Sunday, February 28, 2010
Jim Rogers says high spending to haunt Indian economy
To quote Rogers, "India has nothing to show except a bunch of rich politicians". I am expecting sharp deceleration in the growth numbers coming out of India as the stimulus is rolled back. The stock market is headed to the previous lows and 12500 doesn't seem too far. Here is the link to the video. Be afraid, be very afraid.
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15 comments:
Jim Rogers is a windbag. He talks of China as if its the next great thing. Be that as it may....but what about empty CBD's and town centres and bridges to nowhere. Its not if they built it they will come. if you can make it cheap enough - then they will come. China is seeing a real estate bubble which is unbelievable. Cost of property in Outskirts of Beijing and Shanghai are greater than 80 times yearly income of a couple earing upwards of INR equivalent of Rs.1.5 Lakhs. Even with funding from both parents and mortgage can this be met.
Hedge Funds and Short sellers like Hugh Hendry and Jim Chanos are excited to see this and are shorting all the way to the bank... here is what Chanos says.... http://www.gurufocus.com/news.php?id=82551
BTW that link does not load....do you have the link to the text version??
Indian infrastructure is compared to third world countries, but the real estate prices are compared to developed countries like Europe and US. What a Joke!!!!!
I see lot of complain on this board, but no one really wants to take even a basic action to solve the issue. I posted a link where one can write about housing issue to PMO. Till date only one more person has sent comment.
frustrated buyers why not take some action
If all buyers are so pathetic in taking action, no wonder, builders and politicians will take advantage of them.
Nariman Point world's fifth most expensive office location
Its even higher than Manhattan !!!
DLF converts Mumbai mall project into residential one
This is the link
http://jimrogers1.blogspot.com/2010/02/jim-rogers-indian-economy-bloomberg-26.html
Problems for Real Estate Sector
1) Price Rise for Cement, Steel
2) Price Rise for Petrol, Diesel resulting in increased transportation costs
3) 10.3% Service Tax on the payments made for Under Construction flats. (Before the completion certificate of the Flat.)
4) Teaser Loan Interest Rates have started disappearing.
All these factors would make Flats more and more unaffordable for buyers.
Also, the RBI and Banks will not be able to continue restructuring the loans forever, which are given to Builders and Real Estate Companies.
Seeing this high unaffordability, Indian Real Estate would start crashing in coming months.
Buyers, do not buy and do not get trapped.
I have a question to the blogger s here. Suppose, you have 10cr undeclared wealth lying around with you, tell me which of the following you would consider
1.Help friends and relatives in need
2. Lend money to the businessmen for an interest
3.Keep it in safe custody in a bank locker
4. Buy gold and valuables and keep them in a safe in your home
5. Invest in immovable property
Even a kid will tell you that the first 4 methods are risky and the safest one being the 5th
This is what is happening in real estate. Swiss banks, offshore banks, benaami fixed deposit schemes/accounts are no more safe as in this computer age it is a child's play to trace these. If one hoards money/gold or lends it for interest sooner or later the gangsters will smell the scent and ask for a cut which may be the major portion of what one has hid.
As long as the corrupt government remains, and i think it will for a long long time to come, I don't see a remedy for this. This is the fundamental we differ from the developed world. Comparing us with them and hoping something like of similar nature will follow in our country is not only futile but foolish.
My advice to you guys is 'Analyse the situation rationally and use your brain and make financial decisions. There is no doubt that the days ahead are not at all rosy.
SabbalSeshu,
I found your post very funny. It is mainly aimed at people with lots of black money. I think most people who post here are professionals with no black money. So, your advise should probably be posted on a blog called "Financial Planning for Corrupt Netas and Babus" :-)
Real Estate in India is not a safe investment at all for the following reasons:
1. You don't know the legality of the land/house/apartment. I read a story recently that the land sharks have even stolen defense land!
2. If you buy land and don't look after it, your gangster friends might move a tabela into the land and claim it.
3. If real estate is such a black money shelter, don't you think some government will reform it. We are copying the west in everything. Very soon, land records will be online in every city in India, I can already see my da's property records online in a small tier-3 city in India. After UID becomes official in India next year, IT department will start tying land records to UID. I am giving it 5 years before all this black market crap falls to pieces.
This is the reason, most people in this forum stick to economic principles in analyzing the ongoing bubble in India. In the US, before the bubble, I knew a real estate agent who was driving a BMW. The poor fellow is now working in a Walmart.
Good luck to you.
Bhimsen
The black market ponzi scheme is the sub-prime of the Indian market. Housing fundamentals should be determined by income. There are 20 millions residents in Mumbai but hardly 2L can afford an apt at 1cr. Compare the affordability to other cities like Pune, Bangalore, Chennai and Hyderabad. In those cities there are probably 5L people who can buy an apt at 50L. If one has to buy, its better to take a risk where there is affordability.
The average income of a mumbaikar has nothing to do with the average price of a flat. If there are 1 lakh buyers but only 50000 flats in the market, then the average income of the top 50000 people of the 1 lakh matters. Income of bottom 50000 should not count in the average. As for crazy prices in mumbai, the fact is, there are no investments in India that can be deemed safe, so people buy flats and the prices keep going up...and the cycle continues.
Almost every other weekend I receive many SMSes which beg the customers to attend some realty exhibition or realty expo.
Newspapers like TOI are printing paid news and acting like pimps for RE.
Due to recession, economic downturn, layoffs and job insecurity people are scared to purchase Flats because they are afraid of huge EMIs for 20 to 25 years.
Also, lot of RE projects are on hold or suspended.
This indicates that lot of flats and RE is not getting sold.
Indian Real Estate is also going to crash like US and Dubai Real Estate.
Jim Rogers says a lot that is correct and dissapointing for India, only we do not like to hear it or are Helpless in the face of BABUS & POLITICAL CLASS.The Arabs are fighting for democracy from "rulers", in Inda we have democracy but with corrupt,rich, lazy, political rulers & ruling families. In India ALL politicians are have same DNA,though from different parties, we need to fight all at the same time.Take the peoples movement forward,shun the politician, switch off his/HER image from the TV,turn your face away when you see one.
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