Monday, April 15, 2013

Top 10 countries slammed by the crash of gold

1. USA Holding > 8500 tons of gold
10. India                 550 tons of gold held by the government

The appetite of individual investors in India is negligible compared to the holdings in the soverign  countries. Per capita a US citizen holds Gold more then any India citizen.

The crash is gold is a reminder to everyone that the middle class gets crushed whenever bubbles are created and gold is no exception. Full article here


The US government controls everything, Gold, the fiat currency, crude oil prices, interest rates, nuclear arms, defence technology, everything in short which is of any significant importance. Everythign else they are happy to outsource to countries down the totem-pole

694 comments:

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Anonymous said...

Well unfortunately it looks like the bears here who were smart enough to spot the RE bubble were also dumb enough to load up into the Gold bubble. There is an eerie silence here. I am sure there are a lot of sleepless nights ahead for the bears on this group.

It pays to practise what you preach : diversify!

aam aadmi said...

Well unfortunately it looks like the bears here who were smart enough to spot the RE bubble were also dumb enough to load up into the Gold bubble

Huh...Who loaded into the gold bubble ? Everyone here bought gold as an insurance and they don't care about it's price fluctuation. I never buy gold as an investment.

ShashankRao said...

I am all into cash from the year 2008. I missed many buses and trains. but I was kind of sure even if I had boarded them I might find myself in some accident. I am now certain I will board Air India flight sooner than I thought. Regarding Gold, I wont surprise if it reaches $700 within a month. Traditionally top notch world economies(US,Germany,Japan) put money in Stock and not in a non productive commodity like Gold. They want everyone to dump Gold and instead put your money in Stock market. Days of Real estates are also numbered as no new fund from abroad is seen to be coming to India. Guys be ready, fasten your seatbelt, roller costar ride has now started....:)

Anonymous said...

I was always careful of Gold as an investment. Gold does not have any cash flows and was at decades high. One look at the Gold price chart and you could see that the reversion to mean was poised to happen. It was just a matter of time....Gold had risen to unsustainable highs and a reversion to mean should bring it to below $1000...I would not buy gold at even those prices. Because at that point there will be a lot of attractive companies available at bottom prices. Oh and also the property bubble seems toast now, given all the macroeconomic hens coming home to roost.

Anonymous said...

Indians buy gold for several different reasons, not just for investment and trading.

Biggest impact of drop will be to people who actually bought at recent highs hoping for even bigger gains. i.e. greater fools.

polt said...

It pays to practise what you preach : diversify!

Amen to that. Also, I find it surprising that people in their 20s and 30s stocking up on gold, instead of productive inflation beating assets (debt/equity funds).


Last year, the common refrain here was that 'XAU' and 'RE' will never fall. The moment it fell a bit, buyers would rush in and push it up all over again.
Well, we've now seen what has happened to Gold. What makes RE so immune to correction?


Nice article here by Krugman -

http://www.nytimes.com/2013/04/15/opinion/krugman-the-antisocial-network.html?_r=1&

"The philosophical misconception, however, seems to me to be even bigger. Goldbugs and bitbugs alike seem to long for a pristine monetary standard, untouched by human frailty. But that’s an impossible dream. Money is, as Paul Samuelson once declared, a “social contrivance,” not something that stands outside society. Even when people relied on gold and silver coins, what made those coins useful wasn’t the precious metals they contained, it was the expectation that other people would accept them as payment. " - PAUL KRUGMAN



Anonymous said...

Ok. Where does Rupee go from here? I said in the previous thread that (contrary to popular belief), INR would strengthen. So far I have been proved right.

But what is the long term outlook? Is it demand for Rupees or massive wealth destruction eventually showing up in the currency? Which force will ultimately prevail?

Sirius.

Pawan said...

Somebody mentioned Canada is scraping the point based immigration system. Seems like US is going to start one.

The bill also proposes a merit-based system for immigration. Under this immigrants can apply for visas and they will be given a score based on their education level, employment and other considerations.”People with the most points will earn the visas. Between 120,000 and 250,000 visas could be available each year under this program, which is designed to funnel talented immigrants to the US. It would launch five years after the bill is enacted and would provide a path to citizenship for immigrants,” the WSJ reported.

Link:
http://www.firstpost.com/world/us-immigration-bill-to-increase-h1b-visa-may-affect-indian-firms-702200.html

Wise Investor said...

What is your outlook on gold now?

Anonymous said...

Won't the crash in gold prices actually spur up the Real Estate?

Anonymous said...

Where is the gold bull Dhiman or should I say Dhim(or)an ;-)?

Anonymous said...

"Somebody mentioned Canada is scraping the point based immigration system. "

Canada has not scrapped its points system. Canada will never scrap its points system and Canada will never discourage immigration. Politicians love immigrants because immigrants vote for the parties that let them in. Canada has of course taken this to ludicrous extremes, thus the sh*t wages, over-saturated job market, poor working conditions and PhD cab drivers and MBBS pizza delivery persons.

Anonymous said...

Each time falls dramatically, there is a period of consolidation, followed by a period of slow decline, followed by another dramatic fall.

Gold is nowhere close to bottoming out. Not even close. It is going to go much, much lower. In the meantime, we can see some bounces on buying by the usual suspects.

Anonymous said...

Is this Cyprus rape a boon for the so called BITCOIN. Meanwhile look forward from drumming on Germany and whole of Eurozone. If GDP contracts drastically who will be buying Goods and Services from other

REBear said...

Somebody mentioned Canada is scraping the point based immigration system.

Well I didn't intend to put full details, but the program has been paused since last one year and is expected to reopen on May 4, 2013 with a much tighter set of conditions and a limit on the number of such visas for the first year. Many people are already waiting eagerly and so if one wants to take this route he may be out of luck this year.

http://www.cic.gc.ca/english/department/media/notices/2013-03-01.asp

http://www.workpermit.com/news/2013-03-19/canadian-immigration-announces-further-changes-to-federal-skilled-worker-program

Other countries like UK have altogether scrapped the point based system.

REBear said...

@Pawan

Somebody mentioned Canada is scraping the point based immigration system. Seems like US is going to start one.

We will see what the final fine print is when it becomes a law. But what I have found so far is that most desirable countries are not keen to take entrepreneurs who have successfully bootstrapped their business and are consistently making enough money to afford a good life with their family in that country and pay taxes. They either want immigrants to be indentured servants of big companies(like H1B in US), or raise capital from Venture Capitalist to get temporary green card(Startup/Entrepreneur visa). These options may not be suitable to people who may not want to raise capital initially, and carefully scale their business.

Few countries like Mauritius, Denmark, Sweden do have a provision for self employed, but each one has its own shortcoming due to which they have opened their doors for self employed. In any case and any day, they are much better than India to live peacefully and if other options are not feasible, one can go with one of these options.

Anonymous said...

NAGPUR: City and rural cops have proved that they not only have grit but kind hearts too by contributing around Rs 62 lakh towards the chief minister's special drought relief fund.

In contrast to a western Maharashtra-based senior politician's irresponsible statements tragetting drought-hit farmers, the cops have showed that they have no qualms in sacrificing their day's salary for a humanitarian cause. The funds raised by these cops will be utilized to provide relief to the drought affected people of Marathwada and several other districts of Maharashtra.

Following an appeal from the office of the state director general of police, personnel from both city and rural police department came forward with their voluntary contributions. While city police contributed around Rs 48 lakh to the relief fund, their rural counterparts contributed around Rs 14 lakh. The entire city police headquarters too offered their contribution, sources informed.

A circular, issued from state DGP's office last month, had underlined the appeal stating that interested constables upto the rank of assistant police inspectors could contribute to the drought-hit citizens by giving away a day's salary while officials from PI rank and above could give away two days' salary.

Police sources said that bothcity police chief KK Pathak, joint CP Sanjay Saxena, superintendent of police, Nagpur rural, Manoj Sharma and additional SP, rural, Prakash Jadhav took initiative by making contributions in their personal capacity.

aam aadmi said...

http://www.firstpost.com/economy/are-builders-harping-on-labour-shortage-for-realty-project-delays-702522.html

No sales: 1.4 lakh unsold NCR houses; Mumbai property show a flop

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REBear said...

A majority of analysts are ignoring the "wealth effect" on the economy as a whole that is caused by crash in Gold values. Indians hold a lot of Gold, and crashing Gold values is going to destroy wealth of Indians, a sentiment enough to cause stop buying unnecessary goods and services. Example : Lot of people who saw soaring property values spent money on upgrading cars, upgraded travel from trains to flights, etc.

Of course it is assuming that the Gold prices will crash further significantly. There are too many Gold bears out there, so we don't know if there is enough downside left in Gold.

Anonymous said...

Anon at 11:42

Currency value depends on these things

1. Ability of the country to make money by exporting
India has trade deficit with 110 countries.

2.Inflation
India has 10% plus and currency value has to go down.

3.Debt level
we have 5% CAD. 63% of GDP as debt.

4.Domestic economy growth
Slowing. depends on housing economy

5.Innovation and Technological capability
slowly catching up

6.Revenue generation
Taxes..? Who pays except TDS ?

7.Natural resources
I am yet to educate myself on this. I know we dont have oil

8.Kindness of strangers. ( Supply and demand)
Foreign peoples investment(FDI) and their bet on Indian economy. If US market picks up, they will slowly unwind

9. Leadership
A strong leader can move things. As of now we have a manager Manmohan Singh

All I see is negative outlook for India and currency

Anonymous said...

NAGPUR: Vidarbha Industries Association's (VIA) Lady Entrepreneurs' Wing recently organized a panel discussion on "Challenges of manpower management in medium and small scale units" in the city.

All three panelists -- Neeta Shah, HoD, Ramdeobaba Kamla Nehru Engineering and Management College, soft skills trainer Anushka Karira and Emerge Data Services Limited vice-president Sonali Pathak -- stressed on the qualities of management handling that helped in the retention and growth of manpower in small and medium sized enterprises.

The ability to communicate with people at all levels was one of the most important skills. One should have clear communication about goals, responsibility, performance, expectations and feedback from the staff, the experts said.

Anonymous said...

There wont be an RE bubble. Gold prices crashed and there were huge queues to buy gold because people felt they will never get this opportunity again. If RE prices come down lot of people will jump in pushing the prices up. So don't bet on 50% drop. Max 2 - 5 % if at all drop

Anonymous said...

@Anon - "Gold prices crashed and there were huge queues to buy gold because people felt they will never get this opportunity again."

Possible. But you should also read this - http://en.wikipedia.org/wiki/Dead_cat_bounce

Anonymous said...

@Anon above -

More than dead cat bounce. A decline in prices of an asset is correlated to investor psychology. When an asset prices get depressed, there is a downward pressure and there is an upward pressure where the shorts and other traders come in to buy and support prices. So prices fall, then rise or consolidate for some time and then again fall depending on the sell pressure. And gold looks like it might face quite a huge downward pressure. If the buy support was huge, gold would have rebounded to a large extent. But it looks like its consolidating at this level before resuming decline.
RE will probably behave differently. I would anticipate a very sharp decline and then probably mild buy pressure, before the flood gates really open and the market crashes.

REBear said...

. Gold prices crashed and there were huge queues to buy gold because people felt they will never get this opportunity again

This is called Bull Trap.

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

http://www.investopedia.com/terms/b/bulltrap.asp

REBear said...

Just to correct myself above, I meant to say that the recent bounce back in Gold and Silver prices may be Bull Trap.

aam aadmi said...

There wont be an RE bubble. Gold prices crashed and there were huge queues to buy gold because people felt they will never get this opportunity again. If RE prices come down lot of people will jump in pushing the prices up. So don't bet on 50% drop. Max 2 - 5 % if at all drop

RE is not gold, you can't walk into a shop and buy it with your debit card. It requires a lot of commitment and months of paperwork, not to mention plonking down your life's savings. Moreover RE market is opaque, it will be hard to know when prices decline by 2-5%.

There won't be any queues till prices decline significantly.

Anonymous said...

Yes this is a bull trap.

20% may buy (greed) and watch it stabilise for some days or months.

Once it falls again no one will support it and the downnslide shall continue.

Stability is temporary. Fall is permanent

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Anonymous said...

How did we as a nation become so intelligent? While the rest of the world struggles to find yield, income or growth in investments, we invest only in things that always go up and that never fall. Indian RE and Gold always go up. The current fall in Gold is temporary and a great buying opportunity. That is why jewelry stores across the nation were chockful of customers and all physical gold was bought up immediately. Indians were buying when the whole world was selling (Warren Buffett: You have to be greedy when others are fearful). There is now a shortage of physical gold across the country. Eventually, Gold prices will go up as they have always done.

As for Real Estate, that is an asset that will never go down. It can only go up. Even if sales slow down prices will never go down. Your investment is safe. Stable. It can only go up. You don't have to sit home at night and fear a 15% crash overnight. It can never happen. You can sleep at night. With Indian RE you can never lose. Your capital is safe and protected. There are no surprises.

Again, we are the most intelligent people on the planet for having discovered two asset classes that can never, ever, ever, EVER go down: Gold and Indian RE.

Hope this helps.

Anonymous said...

^^^ RE (or land) and gold have a history with almost all cultures. Nothing special about Indians (or Chinese for that matter) other than perhaps they are the oldest surviving civilizations.

Anonymous said...

Even if we accept that the bubble bursts it is not going to happen in our lifetime. Why do you guys want to live a losers life by renting. Buy a home and move on. It will be pathetic to become old and having to shift apartments

Anonymous said...

Lets get down to basics - Value of any assets is the price anyone willing to pay for it.

If someone is betting on High paying jobs(IT/MBA etc) will be there always and Black money will keep supporting the RE always..then just explain why the hell the Hydrabad Real Estate market is stagnant for years...Any informed guy must know that the largest population working abroad(esp. US) in IT jobs is from Andra...that means there must be millions following into Andra RE market from overseas Telugu people..then it should be the one which must be the highest valued..but we see a different picture...
Now a smart guy can point out about the political instability because of Telungana issue...but how come the points made from the RE bulls on this blog doesn't apply to it...rational comments are welcome...

Anonymous said...

// why the hell the Hydrabad Real Estate market is stagnant for years

Gultis are never after RE. They are just interested in faking resumes, landing in US and then living with 10 other fellow gultis in a one bedroom apartment, eat only curd rice and stack all the money in savings.

REBear said...

http://theportugalnews.com/news/gold-visa-could-attract-thousands-of-rich-chinese/28236

Indian entrepreneur bought "gold" visa of Portugal for 1 million Euros rather than staying in India ! I thought India is an emerging economy with vibrant Real Estate market in comparison to sinking economy of Portugal !

REBear said...

Some one was mentioning that Canada can not stop immigration because of its low population. Despite of its need, yesterday it has come up with new very harsh requirements for the program. Clearly world is closing the doors for Indians.

http://www.cicnews.com/2013/04/breaking-news-federal-skilled-worker-details-revealed-today-042428.html

"With respect to the 24 eligible occupations, the government has placed an overall cap/limit of 5,000 applications that will be accepted for processing. Within the 5,000 limit, a maximum of 300 applications will be accepted for processing per eligible occupation."

aam aadmi said...

With regards to immigration, the way I see it, the elites are pushing for it because it suits them, "more growth" and all that nonsense, actually it's 'more profits', the locals don't like it even one bit and are merely putting up with it.

Why should a country grow into perpetuity is something I have never understood. Someone was mentioning Japan the other day, I think the Japanese will do fine, they are stabilizing their population. Their island is overcrowded as it is and a little less population will be good for the country. It's we who are in big trouble...see this alarming report from Maharashtra

http://www.thehindu.com/opinion/op-ed/drilling-holes-in-the-thirst-economy/article4630897.ece?homepage=true

So how many irrigation borewells does Maharashtra have? No one knows. A 2008-09 GSDA report places the number that year at 1,91,396. “There are probably more in my district,” jokes one senior administrator. How did we end up with such insane figures? “There is no obligation,” explains a GSDA official, “on any owner to report or register a new borewell. Oddly enough, the owner of a traditional dugwell is obliged to do so and pay the water cess. But not a borewell owner.” A new State law setting that right is stuck pending the President’s approval for some time now.

Imagine that 2 lakh borewells and that's a huge underestimation, I am guessing actual numbers are 4 times that figure maybe 5 times. That's 10 lakh borewells for a population of 10 crores. That's 1 borewell every 100 people. This is beyond emergency. It's catastrophic, they are going to ruin the land for hundreds of years to come, we just can't see it yet.

Deepu gupta said...
This comment has been removed by the author.
Anonymous said...

http://www.mid-day.com/news/2013/apr/200413-mumbai-bmc-official-drawing-rs-25k-has-rs-7-crore-assets.htm

This is why RE in India will never come down. Too many people with black money

Gaurav Mishra said...

good post u know about thatUKN Esperanza Phase 2 property.

REBear said...

@Anonymous at 8:25 PM

http://www.mid-day.com/news/2013/apr/200413-mumbai-bmc-official-drawing-rs-25k-has-rs-7-crore-assets.htm

This is why RE in India will never come down.


The BMC official with 25k salary has assets with Rs. 7 cr, NOT cash, and this is why RE would crash ! Not enough cash or liquidity to support the fall when it comes.

A major source of liquidity has got dried up with falling Gold prices. Look here for correlation of RE and Gold prices in Asia and Central London :

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/after-gold-is-real-estate-the-next-asset-class/articleshow/19634970.cms

http://www.moneyweek.com/blog/london-house-prices-this-could-finally-be-it-63516

Anonymous said...

Please read this and tell me if you think RE will collapse

http://economictimes.indiatimes.com/markets/commodities/indians-make-the-most-as-gold-prices-crash/articleshow/19633541.cms

REBear said...

Please read this and tell me if you think RE will collapse

This may most likely be what is called Bull Trap :

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

We still don't know if Gold will suddenly rebound higher and reverse the trend, but a close below 1250$ would confirm the prolonged bearish trend. IF Gold has entered a long term bear market, it would have devastating effect on the economies.

http://www.thehimalayantimes.com/fullNews.php?headline=Gold+decline+sounds+alarm+for+global+economy&NewsID=373362

For instance, if the pent up demand ends up in a bull trap, there would be severe liquidity crisis in India as these bulls have trapped there money for ever and will never sell at a loss. This could affect demand for good and services, including real estate.

DISCLAIMER : I don't know if Gold will reverse its trend. Several analysts including Marc Faber and Jim Rogers believe that Gold bull run is far from over.

Anonymous said...

// For instance, if the pent up demand ends up in a bull trap, there would be severe liquidity crisis in India as these bulls have trapped there money for ever and will never sell at a loss.

If you think positively, gold prices will soon start rising and soon all these Indians will have a lot of money that they can invest in RE. This is what will happen in the near future.

Anonymous said...

It will be funny, if Gold goes down to 500 in the next 10 years.
2000 to 2012, gold had a bull run, about a 700-900% run, but chances of that happening is very slim. If you bought for $200ish and did not sell for the 900% gain, then why are you investing????? 1980 to 2000 gold went down from 600 to 270ish. :)


Making money is very tough for majority of the people, so if the same majority is buying gold at these levels, they will get hosed.


Pulling a trigger for a gain, is very tough, you want that extra 10 or 50% percent, but eventually the bubble will pop and you will say , damn it, i should have sold.
Real Estate right now is at the damn it level, while gold was at damn it level at $1900ish. :)

Anonymous said...

Rogers is bullish, but he has $$$$$$, so even if Gold tanks, he will be just fine + he has a young chinese looking wife .

Soros, who started with Rogers, is a bear when it comes to gold.

Anonymous said...

@anon above,

A lot of these traders are hedged. They bet both ways, watch the market daily, think about it all the time. So if the market changes directions, their stop losses are triggered they get off their positions and go the other way quick. They have spent a lifetime doing this successfully. Its foolish to follow them and expect the same results. Also they say one thing and do the other...

Having said that, their primary thesis is that money is in an inflationary spiral. And so alternative currencies like gold should see a flight to safety resulting in higher prices for gold. But as someone pointed out 1980 - 2000 although debt expansion and monetary expansion was probably the steepest, gold still got pummeled down to its lowest levels. This happens when the economy seems to be chugging along nicely and the world seems to be offering better returns elsewhere. I think this is the case now, where the world is starting to feel that things are getting better and catastrophic depressions will not occur. Which means gold is not required for the apocalypse scenarios the dooms dayers were talking about. So gold might just be headed much much lower.

Anonymous said...

One reason for gold's crash in 1980 was that US interest rates started to go up (reaching a peak of about 15%) in 1981.
With high interest rates, it was thought that the high inflation of the 1970s would be tamed. Besides, when you can get 15% in US govt bonds, why own gold?

The Feds behavior this time too will have have a large impact. They have been hinting that QE cannot continue forever, but when it will be stopped is anyone's guess.

Anonymous said...

"Rogers is bullish, but he has $$$$$$, so even if Gold tanks, he will be just fine + he has a young chinese looking wife . "

I think you might be thinking of Faber. Rogers' wife is lily white. Besides, if you really want a "chinese looking wife", it's not all that hard. Take a flight to Bangkok with a thick wad of dollars and you'll come back with one.

Anonymous said...

@5:14pm

"Making money is very tough for majority of the people, so if the same majority is buying gold at these levels, they will get hosed."

Some very interesting observations about markets in your post. I will only say this. Indians stubbornly but patiently invested in the Gold bear market from 1980 to 2002. For this they were richly rewarded by the 2002-2013 bull market which (as I explained in a previous post) constituted an enormous transfer of purchasing power from the rest of the world to Indians. Household wealth quintipled because most households held their wealth in Gold and Gold prices quintipled. The rest is history. The Gold bubble was a major contributing factor to the Indian RE bubble (which also quintipled from 2002-13 along with Gold).

Now, the $64,000 question is whether Gold's decline is permanent or whether it will again resume its strong trajectory forward. I must admit I'm uncomfortable saying that Gold's ascent is over. This is because the conditions that led to the Gold bubble in the first place have not changed. Firstly, the Fed, BOJ, BOE, ECB, SCB, RBI and other Central Banks are still printing money like it's going out of fashion. That has not changed. Secondly, while inflation concerns have somewhat abated, no one can deny that paper money buys less and less in terms of food, fuel, rental RE, education, health care, clothes, year after year after year. The whole world is in fact in a period of slow stagflation. That has not changed. In stagflation, the best asset one can own is Gold. Thirdly, real interest rates, worldwide, are at 0%. This has not changed. There is not a single country in the World where a government sets a rate of interest that is above the rate of inflation (personally I don't believe we will ever in our lifetimes, see any government permitting a rate of interest above the rate of real inflation). When interest rates are at 0%, the opportunity cost of holding Gold declines because Gold competes with other productive investments. If other investments are also, like Gold, offering no yield, there is no penalty for owning Gold and this removes downward pressure on the metal.

I think Gold prices may consolidate around these levels or even head slightly higher in the coming months UNLESS one of the factors I have outlined above significantly changes.

Sirius

REBear said...

I must admit I'm uncomfortable saying that Gold's ascent is over.

It might well be the case that Gold has entered prolonged bear market, but I see too many Gold bears all of a sudden so there is a contrarian view that can not be dismissed. Read this where the Author argues that Gold will see its day once again soon :

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10001937/Fed-and-Bank-of-Japan-caused-gold-crash.html

REBear said...

Interesting comment in the above link. Premiums on physical Gold are rising very fast. Not available for less than 2000$/ounce in Asia. Would be interesting to see if Physical Gold prices decouple from paper Gold prices soon. So its possible paper Gold is available at 1100$, but the physical Gold price is still 1700$. Just plausible one point of view.

polt said...

> Firstly, the Fed, BOJ, BOE, ECB, SCB, RBI and other Central Banks are still printing money like it's going out of fashion. That has not changed.

Could be. But the banks are currently fighting deflationary forces and the market might come around to the same view, i.e. that deflation and not inflation will be the problem going forward.
If that happens, commodities will be crushed. Whether that is good/bad for RE remains to be seen. But I would guess that assets that were bought merely for capital gains (gold/land, etc) will lose favour. In times of deflation, assets without yield will lose capital value.

polt said...

But the banks are currently fighting deflationary forces

I meant to say 'the western banks and BoJ are fighting ...'

Anonymous said...

@Polt,

"Could be. But the banks are currently fighting deflationary forces and the market might come around to the same view, i.e. that deflation and not inflation will be the problem going forward. "

Don't believe all this hooey about "deflation". "Deflation" is as real as the tooth fairy or Santa Claus. If you ask the average Japanese, they will tell you that the cost of pretty much everything (petrol, food, electricity, rents, train fares, heating, education, etc.) is going only in one direction: up. Inflation is actually intolerably high in Japan and is hitting the average Japanese consumer hard. Yes, if you own stocks or real estate, your wealth has "deflated" (and this seems to be the only type of "deflation" the Central Bankers care about). If you've traveled to Japan, you'll realize what a huge bogey-man this whole "deflation" thing really is. Everything is *bloody expensive* in Japan and prices are only going UP, not down.

Again, don't believe everything you hear from Central-bank propagandists.

Anonymous said...

@REBear

It should be opposite. If physical Gold is 1500 then ETF should be 1700 anticipating high/low demand in future.

Anonymous said...

"Premiums on physical Gold are rising very fast. Not available for less than 2000$/ounce in Asia. "

Actually, last time I checked, India is in "Asia" and Gold is available here at a much lesser price than $2000/ounce.

So much for spreading misinformation

Anonymous said...

who wants to invest, looking 20 years in advance, fact is half the people investing crorers in gold , will be approaching planted in the ground time, ie dead. If you are 75 years old, and you invested in gold in 1985, your time is up anyways. :) when are you going to live your life???? why do you want to invest for your kids???? forget the kids, you make sure to sell your gold now and blow that profit and have fun.

Dump your 75 year old wife and go get a cougar and then go out with a bang.

Anonymous said...

The IT party is over

http://timesofindia.indiatimes.com/tech/enterprise-it/strategy/Indian-IT-ups-sales-without-adding-employees/articleshow/19672997.cms

Anonymous said...

amazing story..

http://en.wikipedia.org/wiki/How_Much_Land_Does_a_Man_Need%3F

Anonymous said...

On Monday, a newspaper reported that businessman Mukesh Ambani, India’s wealthiest citizen with a net worth of more than $21 billion, will be provided security by the government’s elite commando team. Ambani will now have bullet-proof escort vehicles with armed commandos from the Central Reserve Police Force (CRPF) wherever he goes in India.

The news comes at a politically inopportune moment. In the past few months, Indians have been incensed over the lack of safety for the nation’s women and over what they view as police apathy. Over the weekend, activists protested the brutal rape of a five-year old girl in New Delhi, and demanded the resignation of the city’s police commissioner.

At any given moment, according to a recent report by the Brookings Institute, only about one-third of New Delhi’s 83,762 police officers are doing actual police work. The rest, the report found, are busy providing protection to senior politicians, bureaucrats, diplomats or other VIPs. The Supreme Court has called VIP security an “abuse of power.” A typical VIP under police protection might receive three guards. On average, there is one policeman for every 761 Indians, according to government statistics.


Another day in the Joke republic of India.

This is dictatorship folks, the elites live in fortified compounds and protected by militias.

The rest are living in the jungle where 5 year olds are prey. Society disintegrating before one's eyes and mango people still chasing gold and RE...

Sichermove KL said...

Nice Blog!!
real estate in India

aam aadmi said...

http://www.thehindu.com/news/national/senator-accuses-indian-firms-of-abusing-h1b-visas/article4646834.ece

Something worthy of note here

The proposed comprehensive immigration bill if passed by the Congress and signed into law by the US President would bar companies from hiring people on H-1B visa if 50 per cent of their employees are not Americans.

Anyone who was shouting about the increase of cap in H1B and it's implications for RE should at least bother to read the fine print.

Anonymous said...

@above,

Chill dude. Our IT companies may not be that smart in Product Development but are very good in body shopping. They will always find a way.

Anonymous said...

If House is a Share everybody loves to invest, why not IPO style of selling shares sorry houses?

Well done TATA!

http://economictimes.indiatimes.com/markets/real-estate/news/tata-housing-project-gets-bookings-worth-rs-450-crore-in-1-day/articleshow/19697998.cms

Anonymous said...

^^ Wow, unbelievable. This doesn't look like bubble peak, lot's of interest even @10000 p sft rates!

Anyone know of similar mania elsewhere? Probably Florida got this crazy...

Next up, Indian builders will launch on Ebay?

Anonymous said...

Most of the bookings for the TATA Apt IPO must be from flippers who want to sell it the first moment they see any profits...these are traders not the end users....otherwise there wouldn't be a single empty apartment in the country....come on guys...you know it all..how does the game is played...the hype is artificial...look at the bleeding balance sheets of these companies...

Anonymous said...

Gurgaon is fast running out of its ground water, thanks to the high-rises shooting up at jet speed in the 'Millennium City'.

Despite a high court ban on the use of ground water for construction purposes, real estate companies in Gurgaon are banking on the source for their daily usage.

The developers, however, aren't directly drawing the water but sourcing it from the local "water mafia", which has dug up wells in different parts of the city.


Waiting for this bubble to burst. It will be an interesting experience to say the least when the taps run dry.

REBear said...

Waiting for this bubble to burst. It will be an interesting experience to say the least when the taps run dry.

http://shanghaiist.com/2013/04/23/is_there_a_chinese_housing_bubble_excerpt_landed_china_christopher_dillon.php

From the above link :

"I would be more concerned about documented — yet less dramatic — threats like air pollution than a housing bubble bursting"

Conclusion : Housing bubble is not as serious a concern if we talk about air pollution and water scarcity. If the taps run dry even the bears on this forum would not be buying house if the bubble bursts.

Anonymous said...

Everything gets overlooked in the BULL markets(the kind of we see in Real Estate India) as it is going on over a decade now..and most of the time...people's memories are very short...the young generation in the last decade haven't really seen a bad Job market and they hardly know the jobs in private sector today are not the same of Government jobs...so the party will continue till we see a great shock...till then all the bears will be ridiculed...only after the carnage people will become WISE....

Gold has retraced 50% of the last fall....which isn't any surprise...just watch if it continue to climb further with the same speed otherwise fall to $1200 is quite in sight....Gold finance companies are under great stress and if Gold goes into three digits then they will get toasted and the collateral GOLD kept with these companies will hit the retails market adding to the downfall....

Stock market is doing fine so far....no new high will be made till election gets out of the way....

RE price stagnation is already on the card...now people will think twice before doing their biggest investment in life....

Anonymous said...

Real estate prices will never come down in India until India suffers a harsh economic crisis. It is only severe economic crises that put an end to housing bubbles in other countries (Japanese stock market crash of 1989; Asian economic crisis of 1997; US GFC of 2008, etc.).

India must suffer a major economic crisis along the lines of the aforementioned crises and suffer devastating job losses and very high inflation. Until that happens, Indians will never realize the value of cash and will continue to buy Gold and RE.

When such an economic crisis will happen cannot be predicted. If history is any indication, it will happen when all the bears have thrown in the towel and have bought the RE bull story and finally hopped on to the bandwagon. There must be a massive capitulation and helplessness on the part of the bears. It is only when there are no more buyers in the system that the market will finally implode.

That could take a long time. A very long time. One thing that can be predicted with much confidence though is that it will happen when no one expects it.

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/housing-prices-up-by-avg-20-in-delhi-ncr-during-jan-march/articleshow/19725897.cms

This is just in 4 months. In one year prices will double. Buy now if you can afford otherwise you will be priced out forever.

Anonymous said...

Anon Above

So you do it in just 1 month.
Buy all that there is to buy in delhi and be happy lol

We will buy from you after one year when prices double :)

REBear said...

This is just in 4 months. In one year prices will double. Buy now if you can afford otherwise you will be priced out forever.

It's fake story, I can tell you because I live in Vasundhara Enclave which is mentioned in the article as the area witnessing most appreciation (28%). There are no sales happening in this area at the quoted price. All apartments that are on sale have been on sale for the past 6 months. There is an apartment that has been put on foreclosure by Canara bank and has not been sold for the past ONE year. It is available at 30% discount to the quoted "market" rate, so why is it not sold ? Don't believe me, look here :

http://www.canarabank.com/Upload/English/Content/SN-CTIL.pdf

http://tenders.indiamart.com/details/706747195/

Anonymous said...

http://www.firstpost.com/real-estate/realty-is-in-trouble-buyer-boycott-has-not-abated-727947.html?utm-source=hp-footer

Anonymous said...

Thanks to Anon above for sharing the FirstPost link...

But I am sure the RE Bulls are least bothered about the defaults/delay of interest payments from RE developers as RE is evergreen asset that always goes up....

If only people were wise..there would not be any asset bubble ever...but history tell us otherwise....

The only obvious scenario which I think is going to play out is Stagflation...little growth but still high inflation wiping out most of the peoples wealth.....

Anonymous said...

The firstpost link suggests that even non-bank funding for builders is drying up. First the banks stopped (mostly because the RBI is worried about NPAs), now even the rich individuals (diamond merchants, etc) seem to have stopped funding the builders.

Anonymous said...

http://www.firstpost.com/real-estate/realty-is-in-trouble-buyer-boycott-has-not-abated-727947.html?utm-source=hp-footer


Ignore what is written in these columns. These are written by overhyped MBAs who have no idea about the market reality. Just go and talk to a builder or a broker. Forget crash RE prices have incresed by 10% in the past 4 months. Some of the brokers say that by end of the year proces will increase another 25%

Anonymous said...

Anon above,

A question for you - suppose (I know this is hypothetical and will never happen, but grant me the latitude), suppose real estate has stagnated and a crash is around the corner. Also suppose the brokers being in the market know all about this and are taking precautions not to be burned by it. Now at this juncture suppose you ask a broker about the state of the market, what is his response going to be? A wise man has said - never ask a barber whether you need a haircut...

aam aadmi said...

@Above
Forget about rational arguments, bubbles are never rational. Can you imagine RE going by 20-30% every year, is it even realistic? anyone who thinks so must buy a copy of secondary school maths book and take a look at the exponential function.

Anonymous said...

@aam aadmi,

I agree bubbles defy rationality which is why they are called irrational exuberance. All the actors involved in bubbles suffer from the ostrich syndrome. Just trying to ask some hopefully "sensible" questions...

Anonymous said...

A few days back gold prices crashed. instead of being afraid, indians across the board bought gold that there was no gold available to sell. Now gold is rallying back up again. Same thing will happen with RE. There is so much demand and the fact that for Indians renting is not considered socially cool and looked down upon, as soon as prices start to fall soemwhat buyers will step in. Mark my words ten yrs from now we will be on this blog and nothing will have canged. Why dont you guys accept that you cannot afford to buy a house and move on instead of posting links to wiki articles or comparing with other countries

Anonymous said...

Talking about GOLD and RE is like comparing Apple to Oranges:)

Most of the people buy gold by giving cash..so drop in GOLD prices doesn't hurt much as it utility as ornaments still holds good...again you dont have the obligation of paying EMI for GOLD....

For most of the people..RE is the biggest investment which can not be bought with cash outright..you have the obligation of paying the EMI for around 20 years....so all it takes is a couple of really bad years for job market...and you have lot of homes underwater....So drop in RE will be a reaction to bad job market and economy....which is not such a rare scenario....so cross your finger and hope for the best....

If someone dont understand why RE developers are defaulting on their debt obligations then it makes no sense to explain why the RE days are counted....

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/lodha-group-indiabulls-cut-luxury-apartments-prices-by-up-to-15-in-mumbai/articleshow/19773311.cms

Early days and the drop in prices is only for the ultra-high end homes. (25k/sqft). In principle this will lead to a cascading change down the chain. If a 28K/sqft home is now selling for 25k, then the seller of a 25k home has to lower his prices too.
Whether this will happen in Mumbai ...

Anonymous said...

http://articles.economictimes.indiatimes.com/2013-04-27/news/38862226_1_gold-investors-gold-futures-ounce

So much for the "dead cat bounce" theory. People who read wikis are the real loser here. The man on the street is the real winner Same is the case wit RE

Pawan said...

An off-topic question.

Recently Spain was giving residency certificates to people if you buy property worth 200K USD there.

My question is,
1. How much money can an Indian citizen living in India transfer abroad?

aam aadmi said...

Whether this will happen in Mumbai

There's no data but my anecdotal experience says no, I saw a property which was listed at 1.2 crore 5 months ago, now it's 1.34. This is in Goregaon.

A flat that was worth 35L three years ago in the same Goregaon region now goes for 75L.

Interestingly when I was in Mumbai I saw a guy in front of me paying for his bill of 50k with cash. This was at the Oberoi Mall. The cashier got tired of counting the 50 and 100 Rs notes, even I got tired of standing in the line.

Anonymous said...

@Pawan,

"My question is,
1. How much money can an Indian citizen living in India transfer abroad?"

You have just answered your own question. If a suave, highly-educated software professional like you could not find the answer to this question, then there is likely no unambiguous, verifiable answer at all.

It would seem that a government ruling over 1 billion people can provide answers to basic questions on these on an FAQ on some website. But no. This is India and we are talking about the Government of India here. The Indian government thrives on keeping its population in perpetual doubt and fear relying purely on rumours and hearsay in order to get crucial information.

Best long term solution? Immigrate!

Anonymous said...

I will reiterate what I wrote earlier. India needs a major economic crisis, on par with the Japanese stock market crash of 1989, the Asian economic crisis of 1997 or the US GFC of 2008 in order for the housing bubble to burst.

So far, India (like China) somehow seems to be lumbering alone without any signs of a major economic crisis. It is difficult to say how long it will take for that to happen. It may be that there is something about large developing economies like China or India that indefinitely forestall serious economic crises. If that is the case, the RE bears on this board may all be in for a very, very long wait.

Remember: markets can remain irrational longer than you can solvent.

Anonymous said...

Really? Prices going down in India?

http://economictimes.indiatimes.com/markets/real-estate/news/lodha-group-indiabulls-cut-luxury-apartments-prices-by-up-to-15-in-mumbai/articleshow/19773311.cms

Anonymous said...

Jayprakash Narayan organized Total Revolution against corruption. This was 1974

Indira Gandhi declared Emergency in 1975.

This was the closest we got to complete overthrow of corrupt government.

Do we have the guts to get out on the street and face the persecution.

Yeah, if you think the entrenched elite will simply give up and fade away, you haven't read your history.

Will we ever thunder to Sonia and Rahul: Singhasan Khaali Karo Ke Janata Aaati Hai

or will we continue to whimper and whine online.

Those who do not remember their history are bound to repeat it...

Anonymous said...

Are Indians really stupid?

Can't we make up our minds whether CBI is a fierce national guard dog or a puppy sucking on the thumb of our politicians?

What about Manmohan? How come this sob gets away with a squeaky clean image while presiding over the biggest scams in our nations history...

Make no mistake, the world is watching and India is turning into a joke country with every passing day.

Even Chinese have reversed their hindi-chini bhai bhai stance and are taking up aggressive postures. Chinese are not dumb like Pakis, when they make a move they've thought at least 10 if not 100 years into the future.

This may be the beginning of the end of Indian democracy.

aam aadmi said...

Remember: markets can remain irrational longer than you can solvent.

Yea but being an RE bear means that you save money given the abysmal Rent/EMI ratios. It just requires some mental resolve and the ability to put up with frequent movements, which according to me is also a plus since you tend to live frugally and not accumulate unnecessary crap.

Anonymous said...

// which according to me is also a plus since you tend to live frugally and not accumulate unnecessary crap.

This is loser mentality. Dude just live your life man. Dont let wikis affect quality of your life

Anonymous said...

"Yea but being an RE bear means that you save money given the abysmal Rent/EMI ratios."

Yes, but it is also very difficult to countenance the fact that you're missing out on all the equity appreciation that your neighbours are laughing with all the way to the bank. Also, don't forget about pressure from the wife, family and peers to buy which can be ENORMOUS. I strongly doubt that there are any women readers on this forum for example (if there are any, please identify yourself and I apologize in advance).

This is the nature of bubbles. Eventually even the bears get helplessly sucked in.

REBear said...

@Anonymoust at 11:24 AM

Mark my words ten yrs from now we will be on this blog and nothing will have canged.

Kindly tell us your identity (name, email address) before placing the bet. 10 years is a pretty long time, and as one year ago Jim Rogers was saying there is no asset class including Gold which can be up for 12 years. So Gold is down this year, not surprisingly - there is NO asset class that can consistently beat inflation in the long run.

Why dont you guys accept that you cannot afford to buy a house and move on instead of posting links to wiki articles or comparing with other countries

Send me your bank statement and I will send you mine and it will be clear who can afford what. If we make a bet of 1 apartment of RE crash within 10 years, I am sure you will not be having enough money to cover your bet in case of crash, most of you are leveraged !

The issue of discussing RE bubble is a different one - paying enormous sum of money to builder mafia for a shitty RE in a third world country like India with no amenities, no security. I have no issue with RE bubble in London and I wish I will be having enough money to buy a condo there and happily live my life !

REBear said...

@Pawan

Recently Spain was giving residency certificates to people if you buy property worth 200K USD there.

My question is,
1. How much money can an Indian citizen living in India transfer abroad?


"Resident Indian" (see web for definition) can transfer upto 200K USD per year abroad under Liberalised Remittance Scheme (LRS). So a family of four can xfer 800K USD per calendar year. This money can be used to purchase assets abroad such as stocks, Real Estate, etc. This money can NOT be used for trading in F&O, margin calls, and very surprisingly for setting up a company abroad, earning points for residency abroad. Yes, resident India is banned for transferring money abroad for setting up a company - a perfect violation of Human Rights, and that is what I hate about this country and its politicians.

As a side note, the residency certificate that you get from Spain, Portugal, etc. does not allow you to work . Only use it if you are retired and have enough money !

Anonymous said...

"Yes, resident India is banned for transferring money abroad for setting up a company - "

So how are the elites able to buy European auto makers, French steel makers and able to set up US subsidiaries of their domestic firms?

Anonymous said...

"there is NO asset class that can consistently beat inflation in the long run."

What about Indian RE? Indian RE has consistently beat inflation over the past 60 years post-independence. It seems that 60 years is pretty much in line with generally accepted definitions of "in the long run".

aam aadmi said...

This is loser mentality. Dude just live your life man. Dont let wikis affect quality of your life

LOL. Buying crap which breaks down in 11 months (precisely) improves my life ? I think it just drains my bank account faster.

Quality of life has nothing to do with spending money on stuff I don't need. With the money that I save paying EMI's and buying junk, I can go on two domestic vacations every year and one abroad if time permits.

Anonymous said...

// LOL. Buying crap

Most of the people posting on this blog are IT kids who dont have any guts. Look at their language "LOL" ,"Show me yours and I will show mine" No wonder you guys cannot afford RE in India as you are gutless morons

REBear said...

So how are the elites able to buy European auto makers, French steel makers and able to set up US subsidiaries of their domestic firms?

Indian companies can setup subsidiaries or Joint Ventures abroad with no cap on outward remittance(RBI permission needed if amount exceeds 10 million USD). What I was talking about is setting company abroad by resident individual , not Indian company.

The reason is clear, if an Indian company setups a subsidiary abroad, it will be liable for income tax on world wide income. Whereas if the Govt allows individuals to open company abroad and transfer there business, it will lose tax base.

REBear said...

No wonder you guys cannot afford RE in India as you are gutless morons

How much money do you make ? Don't speak in the air, show data and it will be evident who is moron :)

REBear said...

What about Indian RE? Indian RE has consistently beat inflation over the past 60 years post-independence. It seems that 60 years is pretty much in line with generally accepted definitions of "in the long run".

Lets speak with data rather than weird assumptions. The best gauge of long term inflation is wages. My Father used to get 1000/- as salary in year 1984 and his salary was 10000/- in year 1997. We bought a house for 1 lakh in 1984 and sold it for 6 lakh in 1997. For a teacher in Govt school, I know salary in 1974 was around 300/- and near retirement recently the salary was approx 40000/-.

If there is an year wise official data available for wages, it would make the situation more clear. If RE returns are above inflation trend line for the past 10 years, it would be a clear sign to sell as it will soon revert to mean.

Anonymous said...

// Don't speak in the air, show data and it will be evident who is moron :)

Hey kid goto school. Exams are near and you should be studying for them. This site is no place for teens

aam aadmi said...

@Above
Why this kolaveri ? Just because others have chosen a lifestyle that doesn't match yours. Or maybe you are angry that some people can live carelessly without worrying about their bank balance, properties etc, a life that you always desired.

I have enough money to take care of my current and future needs and I am happy with my life, don't need any 'guts'.

I maybe a kid but I am mature enough to not participate in "mine is bigger than yours" contest. On another note here's a blogger who teaches people to live frugally and 'happily'

http://www.washingtonpost.com/business/meet-mr-money-mustache-the-man-who-retired-at-30/2013/04/26/71e3e6a8-acf3-11e2-a8b9-2a63d75b5459_story.html?hpid=z1

This guy lives on $25k annual income for a family of 3 in US and is 'happy'.

Doesn't eat outside and makes his own coffee.

REBear said...

Hey kid goto school. Exams are near and you should be studying for them. This site is no place for teens

Hehehe, teens, hmm, teens in this world are more capable and smarter than you. Look at this 17 year old guy who sold an app for 30m USD to Yahoo :

http://www.guardian.co.uk/technology/2013/mar/25/summly-sold-yahoo-teenage-creator

He was smarter than you - he knows when to EXIT. If he were like you, he would have thought of getting better price after 10 years and never sold his app ! Remember dumb ass like you never make money as they never know when to exit or reshuffle portfolios !

Pawan said...

Remember: markets can remain irrational longer than you can solvent.

Or may be we are missing the big picture. I mentioned FMCG stocks were trading at 30+ PEs some 1 or 2 years back. HUL today shot up 17% and trades at 40PE now and still 20% below its life time high.

There is an expectation that Indian GDP will grow to anywhere between 10 to 20 times in next 2 to 4 decades and high stocks prices or RE prices are reflecting/discounting that. In between scares come like in 2008 and then minor ones like 2011 but so far nobody sees anything on the horizon that will derail India from this growth path.

Of course it does not mean that we must follow the herd and the herd is right but 'big and sustained' RE or stock market crash will come only when serious doubts get raised about the India growth story. How and when these concerns will come from is anybody's guess but trust me when that time comes, few will have the money to pick up cheap assets and even fewer will have the guts.

Aroost India said...

The moment Real Estate Market abroad picks up, you will see lesser NRI investments in India and that should bring the prices down.

Posted By : Aroost India Real Estate

Anonymous said...

"There is an expectation that Indian GDP will grow to anywhere between 10 to 20 times in next 2 to 4 decades and high stocks prices or RE prices are reflecting/discounting that."

Japan, a country with (to put it mildly) a much, MUCH higher level of human development was expected to grow stratospherically in the 80's for the next 2 to 4 decades. Unfortunately, even Japan couldn't avoid a catastrophic bubble implosion (from which it is still recovering).

I have been to Japan. I like Japan. India sir, is no Japan.

Anonymous said...

"The moment Real Estate Market abroad picks up, you will see lesser NRI investments in India and that should bring the prices down. "

I don't know if this is written in jest or if you are serious.

There are now housing bubbles across the developed world. Just to name a few: London, France, Switzerland, Austria, Scandinavia, Singapore, Hong Kong, Australia, Canada.

Germany, US and Dubai are fast catching up, afraid to be left behind in the global RE party. It's like 2008 never happened and the lessons of 2008 were never learned.

It's frankly amazing how much recklessness is being rewarded in our age.

polt said...

Now Netherlands joins the party -

http://www.spiegel.de/international/europe/economic-crisis-hits-the-netherlands-a-891919.html

Only France/Germany left now.

Ofcourse, India has Gods special people. We will continue becoming richer simply by buying RE from each other.

Anonymous said...

btw,
http://www.aljazeera.com/indepth/features/2013/02/201322081918452141.html
// ====
Thousands of Punjabi farmers have bought land in distant Georgia lured by cheap prices, angering some locals.
...

Many Georgians, however, view the influx of foreign farmers as an "invasion". Estimates suggest thousands of Indian farmers - mostly from the northern state of Punjab - have immigrated since 2012.

---

One of the reasons Palhan chose Georgia is because land here is so inexpensive.

"I can buy a hectare of land for US$1,000-$1,500. I can't imagine finding something that cheap in Punjab," the bearded farmer said. "You can't compare the prices. I sold one hectare of my land in Punjab and with that money I could buy 200 hectares [495 acres] of land in Georgia."

Stroking his turban he added jokingly: "I am a true Punjabi at heart. We have this inherent hunger for buying more and more land. There's not one Punjabi who is satisfied with the land he owns."

---

The union founder admitted the inadequacies of local agriculturalists, but said the government should focus on Georgians instead of foreigners to boost food production.

"Georgian farmers lack the know-how and skills. We don't have the resources to invest in building infrastructure. That's why Georgian farmers are lagging behind, while Indians come and literally grab their land for the cheapest prices."

Babunashvili said he doesn't have any statistics on how much land Indian farmers own in Georgia, but he wants immediate government action to halt foreigners from buying up prime agricultural areas.

"We must stop this invasion of land-buyers from India. I call it invasion because they are coming in massive numbers," said Babunashvili.

=== //

Lol.

Anonymous said...

It's amazing! GFC of 2008, EU debt crisis, Commodities crash of 2011, Rupee collapse of 2012, Gold crash of 2013. In each of these crises, there was resilient hope that the extant crisis would finally seal the fate of the Indian housing bubble.

But the housing bubble just goes on and on. Just like the Energizer bunny. No amount of global or domestic crises have been able to falsify that time-tested hypothesis: "Indian RE prices never go down".

I think it's time to admit that Indian RE is in fact a unique asset class and that the RE bulls do have a point. The die-hard bears on this board have all been plastered with egg on their faces while their "idiot" RE bull peers have been laughing all the way to the bank with ever-increasing prices on their purchased properties.

Anonymous said...

paying enormous sum of money to builder mafia for a shitty RE in a third world country like India with no amenities, no security. I have no issue with RE bubble in London and I wish I will be having enough money to buy a condo there and happily live my life !

western economies are bankrupt. they need foreign money and it may buy you some tolerance for a while. you'll be foolish if you expect this welcome party to last though.

politicians are the same everywhere. if they can save their own skin by diverting the fury of the masses towards some minority communities, what do you think is going to happen?

REBear said...

I think it's time to admit that Indian RE is in fact a unique asset class and that the RE bulls do have a point

You forgot to include China, HK, Singapore, Indonesia, and so on in the list of "unique asset class". Its only a matter of time that your eyes will open and then it will be too late ! I have earlier posted evidence of clear sign of bubble bursting in my area but I know bulls will easily gloss over.

Having a uniform bias towards bullish or bearish sentiment never makes money - only smart people who timely enter, timely exit make money.

GSM said...

@above,

I can agree the bubble will burst one day. But there will be cities the prices will cross the previous peaks in a couple of years like London or New York. So as long as you buy there and able survive a downturn, you should be ok.

Anonymous said...

@Anon who posted earlier about gold saying -
"So much for the "dead cat bounce" theory. People who read wikis are the real loser here. The man on the street is the real winner Same is the case wit RE"


http://economictimes.indiatimes.com/markets/commodities/rush-for-gold-coins-jewels-peters-out-as-price-recovery-dampens-demand/articleshow/19821275.cms

This is exactly what happens in a dead cat bounce. Some folks rush in and buy giving the asset a temporary jump. But others wait on sidelines and wait for a greater fall. Eventually the slide resumes and mean reversion kicks in.

Anonymous said...

@REBear:

"Having a uniform bias towards bullish or bearish sentiment never makes money - only smart people who timely enter, timely exit make money."

All quite astute and worthwhile, but ultimately non-actionable, observations. We have a situation now where the denizens of an entire country have been turned into Crorepathis over a period of a few years (the response to "Who wants to be a Crorepathi?" in India has become "No one, we already are").

The questions are: will RE prices experience a dramatic decline as they have in other countries with a housing-never-goes-down cultural myth (USA, Japan, Singapore, Dubai) or is Ch-India somehow fundamentally different? (I note that Ch-India have both not suffered any kind of major crash since McManmohan-1st-incarnation and Deng-Xiao-Ping). If prices do fall, by how much? If prices don't fall, then how much higher can they go before they peak?

Vast fortunes will be made and lost depending on the answers to these questions?

Anonymous said...

While the economic slowdown has impacted automobile sales, the luxury car segment has managed to retain its momentum, growing at a compound annual growth rate (CAGR) of 30% to 40% from 2008 to 2012. Mercedes Benz India marketing director Debashis Mitra told India Knowledge@Wharton recently: "Two to three years ago, Delhi and Mumbai accounted for nearly 70% of our sales. Today, this percentage has declined to 50%; the rest is accounted for by Tier-2 towns."


Someone who can splurge on a Mercedes in a Tier 2 town has surely bought lots of RE, perhaps even in a Tier 1 city.

Just like the fellow who aspires to "settle" in London, rural folks aspire to buy in Mumbai, Delhi, Bangalore etc.

And there is lots of money in smaller cities and even rural areas (farming income is tax free in India so there are no estimates)

This is growth, and growth is uneven. Those who were entrenched in cities are getting replaced by newcomers with higher purchasing power.

Graduates in IT have less net worth after 20 years of salaried life than an illiterate farmer who owns 1 acre on the city outskirts or a pan-wallah who expanded his business from 1 to 20 shops in the same amount of time.

These are real life examples of folks I know. Completely illiterate but are worth tens of crores through sheer luck (and a little bit of hard work)

REBear said...

Vast fortunes will be made and lost depending on the answers to these questions?

Every bubble bursts eventually, no matter whether Asian RE bubble, Japanese debt bubble with record low interest rates, Silicon Valley RE bubble, etc. I wouldn't worry about the level of correction when the bubble bursts, my bigger worry of living in India is rampant pollution levels, toxic food, unhygienic places that have spurted with RE bubble and result to incompetence of Indians unable to improve living standards with wealth. For instance, posh areas in Delhi like Sukhdev Vihar which is very near to Vadra's residence has seen alarming low levels of air quality :

http://www.thehindu.com/news/cities/Delhi/sukhdev-vihar-incinerator-turning-air-toxic/article4669555.ece

In East Delhi where I live air quality has become so sick suddenly with growing stench of drains & Yamuna that I feel like immediately moving out of this country. I can't wait for US Senate & House to pass Gang of Eight immigration reforms bill so as to relocate to US once and for all, rather than hopping from one country to another with family.

Anonymous said...

"western economies are bankrupt. they need foreign money and it may buy you some tolerance for a while. you'll be foolish if you expect this welcome party to last though."

Western economies are not "bankrupt". They owe debt obligations denominated in their own currencies. The US, Japanese and UK governments have an unlimited ability to print as much Dollars, Yen and Pounds as they want to repay any debt obligations. Nowhere in history has a country with debt denominated in its own currency defaulted. EVER. The fact that these governments have borrowed a lot of money is already factored into the value of their currencies. The chances that they will default or be forced to go "bankrupt" involuntarily is virtual nil. Zero. The US and Japan for example have increased their borrowing manifold over the past two decades whereas interest rates (which measure the risk of non-payment) have plunged during the same period.

"politicians are the same everywhere. if they can save their own skin by diverting the fury of the masses towards some minority communities, what do you think is going to happen?"

Actually it is only Western politicians (who pander for ethnic votes) that have prevented the rage of the mobs from expressing itself against immigrant communities. Today in the West any discussion or opposition to immigration will automatically label you "racist". Even though there is plenty of discontentment at the street level towards immigration, this has not prevented Western governments from keeping their doors wide open for skilled labour from India, China and other countries (the UK is the sole exception).

Try educating yourself more on the issues rather than falling back on facile cliches.

Indian Real Estate said...

Gold is nowhere close to bottoming out. Not even close. It is going to go much, much lower. Property is going to be a very hot market in future. Rather than investing in Gold, everyone should invest in property so it can get doubled in future.

REBear said...

western economies are bankrupt. they need foreign money and it may buy you some tolerance for a while. you'll be foolish if you expect this welcome party to last though.

To add to the comments made by Anonymous at 1:19 AM, it seems people who say things are same east and west haven't lived enough in other parts of the world. I have lived in different parts of countries and work with people of all nationalities and ethnicity. I can assure you things are not the same and Indians are the worst lot, people who can not be trusted, jealous and utterly selfish, and they don't care about quality of life. Chinese living in Beijing are not foolish to invest millions to get a US green card via EB-5 route, a country which you call bankrupt.

For instance, a bill to require labelling of GMO foods is introduced in US.

http://www.boxer.senate.gov/en/press/releases/042413.cfm#

I can not imagine such a bill being considered in third world country like India, and even if it is there every GMO food will be falsely labelled even by big corporations, just like a lot of "Vegetarian" biscuits are labelled with green mark.

Anonymous said...

For instance, a bill to require labelling of GMO foods is introduced in US.

If this is even remotely true, I would rather be in third world India

http://www.zerohedge.com/news/2013-05-01/guest-post-what-it-means-be-free-america

Anonymous said...

"I can assure you things are not the same and Indians are the worst lot, people who can not be trusted, jealous and utterly selfish, and they don't care about quality of life."

The problem is that there is absolutely no sense of a "greater common good" in India. This is partly a by-product of the caste system whereby everyone is looking out for their interests (and the interests of their fellow caste members) only and to hell with others.

Anonymous said...

^^ The first mugging you experience or the first instance of your child being called a sandn!gger and reminded to go back where he came from in school and you'll be singing a different tune.

And God forbid if you are Sikh or Muslim and like to follow you religion, then you're truly in mortal danger...

But if you're willing to severely restrict your Western world experience to a select few areas of a select few cities then I agree, West is better than East because it has better material comforts.

Anonymous said...

For instance, a bill to require labelling of GMO foods is introduced in US.

This is a joke, right?

GMO's are fully approved and have been in the US market for years and being consumed daily by the entire population in one way or another.

US has a law on the books right now that gives total immunity to biotech companies from lawsuits regarding any harm their "approved" genetic organisms may cause.

Farm and biotech are multi-billion dollar corporations with complete control of congress. Tens of lobbyists for every congressman.

By any objective measure, US is the most controlled (and brainwashed) "open" society on the planet.

Even Chinese (whom many American sheeple consider as oppressed) are better off, atleast they recognize their government is corrupt and are constantly protesting it.

The US sheeple actually cheered on the war with Iraq and silently accepted the bailout of wall street crooks. The price of these blunders will be paid by atleast 2-3 generations. Already current generation is jobless and penniless.

Elsewhere in Iraq and Afghanistan, hundreds of thousands of children from the 10 year war have grown up into teenagers and adults without any education. Most have seething hatred for US. Doesn't take a genius to figure out what's going to happen if even 1% of them decide to exercise their emotions.

Anonymous said...

India's Supreme Court recently showed the middle finger to Western companies trying to enforce their patent on life saving cancer treatment drugs.

Would like to see any corporation-controlled Western government pull this stunt off. There will be martial law declared the very next day.

REBear said...

If this is even remotely true, I would rather be in third world India

http://www.zerohedge.com/news/2013-05-01/guest-post-what-it-means-be-free-america


I can only say that the first hand information that you derive from direct experience and interaction is the only reliable source of information rather than anti US articles from bearish sites like zerohedge. Man go to America, interact with people there and notice the social IQ. I have interacted even with taxi drivers in both Bay area as well as Singapore and I was stunned to see their knowledge, IQ, and ethics. Come back to India and you immediately realize the difference.

Bottom line for me is media articles have never been of any help to me for taking any decision. That's a different LONG story of my experiences which includes doing business with Indians in Indian market, doing business with Americans in the western markets, and also personal interactions with Indians at all levels and interaction with westerners.

Anonymous said...

This is an example of how strict Western societies are on the subject of racism. 14 year old schoolgirl arrested on racism charges for asking teacher to be re-assigned a different group from the one with kids speaking Urdu:

http://metro.co.uk/2006/10/13/schoolgirl-arrested-for-racism-281839/

It is ludicrous to state that racism is a serious issue in these countries. In my experience, Indians, with our unbridled love for white skin and our billion dollar market for "fair and lovely"-type skin creams are the biggest racists of all.

Anonymous said...

And the thread devolves.

One thing about Indians is certain, they like to feel good about themselves not based on their own merits but by pointing out the demerits of others.

Even an educated NRI settled in the West will routinely spit on India to make him/herself feel good about their decision to relocate.

Guys, be happy with yourself. If your entire life is based on the premise that you have to make others feel miserable in order to feel better about yourself then you're wasting your precious life...

Anonymous said...

You are also doing the same.

Anonymous said...

http://www.mumbaimirror.com/mumbai/crime/Oberoi-Splendour-residents-move-court-against-builder/articleshow/19876425.cms

Interesting. Even after paying 3 crores for a 880 sq ft pigeon hole there is no peace of mind

Gaurav Mishra said...

Nice blog!!! thanx
Prestige Westwood launching soon 2/3 bhk apartments in bangalore

Pawan said...

http://forbesindia.com/blog/business-strategy/why-the-real-estate-market-could-crack-in-2013/#ixzz2R5RSZIjf

Anonymous said...

Interesting. Even after paying 3 crores for a 880 sq ft pigeon hole there is no peace of mind

Nothing new here. These things are fairly common. More power to the residents who are at least awake and ready to fight for their rights.

Let's face it, in a day and age when even erstwhile honorable professions like doctors and teachers do a shoddy job expecting a builder to come through on all their promises is a little too much.

Here's an equivalent example from the #1 "luxury" builder in the US:


Three homeowner associations at the upscale Lake Barrington condominiums in East Naples are suing Toll Brothers Inc., alleging that the developer and contractor violated local, state and national building codes and built condos with numerous hidden defects.

Lake Barrington Condominium Associations 4A, 4B, and 4C say the defects involve the condos’ common elements, the roof and structural components, and mechanical, electrical and plumbing elements, according to the lawsuit, filed in April in Collier Circuit Court.

The lawsuit says the defects will result in higher assessments for homeowners, who will be forced to pay large sums of money for repairs.

A similar lawsuit was filed in April in Orange County in Central Florida.

Horsham, Pa.-based Toll Brothers, a nationwide luxury home builder, has gotten into trouble in Massachusetts, Virginia, Connecticut and other states due to similar complaints about shoddy construction and code violations.

Anonymous said...

@Pawan

http://forbesindia.com/blog/business-strategy/why-the-real-estate-market-could-crack-in-2013/#ixzz2R5RSZIjf

What is this, the 10th reprint of an article originally published in 2003?

Anonymous said...

One thing about Indians is certain, they like to feel good about themselves not based on their own merits but by pointing out the demerits of others.

Wait, isn't that why the internet was invented? So we could *all* talk s#it about others... :P

Anonymous said...

From the link :http://forbesindia.com/blog/business-strategy/why-the-real-estate-market-could-crack-in-2013/#ixzz2SLZYr6hp


Lastly, according to the Ministry of Housing and Urban Poverty Alleviation, 11.09 million homes in urban areas are lying empty


Is this a typo in the article - 11.09 million....looks like the writer as on dope....

Anonymous said...

There is no error or typo. The figures are right or understated for India.

In US also with the market booming again, the banks are hiding more than 20 million homes called as shadow inventory. India did more construction and has a lot more flats in the pipeline for completion.

Scams everywhere to keep RE prices propped up.

Pawan said...

Is this a typo in the article - 11.09 million....looks like the writer as on dope....

Scroll down to the comments section. One of the readers has asked for the source of this data and the author has provided a link.

Pawan said...

Here it is for the lazy souls:
http://www.indianexpress.com/news/18-mn-houses-needed-11-mn-lie-empty/1008345

Anonymous said...

To Pawan above...
Thank you for sharing the link for 11 million empty homes...

Back in October last year our finance minister Chiddu has given a figure of 5 lakh empty homes...but this report has totally different number...if anybody can explain what am I missing..i would really appreciate...

Anonymous said...

One more strange observation...the nagging I hear from the young folks who have just started working(in IT/Finance/MBA) jobs in India..that it takes them atleast 3-4 year to save the money for down payment of houses...and again mostly they have to search for a partner who is also working in other to make up for the EMI....the RE prices have been in upward trend for over a decade now...and these young folks do not understand that it can not be a one way road of appriciation for another 20 years till they pay off the loan...no matter what is your educational background...people never talk the trouble to jot down the numbers on paper and figure out that if you compound the home price hike over next 20 years..the numbers just do not match up... unfortunately only a sever recession will bring sanity to this mess...

Anonymous said...

Industrialists looking for a trophy asset have managed to push up property prices in New Delhi’s most precious area, Lutyens’ Delhi, by eight-fold in the last 10 years, so much so that dilapidated, torn out properties in the area are costlier than prime property in New York, London and Lisbon at current valuations.

Of the 1,000 bungalows in the zone, only 65 are privately owned and the rest are owned by the government. However, the value of the privately owned portion (approximately 255 acres) has gone up from Rs 6,100 crore in 2003 to Rs 49,000 crore now, while the value of the government land has grown from Rs 24,000 crore to Rs 1,92,000 crore


Too much easy money.

NY and London we have the global financiers.

Delhi we have a spigot straight from honest tax payers to the cheats.

Anonymous said...

Looks like bubble time again
http://www.bloomberg.com/news/2013-05-04/tetangco-says-no-plans-currently-for-philippine-capital-controls.html?cmpid=yhoo

Anonymous said...

1 million empty flats, or 11 million does not matter, since few rich elite can afford to hold on to those flats.


Just saw a article, that a 9 year old was driving his dad's Lamb or Ferrari and the dad owns like 10 other luxury hobby cars. SOB's like that probably owns 100 flats He does not care about the bubble and he has no intention of selling them either. These flats in England, US, Aussi land will be worth about 15-25k dollars, but in India it is worth about 100k. This bubble will not pop. India has 1.3 billion people, and all you need is few million people to keep this bubble going on for the next 1000 years.

Anonymous said...

They did arrest the father, out on 5k bond, and he has 18 cars worth about 4 million, on youtube, his mom is the one that captured the video.

Dont know if the mom is a hottie, but her name is Amal Nisham. IF she is a hottie, i have no problem with the 9 year old driving the ferrari, but if she is a double bagger (putting 2 grocery bags on her face, during grex, due to her looks) then the kid and the father need to be arrested.

Anonymous said...

There is massive corruption in this country. The nephew of the rail minister earned 152 crores in 5 years.

Look at this
http://timesofindia.indiatimes.com/city/mumbai/Another-richie-rich-on-the-run/articleshow_dc/19905664.cms

A deputy collector making 118 crores. There is news of a couple of PWD officers making 100+ crores. Just imagine the money these babus are amking. Do they care if there is a bubble

aam aadmi said...

and all you need is few million people to keep this bubble going on for the next 1000 years.

No No and No. For the Nth time, it doesn't work that way, why don't people understand.

It's a thermodynamic system like any other system which takes in raw materials, energy and produces stuff and byproducts (pollution). There has to be a byproduct to get the system running, the output cannot be greater than the input.

For an economy (even a black one) there are people at the bottom, the workers, the farmers, the managers, the plumbers the electricians who must consume and contribute to keep the system running. Imagine an ecosystem where all insects die, can the predators at the top live ? No.

It's the same as thinking that two people can survive merely by washing each others clothes. Money is just a medium of exchange, it's not the real wealth.

Anonymous said...

PUNE: As many as 127 fodder camps are currently operating in Satara district with close to 1.1 lakh cattle receiving food and water daily. There are 63 cattle camps in Mann tehsil alone with 54,000 cattle benefiting out of it, says a report prepared by the Satara district administration.

The eastern part of Satara is district is perennially drought-hit and receives annual rainfall of around 250mm. There has been a severe water scarcity, as water supplying sources have dried up and there is no water recharge mechanism.

Among the 127 fodder camps being run in Satara district, there are many camps set up by the social organizations and cooperative societies and they are bearing the expenses. Of the total cattle strength, there are 98,392 major cattle and 12,768 are minor cattle.

There are 44 cattle camps in Khatav tehsil facilitating 38,769 cattle while Phaltan tehsil has 20 cattle camps providing food and water to 18,295 cattle.

The state government has spent more than Rs 50 crore alone in Satara district for supplying fodder and water for cattle. Many villages in the district are dependent only on water from tankers, the report said. Tankers are going long distances and this is an alarming situation, the report added.

Anonymous said...

No No and No. For the Nth time, it doesn't work that way, why don't people understand.

It's a thermodynamic system like any other system which takes in raw materials, energy and produces stuff and byproducts (pollution). There has to be a byproduct to get the system running, the output cannot be greater than the input.


Yes Yes and Yes. Nuclear fusion is non renewable technically but more than enough to last for 2^N generations.

aam aadmi said...

@Above
Nuclear fusion ???. You can't be serious.
As someone said, Nuclear fusion is the power source of the future and always will be. I find it strange that educated people fall for this kind of blind faith in technology, kind of the same as religious blind faith about god saving the world.

JMG at the archdruid blog has coined a term for this "The religion of Progress". Sounds right.

polt said...

http://economictimes.indiatimes.com/news/economy/indicators/no-housing-price-bubble-building-up-in-india-rbi/articleshow/19911667.cms

Alan Greenspan, Mervyn King, ... all said the same.

The BBC comedy - Yes Prime Minister had a dialogue that went something like - 'Things are true only when they are officially denied' :)

Anonymous said...

Cash, gold bars and ornaments were found in four lockers belonging to Chikhlikar and Wagh. ACB investigators found Rs 7.45 crore cash, valuables worth Rs 2.04 crore, fixed deposit receipts totalling Rs 7.68 lakh and share certificates of Rs 4 lakh belonging to Chikhlikar.

He was also found to have immovable assets worth Rs 14.28 crore, including 26 properties.

Anonymous said...

^^ Now that's what I call a well diversified portfolio.

There are thousands (if not lakhs) of such corrupt public officials in every major city.

There are cops living in shabby government quarters who have 10-12 empty flats in their relatives names.

Pawan said...

There are cops living in shabby government quarters who have 10-12 empty flats in their relatives names.

All the more reason to not compete with or bail them out.

Anonymous said...

All the more reason to not compete with or bail them out.

Compete: we can control that. In some respects, it's already beyond reach of average salaried white collar worker.

Bail out is guaranteed to happen.

Anonymous said...

Who can blame these Govt SOB's??? if you have a chance to make 50-100 crores, wouldn't you cheat???? Gold is going sub $1000, so the best bet would be if these Govt employees or crooks, keep buying gold from 1900 to sub 1000. Gold crash or a Pakistani nuclear attack is the only way the real estate market corrects.
Also keep an eye on the daily suicide meter chart>>> If you see a spike, it means Gold is crashing and possible real estate correction happening.

Gaurav Mishra said...

This is a good idea putting this nice!
Prestige Westwood

Anonymous said...

swan dives from the luxury condos?!! I think with elections around the corner and the state of these builder firms...India Bulls, HDIL, DLF...its going to be absolute carnage. The middle class of India is levered to the hilt. They have drunk too much from the chalice of the wealth effect. If the world goes for a topsy turvy and their real estate wealth evaporates, gold goes back to mean...and the interest rates start rising. Perfect Storm!! Swan Dives from luxury condos!!!!!

polt said...

http://economictimes.indiatimes.com/opinion/poke/me/Poke-Me-Why-real-estate-is-a-bad-long-term-investment/articleshow/19949364.cms

A worthwhile read.

Every bull on this blog should heed the point about supply. That is what keeps prices in check. In almost every country where reliable long term data is available, RE has given a return roughly similar to inflation.

Pawan said...

http://capitalmind.in/2013/05/housing-prices-do-show-signs-of-a-bubble/

Anonymous said...

Every bull on this blog should heed the point about supply.

There is much more to real estate demand and prices than simply square footage, bricks and steel. The whole of India can be housed in Bihar, but how many Mumbaikars would like to make the trade even if they were offered 10x the space they currently occupy?

aam aadmi said...

@Pawan
Thanks for the link. 26% CAGR and Subbarao says no bubble, talk about lying through your teeth.

Anonymous said...

http://www.divyabhaskar.co.in/article/DGUJ-SUR-25-families-dream-home-broken-jt-group-builders-are-underground-4257670-NOR.html

polt said...

@Anon - "how many Mumbaikars would like to make the trade even if they were offered 10x the space they currently occupy?"

Its not about Mumbaikars moving to Bihar. Its about more supply coming up in Mumbai.

Compare Mumbai with Manhattan or Hongkong and you will see how many more apartments and office buildings can be built in Mumbai and in other cities of India.

Supply always catches up and overshoots demand for a while. That is what causes cycles.

Anonymous said...

http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/it-slowdown-consumption-fewer-jobs-and-smaller-pay-hikes-force-techies-to-cut-back-spends/articleshow/19959128.cms?curpg=4

aam aadmi said...

Compare Mumbai with Manhattan or Hongkong and you will see how many more apartments and office buildings can be built in Mumbai and in other cities of India.

I disagree. To cram even more people into that space you'd have to provide more services, better drainage, better public transportation, overhaul the water and electricity infra. It can be done but then Indian cities wouldn't be Indian cities.

Anonymous said...

@aam admi - "It can be done but then Indian cities wouldn't be Indian cities."
If the West can do it, so can we. Might take a while, but not impossible.

I agree our cities are more densely populated, but we are not at all space constrained. Navi Mumbai/Noida/Gurgaon all came up in the last 20-30 years. We can easily have 50 or 100 more such cities within close proximity of our existing large cities.

Pawan said...

@aam aadmi
o cram even more people into that space you'd have to provide more services, better drainage, better public transportation, overhaul the water and electricity infra

I can tell you that that un-cramped places in NCR region like Gurgaon have pathetic power, water and sewerage while cramped areas of Delhi have absolutely no problems with these facilities.

Gaurav Mishra said...

hi, this blog is very helpful and knowledgeable to us..
Prestige Group

Anonymous said...

Supply side of this equation is completely rigged. Builders work together with their almighty financiers and political masters to increase prices in tandem. There is no real competition.

Demand side of the equation is the only consideration to pop this bubble. A global panic coupled with mass layoffs in the Indian IT sector will quickly bring things to a sane level. Anything less means this party continues as in a population of 1.2 billion the line of greater fools is literally never ending.

aam aadmi said...

@Pawan
That still doesn't answer my question. If you put even more people in a place with no problems, is it guaranteed that no problems will happen.

Look at Bangalore, the city was never designed to hold 1 crore people, now look at it. It's a stinking mess.

aam aadmi said...

http://in.reuters.com/article/2013/05/10/india-autos-idINDEE94902N20130510

India's car market is enduring its worst sales decline in history after sales in April fell for a sixth straight month, according to an industry body, as economic gloom and rising ownership costs savage a once much-vaunted growth market.

What's happening here. I thought cars were a status symbol. The more the better right ? Esp with all that black money people keep talking about.

Pawan said...

@aam aadmi
It is strange that despite poor numbers from discretionary purchase space, stocks and sectors related to these are still booming.

Anonymous said...


http://www.stockmusings.com/mumbais-residential-realty-bubble-may-burst-anytime-now/

Not sure about the prediction, but he gives some interesting data about the difference between resale and new prices.

Anonymous said...

Mish on the Indian housing bubble

http://globaleconomicanalysis.blogspot.in/2013/05/huge-bubble-in-india-home-prices-ready.html#echocomments

--Amit

Anonymous said...

I was in Mumbai/Pune for the last two months.

Following are my observations:
1. Everything is now 100% more expensive than in 2008.
2. All recruiters and companies I met said that economy has slowed considerably.

Conclusions:
1. India at the current exchange rate is no longer competitive. Look out for rupee depreciation.
2. India will soon successfully inflate away speculative real estate prices i.e. opposite of the US scenario. Therefore, a real estate collapse of 50% or more looks nearly implossible in rupee value. It may be less than 50%.

Therefore, Indians living in India who have diligently waited for real estate prices to drop, I feel sorry for you. Your patience, savings and diligence was once again screwed.

For NRI, you are in fortunate situation. You can wait for rupee to fall.

Anonymous said...

@I thought cars were a status symbol.

Tip: If millions of people own something you do, you can't claim any "status" from it.

Perhaps Maruti and Tata are taking a cue from Ferrari to improve their image:

Ferrari says it will limit sales of its high-performance street cars this year to below 7,000 units to protect the brand's aura of exclusivity.

BTW. there was a recent press report that luxury car maker Audi India reported 37.01 percent rise in sales in April. Now an Audi buyer is typically the one who may have a multi-crore real estate investment portfolio. So I guess one can pick and choose what they want to see from these numbers.

The ultimate fact is actual RE prices on the ground.

Anonymous said...

For NRI, you are in fortunate situation. You can wait for rupee to fall.

Which other currencies are better off in debt and deficit? Euro? Dollar?. As I see the bubble today is the Dollar bond bubble. It may very well take a few years to burst though.

Anonymous said...

// I was in Mumbai/Pune for the last two months.

I like people like you who base their comments on ground realities. Unlike the other idiots here who quote wiki pages

Anonymous said...

@Anon - "Everything is now 100% more expensive than in 2008. "

Your generalization versus this (previously posted) bloggers info about resale prices -

http://www.stockmusings.com/mumbais-residential-realty-bubble-may-burst-anytime-now/

aam aadmi said...

@Anon
India will soon successfully inflate away speculative real estate prices i.e. opposite of the US scenario. Therefore, a real estate collapse of 50% or more looks nearly implossible in rupee value. It may be less than 50%.

Yes that's a possible scenario. That's where gold comes in, people need to invest in gold as an insurance against a very high inflation scenario.

Anonymous said...

@Anon
India will soon successfully inflate away speculative real estate prices i.e. opposite of the US scenario....

What does it mean??

REBear said...

Yes that's a possible scenario. That's where gold comes in, people need to invest in gold as an insurance against a very high inflation scenario.

For anyone who believes rupee is headed for a big fall, a much better option is to go long on USDINR in NSE. April 2014 contract is available at 57.70.

REBear said...

I like people like you who base their comments on ground realities. Unlike the other idiots here who quote wiki pages

Ok so let me show you ground reality. Barber in my area is also a broker and he told me shocking facts. There has not been a SINGLE transaction in Vasundhara Enclave area since past 4 months. There was a rumour that a small 2 bhk flat was sold for upwards of 1 cr around 4 months back. He told me that it was purchased by a financier for 72 lakhs, and he has now further put it for sale for 82 lakh to exit his investment. One more property that is listed upwards of 1.6 cr at online portals was actually sold for 96 lakh 4 months back.

Of course, now you would dispute above claims because none of this is public information. That is why I like wiki articles :)

Anonymous said...

@Anonymous
What I meant by "India will soon successfully inflate away speculative real estate prices i.e. opposite of the US scenario"

Let us take two assets... A and B. Over long term ratio of A to B is 2.

However, in the interim period, for whatever reason, everyone is going crazy for asset A. The result ratio of A to B is now 10.

Now there are two ways the ratio will be 2 again.

1. Price of A falls... (US scenario)
2. Price of B rises... (looking a more likely India scenario).

So if real estate price does not increase for 2-3 years while everything else is increasing by 15% every year. The ratio of real estate price to income (whether personal income or business income) would adjust back to normal long term levels.

I was in India in 2008. I am a banker and provide advisory to corporations. I was just shocked by the price increase. The same restaurant serving same food is now twice as costly. I therefore thought to share my observations.

Indian said...

The growth story of India is not exactly Black and White, thats why my Indian banker left India and failed to realised the real logic for price increase

Today Cushman & Wakefield came out with research that price in mumbai increased by 66% in last four years. that means India real interest rate is in negative by another 5%, so as long as real interest rate is negative real estate prices will go up.

Now this is an effect and not a cause for price increase. The price is increased by one major reason which is only and only black money which makes any asset price cheap because investor dont care as thats a black money

Another is jump in PE and bank lending and they demand 20% IRR which makes project expensive by 40% to 50% in two years time

Last but not the least is that, industry is not regulated which makes builders king and they can decide what they want.

My belief is that, if Congress goes, the price will crash by 30% and if they continue enjoy the ride or fraustrate, based on whichever side you are

Indian said...

The growth story of India is not exactly Black and White, thats why my Indian banker left India and failed to realised the real logic for price increase

Today Cushman & Wakefield came out with research that price in mumbai increased by 66% in last four years. that means India real interest rate is in negative by another 5%, so as long as real interest rate is negative real estate prices will go up.

Now this is an effect and not a cause for price increase. The price is increased by one major reason which is only and only black money which makes any asset price cheap because investor dont care as thats a black money

Another is jump in PE and bank lending and they demand 20% IRR which makes project expensive by 40% to 50% in two years time

Last but not the least is that, industry is not regulated which makes builders king and they can decide what they want.

My belief is that, if Congress goes, the price will crash by 30% and if they continue enjoy the ride or fraustrate, based on whichever side you are

Anonymous said...

^^ BJP was in power in Karnataka and engineered it's own scams. So it doesn't matter if Congress or BJP or some other party.

Agree about black money bit. Trouble is we have everyone at the top who is corrupt and there is total contempt for rule of law by upper class.

We need a few honest people at the top but the problem is the majority of voters themselves are corrupt.

India is suffering a crisis of values.

http://www.thehindu.com/news/national/karnataka/93-per-cent-of-newlyelected-mlas-are-crorepatis/article4703486.ece

Anonymous said...

It should be easy to expose corruption these days. Just follow the money. These guys have to leave an electronic trail. It's pretty unwieldy transacting crores worth in paper notes...

Can we redirect our IT superpowerness where it's needed the most?

Anonymous said...

Home prices are now affordable

http://www.moneycontrol.com/news/business/home-prices-near-most-affordable-levelsover-30yrs-hdfc_869735.html#toptag

aam aadmi said...

@above

Funny. The study is done by HDFC.

That's like a fruit vendor saying that watermelons are now affordable.

Kulbir said...

http://in.finance.yahoo.com/news/once-landowners-now-security-guards-105502595.html

Very interesting article

Anonymous said...

Gold is spooked. Going back to $800 per ounce. Probably will be $1000 by the end of the year. Sell your Gold.

Anonymous said...

Home loans are set to get cheaper after the Reserve Bank of India (RBI), in its credit policy for 2013-14 , cut the repo rate — at which it lends short term funds to banks — by 25 basis points to 7.25%. The RBI also said residential housing projects are less risky than other sections of the commercial real estate sector, hinting at lowering rates on loans to developers to implement housing projects.

Looks like the right political levers have been pulled and RBI will succumb to the will of our Masters.

Anonymous said...

@Kulbir

Atleast they got fairly compensated.

Unlike tens of thousands of others who don't even see a tenth of the real value of their land and are casually forced off it by the politicians and their henchmen.

Look up Lavasa for instance...

If this greed and stupidity continues, India will fall apart in 20 years time. This type of injustice coupled with pathetic judicial system guarantees rise of Naxal type movements where the powerless take the law into their own hands.

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