Thursday, July 05, 2012

Mumbai home sales growth stagnates in June

Article Link


A situation of plenty continues to plague the Mumbai real estate market with unsold inventory amounting to 80,000 units which forms 37 per cent of the total residential supply under construction.
The market stagnated in June due to high prices and most buyers having stayed away expecting an imminent drop in prices in the near future. 

The report indicates prices have been moving in a narrow range in the past four quarters as a virtual stoppage of new launches over the past year has constrained supply and cushioned prices from dropping in spite of absorption levels steadily trending downward.
Absorption numbers in FY2012 are estimated to have dropped more than 60 per cent from its 2007 heydays and 35 per cent from FY2011, to an estimated 45,000 units. This steep drop in absorption levels should have resulted in a similar correction in prices.

300 comments:

1 – 200 of 300   Newer›   Newest»
Pawan said...

continuing from previous thread...
(had posted there by mistake)

@skeptic
the 7.5% premium is to avoid having to move all the time.

This is exactly the kind of stupid reasons people fabricate to justify their own actions and beliefs.

Being in debt has its own opportunity cost. Let me give you my own example. Last year, this time I was working in Intel. Today I am in a 20 people startup trying to do something interesting/big. Had I been under a big debt, I would never have made this switch. That is the real opportunity cost for me.

Anonymous said...

Where are the price reductions? and please, some real examples of middle class housing!

Does it matter for the folks who've been waiting for bubble to pop if a 5 crore flat is now being offered for 4 crore?

Anonymous said...

Remember, market price is what a transaction occurs at, not what the builder cost is and if they are making a profit or not.

Mehta said...

I think if you want to take a blended count - assuming that you have a 12 storey building with 6 flats/floor (on an average)..we would have 72 flats in that building.

So for 80,000 flats we are talking about 1111 such buildings!!

I dare say the real number might be in the neigborhood of at least 2500 building or more.

If we assume around 80 lacs/flat on an average. We are talking about an inventory of 80,000X80,00,000 = 64 thousand crores!!

And I am betting these jokers are understating numbers..the actual number might be in excess of 1,00,000 crores!! If that's not a bubble, I would like to know what is??

Anonymous said...

This bubble is called inflation, for burst to happen what we need is deflation. Do you think India will have deflation period? Sorry, that's not happening. Inflation is becoming new norm.

Anonymous said...

Stagflation cann cause bubbles to burst big time and would be worse as there is no growth.

Btw, with constant inflation the country will soon get downgraded by Moodys as well as RBI will not increase rates. Rupee will collapse eventually.

skeptic's ghost said...

This is the story of every Indian city.

"Dry taps and open sewers: welcome to India's 'Millennium City'"

http://in.reuters.com/article/2012/07/05/india-infrastructure-gurgaon-idINL5E8HP11C20120705

also from last post
@Pawan -

I am not justifying spending the extra 7.5%
I am just saying that given the present scenario, many people would take that chance of paying that premium in order to secure a home.

Since Banks in India don't lend more than 50% of the total value (80% of white portion) - there is not a really heavy debt burden if the property price appreciates. (unless the building is going to collapse).

Usually ones spouse can take over the load of the EMI in worst case of losing ones job for a few weeks/transitioning to a newer better opportune job.

On the flip side in your case, if you owned property worth a year/2 yrs salary, you could probably sell it and use it as capital for your startup.

Its a different matter if your equity in the home is negative - but otherwise I dont see debt as an opportunity cost.

Anonymous said...

^ I have to question the wisdom/motive of companies like Google, Microsoft and others for opening up in such places!

In India, wherever IT goes, overcrowding and shortages of basic amenities result.

Bangalore was a beautiful city 20 years ago. Now look at the congestion and shortages.

Mehta said...

Flat sales dip - TOI article

If 1.05 lac crore is the inventory. The weighted average cost of capital for most businesses in India is around 12-15% which means that these developers need to pay around 0.12* 1 lac or around 12,000 crore as interest burden minimum for just servicing interest costs on the debt. The actual number should be around 15,000 crores!

Now, some morons may claim that builders have a lot of black money and they will keep on holding up the prices until they have black money...

Well, they need to pay back banks 15,000 crores in interest payments every year in white money..if they get a moratorium from the banks, the interest burden will increase.

Secondly, what moron will burn his home money to keep the prices high just to spite the buyers??!!

The way, the developers are paying themselves dividends, I am anticipating a huge crash, where developers will disappear to Dubai with their cash, banks will run to the govt and RBI...people will run for their money in the banks. It will be extremely chaotic. Also, if Rupee goes to 60...all these developers and their bankers are screwed. I think these developers and bankers are on a "highway to hell" and they all know it. Which means reflexivity is now going to kick in, in an accelerated fashion.

Anonymous said...

Mr. Mehta well said. I see blood on the streets in India. Land of fools. Even neducated people cannot see that it is too good to be true.

polt said...

@Mehta - "pay around 0.12* 1 lac or around 12,000 crore as interest burden minimum for just servicing interest costs on the debt. The actual number should be around 15,000 crores!"

You understate the number. Many developers take short term loans from rich businessmen at rates as high as 35% p.a. Usually these are for a few months, but nevertheless add significantly to the interest costs.

shivalover said...

India needs a revolution, the public needs to revolt over the politicians corrupt and failed policies, there is only suffering seen for the common man in the next year ahead.

Anonymous said...

$300K, but no water/electricity !

http://economictimes.indiatimes.com/news/politics/nation/dry-taps-open-sewers-welcome-to-gurgaon-indias-millennium-city/articleshow/14708570.cms

aam aadmi said...

Gurgaon is a festering wound, a city that wasn't meant to be there, like Las Vegas and Phoenix. They will go the way of dodo before we hit 2025.

Only old cities and towns which have access to water and fertile farmland around them will survive.

Anonymous said...

The Canada bubble continues to deflate.
http://www.greaterfool.ca/2012/07/05/market-update-6/

Interesting quote about the US in that post - '“When a bubble collapses, it falls with a merciless knife-edge. The crash scythed through neighborhoods from coast to coast. In some Californian suburbs, prices fell by 70%. In Las Vegas, prices fell 65%, in Phoenix and Daytona Beach they dropped 60%. Rather than a gentle landing, five years of price increases were erased in eighteen months "

We may not have such large falls here, but certainly some correction.

Why are folks paying $300K for a house with no water/electricity? Why are prices rising in Gurgaon?
Why are desi papers quoting home prices in dollars?

Anonymous said...

http://economictimes.indiatimes.com/news/politics/nation/dry-taps-open-sewers-welcome-to-gurgaon-indias-millennium-city/articleshow/14708570.cms

Anonymous said...

The bubble in RE india is very unpredictable. but it IS a bubble and will burst as in all other places. life is very very cheap here and no way am i paying this much money for this kind of ***t

Anonymous said...

Cash-strapped Developers offering discounts on flats is not anything new. This has been going on for some time.

The real test is when prices in the secondary market fall. When and how is that supposed to happen? Indians will never sell property because "property only goes up". At some point of time, it becomes a self-fulfilling prophecy (as indeed, it already has become). So I would be very wary of any argument that Indian RE can fall significantly in nominal terms measured in INR.

In Zimbabwe, prices have risen year over year when measured in nominal prices. In real terms, prices will correct significantly but this will take time, perhaps as much as a decade.

When the European financial crisis hit nearly 2 years ago, there was a lot of optimism on this board that Indian RE prices would crater (go back to the archives and take a look at the posts during this period). But here we are TWO YEARS later and that has not happened. We are still at the same level (in nominal terms) where we are two years before.

Can anyone confidently state that two years from today, RE prices will correct? I'm an RE bear, but even I am not confident enough to make such a prediction. I feel two years from now, we will be more or less stuck in the same holding pattern, flat prices with the INR around 58-60.

INR is strongly correlated to the EUR. If the EUR crisis is resolved (or a short term fix is found), then expect INR to appreciate significantly from current levels.

Anonymous said...

>>>INR is strongly correlated to the EUR.

Just curious to know, if you have any data to prove this statement.

Anonymous said...

"Just curious to know, if you have any data to prove this statement."

Take a look at this graph:

http://www.google.ca/finance?q=EURINR

Now add USDINR to that chart in the "Compare" field.

You will be struck at how strikingly similar in shape both the "EURINR" and "USDINR" charts are.

Pawan said...

@skeptic
if you owned property worth a year/2 yrs salary, you could probably sell it and use it as capital for your startup.

This thinking reflects another stupidity - "RE helps me save". When people say this, they mean two things:
1. People who don't buy RE don't save.
I need not say how stupid this is.
2. One saves only when one is forced to. I am forced to pay EMI to the bank otherwise I wouldn't save at all. I would blow up all the money.
This is even more stupid.

Mehta said...

@ Polt,

1> I agree, there are several mistakes I have made. Not accounting for short term/high interest debt was one. The other was accumulation of interest load. This debt has been taken over the last 7-8 years via ECB's and other such mechanism as well. Which means the interest payments have been piling up. I think the interest load could be some fantastic number which will make our jaws drop one day....it will be passed on to the banks, who will be rescued by the govt..by printing money, which would mean INR/$ of some fantastic amount maybe 100 or so. Which means the gullible sucker on the street who has been buying all this India Incredible stories with a thumb in his mouth will get severely shafted!!! Being the masochist, he would probably enjoy it. As MMS says with great determination we can overcome the adversity we are facing in this country.

2> The Anonymous joker @ 5:04 - The charts you have shown, merely illustrate that EURINR and USDINR are correlated. Pls. brush up on basic maths before deriving conclusions from such charts. The chart says that Rupee vs. Eur goes up or down similar to Rupee vs. USD. It does not mean that rupee is correlated to Euro!!!

3> India will never do a revolution. India is full of people who look after their own interests. A politician coming in and offering subsidised milk will be worshipped, the moment we have a problem. The gullible sucker who votes with one thumb in his mouth and the other up his a$$ does not even realize that the same polician is robbing money from gullible suckers to reduce the price of the milk. You need educated people with some degree of integrity and some amount of spine to do revolutions...

4> I don't have a house, I have not purchased it as yet. But I have my savings in CD's and it's well over 2.5 crores in INR terms. I don't gamble and I don't invest in stupidly priced assets. So, I agree with Pawan about everything he says.

aam aadmi said...

I'm an RE bear, but even I am not confident enough to make such a prediction

The golden rule for predictions is that you don't put a definite date on it. Does it make the prediction worthless then ? Maybe, sometimes, but not always.

Anonymous said...

Dry taps & open sewers: Welcome to Gurgaon, India's 'Millennium City'

Most days there is just a trickle of water from the taps and sometimes even that dries up before noon. The 56-year-old has often had to scurry to a neighbour across a potholed road to borrow a bucket of water and haul it back to her rented $300,000 home, sweat rolling down her face.

http://economictimes.indiatimes.com/news/politics/nation/dry-taps-open-sewers-welcome-to-gurgaon-indias-millennium-city/articleshow/14708570.cms

Anonymous said...

// Dry taps & open sewers: Welcome to Gurgaon, India's 'Millennium City' //

So what? I am still crorepati. I keep buying RE and will be arabpati soon and you suckers are and will be left dry anyways in rented place.

Read between the lines - all infrastructure hits poor people the MOST, the FIRST and ALWAYS! Only way out in India is to be top of pyramid, even if it crashes you will be not crushed.

Anonymous said...

I have a felling things are very bad than they are made out to be. Slowly all the bad news are coming out. Now Igate has delayed joing dates. Not a big deal but this is going to hurt sentiments

http://timesofindia.indiatimes.com/tech/careers/job-trends/iGate-delays-joining-dates-for-freshers/articleshow/14707861.cms

Anonymous said...

NRIs have developed a thin skin. those in india deal with this on day-to-day basis. media shines light once in a while and big hoopla is made about lack of water, shortage of power etc. this has been going on since forever...

the reality is, india remains a 3rd world country for the vast majority 90+%, unless you're part of the select few elites who've never had it better.

don't see the trend reverting anytime soon.

Anonymous said...

Flat sales dip by over 60% in Mumbai

MUMBAI: The city's real estate market has stagnated with only 45,000 apartments sold in the Mumbai metropolitan region (MMR) during 2011-12, well below the market average of 80,000 units annually.

A Knight Frank research report released on Thursday said the market has an unsold inventory of 80,000 flats valued at Rs 1.05 lakh crore. "Buyers have largely kept away from the market expecting an imminent drop in prices in the near future,'' it said.

Anonymous said...

"4> I don't have a house, I have not purchased it as yet. But I have my savings in CD's and it's well over 2.5 crores in INR terms. I don't gamble and I don't invest in stupidly priced assets. So, I agree with Pawan about everything he says"

Hi, i have 2 flats for you. I will give you a 25% discount if you pay me cash. :) Total Price (2.5 crores)

Your dream of owning a house will become true and i on the other hand will laugh all the way to the bank thinking i have met a greater fool :) and put those 2.5 crores in CD

Tilak Kumar said...

wonderful post ! Thanks

Mehta said...

anon @ 1:11

You offer is not interesting to me for the following reasons -
1. I am in my early 40's and wish to be a free bird for some time. Owning a home ties me down and prevents me from doing things, seeing new places and life this one beautiful life I have.
2. I believe in wealth creation. Slowly and systematically as my ancestors have taught me. Owning a home (or 2), will seriously deplete my wealth. In addition to the cost I would have to incur (I would never take any debt, have always followed a zero debt philosophy in life), there are hidden associated costs which result in a negative cash flow from this "RE asset". Hidden costs of owning a home .
3. If I treat a house as an investment and buy one, it should have several appealing things for me to be interested -
a> It should be at the bottom end of economic cycle and the cost of the home should be at more than 50% from the peak prices.
b> The servicing costs are very low and the location, potential for growth etc is such that I will be able to easily dispose it after 7 to 10 years.
c> Rental income is high relative to cost (PE should be around 8 or so)...

Whenever that happens, pls. do contact me and I will buy those two houses you are talking about. Meanwhile, I go about my slow turtle way...enjoying life's experiences.

Anonymous said...

i have a house that has a 7 PE in the USA. Anyone interested in making an offer?

Anonymous said...

Doesn't look like a slowdown:

http://finance.yahoo.com/news/mumbais-boom-turns-renters-millionaires-152305336.html

polt said...

@Mehta - "2. I believe in wealth creation. Slowly and systematically as my ancestors have taught me."

Excellent point. Over the last ten years, we have lost our senses in herds, thinking that leveraged real estate bets are a surefire way to prosperity. Now we will regain our senses slowly, one by one.

As robert shiller points out in his books and talks, till the 1970s a house was merely a place to stay. It was with the advent of easy credit that homes began to be treated as a way to make easy money. Of course, history shows time and again with countless bubbles that there is never an easy way to make money. It has to be earned slowly, patiently, and with a ton of hard work.

I disagree with your zero-debt philosophy though. Debt used prudently can deliver benefits.

Anonymous said...

"Excellent point. Over the last ten years, we have lost our senses in herds, thinking that leveraged real estate bets are a surefire way to prosperity. Now we will regain our senses slowly, one by one. "

Nope. This is nonsense advice. Getting rich is simple in India. Buy a house, lever-up as much as you can, pay back the mortgage in depreciated currency all the while watching the price of the house blast through the roof and even exceeding first world levels.

It is a formula that has worked just perfectly in the 1980's in the 1990's and in the 2000's. There's simply no reason it shouldn't work in the 2010's also. The idiots who feel otherwise are just tasting sour grapes.

Anyone who owns a house in any 1st tier city or even second tier city in India is, by definition, a Crorepathi today.

And no, there's absolutely no slowdown or any sign of this slowing in the near future.

THERE IS NO ONE WHO HAS SOLD A HOUSE IN ANY OF THE METROS FOR A LESSER PRICE THAN WHAT HE PAID FOR IT.

NO ONE.

Anonymous said...

Anon above:

Instead of preaching here, why don't you by some more flats and be more rich and happy. This is not the right blog for you. Go to a blog owned by bankers and realtwhores.

I'll buy when it drops by 60% in the next 2 years. Otherwise why buy, I'm a happy renter. Some of my friends are also cashing in now on these insane prices and putting the money in bank @10.5% interest.

Anonymous said...

THERE IS NO ONE WHO HAS SOLD A HOUSE IN ANY OF THE METROS FOR A LESSER PRICE THAN WHAT HE PAID FOR IT.



TRUE, BUT WHY? WOULD IT SUSTAIN?

“Since the beginning of the Great Recession in 2008, the central banks of major industrialized countries have been keeping interest rates unusually low to ‘help revive the economy.’ The low rates, coupled with the massive money creation engineered by central banks (what is referred to in the jargon as ‘quantitative easing’) are giving economic factors the false impression that there are a lot of savings around to be borrowed, when that’s actually not the case, or not as much.”

‘Saved resources are those set aside instead of being immediately consumed. Printing pieces of paper with dead politicians on them cannot, logically, add real savings to the economy.”

India is sitting on a mssive bubble created by RBI and politicians. When it deflates/bursts, there would be so much disaster you cannot even think of.

If you don't believe, buy more RE as anon below you mentioned.

Anonymous said...

When it deflates/bursts, there would be so much disaster you cannot even think of.

Precisely why it doesn't make sense to "plan" or "invest" for such a scenario.

What we have here is a minority of folks who have bought gas masks and are preparing for a nuke attack while the rest are out there going about their lives without a care.

Guess what, if a nuke attack happens, there will be so much chaos and destruction the difference between those who were partying vs. those who have gas masks will be none/negligible.

Everyone will be dead or dying.

Anonymous said...

Students of the housing bubble fail to note that in each case when the bubble burst, the prudent (i.e. savers, those without any debt) were punished.

The profligate and reckless (bankers and mortgage brokers) were rewarded.

The fact is that Indian leaders and elite are deeply invested in real estate.

It is a rare individual in this day and age who would willingly institute policies for the general good that go against his/her own interests.

Just like in the West, the bankers and politicians are more likely to agree for nuclear war before they agree to give up their (mostly illegally) accumulated wealth/power.

Anonymous said...

Anon above:

Your point is totally illogical. The people in power may be invested but they cannot control the fall. When it falls, it will fall hard.

Savers in West got screwed because of policies of people in power but that didn't stop the RE fall. You can get a house for 30% the peak price in many parts of US.

Anonymous said...

@Anon - "Students of the housing bubble fail to note that in each case when the bubble burst, the prudent (i.e. savers, those without any debt) were punished. "

Rubbish. Its the heavily leveraged that are filing for bankruptcy, losing homes, living on food stamps.
Savers were hurt too due to the downturn/job losses, but nowhere as near as badly as the leveraged ones.

"And no, there's absolutely no slowdown or any sign of this slowing in the near future. THERE IS NO ONE WHO HAS SOLD A HOUSE IN ... "

Are you new here to this blog? See http://www.nhb.org.in/Residex/Data&Graphs.php . Even the great Mumbai city is showing signs of peaking.

aam aadmi said...

India's black swan..

Power sector loans
http://www.firstpost.com/business/banks-worried-sick-over-powermins-rs-2-lakh-cr-debt-recast-plan-371822.html

IMO these loans have to be perpetually rolled over because they can never be paid back, to repay the loans, rates would have to go up between 100-200% and most illegal connections will have to be weeded out, a near political impossibility.

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/buying-a-flat-dont-get-carried-away-by-the-sample/articleshow/14734193.cms

Pawan said...

RBI concerned with slow deposit growth. Should we expect a hike in interest rates then?


http://www.moneycontrol.com/news/economy/rbi-concerned-over-slow-deposit-growth-iba-head_727690.html

Anonymous said...

@Mehta in early 40s
Man! How are you handling the pressure from your spouse.
My wife looks around and says "Everyone has bought the house! Except you ( Stupid ) !"
She strongly feels one cannot feel happiness without owning a house?!

Many time I was in the brink of throwing in the towel and joining the crowd for true Nirvana!

Anonymous said...

>rates would have to go up between 100-200%

That won't be any problem. Aren't all Indians millionaire, as some real estate gurus say?

aam aadmi said...

^well of course, black money will pay for the power, in fact black money will pay for everything, nothing can escape the clutch of black money. It's an all powerful, omnipresent entity.

Anonymous said...

@Anonymous who wrote "THERE IS NO ONE WHO HAS SOLD A HOUSE IN ANY OF THE METROS FOR A LESSER PRICE THAN WHAT HE PAID FOR IT.

NO ONE."
Check out your facts. In the 95-96 real estate dip in Mumbai and suburbs there were several who got badly burned. My colleague had bought a flat in Mira Rd @1500 and when he wanted to sell the rates had dropped to 800 in a year! In that period several Mumbai builders had gone belly up and fled to the Middle East. Do any of you remember this period. There's no reason why it cannot happen again, this time the bubble is way bigger

Anonymous said...

// There's no reason why it cannot happen again, this time the bubble is way bigger //

if you think RE is going down this time, you are WRONG. Why? because this time everything is more.. I mean corruption, black money, white money printing, globalization, population. Compare apple to apple if you have to.

Do you think RBI and RE builders and sellers will sell for less. Give me one good reason. Even if they hold or sell for less they make a profit of atleast 200% and prices will still be high.

The fact that RE prices are high is that many people out there can afford it, may be you and I cannot.

Nope, I am not advocating to buy RE. I'm just stating facts on the ground. Only way for prices to come down is allow builders to create more dwellings and bring them to correct accounting standards and legal contract compliance - which ain't happening in our lifetime.

sue the builder who doesn't complete project on time and what was promised. Any out there with balls to stand up? and also do you believe in legal proceedings (if they happen to close in your lifetime) ?

ehh?

skeptic's ghost said...

Since the talk is about how the RBI is in a big nexus with politicians, big bankers and builder lobby - here is what RBI will do in the following days

- It will allow rupee devaluation via printing and bond buying (to increase supply via foreign currency inflows/help exporters) -

- It will selectively reduce rates for home loans (aka stimulus - there is still scope of reduction of interest rates by 2-2.5 percent)

- It will roll over / help roll over debts of big builders and consolidate land banks via internal ownership transfers to retain value.

All these things will keep happening to stem the fall of RE in INR terms -

unless there is a catastrophic black swan event - I dont see prices fall - they might stagnate (which means fall in real terms) - also there is no compelling reason for any Central bank in the world to raise interest rates.

Whenever rates have risen in the past they preceded defaults/wars/hyperinflation/natural calamities.

polt said...

@skeptic -" It will allow rupee devaluation via printing and bond buying..."

Virtually all the things you mentioned have been tried by the Fed/ECB/BoE. The bubble still popped. It will be the same here.

@Anon - "If you think RE is going down this time, you are WRONG"
1. See the residex graphs. The correction has already started.
2. You really need to catch up on some history. Read 'This time is different' by Rogoff and Reinhardt. Then come back and make the 'This time ...' statement.

skeptic's ghost said...

@Polt

Fed/ECB/BoE (+ BoJ) actions were after the bubble popped
The bubble in Japan, US popped due to excess inventory and no buyers.

RBI and Chinese Central bank know very well what the outcome of a housing collapse would be on the economy - they will try to stem the black swan with similar measures before the bubble collapses.

People were predicting Greek-Spanish Default would cause some ripples but ECB has joined the Fed and BoE to keep rates at near 0% as long as they think its viable.

China and India have oversupply in commercial real Estate - so im not denying the bubble will pop their. For housing though I really doubt the central bankers will let such a giant asset class end in free fall.

Anonymous said...

@ Polt
//Virtually all the things you mentioned have been tried by the Fed/ECB/BoE. The bubble still popped. It will be the same here. //

Nope, you are talking about USA/UK. They have strong law and legal enforcement compared to India's legal enforcement. You can get away for all wrong doings and be caught for minor offences... so you will be at both the receiving ends - from goons and Gods.

I agree with Skeptic ghost, unless there is some ultra huge catastrophic event, nothing gonna change. Unfortunately, Indians are timid and will never revolt or react.

Anonymous said...

MS Dhoni made over 20 million dollars last year, Sachin made over 20 million, CEO's of IT company's and top level managers also making in the millions( $$$$), Bollywoods elite all making over $$10-20 million per year, you have Goldman and other companies just forking over billions to buy land/ property, so how is the price going to come down????? top .5% is screwing the the middle and lower class. Make it illegal to own more than 1 or 2 houses or land or buildings.

You have NRI'S , silicon valley geeks or bastards, who already made millions, coming to India and buying land. They do not care if 1 house cost's 3 crores or 5 crores. Some of these guys are worth over 200 million dollars. Housing market is not going to crash in India, the middle class is finished in India. Only way the price comes down, make it illegal for the NRI's to own property or land. IF the silicon valley bastard has 100 million and he buys land in USA or SAN Fran, it really does not matter since you have too much land in the USA. Then you add the Indian bastards from Canada, Bastards from England, Bastards from Africa, Bastards from Middle East all buying into this frenzy. They dont live in India, but they must have land and property. Property correction not going to happen. You might see a 10-25% correction, but that is not going to help the 99%ers.

Anonymous said...

Look at the market in any major metro. Builders and property developers are marketing to the top 1% earners in the economy.

The majority has been priced out of the market since 2005 (or perhaps even earlier) Those who have stretched and bought the monthly payment plan are going to be in deep doo-doo when the correction happens.

This is how wealth is transferred from the economically weak to the economically powerful.

Look at US. Wealthy investors are pooling in their money and buying up foreclosed houses, flipping them back to middle class for 20-30% profits. Paper pushing is the name of the game.

Option for mango man:
1. Become a tenant and be at mercy of landlord.
2. Buy in a fringe village area and be at mercy of petrol prices
3. Buy in undesirable part of town and be at mercy of neighbourhood goons/mawalis.

Are any 1 BHK (i.e. a starter flat) being sold in any major city?

Anonymous said...

4th option (for some levity) Take the servants room in one of the multi-crore flat :-)

Seriously, never before have so many flats sprouted up with attached servants room.

polt said...

@Skeptic - "Fed/ECB/BoE (+ BoJ) actions were after the bubble popped"
Could be. But it did not prevent prices from falling further even after QE was started.

"The bubble in Japan, US popped due to excess inventory and no buyers."
Bombay has 80K unsold flats valued at 105K crores. Sales are down 60% and are now lower than even the recession of 2008.
I assume the situation is equally dire in NCR.

The bubble is not really all over India. Bangalore and Hyd have had gently falling prices for over 5 years now (See residex data). So homes are relatively affordable. One can get a decent 2BHK for about 45L.

Anonymous said...

^^^
US elites were short the housing market.

Indian elites are long the housing market.

Anonymous said...

@Anon - US elites were short the housing market. Indian elites are long the housing market."

When the poop hits the fan, even the elites join the stampede to sell.

http://money.cnn.com/2009/06/03/real_estate/Geithner_housing_market/index.htm

Anonymous said...

The "techies" are feeling the heat
http://timesofindia.indiatimes.com/tech/news/software-services/IT-companies-struggle-with-growing-benches/articleshow/14786005.cms

aam aadmi said...

@above
Yes there is a definite slowdown, many techies in service sector whom I have spoken to talk about no pay hikes and no work. Some noobs actually thought that no work is fun and they can go like that for long time, they don't know what's about to hit them.

Also I am speaking on an anecdotal basis but there is a sudden surge of people wanting to buy stuff through their relatives from US as prices have surged here on account of rising taxes, inflation and USD rise, reminds me of 90's when people waited for friends and family to return from US and bring stuff.

More news on commercial real estate front
http://articles.economictimes.indiatimes.com/2012-06-06/news/32078950_1_new-malls-shopping-malls-inorbit

Surprise Surprise, shopping malls are falling out of favor.

For me this is welcome news, I would really like to see these ugly monstrosities die a quiet death ASAP.

Pawan said...

@Anon 6:14
Look at the market in any major metro. Builders and property developers are marketing to the top 1% earners in the economy.

That is exactly why this mania is not sustainable.

Look at the telecom sector. Initially when cell phones were introduced in market some 20 years back, phones were priced at 40-50K (in those day's currency!!!) and outgoing/incoming call rates were Rs 15/Rs 5 per minute. Sure some people bought even then.

Talk about all the bullshit that land is scarce and spectrum is not but that is what will happen to RE too.

Anonymous said...

"That is exactly why this mania is not sustainable.

Look at the telecom sector. Initially when cell phones were introduced in market some 20 years back, phones were priced at 40-50K (in those day's currency!!!) and outgoing/incoming call rates were Rs 15/Rs 5 per minute. Sure some people bought even then.

Talk about all the bullshit that land is scarce and spectrum is not but that is what will happen to RE too"

How may brought them?

1 in every 100

Whts the scene now?

90 in every 100

Why?

Because of the affordability..
There are even profits to be made if one doesnt think of GREED.

And this is how the future will be.
real estate in the future will nbe affordable to everyone because no one think of it as a money making career

When rates go down, no one cares for that sector any longer

Where was this 'real estate' 'real estate' talk before 2003?

aam aadmi said...

Oye lucky lucky Oye in Bangalore

http://www.dnaindia.com/bangalore/report_gangs-of-bangalore-with-land-sharks-you-lose-the-plot_1712994-all

Land Mafia in Bangalore

aam aadmi said...

^LOL. Got the wrong movie, it's Khosla ka Ghosla..

OldButNotWiseGuy said...

Demand for office leasing down by 21% in 2012 first half - The
Economic Times


Slowdown-proof Delhi farmhouses, swank Mumbai towers facing a
sharp demand slump - Economic Times



But India is different; real estate prices would always go up in India...

skeptic's ghost said...

@OldButNotWiseGuy

True - but
Even the most optimistic bulls are bearish on commercial and non housing real estate.

(also we are talking about Housing bubble and not general RE bubble)

Commercial zones are toast for the next decade irrespective of what happens to the housing market.

The bigger debate has shifted to WHEN ad whether house prices will reduce, collapse or stabilize. When will the super-deleveraging start for housing

We can categorize people visiting this blog as follows -

A) People are happy to rent at fraction of ownership costs - OR already own property.

B) Many are tired of renting and wouldn't mind to pay the premium of ownership - but are angry at being priced out by investors in good areas.

C) Home flippers who sell existing owned properties and are looking to invest in new ones

D) Savers with money in the bank and unwilling to bet on RE fearful of the bubble (truly so).

E) observers - some who have sound knowledge of Economic fundamentals and past bubble and some who have actual data from the field and those in touch with the builders and RE salesfolk


Over the past 5 years on this blog, none of the predictions of collapse have come true.
The small blip in 2008 end to 2009 end was a good opportunity for those who bought.

Anonymous said...

Anon Above

But a collapse is imminent.

Even today, even tommorow, even after a year.. until the day it collapses.. beause there will be no recovery thereafter.

Best part is "Collapse will always be near"

This will hold true today, tommorow or any day u come to this blog until the actual collapse happens

And that my friend gives a sense of JOY to us and a sense of FEAR to others :)

Anonymous said...

//Over the past 5 years on this blog, none of the predictions of collapse have come true.//

One turkey told the other turkey without knowing tomorrow is thanksgiving day

"Humans are friends of us. They take care of food,water and provide shelter. I have been observing this from birth."

Second Turkey told
"No! They are our enemies! Oneday they will kill us and eat us!"

First Turkey told
"Yeah! You have been telling this for long and dont know when!
I have been observing them from birth and every day they come at scheduled time and feed us.
Future is very bright!"


Read it from Blackswan book
In above story when is Thanksgiving day is know only to humans!

In our story God only knows!

Anonymous said...

My question is why buy RE today? Why can't we buy this tomorrow? Will we be priced out, i.e. prices will be so high that RE will be affordable? If so, then what is my scenario will be for most of commoners.... therefore who will be afford tomorrow? WHO? again... WHERE ARE FUTURE AFFORDABLE BUYERS to come from?

Anonymous said...

Read it from Blackswan book
In above story when is Thanksgiving day is know only to humans!

In our story God only knows!


with all due respect, this one about the not knowing when part is bullshit. to the common man, it may seem like an act of God but financial armageddon is very deliberately and very knowingly brought about.

Study Enron, the housing bust, TARP bailout or even the recent scam to manipulate the LIBOR rates and you will know it's not God but some greedy SOBs who are fucking everything up.

The elites are so powerful today that they can bring down entire countries to their knees. Scientifically proven:
http://phys.org/news/2011-08-powerful-corporations-world.html

Thats what humanity has boiled down to. After centuries of "evolution" we're nothing but petty thieving animals.

Anonymous said...

The TOI had a similar story -
http://economictimes.indiatimes.com/tech/ites/it-industry-hit-by-shortage-of-projects-from-europe-and-us/articleshow/14794654.cms

Is this the end of the IT bubble or at least the IT salary bubble (automatic double digit hikes every year)?

Even with a Rs56/$ exchange rate, projects are slow to come by.

Expect stagnation in hiring numbers if not layoffs right away. Eventually, the bench numbers will start to bite and cuts will be necessary.

OldButNotWiseGuy said...

@ skeptic's ghost

Commercial zones are toast for the next decade irrespective of what happens to the housing market.


If there are no *new* companies occupying these commercial zones; where do you get *new* money to put into housing market?

Anonymous said...

This is what happens when herd mentality sets in

http://www.ahmedabadmirror.com/article/2/2012071120120711020234332ea851e58/Struck-by-reality-BE-students-quit-course-to-pursue-science.html

aam aadmi said...

US in recession
http://www.financialsense.com/node/8720

ECRI's Lakshman Achutan says data indicates that US is already in recession

Anonymous said...

The IT thing is really worrying me. Probably a good idea to jump off to a start-up and forget about huge paychecks anytime soon.

Anonymous said...

@Anon - "The IT thing is really worrying me. Probably a good idea to jump off to a start-up "

If you are worried about job security in a large services company, you will be under far more stress in a startup. The risk-reward equation is very different.

Anonymous said...

IT companies (..'ies') hire in hundreds (with 's'). So many freshers (with 's') are joining every month. Salary hikes are in double digits (!!) every year. What the hell is going on... where is this money flowing from? There is more money than water in India.

I don't think this ever happened in developing countries ever, even in their best times. So what is so different in India where IT is 100% dependent on western countries.

aam aadmi said...

The IT thing is really worrying me. Probably a good idea to jump off to a start-up and forget about huge paychecks anytime soon.

You want to join a startup for job security ??
It doesn't work that way. You should ask around as to how people work in a startup.

IT is definitely witnessing a slowdown, though it's not as bad as 2008, most companies are sitting on huge cash reserves and are well prepared though still there will be effects. My juniors are telling me that they are getting delayed or no offer letters.

Anonymous said...

Off topic but look at the way corruption has seeped into the indian psyche and how these officials are playing with the careers of students

http://timesofindia.indiatimes.com/city/nagpur/Rs-10000-bribe-demanded-from-engineering-student/articleshow/14832474.cms

Kulbir said...

If you really want to understand on real causes to why this is happening please read Austrian Economics and especially Austrian Theory of Business Cycle by Fredrick Hayek. This is the only credible theory which explains the boom-bust cycle and is the only explanation of Indian real estate boom.
Indian real estate bubble is way bigger than one in 2006 USA and probably equal to Chinese real estate bubble. I personally feel if there is one thing that can stop the progress of India and China it is the real estate bubble in each of them. Just see what to Japan after 1989 when their real estate bubble burst, Japanese were supposed to takeover USA as the biggest economy in the world it was just stopped in its track by bursting of asset price bubbles.
Similarly people are predicting that India and China will overtake USA in next two or three decades. I think this prediction is highly optimistic as people don't take into account the real estate bubbles in both these countries.
Indian real estate bubble can have very big macro economic impact that people don't think of and the economic growth of past decade or so can virtually vanish in a matter of few Quarters.

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

Anonymous said...

"If you really want to understand on real causes to why this is happening please read Austrian Economics and especially Austrian Theory of Business Cycle by Fredrick Hayek. "

Dhiman, welcome back! You were missed (NOT)

Anonymous said...

Where is the slowdown?

http://economictimes.indiatimes.com/markets/real-estate/news/apartment-bookings-in-greater-noida-and-delhi-back-on-track/articleshow/14813446.cms

Pawan said...

@Kulbir
Indian real estate bubble can have very big macro economic impact

Very true. When somebody buys a house, they give a fillip to so many industries - steel, cement, labour, white goods, auto, banks and many other. Fact is that Indian govt. needed a way to put the burgeoning working class (result of population and demographics) into jobs - productive or non-productive. Housing is a big generator for such jobs. Look around yourself and see the number of labourers, masons, carpenters, welders, property dealers, bank loan agents and who not making a living out of it. It is like a big growth engine pulling everything up not in the least aided by the perceived wealth effect. One can't even imagine what happens if this engine stops pulling.

polt said...

http://shittingalpha.wordpress.com/2008/10/29/japan-real-estate-bubble-and-price-rent-ratios/

India is in a bubble, but probably not of the same magnitude as Japan was. As the above chart indicates, Japan RE had a price/rent ratio of 60 at its peak in 1989. (Strangely even the Nikkei was trading at about 60 times earnings).


In India I have not heard of price-rent ratio more than 35-40. So bubble? yes. Japan redux? probably not.

Golconda said...

I have been visiting the blog sparsely over a couple of weeks. And wanted to chime in with my thoughts on the following statement.

The IT thing is really worrying me. Probably a good idea to jump off to a start-up and forget about huge paychecks anytime soon.

If u are single and have just started your career in IT, then my advise would be that you don't make your career decision based purely on paycheck or perception of job security.IT is a field with rapid changes, what may appear secure today may not be that way a year from now.Just look at Nokia and RIM, just a few years back they were the giants of mobile phone industry. I agree some sectors may not go through such rapid innovation and may be relatively stable, but NEVER bet that just because a company is sitting on a lot of cash they won't layoff employees.

My opinion is that you should try to identify and follow what u are passionate about(not an easy task as its always easy to follow the herd), if you really enjoy your work that in itself is a big bonus.Joining a start up just with the hopes of striking it rich maybe a very frustating experience if you don't enjoy the work. If you really love ur work it won't be so bad even if the startup goes bust.

But if u feel IT is NOT something u like, the sooner you move out the better by planning some exit strategy.

DhImAn said...

Dhiman, welcome back! You were missed (NOT)

Yeah, I know. I have that effect on people. It's textbook PTSD.

Kulbir said...

//In India I have not heard of price-rent ratio more than 35-40. So bubble? yes. Japan redux? probably not.//

Hi Plot,
On the nation wide scale 35-40 PE might be true but when you consider micro markets this is not true. In Chandigarh we have apartments which are worth more than 2 crores are being rented out for 20-25 thousand per month this might be 80-90 PE which is pretty close to Japanese levels.
Plus you have to differentiate between commercial and residential real estate. PE's for office space and retail is still reasonable but agricultural land is out of whack. In USA farmlands which is priced above $10000/acre is considered expensive but in Punjab and Haryana these prices must be a real bargain, land prices are upwards of one crore a acre within 30 km radius of every major city.
So much commercial and retail space is being developed in and around Chandigarh that it hard to imagine how all of it can be filled up, I feel the case is similar for other cities as well. The problem is going to accentuate when all this space is going to come on line, there are not enough businesses to fill up these spaces which is going to put downward pressure on rents thus the only sane PE multiples we have are going to get screwed up.
But there is one thing going for Indian real estate and it is Poor execution capabilities of Indian real estate developer, many of the projects are going to left half way and slow development speed is helping the finished projects had Indian property developer been faster at executing their projects this bubble would have burst along with Dubai real estate bubble but never mind better late than never!
Thanks

Anonymous said...

"India is in a bubble, but probably not of the same magnitude as Japan was. As the above chart indicates, Japan RE had a price/rent ratio of 60 at its peak in 1989. (Strangely even the Nikkei was trading at about 60 times earnings).


In India I have not heard of price-rent ratio more than 35-40. So bubble? yes. Japan redux? probably not."

I stay in a 1.2 cr house (mumbai) paying a rent of 20k. That makes it 60.

Though the market rent is 23, 20 is wht you will get for cuz no one is ready to pay 23 lol. :)

So india it is 50-60 in tier 1 cities.

Best guess: 60

Please let us know how it is in ur cities and localities.

Asking price + Actual Price

Ex: Asking:23 Actual: 20

Will give us a better idea of where this bubble is heading too.

Anonymous said...

// Though the market rent is 23, 20 is wht you will get for cuz no one is ready to pay 23 lol. :) //

Why is that no one ready to pay 20k? buyers are ready and are paying to pay 3 times for EMI. So there is enough room for rent to increase to match up with EMI.

Earnings in India for many households is > 1 lacs.

StumpedInPune said...

These are actual average numbers from Pune market

New 2BHK Sale Price

2009 : 35 Lacs
2010 : 45 Lacs
2011 : 55 Lacs
2012 : 65 Lacs

Meaning prices have been increasing 23% every year without fail. Do we have this high inflation in Pune really? So far Pune seems to defy all the logic wrt RE prices

Anonymous said...

"Earnings in India for many households is > 1 lacs"

Most of them own houses.
Why then do you find so many options for rent?

When i was house hunting i had around 15 houses available.

So there are plenty of choices for renters which means demand is low

If EMI is 3 times and people are ready to pay then either they are over confident of their future or they are plain fools

Anonymous said...

//Most of them own houses.//

Nope, most are immigrants and new generation. Past years owner had to save money and in their 40's houses were purchased. Today boys in their 20's are buying/owning a house.
Also there is concept of multiple houses ownership.


// Why then do you find so many options for rent? //


Because there is no collective lobby for people who want to rent. they are not negotiating hard. Because they are already owner of houses they are taking it easy.

// When i was house hunting i had around 15 houses available.
So there are plenty of choices for renters which means demand is low //

Demand supply logic is always skewed/manipulated. Low demand doesn't mean supply is huge. If you search for houses there are 30 available, but are prices low? NO.

// If EMI is 3 times and people are ready to pay then either they are over confident of their future or they are plain fools //

If they are capable of paying their EMIs and managing their finances, I don't see what is wrong in being optimistic of future.

Anonymous said...

@Anon - "Because there is no collective lobby for people who want to rent. they are not negotiating hard. Because they are already owner of houses they are taking it easy."
There is no lobby for owners either.


"Low demand doesn't mean supply is huge. If you search for houses there are 30 available, but are prices low? NO."
Did you even read the previous posts. You seem to have missed the point that prices are high, but rents are low. i.e. high P/E ratio. Mean reversion will follow.

Anonymous said...

RE market is so opaque it's useless trying to gather any data. Instead look at the prime drivers of RE buying/renting.

Finance/business seems to drive Mumbai/Delhi market.

IT seems to be for tier 2 cities like Pune/Bangalore/Hyd.

What's happening in these sectors. If they are expanding, there will be sustained demand for rentals.

If they are offering bonuses and the like, employees would feel comfortable and/or become eligible to take on mortgage debt.

Anonymous said...

you have 70% of the population under 30 years old, they will buy houses/ apartments. IT sector might slowdown, like Infy , but the INFY CEO still makes millions. Property prices come down 20%, he will buy land or property, or his son will buy or his wife will buy. Stock market not going to collapse since INDIAN stocks not selling at high pe( not much growth now), unlike the dot com bubble when stocks sold for billions( market cap),while they never made any profit. INFY growth has slowed down, but they still make $$$$$$$$$$$. All these companies sitting on cash, unlike the dot com stocks. Millions of Indians living outside India, coming back home, and they all have retired. They all make over 2000 dollars per month( pension+ social security), they can afford high priced homes. So this pipe dream of real estate collapsing, not going to happen. I hope it collapses, but it will not happen.

BLAME the ELITE for this, but it is the 99% who made them elite. You voted them in, you pay big moneys to watch their movies, you buy their advertising products, you worship them, so you deserve to be hosed. Keep doing that, and then complain. Jai Hind. I have to go now, Amir Khan movie about to start.

Anonymous said...

BAchan, Amir Khan, Salman Khan, Indian Cricket team, CEO's of CO's all live outside India, most of the time, but you idiots still support them. So make sure to go and watch Salman Khan's movie, and help him buy 5 million dollar house/ apt in Delhi, Bombay, and 10 other cities. Thank you for your time.

Anonymous said...

BLAME the ELITE for this, but it is the 99% who made them elite.

Agree.

99% is trying to prosecute the criminal elite now. Too little, too late?

Whiff of smoke arising out of wall street and europe regarding derivatives scandals and market rigging.

Need a few honest public servants to save the masses!

Here's an example of how the elite are being punished:

Google (that company whose slogan was "do no evil") slapped with LARGEST FINE IN HISTORY OF FTC (a princely sum of 22 million USD)

Caught violating user privacy of all things!

Ouch, thats gotta hurt considering their 10000 million in quarterly profit.

But more importantly, how many will stop using Google products. Hold them accountable?

Therein lies the rub my friends. Politicians and corporations sodomize us day in and day out and majority are helpless/clueless victims.

Keep showing up to work, pay your mortgage and taxes on time. Play your part without asking too many questions and reassure yourself and everyone around you that "All izz well!"

Anonymous said...

Sachin will fly to England, to watch Roger Federer play tennis, live in England for 2-3 weeks, and come back home. You all make sure to buy his bat next time, while he purchases a 10 million dollar beach property, with your hard earned $$$$$$. Then the masses cannot find the reason, why the prices of home keep going up. :)

Anonymous said...

^^^ BTW. that is the mother of all bubbles.

Anonymous said...

Why is Sonia Ghandi ever elected??? what qualifications does she have???? you are telling me that India has 600 million women who are not qualified, but we have to get a Italian waitress to lead the country???? now all of a sudden her son is the next leader??? 600 million men in the country, but you idiots going to elect the next guy who happend to have a Ghandi name. IF a movie star runs for some lame asrse post, he gets elected. wtf, is wrong with you people???? why they f cant you get 1 sob who is not related to some politicians or some movie star?????? Amitabh bachan runs, he will get elected. His hot daughter in law runs, she will get elected( i have no problem with that, since she is hot).

Anonymous said...

BTW. don't ask/discuss this openly in your workplace but it is an unwritten policy of large corporations to treat various regulations and consumer protections as optional.

High paid legal teams and consultants are hired to do a "cost-benefit" analysis of complying with the law vs. breaking it and paying a fine instead.

All those ethics courses and training videos are for the clueless wage earners.

If you think ethics are being debated in executive board rooms, you got another thing coming. Big business is all about getting an *unfair* advantage over everyone else.

Anonymous said...

Indians being tested for new depths of dumbness...

http://www.hindustantimes.com/business-news/CorporateNews/Now-Disney-to-come-home/Article1-876729.aspx

Per the previous poster on how we unwittingly enrich the 1% "brand" ambassadors, now folks will pay a royalty to Disney for the privilege of owning a cartoon inspired apartment!!! WTF?!

But Indians are not alone to blame. In the 1980s a certain actor was elected governor of Cali and subsequently president of US.

A compulsive womanizer was elected prez.

A spoilt brat with a massive drinking problem was elected governor of Texas and later president in US simply because of his family name.

Multi-millionaires are routinely elected as "representatives" by a population who wouldn't see a million dollars even if 10 generations slogged their asses away.

Unfortunately, democracy is a tyranny of the morons.

A benevolent dictatorship is what most humans are designed to operate under (which is what a corporate structure is, BTW.)

GSM said...

US Declares largest ever natural disaster due to drought

So what is the compensation? Loans with Low interest rates... LOL ...

Anonymous said...

How the bubble corrected in the USA ---

http://www.nytimes.com/interactive/2010/04/20/business/20100420-rent-ratios-table.html

Since then (2010), the p-r ratios have fallen further, partly due to falling prices and partly due to rising rents.

Likely same will happen here.

Anonymous said...

i bought 10 flats of 35 lakhs each in venuspark land ahmedabad .. My friends r saying i committed a mistake..yu can buy big residential plot in indore which is growing fastest in asia ..what u think

Anonymous said...

looks to me prices are here to stay. cant afford it, you cant
http://www.thehindu.com/news/cities/bangalore/article3634542.ece

aam aadmi said...

^Builders cannot raise prices any more because houses won't sell, the cow is sick and cannot be milked anymore. They will have to cut down on margins to accommodate the prices.

Anonymous said...

^
with more people earning in $ and investing/buying in India do we even have half a chance other than whine?
Dont get me wrong. i agree cent percent with you. but just being practical.

Pawan said...

Anon:
looks to me prices are here to stay. cant afford it, you cant

This is stagflation!

Btw let us not forget that the money invested in most RE projects is FDI money who are promised/expecting 100% return in 3 year before they invest. This is about 25% every year.

If they can't sell for 1 Cr this year, they will have to sell for 1.25 Cr next year to get the same return. Of course that is even more difficult. Interesting to see how long the foreigners can hold.

Please note that just like stock markets are driven by FII money, RE market is high on FDI. Local builders/politicians/mafia do not have enough clout to affect anything.

StumpedInPune said...

@ Mango Man

These are actual average numbers from Pune market (Pimple Saudagar area; not prime locality by any standards)

New 2BHK Sale Price

2009 : 35 Lacs
2010 : 45 Lacs
2011 : 55 Lacs
2012 : 65 Lacs

Meaning prices have been increasing 23% every year without fail. And there have been buyers at every pricing; just roam around and check availability; there is close to none. Year 2008/2009 was a Black Swan event; people must have wised up after that...if everyone is waiting for price reduction...guess what it would not happen...

Anonymous said...

"looks to me prices are here to stay. cant afford it, you cant"

Construction costs are a very small part of the price of housing in the cities (less than 10%). Even if construction prices go up by 20%, that will have a negligible effect on the price of constructed housing.

Where the correction has to happen is in the price of land. And that is simply not happening. I just spoke to a friend yesterday who is a huge land speculator and he was going on about how he bought this plot of land in 2009 for 25 lakhs that is now worth 1.25 Crores.

This was just yesterday. Correction? What correction? Not in India.

We are different.

Anonymous said...

"Please note that just like stock markets are driven by FII money, RE market is high on FDI. "

So why haven't RE markets corrected like the stock markets have?

Anonymous said...

@Anon - "I just spoke to a friend yesterday who is a huge land speculator and he was going on about how he bought this plot of land in 2009 for 25 lakhs that is now worth 1.25 Crores. "

RE = landprice + commodities + labour.

The commodity bubble is bursting. The land price bubble will follow.
BTW, your friend is in all probablity exaggerating.

Anonymous said...

// I just spoke to a friend yesterday who is a huge land speculator and he was going on about how he bought this plot of land in 2009 for 25 lakhs that is now worth 1.25 Crores.//

Is your friend asking/selling for 1.25 Crores or simply speculating? Does he have genuine offers? I assume he must looking at RE buying epidemic going on in India.

Real price is what buyer is ready to pay for your product and not what is speculated in market.

Anonymous said...

Where the correction has to happen is in the price of land.

I think we have a winner.

aam aadmi said...

@StumpedinPune
When I was a kid, I was growing tall at an astonishing rate, if I had extrapolated that trend at that time, by now I should have been 10 feet tall, of course I am not that tall.

Prices are not forecast based on previous trends but on economy's current condition and future trends. Nothing supports your RE will keep going up theory. Pay hikes are stagnating and inflation is eating away all spare income, why would prices keep rising, who is going to buy those flats ? Santa Claus ?

StumpedInPune said...

@MangoMan

Nice analogy..but that's it.

All of us would like price reductions; but since inflation is not going to go down, why should RE come down?

I was long bear on RE; sitting on fence since 2008, and trust me it is hurting a lot, now I am thinking if I do not act now; I would be priced out foreover.......

polt said...

@stumped - "All of us would like price reductions; but since inflation is not going to go down, why should RE come down?"

Because RE has gone far ahead of inflation in the last 7-8 years. So it will likely stagnate or fall till inflation catches up.
This is not just hot air theory. See the residex charts. This has happened in Bangalore, Hyderabad, Jaipur, Kochi.
Even Delhi,Mumbai are showing signs of peaking. QoQ growth has slowed. You can question the accuracy of the numbers, but the trend is quite clear. http://www.nhb.org.in/Residex/Data&Graphs.php

Pawan said...

Pawan: "Please note that just like stock markets are driven by FII money, RE market is high on FDI."

Anon:
So why haven't RE markets corrected like the stock markets have?

Multiple reasons:

1. Foolish hope of investors.
Recently a dutch pension fund invested millions in Godrej properties. Pension funds promise 8-10% returns to the employees who contribute to pension and unable to make such returns they take risks. Many such funds have been wiped out in the 2008 stock market crash fiddling in derivatives. They are hoping to make huge returns in India/China RE but they will burn here too. Rupee depreciation will take away all their gains even if RE prices didn't fall. RE fall will wipe them out. You can imagine the ruckus when someone is told their life savings have been wiped out.

2. You can not short RE markets.
There is no profit for big operators to do anything to make the housing markets fall. You can't make money shorting RE. This makes RE fall slow and protracted.

3. Exit from RE is not easy.
One can sell stocks easily. If you have huge number of stocks in a company, you can buy options to protect current price and then go on a selling spree. You will make money both on stocks and its options.

4. There is no data available.
How do you even know prices have not corrected?

5. FDI in realty has fallen by 92%.
Link:http://www.financialexpress.com/news/realty-share-in-fdi-slumps-to-1.94/952559/
The effect will be seen soon. This means less and less new projects will be launched. The current one will have to be finished since there is money stuck. This may paradoxically hurt new supply. A few builders will go bust and the FDI people who bring in fresh money will come hoping for more modest returns and projects will be priced sanely.

Anonymous said...

@polt:
what i dont understand is this. how can the 2007 index show 100 for bangalore and 92 in jan 2012. havenot the prices doubled here since then. then what are these numbers?

polt said...

@Anon - "what i dont understand is this. how can the 2007 index show 100 for bangalore and 92 in jan 2012. havenot the prices doubled here since then? "

Prices have certainly not doubled. Atleast not where I stay(North Bangalore). My dataset is very small though. (two apartments in two different buildings). They were on offer for about 70L in 2009 Jan/Feb ... no one bought. One was rented out. Both were still on sale for 70L in 2012 Jan, agent says negotiable. Both apartments are from reputed builders and look well built (at least to my untrained eye).

Unlike stocks where you get accurate data, RE is mostly based on hearsay. Plus folks only brag about their profits, no one talks about losses.

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/mumbai-q2-office-space-absorption-falls-to-lowest-level-since-2009-dtz/articleshow/14866108.cms

Commercial RE slowdown. Strong leading indicator of the job scene. This time may be as bad as 2008/09.

polt said...

I can speak from personal experience too. A small plot of land that I bought a fair distance from Bangalore in 2009 has hardly appreciated in price. I would be lucky to get a 15% nominal gain if I sell today. (i.e. a loss in real terms).

Anonymous said...

- become a tenant
- change house every year
- pay brokerage, security deposit, movers, stamp duty every year
- always at the mercy of your landlord

I can understand why some people here just don't feel like renting.

Anonymous said...

have you seen marathalli, whitefield. its astonishing.

Anonymous said...

@polt: have you seen marathalli, whitefield. its astonishing.

Anonymous said...

lol, I wonder if this is legit:
http://www.globalpropertyguide.com/Asia/India/price-gdp-per-cap

samix said...

- become a tenant
- change house every year
- pay brokerage, security deposit, movers, stamp duty every year
- always at the mercy of your landlord


Very true, for the past two years due to some personal reason we were forced to rent out own flat and move to a rented flat ourselves, it was a pain. The cunning brokers, the haggling landlords, paying the movers and packers. Especially changing flats every 11 months. Infact my parents had to cut short their stay with me in the Middle East and run mid way to India because the landlord would not increase the lease even by a few months so that my parents could live their entire visa term that we had payed for.

On the other hand in the Middle East and the west, renting is a breeze and any day more profitable and hassle less than owning your own house, in India it is a nightmare.

Anonymous said...

^ Samix, correct if I'm wrong, isn't this 11 month rent period phenomena exist only because landlords/tenants want to avoid stamp duty and registration of agreement?

Anonymous said...

correct if I'm wrong, isn't this 11 month rent period phenomena exist only because landlords/tenants want to avoid stamp duty and registration of agreement

There are numerous reasons. Prime reason would be weak legal infrastructure and a prevaling attitude of "might is right" which makes landlords extremely jittery about tenants who "establish" themselves in their property.

A friend had his flat for rent in a posh locality in Pune. Since he is in US, his parents made rental agreement etc. on his behalf. Now it turns out the person whom they rented to is politically well-connected. He doesn't pay rent on time, has over-extended his lease and also damaged the flat contrary to the lease terms. My friend has no recourse. His aged parents are not in position to run around Indian court system.

The motive of this tenant is unclear at this stage but it seems like eventually my friend will be forced to sell this property at a loss / below market rate to this goon.

Anonymous said...

This is great news for buyers
http://timesofindia.indiatimes.com/city/delhi/Boon-for-flat-buyers-Deed-possible-without-builders/articleshow/14916484.cms

Anonymous said...

unbelievable story in shining india
http://www.bangaloremirror.com/article/10/2012071520120715123817328dfcda6e6/For-7-years-Std-X-pass-held-plum-posts-in-IT-majors.html?pageno=1

aam aadmi said...

^This is not so much a sign of corruption as it is a sign of how useless academic degrees are.

This guy went through IIM and was earning money purely based on his hard work and merit, I don't see anything wrong with it. What's the big deal about a degree anyways, some people are simply nor fortunate enough to get one, doesn't mean they are incompetent. Of course he shouldn't have lied, but then he wouldn't have got the job either.

I know a couple of guys who quit after 12 standard, brilliant programmers. Although in their case they were lucky enough to have been accepted in-spite of not having any degree.

StumpedInPune said...

@Polt

Because RE has gone far ahead of inflation in the last 7-8 years. So it will likely stagnate or fall till inflation catches up.
This is not just hot air theory. See the residex charts. This has happened in Bangalore, Hyderabad, Jaipur, Kochi.
Even Delhi,Mumbai are showing signs of peaking. QoQ growth has slowed. You can question the accuracy of the numbers, but the trend is quite clear. http://www.nhb.org.in/Residex/Data&Graphs.php


Agree with you that RE has gone far ahead of inflation..

Not sure how accurate is this residex data...for it shows downward trend in major city like Hyderabad

Data or no data, Mumbai market has been out of reach of common salaried class since ages...now I feel same thing is happening in Pune RE market..prices there have been on continuous rise without fail...have not seen any slowdown signs in Pune yet..there are lot of new projects and there is dearth of buyers..I have talked to lot of people (no experts though; common folks like me) and everyone strongly believes prices go only up...

StumpedInPune said...

^^
correction above..
and there is NO dearth of buyers..

Anonymous said...

Stumped,
Why don't you buy more RE and be happy instead of preaching here. Buy more as it will only go up and shut up.
You should not be left behind. I would say buy, buy, buy as prices will double in two years.

I am selling all my RE investments and putting the money in bank and abroad. But you should buy.

Anonymous said...

http://articles.timesofindia.indiatimes.com/2012-07-13/india/32662654_1_punjab-s-malwa-water-uranium-uranium-contamination

// --
"The level of uranium in the ground water is 50 percent over the WHO norms. The source of this is not yet known. Punjab is the only state to have uranium in its water," Ramesh said here.
-- //

Some guy on RE Forums said there was also news of finding uranium in water of Gurgaon. What the fuck.

Anonymous said...

//
What's the big deal about a degree anyways, some people are simply nor fortunate enough to get one, doesn't mean they are incompetent.
//

[Off-topic]
I wonder if we had a system of community colleges, would that help these kind of people? I know few people who dropped out of their high school but later in life wanted to join college for higher studies (of course they couldn't because we don't have GED system).
[/Off-topic]

Anonymous said...

http://www.indianexpress.com/news/why-is-india-corrupt/974515/

May not address all aspects but shines light on our culture of subservience

Anonymous said...

when is this correction going to happen?? any guesses????? you have European crisis now, but it really is not bringing the prices down. US economy is stagnant, but prices in India is not coming down, IT CO's struggling now, but prices not coming down. What happens if Europe improves little??? or the US economy improves little????? when the IT co's grow at 20% year over year??????

Anonymous said...

Anon above:

Hang in there. If there is another recession in US soon, it will burst in all over Asia. The problem is that the Govts are supporting this big scam alongwith banks and builders and they have power over policies.

But it will burst as they cannot sustain it for a long time.

StumpedInPune said...

To the anon above who is suggesting to go and buy more RE..

I am trying to make an informed decision here; as to should I wait or should I take the plunge.
While past price rising from 2009 is no guarantee that prices would continue to rise in future; there are as well no signs of slow-down either (in Pune at least). While its clear now that, 2009/2010 was really good time to buy (Don't ask me if I were sleeping throughout 2009 and 2010); what happens if I commit myself now? Its easy to say that if you are buying for your own use, then price fluctuation do not matter; its easier said than done.

Right now, I am under lot of pressure from my wife, mother, mother-in-law, father, father-in-law, my own kids, my relatives, my friends, to buy before prices rise. I clearly see that RE prices have been rising close to 25% every year; at least my salary/savings have not grown at this rate. RE in Pune (at least) does not follow any logic; there have been buyers at whatever rate builders are quoting. Come to think of it, the whole balance is tilted in builders favour; there is 30 % or more loading (salable vs carpet); additional charges for car parking; upfront maintenance, floor rise and what not. For a buyer like me; I have to put my neck in line to buy a decent flat at decent place. Middle class people like me bargain for a rupee or two with the local subjiwalah; but when it comes to buying RE; I feel I am hopelessly toothless......I have to feel positive about buying a place where I am planning to spend rest of life happily; why I do not get that feel?

Pawan said...

@StumpedInPune
why I do not get that feel

That answers your question.

Most of us are under peer pressure (call it wife, relatives, kids, friends, colleagues) to buy at inflated prices but most of us are resisting because we don't feel comfortable buying at this price.

If you can afford it then go ahead. There is a good chance you will see someone buying the flat next to yours 20% cheaper next year. If you can live with that, sure go ahead. After all it is a discretionary purchase to an extent.

Anonymous said...

Stumped:

I was under similar pressure from my in-laws and my parents to buy a house in 2001 in US. I talked to my wife and asked her if she trusted my judgement. She said she is with me and waiting would be okay. We waited till 2006 and she was losing her patience. Then I started renting a similar house that we would buy but still didn't buy and told her that you want to live in a big house and here it is. She was fine with it but owning a home is a different feeling.

Finally I bought the house in US in 2010. Guess what, the house that we bought was selling for 750K USD at peak price and I bought is for 300K USD. Now my whole family is quiet since then but they say India is different and I should buy in India now.

You have to understand that 99.5% people are in rat race and stupid. They don't want to believe that it is too good to be true. I told them that I'll buy in India, when prices are 60% down from current levels and they say you are dreaming.

Well, cutting the story short, people in US have seen this whole movie and India is not even at the intermission point of the movie. When it will go down, India will be toast and GOI will not be able to do anything. Keep your cash safe and happily rent. You can tell your folks nicely or loudly that it is your money and you can't waste it for their ego and showing.

You'll see bubbles bursting in China, Canada, Aussie, Hong Kong, Korea, Singapore annd India very soon.

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/property-sales-slump-in-kerala-as-nris-lose-faith/articleshow/14977601.cms

Another argument used by bulls here - "NRI money and rupee depreciation".
Has not worked in Kerala. Probably will not work elsewhere.

Anonymous said...

// I was under similar pressure from my in-laws and my parents to buy a house in 2001 in US.

I would not compare India vs USA. There is a huge difference in renting in USA vs India. In India if you rent you have to deal with brokers, landlord, moving and so many things. I never bought a house after living for 10 years in USA. Back in India in 2011 and my wife and inlaws are pressuring me to buy. They say that if people who never went abroad can buy a house why cant you. The pressures when you are in USA is different when you come close

Pawan said...

@Anon
In India if you rent you have to deal with brokers, landlord, moving and so many things.

If you buy you still have to deal with these people. If your neighbour is a nuisance you can move out if you are renting. What would you do if you were an owner?

These arguments are the discretionary side of RE story. Just as buyers justify why they bought, renters have equally strong arguments about why they haven't.

It is the financial side of it which should make sense. If it does, go ahead and buy. No body should be giving free advice to people on what they should or should not do with their money.

aam aadmi said...

@StumpedinPune
No one can predict the future, this bubble could last another 10 years, who knows. By that time you would have finished your mortgage payments.

OTOH prices could crash in the next six months, it all depends on your appetite. The usual advice I like to give is not to go 'all in' like poker. If you have income to save as well as pay EMI's, it's not such a bad idea.

GSM said...

Been to Realty expo in Bangalore yesterday, Here is what I noticed

1. Compared to previous ones I visited in 2010, there were not many people around clearly showing lack of demand

2. The selling price of the plots was high, even in North Bangalore unlike what Polt says. LOL, one guy even guaranteed a doubling of my money in 1 year. In other words I would be paying double if I miss the opportunity now.

3. The exhibitors were trying to rope in only for investment in properties showing how much ROI you would get. No one was trying to sell on end use or on quality of their product.

4. 90% of them were ready to negotiate on the prices. I would assume this is because they have a problem with liquidity.

Pawan said...

Please refer to the image:
http://www.moneycontrol.com/news_image_files/2012/p/PPF.JPG

In 1990-91, there were debt instruments returning 15%. In fact everything other than savings account rate was 12% or more.

In 2002-2003 there was nothing that offered more than 9%.

This is the real cause of bubble. Not paying fair returns to savers.

India growth story has been based on paying zero to negative real returns to savers. Same as Ben Bernanke did in US. So how is our bubble different than theirs?

polt said...

@GSM - "The selling price of the plots was high, even in North Bangalore unlike what Polt says."
In my defence, I did not say prices are low. All I said was that apartment prices in N.Blr have not gone up in the last five years. They are merely back to about where they were before the 2008 crisis.


"LOL, one guy even guaranteed a doubling of my money in 1 year."
Why is he selling it you. He should borrow against all his present assets and invest himself :)

GSM said...

They are merely back to about where they were before the 2008 crisis.

May be, but they have atleast doubled from their 2009 lows.

aam aadmi said...

http://www.hindustantimes.com/News-Feed/SectorsInfotech/No-wage-hikes-at-Infy/Article1-890061.aspx

It is official. Infosys, which was for years an object of envy as an employer for its fat pay hikes, stock options and global dreams, is enforcing an across-the-board wage freeze this year. This is unusual, because its key industry rivals Tata Consultancy Services (TCS) and Wipro Ltd have
gone ahead with salary increments, although the information technology sector as a whole has been hit by a sluggish recovery in the US and a persisting economic crisis in Europe - the key export markets for India.

REBear said...

Folks,

Is this happening in Mumbai ?

http://m.timesofindia.com/city/mumbai/Realty-rates-drop-in-Lower-Parel/articleshow/14968929.cms

Anonymous said...

@REBear - there is no drop except in media. People are asking more and more everymonth. Just 2 days ago, some one asking for 1.5 crore for 300 sqft flat in Mumbai. Nope this is near Thane and not in south mumbai.

Go figure. People who have no debt and nor have need of money.. they are the one asking ALOT.. they have holding power (no they don't have buying power).

Anonymous said...

Anon above:

If they have holding power why don't they ask 3 crores or more for a 1.5 crore house.

Holding power doesn't mean anything. When the prices drop all over, people who are owning the RE free and clear will lose it from their profits.

In US, all people who had loans and only 5% down payment benefited from all this downturn as they gave the keys back to the banks and walked away. Those who were waiting and holding on to their RE as they could hold ( paid off RE), are losing more than 50% of value from their savings wipe off.

In India it is all stolen money people park in RE. Easy come annd easy go.

Don't you guys feel it is too good to be true. How can a flat worth 25 lacs in 2007 now worth 2 crores? Something is really really wrong and will correct with time. Sell, sell, sell and keep your money in savings before it is too late.

But how would people save thier black money or proceeding from a sale of a house which is black money. Say someone receives 2 crore in a suitcase. How can he park it? In a locker or in another RE. Majority of th eblack money component will vanish.

Anonymous said...

Warnings have already been sounded in Hong Kong of a possible bubble if proper policies are not put in place, while in China the government has taken several steps to curtail real estate speculation

Prices of residential projects in many Asia-Pacific countries are flat or declining, led by the biggest market, China. Hot spots such as Singapore are also facing price declines in many residential projects.

Hong Kong, the leading property market in Asia, is also accelerating land auctions in order to counter decreasing prices in the residential sector, which stemmed from earlier measures aimed at taming rapid price appreciation.

UK-based Jones Lang LaSalle also foresees residential prices in China, Singapore and Hong Kong continuing to fall through this year. Indonesia is the strongest market in the region.

In Hong Kong, home to thousands of financial professionals who buy property for investment and speculation, people are not confident about buying property assets and are waiting to see how developments in Europe play out.

Conditions are also dire in Singapore. According to Singapore Business Review, more than 50% of units in some new developments remain unsold. The number of launched but unsold units reached a record 8,245 in May, it said, quoting data from Savills. Private property sales in the city state plunged byHe likens the crisis in Europe to a cancer, while the United States is recovering from a heart attack. Both had enjoyed prosperity for so long, they couldn’t see a crisis coming.

“I believe that the crisis is getting worse. This is just the beginning. It will last a long time. There are tough times ahead for us. Only those who can protect themselves can win.”

India is in the same boat. It's just that people all over the world with bubbles think they are different and come up with justifications why their bubble wouldn't burst.

Anonymous said...

Right now, I am under lot of pressure from my wife, mother, mother-in-law, father, father-in-law, my own kids, my relatives, my friends, to buy before prices rise.

IMO, there is no price for peace of mind. So IF you can afford the mortgage and it would ease the societal pressure you're facing then I'd say go ahead and do it.

Real estate cycles take decades to work their way through and you cannot postpone your life based on events that are completely out of your control.

Take solace in the fact that everything in this day and age of hype and marketing is overpriced.

I bet many on this forum who get outraged when builder charges 3x construction cost waited in line to eagerly pay 3x-4x for an iPhone/iPad.

Anonymous said...

JAPAN has the oldest population in the world, while India has the youngest under 30 population. Indian stock market pe is around 15 or lower now( not expensive). Land value can still go higher, while flats might not have too much upside potential, but it is not going to go down much.
Indians dont like to sell for a loss, but they might commit suicide.

Anonymous said...

@Polt,

"I can speak from personal experience too. A small plot of land that I bought a fair distance from Bangalore in 2009 has hardly appreciated in price. I would be lucky to get a 15% nominal gain if I sell today. (i.e. a loss in real terms)."

So let me get this straight. You've been buying RE on the side while at the same time touting an impending real estate collapse on this board?

Do you work for Goldman Sachs by any chance? You remind me of "Fabulous Fab".

Pawan said...

Construction in Gurgaon banned because there is no water:

http://timesofindia.indiatimes.com/city/gurgaon/New-construction-in-Gurgaon-put-on-hold-to-tackle-water-problem/articleshow/15011124.cms

Anonymous said...

^ Wait, this will increase prices, right? supply < demand. People don't need water.

Anonymous said...

we all grew from a few inches to about 4 ft in 8-10 years. @ same rate of growth, we would have been more than 10 ft now. are we so?

Anonymous said...

agreed that prices might increase a lot in the first few years after construction, there is no way this is sustainable. having seen the crash in US all to closely, its a matter of time the IT jobs move over to regions of lower costs. theres no way these pigeonholes in open shit can cost as much as a 8000 sq ft villa in the US! no way.

polt said...

"So let me get this straight. You've been buying RE on the side while at the same time touting an impending real estate collapse on this board? "

1. Nope. I bought it four years back at the peak :(. Have not bought anything since then. Do not plan to buy anymore, at least not at current valuations.
2. If I were an i-banker, I would be 'talking my book', touting RE and conning someone into buying. I would NOT be talking about an impending correction.

polt said...

Canada - similar story as us. Sales are lower, but prices higher :) .

But wait, we are different ...

http://www.thestar.com/business/article/1227035--house-sales-decline-across-canada-but-prices-up-across-the-gta

Pawan said...

In our office, we were just discussing about Indian e-commerce sites and I realized that if this clicks, and believe me the cost conscious people are using these sites big time, then pretty soon all retail space in metros will be toast! In smaller cities, people will still go to a shop to buy stuff but in metros people will frequent the malls just for movies and restaurants. What say guys?

http://www.economist.com/blogs/schumpeter/2012/04/e-commerce-india

Anonymous said...

@Pawan - It will not be easy.
Flipkart is running out of cash and laying off people ---

http://timesofindia.indiatimes.com/business/india-business/Flipkart-needs-big-money-to-keep-delivering/articleshow/15012709.cms

Anonymous said...

^^^ Unlike Western economies, e-commerce is a niche segment in India where vast majority of retail transactions are still in cash.

Those blindly aping the West are doomed to failure.

Anonymous said...

theres no way these pigeonholes in open shit can cost as much as a 8000 sq ft villa in the US! no way.

Are you dense? Get out of your mental bubble and witness reality.

And whats up with this fascination with shit? In the West they market it as organic fertilizer and you pay good money to eat food grown in it!

REBear said...

This is how you enjoy other people's money through negative real interest rates :

http://mobile.bloomberg.com/news/2012-07-16/zuckerberg-s-loan-gives-new-meaning-to-the-1-mortgages.html

Anonymous said...

@Polt.

"1. Nope. I bought it four years back at the peak :(. "

I don't understand. Why did you buy when you were convinced there was a bubble? Or were you not sure there was a bubble four years ago?

Anonymous said...

"Canada - similar story as us. Sales are lower, but prices higher :) .

But wait, we are different ..."

Toronto is a ghastly vortex of the two worst RE bubble-inclined ethnicities on the planet: Indian and Chinese. No wonder they have the last unexploded RE bubble in the Western world there.

Indians and Chinese. Whereever you find either of these two ethnicities in abundance you can bet your bottom dollar that they will blow up RE bubbles: Canada, Australia, Singapore, Hong Kong, South Africa, Dubai, UK not to mention of course India and China.

It's always the same story: Indians and Chinese.

Anonymous said...

In most Asian cultures, docile females and sex starved males is recipe for population bubble and inevitably fuels RE demand.

Anonymous said...

"In most Asian cultures, docile females and sex starved males is recipe for population bubble and inevitably fuels RE demand.""

In case you haven't noticed, Indian and Chinese females are no longer "docile" today and sex is abundantly and freely available in both India and China.

polt said...

@Anon - "Or were you not sure there was a bubble four years ago?"

Yes. Was younger and naiver. Besides, I had not yet found this blog :)

I still believe RE should be part of one's portfolio. But one should be extra careful especially when leveraging.

I did not lever up to buy, and who knows maybe in 15-20 years the price may recover (or at least retain value in real terms).

analog said...

"In most Asian cultures, docile females and sex starved males is recipe for population bubble and inevitably fuels RE demand.""

shabash! give him a PhD

aam aadmi said...

docile females and sex starved males is recipe for population bubble and inevitably fuels RE demand

I think I can quickly summarize the argument of an RE bull

ABC, XYZ...blah blah blah hence RE prices will keep going up...

Anonymous said...

"I think I can quickly summarize the argument of an RE bull"

I think we have to redefine what value means in the context that a human life is necessarily finite.

There is no such thing as "objective value". Objectively, a house in an Indian city may not be worth more than INR 40 lakhs (max). A flat should sell for no more than 20 lakhs. However, we don't live in an ideal "objective" world and the Indian RE bubble has taught us all a rich lesson that we don't have the luxury of years, indeed decades, to wait around waiting for prices to correct to objective levels.

For the time being, we should accept the true value of such assets as the value that the markets assign to them (for whatever reason) and live with it.

Anonymous said...

In most Asian cultures, docile females and sex starved males is recipe for population bubble and inevitably fuels RE demand.

Let's not forget, more people = more shit!

skeptic's ghost said...

Ha,
From 2001-2010 India Added 200 million babies. It's another matter that most of these will be occupying slums in coming decades. The wall street gurus and their government chelas will paint this as a demographic dividend and blow the bubble even higher

polt said...

Melbourne = Mumbai ?
1. Home Sales down 40% - Tick
2. Inventory more than 2008 levels - Tick
3. Construction still on - Tick
4. Prices rising - Tick.

But wait. We are different ...

Anonymous said...

On a canadian housing blog, I found this comment. Replace Toronto by Mumbai/Delhi, and Iranians/Chinese by NRIs and you will get the usual stuff peddled by the bulls on this blog :)
Funny, how people everywhere think their situation is different, but the reasons turn out to be the same.

...[High prices have] been fuelled by the following factors:
1) Iranians, Chinese and other wealthy internationals are parking their cash in Toronto. Its a big city, there are lots of free benefits and its safe.
2) They are not building more land. The land is used, scarce, populated.
3) Prices will always go up b/c of the above two and the fact that NO ONE walks from their mortgage. Ever. Or will ever again.
4) The government CANNOT allow prices to fall. Ever. Or we’ll be more screwed than the US.

GSM said...

In our office, we were just discussing about Indian e-commerce sites and I realized that if this clicks, and believe me the cost conscious people are using these sites big time, then pretty soon all retail space in metros will be toast!

I would say in the coming years technology will change a lot of other things not only retail. A few examples

1. Able to watch a newly released movie streamed on your LCD TV on demand at a fraction of the cost of that of a multiplex

2. Your kid able to take classes live on internet instead of having to go to school and taught by the best teachers at a fraction of International Schools' fees

3. Consulting a doctor live over internet for petty diseases from home without having to take an appointment

4. And the best of all, able to work from anywhere in the world with your colleagues with just a internet connection (We guy already do with our counterparts in other countries, why not the same with the person next to you?)

Of course people always tell me that they go to malls for the experience not only for the movie, doctor and teachers cannot be replaced by virtual ones or we always have to sit together physically and work. Well, tell me how many of you book tickets online vs going to a travel agent or recharge your mobile/DTH online or read news online? Did you change your behavior from a few years before?

Anonymous said...

"Melbourne = Mumbai ?
1. Home Sales down 40% - Tick
2. Inventory more than 2008 levels - Tick
3. Construction still on - Tick
4. Prices rising - Tick. "

Don't understand your point. Melbourne is like Mumbai in that sales are falling but prices aren't. So what?

This is what is happening worldwide wherever there are Chinese and Indians, the two most "RE can only go up"-thinking communities.

Melbourne, like most cities in Canatralia (Canada + Australia) is chockful with Indians and Chinese.

RE will never *ever* correct meaningfully in India, China, Canatralia, Hong Kong, Singapore or anywhere else where these two groups abound in large numbers.

INDIANS AND CHINESE WILL *NEVER* EVER SELL REAL ESTATE ONCE THEY ACQUIRE IT.

polt said...

"RE will never *ever* correct meaningfully in India, China, Canatralia, Hong Kong, Singapore or anywhere else where these two groups abound in large numbers."

1. Utter rubbish. You overestimate the ability of the two communities to hold up prices.

2. HongKong, Singapore fell massively during the Asian Financial crisis (1996). Infact prices there have just about reached 1996 levels currently.

3.Canada is slowly but steadily heading the USA way.

4. How do you explain California RE bust? Both these communities abound there.

polt

polt said...

Incase anyone is interested
1. Hongkong RE data - http://static.alsosprachanalyst.com/2011/01/Hong-Kong-Real-Estate-History-in-a-chart1.png

2. Singapore -
http://www.singaporerealestate.info/property%20price%20index%201960%20to%202010.htm

Kulbir said...

Hi Plot,
Thanks for the data, people tend to ignore one important thing that Indian real estate bubble is part of a global real estate bubble. Prices have been rising incessantly for past decade or so all over the globe. Cheap money is what blows up bubbles and plenty of money is sloshing around thanks to generous central bankers.

Anonymous said...

// -- people tend to ignore one important thing that Indian real estate bubble is part of a global real estate bubble. Prices have been rising incessantly for past decade or so all over the globe. -- //

We have a winner!

Anonymous said...

US bubble, blown out of proportion. Cal, AZ, FL and maybe NV and couple of other states may have had a bubble, but 40+ other states doing just fine. 90% of the Desis in the US have jobs and they are all doing just fine. If you want to find a job, you can find job. It might not be in the IT field, but you can find a job.
Asian unemployment is the lowest compared to Whites, Blacks and Hispanics. You dont see too many Asian's homes foreclosed. Majority of the houses still have the house value from 2008.
Indian real estate not going to crash, because it depends on the elite, not the fresh out of the college guy making 60k/ month. Elites will still make the big moneys even if everything around them collapses.

Anonymous said...

Anon above:
You are a fool. Go ahead and buy more RE in India and get your ass whacked by your family pretty soon.

In US do you know how many houses are banks sitting on that are not even in the market. DC metro area brought only 15% of its foreclosed homes. As many as 20 million homes are lying vacant.

I'm not sure what world are you living in US, it is hard to find even $7 minimum hour job. People are buying guns to be safe. Look at the gun sale figures. Don't be too optimistic as less knowledge leads to buffoons like you. Go read about Fed printing, banking issues and world wide easy money that led to this massive crisis all over the world.

Get real.

Anonymous said...

^^ Regarding gun sales, US has 3 groups:

1. Guns & ammo survivalists
2. Gold bugs
3. Sheep

When the SHTF, those with gold/silver better manage to escape before those with guns come looking for them.

The sheep are going to get slaughtered either way.

Anonymous said...

"1. Utter rubbish. You overestimate the ability of the two communities to hold up prices. "

So explain China, India and Canatralia. There are no meaningful declines in any of those countries. In China, in a rare display of sanity, the government (imagine that, a government) has taken forcible steps to pop the real estate bubble. Despite that declines (if any) are only nominal. If anything, RE in China has actually started to rise again. See: http://www.forbes.com/sites/kenrapoza/2012/07/18/china-housing-bubble-re-inflates/

No one has really lost money. Any stories of people who lost money is purely anecdotal especially in Canatralia.

"2. HongKong, Singapore fell massively during the Asian Financial crisis (1996). Infact prices there have just about reached 1996 levels currently."

The difference is that we don't have a global banking system where Central Banksters are willing to do anything, including print trillions of dollars, to support asset prices. Hyper-aggressive monetary policy is here from now till the end of our lifetimes and beyond.

"3.Canada is slowly but steadily heading the USA way. "

Not a chance in hell. Canada's insane immigration policy alone will guarantee the continuance of the bubble.

4. How do you explain California RE bust? Both these communities abound there.

California is part of the USA which suffered a nationwide housing bubble. I don't consider the USA as a country that's heavy on Chinese and Indians. Indians and Chinese combined in the US are actually less than 5% of the overall population.

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polt said...

@Anon
"The difference is that we don't have a global banking system where Central Banksters are"
So which one is it for HK/SG? Is it Indians and Chinese or is it Central Bankers now :)

'Australia' - See http://www.debtdeflation.com/blogs/2012/05/01/australian-house-prices-down-10-from-peak/
Trend for this year is still down. No sign of flattening yet. Same in Canada.

"Indians and Chinese combined in the US are actually less than 5% of the overall population."

http://en.wikipedia.org/wiki/Demographics_of_Australia , http://en.wikipedia.org/wiki/Demographics_of_Canada
Check the numbers. Hardly an earth shaking percentage of IN/Chinese and certainly NOT enough to keep RE up.

You really ought to get some data to back up your arguments.

Anonymous said...

You really ought to get some data to back up your arguments.

Good luck finding any reliable data to do a data driven analysis on Indian real estate.

And if you want to maintain any credibility please do not post Indian government websites/statistics.

polt said...

"Good luck finding any reliable data to do a data driven analysis on Indian real estate."
Fair enough, so we try and draw parallels from other countries which have seen a similar run up in prices.

"And if you want to maintain any credibility please do not post Indian government websites/statistics."

Ok. Will ask my neighbourhood RE dealer for his assessment on prices, interest rates and the liquidity in the market and post that here :).

Anonymous said...

http://www.firstpost.com/business/watch-out-the-it-bubble-may-be-about-to-burst-381138.html
d'oh

Anonymous said...

INDIANS AND CHINESE only represent 5 % of the population, but they represent over 30% of the wealth in US, just like the Jews. Jews dont even represent 5 %, but they probably have 30% of the wealth. Hispanics and Blacks represent 25% of the population, but they only have maybe 10 % of the wealth. 75% of the motels/ Hotels owned by Indians and Chinese, even though they only represent 5 % of the population. Go to any hospitals, it is all Indians, Chinese or Vietnamese (Nurses or Doctors). Largest growing population according to the census= Asians, in the US. 2 of the 50 Governors are Indians. New York DA is also a Indian( possible a future Mayor of NY). DA has a brother who sold his business to AMZN for 500 million dollars. You think 100 million may have come to India?????? Dr. Sanjay Gupta( CNN), also has a brother, who sold his company for about zillion dollars. Goldman SAchs???? Jews and Indians. All these wealthy Indians send money back home or they have property back home. This is why, you will not see any major correction in the property market. Middle class is screwd in India because of this.
They need to get rid of the duel citizenship crap, force NRI's to pay extra tax on deposits, and let them pay more for property tax.

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