Monday, October 15, 2012

Vadra and cronies to blame for India's housing bubble.

Economic times writes here on Robert Vadra's role in inflating India's housing bubble. Looking at the data we can safely conclude that India's housing bubble is been inflated beyond limits by politicians and their black money dealings with builders with tacit support of public sector banks. The property flippers and NRI's are just pawns in this real game where the biggest transfer of wealth and land to politicians has been done in broad daylight with everyone from the law enforcement and the fourth estate turning a blind eye to this mega scam of massive proportions. NREGA and all schemes for the poor of the country are just eyewash to win votes so these greedy politicians can accumulate wealth which can be measured in astronomical units.



During 2009 and 2010, Vadra bought 25 apartments in DLF Capital Greens, a premium project constructed on a 38-acre land that DLF acquired from DCM Shriram and the Lohia Group in 2007 for Rs 1,675 crore. While the builder launched the first phase of the project at around Rs 4,500-5,500 per sq ft, the prices subsequently increased to Rs 10,000 per sq ft. Vadra brought these apartments in the first phase and sold them in 2010-11.

He also booked 15 apartments in DLF Magnolias, a premium project next to a company-owned golf course on the Gurgaon Golf Course road that is nearing completion. Of these, he has already sold 13 apartments and still retains two units.



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Here is the summary of Shriram Subramanium on investing in real estate stocks. Full article here.


The ongoing DLF  - Vadra controversy has brought to light the blatant transgressions that real estate companies - listed and un-listed - adopt in India. Real estate companies have never been known to be high on transparency and corporate governance. This is just a reflection of the deeper morass in the real estate sector, which is by far the largest and most valuable asset class in India. It is not the marketplace that decides the fortunes of real estate companies, but the builder-politician nexus that picks out the winners in this sector.


Realty sector shouldn’t be listed as the companies don’t need shareholder funds, nor will they ever make any money for investors. 

This is because:

(a)   The sector depends a lot on black money.

(b)   There is little transparency in land values or construction costs.

(c)    Politicians and bureaucrats have lot of discretionary power in deciding winners and losers.

(d)   Companies need to pay speed money to get all approvals for all stages of project development.

61 comments:

Anonymous said...

A couple of corrupt politicians and bureaucrats does not mean that the entire class is corrupt.
This generalization is leading to a policy paralysis with the entire decision making machinery coming to a halt.
Rabble rousing by the likes of Kejriwal and the media are responsible for the slowing economy.
Also, because of these people land deals are in jeopardy further inflating the bubble and keeping housing out of reach of the most needy.

Anonymous said...

^ Haha, you think housing was in reach of the most needy before Kejriwal-Vadra? Do you even know who are these "most needy" people?

Vik said...

Another expose today has Vadra making 600% in 4 days by trading land in Manesar netting around 50 crores. This is a common practice in India where a fractional advance is paid by the middlemen buyer after the price is finalized and the seller then waits for the buyer for the remaining amount by hoping that the middlemen buyer is able to resell the price at higher price to the next greater fool. In this case DLF is left holding the bag since the land acquisition is cancelled and he has paid the money to Robert Vadra. In this case due to Robert's Vadra special status, he is able to coerce poor farmers to sell him the land at throwaway prices and then influence the usage pattern of the land in few days as opposed to years

Anonymous said...

@Vik
It is called options trading. Middleman buys the option to buy a house at 1 crore price by paying option premium of 10lakhs ( Called Advance) which is fraction of house price.When he finds the greater fool, he exercise his option and sells the house at 2 crores and pockets the difference.
in this trade investment is 10lakhs and ROI is 100 lakhs ie 1000% the investment.
If he had bought the house by paying 1crore he would have made 1 crore ie 1x 100% of the investment.
Options can magnify the profit and vadera is genious and you are just jealous

GSM said...

The scams expose should have come out 1 year later. With only a few months for elections then, all the UPA allies would have turned against them and atleast some accountability would have been on the congress to talk in leiu of elections. Sometimes you may have to listen to your brain than your heart.

GSM said...

In this case DLF is left holding the bag since the land acquisition is cancelled and he has paid the money to Robert Vadra

The UPA govt awarded KP Singh Padma Bhushan for Business Excellence...for building a insolvent company with more than 25k crore debt? If ever DLF is surviving, it is because of UPA support with these kind of deals. And you are saying they are left holding the bag?

Anonymous said...

I think he means DLF shareholders and employees are left holding the bag.

This is a metaphor for India. When the SHTF, mango people will be left holding the bag. The looters will be long gone and living off in some far away country.

It's no wonder the elites are least concerned if the environment is fucked or fertile land is covered with concrete and dust or natural resources are squandered away.

Speculation is the name of the game. Make money in the short term any which way you can. Who cares about tomorrow, your plan is to be long gone by then.

Anonymous said...

India and Indians becoming joke of the world.

Indian Steel Minister Beni Prasad Verma defines benchmark of corruption through his (inadvertent?) remarks:

"I believe Salman Khurshid could not have embezzled 71 lakh. It is a very small amount for a central minister," Verma was quoted as saying by the Times of India newspaper on Tuesday.

"I would have taken it seriously if the amount was 71
crore ($13.4 million).
"

Truly a banana republic of mango people.

Anonymous said...

^^^ 71 crores for a minister? that may be very small amount if you compare to scams that have emerged recently. Scams are in if not thousands then at least in hundreds of crores.

Mango people are happy as their RE investments are growing. They are also corrupt (unwillingly). The problem is with all the scams and corruption and black money and fake money - why are people so happy? why foreign investments coming in? why RE is 'unaffordable'?

Reason- few/many that are not benefiting for corruption or cannot get bigger bribes are jealous. Why blame anyone, look yourself in mirror! Make most with facts what you have and what you know.

Anonymous said...

Reason- few/many that are not benefiting for corruption or cannot get bigger bribes are jealous.

There is a wise Indian saying (unfortunately not from India but from Native Americans)

Only when the last tree is cut, only when the last river is polluted, only when the last fish is caught, will they realize that you can’t eat money.

Money, gold, property going to be worthless when air will become poison and water will turn to sewage.

Already children being exposed to pollution in big cities causing brain damage and breathing difficulties. Lungs getting coated with cancer causing vehicle emissions.

But even highly educated folks will jump to buy diesel guzzlers to save few rupees.

Anonymous said...

^ Relevant to your comment:

http://timesofindia.indiatimes.com/city/patna/Ganga-a-deadly-source-of-cancer-now-Study/articleshow/16858510.cms

aam aadmi said...

@above
Well that's the thing, people keep criticizing Malthusians, all the time harping about there being no "end of the world" or some kind of catastrophe. I think they are blind, I see catastrophe all around us, just not the kind that is shown in movies.

Naturally flowing water in populated areas is so polluted nowadays that you cannot drink it anymore, even touching it might give you diseases. On the other hand I have seen free flowing waters in the upper reaches of Himalayas and fresh virgin mountain streams in Western Ghats. There is nothing like that water anywhere, even bottled water doesn't taste as good.

The air in cities is so polluted that I have to wear mask even while walking on the road, it's no longer possible to grow anything naturally on land because we have destroyed top soil with incessant irrigation and fertilizers, and the less I talk about food the better.

Quality of life has degraded severely in this so called period of development. What's the point of living a life like this for 100 years. To make it worse all our life support systems are dependent on the availability of cheap energy 24x7, even the slightest disruption wrecks untold misery.

REBear said...

@aam aadmi

As a matter of fact, I have been thinking very seriously of a good place to live within Delhi/NCR with the best air quality. I am yet to find an answer. Earlier I lived in Faridabad, it was a nice apartment, but the illegal factories running at night threw so much black smoke that we had to shut off AC sometimes to safeguard ourselves from poison. I thought it was not good for my newly born kid and so I relocated to East Delhi near Noida. However, this location turns out to be worse. There is a constant pungent odour (like that of Hydrogen Sulphide) in the air occasionally. It pervades MOST of the areas of Noida(I checked it upto Sector 62). People are not sure what causes this odour but on surfing the web it looks like Yamuna may be the cause :

http://www.hindustantimes.com/India-news/UttarPradesh/Aquatic-plants-to-curb-stink-around-sector-18-market-in-Noida/Article1-903950.aspx

So now whole of Noida, Faridabad, East Delhi are a clear no-no to me for living (renting or purchasing). In the longer term I have decided to move outside India to avoid such chaos, but if anyone has any practical suggestion or solution till I stay in India please advice me where do I go. FYI, I just need a place with high speed internet connection and good electricity/water supply.

Anonymous said...

^^^ @REBear

There is no happy place. Choose to live today where you feel your needs are met.

If you need good infrastructure, you HAVE to move out of India. Will India have good infrastructure ever? Yes, but by that time you would be retired or dead.

I was fussing about affordability and profits people make from thin air with no own labor or own money . But have to come to mindset that I should be happy with what I have and make sound decisions with what I know. If I can rent for cheaper than I will rent. If I can make money from bubble - I will make.

Black money, corruption, poor infrastructure in India has ALWAYS been there and WILL ALWAYS be there. So what are you going to do - be part of it or be away from it. Old saying - prevention is better than cure.

I have friend who visited India recently for couple of months, he had great time visiting places, meeting family and relatives. But he concluded he doesn't want to be in India given choice - Why? Same reason you have.... well he returned to USA.

Anonymous said...

Black money, corruption, poor infrastructure in India has ALWAYS been there and WILL ALWAYS be there. So what are you going to do - be part of it or be away from it

The sooner people like you leave India the easier it will be for the rest of us to correct the situation.

Remember this about corruption, if you're not part of the cure, you're the disease.

Anonymous said...

// Remember this about corruption, if you're not part of the cure, you're the disease. //

hey moron - corruption itself is disease. Either you are part of it or out of it.

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Anonymous said...

Are any of these crooks bulletproof? How come they don't fear of local population? I think Indians are missing violence gene in their DNA! If you can't kill the crook than kill the family member that they are saving black money. I don't remember any assassin or jailtime for any crook in India! What a fuc*ing lousy country to live in!

sandhya said...

All the big cities are polluted by politicians and pollution. Normal middle class people stand nowhere now-a-days. Blame for India's housing bubble is biggest mess now.

Anonymous said...

China and pakistan should attack india asap. they have best of the opportunity as every indian politician, beaurocrat, senior services officers n police are busy in corruption n investing in real estate.

Anonymous said...

there is no exception. india has become a scoundral country

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