RE purchase and why the bubble is not bursting?)

http://news.ideforex.com/2011/12/economic-collapse-stealth-mode-in-asia-jim-rogers-moves-to-china.html

My point is that the cover-up and nexus of (politicians & builders) can defy all logic for quite some time and we are currently in that phase.Once this one is over (I mean once they realize that this is not a good investment anymore or there are better things to do, and i don't know the time frame by god) we will certainly see the winds of change.

Let me know if i am being too optimistic.


Thanks

Subodh

Anonymous said...

Now it is the turn of Netherlands - http://www.telegraph.co.uk/finance/financialcrisis/9212241/Fitch-doubts-Dutch-AAA-as-property-slump-reaches-coma.html

BTW, the population density there is higher than that of India. One argument made on this blog is that the population density in India will keep prices up. It did not do so in Japan, and it seems to be failing in Holland as well.

Anonymous said...

"BTW, the population density there is higher than that of India. One argument made on this blog is that the population density in India will keep prices up. It did not do so in Japan, and it seems to be failing in Holland as well."

There is a big difference between the Netherlands and India. In the Netherlands, house prices are denominated in a real currency (EUR) and not in a bogus joke currency administered by a bunch of corrupt, incompetent chimpanzees (INR).

Measured in terms of INR, house prices will NEVER fall.

Pawan said...

Measured in terms of INR, house prices will NEVER fall.

Infosys has declared that they will not give any raise to their 1.5L staff this year. This means no salary hikes in rupee term. Let a few more companies come out and say this and you will see what happens.
Never be too sure of anything.

aam aadmi said...

A few days back in NDTV's property show, they had mentioned that apartments in Bangalore have given returns of 10% YoY over the past 4-5 years, and Bangalore is one of the middle growth areas.

I'd say that it's not worth risking your neck and becoming a bonded slave for a 10% return. FD's are much better in this scenario. Zero risk and high return.

Anonymous said...

"Measured in terms of INR, house prices will NEVER fall."

Rubbish. See
http://www.nhb.org.in/Residex/Data&Graphs.php . It shows gains and LOSSES in INR.

Anonymous said...

"Rubbish. See
http://www.nhb.org.in/Residex/Data&Graphs.php . It shows gains and LOSSES in INR."

You are kidding right? There are losses...where? Hmm...let's see: Hyderabad (this is because of political issues - Telengana), Jaipur and Kochi.

NEWSFLASH: The vast majority of people on this board don't want to own homes in Hyderabad or Jaipur or Kochi.

Anonymous said...

"I'd say that it's not worth risking your neck and becoming a bonded slave for a 10% return. FD's are much better in this scenario. Zero risk and high return."

The real issue is whether the "said return" exceeds the rate of inflation. Without that, there are no real returns. Period.

I will venture to say that there is not a SINGLE financial asset in India that has a yield that exceeds the rate of inflation. If I'm wrong, please identify the asset.

Anonymous said...

I don't understand the references in this blog to "debt slaves" and generally concerns about getting into debt.

The governments of the world have gotten so deeply in debt that the only way they can get out is through massive inflation. Debters will ultimately pay back their loans in massively depreciated money. Think about the buyers who got mortgages in 2002-03 to buy homes. All of them are paying back their loans with Rupees whose purchasing power is mere paise on the 2003 Rupee. In the meantime the houses they purchased has gone up 5 fold (if not 10-fold).

This is how the game is played. If history is any guide, getting into debt is the smartest thing you can ever do while saving is possibly the most insane thing you could do.

IF YOU LIVE IN A COUNTRY THAT ISSUES FIAT CURRENCY, YOU SHOULD ENDEAVOUR TO GET INTO AS MUCH DEBT AS REASONABLY POSSIBLE.

I wonder if there is a word for "Saver-slaves" or the equivalent because savers are going to get royally shafted in the years to come. 2002-12 was just the preview.

THERE WILL NEVER BE A TIME IN OUR LIFETIMES IN ANY COUNTRY WHERE INTEREST RATES ARE ABOVE THE ACTUAL RATES OF INFLATION.

ambush said...

A few days back in NDTV's property show, they had mentioned that apartments in Bangalore have given returns of 10% YoY over the past 4-5 years, and Bangalore is one of the middle growth areas.

I'd say that it's not worth risking your neck and becoming a bonded slave for a 10% return. FD's are much better in this scenario. Zero risk and high return.


That is BS. RE in India is giving return of less than 5%.

For a 1 crore flat in bangalore, a 10% return would mean a rent of 10L a year, or about 80000 a month. Find me a flat that that is getting that much rent, worth 1 Crore.

Anonymous said...

@Anon - "NEWSFLASH: The vast majority of people on this board don't want to own homes in Hyderabad or Jaipur or Kochi."

So when the data does not support your argument, make generalized statements about the 'vast majority'.
BTW, Chandigarh tri-city area prices are also down 20%+ last year. See -http://www.tribuneindia.com/2011/20110901/biz.htm#1

Mumbai, too is not immune to falls. Some parts actually had declining prices. See http://articles.economictimes.indiatimes.com/2012-03-26/news/31240259_1_crisil-research-home-prices-cement-prices

But I guess the 'vast majority' does not want to buy in these cities either :)).

Anonymous said...

Anon = "I will venture to say that there is not a SINGLE financial asset in India that has a yield that exceeds the rate of inflation. If I'm wrong, please identify the asset."

Depends on the time period. But over the last 30/20/10 years, stock markets have easily beaten inflation in India. Over the last five years, they have not.

ambush said...
This comment has been removed by the author.
Anonymous said...

"Depends on the time period. But over the last 30/20/10 years, stock markets have easily beaten inflation in India. Over the last five years, they have not."

I was talking about "yields" (i.e. income), not cap gains.

Pawan said...

I was talking about "yields" (i.e. income), not cap gains.

How does that matter?

aam aadmi said...

That is BS. RE in India is giving return of less than 5%

Sorry about the choice of words, it's price appreciation, not returns in the traditional sense.

Anonymous said...

"How does that matter?"

I was talking about stated yields. I thought that must have been apparent from the context of my post.

Anonymous said...

To buy the same house if not in INR you need USD or EUR. The house which was priced 50K USD is now 1/2 a million. Get it no STFU.

Anonymous said...

House prices will correct in real terms when the Rupee collapses to the slimy junk that it is.

polt said...

Anon = "I will venture to say that there is not a SINGLE financial asset in India that has a yield that exceeds the rate of inflation. If I'm wrong, please identify the asset."

RBI is planning indexed bonds.
http://www.deccanherald.com/content/238137/rbi-allow-inflation-indexed-bonds.html


If there were indeed a 'safe' instrument yielding more than inflation, the demand would push its price up and bring the yield down till it matches inflation. This is generally what happens with the US TIPS and the UK inflation indexed gilts.
So it is unlikely that such an instrument exists anywhere.

polt said...

There are 'risky' instruments that yield more than inflation. Lots of private companies (Ex Shriram Finance) are offering rates of upto 12%. Smaller firms offer more. I often see ads on autorickshaws and buses for these firms.

aam aadmi said...

http://www.thehindu.com/business/companies/article3332819.ece

Barring maintenance work, all other water-dependent work in Mangalore Refinery and Petrochemical Limited (MRPL) has come to a halt due to water shortage, a top official, who did not wish to be quoted, told The Hindu.

“Entire exports from MRPL and LPG for the domestic market will be affected,” the official said. Phase-III and Phase-II units of the refinery were shut down a week ago.


For those who don't know, MRPL is India's largest refinery. The aforesaid water shortage is the drought in Karnataka.
Effects include

1. There will be a shortage of petrol and diesel in the short term.
2. Exports will be impacted.

You could also see sporadic pump closures with "no fuel" boards outside. This means imports of finished gasoline and diesel (which are costlier).

I mention this because will worsen the INR situation. Expect INR to trade around 52-53 for the foreseeable future. This is what a 'tipping point' looks like. When things go bad, they do so in a torrent.

Pawan said...

I was talking about stated yields. I thought that must have been apparent from the context of my post.

And I am saying how does yield matter?

If you put Rs. 100 in a 10 year FD which gives Rs. 10 interest each year and gives you 100 Rs at the end of 10 years back versus investing Rs. 100 in say a house where you get Rs. 20 per year as rent and at the end of 10 years you sell the house for Rs. 200.

Pawan said...

Oops! Read "Rs. 2 per year as rent and not 20" in previous post.

Pawan said...

I will venture to say that there is not a SINGLE financial asset in India that has a yield that exceeds the rate of inflation.

Gold it is. Not just in India, world wide. I have understood the fact and I am planning to put substantial part of my savings in Gold starting this year.

Any asset that the govt. can create, tax, or confiscate is not safe. By these definitions, there is no perfect asset. The two which come closest to perfect are 1) gold and 2) knowledge/education/skill.

Real estate is good too as long as going is good. If the level of economic activity falls in the area where you own a house, its value will fall too. Agricultural land may become infertile or arid.

There is no option but to earn and spend in fiat currencies but do save in gold.

Does anyone know what is the best place to store physical gold??

samix said...

Pawan what happened ? You turning to gold ? I remember all our posts where you were so anti gold and thought that it was in a bubble!

Pawan said...

Some evidence (or not!):
http://www.rbi.org.in/scripts/PublicationsView.aspx?id=12732

Gold price in 1970 was Rs. 185 / 10 gms. Now its 30,000. Up 150 times. CAGR 12.5%.

BSE Sensex started in the same year at 100, now it is 17,000. Up 170 times. CAGR 13%.

Does anyone have data for same-area property prices and salaries in 1970 and now?

Pawan said...

@Samix,
I was anti-gold. Yes.
I was anti-property. Yes.
Basically I was anti all traditional thinking and pro all new thinking.

I realized the hard way that there is something our supposedly backwards and unlettered ancestors knew better.

I have realized that there is no progress. That there will always be the ruler and the ruled. And that is why Anna Hazare can not succeed.

Yes I am still learning. Its an eye opener. Though I would have been better off just listening to my parents.

Anonymous said...

"Gold it is. Not just in India, world wide. I have understood the fact and I am planning to put substantial part of my savings in Gold starting this year."

Pawan, be very, very careful when your mind tells you that a certain approach is the most desirable just when the entire world is also of the view that the exact same approach is the most desirable.

I'm not saying I have any other alternatives (there aren't many if you're in India and your face is under the jack boot of the RBI, GOI and other assorted criminals), but Gold is a form of insurance to protect against cataclysmic events and hyperinfation. It is not so much a form of investment than a store of value.

Of course only you can decide what is best for your circumstances.

Good luck.

Pawan said...

It is not so much a form of investment than a store of value.

And that is precisely what I (in fact most of us) need!

If I have to get rich, I have to work harder and make more money. I see no other way. I no longer look at my savings as investments. I just need a store of value.

Of course I will keep money in cash/FDs and in stocks too but I am going from no-gold to like 1/3rd to 50% of savings in gold. Not immediately. But over the next few years.

As Bill Gates said, you can make money only by using your primary skill. Mine is writing software. I am betting on that.

(At the risk of self-promotion, if you are interested in seeing what we do, visit www.bluestacks.com).

Anonymous said...

"If there were indeed a 'safe' instrument yielding more than inflation, the demand would push its price up and bring the yield down till it matches inflation."

This is a very good observation (and I'm surprised no one else caught it). This is why I wrote above:

"THERE WILL NEVER BE A TIME IN OUR LIFETIMES IN ANY COUNTRY WHERE INTEREST RATES ARE ABOVE THE ACTUAL RATES OF INFLATION."

If ever there is even a single country that offers a rate of interest higher than the real rate of inflation, then funds from the REST OF THE WORLD would flow into that country pushing up the price of the yield security until the yield is just above the rate of inflation of the country where the said funds are flowing from (adjusted for forex variations).

I'M AFRAID WE ARE DOOMED SO LONG AS FIAT MONEY MANIPULATED BY UNSCRUPULOUS CENTRAL BANKERS RULES THE WORLD.

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

Guys and especially Pawan, here are some very good economic quotes with respect to gold, fiat money and banking that you may like

http://samixblog.blogspot.com/2012/04/some-good-economic-quotes.html

Anonymous said...

@Pawan,

Nice concept, but I don't understand the business model. How do you intend to make money exactly?

Skeptic's Ghost said...

@Pawan - "there are the rulers and ruled"
Yeah but at least you get a chance to change them once in a while - even if your candidate lost, at least you have a moral victory of voting against that ruler. Another way to change the rulers is as I said all the time some sort of war or insurrection (like the Emergency dethroned the INC in India)

Anonymous said...

Why do people pay the highest prices in the world to live in one of the most unlivable cities in the world. In Mumbai one has to pay 5 crore to not have views of slums and their daily rituals/able to commute within 1 hour to work, schools that are decent, and a lifestyle that is a litte better than animals.

Anonymous said...

Our ancestors preferred gold because if one had to move overnight due to (floods/famine/disease/war/new ruler/1947 split), gold was easy to transport and held it's value. One had little claim on abandoned property in old days, fiat currency was not existant, thus gold was the only means of storing transportable assets.

Pawan said...

Nice concept, but I don't understand the business model. How do you intend to make money exactly?

Sorry for hijacking the board.
Please come to our facebook page and may be you can get the answers there.

polt said...

Pawan,
Sensex was 100 in April 1979. = 17.4% return.
Gold in 1979 was 800. = 11.2% return.

We do not have longer term data for Sensex, but for gold we do. In 1925 it was Rs 18. = 8.8% return.
See http://www.rediff.com/money/2007/aug/17gold.htm

Over a reasonably long term (say 15+ years) my bet would be that equities would do far better than gold.

Stocks for the long run !!

Anonymous said...

http://timesofindia.indiatimes.com/business/personal-finance/Realty-good-savings-tool-for-retirement/articleshow/12760385.cms

Anonymous said...

Indian house prices will go down only when the Sun burns out of helium, collapses and becomes a black hole sucking everything in the solar system (including Earth) into it.

This is estimated to take around 5,000,000,000 years.

DhImAn said...

Housing prices will never go down... etc...

Look up the Dunning Kruger effect.

I quote from the Wikipedia page: "Ignorance more frequently begets confidence than does knowledge."

Pawan said...

Dhiman,
Sometimes you do need confidence. In the 2008 stock markets crash, I invested all my money in stocks but kept on hearing negative news day-in and day-out; finally succumbed and pulled my money out. If I had held on, I would have made very good gains (provided I sold them too by 2010 end as most of them are back to 2008 levels).

Sometimes ignorance helps.

Anonymous said...

@Dhiman

"Look up the Dunning Kruger effect."

Ok genius. Give us a reasonable time frame before which Indian RE will significantly correct in INR terms. If such correction does not happen during your stated time frame, you will come back on this blog and eat humble crow and abandon once and for all anarcho-capitalism as a means for structuring society.

Deal?

Anonymous said...

// Indian house prices will go down only when the Sun burns out of helium, collapses and becomes a black hole sucking everything in the solar system (including Earth) into it. //

a) Sun is not massive enough to become a blackhole, it will go red giant and slowly cool down to a white dwarf star.
Then if, and only if, another white dwarf collides, it will go type la supernova.

b) Housing prices will go down simply because it is not sustainable. The present government is simply avoiding pricking the bubble because they don't to face the anger of people. If congress lose, it'll be a good thing for them simply because the other party will have to take all the blame.

- Prick housing bubble -> developers go bankrupt -> debt - > bailout -> investors go mad -> suicides -> government collapse

- Don't prick bubble -> inflation goes up -> people go mad -> government collapse

- Take the risk of forcing people to go from real estate and gold to stocks as primary investment -> hope for the best

Anonymous said...

^ the fuck.

Anonymous said...

"- Don't prick bubble -> inflation goes up -> people go mad -> government collapse"

Governments worlwide don't give a flying fig about inflation. That much must be amply clear given the experience of the past decade.

DhImAn said...

Ok genius. Give us a reasonable time frame...

Hmm, lets analyze this for a brief moment, shall we?

That "OK genius" part is sarcastic; meaning that you think that I am not a genius, but more accurately think that I am a moron.

The second part of the statement is a challenge - stated differently, it says - "if you are not a moron, prove it by stating the precise time of a future event - if the time is not met, it proves you are a moron".

To wit, if you consider me a moron, and you obviously consider yourself to not be one, then ask yourself this - could your own lack of understanding and skill be making you think that you are intellectually superior?

Or, in other words, could it be that your superiority is illusory, and stems from your own incompetence?

That is precisely the point of the Dunning Kruger effect - that morons think or themselves as geniuses and others as morons.

Geniuses on the other hand, think of themselves as fairly smart, and others as more or less fairly smart too, and can only wonder why others don't see what is so obvious and plain for them to see.

This is a divide that cannot be bridged. I could be a moron too - I accept, but being human, I can't escape my own cognitive biases. From my side of the fence the world looks different.

It may not from yours. I can only tell you what I see; whether that will come to pass is another matter.

If this provokes an ad hominem attack from you, then I can only imagine that that stems from your failure to make a convincing logical case for your point of view.

Anonymous said...

http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=688

Read this if you guys got some time.

Parth said...

someone mentioned Netherlands, a lot of institutional investors are cashing out here. The prices in Netherlands (except 3 large cities Amsterdam, Rotterdam and Hauge) post this pending correction would match tier 2 city prices in India

http://www.dutchnews.nl/news/archives/2012/04/foreign_investors_may_auction.php

I would appreciate if there is no discussion that is NL right benchmark for India. I hope its a useful piece of information

Anonymous said...

No worries - RE prices in India are not going to go down, why should they go down? Infrastructure and money centric cities will always attract more and more people for available opportunities.

Once inflow of migrants slows or stops, prices will be stagnant (not decline). Indian corporations are not so bold to shift to tier 3 cities, they have to build and/or contribute to local infrastructure which they are not ready to.

So get used to it, high prices for everything from RE, Car and in coming years Asian 'cheap labor' will be just a fairy tale to be told in western countries evtt history books.

Anonymous said...

My point is that the cover-up and nexus of (politicians & builders) can defy all logic for quite some time and we are currently in that phase.Once this one is over (I mean once they realize that this is not a good investment anymore or there are better things to do, and i don't know the time frame by god) we will certainly see the winds of change.

Let me know if i am being too optimistic.


Ofcourse you are. From time immemorial man has fought and killed his own brothers over land and gold. Politicians and elites are todays feudal lords and tyrants.

In short, we're not going to enter an age of enlightenment anytime soon.

Anonymous said...

I would appreciate if there is no discussion that is NL right benchmark for India. I hope its a useful piece of information

Living in a democracy is like studying in public school. Your facilities are going to be limited by the wealth of your neighbourhood (i.e. tax income available to for development) and your learning (i.e. quality of life) will be capped by the average IQ of your peers (i.e. countrymen)

Countries like Netherlands are way ahead of the curve and really cannot be compared. In many aspects, majority of Indians cannot even be considered civilized...

polt said...

Robert shiller has a good article in todays FT.
http://www.ft.com/cms/s/2/1cc90a5c-87a8-11e1-8a47-00144feab49a.html#ixzz1spbDcMvJ

The following sentence from the article is equally applicable in India too.

" Note that in the latest bubble home prices in the US and the UK rose rapidly relative to the cost of renting. It was not a rental boom. It was thus financial in origin, NOT caused by a rise in the real scarcity value of housing services that people want to consume. "

aam aadmi said...

Countries like Netherlands are way ahead of the curve and really cannot be compared. In many aspects, majority of Indians cannot even be considered civilized...

You are right but you are going to piss off a lot of people on this forum with this one.
Yesterday I read a news item where locals in NCR beat up a doctor because he did a CPR on a girl to save her life.

Poor doctor, imagine getting a thrashing trying to save someone's life.

Kulbir said...

We are experiencing a massive property bubble here in and around chandigarh. Yesterday i along with my friends did analysis for a 14 room hotel in chandigarh, we concluded that even at 100% occupancy rate for rooms and banquet hall the income cannot exceed Rs 12 lakh a month(room for Rs 2500 for one night) then you take income from eateries to be rs 3 lakh (which is on higher side), we did not consider any expenses any concluded that hotel must not be priced above Rs 18 crore. But we were shocked to find that owner had rejected offer for 50 crore on the same property. The price of property has certainly got nothing to do income potential from it. If this is not a bubble I don't know what will qualify as one. This is not lone instances. Zirakpur is a upcoming suburb of chandigarh there too apartment which cannot find tenants for Rs 5000 a month are selling for more than 40 lakh.
I will like others to also share such difference in property price and rents in their respective localities. If people say that their is huge demand for real estate should the rents not rise proportionality. Thanks and please contribute to the discussion.

Anonymous said...

@Kulbir -
There is lot of analysis on RE bubble, inflation, economy, supply demand, etc...

I feel RE is correctly priced as per inflation (money supply) BUT many other necessities are not and their prices need to increase to be on par.People have money and are buying crores of worth RE, but not renting same RE for fraction of that same money, this simply because they don't feel like renting.

Anonymous said...

@Anon - "this simply because they don't feel like renting."

This is a rather strange explanation.

Price/rent ratios shot up all over the world (and here in India) not because folks did 'not feel like renting'. The ratios went up because rents tracked inflation, but prices tracked credit growth.

Anonymous said...

// The ratios went up because rents tracked inflation, but prices tracked credit growth. //

* prices tracked credit growth AND RE PRICES.

* rents SHOULD HAVE tracked inflation? nope, BUT they WILL slowly and steadily. Also other expenses will also go up... seen difference in your expenses from prior years... more to come !

Kulbir said...

The property is actually put to productive use by tenants which is why you will never find a sustained bubble in rental markets. By the way the rental market is also distorted in India by various rent control acts, many people keep their properties empty rather than letting them out also only old tenants benefit at the cost of new tenants as the landlord assign higher risk to letting out property than keeping it empty. If these rent control acts are repealed rents will actually come down as supply will increase.
Property prices in the long run are function of rents.
"In short run prices reflect the sentiment of people but over the longer period they reflect VALUE".
Well value is very subjective but i feel value will someday emerge in real estate and according my limited understanding i believe one day EMI for a property will be same as rent for it.
I have got nothing against real estate but i feel price's have gone way far ahead of value. Pls contribute i want to take this discussion to its logical conclusion. Thanks

Anonymous said...

First of all this is not perfect world and second humans are not always logical. Lot of decision are taken with emotions, sentiments and instinct.

EMI will NEVER be in sync with Rent... NEVER. So choose your side with your analysis and see what suits you best. As investment perspective currently being on rent seems the best option. Buying RE is not investment for everyone.

Negotiate hard on buying RE and on rents, see which investments gives you best returns on your instinct, and analysis.

Remember many RE owners are crorepati as long as someone is better off and ready to pay crores. If cycle needs to continue, India needs multi crorepatis to sustain. I feel end is near.. not many multi crorepati are left, that is why credit comes to play... RBI WILL cut rates, if not I will be watching fireworks from close up.

Anonymous said...

//RBI WILL cut rates, if not I will be watching fireworks from close up.//

They already have. Prepare for inflation.

REBear said...

@Anonymous at 2:26 PM

EMI will NEVER be in sync with Rent... NEVER.

They HAVE been before. In year 1999, our family stayed in a rented floor in Kanpur city and used to pay 2500/- as rent. The upper floor was rented for 3000/- and there was a single room on terrace and it was rented for 1000/-. Total rent for the house = 3000 + 2500 + 1000 = 6500/-. In year 2001 we purchased an apartment in Kanpur city. Our landlord was continuously persuading us to instead purchase the same house we rented for Rs 10 Lacs which we denied as we preferred to stay in an apartment with power backup and better location. He kept on persuading and even offered a deal for Rs 8 Lacs as he felt we were very "nice" tenants. He also tried to argue that we are spending 7.5 Lacs to buy 2 BHK apartment and for 8 Lacs we are getting a full duplex house where we might rent one of the floors and get rental income.

Calculate the Price/Rent ratio yourself and compare it with the data we have today !

Pawan said...

The property is actually put to productive use by tenants

That's one side of the argument. By that logic, Gold should be given on rent to women when they want to wear it and the price should be some multiple of rent.

Let's just accept there are things we can not understand. There was an article I once read which stated that 95% of the women you meet are not interested in dating (anyone and at that point in time). You may argue that you are rich and handsome but that doesn't cut it. Explain it to me logically.

Anonymous said...

do you think inflation is high in India now... think 2 times of that - Diesel prices may increase !!

http://timesofindia.indiatimes.com/india/Govts-in-principle-nod-to-free-diesel-prices-evokes-criticism/articleshow/12853384.cms

yes, finally no more socialistic attitudes.

Kulbir said...

Real estate is an economic asset therefore at least as an investor you cannot ignore yields. People who buy multiple homes need to consider yields as real estate is not the only asset in the world where you can put your hard earned money, there are many other avenues available for putting good use to your money.
As for commercial properties considering yields is an absolute must as commercial real estate is an investment asset.
What i feel there is going to be massive oversupply situation in all kind of real estate. I personally do not know anyone who does not have his or her own house but i know lot of people who own multiple properties. I read an article recently that there are 6.19 lakh empty homes in Haryana, a state with population of 2.3 crore.
People tend to get emotionally attached to real estate and forget all the valuation consideration. I still feel if you do not own a home then you must buy one but for a investor there are better opportunities available, you just need to search them.
By the way when did you start comparing logic applicable for women with real estate it show how attached you are to your real estate and using strange logic to justify high real estate prices. I love my girl and family not my investments. Thanks.
Haryana empty homes article, read for self. http://www.tribuneindia.com/2012/20120404/haryana.htm

AnonymousLulz said...

Meanwhile the banks are readying their bailout -

http://www.moneycontrol.com/news/business/banks-to-restructure-rs-2-lakh-cr-loans-by-end-fy13-crisil_696414.html#toptag

Capitalize rewards/profits, socialize risks/losses
A page from the book of Goldman Sachs, Uncle Ben Bernanke, Hank Paulson and Timmy Geitner.

Anonymous said...

Go back to sleep India. Government is in control. Here watch some chickni chameeli and cricket and STFU. You're free to do what we tell you to do.

You're a free man!

polt said...

Kulbir, thanks for the Tribune link.

I agree the data is just for one state, but it should help stop the argument used by the RE bulls about high population and housing shortage. More so since the vacancy is highest in Gurgaon - home to the 'high-earning' IT/BT crowd.

The population desnity of the Punjab, haryana, Delhi, UP corridor is higher than the the countrywide average.

I have made the point before about how statements about 'demand' should be qualified with a 'price'. Demand yes, but at what price ?

The commonly used metrics - price/income, price/rent and housing inventory - all indicate that housing in India is over valued.

Pawan said...

The commonly used metrics - price/income, price/rent and housing inventory - all indicate that housing in India is over valued.

I would again say that we must look for counter arguments. Data points, logic etc that disprove what we believe. If RE is booming, there has to be a reason.

Let us look at rent/income. In Gurgaon, anyone paying 20K as rent has a take home of 100K i.e., 20% of post-tax salary as rent. But in California I know friends who pay 35-40% of their take home as rent.

We may reach a state where monthly rents become very close to EMIs but that will happen because rents will go up (substantially*) and not because EMIs will come down (substantially*).
(Substantially for me means anything above 20%. 20% crash can come any day.)

Kuldip mentioned that there are so many investment avenues possible. I would like to hear of them.

I quote from an article posted earlier (link: http://in.finance.yahoo.com/blogs/economaniac/rapidly-deteriorating-fiscal-situation-061046988.html)
The often stated problem is that money-printing at this level will stoke inflation. Effectively, to fund a deficit of 600,000 crores, the RBI might need to print 200,000 crores. That is an increase of nearly 15% in our money supply, and if you add another 10-12% from other ways, we'll be expanding money supply by one-fourth every year, a sure shot recipe for higher prices as the money chases the same goods.

At 25% expansion in money supply a year, in 3 years your money's worth would be half. And RE, Gold or whatever rupee denominated assets look expensive today will begin to look very reasonable.

This govt. still has another 2 years and I don't see anything changing till then.

Anonymous said...

Let us look at rent/income. In Gurgaon, anyone paying 20K as rent has a take home of 100K i.e., 20% of post-tax salary as rent.

This is likely because of oversupply (as the article indicates). Oversupply usually means that prices will fall or stagnate till inflation catches up.
Polt.

Anonymous said...

test

Anonymous said...

The commonly used metrics - price/income, price/rent and housing inventory - all indicate that housing in India is over valued.

Price/corruption metric is what governs the real estate market in India. Higher prices are indicating the higher levels of corruption in RE.

Politicians, IAS and defence officers, private business and corporate honchos, mafia dons are all in the game to slice of their piece of pie. If I were to hazard a guess, in the major cities roughly 50-80% of the retail price is already baked in before the first brick is even layed.

To understand this first hand, try to acquire land then try to get it zoned for multi-family residential use then you will quickly understand why "it's different" in India.

polt said...

>Higher prices are indicating the higher levels of corruption in RE.

I disagree. High ratios indicate expectation of high growth in income. Just as in stocks a high P/E ratio indicates high expectations of future growth (FB has a P/E of 100, Apple has a P/E of about 17 because folks expect FB to grow much faster and eventually justify the high P/E).

In the same way home prices in India had baked in expectations of high growth in GDP and personal income. Clearly it is unreasonable to expect 15% salary hikes and high growth for ever. But it seems people expected it and pushed up asset prices as a result.
We are not different. We too thought (like the westerners did) that homes are a one-way ticket to prosperity.

But now in the earnings season, you can see the muted reports. Infy, Wipro, etc. Their stocks are lower, expect cost cuts and wage growth to be lower as well. Judging by the NPA's at Indian banks, the non-IT industry is struggling too.

The stock markets and the RE prices are in for an interesting ride.

skeptic's ghost said...

@Polt - ready to use land and resources are scarce in India.

Even in my ancestral village my family farm is selling at 30 lakhs to the acre (~60k US$ per acre 1.5$ / sq feet) Here the price appreciation has come with baked in expectation of growth in Farm produce price due to inflation.
Guess what,the same bankers who lend to homebuyers in city have lent to farmers with the land as collateral and a steep fall in rural land prices will mean more bailouts and writeoffs for the banks which has to be backed by tax payers or by the budget deficit spending.

All I am saying is that the deflationary event has to apply to all sectors in India for prices to fall. And with Central Bankers in Control - they will never let that happen.
Even if it does, there will be a premium to pay for land in India (like there is in Europe) - unless there is a war/civil war or some crazy catastrophe.

BTW In Arizona & New Mexico where I live I can get an acre in the woods for under 20k$ (even lesser)

Anonymous said...

Every Indian should read and sign this petition:

http://moneylife.in/article/president-pratibha-patils-palatial-home-in-pune-many-unanswered-questions/25181.html

With tens of thousands of veterans and soldiers families living in pitiful conditions and the nation running an alarming deficit, the supereme commander in charge of the nations security should be ashamed at her extravagance. Our government servants need to be bitch slapped out of their self-delusions of grandeur and royalty.

I've always maintained that the only thing that is keeping the lid on this sham of a democracy is the Indian army's tradition of being subservient to the corrupt politicians. Otherwise, our political establishment is not that different from Pakistan.

Unfortunately, with today's brainwashing by the media even if a hero like Mangal Pandey were to emerge he will be made to look like a terrorist not unlike what has been done to the naxals.

skeptic's ghost said...

Whats signing petition going to do if people dont go and vote - many here will simply enjoy election day as a vacation day.

We get what we deserve.

Anonymous said...

//Let us look at rent/income. In Gurgaon, anyone paying 20K as rent has a take home of 100K i.e., 20% of post-tax salary as rent.//

Wow, I know a lot of people who pay up that rent, even higher. $2000/month salary seems a bit too high for India, but then again, disparity in third world (and USA for odd reasons) always surprise me.

//Whats signing petition going to do if people dont go and vote - many here will simply enjoy election day as a vacation day.//

I don't vote because we have a First Past the Post (FPTP) system. People with only 20% votes end up being the representative of 80% people who actually voted against them. Colossal level of herp-derp business here.
I think if we had alternative voting we'd see more turn around (for good or worse, I don't know).

Anonymous said...

@Skeptic - "ready to use land and resources are scarce in India. "

We would not have a overhang of empty homes if that were the case. Gurgaon, despite its rapidly growing population, has almost 20% vacancy rates. One in five homes!!

The land scarcity argument has been used to justify bubbles, most famously in 'small island nation' Japan, and now in Australia. So far it has not held up. And the data in the Tribune article (if true) indicates that the argument does not hold water here either.

Polt.

Abhijit said...

Please find below article where HSBC has started laying off people


http://timesofindia.indiatimes.com/city/hyderabad/HSBC-axes-200-employees-from-Hyderabad-offices-350-in-Pune/articleshow/12874894.cms

Anonymous said...

http://www.business-standard.com/india/news/web-analysis-bad-debts-return-to-haunt-banks/163726/on

Anonymous said...

In much of India the surge in prices and the builder confidence in maintaining these high prices is backed up by strong demand from the IT crowd. If and when Indian IT industry experiences a significant downturn then we can expect prices to come down in a meaningful manner and make RE reachable for the average salaried worker who's income and bonus is not linked to USD or Euro earnings.

Mumbai and Delhi may be exceptions as they have alternate sources of buyers from the finance and political realm.

Anonymous said...

black money and fake money discussion have been many time on this forum... India has it's own way of boosting economy by fake money... this fake money translates to black money easily and that drives up economy.

Yes - India is faking and shinning and ofcourse economy is growing, RE is up and up !

http://www.thehindu.com/opinion/editorial/article3353733.ece

Anonymous said...

//-- Please find below article where HSBC has started laying off people --//

And on the other hand, Unilever hiked the salary by 8.5%

aam aadmi said...

HSBC laying off people

Hedge funds and Investment Banks are over-leveraged not just technically but in the society as well. IMO they are just glorified gamblers.

And I am saying this knowing that there's a place for gamblers also but this sector has just exploded in recent years without any rhyme or reason, they create nothing of value for the society, most of their jobs if not all can be done away with and Financing can go back to the traditional retail banks.

They will shrink back to their historical levels which back in the 70's amounted to a broker taking up a second job to feed his/her family.

DingDing said...

"retail banks"

interesting how financial language has evolved, Oxymorons are now part and parcel of the language

Wish banks were just "BANKS" and not shops that they are today !

Shaily Jain said...

If anybody looking to buy a house or invest in real estate anywhere in india, Please forward your query to shaily.s.jain@gmail.com

Anonymous said...

//If anybody looking to buy a house or invest in real estate anywhere in india, Please forward your query to //

lol, I doubt that you will find any here.

aam aadmi said...

Spain reporting 25% unemployment.
http://www.aljazeera.com/news/europe/2012/04/20124278531872704.html

Of course house prices will continue to rise and Aliens will keep buying iPads.

Getafix said...

http://ibnlive.in.com/news/7-reasons-why-indias-economy-wont-collapse/252709-7.html

If I go to the doctor for flu, and he starts off by saying, "Well first of all let me give you 7 reasons why you won't die", should I be concerned???

Anonymous said...

@aam admi,

But dont you see. We are different. We will have double digit salary hikes for ever. 8% growth in GDP is virtually guaranteed. Home prices will double every five years :)

Anonymous said...

Hey guys, a question: Has the IT crowd in India ever witnessed a downward trend in their salary? 8% cuts instead of hike?

Anonymous said...

//-- Getafix said...
http://ibnlive.in.com/news/7-reasons-why-indias-economy-wont-collapse/252709-7.html -- //

"Jonathan Anderson of Emerging Advisors Group"

Sounds legit.

aam aadmi said...

@Anon at 12:33
We had a 10% cut in 2009. They also introduced a system of variable pay back then which resulted in a loss of 1-2% loss for the majority of employees and this was on top of mass layoffs and forcing some employees to work only 3 days a week for 60% of the salary.

Many other companies followed suit.
Needless to say I left that place when good times returned. But yes when things go bad they do so in a hurry. Infosys has already put a hike freeze. Though other comapnies are giving small hikes.

The way I see this is that growth is now a zero sum game, there will be winners and losers but there is no rising tide. IT companies are vying for a fixed pie of contracts.

Unknown said...

" Out of all the debates , i would like to understand as a layman a simple economic outcome .. when a house cost is 1 cr and its rent is 20 thousand rs ( which i give ) and the same asset can give the owner around 75 g's , what is his smart math behind this ( if any ) ???

Pawan said...

i would like to understand as a layman a simple economic outcome

Inflation.

Anonymous said...

Indians are in a major denial mode. The RE is massively overpriced and highly unsustainable. For those people talking about supply and demand and other economic theories, I would like to ask what happens when "Supply increases and Demand decreases". This is what is coming. Many Indians are going to be caught offguard when the freefall starts.


All the growth story is fake based on borrowed money. Lately media has been saying that the "I" in BRICs is going to be replaced by Indonesia. That would be a big shame. Austerity would really hurt Indians as now they are used to RE worth crores and very high salaries.

Diesel is going to be deregulated soon, all the diesel car owners are going to get a spanking.

Anonymous said...

what is his smart math behind this ( if any )

There is no math. Gold, diamonds and RE are convenient channels for black money.

When you have a spigot gushing water on demand you wouldn't be wasting your time trying to capture a few drops of rain!

Put yourself in the shoes of someone who is trying to hide the gains from a criminal enterprise (i.e. black money) The last thing you want is any connection/trace to this money which would lead the authorities to this wealth. Trying to "invest" this money for fear of losing out on some interest income is the least of your concerns.

After 9/11 the underground money money transfer network is almost extinct as all western countries are co-operating with interpol, FBI etc. to monitor these transactions as they enter/exit their banking systems since the same criminal networks are being used by terrorists.

So where do you park your "hard earned" wealth?

aam aadmi said...

I don't know when will this black money myth die, yes black money exists and so does massive corruption but it cannot exist without 9% GDP growth.

It's the economic growth though western-Indian wage arbitrage that is allowing money from the west to flow in here and bid up the prices.

Without it there is no dalal street, no silicon valley and no immigrants who make all these cities what they are. Without it we go back to the 70's and a stagnant economy. Corruption exists in Central African states as well and on a much more massive level but there ain't no Housing bubble there. Black money is a symptom not the cause.

Anonymous said...

Mango Man,
Very well said. Black money is the symptom and not he cause. One also need to understand that Bl.Mo. in India has been for ages and we never saw this kind of insanity.

One should also look at from where is the money coming be it black or white? Is it just GDP?

I think that the stolen black money peopl emade during this mess would evaporate. Easy come easy go.

aam aadmi said...

One should also look at from where is the money coming be it black or white? Is it just GDP?

Most of it is through land dealings, think of the politicians and babus as the intermediaries who sell the country's land to the MNC's and the emerging middle class. Since such staggering amount of money has flown in since liberalization black money has also taken off correspondingly.

It's the same everywhere, China, Brazil, just that Indians are very inefficient, while maybe 10% of the money ends up in swiss bank in China, here the factor is 60%, and what is the rest 40% spent on, not on improving healthcare and education, but on building temples and buying fancy gadgets.

For the last two days some temple dedication ceremony has been going on in my locality, some politician has build two large temples in the span of two years and arranged a free feast for the people and all this when the ward lacks basic garbage disposal, roads are a shit and the local healthcare center lies in tatters.

But there are no complaints, people are happy, they are praying to god for better infrastructure.

Anonymous said...

Regarding my previous post on 12:05, I'm pleased to report that people power has prevailed. Congrats to everyone who stood up to the highest office in the land and shamed the president into giving up her unethical behavior for now atleast.

This incident was a good example of democracy in action, it requires constant vigilance from the member citizens.

Anonymous said...

// It's the economic growth though western-Indian wage arbitrage that is allowing money from the west to flow in here and bid up the prices. //

Spot on. Probably the best point in this thread.

Anonymous said...

// It's the economic growth though western-Indian wage arbitrage that is allowing money from the west to flow in here and bid up the prices. //

Spot on. Probably the best point in this thread.

Anonymous said...

http://www.rediff.com/news/special/of-mamata-and-mati-special/20120425.htm

Confuse the symptom and cause at your own peril. Fund managers are increasing exposure in realty and floating RE specific funds since they have assurances from the political establishment that this party will continue. Otherwise, what sane person would invest in the most opaque form of investment in the country! So it's definitely a positive feedback loop but foreign money entering the Indian real estate sector seeking an outsized return is NOT the prime driver.

The prime driver is black money / corruption where state owned land and resources are being given away at dirt cheap prices. The politican pockets the difference. With this illegal money the politician "buys" more influence, becomes even more "powerful" and the same cycle repeats. This is the positive feedback loop that is driving India's "growth" and encouraging the building / infrastructure boom since all individuals in the food chain make a guaranteed profit (except the country as a whole becomes poorer)

This is not unlike the sheikhs in the ME selling their countries natural resources and pocketing the profits for themselves.

For specifics you have to painfully dig into the details of how land acquisition is performed for any project (public or private) You'd be shocked at how cheap the land is offered to corporations and developers by the government. Unfortunately, this is not only time consuming but near impossible given the opaque system of land records, titles, poor recordkeeping etc. This is why only the 0.1% most egregious abuses ever get any sustained scrutiny (example HCC with Lavasa, Satyam with Maytas, Ansals with Dadri wetlands etc.)

Point is, there are thousands of these transactions happening unchallenged all across the country.

http://www.business-standard.com/india/news/cag-raps-maharashtra-govt-for-shady-land-deals-that-resulted-in-heavy-losses/470188/

http://indiatoday.intoday.in/story/land-scams-pm-wants-transparent-policy-on-govt-land-deals/1/132531.html

Anonymous said...

BTW. above also explains why you pay 1st world retail prices for 3rd world services.

Government could be providing 1st world services if transactions were done transparently. Cities like Mumbai could be truly world class since land is so valuable and government owns (or used to own) bulk of it.

Since government is getting 3rd world rates for the land you are getting 3rd world infrastructure and services from the government. Worse, government is borrowing on your behalf to make up for the loss in revenue (i.e. deficit)

All this time, the finances of our "leaders" and industrial houses are going great guns. Go figure...

samix said...

This is not unlike the sheikhs in the ME selling their countries natural resources and pocketing the profits for themselves.

I think this is a mis-informed statement, though the sheikhs do sell the natural resources and pocket a lot of money, but the amount of money and wealth that they share with their citizens is unparalleled anywhere in the world.

If you come to any Middle East oil producing country, then you will see that every citizen lives like a king driving cars like bentleys, mercs, lexus, bmw etc. All have government provided accommodation in the form of villas and bungalows, it is a very different picture here.

World class health services are provided for free, and foreign education is free with a stipend for any citizen who wants to pursue further higher education. Roads and other public services are very very well kept, the country is properly landscaped.

In India our politicians sell the natural resources and do not spend a single penny on us or infrastructure or health care or education.

PS: I know this because I am an expatriate working in the gulf.

samix said...

On top of that there is no Income Tax for citizens or expatriates in the Middle East oil producing countries.

Anonymous said...

I think this is a mis-informed statement, though the sheikhs do sell the natural resources and pocket a lot of money, but the amount of money and wealth that they share with their citizens is unparalleled anywhere in the world

Yep, modern day Robin Hood's for sure.

If I could ask the eagle if he'd prefer to live in a golden cage and have a mouse fed to him daily OR fly free and take the risk of going hungry every now and then, I suppose in some parallel universe the eagle would choose the golden cage.

I think it should be abundantly clear by now that the proverbial golden cage is no good for people either. You can fool some of the people all of the time and I will concede that a majority of the people are easily duped.

The Arab spring should've made this abundantly clear including the uprising in one of the most affluent ME regions (Bahrain)

BTW. if this were the standard by which to judge your countries leaders/rulers, a vast majority of Indians could also conclude that their material lives have improved over the last 10-15 years. So I suppose we should just get back to "minding our own business"

One could argue that since, for a good period of time, Indian living conditions deteriorated after British left we should never have fought for our basic human rights. After all, more Indians were driving Rolls Royce's back during the days of the Raj than are currently!

Anyway, let's not derail the thread but if we are to assume the ME sheikhs are *relatively* more benevolent and good intentioned than our own politicians and leaders, I think we're screwed. Perhaps we can request the British and/or Arabs to come and conquer us again.

Anonymous said...

// Perhaps we can request the British and/or Arabs to come and conquer us again. //

Nah, they're too busy cleaning the mess in their own countries.

Anonymous said...

http://www.hindustantimes.com/News-Feed/BusinessRealEstate/BusinessRealEstate-LP-Lid.aspx

Now, realtors face interest mountain

Realty investors left holding their apartments as demand sinks

Pawan said...

Loan mountain! Big deal huh?
http://www.moneycontrol.com/news/business/lic-housing-fin-to-double-loan-amount-to-developersfy13_698263.html

And LIC money is your money btw. Stop them if you can.

«Oldest ‹Older   1 – 200 of 263   Newer› Newest»