Sunday, June 17, 2012

Home sales slump by more than 50% in Delhi, Mumbai areas

Article Link

While MMR reported the sharpest drop of around 58%, NCR slumped 57% from the year earlier. Bangalore witnessed a drop of 18% in sales, the report added.

Sales in NCR dropped to 15,104 units from 35,420 units and it fell to 11,473 units from 27,676 units in MMR.

The two regions saw a residential supply of 107,731 and 89,461, respectively, in the first quarter.

Samir Jasuja, founder and chief executive officer, PropEquity Analytics, said, “In the coming quarters, there would be strong pressure on many micro markets and we expect inventory overhang to increase and absorption could continue to slow down. Mumbai in MMR and Gurgaon in NCR have seen the sharpest falls in absorption.”

“If this trend continues, there could be a price correction of 5-20%, especially in the micro markets of NCR, MMR and Hyderabad,” he added.

Bangalore hasn’t been as badly hit because of demand from genuine homebuyers and end-users, apart from the fewer unsold properties.

Sales in the southern city fell 18% to 7,704 units from 9,410 units.

The other two markets are largely investor driven.
“Generally, investor-driven markets would see downward risks than end-user driven markets,” added Jasuja.

167 comments:

Anonymous said...

It seems the boom is running out of steam !!! I don't think RBI will be able to save to RE market this time, given the high inflation.

shailesh said...

Opposing view at,

Real estate recovering from the bottom

Anonymous said...

I've been a ardent reader of this blog. I am a NRI living in Middle East for the last 15 years and employed as a middle level manager in a oil company.

Off late lot of reports are appearing in Indian newspapers regarding the involvement of gulf based NRIs investing in mumbai real estate. A link to such report is given below.

http://www.mid-day.com/news/2012/jun/170612-NRIs-arent-letting-you-buy-a-home.htm

Nothing can be further than truth .

Even after the Indian Rupee slide, 1 crore rupees translates to UAE Dhs 600,000. The average earning of an Indian in gulf is Dhs 3000 per month. 5% of the people may be earning around 20,000 pm. In the second category, even after penny pinching people can hardly save 10,000 p.m. One crores works out to be 6 years savings. No NRI employee is fool to invest the money in a slum city like Mumbai.

On the other hand, there are lot of Indian businessmen/gangsters/relatives of politicians have made dubai as their second home and most are involved in money laundering. My guess is that the real estate investment is from these people.

There is no job/ residency guarantee in middle east and therefore NRIs role in real estate gambling is minimal, if at all they are involved

analog said...

@anon above - sadly the sentiment here though is that its NRIs and the credit that has created the bubble.

i am with you on this very much. in my briefest foray in the RE market, I was much surprised by the number of full cash transactions on residential land that happens in india.

another good indicator of this is to observe the number of resales in areas where there has been no appreciation in residential land in the last 3-4 hours (say vakil whispering woods or the upkar layouts in bangalore). if i held the land on loan and was paying exorbitant interest rates on these properties, i would be selling because its a loss making investment by a large margin. a majority of the residential land i suspect is bought with black money because the number of resales here are negligible (say 1 or 2 a month out of the 2000 odd plots which have been sold in these two layouts). there are no constructions here either as all owners are 'investors' though these layouts are around 10 years old.

analog said...

*3-4 years

aam aadmi said...

You know what are the classic signs of a bubble ?

When one economic group thinks that the other one is buying...

@Anon at 4:52...thanks for clearing that up.

polt said...

This story about NRIs holding up prices has been seen before.

1. 1980 California - 'Rich Japanese will keep buying'. End result - correction.
2. 2007 Spain - 'Rich north europeans will keep buying'. End result - correction.
3. 2011 Canada - 'Rich Chinese ...' End result - correction.
4. 2011 Australia - 'Rich Chinese ...'

2012 India - Rich NRIs ... :)
No prizes for guessing end result.

Anand said...

Correction to Anonymous 4:52

1. 50% of NRIs in gulf earn less than DH 1000 (cooks, drivers, casual laborers etc)

2, About 25% earn between DH 1000~DH5000

3. 20% earn between DH 5000-DH15000

4. 5% earn above 15000,

Vast majority of well to do NRIs are from the state of kerala. These guys invest in kerala, not in Mumbai

4. Highly qualified Indians do earn phenomenal salaries, but most save money and migrate to the west.

As anon said, I agree that laundered money is routed back to India and parked in real estate

analog said...

what is this nonsense about sales falling, this report shows otherwise.

http://www.asiapacific.joneslanglasalle.com/india/Gurgaon/June2012/Pulse_June_2012_India.pdf

now who do we believe?

Anonymous said...

// One crores works out to be 6 years savings. No NRI employee is fool to invest the money in a slum city like Mumbai.


Your assumption that people will make an all cash transaction is not correct. I know several NRIs who bought RE in mumbai and financed the purchase through loans. You can get cheaper loans in US. Moreover many credit card companies offer balance transfer options at 3% and no interest for 18 months.

Pawan said...

now who do we believe?
Believe the barber when he says you need a haircut.

Pawan said...

Read the venezualen car article. Immediately reminded of the days when people would book a scooter and get it five to ten years later and upon taking the delivery would sell it for profit. Also struck me that this is why ready to move properties are considerably expensive than the under construction ones. Same logic: don't want to wait, need it now - pay more.

Cut to today. Two wheeler market has matured beyond that nonsense. Housing will get there too. Obviously those who got a Scooter then went around proudly for a while. Let the RE `winners` enjoy their spoils till then

Anonymous said...

Your assumption that people will make an all cash transaction is not correct. I know several NRIs who bought RE in mumbai and financed the purchase through loans. You can get cheaper loans in US. Moreover many credit card companies offer balance transfer options at 3% and no interest for 18 months

Well. gulfies don't have this luxury as there is 0 job security and using credit cards to finance is a sure way to land in gulf jails. Even if one is a CEO of a company, he can be just kicked out if a local doesn't like him.

Anonymous said...

The participants on this blog are like blind men feeling the elephant.

Keep your views coming folks. It is going to be hilarious when good 'ol Subbu and his banking buddies bow to the will of the people (in power) and ensure their prized assets continue to climb ever higher.

Fact: Our dear leaders have their wealth tied up in real estate.

Fantasy: Our dear leaders will craft policies to ensure land and real estate prices collapse so they become within reach of common man.

Yes, eventually a correction may happen. But it will be a token and likely used by the well-connected to even seize more assets. There will hardly be any relief for the retail buyer / end user.

Anonymous said...

^ We know that fact. I don't believe government will do anything to prick the bubble but I also believe sometime government can do very little to stop a bubble from going burst.

Anonymous said...

Freshers joining dates delayed.
http://economictimes.indiatimes.com/news/news-by-industry/jobs/infosys-delays-joining-dates-for-engineers-hired-from-campuses-as-slowdown-bites/articleshow/14218262.cms

Slow lateral hiring
http://timesofindia.indiatimes.com/tech/news/software-services/Lateral-IT-hiring-grinds-to-a-halt/articleshow/14218123.cms

How is all this possible. Arent double digit hikes and plenty of jobs here a birthright :)

Anonymous said...

@Anon - 'and ensure their prized assets continue to climb ever higher.'

The Federal Reserve with all its might and the reserve currency of the world has not been able to prop up RE.
We have a currency that is being dumped. Create more of it and watch inflation shoot through the roof. Rs55/1$ will seem like a very desirable objective then.

samix said...

Reposting the comment here, so that we can take the discussion on this post

Kulbir, it is the fault of the RBI and the GOI to a large extent, because the person who controls the Interest Rates and the Money Supply controls the rates of everything.

The GOI and RBI under the current fiat money regime have a monopoly over money, whereby they are the only one's who can set the interest rates and the supply of rupees.

Secondly with policy decision the government and the RBI can easily create a bubble in any sector, like the tax rebates for real estate etc.

For example if the GOI and the RBI want to blow up a bubble in lets say toothbrushes, all they have to do is create a policy that rewards toothbrush manufactures immensely, give them tax breaks, customs duty breaks, cheap loans, be the buyer of last resort at exorbitant prices and thus a bubble is created for all to see.

Also you may have heard of the the plunge protection team in the US, which invests the governments money in the stock market when the markets are tanking buying up shares and holding the market, I have no doubts that India also has such a team. similarly in the recent dollar appreciation against the rupee the RBI was intervening in the forex market overtly.


Lets take the example of cars, a government can and has infact created a bubble in cars, that government is Venezuela!

Here is the BBC link, where OLD CARS are EXPENSIVE than NEW cars!

"A year ago my car cost me 54,000 bolivars (around $25,115) and I can already sell it for over 65,000 ($30,230)," says a happy Hernando Camacho, who drives a Renault Clio.

And in Venezuela people invest in cars for appreciation against inflation here!

Many Venezuelans view buying a car as a more secure investment than keeping their savings in a bank, where they can be eaten away by an inflation rate that hit 30.9% in 2008.

here is the link http://news.bbc.co.uk/2/hi/americas/8028865.stm

So kulbir, there is no limit to the absurdity that a government can cause in the markets with their policies and the central bank with their printing.

DingDing said...

Always ask "Cui Bono"

results will then be self-evident

DingDing said...

http://www.outlookindia.com/article.aspx?281278

Anonymous said...

^ comment on that post:
"THIS IS WHY PEOPLE WANT A CEO TYPE LEADER LIKE MODI"

lol

Anonymous said...

Can't buy a home in Mumbai? Blame the NRIs

http://www.ndtv.com/article/cities/can-t-buy-a-home-in-mumbai-blame-the-nris-232571

Pawan said...

No rate cuts.
http://www.firstpost.com/economy/rbi-holds-repo-rate-crr-flags-inflationary-fears-347277.html

If RBI was really `free` they would have hiked rates but nonetheless.

Anonymous said...

Finally. The RBI has some spine after all.

aam aadmi said...

A good decision by RBI, the best they could do at this point. Though I would have liked an interest rate hike by 100 points.

There's too much cheap credit in the system.

Pawan said...

There's too much cheap credit in the system.

More than that, savers are not getting just returns.

Bindas Bhai said...

Vik,

You have been predicting RE crash since 2007. I feel people following this blog has only lost.

RE cycle will end only in 2015 till then guys chill.

Kind regards,

Bindas Bhai

Kulbir said...

Hi Samix,
It is good to hear from you, I do agree with with you that govt. creates distortion and sometimes these distortions manifest themselves in form of bubbles.
But this does not mean they can control everything, all of us know how black markets thrived in certain industries before opening up in 1991. Black markets are direct challenge to and consequences of wrong headed govt, policies.
What I argue is where and when more freedom is given to entrepreneurial spirits of people prices do come down despite of money printing and some wrong policy actions.
There is no society or country where ideals of anarcho/libertarian economics are followed in their true sense but nor you get societies where Marxism/socialism is followed as their proponents would like what you get is mixture of these two.
I am realist not idealist. You cannot get govt. off your backs period.
That said real estate prices in India are unjustifiable, what I believe is bubbles are also market mechanism to correct such distortion. Historically also proper housing has been just pipe dream for millions of Indians what this real estate bubble is going to ultimately result in is lowering of real estate prices to the level where common man can afford real estate.
All these empty homes and commercial complexes are going to someday bring down the price when it does happens only God knows.
Thanks

aam aadmi said...

@Kulbir
Common man will never be afford housing, it's the nature of things. If housing collapses it will be accompanied by a recession and big job losses. Although many including me wish a rate hike, the truth is that without continuous credit the system will simply collapse.

The economic system is on life support, that is the truth of the matter. Which is why statements like housing boom will continue are immaterial, the ending is written in stone.

Anonymous said...

// RE cycle will end only in 2015 till then guys chill. //

and until 2015 RE prices will rise by another 50% to 100% ? Why is that? Economy is on full steam? India became productive country? Lord Rama showered free money to everyone?

Please post your analysis, even if it is stupid. No one will judge you... but making blanket statement is like throwing a fluke.

aam aadmi said...

http://timesofindia.indiatimes.com/india/UP-government-orders-all-malls-shops-to-shut-at-7pm/articleshow/14217961.cms

In case you were wondering, the order is due to shortage of electricity...

http://indiatoday.intoday.in/story/delhiites-reel-under-an-acute-water-crisis/1/200424.html

Haryana has cut water supply to Delhi to feed their own citizens...

This is what real collapse looks like, not some event as shown in the movie 2012...however as many believe RE can only go up of course...buy a house for 1cr then burn diesel for electricity and import water through tankers, what could be wrong with this picture

Pawan said...

http://www.firstpost.com/economy/after-sp-fitch-revises-indias-outlook-to-negative-on-policy-logjams-347931.html.

When it rains, it pours.

Kulbir said...

Hi Aam Adami,
One thing I have learnt in investing is "Never say Never". There was time when common man was unable to afford telephone connection let alone mobile phones scooters were considered luxury and car were meant for kings only. Today the world has changed human enterprise and innovation have made these things common place.
"Hope is eternal" I strongly believe that this bubble is going to lead to correction in real estate prices to where common man will be able to afford, at least rents are not rising as fast as real estate prices which is helping the man on the street.
For those who feel this bubble will never pop, I will like to repeat my words "Never say Never"
Thanks

KSM said...

Kudos to Subbarao

RBI Governor D.Subbarao comes to party. Even though he comes late he came latest. Inspite of all the pressures from Government, Corporate Mafia and media brokers he held his fort like a man possessed. This gives us a comfort that atleast somebody is thinking long term for the betterment of country. As I wrote earlier, he was a worried man after last month mis adventure and he is now trying to make amends.

Inspite of Pranab Mukherjee's pressure, he handsomely declined to cut the rates. In fact the brokers and mafia should thank their stars for Subbarao not to raise the interest rates. Such is the state of economy that cutting rates is idiotic.

SBI and Its Chairman

Like a cheap road side fellow, SBI was trying a cheap trick last week. They claimed to cut rates from 0.5 to 3.5 for some sectors which no one heard of. They also said that they will cut further if RBI cuts CRR. They claim the SBI interest rate cut was not applied to retail. Some sections of SME and Agriculture was the beneficiary. As a ex-banker we know already the agriculture loan normal rate id 7-8 and below. Did they cut to 4% now? Whom they are trying to fool. Subbarao ignored these cheap tactics. Many know that this cheap trick is to induce RBI to cut rates and then swallow the interest into their balance sheets. I wonder why SBI forgot it social objectives and competing with blood suckers like HDFC and ICICI?

Godrej Comedian

This guy who could not come up with any reason for rate cut in CNBC today. But repeatedly telling that we need to cut rates. Now he started saying we need to cut CRR. Until last month he was talking about Repo. Now he was taking about CRR. Somebody might have told him that SBI is begging RBI for CRR cut. So he also started like a tape recorder. We know he forayed into real estate and he wants that bubble to be inflated further until he sells all his assets. Poor guy.

Tale of Core-Inflation

Media brokers and Corporate mafia found and coined a new term called core-inflation. I really dont understand these guys. Are they really idiots or acting like one? we need to know this. When RBI says people are suffering from Inflation, these idiots are telling core-inflation is reducing. Core-inflation means manufactured goods inflation. Am I buying heavy machineries to my home every month? I buy groceries damn it.

What policy paralysis

Until now, our fuel prices are regularised. We were not facing issues. Why now? suddenly all are talking about policy paralysis. If the govt allows FDI in retail and FDI in aviation do you think our economy will improve? No. Mallya's financial condition only will improve.

Attack Real Estate

For real growth to return, we need to prick the real estate bubble.

KSM said...

www.ksmfinanceindia.blogspot.com

Anonymous said...

http://finance.yahoo.com/news/china-home-prices-fall-more-080802163.html

We are next. No escaping it. My guess would be that the tier-2 cities in India are probably seeing a correction already. Its just the opaqueness of the market here that prevents clarity in price information.

aam aadmi said...

@Kulbir
You have a point but there is problem in simply extrapolating historical trends...a phone connection is not the same as a house.

Experience from 5000 years of human history suggests that housing or in olden days land price collapses are always accompanied by an economic depression. See land/housing behaves much like gold, it's not just a consumption item, it's a store of value and power.

aam aadmi said...

Contd...
Housing prices almost always correlate 1 on 1 with stock indexes, it's not the same with mobile phones, TV or scooters.

analog said...

>> Housing prices almost always correlate 1 on 1 with stock indexes

with some damping and latency

ShoutLoudest said...

This blog is full o f losers.. Fools who missed the bus and now envious that those who dared have earned rich rewards (double triple the investment).. Everyone in this forum keeps on yelling WOLF..WOLF.. desperately hoping that the proverbial WOLF (RE bubble prick) appear from some where..

Guys.. Get a life.. Invest in RE...

Lost_To_Bubble said...

Are we really in Bubble? I have been holding my purchase since long ( 3 years and still counting....)...talking of Pune (Hinjewadi; Baner; IT crowd areas)

1. If you are earning 20L per year (gross); you are eligible to get loan upto 1 cr.

2. With both husband and wife working in IT; is 20L gross per year a big deal?

3. May be not everyone is earning 20L; how about 10L? Then you can get loan upto 50 lakhs.

If the banks are promoting this; why do you think there is a reason to bring down house prices? Do you really think that IT sector would dwindle?

Lets say hypothetically; magically prices fall to such levels that you get 2BHK for 30L; 3 BHK or 45L? What do you think; within how much time they would gone? Within minutes?

I guess I have missed the bus big time now...I could have paid 60L 3 years back or a 3 bed; now same is priced at 1cr..

skeptic's ghost said...

@ShoutLoudest
@Lost to Bubble

I have been frequent poster and visitor since 2006 here and I bought my home in Pune during mid -end 2009 slump. Today my home loan is almost paid off (only owe 15 lakh)

Ive always been saying that prices wont correct in INR terms in good neighborhoods (for housing).

You should have done your analysis instead of blindly believing what people write here.

Till 2008-09 people were hoping that prices will fall to pre bubble 2005 levels - that actually happened if you look at property prices in ounces of gold

Example 2006 1 tola (1/3 oz) gold was approx 10k 12k INR.
Today its 30k INR
If property was 2500 per sqft in Pune West Area - today it is mostly between 3 times that price.
Indian banks do not lend recklessly - so if you needed home to live (an not invest) you shouldnt wait. Most people here are also speculators, investors, those looking to preserve their "wealth"

However if buying - make sure you dont compromise on quality and location (you can compromise on sq ft and amenities) - and make sure you buy and live in it - else renting home in India is losing proposition unless you want to park black money or want to do social service by paying 3 times rent as EMI.

skeptic's ghost said...

PS - my last comments to buy do not apply to Mumbai -

If I were living in Mumabai and could not relocate - I would rent for cheap, and buy a holiday home for weekends in Alibaug by the beach or Lonavala/Khopoli by the hills.

Anonymous said...

There is a faulty premise that housing in major cities will get to the point where the common man can afford.

Land in major cities is too valuable for property developers to cater to middle class. Most apartments are being built with amenities traditionally affordable only by upper-middle / rich folks (premium fittings, clubhouses, gym, swimming pool, concierge etc.)

Very few projects cater to middle class and these are usually in fringe areas/villages where few would prefer to live.

We need affirmative action in property development and allocation, not unlike the Adarsh housing scheme but without the corruption if middle class is to realize it's dream of property ownership.

AnonymousLulz said...

@Above Anon

We already have that in the form of DDA, CIDCO, HUDCO, MHB MHADA KHB etc.
Each have affirmative action quota for SC/ST/OBC/Minorities

Problem is that they take decades to build a unit. Private builders can build 9 storey complex in 1 year.
Also state dev authority schemes are rife with speculation - people will put in as many applications to increase their chance of allotment in lottery.

What are you smoking? Socialism doesnt work.

Anonymous said...

What are you smoking? Socialism doesnt work.

Yep, affordable shelter is not a human right.

You should have lots of money to qualify for the privilege of owning your house.

Rest can rent or live rent-free (under a bridge) This is probably the real reason India needs more flyovers! LOL

Bindas Bhai said...

Anon 3:55AM

RE cycle in India is typically 10 years cycle and hence I made this statement.

Some of you guys are predicting for last 5 to 6 years about RE crashing and we all know where this statement stands. I can understand that you have missed the bus but let me assure you that if you are an actual user having the capacity to pay the EMI and yet live a decent life then I would suggest you to go for it, you will never loose in RE especially in a country like India.

If you want any of my analysis kindly go thru my posting in 2008/09

All the best guys.


Bindas Bhai

Anonymous said...

// If you are earning 20L per year (gross); you are eligible to get loan upto 1 cr.

Me and my wife are working in IT in bangalore for last 8 yrs. Both of us make 20 lakhs together. Our combined income after taxes comes to 1 lakh per month. But expense are so high that after living a normal life with a couple of vacations per year, we have very little to show for savings. After 8 yrs we can barely put 20% down on a 1 cr flat. Constantly worrying about job security and no retirement savings. I always wonder how other couples manage. Coming to think of it 1 lakhs per month in a city like bangalore is not much.

polt said...

>Housing prices almost always correlate 1 on 1 with stock indexes

Wrong. Across the world, wherever long term data (75-100years) is available, housing prices have risen at inflation plus maybe 1%. Equity markets on the other hand have returned inflation + 5%.
Do not be biased by 10-15 year data.

You may think there is not much difference between 1% and 5%. But there is a huge diff. Compounded over 40 years (average working life), 1Rs at 1% growth becomes 1.48Rs . 1Rs at 5% becomes 7Rs.

All this talk about 'missing the bus' is just rubbish spruiker talk. Be patient. All bubbles end. Always. There has NEVER been an exception in history.

If you think this is not a bubble, thats fine too. Go ahead and pick an affordable house. There still are plenty of options for what we 'need'. What we 'want/desire' is a different question altogether.

Pawan said...

Who has the most Gold in the world?

http://www.cnbc.com/id/33242464/?slide=1

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/home-sales-drop-as-property-prices-rise-faster-than-salaries/articleshow/14252779.cms

Pawan said...

Coming to think of it 1 lakhs per month in a city like bangalore is not much.

The OP meant that if you earn a lakh per month and live like a beggar for 5-10 years you may be able to buy a house and feel rich thereafter. India is a land of sacrifices.

Anonymous said...

http://www.greaterfool.ca/2012/06/18/demand-hoods/

Exact same thing in Canada as here. Sales are falling, but prices (due to previous momentum) still rising.

We are not different ! Our ending will be similar

aam aadmi said...

@polt
Wrong. Across the world, wherever long term data (75-100years) is available, housing prices have risen at inflation plus maybe 1%. Equity markets on the other hand have returned inflation + 5%.
Do not be biased by 10-15 year data.


Yes you are right, over a 100 year period stocks trump housing but they are still correlated to a large extent, it's hardly ever the case for a reasonable period (say 4-5 years) that stocks are falling and housing is going up or vice versa.

Coming to this missing the bus thing, it's all balderdash, as I like to tell my colleagues who keep talking about the increase in perceived wealth. I tell them that unless they have sold their 3bhk and moved into a 1bhk they haven't maid a penny on that house.

Anonymous said...

When it rain, it pours indeed ! . The bad news continues.

Automakers stop production. Currently its just for a few days, but if the slump continues expect more such shutdowns. Ancillary companies supplying components will also be badly hit.

http://timesofindia.indiatimes.com/business/india-business/Auto-companies-stop-production-as-demand-slump-continues/articleshow/14268873.cms

GSM said...

Fools who missed the bus and now envious that those who dared have earned rich rewards (double triple the investment)

No one misses the bus, the bus will always come back to the same stop after a round trip. You just have to wait patiently for it to return. If you are restless, you will pay what the rickshawala demands and reach the destination. By getting into a rickshaw you can get robbed during the journey :-)

Getafix said...

For the idiots who keep saying "missed the bus", what bus are you talking about?
Do you guys realize that for some people there could be moral or ethical reasons to be not part of a scam?
Or that some people are smart of enough to buy stuff based on fundamentals and not because every one and his brother-in-law is going ahead and doing so.
Lemmings have a great herd mentality and we all know where they end up. At the bottom of the cliff. (Answer provided for the benefit of the members of the "missed the bus" brigade).

Anonymous said...

"No one misses the bus, the bus will always come back to the same stop after a round trip. You just have to wait patiently for it to return. If you are restless, you will pay what the rickshawala demands and reach the destination. By getting into a rickshaw you can get robbed during the journey :-)"

Hahaha well said and so true!

and if you can walk in the opposite direction until you get your bus you can also expect it to be less crowded (MORE COMFORTABLE)

Patience is a virtue and that is why i am HAPPILY renting

Let prices go 100,200,300,400,500%

I DONT CARE!

I will rent until i can afford + save

BUYING == PAIN
RENTING = HAPPINESS!

INDIAN MENTALITY = @#$^ :)

skeptic's ghost said...

How can you be happily renting if your landlord kicks you out every 2-3 years?

How can you raise a family moving around all the time unless you don't care for them?

Home ownership is not merely an investment - many here keep saying that owning home only has to do with the value of the property - that only says how greedy and moneyminded you are.
As someone said previously on this blog - India has a housing bubble not a home bubble.

Anonymous said...

@skeptic's ghost
Agree that housing is not just an investment, and yes buying has its benefits.
But at current prices, it just seems risky. Besides, with an uncertain economy and sky-high interest rates, the risks are higher. Even a few months of unemployment could put a home buyer in serious trouble. Esp if they have a car EMI, school fees to pay, etc.
In such situations, renting offers more flexibility.

Pawan said...

How can you raise a family moving around all the time unless you don't care for them?

How can you project your own insecurities on everyone?

aam aadmi said...

How can you raise a family moving around all the time unless you don't care for them?

You are making too big a deal out of it...people move all the time, my dad had a transferable govt job, I never suffered any trauma in childhood :) and we are talking about moving within the same city here.

In retrospect it taught me to live with an open mind and few possessions.

On a separate note here's a news item that's worth a mention

http://www.moneycontrol.com/news/cnbc-tv18-comments/puravankara-to-lure-nris-opens-officesaudi-arabia_719918.html

The link says it all. Signs of desperation for sure.

Anonymous said...

No one misses the bus, the bus will always come back to the same stop after a round trip. You just have to wait patiently for it to return. If you are restless, you will pay what the rickshawala demands and reach the destination. By getting into a rickshaw you can get robbed during the journey :-)

In the meantime, watch as others zoom by in their rickshaws.

Yes there is risk of getting robbed (i.e. overpaying, facing foreclosure due to job loss etc.) but there is risk of bus not arriving until the next day when it may be too late (i.e. you die, your kids grow up without a permanent place to call home etc.)


In other words there can be no blanket advice given to the end user as it varies according to individual circumstance.

Remember, if you need housing to build a home, do your homework ( pun intended) and go for it. Life will not wait and to paraphrase a famous quote, Markets can remain irrational longer than you can remain solvent.

The housing market in India has certainly tested the patience of bubble watchers and no one can give you a specific date when this trend will reverse.

If you want RE for speculation/investment then it's a whole different set of considerations.

Anonymous said...

An Indian solution to Indian problem.

Ask for property in dowry like quite a few co-workers did.

If you already have property then ask for luxury car etc.

Anonymous said...

WTF is wrong here. Living in America for 25 years, 2 Masters Degree, Family, 2 kids, 1 in Ivy League College, 1 in private school. Mid Level Manager in Fortune 500 company steady employment with decent pay and living in a city with low cost of living expense. Yet near broke, Net worth ablut 2 cr. Cant even think of going to India. Feel like a beggar. Should I just count my blessings?

skeptic's ghost said...

You are making too big a deal out of it...people move all the time, my dad had a transferable govt job, I never suffered any trauma in childhood :) and we are talking about moving within the same city here.

Government job means lifelong job/pension security.
Most first time home buyers from salaried class today are either working in todays sectors (IT/Software/Electronics/Pharma/high end manufacturing/Automobile/Management/BPO/KPO/Education).

These people (me included) have been systematically priced out of the market - not by NRI's but mostly by speculators/brokers and investment buyers who buy up units even before launch of schemes.

If policy makers wanted to clean up the mess (China already started doing this) - they need to make sure investors that dont live in the property and just park money are penalized by high taxes and higher maintenance costs.
Also builders should be forced to prefer to sell to actual end users and not speculators.

However that becomes borderline dictatorial (hence being successfully done in China).

The other solution is to ease zoning and create many freeways/public transit connects/ public amenities to outskirts of 8 major metros and allow maximum possible incentive to de-congest big cities like Mumbai/Kolkatta.

The third option is to subsidize housing for weaker segments using non existing tax money.

In either cases the government needs to step up. Sadly politicians view land as cash cow which they will sacrifice one piece at a time. So do big developers who have hoarded tracts and tracts of housing land.
=Talk to your legislator/corporator or distric collector and try to find a solution and see if it can be done without bribing to eternity.

Anonymous said...

Should I just count my blessings?



Wait till US reinflates its bubble and you will find yourself 3 times richer than now. In the meantime Indian bubble is bursting and Indians will find themselves poorer each year now by 10% every year for the next 10 years.

If you want to move to India, rent. Do not buy. Don't feel like a beggar. Your net worth doesn't define you. You are what you are and enjoy your family instead of getting into the rat race.

I live in DC area and feel blessed with what it is. DOn't worry about things that are beyond your
control. All my net worth is my earnings and in India net worth is all speculative money and not
earned money. People cannot buy back their own houses today if needed. If you want to talk more,
email f o r v g at h o t m a l e.

Anonymous said...

anon above go back to ur mental institution. they are luking for u

Anonymous said...

Anon above:
Looks like you ran from an asylum. You are so fucked uo to write such a note for the anon nabove you.

I would like to add to the anon above you that US has seen net worth decrease by 40% in the last 10 yeaers whereas India has seen it become 10 times. Moreover, salaries in nIndia have become 4 times in nth elast 10 years whereas in US thay has become 70% in nthe last 10 years.

So hang in there buddy. Good times are coming for US and Indian speculators are going to be toast soon. Too easy money has made Indians worthless, good for nothing. RE bubbles in China, India, Aussie, Singapore etc. are bursting now.

Anonymous said...

This blog is just becoming a predicting machine.

Anonymous said...

Anon above:
Do you have anything solid to say?
It is all about theories and predictions based on good data and evidence. What is your problem?

Don't like it, leave it. Go buy more flats and fuck yourself.

MindOverMatter said...


WTF is wrong here. Living in America for 25 years, 2 Masters Degree, Family, 2 kids, 1 in Ivy League College, 1 in private school. Mid Level Manager in Fortune 500 company steady employment with decent pay and living in a city with low cost of living expense. Yet near broke, Net worth ablut 2 cr. Cant even think of going to India. Feel like a beggar. Should I just count my blessings?"

Agreed.....In India you end up paying first world prices for third world lifestyle .......how long can this continue?

Anonymous said...

The way India is spending money by borrowing, INR will go to 70/USD.

India will keep printing money and kill the rupee. People may feel rich in INR terms, but inflation will kill them.

Anonymous said...

Agreed.....In India you end up paying first world prices for third world lifestyle .......how long can this continue?

Countries like India, China and Brazil are on the rise. US, Europe and Japan are in decline.

They have too many liabilities: aging population, old infrastructure, high cost liabilities and stagnant growth.

If (and it's a BIG If) India can minimize it's corruption issues then we have enough latent demand in the economy to power our own growth engine and investors from around the world will come flocking.

The macro trend is towards a flat world so folks in low cost centers can expect the opportunities and incomes to continue to rise as folks in high cost centers continue to experience decline in their wages and/or standards of living until there is an equilibrium of sorts.

Anonymous said...

I just had a dream that property prices will double in 2 years. Since I had this dream in dawn it has to be true. I am predicting that RE in India will double in 2 yrs

Anonymous said...

There will be elections in Pak soon. The Pak govt will start printing money and guess where all that money will go to. Indian RE. This will cause prices to shoot

Anonymous said...

my dad had a transferable govt job, I never suffered any trauma in childhood

I don't think it's that simple anymore. Perhaps being a govt. employee qualifies for privileges as far as schooling of children, location of stay etc. but for average private sector worker, once your kids get into a school it is very difficult to change mid-stream.

One person even sent his children to live with their grand parents so they could have stable schooling instead of being at mercy of landlords every year.

aam aadmi said...

@Above
Yes there are privileges, there's KV which ensures that school to school transition is smooth and govt accommodation which would cost crores if one takes the real value, but that doesn't mean you can't take any lessons from it.

Maybe we should make all schools like that, where it's easy to move. All I wanted to convey is that getting stuck at one place with tonnes of liabilities is not the way to go.

I understand the need for safety so have what's called a storm shelter, a cheap property in a tier II or III town, preferably close to your hometown. Which can be used when times are bad. But why should one have to purchase a house where one works ? makes no sense to me, unless you are trying to shift permanently.

In the end it's a mindset problem, people accumulate lots of stuff when they live which makes moving difficult.

Anonymous said...

This guy took a bribr of 5 crores for one simple decision. There are people who paid him 5 crores

http://timesofindia.indiatimes.com/india/Cash-for-bail-Law-catches-up-with-CBI-judge-Pattabhi/articleshow/14281497.cms

He put the money in bank lockers. A few months later he would have put the same in RE. This is just one example. There are thousands of people like this in India who make crores just like it. And people keep saying RE will go down in India. Not in a lifetime

Pawan said...

Why small disasters are good: A brilliant write up.

http://www.dnaindia.com/money/report_yellowstone-effect-lets-put-our-hands-together-and-welcome-crisis_1600570-all

Trust me, I'm a broker said...

^ tl;dr. RE will double in 2 years.

Getafix said...

@Pawan:

Fantastic link buddy. Thanks for tha same.
This author writes well. Below is the link to another of her columns that I found pretty interesting:

http://www.dnaindia.com/analysis/column_budget-2012-ponzi-scheme-just-got-bigger_1663481

Pawan said...

@Getafix,
Good article. Had heard of these numbers before but only after reading this article the enormity of the situation begins to make sense.

Anonymous said...

Countries like India, China and Brazil are on the rise. US, Europe and Japan are in decline.

Yes USA is in decline. Their population is ageing and they are about to be hit by massive liabilities.

But I would still expect the US to survive and rebound back in time, because I think the US has got itself right on the three most fundamental aspects of being a powerful nation, and those, in my humble opinion, are:

1) Top notch quality of citizens - achieved though an education system that encourages creativity, innovative thinking, and a culture of asking questions from kindergarten stage.
2) A law and order and justice system that effectively protects the rights of the citizens thus produced - and run, in part, by citizens themselves.
3) A military-industrial setup capable of protecting the interests these citizens from external threats.

India unfortunately has neither.

Anonymous said...

^ Any western nation will beat India in terms of quality of education and social values. Indians just like to believe they are #1.

Getafix said...

http://www.firstpost.com/economy/fitch-hitch-economic-mirror-may-be-cracked-but-it-doesnt-lie-348479.html

First para from the above story:

In the Grimms fairy tale centred around the life of Snow White, the vain Queen goes into a fit of rage when the magical mirror on her wall tells her that she is no longer the fairest of ‘em all. But even she, in all her vanity, acknowledges the verity of the mirror’s brutally honest message, and goes about trying to remedy the situation by dealing with the bothersome princess.

But in the fairy tale world that our economic policymakers inhabit, the mirror that tells them the bald truth about the economy has become the target of criticism for having distorted the “reality” as it exists in their imagination.

MindOverMatter said...

From the budget ponzi article;
"simple English Indian government spends 65.5% more than what it earns."
..65% more spending and no progress /infrastructure to show for it...

I wonder how that number compares with USA which has the largest debt of all nations. But still USD is world's reserve currency; may be USA can afford that kind of spending at everyone's expense...

Anonymous said...

@MindOverMatter

Maybe a major portion of the 65% is eaten up by ministers and babus before it can go anywhere near it's original destination, finding it's way eventually into the RE bubble.

Maybe all that money printing in India is just... black money printing.

skeptic's ghost said...

@MindOverMatter

http://www.usdebtclock.org/
http://www.usgovernmentspending.com/federal_deficit_chart.html

US 2011 deficit was about 1200 billion USD

US GDP is about 15-16 trillion US$
so US deficit is about 7.5 to 8% of GDP

before the credit crisis hit it was very low in spite of 2 wars and record social programs enacted under everyone from Roosevelt to Clinton.

US has debt to GDP ratio of approximately 100% but that pales in comparison with Japan or UK's Debt to GDP.

As long as US remains worlds only superpower - no one can vasool that money.

Also US has incredible amount of untapped oil, coal, natural gas and Uranium which amount to at least half century of energy usage for the whole world.

Anonymous said...

Most regions without power for 8 - 16 hours in India.

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/india-reels-under-power-cuts-some-regions-without-electricity-for-8-16-hours-daily/articleshow/14308768.cms

4 years ago MMS made a big deal about the Indo Us nuclear deal. Whatever happened to that

Anonymous said...

Another way to increase the cost of living

http://timesofindia.indiatimes.com/india/Govt-plans-to-make-you-pay-highway-toll-forever/articleshow/14310043.cms

This will mean everytime you step out you pay 200 rupees plus petrol

Anonymous said...

Are NRIs from the middle east really pumping up RE?

http://www.khaleejtimes.com/kt-article-display-1.asp?section=todaysfeatures&xfile=/data/todaysfeatures/2012/June/todaysfeatures_June27.xml

Anonymous said...

>4 years ago MMS made a big deal about the Indo Us nuclear deal. Whatever happened to that

People go apeshit whenever we try to build a nuclear power plant. Apparently they want no power cuts but won't let anyone to build nuclear plants.

Anonymous said...

There you go.. scams.. what scams? Where are the evidences? Legally gone, need proof, there are pictures of fire.

http://timesofindia.indiatimes.com/india/Fire-at-Mumbai-Mantralaya-kills-three-chars-vital-files/articleshow/14326078.cms

I am speechless...

Anonymous said...

I always said Indian deficit is balanced except for oil and gold and it will self correct in case of boom or bust for which I was harassed by Mr. Dhiman. Here we are. Crude oil at $90 a barrel down from $125. If it remains around the same level, straight away atleast $20 billion reduction in deficit. Not to mention side effects such as stimulus to auto sector and reduction in inflation (and interest rates)

aam aadmi said...

@Above
We are not discussing Oil or Gold...as it has nothing to do with RE.

Anonymous said...

How not? If oil goes down due recession, inflation and deficits go down and so does interest rates. Does interest rates do not have a impact on RE? If Gold goes up because of inflation, and Indian's own Gold does it make them less vunerable to distress sales?

aam aadmi said...

Well it was a sarcastic remark, since recently people were censured for discussing things which apparently have nothing to do with RE. Even though what people were discussing was related to resources, energy etc etc.

I think it shows the futility of discussing RE without seeing the larger context, quite like wall street execs giving annual forecasts which bear no resemblance to reality.

When I saw this blog at first I thought I could share some interesting data like oil production figures and some other resource charts with folks here since these generally do not filter through the media.

But looks like most people are not interested in anything other than what's happening in their immediate surroundings.

Pawan said...

@aam aadmi
But looks like most people are not interested in anything other than what's happening in their immediate surroundings.

I am very very interested in knowing how energy would play out in the future. Energy matters more than anything else for our future. So if you have some insights, please do share.

Anonymous said...

16 hours powercut, paid 50 lakh for 2bhk. All iz well.

skeptics ghost said...

USDINR 57.3
2008 USD was 39

If prices correct to 2009-10 levels the correction RE is already over.

https://www.google.com/finance?q=CURRENCY:USDINR

Again I say savers will be punished, borrowers will prosper or at least enjoy.

Falling Rupee-> high cost of imports->inflation->high interst ->low spending-> slowdown-> stimulus->printing->more falling of Rupee ...

With more bad news on the way from China and Europe, INR might fall to 70-75 to the $.

Getafix said...

As always, all forms of debate, ideas, discussions have been killed by the idiots who wanted to stick to the "topic".

Of course it would have been expecting too much from these morons to understand that the causes could be interrelated and may have a direct/indirect bearing on the matter at hand.

All those who think that the news links posted in the past few days are more interesting/relevant than the stimulating debate happening a few days back, raise your hands.

Not so fast you "shut down this blog" retard!!!

aam aadmi said...

@Pawan

I am not writing anything here but you can go to TOD (http://www.theoildrum.com/) , follow the threads and posts for 6-7 months and you will get a good picture. You could browse the archives to get there faster.

Anonymous said...

Any price fall or increased demand yet?

Pawan said...

@Aam aadmi, thanks for the link. Already liking it.

Anonymous said...

"But looks like most people are not interested in anything other than what's happening in their immediate surroundings."

I am sure many lurkers like me are very much interested. Please do post. Ignore the retards.

Anonymous said...

Pranam Mukarjee & Subba Rao have been trying hoodwink the people, but now it seems that things are slipping out of their hands. Pranan Mukarjee is going to be our next president and Subba Rao is due to retire and spend his days in his multi billion (not crores) rupees plantation in south that he acquired in his relatives names. So both are not worried. But what about you and me. We have a reason to worry.

Rupee is sliding and no one knows when the freefall will stop. Prices are skyrocketing. Real estate is out of reach of most middle class Indians. Looks like India is going to be another Zimbabwe. What if Rupee hits 70 a dollar and a can of coca cola costs rs 300 and petrol price reaches 150

Anyone in this blog has a answer ? If you have please let us share your thoughts

Anonymous said...

Ever since they came up with that stupid Rupee symbol, the rupee haas been in the toilet and is on its way to hell and beyond. May be its time to change the symbol.

Anonymous said...

What if Rupee hits 70 a dollar and a can of coca cola costs rs 300 and petrol price reaches 150

It's virtually guaranteed. The middle class will be squeezed out.

There will be a permanent class of landlords and tenants.

All along the Indian middle class has been narrow minded and selfish and has been the least politically active amongst the electorate.

As a result politicians have kept the poor satisfied with subsidies and the rich happy with give aways while all the burden of inflation and government borrowing money is hitting the middle class and their savings the most.

This middle class apathy has been going on for decades and the sins are finally catching up.

aam aadmi said...

Are you predicting hyperinflation or high inflation? There is a big difference between the two.

I see hyperinflation as unlikely, at least in India. The armed forces cannot function in a hyper inflationary scenario, salaries cannot be paid, oil cannot be imported, bureaucracy cannot be maintained, the maoists and insurgents will have a free run all over the country.

If you recollect the incidents from Russia in 90's. Many regions had declared independence in the immediate aftermath of Rouble collapse, and India is thousand times worse when compared to Russia. The govt knows this well. I had mentioned this before as well but if Rupee keeps plummeting, RBI will be forced to raise interest rates like Volcker did in the 80's. The 'growth story' will be sacrificed to keep the country from disintegrating.

But I do expect the high inflation scenario to continue for quite some time, in the end our collapse will not be sudden but slow and painful..spread out over decades. I will plan accordingly.

aam aadmi said...

The following is a link from 98, when the Rouble was collapsing...

http://www.guardian.co.uk/world/1998/sep/08/1

You are free to make your own inferences about implications of something similar in India.

Anonymous said...

^ That's a scary scenario.

Raj SAP - SD said...

http://articles.economictimes.indiatimes.com/2012-06-19/news/32317688_1_home-prices-property-prices-average-increments

Getafix said...

A few weeks back, Dhiman had postulated that the root cause of the real estate bubble in India (as elsewhere) is easy Credit instead of the generally accepted black money.

Upon giving this a thought, 2 situations come to mind:

1) Lets us take an over simplified example of labor inspector, under whom there are, say, a 1000 factories. He charges/extorts 10,000 annually from each, making a total of 1,00,00,000 rupees a year. It would be safe to say that he goes ahead and buys a flat in NCR for this amount. I don’t see where credit played a role here. Pretty much all of it is corruption money.
2) Similarly, one of the factory owners, due to the nature of his business, ends up with a margin of 2,00,00,000 per annum. To avoid paying taxes, he converts almost 90% of this (~1,80,00,000) to black using various loopholes in the system. He will most probably put this money in real estate further inflating the bubble. Again, I do not see the role of credit here but of mostly of black money.

Moreover, since in both the above cases, the monies are essentially to be kept under the radar and cannot be kept at home as cash for long periods of time, hence more often than not, they will be hasty in making the decision to buy and will end up paying more further inflating the bubble.

This is my understanding of the basic reason for the situation at hand.

There is a good chance that I may be wrong or only half right but this is pretty much a layman’s hypothesis of the current real estate bubble.

I would love to hear if the above is entirely junk or can the bubble be attributed at least in some way to corruption or black money.

DhImAn said...

Getafix, I don't want to go into the entire debate again, so I'll leave you to ponder two important questions.

1. The two scenarios you put forward have existed for much longer than the past say 20 years. Government officials have been taking bribes since centuries, and businessmen have been earning money since the beginning of business.

So why is it only now, say in the last 10-20 years that that money is flowing into real estate?

2. The two scenarios do not exist appreciably in countries like USA, Canada, Australia and other EU countries.

Why then did real estate increase so much in price in these countries as well?

Perhaps when you think about these deeply enough you'll begin to glean some of the true workings of money.

aam aadmi said...

So why is it only now, say in the last 10-20 years that that money is flowing into real estate?

That is exactly what I try to tell people. Corruption hasn't blossomed in the past 20 years, it has always existed. We have actually improved our standing in Transparency international's list. Improvements in IT have also resulted in streamlining many processes which would have taken a lot of hand greasing 20 years ago. Just imagine getting a passport or a DL 20 years ago, or even a telephone connection. Think how much money one had to dole out as 'chai paani' to get things done.

The problem is the phenomenal amount of money that has flown into India in the last 20 years. It has magnified an already existing problem in the eyes of the people.

So in a sense Black money is like an unofficial tax on the white money, it behaves like a parasite, it may kill the host ultimately but it cannot survive without the host.

Anonymous said...

So why is it only now, say in the last 10-20 years that that money is flowing into real estate?

You don't have to be vague. The precise date is 9/11/2001. Since that date the US pressured all it's allies to start monitoring financial transactions. The side effect has been a cut down in the ability to stash money overseas as the hawala networks are under maximum scrutiny (since same networks are also used by terrorists) International financial institutions were more likely to flag a transaction / seize the money / freeze accounts etc. when foul play is suspected.

So a problem that was out of sight and out of mind for the average Indian has suddenly become very personal as all this ill-gotten wealth tries to find room in the local economy. And it's a no brainer that land/property is the most opaque form of investment i.e. perfect for hiding away large amounts of ill gotten wealth under multiple layers of complexity.

The elites would still prefer to stash their cash abroad in Swiss francs or US dollars. Hawala is still ongoing but it's subdued than before. So nothing has changed in that respect, the black money hoarders are just doing some asset reallocation ;-)

Anonymous said...

O.P. Sharma remembers the day, in 1991, when he caught a major hawala dealer in the act of funding terrorism. And he remembers finding evidence that the same dealer was also funding top names in Indian politics.

It was the proudest day of his 30-year career, and the day he began to lose faith in the Indian criminal-justice system.

Soon after accounting books were discovered in the home of R.K. Jain, a top hawala dealer in New Delhi, Mr. Sharma says police were told to ignore the evidence against politicians and to simply go after the terrorists. When he refused, Sharma promptly lost his job. A few months later, charges against all but two of the politicians in the Jain case – including current Foreign Minister Yashwant Sinha and Deputy Prime Minister L.K. Advani – were dropped.

Such political interference could have the dangerous potential, experts say, of undermining cooperation between US and Indian police forces tracking down Al Qaeda funds in Indian banking channels.

"In 30 years, all the investigations and prosecutions by me have ended in conviction. But in the biggest case of all, I got taken out," says Sharma, who has since retired.



You would be pleased to know that "justice" was finally done in this case!

http://www.mid-day.com/news/2003/jun/57303.htm

Anonymous said...

^^^ Reference for the above:

http://www.vineetnarain.net/html/the_hawala.htm

Anonymous said...

Petrol prices have increased and rupee is falling. However I dont see any difference in people's habits. People are still buying petrol and taking vacations. Nothing has changed

http://economictimes.indiatimes.com/news/news-by-industry/services/travel/falling-rupee-fails-to-deter-indian-travellers-from-planning-foreign-holidays-study/articleshow/14359055.cms

Anonymous said...

Watch this if you understand Hindi:

http://www.youtube.com/watch?v=VsTgAT-YC8s

If you still don't understand why/how the money heretofore parked abroad is being brought back then I don't know what else would convince you.

Anonymous said...

Isn't that the "What is cloud computing" guy? Computer ka data cloud mein chala jata hai, maloom hai apko?

Anonymous said...

For those who understand English:

http://www.youtube.com/watch?v=uPCGKRpWh4c

aam aadmi said...

@Anon at 10:51

The article's title and it's content have no correlation. The article clearly mentions that people have cut their traveling distances and are now only taking budget deals that too in off season.

That's what I'd expect to happen; incremental changes which add up slowly, were you expecting Armageddon because of rupee depreciation ?

I've been stressing again and again that one shouldn't look for stories about sudden collapse, it's a human bias. They occur but rarely.

About the petrol price hike, I am sure there are many marginal buyers who are now priced out of the market even if consumption itself is slowly rising because of sheer numbers.

Anonymous said...

can someone tell me what is going on in Indian realty market?

Anonymous said...

// can someone tell me what is going on in Indian realty market?

This is the wrong place to get the info you want. This place is filled with theoretical guys from USA who read useless wiki articles and feel that everything that happens in US will happen in India without knowing the ground ealities. If you want to know the true state of indian reality visit the indianrealestate forum.

Insallah said...

Indian real estate is defnitely slowing. Will it plateu with the rupee going down or will it crash-who knows. if it goes down, India won't go down easy-our people will take to the streets and there will be violence. Lets see.

It looks like China has been fabricating evidence for a while-lets wait and see.

analog said...

@getafix, dhiman, aam aadmi - You are thinking black money only from corruption. there is another source simply from tax evasion. I did my taxes yesterday and ended up paying a few lakhs and was miffed. my CA advised me to withdraw periodically and buy a flat and he can then show it as expenses (register professional tax and show it as paying around 10 people a salary). this is typical practice here apparently. again, as much as this is credit-fueled, there is a major share from black-money. you will be surprised by the number of non-loan cash transactions in real-estate.

Pawan said...

can someone tell me what is going on in Indian realty market?

Nothing much.

2011-12 has been a below 7% GDP growth rate year and the effects are already visible - IT companies freezing increments and new hiring, car companies stopping production for 2 weeks, capital goods companies sitting idle with no orders and so on.

Let the GDP growth fall to 5% and stay there for a couple of years and you will see the change.

aam aadmi said...

@analog
No I didn't say so...there are a variety of ways in which tax base gets reduced, IMHO tax evasion also counts as corruption, as far as loopholes go, they are a grey area and tax laws should be simplified to a level that anyone with knowledge of class 10 maths is able to work them out. Bad news for your CA though, he would lose his job if that happened.

As far as using cash is concerned, it's not illegal, not declaring it is, counts as corruption and has always existed. If anything I would say that cash usage has declined significantly in the age of credit and debit cards. Salaried folks actually prefer paying with their cards since they have already paid taxes on their income and the transaction is easily traceable.

aam aadmi said...

Chinese data manipulated

http://www.nytimes.com/2012/06/23/business/global/chinese-data-said-to-be-manipulated-understating-its-slowdown.html?pagewanted=all

Who knew. LOL. Is this even news ? We all know how data is manipulated, if you want the real economic picture see commodity prices, they are a good indicator of what's about to come. Even the stock markets are rigged to a great extent. But it's next to impossible for banks and governments to manipulate commodity prices at an international level, although they have tried to do this through ETF's but it's effect is easily uncovered. Brent dropping to $90 is harbinger of things to come.

To sustain economic output at levels of 2007, Brent would have to go to $150 and that ain't happening anytime soon.

Anonymous said...

From the ET article - "If they do not buy a home now, they know the rate at which home prices are going up, they would be priced out of the market when they venture out next," says Sumit Joshi, director of Noida-based brokerage firm Real Credit Consultancy."

Another broker peddling the stupid 'you will miss the bus' argument.

Getafix said...

@Analog:
I already gave the example of tax evasion by the businessman in my post.
@Dhiman & Aam Aadmi:
Your responses make sense and I agree with the same.
I would still think that this inflow is first being converted into black money (a lot of it, if not all), and then channelled into the RE market.

Anyway, my next question is, where is all this money coming from?
Is it from the US primarily? With the super loose monetary policies over the last decade, or some other source.
If it is indeed flowing in from the US (whether on account of interest rate arbitrage or easier more opportunities to game the system in India), is it not counterproductive for the their own economy to allow this outflow?

aam aadmi said...

^ Anyway, my next question is, where is all this money coming from?

Partly economic development i.e development of natural resources which I like to call 'Loot of Mother Earth' and partly from American and European middle classes which are getting poorer by the day.

DhImAn said...

Anyway, my next question is, where is all this money coming from?

Ah, I told you, you would come closer to learning the truth about money if you pursued in your inquiry.

Now you've asked the golden question - where is all this money coming from?

Once again, instead of telling you, let me ask you some questions. Do ponder these - hopefully they'll take you closer to the truth.

1. Since money today is not backed by anything, it can be created at will. What is the process for doing this? Surely RBI (or the Fed) doesn't print all that money on paper, or other physical media. In fact, physical money is barely 5% of all the money that exists for most nations.

So then, how does money come into being?

2. The US embarked on significant money creation exercises - they called them QE1 and QE2. This increased the total quantum of USD in existence. So, let's say the earlier quantum of USD was 100 units, and afterwards, 110 units.

At the same time, the quantum of INR (as an example of another currency) was say 5000 units. This gave an exchange rate of 50 INR to 1 USD.

After the US money creation exercises, exchange rates (and now I mean with all countries, not only with India) did not change significantly.

How is this possible?

Hint: If you get stuck, look up "competitive devaluation" and "soft peg".

Perhaps, when you understand this mechanism, you'll understand how deeply interlinked the economies of nations really are.

get said...

I am not sure I am smart enough to even understand your questions enough, forget being able to answer them correctly.

Your first point brings to mind terms like fractional banking, notional wealth etc. Not sure if this is what you meant.

In your second point perhaps you are implying that after the massive printing of dollars for QEs 1 and 2, every other country including India matched this by printing their own currencies.
That would also imply that the recent fall in rupee means that India has had to print even more to keep up with its deficit.

So the printing presses of the entire world’s economies are really also the fountainheads of excess liquidity in the system.

If my inferences are correct (and do correct me if they are not), would this mean, that easing up of the moneys by central banks all over the world resulted in these bubbles instead of bringing on the desired results?

Also, every time there is talk of economies of the world being interlinked across nations, I can’t help but wonder that why is it then bubbles are a localized phenomenon!

Getafix said...

^ That's me. Hit the enter button too soon.

Kulbir said...

Hi Getafix,
I agree with Dhiman that credit expansion is causing real estate prices to rise but I will like to add that in our case the psychological factor is playing a much more important role in keeping this bubble inflated.
Please remember that nobody has lost money in real estate and gold in India, this has very important implications for investing. As they say about wars that every so many years there is a major war because we tend to forget the destruction caused by the last one, similar is case with bubble. Bulk retail investors did not lose much money 2008 crash because very few invested in stock markets due to memories of Harshad Mehta scam.
Real estate and gold are only asset class where people have not lost at least after our independence(as during partition people lost their land holding during forced migration), because of this fact nobody is afraid to put their life's saving in real estate. Bubble don't have to be necessarily be credit inflated, strangest things have happened in economics history, my personal favorite is first bubble in history Tulip Mania. It is most fascinating as people got mad about investing in flowers and paid absurd amount of money for them. Herd mentality can cause even the brightest of human kind to make absurd mistakes Sir Issac Newton after losing money in South Sea Bubble made following observation: "I can calculate the movement of the stars, but not the madness of men". Do you consider people currently investing money in real estate smarter than Newton?
I personally am a big fan of Robert Kiyosaki's cash flow investing. If anybody understands cash flows he can tell you that Indian real bubble is way greater than the U.S real estate bubble of 2006.
I will like you guys to read some basics of cash flow investing and psychological economics by Robert Schiller.
Thanks and hope this helps.

Anonymous said...

The govt is proposing raising the FCNR rates and intriducing a foreign currency bond. If these rates are anywhere above 5% you will see a lot of foreign exchange coming in that will help the govt tide over the crisis short term

http://timesofindia.indiatimes.com/business/india-business/Govt-may-cut-spend-raise-NRI-deposit-rates-to-boost-economy/articleshow/14377252.cms

Anonymous said...

Sometimes I feel developers have it easy. If the rupee falls NRIS are there to bail out RE and if the rupee appreciates it seems it is "India Shining" and you see locals stepping up. Maybe NRIs are what are making a difference to the RE market. Which other country has such a massive population of dispora who are still emotinally attached to the country

http://www.emirates247.com/property/real-estate/indian-property-show-to-help-uae-nris-cash-in-on-weak-rupee-2012-06-23-1.464085

Anonymous said...

As property prices rise we will soon see land grabbing cases for NRI lands. NRIs are easy targets who wont fight back and the indian justice system is surely of no help

http://www.thehindu.com/news/cities/Hyderabad/article3553478.ece

http://www.hindustantimes.com/Punjab/Jalandhar/Octogenarian-quits-NRI-Sabha-to-fight-land-grab-case-on-own/SP-Article1-877776.aspx

Anonymous said...

http://timesofindia.indiatimes.com/business/international-business/Credit-boom-stokes-risks-in-emerging-markets-BIS/articleshow/14377467.cms

Anonymous said...

You say that physical money in the world is just 5% of the actual money in circulation.

So what if one fine day everyone decide that they would withdraw their money and keep it in the form of physical money..

We would be allowed to withdraw only 5% of the money we wish to withdraw?

And if yes, can someone explain how and where would we get the other 95% from and in what form.

It just for my information. Thank You.

DhImAn said...

You say that physical money in the world is just 5% of the actual money in circulation.

More or less. Some countries may have more, others less.

So what if one fine day everyone decide that they would withdraw their money and keep it in the form of physical money.

The system works on the basis that this won't happen. Ever. If this happens, it will cause a "systemic failure".

We would be allowed to withdraw only 5% of the money we wish to withdraw?

If that. Much before that you will have capital controls.

And if yes, can someone explain how and where would we get the other 95% from and in what form.

Now that's the most important question, don't you agree?

It just for my information. Thank You.

The rabbit hole goes very deep. You've been forewarned.

DhImAn said...

Watch this video to learn more about the world's monetary system.

Anonymous said...

Before 1990s if somebody deposited Rs 1000 in a 'nationalized' bank, the govt will take it and 'spend' it on useless projects. Ordinary folks did not get any morgage from our nationaized bank unless they know the right people. No loan No house. The politicians who stole money from the bank, bought real estate for Rs 1000 (lets exxagerate and assume they stole everything). So Total available money to buy real estate was Rs 1000.

No when somebody deposited in a private bank, they turn around and leverage it at least 10 times and loan Rs 10,000 (10 x 1000). So ordinary folks have access to morgate to buy real eastate for 10,000 .i.e 10 times the politician who stole all the money.

whenever the price of an asset increases (tulip, stock, gold,anything) , herd mentality takes over and people put all their savings (black moeny of ordinary folks) money in that asset. So it goes up.


The politicians still steal money and invest into RE. They will always do. Also it is bit diffcult to do hawala on large amounts these days.

When a asset goes up it takes the stairs, but when it comes down it takes the elevator. people go mad in herds, but they regain their senses one by one. They always do.

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