Friday, June 07, 2013

Real Estate Regulator - Friend or Enemy

Sugata Ghosh  from Economic Times Writes -

 Verbatim copy from ET
http://economictimes.indiatimes.com/opinion/comments-analysis/real-estate-regulator-harsh-rules-soft-banks-will-keep-realty-unclean/articleshow/20468159.cms

Real estate regulator: Harsh rules & soft banks will keep realty unclean


After politicians, builders are the most despised lot. Everyone has a story of someone who got a raw deal. The keys were handed over three years after the promised date; buyers had to cough up more midway, thanks to a clause that initially appeared insignificant; the redeveloped apartment had two-and-a-half bedrooms instead of three; and a year later, another 20-storied tower sprung up on the "open space", blocking the view of the racecourse or the sea — for which the owner, taken in by pictures on glossy brochures, had paid a premium. The list is endless.

Some angry buyers move the consumer court while others grudgingly accept what they get. A few years down the line, they stop cribbing as properties in the neighbourhood change hands for double the price they had paid. By then, they could be browsing another brochure that has found its way into the inbox, planning a second home that comes across as the only sensible, even if a little sticky, investment.

The housing market is about spiralling rates that have priced out most buyers, ambitious developers who are answerable to no one, emergence of property as an asset class and mortgage instalments becoming the dominant outgo in household budgets.

Like politicians, developers require no qualification: anyone with a claim on a slice of land can put out an advertisement to attract buyers. It's a business that employs millions and flourishes without a watchdog. Thus, any hint of a new law that assures fair deals and exemplary punishments that would be handed out by a new regulator is irresistible.

But it won't be a cakewalk. Advocates of such legislation should be prepared for the tortuous road towards a well-regulated and cleaner property market.

First, home prices could go up in the medium term. Once the new Real Estate (Regulation and Development) Bill, 2013, becomes law, builders would be barred from selling a project till all approvals — as many as 70 of them — are in place. This would delay launch of new projects and push up prices of those that are cleared.

Second, corruption may rise as multiple agencies drag their feet on clearances. Developers may strike convoluted deals giving buyers the option to purchase later. Third, disqualifying a shoddy builder could stall construction in all half-done projects and hurt genuine buyers. And, lastly, the validity of many regulatory actions could be challenged in higher courts.

There would be hurdles on the way and unless there is a quick and effective mechanism to throw out unscrupulous developers and hand over unfinished projects to others for completion, harsh measures would backfire on home buyers. This could defeat the purpose behind an otherwise strong law.

The proposed regulator must play a meaningful role so that approvals are not held back without a valid reason. Besides listing out approved projects, its website should also spell out reasons why clearances are yet to come for pre-launch projects. This would make agencies responsible for vetting projects little more accountable.

It will be a tedious job but a real estate regulator, unlike most regulators, will have to play a far more proactive role that goes beyond giving the final green signal to a project when all approvals have been obtained by a builder. This will ensure that supply doesn't dry up in the short run.

But throwing the rule book would be ahalfway measure if men who bankroll developers are unwilling to pull the plug. More than any rule, this alone can make the biggest difference to the Indian property mart. So far, it hasn't happened. Banks could have brought about the change in 2008-09 when one of India's largest builders was on the brink of collapse.

Instead, lenders threw a lifeline to keep it afloat. While realty stocks plunged 90%, generous bankers thwarted a natural correction in property prices. India was among the few countries where real estate prices did not fall — in fact, even rose in cities like Mumbai — post Lehman. It was a reminder of the clout the trade wields. Having survived the worst crunch, its influence could have only grown since then. Pushing a righteous Bill a year before the polls may be a brilliant idea by the government. But make no mistake. It's aimed to restrain a formidable lobby.  


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The question now becomes - will this regulator be actually beneficial to end users  - Will India make a law like China - where they are discouraging or banning buying properties for investment -
Will our builders which are in full nexus with the politicos comply ? Will the corrupt bureaucracy of India actually change and not let this regulator be yet another bribe to pay to get a home?

357 comments:

1 – 200 of 357   Newer›   Newest»
Anonymous said...

RE bubble watchers should read the last para.

There is no hope for common man.

Anonymous said...

If the market is cornered then prices can remain high indefinitely (depending on the holding power of the seller/builder)

If buyers stop biting then the individual investors may get into trouble but bigger builders / investors backed by PE can continue to hold on as long as there is funding.

So lots of things need to align before we see a meaningful correction.

Ofcourse if there is another black swan like Lehman then all bets are off, but who would be brave enough to plunge into the markets then?

Anonymous said...

I am using common sense here (which people prefer to avoid for the larger part). Any bubble (assuming RE is in a bubble) cannot be sustained without buyers! You need buyers and you need buyers who are desperate to purchase at any price...Everyone agrees that buyers have been priced out. So how will the bubble be sustained? and If its inflating on sheer inertia, how long can it sustain?

GSM said...

@above,

For a bubble to sustain you just need speculators financed by cheap credit. No need of real buyers.

Anonymous said...

In surat,90% residential and commercial project are delayed delivery 2-4 years due to liquidity crunch.Many projects even not started.rent is also going down in Textile market bcoz slowdown in business and over hyped rents.Some builders doesn't allow investors to sale flat in vesu area on discount(no registry below builder rate).Investors & brokers are saying no transaction is happening.Even prices are falling significantly but no transaction.So what is "market price" of flat when no transaction is there.I know some projects in parvat patiya,surat where 6 months before price was quoting 2500/-s.f. and now no transaction even paper ad of 1700/- negotiable

Anonymous said...

GSM said...

"For a bubble to sustain you just need speculators financed by cheap credit. No need of real buyers."

For how long??? Certainly not forever!!!

Anonymous said...

For how long??? Certainly not forever!!!

Can seem like forever if your scale is a typical human lifetime.

Barring a couple of hiccups, Indian RE has been in upwards trend since 2001 and this can easily continue for the foreseeable future.

Notwithstanding the downturn, HNI wealth is predicted to increase 3x times in the span of 5 years from present 2011-2012 to 2016-2017. These are the folks that matter when we wonder about who's making these multi-crore asset transactions.

Upper middle class investor will be lucky to double their net worth during same period. These are the folks who have to increasingly stretch themselves and test their borrowing limits to be able to keep up their standard of living.

And middle class (aka common man) will be lucky to preserve the purchasing power of their meager savings. These are the true losers, despite rise in nominal incomes, their quality of life will continue in downward trend. As far as home ownership is concerned these folks need not even bother applying...

aam aadmi said...

@Above
It's the same old "the rich will run this economy perpetually" argument. That's not how systems work.

It's not theory, I am quoting from history. This isn't the first time a bubble has built up and neither is this the first time there is such a large gap in income levels.

Anonymous said...

@That's not how systems work.

This is Indian system and it works! If you don't like it, get up and change it. Anything else is wishful thinking...

Anonymous said...

Cheap credit?! The credit cycle is over like Subbarao himself was saying and across the globe. The tightening cycle has begun...plus "speculators" who have bought at the top need to find a greater fool as soon as they can and if they can't...the run!

aam aadmi said...

This is Indian system and it works! If you don't like it, get up and change it. Anything else is wishful thinking...

This time is different. Isn't it.

The more you justify it the more it sounds like any other ordinary bubble.

Anonymous said...

As long as the banks know that the govt will bail them out they will continue giving loans.

In the end its the bailout money source which is unfortntly the common man :(

So either way common man loses.

But there is a catch. Indians will never allow the govt to bail banks out with their money :) thats when the fun will start. thats when the sleeping giant will wake up and ensure riots to overthrow ANY government

Back to RE. Its an investor driven market but investors are no longer interested in property. everyone knows it will crash. builders are holding on thx to the restructuring of their loans.

Anonymous said...

This time is different. Isn't it.

Repeating a mantra or soundbite ain't gonna shift reality. Keep amusing us with your ignorance.

Anonymous said...

But there is a catch. Indians will never allow the govt to bail banks out with their money :)

After 1000's of crores in scams you think a bank bailout to save the average depositors will be a trigger where taxpayers will put their collective foot down?

Can you point to a single episode in Indian history that reassures you this will be the case?

Anonymous said...

First, home prices could go up in the medium term. Once the new Real Estate (Regulation and Development) Bill, 2013, becomes law, builders would be barred from selling a project till all approvals — as many as 70 of them — are in place. This would delay launch of new projects and push up prices of those that are cleared.

100% agree. In a country like India, the more permissions/sanctions you put in place, the more palms that have to be greased. This seems like another massive government sanctioned window of opportunity for corruption to fester.

The problem with the Indian RE market isn't lack of agencies or laws. The problem is lack of enforcement of laws by said agencies. Every builder has violated dozens of existing laws. What has been done and How can adding more laws be the solution?

I can't believe even educated people are dumb enough to think that in a country riddled with corruption, by adding more government bureaucracy they will get a better deal.

Anonymous said...

@Anon -"Repeating a mantra or soundbite ain't gonna shift reality."

By reality, do you mean the following ?

http://www.business-standard.com/article/companies/inventory-level-in-ncr-mumbai-hyderabad-doubles-in-3-years-113053000834_1.html

Anonymous said...

Rupee is at all time low. Us economy doing well. So IT people will get good increments. This and NRIs will propel RE industry for a couple of years. Then Indian economy will pick up steam. So I dont see RE going down

Anonymous said...

Anonymous said...
"Rupee is at all time low. Us economy doing well. So IT people will get good increments. This and NRIs will propel RE industry for a couple of years. Then Indian economy will pick up steam. So I dont see RE going down"

LOL...

Pawan said...

"Rupee is at all time low. Us economy doing well. So IT people will get good increment."

Indian IT companies are working at net profit margins of 25% versus single digit margins of IBM etc. Why do you think this gap will sustain over long term?

aam aadmi said...

Rupee is at all time low. Us economy doing well. So IT people will get good increment.

Despite all the glitz, IT people form a miniscule fraction of the Indian economy, moreover I don't know why nobody is discussing the possibility of interest rates going up to save the rupee. That's a very real possibility, the home loan market will be toast if that happens.

Pawan said...

I don't know why nobody is discussing the possibility of interest rates going up to save the rupee.

Don't have data but I believe not many foreigners buy our currency unlike USD. We steal from our own countrymen (read our deficit is internally funded).

aam aadmi said...

@Pawan
Yes but even Indians are not going to save if the real interest rates keep dropping like a stone.

I am sure another round of Petrol and Diesel hikes are coming on account of this devaluation. This is only going to stoke inflation even higher and god help if there's a panic in the forex market, we might see a Brazil or Argentina like situation.

Anonymous said...

@Pawan - " Don't have data but I believe not many foreigners buy our currency unlike USD. We steal from our own countrymen (read our deficit is internally funded)."

Nevertheless, we buy petroleum and edible oils from abroad. A weaker rupee could trigger high inflation - Bad for the govt in an election year.

Anyway, our great currency hit 58 today. Next stop 60?

REBear said...

@aam aadmi

moreover I don't know why nobody is discussing the possibility of interest rates going up to save the rupee

This is interesting, around 4 weeks back I called my friend who works in a hedge fund in Bangalore. The rupee was 55.35 and I tell him rupee is going to hit 65, tell me a real hedge for my savings. He laughs and asks me why I feel rupee will hit 65 ? My answer - "I know 3 different people who are trying to sell RE and unable to sell it, and there are virtually no RE transactions in East Delhi area where I live. This sounds economy is going to get really bad and there is no alternative other than allowing rupee to fall". He says, "don't worry, RBI will not allow it to cross 56".

And today when I spoke to him, he says RBI may increase interest rates in the policy meeting to save rupee.

REBear said...

@Pawan

We steal from our own countrymen

Yes they literally steal. I got remittance in USD on Friday and was forced to convert it @56.52. Today it crossed 58.10, lost a lot of money in a single day. The Govt doesn't allow exporters to hold USD in account unlike other countries where you can hold multi currency account. This is highest level of insecurity and I call it stealing. If USD is coming in country, they welcome it. If you take out USD, they stop you !

skeptic's ghost said...

USD INR is at 58 today anyone see it slide all the way to 65-70?

Sociaist+Populist schemes like NREGS, Food security, Right to Education and direct cash transfers, unchecked subsidies and non taxed agricultural income - is bound for a doomsday for Indian economy.

The little gain through exporting software, Auto, diamonds and IT isn't going to stem this coming doom
Any thoughts?

REBear said...

Want to know how much can land prices fall, look here :

http://www.irishcentral.com/news/Irish-farmer-buys-back-land-he-sold-for-2-million-for-75000-170673576.html

Of course, these miracles only happen in first world countries. In third world country like India, there is enough black money, corruption, red tapism, politicians builders nexus which don't allow miracles to happen.

Cool Head said...

A lot of money is locked up in RE "assets" held by the banks. There is no productive income for the borrowers (builders) since sales are not happening. They are either borrowing from others or rolling over the loans. Fresh investment from abroad is not coming into RE, nor in the stock markets. The only way to stem the Re slide would be for banks to liquidate their RE holdings by either not extending the loans to the defaulting builders and forcing them to sell at whatever rate they can get, or seizing the collateral (in case of builder defaults on interest and principal payments) and auctioning it (which will actually reveal the real price of the property as against the notional one). This will cut the credit outstanding (though banks profits may be shaved drastically and they get mark to market losses) and squelch the Re liquidity leading to the currency appreciation. Until such measures are taken, the downward slide will accelerate. This will mean that RE prices remain stagnant (no fall) but Re will sink to even 75 to a dollar. So we need now the RBI to get off its kids gloves and really do something else the RE lobby will take everybody down with it.

Anonymous said...

I believe the follies of the last many years are starting to reach critical mass and we are staring at something big coming our way.
At its best there will be a correction and "reversal to mean". At its worst, well, who the f$%k knows.

Anonymous said...

In third world country like India, there is enough black money, corruption, red tapism, politicians builders nexus which don't allow miracles to happen.

Prices in Tier 2/3 cities and fringe villages will be first to collapse.

News media seems to be focused on Delhi/NCR, Mumbai, Chennai etc. But the smaller cities and towns are canaries in the coal mine.

If we start seeing major price corrections or projects being abandoned in these areas the growth story is over and RE goose is cooked. That will shave off another point or two off the GDP...

Anonymous said...

If currency falls and inflation raises, people will have to spend more on day to day expenses and will have less money to invest.

But fortunately banks are now ready with 30 year loan products to fulfill the dream of mango man..

Party will continue..

http://www.bankofbaroda.com/pfs/homeloans.asp

http://www.bankofbaroda.com/pfs/homeloans.asp


Anonymous said...

Shouldn't the policies help everyone in india get roti, kapda, makaan?

Maybe there needs to be regulation so that black money (or extra money) can be put into gold much more easily. Gold is a good hedge against inflation and it won't price people out of basic things in life such as a home.

Anonymous said...

But fortunately banks are now ready with 30 year loan products to fulfill the dream of mango man..

.. to become a mortgage slave.


Thought I'd complete the statement. Welcome to modern era slavery!

Anonymous said...

Shouldn't the policies help everyone in india get roti, kapda, makaan?

Policies are in place.

The problem is in implementation.

Anonymous said...

common people will suffer, but RE not going to come down. Majority of this real estate is house moneys, so INR hitting 65 will not bring the price down. 2008 lehman crisis crashed some of the US real estate, EU crisis is taking out Greece, Spain and few more to follow, but Indian Real Estate has not gone down. Now, the common man who buys a 1 crore home, will probably have to suicide, but the .01% will feel no pain at all.

My In-Laws just sold a property for 3.5 crores and the guy who bought the property paid 1.5 crore to the med school(so his son could get into a med school).

aam aadmi said...

@Above
common people will suffer, but RE not going to come down.

Are you sure about that ? India imports 80% of it's oil, a lot of coal, particularly high grade coking coal, which is used for smelting and much of it's gas.

If rupee keeps falling, the country will literally grind to a halt. That vs interest rates going up and RE collapsing, I think even the politicians will choose the former. It's a not even a choice.

Pawan said...

Mark Faber recently said that while China is claiming 7.5% GDP growth for the last quarter, he believes it was closer to 4%. Now the corollary is that India has always grown 2-3% less than China so we are realistically at 2% - the govt. data fudge not withstanding. If only govt. had allowed a few RE companies to go bust in 2009...

Btw USDINR = 58.9975

Anonymous said...

Lol i guess 60 is just 2 days away.

Ah! Economics. :)

I dont mind rupee falling since i earn in USD.

Long Live The Powerful Dollar.
To Hell With India and its weak rupee.

aam aadmi said...

http://www.thehindu.com/business/Industry/siam-fears-job-losses-as-car-sales-tumble/article4803419.ece

Car sales in India fell for a record seventh consecutive month in May with a decline of 12.26 per cent, prompting industry body Society of Indian Automobile Manufacturers (SIAM) to caution that the prolonged slump in the market could result in job losses in the automobile sector.

Do I hear the word slowdown

Anonymous said...

This was today's news:

http://www.thehindu.com/news/national/other-states/4-dead-in-mumbai-building-collapse/article4803147.ece

This was yday's news:
http://www.thehindu.com/news/cities/chennai/worker-dies-in-balcony-collapse/article4798053.ece
(under construction building)

And many more earlier. Too many collapses of under construction buildings (even 'reputed' builders). I remember Arrat builders' place in a main location (which means high price tag) in Bangalore had caved in sometime back. And after that (and before that too) several buildings
by nondescript folks also kept meeting similar fate. Blame is usually thrown on the 'mud' (land) or 'water' (i.e rains) and things like that. I keep seeing such things pretty often even though I read only one newspaper. Local papers in the "metro"s might carry much more such incidents.
Shows the super-duper construction quality & practices in "metro"s. The blood suckers use the worst possible materials, which are the cheapest, and charge millions for whatever thy build. Pure greed fueled by speculation.

Anonymous said...

@aam-admi - "Do I hear the word slowdown"

How can that be? The rupee has weakened and our IT industry will save the day. RE will continue double digit gains forever :)

Folks harping on about how the weaker rupee will save the IT industry should realise that the clients/customers also know that the rupee is weakening. Hence they will ask for lower dollar costs. Its not like our IT companies have a lot of bargaining clout in these times.

Anonymous said...

India is soon getting a rating downgrade. The party is so over now. What an engineered scam to raise RE prices by 10 folds and calling it growth.

aam aadmi said...

Desperation

http://profit.ndtv.com/news/market/article-titan-plunges-13-on-rbis-gold-guidelines-downgrades-323256

Shares in jewellery maker Titan fell as much as 13 per cent on Wednesday, following the 11 per cent slide on Tuesday on Reserve Bank clarification that all imports of gold for domestic consumption can be made only with 100 percent cash margin.

Something tells me that there will be an artificial shortage of gold in the coming years.

Anonymous said...

http://economictimes.indiatimes.com/news/economy/indicators/Standard-Chartered-says-rating-upgrade-to-boost-battered-rupee/articleshow/20559538.cms

After the market hours, Fitch today revised the credit outlook to stable from negative but retained the rating at BBB- bringing cheer to the government struggling to arrest the rupee slide.

skeptic's ghost said...

The falling Rupee is the correction - From 46 to 60 is almost 24% drop - from 2010 to 2013

Abercrombie Fitch just upgraded India's outlook - this just tells you what the bankers and the rating agencies are smoking - they think the fundamentals are great in both US and India - they dont see the rot in the core.

India's only plus point is that the export based industries are largely in demand due to costs being low via falling rupee & cheap abundant fresher intake. IT/ITES Industry and advanced manufacturing Imports next to nothing and pays low taxes - which allows them to reap windfall with falling rupee.

Internally for the economy to flourish the Real Estate market only has to stall (not increase).Fall will only come in real terms (USD/gold). Import based industries - Agriculture (fertilizer Natgas), Petroleum, Gold, etc will suffer - but this suffering isnt going to dent the RE market. The builders have streamlined their speed of delivery to indefinitely delay till they find buyers.

Land prices won't fall as Zoning is in disarray (read proposed-NA plots). Municipal authorities have fixed ready reckoner pricing - which means you cant ever sell a property below that price.

Overall I feel the falling rupee is actually a good sign this time.

Anonymous said...

@Skeptic - "Municipal authorities have fixed ready reckoner pricing - which means you cant ever sell a property below that price. "

In 2008, land prices on the outskirts of Bangalore fell below the reckoner prices (called 'guidance value' here in Karnataka). But that did not stop transactions. You can transact at a lower price, but tax has to be paid at the fixed rate.

Anonymous said...

In 2008, land prices on the outskirts of Bangalore fell below the reckoner prices (called 'guidance value' here in Karnataka). But that did not stop transactions. You can transact at a lower price, but tax has to be paid at the fixed rate.

Land transactions are always in cash (as much as 90% cash) Hence the ready reckoner.

Anonymous said...

"India is soon getting a rating downgrade. The party is so over now. What an engineered scam to raise RE prices by 10 folds and calling it growth."

Don't count this vampire out so soon. If there is one thing that the past 5 years have proven beyond debate is the utter resilience of this bubble. No matter how many bullets you fire into it, the vampire keeps getting up and coming towards you with its face snarling and its arms outstretched.

India's RE market may get its day of reckoning, but based on our past experience, it is safe to say that it will happen only when people least expect it.

Anonymous said...

>Land transactions are always in cash (as much as 90% cash) Hence the ready reckoner.

In 2008, it did not matter whether you paid in cash or cheque. At that time, the prices actually fell below the guidance value for a short while. There was a clamour to reduce the guidance value, but by the time the govt got around to it, prices had risen.

Pawan said...

No matter how many bullets you fire into it, the vampire keeps getting up

I don't see a single bullet ever fired at RE except may be the recent Real Estate regulator bill. Govt. has maintained other conditions same or changed them for better for the RE industry. If you want to see bullets fired, look at Gold which is being targeted brutally. RE can not take a single such shot.

aam aadmi said...

No matter how many bullets you fire into it, the vampire keeps getting up

All bubbles burst, this too will. The question is what form will it take and who else will go down with it. Given the way our economy works, bubbles would probably burst in small towns first, followed by Tier 3 cities and then the Metros. Data wouldn't be available so no one would know what really happened, there will be a lot of confusion regarding whether the bubble has actually burst.

Bankers will fudge books to show that builder loans have been repaid, builders will probably abscond. A lot of projects will get stuck indefinitely, home loan owners being the weakest group would be hit first as debt collectors start calling them. Lots of cases in consumer courts, Finance minister giving repeated assurances that nothing has happened and 'all is well'. RBI will do backdoor monetary injections without anyone noticing.

Clues would come from the quarterly results of cement manufacturers, labor contractors etc.

Just some thoughts.

Anonymous said...

http://www.businessinsider.com/indonesia-hikes-rates-for-first-time-in-a-year-to-counter-diving-currency-2013-6

Will this be a repeat of the south asian crisis of 1997? That time was an absolute bloodbath in the equity/stock/bond markets of Thailand, Indonesia, etc.

India escaped relatively unscathed. This time around ...

REBear said...

People preferring bank deposits for investment now.

http://www.moneycontrol.com/news/business/sbi-witnesses-60-risedeposits_898466.html

Anonymous said...

"All bubbles burst, this too will. The question is what form will it take and who else will go down with it. Given the way our economy works, bubbles would probably burst in small towns first, followed by Tier 3 cities and then the Metros. "

That all sounds very good in theory, but I'm not as confident as I used to be about this. We have been on this board for years and years and years and there is no sign of a bubble bursting despite tremendous financial calamities happening one after the other after the other (including just to name a few, GFC of 2008, Greece, Portugal, Spain, Italy, Euro Debt crisis, INR crisis, QE 2, QE infinity, etc.)

Despite all this, there is not even a smidgen of evidence that prices have cracked in individual cities or at the national level in some meaningful way. Sales may have stopped but that doesn't tell us anything about prices (other than that the "sales may go down but prices won't" people are right).

Chennai for various reasons seems to be the strongest city of the pack. If Chennai cracks, then there might be some hope for a meaningful correction in other cities. Until then all this bubble-talk is just fantasy.

Anonymous said...

If you rely on government data, here's some food for thought:

http://economictimes.indiatimes.com/news/economy/indicators/iip-data-oops-central-statistics-office-goofs-up-again-with-growth-numbers/articleshow/20580096.cms

These idiots will probably get promoted!

And honest officer like Ashok Khemka (remember him) will be tossed in dustbin:

http://indiatoday.intoday.in/story/ashok-khemka-ias-officer-whistleblower-transferred-40th-time-robert-vadra-businessman-dlf-haryana-government-sonia-gandhi/1/260685.html

Superpower by 2020? More likely a joke democracy...

Anonymous said...

Price correction? Dream on (atleast in amchi mumbai...)

http://economictimes.indiatimes.com/markets/real-estate/news/yes-bank-ceo-rana-kapoors-family-buys-rs-128-cr-house-next-to-mukesh-ambanis-antilla/articleshow/20300618.cms?intenttarget=no

Pawan said...

@Anon above
Rana kapoor holds 12.5% in Yes Bank which alone is worth more than 2000 crores. So what's the big deal here?

Anonymous said...

http://kafila.org/2011/07/01/cities-and-infrastructure-the-road-widening-saga-in-bangalore/

In a nut-shell, the "road-widening" acts are definitely not from a concerned, caring govt. Trees are killed & lung space is thrashed to non-existence only to boost the "value" of the properties around the 'widened' roads - either for more taxes & stamp-duty or for personal, vested interest. Common people (non-realestate, non-banker, non-politico) are being deceived and exploited over & over again.

And this con trick is a bit outdated as well. Still we are getting taken in. Studies have shown that road-widening worsens the traffic and not ease it really:

http://praja.in/en/blog/idontspam/2011/06/23/road-widening-futility-alternatives

Anonymous said...

@Anon - "Price correction? Dream on (atleast in amchi mumbai...)"

A super rich guy buys a super expensive house. And thats your proof that prices will not fall!!

Anonymous said...

"And this con trick is a bit outdated as well. Still we are getting taken in. Studies have shown that road-widening worsens the traffic and not ease it really:"

Well, what are you suggesting? More bicycle lanes so that people can bike to work like White people in Amsterdam or San Francisco?

REBear said...

Price correction? Dream on (atleast in amchi mumbai...)

Well first of all no doubt he is buying a highly overpriced house vis-a-vis quality, though price doesn't matter for him as he is not buying for investment. In India, anything you buy, it's either

1. Pathetic quality, mostly cheap or but sometimes expensive(like Indian RE)

2. Average or good quality, super expensive, no support and service. Examples: Evian mineral water, Durian Furniture, Johnnie Walker wisky, BMW cars, and the most important, branded Real Estate projects in India.

There is no third case from my experience. Mr Rana's purchase falls in category 2, and I am sure he could have got a much better house in a first world country at a lesser price, but living in India is his constraint.

Most of the purchases would undoubtedly fall into category 1. Twenty year old creepy apartments selling over 1.5 cr - are those waiting on the sidelines sure they want to buy this crap, even if it corrects by 50% ?

Anonymous said...

Rana kapoor holds 12.5% in Yes Bank which alone is worth more than 2000 crores. So what's the big deal here?

He's a successful banker. Kuch to dimag hai usme?

Assuming he has some common sense, you'd think a banker of all people would know the pulse of the market and if a price correction is imminent.

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/brokers-turn-developers-as-realty-business-booms/articleshow/20582218.cms

Sizzling hot startups, Indian style...

Any news on the IT slowdown and rumoured layoffs?

Anonymous said...

>Anon - "Assuming he has some common sense, you'd think a banker of all people would know the pulse of the market and if a price correction is imminent."

He has bought a house on Altamont road, probably India's most expensive street. Supply is extremely constrained there and it is completely not representative of what the rest of us will encounter.
Inventory levels (sub 128cr houses ofcourse :) has doubled in many cities over the last two years. That is what should be worrying us, not some CEO throwing away his pocket change on a house in Mumbai.

REBear said...

Assuming he has some common sense, you'd think a banker of all people would know the pulse of the market and if a price correction is imminent.

Lets say you make Rs.20 lakh per year after taxes. You see an expensive LED TV in the market costing 1 lakh and want to buy it immediately for end use cum show off. And you know this TV may be available at half the price in a year or so. Would you wait for a year to get that television ? Further you know that you can get the same TV imported from Dubai at half the cost - would you specially go to Dubai to get that TV ?

I think this exactly demonstrates the position and purchase made by Rana.

Anonymous said...

Rana liked the house so he brought it. Simple. He wants to stay in there. He has the money.

He wouldnt have brought it if he had no money to buy that property.

So his is a genuine case since he cant rent it lol. The only option is to buy.

Here the case is different.

Common man doesnt have the money to buy 1 cr worth of house nor does he like to buy in any other place. Hence no sales. Hence he rents and is happy.

So that basically means if a man cant afford something for 100 rs. he wont buy it when the price becomes 150 either. When no one buys something, the price has to fall around 75 or so to tempt him.

Cool Head said...

Guys, you're forgetting an important thing. It does not matter what the price of the house is, since the guy OWNS a bank. He can simply get a loan from the same bank against that collateral. And for those of you who know how fractional reserve banking works, nothing more need be said.So much for "investing" his money.
On a side note there's an ad in todays TOI for an upcoming project at Juhu @14,600/- psf only.

Anonymous said...

I think this exactly demonstrates the position and purchase made by Rana.

Thanks for the dazzling explanation correlating a consumer electronic with real estate.

Latent economic geniuses lurking here...

RBear said...

Thanks for the dazzling explanation correlating a consumer electronic with real estate.

How are consumer electronic goods different than Real Estate when it comes to end use (including show off) ?

Latent economic geniuses lurking here...

Oh I forgot that those professing Real Estate follows laws of economics like Demand & Supply, Affordability are dimwits. Genius are those who overlook this fact !

Anonymous said...

Rise in rupee and inflation good for IT people and NRIs. Salaries will rise for the next 2 years and then the Indian economy will pick up to 8% growth rate. I have been waiting for RE prices to fall but seems unlikely. I am in non IT so less salary making.

Anonymous said...

http://www.dnaindia.com/money/1848220/report-as-rupee-falls-remittances-take-wing

Man all this NRI money will go in RE

Anonymous said...

>> Man all this NRI money will go in RE

May not. Those guys too are most likely waiting for Indian RE to crash so that they can get better deals for the same amount.

Anonymous said...

or maybe a lot of NRIs are not interested in purchasing real estate in india (except for investment purposes).

There is no way I'd purchase for living in most large (1+ million population) cities.

It's much easier to rent.

Anonymous said...

Bubble Bubble on the wall
Which one is the most weakest of all
RE, commodity, Rupee....
Any theories of which one will burst and fall.....

I am taking bets here. Send your dough to www.indiasuperpower2020.com

Anonymous said...

^^ My vote would be for all of the above though commodities such as gold are also prone to foreign shocks.

Regardless, Indian economy is toast.

As far as India is concerned, you should be long corruption and short democracy.

The only bubble that will continue to grow in India and consume every portion of society is the corruption bubble.

Pawan said...

http://www.moneycontrol.com/news/market-outlook/forget-8-9-gdp-growthforeseeable-future_900720.html#toptag

Anonymous said...

This is the end result of corruption :

http://www.bbc.co.uk/news/world-latin-america-22946736

Anonymous said...

http://content.magicbricks.com/unsold-houses-in-chennai-pile-up-as-sales-slump/?fromSite=toi&utm_source=toi&utm_medium=referral&utm_campaign=toi-mb-whitelabel

Situation is similar in other cities. Probably worse in Delhi/Mumbai

REBear said...

Situation is similar in other cities. Probably worse in Delhi/Mumbai

Even though I am bearish, I wish situation turns around otherwise we have much wider repercussions such as social unrest. Although not in my hands, I would always choose bubble over social unrest.

http://timesofindia.indiatimes.com/tech/careers/job-trends/What-is-keeping-Indias-engineers-unemployed/articleshow/20643448.cms

From the above link :

"Manjunath Reddy, a civil engineer, turned to chain snatching in Thane, a suburb of Mumbai, to support his young family. While he used some money to buy a small flat in peripheral Mumbai, his failure to net a job drove him to crime, he told the police when caught.

Like him, another engineer in Aurangabad turned to car lifting as a route to easy money. "The social aspect of this massive under-employment and unemployment will soon be witnessed," warns Pratik Kumar, HR chief of Wipro and chief executive of its infrastructure engineering unit. "

Anonymous said...

http://timesofindia.indiatimes.com/tech/careers/job-trends/Indian-IT-3-things-that-may-hit-hiring/articleshow/20642909.cms

In under two years, 23-year-old Laveen Bakshi has experienced a wide range of emotions in his stillborn career in information technology. For the electronics and communications engineer from The Maharaja Suratmal Institute of Technology, Delhi, the initial thrill of getting an offer letter from HCL Technologies, India's number four software exporter, has now given way to dejection, desperation and anger after a near two-year wait for a joining date.

At least 6,000 others are in the middle of such frustrating waits to join HCL and other IT companies. Once a magnet for skilled manpower, especially engineers, IT companies are now hiring less -- the sector hired 200,000 people last year, 50,000 less than the previous 12 months, according to industry body Nasscom.

Anonymous said...

"There has been a significant decrease in the premium accorded to profiles of NRIs and onsite workers in the IT sector," says Muragavel Janakiraman, CEO of Bharatmatrimony. com, a popular marriage portal. Holding an IT job is increasingly viewed with the same lens as jobs in other organised sectors, he adds.

Lalitha Iyer is now facing up to some of these changes. Her son Vishnu, 30, has gone from matrimonial goldmine to pariah in 18 months. In early-2011, he went to Germany on an onsite contract. Before his departure, she swatted away piles of potential matches. Now, he's back from his stint, had his H-1B visa application rejected for a US trip. His salary hike too is frozen. "We're not getting any younger to keep supporting him emotionally," Iyer says in her small house in North Bangalore.

Anonymous said...

Guys please, waiting desperately for 1 major builder to publicly announce price cuts and trigger the burst.

These guys are like mafia. Atleast in Pune, prices keep inching up by 100-200 rupees every couple of months...

Anonymous said...

Many employed IT folks (i.e, my collegues)spend a major chunk of their EMI, and are cursing the burden. Now that RE has pushed out & killed farm lands, food prices are going up a mile a minute and it is all the more adding to the burden. The newer IT grads are finding it very very tough to land a job - I'm getting requests from _several_ new grads asking me to refer their resumes in my company, and unfortunately, all the referral call-out emails I get from my HR are for atleast 8 year experienced folks. So I keep telling them "send me your resume. Currently no openings. If I get any callout for freshers, I'll immediately post yours". And it's a long time since I ever saw any request for fresh grads. Feeling sorry but unable to help them out.
And IT folks resorting to crimes happenned in B'lore some months back - one IT guy (some Bhattacharya, forgot his full name) wore a mask & tried to hold up the Indiranagar CMH road HDFC bank, but was caught.
All thanks to the extreme shortsightedness & greed of the government (policies) & the big-banks, people are being pushed to such extremes.

aam aadmi said...

@REBear
I think this was kind of expected, there has been a massive oversupply of "IT" engineers in the last decade, most of them are not engineers, just glorified clerks and code 'coolies'. Many of them even join civil and mechanical just to land an IT job.

So as the market stagnates I'd expect companies to hire experienced people rather than freshers esp when it takes enormous bandwidth to train freshers.

aam aadmi said...

http://www.firstpost.com/real-estate/this-is-what-plummeting-rentals-in-posh-delhi-mumbai-mean-for-you-886221.html

As companies cut relocation budgets, residential rentals in posh areas of Mumbai, Delhi and Bangalore have dropped by around 25 percent. Demand for rented homes in Mumbai’s popular localities like Malabar Hill, Cuffe Parafe fall, Delhi’s most sought after Vasant Vihar, Chanakyapuri and Shanti Niketan are also down by half in the last one year, according to a report in the Economic Times.

Anonymous said...

This is from today's WSJ.


In Pune, India—an automotive manufacturing city about 95 miles from the country's financial capital of Mumbai—Panchshil Realty is building two 23-story, glass-clad towers with the Trump name on them.

"Everyone wants to buy the best house. That's the mentality," says Sagar Chordia, a director with Panchshil. "Everybody knows Trump. People have seen the Trump Tower in New York. Everybody watches 'The Apprentice.' "

----
God save India & Indians from Trump. He is a third grade charlatan passing off as a businessman. After several of his projects went into bankruptcy in the US (note, not personal bankruptcy, his wealth is safe), he is stepping outside.

Anonymous said...

Ay dil muskil se jeena yahan yeh hai bambai yeh hai bambai meri jaan

Apartments in mumbai having New York price tag compare this nation having per capita of 1000+ US$ (devalued coutesy rupee depreciation which boost exports and is great for our nation we should devalue our rupee everytime our exports goes down - sic ) to that of 25000 US$.

Note compare the extreme skewed income in terms of percentages of large sections of population in india as well US having per capita income less than 75%, 50% of these figures

read this
http://www.goodreads.com/author_blog_posts/4358371-my-take-on-maslow-s-theory-in-mumbai

PS BTW is this an IT blog which discusses employment and unemployment

Disaster in Uttarkhand
Real Estate disaster pictures clearly show rapacious constructions but who cares in this nation

Where is the respect for nature which we had in history in religion and culture

REBear said...

@Anonymous at 12:26 PM

Disaster in Uttarkhand

Around 150 people are trapped near Sarantok (just 3.5 kms from Gaurikund) since past 4 days as bridge got broken due to floods. This includes my relatives who were returning from Kedarnath in a group of 25. Of these 25, 3 are already dead/missing - this group has seen these 3 ppl carried away by water current in front of their eyes. So far no relief has been provided, no food packets have been dropped. Tried reaching all the helpline numbers but nobody picks up the phone. I have the GPS coordinates of their location, but so far am not sure if anybody bothers to listen and know about the trapped pilgrims, much less provide any relief.

These experiences are making me really nervous and convincing me this is not the right place to raise my children.

aam aadmi said...

PS BTW is this an IT blog which discusses employment and unemployment


No, this is an RE blog that's why we discuss employment and unemployment.

@REBear
Sorry to hear that, if you have the GPS coordinates you should go immediately to Dehradun and try to get someone to help.

polt said...

60Rs/$ in a few days. In 2007, it was at 38/$ !

stop, hey what's that sound everybody look what's goin down
- http://www.youtube.com/watch?v=bjSpO2B6G4s

Anonymous said...

>>60Rs/$ in a few days. In 2007, it was at 38/$ !

NRI's are rejoicing their fortune

REBear said...

Sorry to hear that, if you have the GPS coordinates you should go immediately to Dehradun and try to get someone to help.

'Juggad' is something that is only helpful in this country. Fortunately, we knew somebody close to us in BSF and he has been very helpful. He initiated contact with ITBP commandants who seldom would have picked our phone. Rescue operations are on today and hope they will be rescued.

Other option is to contact a private jet company and pay them. If you have listened to News channels yesterday, one family payed a staggering 30 lakh to a private jet company to get rescued ! This is how the country works my friend. First priority is people like Harbhajan Singh, next priority is wealthy individuals who can pay any amount to arrange a private rescue, and then comes the rest of the country.

polt said...

50% fall in some places in the diamond market real estate.
http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fashion-/-cosmetics-/-jewellery/diamond-companies-in-a-fix-banks-seek-additional-guarantees-after-sharp-fall-in-property-prices/articleshow/20673202.cms

Wonder how the RE bulls will explain this. After all, isn't Mumbai supposed to some sort of a RE nirvana where black money, politicians, civil servants will never allow prices to fall.


If it can happen there ...
Buckle up folks. The ride might be rough for a few months or years.

Anonymous said...

More than anything, I am interested in seeing what new tricks these thugs pull out of their hats to stop the crap from hitting the fan this time.

If it all plays out as per the laws of nature/economics, an RE bubble would be the smallest thing to worry about in the days/months/years to come.

aam aadmi said...

@polt
Markets are slowing down, esp after Bernanke's speech last night.

This confirms what everyone knew for a long time, that the 'recovery' after 2009 was just down to insane levels of cheap credit.

I don't think anyone can stop this train wreck now.

Anonymous said...

There will be no train wreck.
We have "Billions" of NRIs who will take advantage of the cheap rupee and send in "Trillions" of dollars and save RE.
Just like Batman saves his beloved Gotham time and again, against all odds.

Anonymous said...

2008 GFC. This is it for Indian RE bubble.

Oh wait...

2010 Greek crisis. Ok now this Is it for Indian RE bubble.

Oh wait...

2011 euro crisis. This is finally it for Indian RE bubble.

Oh wait...

2013 Cyprus crisis. This is it for Indian RE bubble absolutely.

Oh wait...

2013 gold price crash. This is it for Indian RE bubble then.

Oh wait...

2013 Japan stock market crash and yen surge. Ok, now this is really it for Indian RE bubble.

Oh wait...

2013 Indian Rupee crisis. Ok, now this is really really it for Indian RE bubble.

Oh wait...






REBear said...

2013 Indian Rupee crisis. Ok, now this is really really it for Indian RE bubble.

Oh wait...


The bubble has burst if you are not aware of. My friend who is trying to sell his apartment in New Faridabad initially put it at 3600/-, sometime back he got offer for 3200/- but he waited. Now, financier is willing to talk at 2900/- and he is not sure if he will back off further if he sees the desperation. He is asking for a LOAN from me as he has already purchased a flat in Bangalore and is out of funds.

As I said, put your house on sale to know the shocking truth.

Anonymous said...

"2013 Indian Rupee crisis. Ok, now this is really really it for Indian RE bubble.
Oh wait..."

It also means that the bubble is running out of air, sorry chances!!!

Do you guys really believe this madness will continue perpetually?? Really???

Pawan said...

2013 Indian Rupee crisis. Ok, now this is really really it for Indian RE bubble.

See this is the interesting part here. If you are a property bull, you have to go out, buy a property, hold it for a while and sell it to make money and so on.
If you are a bear, you just have to wait. If someone believed that we were in a bubble in 2008 and believes we are still in a bubble, that person has no reason to buy now. So most of us are waiting.

Anonymous said...

See this is the interesting part here. If you are a property bull, you have to go out, buy a property, hold it for a while and sell it to make money and so on.

Thanks for completely missing the point of my post.

Anonymous said...

>@Anon - "2013 Indian Rupee crisis. Ok, now this is really really it for Indian RE bubble."

So you are saying that we were prescient enough to predict this as early as 2008 :)

Anonymous said...

God save India & Indians from Trump. He is a third grade charlatan passing off as a businessman. After several of his projects went into bankruptcy in the US (note, not personal bankruptcy, his wealth is safe), he is stepping outside.

Trump is the perfect role model for Indian business men. Routinely show a loss to the tax authorities while privately hoarding the profits.

Anonymous said...

This is how the country works my friend

This is how most of the world works except for a scant handful countries where true democracy still exists.

Good policy should prevent concentration of wealth (and by corollary, power.) Survival of democracy is at stake.

REBear said...

Do you guys really believe this madness will continue perpetually

As long as there are enough fools abroad. And all they need is 20% upfront advance to sell a unit.

http://www.emirates247.com/property/real-estate/uae-based-nris-buying-luxury-properties-in-india-2013-06-20-1.511253

So the 20% ponzi scheme can continue for sometime, the "100%" ponzi scheme where you need to purchase a ready to move unit has already crashed as I pointed out earlier.

aam aadmi said...

Was watching the property show on NDTV Profit this morning, the head of 99 acres said that NCR has witnessed a 1.6% price drop QoQ for last 6 quarters, there were also price drops in Chennai in Adyar, Nungambakkam and many other places.

There was also more interesting data, Bangalore has witnessed a 53% drop in new projects launched in the last 6 months. But it looks like Bangalore is the best performing market right now, the worst ones are Mumbai and NCR, not in term of pricing but in terms of inventory overhang.

The reason attributed was that Bangalore is an end user market, while Mumbai and NCR are speculator driven markets. He said that speculator driven markets and luxury segment would crash first and end user markets last.

Anonymous said...

@aam-admi - "Was watching the property show on NDTV Profit this morning, the head of 99 acres said that NCR has witnessed a 1.6% price drop "

For fun, watch the property show on CNBC (with Samir Jasuja from Propequity). Almost all places recommended by him have seen prices rise by 50% over the last three years. !! I have never ever seen him say that prices are flat or falling anywhere. The show must be having high ratings, for it comes on everyday at 7pm.

Anonymous said...

"For fun, watch the property show on CNBC (with Samir Jasuja from Propequity). Almost all places recommended by him have seen prices rise by 50% over the last three years. !! I have never ever seen him say that prices are flat or falling anywhere. The show must be having high ratings, for it comes on everyday at 7pm."

lol. doesnt surprise me. people maybe believing him and buying since its a primetime show.

When prices fall this guy is charcoal.

The truth is no matter who tells you that property prices will never fall, the prices will fall steep soon.

Even god must be laughing at those investors who buy at this price and smiling at us at this blog :)

GSM said...

For fun, watch the property show on CNBC (with Samir Jasuja from Propequity). Almost all places recommended by him have seen prices rise by 50% over the last three years. !!

Do You mean NDTV profit? The data this guy has is simply awesome. One thing I have noticed is that even if some one has a query about a particular project/ builder, he will go ahead and recommended others. Not sure for the ones he recommends, he gets any cut, but haven't seen any disclosure regarding it.

The funny thing about the Property show in CNBC is that every builder they talk to says that their debt to equity is less than 1 and they are not leveraged. What if the equity value go down? And no one explains why they have to give great offers on pre launches with guaranteed appreciation?

Anonymous said...

Straight from the horse's mouth:

http://economictimes.indiatimes.com/markets/real-estate/news/home-prices-inflated-aggressive-lending-dangerous-deepak-parekh/articleshow/20697380.cms

Rustomjee said...

An important thing to remember about the property "shows" on TV is that their entire revenue model (TRP, advertisements) depends on a "hot" property market. To this date, I have never seen any of the people on these shows even remotely acknowledging the fact that the property prices may go down. Doing that, would affect their own survival.

If the property bubble bursts, as it is showing all signs of, all these shows will go up in smoke. I have seen two bubbles bursting in the US in the recent past (dot-com, real estate), and all the associated charlatans walked away to other (greener) pastures with their carpet bags, even before the smoke completely cleared.

As to the guy Jasuja, he is a fraud. He will probably be selling you snake oil next year. After the property bubble goes up in smoke.

Anonymous said...

The most amazing thing is that this shit is like the biggest PONZI scheme ever and people are still not able to see the truth.
In the US housing bust, people had at least physical possession of houses. Out here, people have paid 80-90% of inflated cost of properties to builders with extremely questionable reputation, zero back ground and dubious histories.

aam aadmi said...

@above all
Of course it's a paid show.

But I was surprised to see someone saying that prices are too high and will fall that too on mainstream TV and it wasn't some buyer, it was the head of 99Acres.

Anonymous said...

@GSM - "Do You mean NDTV profit? The data this guy has is simply awesome"

Yes. Its NDTV Profit, not CNBC.
The data indeed is impressive if inaccurate. You can give him some small town in rural Nagaland and he will have snazzy pictures of a project there that has appreciated 50% !

Anonymous said...

This is the beauty of incredible India. The paltry margins that are paid for hard, sustained business in other countries simply do not apply here.

Just buy a house, do nothing (no need to like work or anything) and wait for 50% yoy returns to come in just like that. It's as simple as that.

Sound public policy has now created a nation of Crorepathis. Virtually everybody in our virtuous country (including homeowners, IT professionals, flat-owners, landlords, farmers, etc.) are Crorepathis.

What could be wrong with such a scenario? Exactly what are you guys whining about? Just buy a house and you too can become rich.

Anonymous said...

^^^ Exactly!!!
There has to be something wrong with this scenario.
What and how will things go wrong remains to be seen.

reality properties said...
This comment has been removed by a blog administrator.
Anonymous said...

Could anyone recommend similar as this blogs or sites for other issues eg transport infrastructure, education and its infrastructure, health, communication, stock markets urban development, lifestyles of urban and rural, etc

I have been reading this blogs for last 5 years and is very informative

Anonymous said...

Dr Doom says wait and watch, wait and watch,

Look at Brazil now its the non Muslim nations riots all over the place. Looks like it is pre empting things to come to Europe and probably India

The systematic rape by bankers JP Morgan HSBC RBS Fed WB IMF ECB and others of Europe which was doing well countries like Ireland Spain Portugal before EU

Superstate, Electronic surveillance RFID (UID) Biogenetic crops elimination of middle class everywhere note savings being wiped year due to inflation devaluation effect on fuel and its effects on other goods and services, emergence of Masters and slaves are the things to come

skeptic's ghost said...

I have been hearing that IT hiring is at its worst - no campus interviews for freshers and not many quality non IT jobs coming to India any more. Even in Industrial belt cities like Bangalore, Pune, Chennai, NCR, Navi Mum etc

A prolonged economic slump like the 1997 South East Asia crisis is inevitable in India if the Rupee goes below 62 to the USD.

Lower Rupee is only good if you have an established business that earns in Dollars - sadly that only comprises of 27% service sector/export based economy (that is an estimate). The majority 73% economy - including food, manufacturing, transport, and housing are going to be adversely affected and will start bleeding jobs only 5-6 months after the first signs of recession.

If Rupee remains this way - by October-November 2013 I see another economic crisis - one that will hurt every aspiring job holding Indian.

It is really stupid that the UPA govt (which we foolishly reelected) allowed expansion of socialistic programs. NREGS, Food Guarantee, free healthcare, RTE and loan waiver - unsustainable subsidies and excessive taxation -
VAT + LBT+ Service Tax + Income Tax + internal cesses included in retail prices.

in 1991 they knew that socialism has failed - chootiyas kept doing the same thing when they came back to Power.
Now everyone will suffer worse consequences in the coming years and they will nicely let the next government fix the problems they themselves created

Anonymous said...


What could be wrong with such a scenario? Exactly what are you guys whining about? Just buy a house and you too can become rich.


Temptation for making a fast buck will test the integrity and morality of any man.

When we have the likes of Tatas, Mahindra and Godrej throwing their hat into the RE industry. In this environment, how can one blame common man for putting his life's savings on the line.

Yet it's true, when the bust happens those with connections will be bailed out, the rest will suffer the consequences.

Anonymous said...

Far Far away, there was an Island.
100 People lived there happily with goats and they ate fish. One should own a goat in that island to get respect.
Goat cost will vary based on their age and had to be paid in Gold grams.Island had only 100 grams of gold.
Average cost of the goat is 1gram
Human population grew faster then the goats and a shortage is created for a supply of goats.
3 People who went to work in near by islands earned more and they too wanted to get respect in their island.
One guy paid 2 grams of gold for a goat and felt proud. That made every villager rich by 1 gram of gold.
Second guy bought a goat for 3 grams of gold. That made every villager rich by 2 gramd of gold.
Third guy bought a goat for 4 grams of gold. That made every villager rich by 4 gramd of gold.
The guy who sold the goat went and bought an old goat for 3 grams. Wow that made the villagers feel confident thet goats are sure way to wealth.
They are now as wealthy as their counterparts working in near by Islands.Now they came to conclusion that going to near by island to work and earn a wealth is waste of time and breeding a goat is the way for prosperity.
So they tought their children, how to breed the goat, how to paint the horns and how to trim the wool etc etc.
Now after seeing the Goat wealth, fishermen of the the Islands started selling their boats to buy goats. Now they too are rich.
An Island which had only poor people , now have only rich people.
And everybody lived Happily ever after ....

Anonymous said...

In a bid to facilitate housing sector growth, the Reserve Bank of India (RBI) on Friday curved out a seperate sub-sector christened as Commercial Real Estate - Residential Housing (CRE-RH), which will attract a lower risk weight of 75 percent and lower standard asset provisioning of 0.75 percent as against 100 percent and 1 percent respectively for the CRE segment only.

http://www.moneycontrol.com/news/business/rbi-creates-sub-sector-for-housing-paves-credit-flow_903382.html#toptag

Anonymous said...

"Far Far away, there was an Island.
100 People lived there happily with goats and they ate fish. One should own a goat in that island to get respect.
Goat cost will vary based on their age and had to be paid in Gold grams.Island had only 100 grams of gold.
Average cost of the goat is 1gram
Human population grew faster then the goats and a shortage is created for a supply of goats.
3 People who went to work in near by islands earned more and they too wanted to get respect in their island.
One guy paid 2 grams of gold for a goat and felt proud. That made every villager rich by 1 gram of gold.
Second guy bought a goat for 3 grams of gold. That made every villager rich by 2 gramd of gold.
Third guy bought a goat for 4 grams of gold. That made every villager rich by 4 gramd of gold.
The guy who sold the goat went and bought an old goat for 3 grams. Wow that made the villagers feel confident thet goats are sure way to wealth.
They are now as wealthy as their counterparts working in near by Islands.Now they came to conclusion that going to near by island to work and earn a wealth is waste of time and breeding a goat is the way for prosperity.
So they tought their children, how to breed the goat, how to paint the horns and how to trim the wool etc etc.
Now after seeing the Goat wealth, fishermen of the the Islands started selling their boats to buy goats. Now they too are rich.
An Island which had only poor people , now have only rich people.
And everybody lived Happily ever after ...."

Kisko bakra bana raha hai yaar? lol
just kiddin. nice story with a nice ending. i hope that island is still rich. :)

aam aadmi said...

@Skeptic Ghost
Lower Rupee is only good if you have an established business that earns in Dollars - sadly that only comprises of 27% service sector/export based economy (that is an estimate). The majority 73% economy - including food, manufacturing, transport, and housing are going to be adversely affected and will start bleeding jobs only 5-6 months after the first signs of recession.

Exactly, a week Rupee is only good for the exporters which in India is a very very small sector since most of our economy is internal and has absolutely no interaction with the rest of the world. However a weak rupee increases the prices of energy and fertilizer and many other critical imported resources and that impacts everything and I mean everything.

Just today there was a report about govt planning to allow power companies to pass the increased costs of imported coal onto consumers, which means get ready for inflated power bills, then there is the increase in petrol and diesel prices, gas prices, heavy machinery, sensitive equipment, you name it.

Our economy won't be able to cope with it. The man on the street will cut back on discretionary spending to cope with this, he's not going to borrow to spend, that's not how the vast majority of Indians think or behave, we know the consequences of borrowing more than what we can afford, there's no chapter 11 here, the money lenders send goons to your house when you fail to pay up.

I can't believe all that nonsense I am hearing about NRI's coming in as white knights and saving India, what balderdash.

We are in for a long term slowdown, which will include RE.

aam aadmi said...

@Anon at 7:04
Could anyone recommend similar as this blogs or sites for other issues eg transport infrastructure, education and its infrastructure, health, communication, stock markets urban development, lifestyles of urban and rural, etc

I have been reading this blogs for last 5 years and is very informative


I follow the energy scenario mostly, there's a website called theoildrum dot com for it, it has links to other blogs as well. There's also archdruidreport dot blogspot if you are interested in the philosophy of a post energy world.

For education I'd ask you to read up John Taylor Gatto or watch his you tube videos, he was an american educator for over 30 years and did a lot of background research on the western school system which was eventually copied everywhere else.

What he found was that the education system was not 'flawed' (as is the current meme on mainstream media) but was designed from the start to be like this. The purpose of school system was not to teach a person to think on his/her feet but to acclimatize them to sit for 8 hours at a stretch and do clerical work, to get up and sit down at the ring of a bell, like training a wild dog because humans by nature are not designed to sit at one place for long and do paper work. The job of the education system was to train clerks and soldiers.

When I read about it I had an 'aha' moment and everything became clear to me, made me realize why so much that I had learnt at school was worthless in the real world.

GSM said...

i hope that island is still rich. :)

Sounds like Dubai. They still are rich :-)

Anonymous said...

to Aam Aadmi
Thanks for info on various blogs regarding energy education system

To Anon 11:42 PM
We are in for a long term slowdown, which will include RE.

After slowdown which now is calculate it in terms of no of units city wise every quarter in terms of constructed and proposed quarter to quarter
there will be only lowdown for most of our country and the world

Mangoman said...

Now since the market starting to fall people are panicking. Who all are panicking?

1. Corrupt politicians
2. Cheat corporate
3. Mafia Real Estate
4. Broker Media
5. Finally the common man who is conned/induced into investment in Real Estate by the above 4

In addition to this list, the so called financial analysts also panicking and started talking that new reforms will help stopping the fall. But in my mango opinion nothing can stop the upcoming catastrophe. Indian Government and its puppet RBI has exhausted all their options and are watching the crash of Rupee helplessly last week.

If a finance minister come on Tv to assuage investor once in a year it is normal and thereby he can command come respect in the market place. But our finance minister come on TV every week whenever there is a fall of 20 points in the index. This is comical. Markets stopped responding to his gimmicks. Last week Raghuram Rajan was given the tough task of convincing markets. Poor Man. What can he do?

Now coming back to reform stuff, I do not see any need for reform. What is needed in couple of percentage points of rise in Interest rates. A small hole in Real Estate Bubble. Some tightening of income tax rules and compliance. This is enough

Some time the so-called experts will over think and over do things and make seemingly simple things complex. That is what happening now.

Rupee / FII / Bond

Simply put now RBI is in dilemma and effectively check mated. If you had observed carefully the rate cut lobby is shutting all its holes in the body last week after the spectacular fall of Rupee. Now Subbarao will give a punch in the face for whoever asks for a rate. RBI is almost knocked out by the vicious cycle of bond returns and Repo rate.

If they reduce repo rate, FII who are already making loss will make further loss, and hence will go out of India.

If they increase repo rate, it appears atleast 75% of top corporate honcho will go on indefinite strike. ( have you ever seen Tata begs for rate cut? I did not. That is the difference between real business man and reel business man

RBI did not cut rates because they cannot cut now.

Nifty Index View

After Bernanke speech many would have observed huge FII selling in bonds and stocks. Stock selling started late but catching up fast now. Friday I saw huge sell figure from FII desk. Let us hope this continues. I am looking for some cheap puts and I think we can easily see 4500 - 4800 in nifty very soon. I mean as early as this year end.

Real Estate Effect

RBI may raise rate or not. Liquidity will dry and Real Estate sharks will run for cover. The tide is going to retreat and we will all see who is swimming naked. That will be interesting. Already I see many ' to let ' boards in many business establishments in Bangalore. Let us wait for the cleansing act and hope for a good beginning after the upcoming crash

www.mangoman2012.blogspot.in


Desi Babu said...

Well written mangoman!

About two and a half years ago, I wrote this post on The Peanut Express on India's housing bubble called Of bricks, mortar and land.

You might find it funny, or even funnier, now that we have some perspective on the entire real estate situation.

Peace!

Anonymous said...

Paisa ban gaya,

rupees to dollar conversion ho gaya,

environment ka vat lag gaya,

rupaiya bhi doob gaya,

abhi kya baki reh gaya?

Like stray dogs we will fight over left-over scraps of Indian economy.

REBear said...

As I told in my previous posts that the bubble has burst but the mainstream media was silent, here is the first media report acknowledging the RE slowdown :

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/slowdown-in-real-estate-time-for-home-buyers-to-go-bargain-hunting-but-exercise-due-diligence-before-buying/articleshow/20714541.cms

Anonymous said...

@mangoman, was looking great, till this news caem by last week:

RBI, though cornered, is still doing its best to save housing RE - the sector that sucks the blood of every middle class Indian.

http://www.business-standard.com/article/companies/rbi-relaxes-norms-for-residential-real-estate-113062100925_1.html

Yeah, inspite of it there wont be much sales, as almost every middle class family is priced-out now, but it is a massage for the RE goons in a way - it might slightly increase their holding power :( What's your thought on this?

aam aadmi said...

@REBear
My friend booked an apartment in Bangalore last week, the listed price by the builder was 3900/sft. He bargained it down to 3200/sft. Handover is due in 1.5 years but the builder wants all the money in 45 days.

To me it sounded like the builder is short of cash and funding the construction on sale receipts.

This is a mid-sized builder.

aam aadmi said...

Contd...
This also means that market prices are inflated by at least 10-15% and one should take builder rates with a pinch of salt.

Pawan said...

@aam aadmi,
EMI/rent ratio is 6-8 times now versus 2 times in 2002. This is clearly insane. A colleague was telling me recently that his friend bought a 2BHK in Blr for 45L where rent was 25K. This is one example where EMI/rent is near 2 times. Long term I believe the current 6-8 times number will settle at 2-3 times.

Anonymous said...

@ Pawan

How will the ratio be rationalized when in fact the EMIs are going up and the Rentals going down (as per a recent report in TOI)?

Anonymous said...

>To me it sounded like the builder is short of cash and funding the construction on sale receipts.

Almost all builders are short of cash. Unitech is offering 15%+ for its FD scheme.

One can negotiate hard, if one has the cash. However, the risk is that the builder may go belly-up in two years.

aam aadmi said...

@Pawan
45L for 25k...that actually sounds relatively reasonable.

You can rent a good 2bhk apartment here for 16k(rent) + 4k(maintenance).

If you want to buy the same apartment it would cost you around 80L.

A very high end 2bhk (like Shobha) would cost you 30k to rent and around 1.2 Cr to buy.

GSM said...

My friend booked an apartment in Bangalore last week, the listed price by the builder was 3900/sft. He bargained it down to 3200/sft. Handover is due in 1.5 years but the builder wants all the money in 45 days

All the money? No bank will fund the entire transaction before construction. Tell me, to take advantage of such offers, how many of us have outright cash.

aam aadmi said...

No bank will fund the entire transaction before construction

Construction is mostly done, around 70%. Rest of it is stuck for some time now.

I was surprised to hear that even after that it will take more than a year for possession. Liquidity must be tight.

Anonymous said...

@Pawan,
Many parts of Bangalore are fairly reasonable when it comes to homes. Land prices are in bubble territory for sure.

GSM said...

Land prices are in bubble territory for sure

That is becoz of local apartment builders who buy 40 X 60, 50 X 80 and build 12 - 20 apartments selling each for 40L in otherwise peaceful residential areas. No body would else buy land at 1 Crore plus and then 50 L to build a independent house on it. Sometimes I am also tempted to get into the business. A cool 2 Crore profit on an investment of 2 Crores in 2-3 years.

Muthu Thamizhini said...
This comment has been removed by the author.
Mangoman said...

Anony,

I was also upset on seeing the news report.

But However this is desperate attempt from a desperate central bank.

Basically by doing this RBI is trying to add some sort of respectability to the balance sheet of the state run banks which are going to show massive massive loss starting from next quarter results.

This is not by anyway going to help the RE sector to recover. This is aimed at showing some respectability to the bank's balance sheets.

As many of us observed, the common man is priced out already and nobody knows to whom the goons are going to sell the massive massive so called investment plots and flats.

RBI is surely cornered. Check mated. Now one brokerage suggested RBI to sell dollars upto 30 billion. See who all are advising RBI...sorry state of RBI once commanded much respect and successfully avoided asian crisis of 90's but pathetically failed in the crisis.

skeptic optimist said...

A rate of 3200 or even 5200 is affordable - (32lakh to 52 lakh) for 1000 sqft home
The problem comes to the inflated market of 1crore+ priced properties - these rates will come to normalized values in $ terms and may correct soon
The second problem is the hokie way builders claim that 600 sq ft is actually 1k sq ft by using super builtup
And also
Construction quality and neighborhood - I don't see prices fall back to 2009 levels - but maybe a yoy growth of 12% level from 2009 which would be about double the price in Rs per sq ft in 6 yrs ₹ - 2800 become ₹5600 in 2014-15 and so on
Which is still way bad in $ terms as rupee has tanked almost 50% from peak of 40 to $ to 60

Anonymous said...

My friend booked an apartment in Bangalore last week, the listed price by the builder was 3900/sft. He bargained it down to 3200/sft. Handover is due in 1.5 years but the builder wants all the money in 45 days.

Assuming with 10percent
interest/yield

Present Value (PV ) : 3200
FV after one year = 3200 + 320 = 3520 Rs/Sqft
FV after 1.5 years = 3200 + 320 + 352/2 = 3696 Rs/sqft

Assuming 2000 Rs/Sqft is needed for the builder and borrowing cost of 11%

Borrowing cost for first year 260 Rs/feet

Borrowing cost for 1.5 year = 220+ 110 = 330 per sq feet


Price of the cash buyer on the day of goods delivered = Price + lost interest on principal + interest saved for the seller = 3696 + 330 = 4026


Your friend has paid Rs 4026/sqft

This price will increase when the project is delayed

What will happen if builder defaults ?

I dont see any deal here

Anonymous said...

To me it sounded like the builder is short of cash and funding the construction on sale receipts.

This is a mid-sized builder.


Not a good deal at all. with full payment being made way before delivery of product builder holds all cards now.

Anonymous said...

For all those who drank and are drinking the RE Cool Aid and have gotten fat over the years, be ready to be slaughtered.....

aam aadmi said...

@Anon at 10:03

Some corrections
It's 1 years and 3 months not 1.5 years, since he's not paying right now. Yield is not 10%, not since RBI cut rates. It's around 9.2% (including tax).

Other than that your calculations are correct, but that's the beauty of leverage, you pay with someone else's money.

Pawan said...

How will the (EMI/rent) ratio be rationalized when in fact the EMIs are going up and the Rentals going down (as per a recent report in TOI)?

My thinking on various topics over the years have lead me to believe that the how part does not really matter. When something has to happen it happens. Explanations are found afterwards. Like in the case of the recent Uttarakhand tragedy. RE is a tragedy waiting to happen. And it will happen. If I don't understand the how of it, that still cannot prevent it.

Anonymous said...

^^^ @ Pawan:

I recall sometime back a few bulls were propagating that the rents will soon rise to match the expected yields from RE investments.

That doesn't seem to have worked out too well as per the report on falling rents.

Wonder what's coming next.

Anonymous said...

"For all those who drank and are drinking the RE Cool Aid and have gotten fat over the years, be ready to be slaughtered....."

We've been hearing chest-thumping bravado statements like this from the clueless know-nothings on this board for the past 5 years (a period when Indian RE has tremendously outperformed pretty much every other major asset class).

Get this into your heads: Indian RE estate never goes down. Believe me. It never has. It never will.

I truly hope this helps.

Anonymous said...

“Foreign exchange reserves are barely sufficient to cover seven months of imports — the lowest it has been in the last 15 years. As a comparison, the other Bric members have 19-21 months of import cover,” writes Tandon.

http://www.firstpost.com/economy/chidamabaram-didnt-start-the-rupee-fire-but-india-is-burning-because-of-it-903103.html

Its serious now!

Anonymous said...

http://economictimes.indiatimes.com/markets/real-estate/news/south-mumbai-property-rates-crash-30-as-buyers-miss-the-view-point/articleshow/20696177.cms

Wonder what happened to all the black money,etc that was supposed to keep prices high perennially.
This article suggests that the view is causing prices to fall, but it probably is the economy.

Pawan said...

@Anon 1:21
I was talking to a colleague whose relative is trying to sell his property in a posh West Delhi locality. This property was being quoted at 2.0 Cr a few months back. He is ready to settle for 1.7-1.8 but not getting any offer beyond 1.5.
This one instance of course means nothing but this may become a trend. May be not. Let's see.

property portal in india said...

Lot of great information which can be helpful in some or the other way. Keep updating the blog,looking forward for more contents.

REBear said...

Get this into your heads: Indian RE estate never goes down. Believe me. It never has. It never will.

hahaha, we are not speculating future, we are mentioning facts of the PRESENT. It's already crashing !

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/slowdown-in-real-estate-time-for-home-buyers-to-go-bargain-hunting-but-exercise-due-diligence-before-buying/articleshow/20714541.cms

Don't trust media, ok put your house on sale for experiment or get to know from the friends who have put their house on sale. My close acquaintances
have not been able to sell for past 1 year even at 20% less in Delhi/NCR.

When is the big CRASH coming ? Answer : When NRIs who are invested know the shocking fact that they have lost it. Right now, my NRI friends who are invested are not selling as they do not find a deal in 60 INR for 1 USD. They are still under delusion that rupee will return to 52 or less and then it would make sense !



REBear said...

This property was being quoted at 2.0 Cr a few months back. He is ready to settle for 1.7-1.8 but not getting any offer beyond 1.5.

He is lucky if he is getting an offer of 1.5 Cr, assuming he is telling the truth that he has a buyer. And if there is a buyer, I am certain he would be a financier rather than a genuine buyer. In East Delhi where I used to live there were no buyers at all. A couple of flats were bought by financiers at 20%-30% discount of "market price" but now those financiers are unable to exit !

Anonymous said...

Anon @11.48

How old are you? Six? twelve? go play with your marbles. When you have "big balls" come back on the board.

Anonymous said...

My friend booked an apartment in Bangalore last week, the listed price by the builder was 3900/sft. He bargained it down to 3200/sft. Handover is due in 1.5 years but the builder wants all the money in 45 days


Other than that your calculations are correct, but that's the beauty of leverage, you pay with someone else's money.



If your friend pays with somebody else's money, he will have to pay interest to that somebody and that will be around 12 to 12 percent. That increases the cost of the transaction further.

I cant understand the beauty, kindly educate me.

aam aadmi said...

I cant understand the beauty, kindly educate me.

Interest rate is 10% not 12, and when inflation is running at 12-15%, isn't a 10% interest rate a sweet deal ?

About the beauty thing, I was talking about leverage in general, when interest rates are low and payments are in future you fail to realize the true cost of money.

Anonymous said...

IT layoffs would be the final nail in coffin for RE appreciation in Bangalore, Pune, NCR

Waiting for some big IT companies to make announcements soon...

Anonymous said...

@aam aadmi
the builder wants all the money in 45 days

Is that the full payment in 45 days gives the interest rate arbitrage advantage?

Or you actually wanted to say If your friend had kept 3200 at 10% in bank , he will have Rs 3696 after 1.5 years
Since inflation is 15% after 1.5 years 3200 + 480 + 276 = 3956 is required to maintain the same purchasing power

His net purchasing power loss would be 3956-3696 = 260/sqft
is this the True cost of economy I fail to understand ?

skeptic's ghost said...

IT isnt laying off but they have stopped hiring - it means no salary increase - no jobs for freshers - no promotions and no attrition jumping

Which means that IT companies will nicely book the extra profit from INR USD conversion.

Short term that only translates to a stagnant market - prices won't fall to under 2x 2009 price - might go lower for under construction -
so do the math - find out 2009 mid price, and multiply by 2 - if you find a dead for that price get it provided builder is good and location is good and you are not buying for investment .

I used the same logic in 2009 after reading this blog and bought - No paid off my home and my parents live there ...

I can almost guarantee INR prices wont fall below 2009 levels unless they are in the far flung outskirts

aam aadmi said...

I am not denying that in theory he is losing some money, of course he is, but it was his personal decision.

And as I mentioned before the construction is 70% complete. I hope that answers your doubts.

aam aadmi said...

1 USD = 60 INR

A rate hike isn't far away. Now waiting to hear the sound of bubble pop.

Anonymous said...

INR is being sold as toilet paper....

Anonymous said...

Anyone else thinks we are about to get "hazaar fucked"??? (apologies to Upamanyu Chatterjee)

Anonymous said...

I'm surprised at some of the prophecies made here, including Rupee's slide, becoming so true.

Hail the group!!!!

Anonymous said...

>>I'm surprised at some of the prophecies made here, including Rupee's slide, becoming so true>>

Except RE predictions :-)

Anonymous said...

@Anon - "Except RE predictions :-)"

Coming soon to a theater near you:)

Rupee trashed. Gold trashed. Can RE be far behind ? The amounts involved will crush the margin traders - the flippers who buy on 10% down and hope to make a quick buck without ever ponying up the entire amount.

Anonymous said...

Except RE predictions :-)

Are you living on Jupiter ? RE is already crashing, all you need to do is not to approach builder lobby but the secondary market and look at the pain there.

Anonymous said...

>>RE is already crashing, all you need to do is not to approach builder lobby but the secondary market and look at the pain there.>>

If true, finally, the sadists in this blog have something to rejoice looking at others pain :-(

Anonymous said...

Anon above:
Sadists are not enjoying but rejoicing that reality is finally coming.

People who bought RE and became rich on paper in a few years didn't really deserve the reward. It is very hard to make money. Easy money goes the way it comes. Moreover all the nonsense created by bankers and foolish rat race had to end somewhere. It was never real. Just being prolonged.

I hope RE falls down by 60%. I hope to see rupee at 70 in six months against USD.

Anonymous said...

I hope to see rupee at 70 in six months against USD.

Expect capital controls to be imposed soon, may be the govt will shut the currency exchange for indefinite time, who knows. After all, this is a gunda country; Gold coins sales are already being stopped on Govt pressure :

http://www.businesstimes.com.sg/premium/india/stop-sale-gold-coins-and-bars-india-retailers-told-20130626

skeptic optimist said...

There are no sadists on this blog - we are all ordinary people - many of us do have money invested in housing RE - but not merely for speculation.

Remember as someone on the blog said - India doesn't have a home bubble it has a housing bubble - There still is a demand for homes, but not for the price expected now a days. I hope the speculators get crushed in the mayhem that will follow.


Anonymous said...

So why are prices still not falling?

Anonymous said...

Prices wont fall - the value of the currency in which they are priced will.

Read comments above ...

Anonymous said...

Anon above:

What makes you an expert in predicting that the RE prices will not fall and only the Rupee will. What if both fall.

Many bright economists and even our top brass couldn't see what is coming, then who are you to say that RE prices will not fall.

In the US they kept on saying RE prices will not fall till they really fell and they fell almost 60-70% in many parts of US.

I'm not an expert but my unbiased feel is that a combination of currency, RE, stocks and Gold will be there and they will all go down.

Wait till US Fed actually start tapering, they have only said they would but when they really stop printing, there would be a lot of hot money leaving India and all other BRICs. The easy money is over.

I would not be surprised if a few Indian banks also fold as they are too exposed. They have been putting lipstick on a pig till now. Here is my take and I'm no expert. Most experts I've seen with big degrees do not know any more, they just get paid more for spewing nonsense:

In the next 4-6 months:
--Rupee will be 64-66 / USD.
--Gold will be $1050, a fall of another 20-25% from where it is today.
--Job losses starting in India.
--RE market would stay stagnant with no buyers.
--Stock market down by another 10%.

In the next ONE year:
--Gold in 3 figures.
--Rupee crossing 70/USD.
--Many jobs evaporating in banking, construction and RE related stuff.
--Stock market to fall further as bad quarterly reports would start kicking in. There would be no buyers of anything.
--RE: Finally RE bulls would start losing ground and RE would be quoted at 20-25% lower than today's price. This will be a downward trend for RE for the next 10 years and prices would drop as much as 60-70% by 2020. There is a massive supply of homes in India and that would be exposed. All investors and speculators will become sellers and flood the market with "For Sale" signs.

Anonymous said...

Prices of "ready to move" homes and homes in good localities will not fall -
In your scenarios you have mentioned above new booking prices will fall for sure.
Also RBI will have to cut rates at that time to increase borrowing (inflation or no inflation)

Indian builders will simply stop all new construction screwing those awaiting possession just to hold the price. Thats how any cartel works - they will rather take the entire boat down rather than suffer.

Anonymous said...

Prices of "ready to move" homes and homes in good localities will not fall -
In your scenarios you have mentioned above new booking prices will fall for sure.
Also RBI will have to cut rates at that time to increase borrowing (inflation or no inflation)


Agreed, prices in good localities will not fall as much. But they would substantially maybe not percentage wise. For example, say a flat in Meerut (NCR suburb) is say 1 crore, it will say go down to 60 lakhs which is a 40% reduction. Whereas say a flat in NCR in a posh locality is say 4 crores and even 20% fall will make it go down by 80 lakhs.

As regards to RBI cutting rates, this is Election year. They cannot have high inflation as UPA will lose. They will try to control inflation and I wouldn't be surprised if they keep rates same or even increase by another 25 basis points or so to keep inflation in check. This would be another kick where it hurts on RE prices.

In any scenario, RE is toast for the next 5-7 years. People do not realize it but the whole country is overbuilt and there is no shortage.

Moreover, it is all about jobs, jobs and jobs and even cheap money. With less jobs, less raises and very hard to get credit, I don't think RE has no other way other than to fall.

For folks who think the other way, please do not argue and buy more flats if you are convinced that prices will not fall. No one is stopping you to buy. I would say buy not only one but many flats.

I've been waiting for the past 5-6 years and would wait I guess another 1-2 years to get in the market. I'm a happy renter and it never made any financial sense to buy when rents are so cheap as compared to EMIs.

aam aadmi said...

So are we now down to the logic "prices of homes in good localities will not fall".

To put some perspective on this, Housing and jobs are like Siamese twins so even well to do localities will fall when there are job losses because some of those good localities are downright unlivable once you don't have a steady source of income.

The maintenance costs alone will eat into your savings, so you shouldn't be looking for good localities but localities which are tied to a particular industry, for example I expect importers to be hit harder by the current crisis compared to say the exporters, so a place like Zaveri Bazaar in Mumbai will be hit harder than say a place like Banashankari in Bangalore.

The maintenance costs of some "well to do" apartments are just obscene.

Rustomjee said...

I have heard that things will improve after the elections because people expect Modi to come to power. Even if Modi is a good leader, he will not be able to immediately reverse the damage done by Congress. Nobody can fight market forces. So, the slowdown will be long and painful.

There is also a a strong possibility that a third front minority government, externally supported by Congress will come to power. That will be the worst news for the economy because these fronts are typically left-leaning with deficit spending at the base of their political model. They will make Sonia's free-food gimmick look like child's play.

I do not see any respite for real estate, as it starts falling. Unless you are a master knife-thrower, do not attempt to catch the falling blade!

Getafix said...

Unfortunately Modi does not have a national level grass roots base as of now to lead BJP to power in 2014.
Third front looks highly fragmented as well.
I hope I am wrong but looks like Congress is back in 2014 for another couple of years at least before all hell breaks loose and a mid term is required.
Not sure what that would mean for the economy as a whole.

Anonymous said...

Oh man. NRIs are going to prop up RE
They will get 60 rs per dollar and with a lot of them millionaires they can easily afford

http://timesofindia.indiatimes.com/nri/other-news/NRIs-warm-up-to-Indian-realty/articleshow/20789112.cms

Pawan said...

If true, finally, the sadists in this blog have something to rejoice looking at others pain :-(

If we are sadist then you are a fascist who was not even willing to consider an opposing view point till a few weeks back.

Anonymous said...

"If we are sadist then you are a fascist who was not even willing to consider an opposing view point till a few weeks back."

What opposing view point? In case you haven't noticed, RE prices haven't budged. In any case, if the INR is crashing and India is going to hell in a hand basket, then obviously that is exactly the time to buy RE as a real asset and as a hedge against inflation. This is especially so because in such an environment, interest rates can only go in one direction: down. ONLY A FOOL WOULD RAISE INTEREST RATES IN THIS ENVIRONMENT.

Indian RE priced in Rupees never, ever, ever, ever goes down. Believe me. Betting against Indian RE should be called the widowmaker's trade.

Anonymous said...

>> If we are sadist then you are a fascist
Yeah, and totally greedy fascists at that, lusting to grow unsustainably, at the cost of everyone else and of the overall economy as well.

Anonymous said...

>> [...] RE priced in Rupees never, ever, ever, ever goes down.

Haven't we heard that before in every nation just before the big crash?

Pawan said...

ONLY A FOOL WOULD RAISE INTEREST RATES IN THIS ENVIRONMENT

That's the sign of a fascist. Shouting when everybody else is talking and declaring anyone with a different viewpoint as a fool.

Anonymous said...

>> Oh man. NRIs are going to prop up RE

That TOI article is fully paid news. Any sober NRI wouldn't dare to buy a flat now in India. Any NRI who had bought a flat in India just one month back when 1USD = 55 INR has already (within 1 month) _lost_ 10% of the money he paid in dollars.
Any sober, atleast remotely informed NRI wouldn't dare to enter now.

REBear said...

Oh man. NRIs are going to prop up RE

Do you have statistics of how many NRIs are already invested ? My calculation : 65%-80% based on a random sample of 10 people I met last year in US. Worse, most of these are still waiting for delivery. Clearly they have been looted by the builder lobby and have lost heavily. They have donated their hard earned money to mother India :)...They are real Patriots !!!

Making money is not easy, timely exit is necessary.

REBear said...

In case you haven't noticed, RE prices haven't budged

Probably it's you who hasn't noticed the contrary. Read media reports, talk to broker, talk to your friends, or put your house on sale. Look at Magicbricks number of home listings for any area in Delhi. The number of houses put on sale have DOUBLED in past 3 weeks in East Delhi.

Anonymous said...

For all those who are expecting the NRIs to be the big savior of this RE scam, kindly pay attention to the below:
Let us say, I as an NRI, bought an apartment worth One crore in January and paid 25% down for the same, Avg. dollar rate was ~ 54 rupees through the month of January.
Hence amount paid in dollars ~ $46,300.

In the last 6 months it does not look like there has been any RE price appreciation nor does it look like there is going to be any time soon.

However Rupee depreciation has not only happened but may be even more severe going forward.

Today my investment is worth only about $41,000, plus loss of interest.

How the hell is this an attractive proposition for me and why would I fall for this BS.

Add to it the gunda builders, price enhancements,super area/carpet area scam, shaky delivery dates...

I hope you get the picture.

Anonymous said...

>>India just one month back when 1USD = 55 INR has already (within 1 month) _lost_ 10% of the money he paid in dollars. >>

You idiot, NRI would have booked paying 10%. Now, thanks to Rupee, he just got a 10% discount on the rest of his payment

Anonymous said...

>>Today my investment is worth only about $41,000, plus loss of interest.>>

Hello, most NRI's are holding L1/H1B visas and they are trying to make as much as money before they kicked out. So calculating the price in terms of $ is futile for the NRI's are sure to return back to India

Anonymous said...

>> Hello, most NRI's are holding L1/H1B visas and they are trying to make as much as money before they kicked out. So calculating the price in terms of $ is futile for the NRI's are sure to return back to India

Does that mean they haven't lost anything in the buying process?

Anonymous said...

>>Does that mean they haven't lost anything in the buying process? >>

Does that mean they haven't gained anything on the rest 90% payment?

Anonymous said...

>> You idiot, NRI would have booked paying 10%. Now, thanks to Rupee, he just got a 10% discount on the rest of his payment

Yeah and after he makes the rest of his payment, his networth/investment-value will be melting like ice cream in summer. How about the amount he has to repay to the US bank he would have borrowed from? Even the principle amount to be repaid in INR (using INR here, as he will get only INR when he sells his flat) would increase by 10% every month. How do you like that?

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