Truth is stranger then fiction. India's housing bubble pales in contrast to the bubble in China. China cannot afford to slow down as it has a massive population to feed. If the bubble burst's the investors go down with the working class.
Just absurd.
What a China slowdown means to the world economy is something nobody wants to talk about. Ask any analyst on CNBC and they would just brush it aside.
The latest CBS 60 minutes video is here.
Just absurd.
What a China slowdown means to the world economy is something nobody wants to talk about. Ask any analyst on CNBC and they would just brush it aside.
The latest CBS 60 minutes video is here.
275 comments:
1 – 200 of 275 Newer› Newest»World's biggest mall a China 'ghost town' March3
http://www.cnn.com/2013/03/03/business/china-worlds-largest-mall/index.html?hpt=hp_c1
This rigged game of central banks cannot go on forever. G-20 is busy printing money and for how long?
Just tells me that in India, the bubble can go a long way before it bursts! I suppose when we see ghost cities in India, we should talk of bubble. Right now, its just some 10 lac apartments...pittance compared to what is shown in the video.
Prices in China have not increased at the same rate as in India (in the last 5 years). In fact nowhere in the world have they increased at such a rate as in India
A general question to all experts (especially the regular registered users):
Assuming and accepting that this is not a bubble, has there been any precedent for this kind of phenomenon in World history where a formerly poor people have grown rich through unearned but broadly-distributed wealth from a national housing boom?
If so, in which countries and when?
Only unbiased answers please.
india, now
@Anon
// Right now, its just some 10 lac apartments//
How many apartments are virtual and built in papers ?
we dont have any statistics.
One of my friend from Chennai own the house worth 65 lakhs ( last checked 2 weeks back, may be a crore today ). He is in US and not ready to rent his house out. Both are working and not willing to risk the capitol.
I would like to know, how many houses , ready to move in condition are vacant like this?
//Just tells me that in India, the bubble can go a long way before it bursts!//
I assume China has less trade deficit or and their currency value may go up. Where as for Indians,it is downhill.
we have trade deficit with 110 countries.
After 10 years, apartment price will be around 2 Crores, but 1USD will be Rs 75 at that time.
In terms of US dollar or Gold, price will be same or less
This blog is about india's housing bubble not china's..... stay on the topic...... blog is lossing its credibility since last few posts
Salaries will hike by 19%.This means in 4 years salaries will double. Already IT people earn upto 30 lakhs. In 4 years this will mean 70 lakhs. With double income couples will earn in crores soon
>Already IT people earn upto 30 lakhs. In 4 years this will mean 70 lakhs. With double income couples will earn in crores soon
According to the IT department, only 400K Indians declare an income of greater than 20L. Assuming that all IT employees pay taxes, the number of high earning IT employees will be less than 400K. It is still too small a number to support a nationwide bubble.
Salaries will hike by 19%
Watch the video "The most important video you'll ever see". It's clear that you don't grasp the implications of compounded YoY growth. At 19% rate of hike, we'll quickly eclipse US in wage rates, at some point other countries become more competitive and the jobs go away.
In fact it's already happening in some sectors. Collapse or some form of stagnation is baked into the way things are built, I've said it before and will say it again, it's a mathematical certainty.
// we'll quickly eclipse US in wage rates
Seems like you are an NRI and jealous that Indians will be earning more than you.
Seems like you are an NRI and jealous that Indians will be earning more than you.
LOL. I stay in Bangalore and have never been to US. Indians can never make as much as those in US barring exceptional circumstances. If that happens jobs will move back to US given the horrendous cost of doing business here.
I know for a fact that some of the senior folks in my group earn around 40-50k USD and keep getting 15-20% hikes every year, I myself make a hefty amount and thank the stars everyday for my sheer luck.
The difference between them and me is that unlike others I don't expect this party to last for very long, how long before some kid in Philippines or Bangladesh figures out that he can earn half the amount I do for twice the work and how long till the companies realize this ? Not very long.
Life's a bi*ch and the party doesn't last forever. I learnt that long back.
@Aam admi - I myself make a hefty amount and thank the stars everyday for my sheer luck.
In the same boat here in BLR. IT is in a nice little salary bubble, and most people dont realize it. Its almost a '10%+ hikes is my birthright' mentality that we have.
What happened to US tech jobs will happen to Indian tech jobs. I wonder if Infosys employees will someday complain about their jobs being outsourced to Philippines, etc :) The globalization knife cuts both ways.
It is already happening to BPO jobs, simply a matter of time before it happens to other jobs as well. Seriously, most IT work being done here does not need half a brain, let alone an engineering degree.
@Anonymous above et al
Those who say that hikes will keep happening in India and the bubble will continue are deeply mistaken. Remember, water ultimately seeks its own level. I know several people will ultimately ignore this but I can say this confidently from my own experience. I am seriously evaluating moving my online business to Singapore or North America before the start of next financial year. The recently introduced "super rich" tax provides even more comfort and a good case for move. Singapore would save me lot of taxes and with that money I can live a better quality of life. North America would tax me more but would provide a boost in revenues and better life quality. India provides nothing ! So there is a clear cut case of water flowing backwards.
I know for a fact that some of the senior folks in my group earn around 40-50k USD and keep getting 15-20% hikes every year, I myself make a hefty amount and thank the stars everyday for my sheer luck.
I don't think all of them is cash. There would be a variable pay component and Stock options with a lockin for a fixed period. Not to mention 30% taxes. It would help if you tell what is the take home of someone earning 25L. I don't think it will be more than 1.3L/ month
Salaries will rise if the demand is there. Doesn't look like it is:
http://www.thehindubusinessline.com/industry-and-economy/info-tech/freshers-hired-by-hcl-tech-stage-protests-across-country/article4475730.ece
http://economictimes.indiatimes.com/markets/real-estate/news/fraud-deal-maharajas-rs-200-cr-bungalow-sold-for-rs-20-cr/articleshow/18842329.cms
// What happened to US tech jobs will happen to Indian tech jobs
Not a chance. US companies outsource to India not because of cost but due to quality. Indian IT engineers are the best in the world and can take on cutting edge work. Even if indian salaries become on par with US salaiers US companies will not have any other option. So salaries in India will continue to rise 10% atleast for the next 30 years
^^^ Sarc???
anon@10:29
Good Joke. Indian engineers deliver Quality?? and High Cost is justified because of high quality?? Good Joke..
Nokia gives 300 percent hike.
http://timesofindia.indiatimes.com/tech/careers/job-trends/Nokias-Chennai-staff-gets-steep-salary-raise/articleshow/18859715.cms
@Anonymous at 10:29 PM
Not a chance. US companies outsource to India not because of cost but due to quality. Indian IT engineers are the best in the world and can take on cutting edge work. Even if indian salaries become on par with US salaiers US companies will not have any other option. So salaries in India will continue to rise 10% atleast for the next 30 years
I don't know why people like you are so disillusioned, headless and irrational. This also applies to people in their 60s who claim to have wisdom through experience. For instance, look at this :
http://timesofindia.indiatimes.com/home/education/news/IITians-struggle-to-live-up-to-families-fat-pay-package-dreams/articleshow/17564282.cms
This kind of irrational behaviour found in humans is exact reason why housing bubbles develop and why they eventually go burst no matter how much ventilator support is provided by banks and government.
Anon at 10:29 PM
I'm working in IT for 8+ years. Whatever you wrote, I cannot even call it a joke.
http://www.mumbaimirror.com/article/2/2013030120130301065930828261e872d/Rentals-crash-in-BKC-and-Parel-as-offices-go-empty.html
India Shining ?
http://www.business-standard.com/article/companies/automakers-get-the-shivers-as-market-turns-cold-113030900022_1.html
@Above
It's not specific to India, car makers are in trouble everywhere, people are buying used cars or not buying them at all as inflation eats their income but gas prices refuse to come down.
I guess a few auto makers will do well in some cases but overall the industry is dying. Fifteen twenty years down the line I won't be surprised if cars become luxuries.
Anon at 8:38
From your link
Commercial property rates in Mumbai always appreciate and investors know that well. Till the market recovers they’ve decided to settle for lower rentals rather than not earn anything at all from their assets
Notice the emphasis on the word always as if it's some holy gospel.
@Aam admi -
It's not specific to India, car makers are in trouble everywhere, ".
Might be a general trend in Europe and maybe US that younger generation prefers public transport. But the Indian slowdown is too sudden to be attribute to the same trend. One year the market is growing double digits, the next they are shutting down production to reduce inventory. Points to a malaise in the economy rather than a slow movement towards public transport.
"Notice the emphasis on the word always as if it's some holy gospel."
Every single article, property TV show puts out the same garbage. There never is any talk of valuation (price/rent, price/income, maintenance costs etc). Its just capital gains :) . When mean reversion hits, it wont be a pretty sight.
younger generation prefers public transport
I know that media is trying to paint this as being about fashion but I think the key point is affordability, the youngsters in US and Europe are not as rich as their parents, jobs are scarcer and require college degrees, as a result the first paycheck tends to be smaller and gas doesn't cost 20c/gallon anymore.
Points to a malaise in the economy rather than a slow movement towards public transport.
You maybe right, only time will tell.
Although over the long term I am still betting that it's not just an investment thing. Cars are just not sustainable in the long term esp in India where oil is imported.
Bubble is NOT in REAL assets like housing, gold etc.
Bubble is in money printing, currency devaluation, tax dodging, stock market manipulation.
Regarding China, they are in advanced stage of environment collapse. Empty cities or overpriced real estate should be the least of their worries.
http://www.bbc.co.uk/news/world-asia-21732457
Indians are marching right along not too far behind.
http://www.punemirror.in/article/2/20120521201205210906527376193728/Dead-fish-pile-up-on-MulaMutha-banks.html
http://zeenews.india.com/business/automobiles/auto-news/domestic-car-sales-down-25-71-in-feb-lowest-in-12-yrs_71933.html
Too bad all that black money is unable to buy cars.
^^^ Yes, but in case you did not notice we are discussing RE here, and in that sector there is enough Black Money floating around to support price appreciation for decades to come.
>Yes, but in case you did not notice we are discussing RE here, and in that sector there is enough Black Money floating around to support price appreciation for decades to come
Evidence please.
Our RE has grown because of a 20% pa growth in money supply. You have to have white money first before it becomes black.
All credit bubble end. This one will too. Just hope that our banks survive the debt default cycle that is underway currently.
@Anon at 6:35
I don't see what's wrong my line of argument...if anything it's much easier to buy cars with black money and they cost much lesser too.
The fact of the matter is that white money drives the economy not black. The black money argument is the argument of last resort for everyone who argues for the bubble.
I don't see what's wrong my line of argument...if anything it's much easier to buy cars with black money and they cost much lesser too.
Wow...how do you say that...can you buy a new 50L car and claim that you paid only 25L even though you paid cash? Can't you do the same for a house. Beside car value depreciates while house prices always appreciate :).
What ever data, the stocks are near 52 week highs and the labor unions are demanding insane wages increases. So which one is going to give in?
@GSM
A car doesn't cost 50L (at least not most of them), it costs 5-10L and you can buy it in an evening with a handbag full of money, which according to the claims made here about black money is mere pocket change for anyone buying an apartment with black money.
If India is flush with black money which is not dependent on white money then consumption should also rise no matter how the economy is. That was my point.
The indian real estate market, though not in major downtrend as of now but certainly showing cracks and sign of impending collapse. Buyers apathy caused by sky high prices showing up in declined sales YoY. But I still have few points to make:
1. I dont think it is going to be sharp decline like that of stock prices. I believe it will be a slow grinding and painful grindling with property prices declining over a long period.
2. I wouldn't stick my neck out and claim exact time like Nov 2014 as a bubble is a bubble. Patience is virtue.
Please go through the link below if you have time...its a old one - but you know Crowd mentality never changes
**Sir Isaac Newton, tulips and real estate**
http://www.uglychart.com/blog/2004/09/26/sir-isaac-newton-
Some interesting facts about tallest building in the world:
Property price dropped from 7000 to 2000....this is for the most tallest (and hence glamourous) building in the world....
http://www.reidin.com/news/showNews/ae_reidin-reidinmediawatch-20120706-1/emaar-reports-80-occupancy-levels-in-burj-khalifa.html
When Burj Khalifa was launched(Januray 2010) it was a dream to buy property here but the property cost was AED 7000 per square foot at that time and investors did not want to buy at that price. Now as the prices have come down to AED 2000 square foot, investors think it is a distressed purchase. Owners are listing price of a luxury apartment at AED 3200 per square foot but they also accept offers of as low as AED 2930
in one the Satyameva jayate like program, One Software engineer is telling this "I have been paying fixed EMI for the past 6 years. My principle dint go down instead tenor is growing..."
I checked against ICICI terms and conditions
What's the difference between floating and fixed interest rates?
Floating Rates:
Depending on the movement of interest rates in the market, the interest rate for the loan is reset at the beginning of every quarter, i.e. January 1, April 1, July 1 and October 1. The rate is reset with reference to the ICICI Home Loan Prime Lending Rate prevailing on the dates of the respective resets. When the rates are reset, customers have the option of either adjusting their loan installment or the loan tenure, subject to the overall restrictions on the loan tenure.
Fixed Rates:
The interest rate is fixed on the home loan for the term of the loan
I have seen following scams in southern state ( House price increase is not called as scam . But I do..)
1.Teak wood scheme. pay little monwy to grow the teak wood somewhere in the remote area and become rich
2.High interest rate for deposits. a vanilla ponzi scheme
3.Data Entry scheme. Well they will provide you with a floppy containing thousand of addresses with space and all you have to is convert the space to comma.Our intelligent software investor wrote a program for that and laughing while counting the money
4. Emu Aussi bird scheme. Deposit a lakh and get birds and take care of it and you will be paid 10 thousand every month and after 12 months you will get back your lakh in exchange of the birds. birds are a guarantee that they will not run anywhere
5.Stock Investment scheme, the intelligent investor will invest and give you 10000 for every lakh of investment. They put Berni madoff in shame. apparently it collected 800 crores
There is no shortage of fools. If they are confidently betting on those schemes, After all what is the problem in investing(?) in a house?
Here is Problem statement of those innocent (?) people
I dont want to work hard. I should be able to make tons of money and make my neighbors jealous
Solutions are many
On people: Innocent or idiot... Only time will tell...its a sad situation.. But true.....
@Anon - "Fixed Rates:
The interest rate is fixed on the home loan for the term of the loan"
No, not in India. It is 'fixed' for sometime and only if market rates are within a certain band. If they increase beyond that band, then the bank will reset your rates.
The US has 30year fixed rate mortgages.
One comment on car purchases - I spoke to a dealer and he said that if you buy a car using cash, this has to be reported to the RTO during registration. So, black money cannot be easily used to buy new cars.
The interest rate is fixed on the home loan for the term of the loan
Fixed interest rates are about 13.5% compared to 10.5% of floating. There is no incentive for to go for that today. Back in 2006, fixed interest rates were running at 7% vs 6% of floating rates. But people found about the actual meaning of fixed rates when the interest rates shot up to 13% in 2008.
And thanks to Chidu that interest rates are around 10% today, else people who took teaser rates fixed 3 yrs, 5 yrs in 2009 would have also had a good learning.
Chidu has both has all his fingers dipped in real estate and he will do anything to keeep the bubble inflated. After the union budget he has asked to Reserve bank to reduce interest rates. In his own words - "we have walked the talk and now its Reserve banks turn to do the needful to prop up the economy" (read reduce interest rates and jack up real estate)
Anon at 3:48
On people: Innocent or idiot... Only time will tell...its a sad situation.. But true.....
Neither. I used to have this moralistic view of the universe as well until I read some books on biology and evolution. Works by Authors like Ernst Mayr and Lynn Margulis.
All animal species are driven by the short term selfish goals of consumption which are always at odds with the long term goals of survival of the species. It's no different with human beings, so in that sense boom and bust cycles including the economic ones are part of nature.
This blog is making you wiser day on day. So good job guys.
You have saved a lot of money for many readers with your CORRECT predictions.
When prices fall, dont forget to open a donation link. I will be the first one to donate some money :)
http://mangoman2012.blogspot.in/2013/03/car-sales-busssssshhhhhhh.html
Comparing cars to RE really shows how little people know about Indian property dealings.
Yes there is black money, tons of it in RE. But it's not in the finished product.
Black moneyed interests are not going in and buying 1-2 bedroom flats. That is the work of speculators and wannabe landlords who are mostly from middle to upper middle class (NRI and locals) reading "rich dad, poor dad" and engaging in day-dreams whilst ignoring the reality of India :-) These are the genuine "bakras" who actually think they are "tigers"
All black money I know and have read (scams) is in land dealings. Ask any honest builder (yes, there will be a handful in your town as well if you take the trouble to search) and they will tell you that depending on proximity to the city land prices make up 30-90% of their cost. If land prices are scrutinized and land dealings made transparent then major cost component will easily drop by 50% if not more. And savings can be passed onto end users.
But this will never happen as land in our country is controlled by the ruler class and as long as they (or their kin) are in charge they will not voluntarily make laws that take away their primary source of income and reduce their net worth (and consequently power) drastically.
^^^ A better analogy would be to imagine if the black money interests were able to control iron / steel supply.
If they can accomplish that they don't need to go out and "invest" any black money in cars.
Mangoman, you think there will be a crash in car prices? Or just some gimmicks to lure in the unwary buyers.
>If land prices are scrutinized and land dealings made transparent then major cost component will easily drop by 50% if not more.
Possibly. But only a handful of folks have the cash to buy large chunks of land outright. The real problem is availability of credit for buying and holding land, and then extending that loan when the builder is unable to pay up.
Banks should insist on the land being put to productive use within 2-3 years of buying it. Otherwise, they are lending essentially for speculative activity. Dangerous for them, bad for the economy.
Hoarding of land should be treated the same as hoarding of foodgrains, kerosene, etc.
After Vadra, DLF in another land scam.
http://www.indianexpress.com/news/rs-438crore-dlfhsiidc-land-deal--scam--unveiled/1087280/0
Full scale looting of India's national wealth. Pretty soon we'll all be slaves to a handful of vested interests (or perhaps we already are!) X-|
@Polt
Hoarding of land should be treated the same as hoarding of foodgrains, kerosene, etc.
In a society that prioritizes future over present that would be the case, however when it's a dog eat dog world the person who hoards land builds up wealth and thus power and so prevents such a mechanism from coming in the first place.
They ultimately destroy the economy that provided them the wealth in the first place but if they don't participate they don't gain any power and lose personally.
It's a paradox that exists in society and you can't do anything about it, some of the pro bubble folks are right here, people who rode the crest of the housing bubble wave are now rich and command more power while folks like me who are patiently waiting lose in the short term.
thought you guys might like this one. stagflation is here (officially)
http://www.firstpost.com/economy/its-official-rahul-flation-is-now-seen-as-stagflation-658473.html
http://mangoman2012.blogspot.in/2013/03/any-hope-for-patriots-this-month.html
Another day, another ghotala
http://www.indianexpress.com/news/of-lakhs-of-sahara-investors-sebi-finds-only-68-genuine/1087225/
Only 2 possible conclusions:
Either Sahara group is a funnel for politicians and other interests benami money and they do not wish to be identified.
OR
SEBI is completely INEPT to only be able to trace 68 out of 1+ lakh "investors".
In the end, justice will be served if the 24000 crores are distributed amongst the verified genuine investors by end of 2013.
Great interview with Jeremy Grantham here
http://www.charlierose.com/view/interview/12812
Do watch
http://www.firstpost.com/economy/why-car-sales-are-falling-but-not-realty-prices-658909.html?utm_source=MC_TOP_WIDGE
A large number of population especially the upper middle class are seen to aspire the dream homes at a strategic locations. Understanding the fact that in order to have a competitive advantage, the Top Builders in Delhi NCR understood that the customization for the customer’s need is the only key....
The animated video says, number of billionaires in India is increasing.
And in 2010 alone $3 billion take was paid to hedge fund managers.
http://www.thersa.org/events/rsaanimate/animate/rsa-animate-crisis-of-capitalism
Indian banks caught red handed, while assisting the rich to turn black money to white
http://www.ibtimes.co.in/articles/446610/20130315/money-laundering-rbi-icici-bank-hdfc-axis.htm
Here is how they do it
http://www.ibtimes.co.in/articles/446610/20130315/money-laundering-rbi-icici-bank-hdfc-axis.htm
Cobrapost alleged that these private sector banks launder black money in the following manners:
1) Accept huge amounts of cash and invest it in insurance products and gold.
2) Open an account to route the cash into various investment schemes of the bank.
3) Do it even without the mandatory PAN card or adhering to the KYC norms laid down by the Reserve Bank Of India.
4) Split the money into tranches to get it into the banking system without being detected.
5) Use "benami" accounts to facilitate the conversion of black money.
6) Use accounts of other customers to channelize the black money into the system for a fee.
7) Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client's account.
8) Keep the identity of the investor/depositor secret.
9) Open multiple accounts and close them at will to facilitate the investment of black money.
10) Invest black money in multiple instruments in the names of different individuals, not necessarily drawn from among the family.
11) Allot lockers for the safekeeping of the illegitimate cash, including special large size lockers to accommodate crores of hard cash.
12) Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along counting machine.
13) Use provisions like Form 60 to deposit the illegitimate cash into the account to route it into investment.
14) Help the client transfer black money abroad through NRE (Non-Resident External)/NRO (Non-Resident Ordinary) account transfer.
This is why I always get a good laugh when fools thump their chests claiming to be part of the largest democracy in the world...
In reality India is closer to Saudi Arabia. There are rules for the peasants and then there are the sheikhs and royalty who can do no wrong.
Billionaires my A$$
The whole nexus is falling apart at the seams -
Expect Rupee to hit 65 if Congress wins again based on more populist policies and no reform.
http://www.bloomberg.com/news/2013-03-15/brics-abandoned-by-locals-with-fund-outflows-highest-since-1996.html
India realty will still quote in Crores of INR - but the it will be INR that will take the biggest hit of coming bust.
The US economy improvement is because of Bernanke and Krugmans money printing.
Here in Arizona the housing market is still at bottom and the banks are lending left and right to 0% down houses - It wont be long before the bubble bursts again as US doesnt have demand for houses and investors wont find renters due to limited population.
In India rentals are still low -
My 2200 Sqft house only rents for 25k in Pune.
EMI for that house now is easily 50k. That too with high down payment + black and 10% interest.
Strange days ahead us especially salaried folks - Hedge well my friends.
http://www.telegraph.co.uk/finance/9934565/Cypriot-savers-hit-as-eurozone-agrees-10-billion-bail-out.html
The terms of the deal mean that Cyprus’s savers will sacrifice up to 10pc of their deposits in a move which will raise as much as €6 billion.
These are the probable scene which will be witnessed in 2017 Monetary Review
RBI has reduced the CRR further and the CRR now stands at -3%. That means RBI will give an extra 3% of the banks total deposits to all the banks to overcome the liquidity issue.
SBI chairman Pramod Chapri so upset about RBI with the minus 3% CRR. He argues RBI should give unlimited money to the banks without any interest cost and the CRR itself is a idiotic banking practice followed centuries ago.
Repo Rate is reduced further and now stands at -4%. This means mango men ( You and me) have to pay 4% interest to keep your money in the bank deposit.
FICCI President Podi Godrej reportedly unhappy with RBI, that the repo rate is reduced only up to 4%. He wondered how industry will grow if the repo rate is -4. He wanted RBI to reduce the rates further.
Karthi Chidambaram ( he would become finance minister by then) expects RBI governor Ramarao to act responsibly to reduce rates further to -10%, so that poor Kumbani's and Jehindra's can eat atleast a square meal per day.
In a separate news, the CPI inflation touches 23% and the WPI inflation is at 12%. Taking note on this inflation figure PMEAC chairman sundarrajan says the WPI decreases by 0.00002% which actually gives room to RBI to cut the rates further. Further he noted that the price of jet engine reduces by 100%, which is what we need to look as a sign of cooling inflation.
Planning commission deputy Chamcha singh puts blame of rural people. He says rural people has become more arrogant these days and started eating decent food for 3 times per day which puts more pressure on the inflation. He also expressed dismay about the fact that poor people started drinking coffee everyday. He also says government is taking effective steps to arrest this trend.
Meanwhile real estate continues to thrive and the price of a single bedroom flat is 10 crore even though 100000 crores of apartments still vacant in the country
www.mangoman2012.blogspot.in
@Anonymous at 7:32 AM
The terms of the deal mean that Cyprus’s savers will sacrifice up to 10pc of their deposits in a move which will raise as much as €6 billion.
And this is shocking truth that I was fearing would happen sometime in India. I have this fear from quite sometime that GoI will someday announce such a haircut to all savers having more than 20 Lakh in their bank account. This is bound to happen one day not too far from now.
And this is for those who think that the government and central banks have everything to control the bubble. I give three examples here when the Govt and/or Central Banks acted thinking that the tool they are using will not have any side effects.
1. Ben Bernanke raising interest rates in every Fed Meeting in year 2005-2006 citing "oil prices hovering around 80$ per barrel pose inflationary risk". After a number of rate increases, suddenly the real estate bubble burst,
2. Japan used the same interest rate tool in late 1980s to contain price inflation. End result was a bubble collapse,
3. Govt of India since past 2 years continuously increased price of petrol while subsidising diesel in order to fund the subsidy bill. Suddenly it is heard that Automobile sales have fallen 25% YoY. Now directing oil companies to reduce prices of petrol immediately so as to provide boost to auto sales.
// And this is shocking truth that I was fearing would happen sometime in India
This will never happen in India. For one india can print its own currency. Second India now has the biggest talent pool in the world and is on its way to become a superpower.
Interesting
http://www.mid-day.com/entertainment/2013/mar/160313-kareena-kapoor-to-become-the-face-of-a-real-estate-company.htm
AZ@Anonymous at 4:30 PM
This will never happen in India. For one india can print its own currency.
Govt will restrain printing currency in the event of fear of downgrades and/or inflation rate far beyond comfort level. It's more simple to propose a haircut for "qualifying" depositors and majority will not crib, which includes many people on this forum. After all, how many people have we seen protesting on the super rich tax introduced in this budget ?
Second India now has the biggest talent pool in the world and is on its way to become a superpower.
Oh you opened my eyes. India is becoming a super power and is unable to handle countries like Italy, Maldives, and Pakistan !!! I hope it will become a superpower one day due to "talented" citizens like you.
Hahahaaha the world's only superpower, who prints the world's reserve currency (the dollar) could not support its housing market and you believe that India can do so by printing rupees...wow! You seem to be having delusions of grandeur.
I have this fear from quite sometime that GoI will someday announce such a haircut to all savers having more than 20 Lakh in their bank account.
People are damned if they save, damned if they borrow, more damned if they buy gold. So what is the way to protect yourself.
My cousin was talking to me on pune real estate. The price of residential properties in kundwa road is doubled in one year from 3500 psf to 7000 psf. The area which is 30 km away from city and no road and no infrastructure.
The main point, at this prices also builder is not selling 25% stock available as he expect to touch 10000 psf. The minimum area is 700 and at current price the cost is 60 lakhs
@anon
The price of residential properties in kundwa road is doubled in one year from 3500 psf to 7000 psf. The area which is 30 km away from city and no road and no infrastructure.
Survivorship bias.
One of my colleague last month bought a 3BHK flat in resale from its first buyer in a Greater Noida project for 56L. The original buyer had bought it from Unitech directly for 35L in 2005. 8 year CAGR is 6%.
Now this person won't go bragging about town what a great investment he made. Specially given that a Gurgaon flat going for 35L in 2005 is easily above 2 Cr today. Both the Gurgaon location and Greater Noida location are equal distance from CP - the centre of Delhi. Even the travel time is same - both places being connected by nice 8-lane expressways.
"Specially given that a Gurgaon flat going for 35L in 2005 is easily above 2 Cr today. "
This could mean Gurgaon is overvalued. Is Gurgaon really that much better than Noida that people are willing to pay 4x for it ?
Rape bias?
Delhi Statistics:
2012: 1 rape every 6 hours
2013: 1 rape every 2 hours
Police response: Increase is due to more victims coming forward and reporting the crimes.
The talented folks in the north can help India become a superpower that will be feared by women world over!
Stock market is getting spooked today due to Cyprus.
Stock market has already gaven its verdict about Real estate companies(DLF,Unitech, Indiabulls Real Estate etc etc) in the crash of 2008. If you compare there share price from the peak of late 2007 and early 2008 to today, you can understand what stock market thinks of these Real Estate companies. Most of these firms are bankrupts.
^^^ Stock price of these companies reflects the reality that these are opaque investments that exist purely for the (off balance sheet) profit of promoters and their enablers in the public sector.
A genuine investor in these stocks will be taken for a joyride and dumped on the sidewalk after his pockets have been emptied.
Well, the genuine investor has been already trashed to sidewalk. For the last 5 years there hardly is any participation by retail investor in stock market.
Sydney, one of the desireable cities to live in the world has a median land price of $547/sqm (i.e. about 2500Rs/sqft).
http://www.macrobusiness.com.au/2013/03/sydney-finally-stokes-supply/
Are our cities really worth more than that ?
I expect the depositor tax in Cyprus to go away, it's too dramatic. Humans are well equipped to deal with such sudden threats.
Inflation works much better for theft, it's slow which means that our brains are not designed to deal with it plus you can't hide from it by putting money in the mattress.
More on the RE stocks saga:
http://www.moneycontrol.com/news/cnbc-tv18-comments/hdil-fights-for-survival-investorsedge_840011.html#toptag
And RBI cuts repo rate by 25 basis points.
Great, just what we needed.
Interest rates have been cut. Now property will become more affordable. With US easing out of recession more jobs will be outsourced and IT salaries will go up by 25% atleast
^^^ Sarcastic? Or just delusional???
Thanks for sharing your blogs important information i think last few year property and real estate growing very fast.
Indiabulls Greens Panvel
Interest rates may be cut further this year.Soon there will be time when people will be living in apartments worth crores but struggling to make ends meet with day to day expenses. Perhaps this is how it started in Zimbabwe with Mugabe regime.
HDIL Saga:
Currently HDIL has no supply of TDRs; their once 5 million square feet of TDR sale is now nil. The management has outlined it will generate 2 million square feet of TDRs in the near future. But analysts say, it will need much more than futuristic projections to restore the confidence of investors.
HDIL is also battling a debt of Rs 4000 crore, with an interest liability of over Rs 500 crores.
--------
With less than 2 weeks for financial year ending....I am not sure how are they going to do any payments. Our finance minister should come up with an bailout package or its going to get very ugly.
http://www.caravanmagazine.in/reportage/lifetime-oprtunity?page=0,2
nice article about SMS marketing used by real estate companies
QE in India
http://economictimes.indiatimes.com/news/economy/finance/rbi-to-infuse-rs-10000-cr-through-omo-on-mar-22/articleshow/19073373.cms
More money printing by RBI => more Rupee depreciation => more cost to import petrol/diesel => more inflation => more defaults =====> Indians screwed big time!!!!!!!
Soon there will be time when people will be living in apartments worth crores but struggling to make ends meet with day to day expenses
Touche. There are people in my office who live in Apartments worth 1-2 crores but keep complaining about the 4k they have to pay for tanker water, 5k they have to pay to the maid and 8k they have to pay for petrol every month. I guess an apartment doesn't make you that rich after all.
The 4k for tanker water???? Is it true or just an exaggeration?? I don't know anyone who is paying that much
Economic experts talk about administrative problems for the slow down of the economy. They say Project approvals delay blah blah blah. This is nonsense I would say. I do not see this as a problem. The approvals and red tapism is in the country for several years. It was there during the high growth phase 2003-2010 etc.
The real problem is
1. Real Problem is Real Estate
2. The 'so called' appreciation myth makes all people to think the only viable business in the country is real estate
3. The lure of 50% or 100% margin attracts people and already many companies and individuals are heavily invested and money is stuck there.
4. Unless we (Government and Banking System) acknowledge that openly, there is no decent solution.
5. Ofcourse, Ugly solution is there which will unfold on its own.
Other than this, if somebody talks about project approvals etc, I dont have slightest of respect for him.
Mango:
RE is the major issue as you said but no one wants to acknowledge it. They call it growth and not bubble.
This year is definitely going to be bad for RE and the next decade will be a slowdown with prices falling slowly.
Now, the elephant in the room is Food bill. If that passes, which would, who would pay 20K crore rupees. More printing and rupee depreciation. Stock market is inflated and will go to 16K by year end.
UPA2 may fall also soon.
Indian market is stable so far because of FII inflows. That tap is soon going to be closed and I would not be surprised at 20% drop in Sensex. Moreover, UPA2 will lose elections which will be another 20% blow to the markets. We are talking Sensex to be around 13K after elections in India.
Get out of RE and Stocks. Rupee is going to 60 in the next year or so.
India is going to get downgraded soon especially with this food bill.
Downgrade would be disastrous. A lot of free money is going to be over. People seeing 20lac flats becoming 2 crores in the last 7-8 years would soon be sad as they woulod revert back to inflation adjusted rates. A 20 lac flat in 2005 which is 2 crores today would be around 80lacs in the coming years.
Many banks would fold in India and if India keeps printing, Rupee would be 80rupees/USD soon.
It's not an exaggeration, water rates shoot up during summer and Bangalore is facing severe shortage right now.
Filling the swimming pool and watering the artificial lawns ain't cheap. I am not talking about a bungalow here, just a community swimming pool.
It's not free money, it's called 'perceived wealth'. You can't even encash it.
If everyone wanted to sell their apartments tomorrow and get rich everyone would be poor. Only a few people will get rich by selling, most people will only derive comfort from thinking about their wealth, that's the beauty of this.
If everyone wanted to sell their apartments tomorrow and get rich everyone would be poor.
You may be right on the part about everyone selling their flats. I am surprised by the sheer number of flats that have come on the market in the last few weeks in Bangalore. Looks like people are lining up to sell, but there are no buyers!
Is this the beginning of the crash?
"Get out of RE and Stocks. Rupee is going to 60 in the next year or so."
Rupee is not going to 60. It will remain at current levels and steadily go higher in the medium term. I wouldn't be surprised to see INR at 45 within the next two years.
INR at 60 will not happen in the medium term, however it cannot be ignored that the INR is in long-term secular decline.
@Anonymous above
Rupee is not going to 60. It will remain at current levels and steadily go higher in the medium term. I wouldn't be surprised to see INR at 45 within the next two years.
Remember the film 'Sholay' where Jai (Amitabh) goes to Basanti's Mausi with a proposal. Mausi says ar the end "Wah beta, Fiscal deficit is out of control, Current Account Deficit is at all time high, (hence) inflation is beyond control, interest rates are reducing, your low growth numbers are fake too, your country is a third world country, but expect your currency to appreciate by 20%" !!!
"Remember the film 'Sholay' where Jai (Amitabh) goes to Basanti's Mausi with a proposal. Mausi says ar the end "Wah beta, Fiscal deficit is out of control, Current Account Deficit is at all time high, (hence) inflation is beyond control, interest rates are reducing, your low growth numbers are fake too, your country is a third world country, but expect your currency to appreciate by 20%"
Well, all those conditions exist right now, but the INR has still found a solid floor at 55. INR strength is strongly correlated to the "risk on" trade which seems to be coming back in full force recently so I don't see how the INR can depreciate in such circumstances. Indian stocks (hovering in a narrow band between 19000 and 20000) and INR (hovering between 55.5 and 52) have been in a holding pattern for quite a while now and I strongly suspect the next breakout is higher for both the INR and the SENSEX.
Let me put it this way: both INR and SENSEX will be higher by year's end.
Sirius
Sirius,
My take is that the party is about getting over in India. Both Sensex and Rupee would be down no on. Don't forget the massive RE deflation coming which will keep pressure down for Sensex and Rupee for the next decade.
There will probably be elections this year itself and UPA will be ousted. That itself will take away 3000 points from Sensex.
I see Rupee at 60 in the next year or so and Sensex around 15K. Massive job losses in RE and banking sectors, RE deflating back to 2006 levels in the next 3-4 years.
To add to above why would Rupee depreciate:
--USD will get stronger and if US raises rates, USD will get even stronger.
--FII investements will dry out in the political climate India has now and with RE crashing.
HDIL Saga continues.....
Why HDIL has lost more than half its value since Januar
http://www.firstpost.com/investing/why-hdil-has-lost-more-than-half-its-value-since-january-668236.html
Mumbai-based real estate firm Housing Development and Infrastructure (HDIL) has tanked 23 percent in four consecutive sessions to touch a new 52-week low of Rs 49.30 today after rating agency CARE downgraded the company’s Non Convertible to default
1.US Economy slows => US prints money => India prints money => Currency stays
2.US Economy grows => Outsourcing grows => More jobs => More Cars => More houses => Indian economy grows => Brings CAD under control => currency stays
In either case currency will be stable
But S&P Rating to junk status ..?
It will bring down INR
"My take is that the party is about getting over in India. Both Sensex and Rupee would be down no on. Don't forget the massive RE deflation coming which will keep pressure down for Sensex and Rupee for the next decade."
You are correct about one thing. And that is that INR strength is directly correlated with SENSEX. This is unlike the US or Japan for example where US$/Yen and DOW/Nikkei strength are inversely correlated.
"There will probably be elections this year itself and UPA will be ousted. That itself will take away 3000 points from Sensex."
If UPA is ousted, that is a harbinger for a strong INR just like we had with the opposition in power in the early 2000's. It was a time of INR strength and hence (as I explained above) a great time for the Indian stock market. It was not a particularly terrific time for real estate. If UPA is ousted (which I think would be a huge mistake to take for granted), then expect INR to strengthen and money to flow into stocks. Money will flow out of real estate.
"There will probably be elections this year itself and UPA will be ousted. That itself will take away 3000 points from Sensex."
"I see Rupee at 60 in the next year or so and Sensex around 15K. Massive job losses in RE and banking sectors, RE deflating back to 2006 levels in the next 3-4 years."
For RE to deflate, Rupee *has* to strengthen. RE will not deflate when Rupee is also deflating. The reason people bought into RE is to protect themselves from inflation. If INR is deflating hard, expect the market to hold on to current nominal prices. There will be no correction.
Sirius.
"USD will get stronger and if US raises rates, USD will get even stronger."
The problem is that there is no chance that the US raises rates any time in the near future. Helicopter Ben is on record stating that the Fed will keep rates low until at least 2016. That's three year out and hence a guaranteed three years of INR strength. I don't see much scope for RE appreciation in this environment as RE (unlike stocks) is inversely correlated to INR strength. In periods of INR weakness, RE tends to outperform (2007-present) and in periods of INR strength, RE tends to underperform.
Indian stocks however should perform very well over the next three years.
The reason people bought into RE is to protect themselves from inflation. If INR is deflating hard, expect the market to hold on to current nominal prices. There will be no correction.
Incorrect. Most country doesn't know about inflation figures. People buy RE purely due to speculative reasons. Just Greed and nothing else.
People will buy RE after the RE market crashes and to hedge against hyperinflation only cash buyers would be able to buy whatever RE they want at 60-70% reduced prices. There would be no buyers period at that time.
Indian stocks however should perform very well over the next three years.
Incorrect. That is only possible if RE doesn't crash which is highly unlikely. GOI can print and buy stocks themselves to keep the stock market afloat.
Why do you think Federal Reserve will not raise rates by next year. The way Dow is doing, it will be another 2000 points up in a year or so and then Feds role is over. US is on the verge of major inflation kicking in and by 2014 there would be rate increases. Moreover, US bond market is about to burst.
Don't be too optimistic about the khichri India has cooked.
The way India has adopted Keynsianism and spent borrowed as well as printed money in the past 6-7 years is remarkable. All India did was followed instructions from other G-20 nations and blew up its own RE bubble, stock bubble by spending and spending.
Now it can't pay its debt. It has to pay so much interest on borrowings. India is on the verge of downgrade and it will happen. It would mean FII money will dry out, RE will fall faster than slow deflation, less money would be available for India to spend, a lot keynsian projects would have to be scrapped which means less spending and more layoffs.
I'm not all optimistic on India story.
"Why do you think Federal Reserve will not raise rates by next year. The way Dow is doing, it will be another 2000 points up in a year or so and then Feds role is over. "
Let me be very clear. The US will never, ever, ever, ever, ever voluntarily raise interest rates to a level above inflation unless they are forced to do so by the markets or a currency crisis (in which case again India would be a safer place to keep your money than the US).
"US is on the verge of major inflation kicking in and by 2014 there would be rate increases. "
Helicopter is on the record stating that will keep the pedal to the metal until unemployment drops below 6% and that he does not expect unemployment to reach 6% before 2016: http://www.cnbc.com/id/100501341
The *only* thing that will make the US raise interest rates is if they are FORCED to do so by a catastrophic decline of the dollar or some other financial crisis. Until then, the US will keep printing money until they run out digital ink.
"Moreover, US bond market is about to burst. "
Again, how can the US raise interest rates if the bond bubble is going to burst? If the bond bubble (and it is a bubble) bursts, that would destroy the banks and many pension funds, what do you think will happen then? You guessed it, more printing, more 0% interest rates, more pumping and priming. A likelier scenario is that the US will not let the bond bubble burst in the first place (i.e. they will continue to keep interest rates at 0%).
Don't get me wrong, I'm not at all optimistic about India's long-term prospects. We all know the issues, so there is no point in rehashing them. I'm just saying that in the short-medium term, India should outperform (against all odds) the developed World.
Sirius.
"People will buy RE after the RE market crashes and to hedge against hyperinflation only cash buyers would be able to buy whatever RE they want at 60-70% reduced prices."
I don't understand, how can the RE market crash and there be hyperinflation at the same time. If you have hyperinflation, house prices will gallop upwards relentlessly at least in nominal terms. In Zimbabwe, during their recent period of hyperinflation, house prices did not "crash" or even stagnate, they went up, waaaaaaaay up.
Sirius.
Unemployment is not one of the FEd's charter. Their main goal is to contain inflation and US has major inflation. Commerce Dept. will have to start showing it soon in CPI figures as well otherwise they would lose credibility. They can lie only so much.
As regards to what Ben Bern. says that he would keep printing, he can change his stance in the next Fed meeting also. Don't trust anything from them as they don't want to rock the boat by saying they will do it next year.
Overall, the whole world is in a bad situation. Guess what happens when Chinese, Brazilian, Aussie, Canadian, Singapore, Indian RE bubbles burst? Everyone will keep printing more and more. Maybe hyperinflation everywhere.
Sirius,
India is already seeing massive inflation. It will now be followed by stagflation which will take RE down.
US will see hyperinflation.
There are so many mistakes in your post I don't even know where to begin.
"Unemployment is not one of the FEd's charter. "
The Fed has a dual mandate, to maximize employment and to ensure stable prices: http://en.wikipedia.org/wiki/Federal_Reserve_System
I think you're confusing the Fed with the ECB which has the sole mandate to ensure price stability.
"Commerce Dept. will have to start showing it soon in CPI figures as well otherwise they would lose credibility. They can lie only so much."
The CPI figures are generated by the Bureau of Labour Statistics (BLS) which is a branch of the Department of Labour NOT by the Commerce Dept.
http://en.wikipedia.org/wiki/CPI
Bernanke has ignored actual inflation figures in the past and has given no indication that he will not continue to do so in the future. The man is a fearless money-printer and is actually proud of the fact.
It does not matter what is written in the Wikipedia article. Helicopter Ben will print money as long as he can. Don't forget he is in charge of the biggest central bank in the world.Stocks and RE will go thr boom and bust, only thing that will persists in high inflation which will make life of the rest 99% a living hell.
"US is on the verge of major inflation kicking in and by 2014 there would be rate increases. "
Whatever numbers pushed by FED to bank is just lying in bank records. It will create money only when bank lends it to somebody.
Inflation in US will go up only when, housing market returns
The US treasury is the mother of all bubbles and it is the last one to go bust. When that happens, all the paper wealth will be destroyed and the world will be a chaos.
When the solution of every problem is to print more money and even more money then does it really matter what is the Mandate of Fed/ECB/RBI? it makes me sick when people talk about academic facts...grow up guys...there are much better things to worry about.
RBI is in mood for more easing this year and I get scared when I think of inflation figures in India for this year.
But I dont want to blame RBI and GOI alone..when people are ready to sell their wife for Real estate - the blame goes to everyone.
RBI is injecting 10,000 crores now.
Wait till RE deflates and bailouts start. RBI will print non-stop. Now with this much printing, RUpee has to go down to 70 or 80 rupees to USD.
I posted this video back in 2011 March
http://indiahousingbubble.blogspot.com/2011/04/china-paper-dragon-ghost-cities.html
Its been 2 years since
As folks have mentioned here about RBI/GOI printing money in excess. It was also mentioned that after the RE bubble deflates, RBI may print even more.
I just wanted to point out that RBI by printing money doesn't create wealth, but has the power to redirect and redistribute wealth.
EG: inflation
Lots of predictions here, I have none to make. We have no idea how things will pan out in the short to mid term. For all we know we might get a severe deflation and everyone with positions in cash will win.
I like Jeremy Grantham's take on future, he says that he is agnostic on short to mid term future and concerned about our long term future because the trend lines are very clear there.
>"I don't understand, how can the RE market crash and there be hyperinflation at the same time."
During hyperinflation, as soon as you get your salary, you spend it on essentials. Essentially, people do not keep any money in the bank.
Hence, banking credit comes to a halt during hyperinflation. Moreover, buying a house is the last thing on peoples minds when essential items (food/medicines/fuel) become scarce. So no credit, and no demand = dead RE market.
Is property a good hedge against hyperinflation?
http://cij.inspiriting.com/?p=475
find here new project in pune Royal Purandar
find here new project in pune Royal Purandar
http://timesofindia.indiatimes.com/tech/careers/job-trends/H-1B-visas-may-double-Report/articleshow/19103684.cms
H1B visas will double. Good news for IT professionals from india. Lots of people will now get a chance to go to US and earn in dollars. Long before RE bubble will burst. IT people income will increase manifold
So no credit, and no demand = dead RE market.
On the other hand, if you had your home already delivered by the builder, you could easily pay off the debt taken with a few months pay. You should only worry if you had to flip around but not a end use home.
"On the other hand, if you had your home already delivered by the builder, you could easily pay off the debt "
Yes and no. Depends :).
Firstly, interest rates will be sky high.
Secondly, in some previous hyperinflationary episodes (notably in Weimar Germany in 1920s), the currency was eventually replaced and your loan had to paid back in the new currency. So all debtors did not get a free pass.
When currency becomes worthless, what becomes valuable are barter goods. Small items (jewellery, furniture, etc) that can be easily exchanged. RE (esp empty non-productive land) loses value.
US does QE to bring down the interest rate and boost housing market.
But when India prints 10000 crores,why interest rate is not going down?
Can somebody explain me?
Anon above:
US does QE to bring long term rates down as the long term rates are tied to the yield on 10 year note. The short term rates are directly controlled by Fed and are at almost ZERO.
In India the rates are set by RBI for everything, so money printing doesn't affect interest rates.
If H1B visa doubles, then billing rates will take at lest 20% hit easily.
"In India the rates are set by RBI for everything, so money printing doesn't affect interest rates."
No. The RBI only sets the rates at which banks borrow from or lend to it. Banks are free to set their own interest rates based on market forces.
Its the same in the US.
The difference is in the currency. People trust the dollar, not the rupee.
"Hence, banking credit comes to a halt during hyperinflation. Moreover, buying a house is the last thing on peoples minds when essential items (food/medicines/fuel) become scarce. So no credit, and no demand = dead RE market. "
Nominal RE prices do not fall during hyperinflation. That is ridiculous Polt and quite frankly I expect better analysis from you. What you posted may be true in a high inflation environment (or even a very high inflation environment) in that people need money for necessities before they can think about RE.
But in a hyperinflationary environment everything from socks to rice is going up thousand fold or even a million fold. At one point in Zimbabwe's hyperinflation episode you needed 200 Trillion Zimbabwe Dollars to purchase half a loaf of bread. Are you really suggesting that in such a situation, RE prices in Harare remained constant at pre-hyperinflationary levels (i.e. around say one million Zimbabwe dollars?). If that was the case, someone would be able to buy up the entire city or at least entire neighborhoods just by foresaking one meal. With 200 Trillion Dollars you could have bought up half the country's RE if RE prices didn't budge. So obviously this analysis is ridiculously flawed and asinine.
Anon above:
You are talking about hyperinflation and comparing with Zimbabwe. Polt and other may have said hyperinflation but what they mean is only high inflation. No hyperinflation is going to happen.
Austerity would be the key word soon in US and EU. Same would apply elsewhere after RE busts and money printing.
No matter what people say or logic they use, RE has to go bust in India. It is not "If" but "when".
My Russian college told me when currency lost value, they ran to stores and bought whatever they can.
And house rents and prices were quoted in USD. But there are not many buyers to pay.
People who had money in bank account lost their savings
From wikipedia
Living with hyperinflation was a challenge for Zimbabweans. Prices in shops and restaurants were still quoted in Zimbabwean dollars, but were adjusted several times a day. Any Zimbabwean dollars acquired needed to be exchanged for foreign currency on the parallel market immediately
In these casee people who had house, gold or USD survived
Probably people should start selling RE in bitcoins. Google bitcoins...the next wave. One bitcoin equals 37 euros.
Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers
Posted on March 20, 2013 by Michael Snyder—No Comments ↓
Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.
The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.
We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
Contd..from above:
The following is the global financial pyramid scheme by the numbers…
-$9,283,000,000,000 - The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.
-$10,012,800,000,000 - The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.
-$10,409,500,000,000 - The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.
-$15,094,000,000,000 - U.S. GDP. It is a measure of all economic activity in the United States for a single year.
-$16,749,269,587,407.53 - The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 - The total amount of money that the global elite have stashed in offshore banks (that we know about).
-$50,230,844,000,000 - The total amount of government debt in the world.
-$56,280,790,000,000 - The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.
-$61,000,000,000,000 - The combined total assets of the 50 largest banks in the world.
-$70,000,000,000,000 - The approximate size of total world GDP.
-$190,000,000,000,000 - The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.
The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.
And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.
The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.
But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.
There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?
When that happens, will you be ready?
How do I get ready? Maybe like:
--Buy a gun as riots would be there.
--Save canned food.
--I'm already selling all my RE.
--Buy more gold.
--Reduce bank deposits to minimum.
--Stash jewellery in mattresses.
--I dunno, what to do.
@Anon - "Nominal RE prices do not fall during hyperinflation"
Essentially, you are saying your house will continue to be a store of wealth during hyperinflation.
Firstly, If nobody is buying, what is the price? Why should its (nominal) price keep increasing at the same rate as essential goods.
Secondly, hyperinflation destroys economies. Do you really think your house will continue to hold its value (measured in gold or dollar or whatever)? Are some rich foreigners really going to come to you and pay you its original worth in a broken economy?
Dream On.
BTW, I never said India is going to have hyperinflation.
Ok US has doubled the H1B visas and green cards. This means 65000 more Indians will now be earning in dollars per year. Majority of them will be buying RE back in India as the exchange rate is too favorable. This will be a boost to Indian RE sector
Anon @2:33 pm
Below zeitgeist Moving forward movie explains nicely
http://www.youtube.com/watch?feature=player_embedded&v=b0u8cTCYLSw
@Above
I am sorry but Zeitgeist is a bit of hocus-pocus.
If someone needs a clearer numbers and statistics based perspective then there are plenty of other books and films.
One important thing everybody seems to overlook. "Law and order" during hyperinflation. It doesn't exists in such period....better you have guns to protect and food supply instead of Real estate investments.
Don't Copy paste Zero Hedge articles here please - people can click link/ copy URL and go there.
Also US is now going to consider Bitcoin transactions without trace as money laundering - No one messes with the FBI.
Note to self: Watch Mad Max reruns this weekend to prepare for India's Housing Bubble Collapse!
India's HB collapse will take time. It will not be quick but a slow deflation for a long time. Already many class B&C cities in India have sales declining.
It would be another 3-6 months for this thing to go down by like 20%, then elections happen and another 20-30% after elections.
We are in a long drawn pain for the next 4-5 years.
Hong Kong Homes Face 20% Price Drop as Banks Raise Rates
By Stephanie Tong & Kelvin Wong - Mar 22, 2013 3:40 AM ET
Hong Kong officials, who have struggled in vain for three years to slow the growth in home prices, are about to get their wish as the city’s biggest banks raise mortgage rates.
Prices could fall as much as 20 percent over the next two years, according to Deutsche Bank AG, after lenders including HSBC Holdings Plc, Hong Kong’s biggest by assets, and Standard Chartered Plc raise their home loan rates by 25 basis points in response to tighter risk rules.
http://www.bloomberg.com/news/2013-03-21/hong-kong-homes-face-20-price-drop-as-banks-raise-rates.html -
Lodha sold flats for 4 crores in 18 days. Who says this is a bubble. There are enough rich indians than people in this blog know about
http://economictimes.indiatimes.com/markets/real-estate/news/builders-cut-apartment-size-and-price-to-perk-up-demand-in-dull-market/articleshow/19119166.cms
@ Anonymus 11:12
Lodha's 4 Crore Flats is mostly taken by NRI. I am in Kuwait, and got lots of calls from Lodha agent in kuwait to invest in the project. Apart from NRI, ultra Super rich in India may have taken the property in the project.
Marketing hype. Who can cross check how much were paid for the flats? Or if anybody really bought them? No one knows.Can one verify from a third party? Nope. Everything is opaque and that is how TPTB want it to be in RE.
In a related news HDIL has been issued a "in default" credit rating as per a news item in ET two days ago.
// Lodha's 4 Crore Flats is mostly taken by NRI.
My point exactly. There will always be buyers fir RE in India no matter the price. So RE will keep on doubling ever 2 years due to these super rich NRIs
What if doubling of RE prices every two years is the new norm going forward.
Instead of there being a bubble!
Anon above:
You are dreaming. A flat at 2 crores will then be 4cr and then 8cr.
Rupee would be Rs.500 per USD and loaf of bread would be Rs.5000 if that happens.
Eros Sampoornam is the name of a new residential project, which is being built by India’s well-recognized real estate developer Eros Group. The group has promised a complete holistic living experience for its residents.
Eros Sampoornam is the name of a new residential project, which is being built by India’s well-recognized real estate developer Eros Group. The group has promised a complete holistic living experience for its residents.
JM Flora is a high-definition lifestyle residential project ,which has been developed by JM Housing.It flourishes multi-storied apartments and is providing good accommodation with all the latest facilities and amenities. JM Flora Noida extension is a new launch residential project Located at Noida Extension.
"You are dreaming. A flat at 2 crores will then be 4cr and then 8cr.
Rupee would be Rs.500 per USD and loaf of bread would be Rs.5000 if that happens."
How do you explain then that the RE prices in Gurgaon are almost 10-15 times the prices in 2002, while the dollar has appreciated only about 15-20% against the rupee.
Havent bought a loaf of bread in a long time but I am sure it is no where close to being 15 times as well.
???
Anon above:
A lot of food grains are subsidized by the Govt. and the real prices are not reflected.
Let's compare, in 2002:
-A flat worth 15 lacs is worth 2 cr now.
-A cup of tea at nukkad was 2 rupees and is worth probably 15 rupees now.
-Lot of clothing is worth 10 times more.
-People use to spend 10-15lacs for a good wedding in 2002. Now 2 crore for a similar wedding.
-Salaries used to be 1/10th of what people make now. Even a sweeper who used to make 1K rupees in 2002 makes 15K rupees today in Govt. job.
Help needed from others for comparison.
(2000-2012)
Petrol 25 - 75
Rice 1kg 18 - 54
Eclairs 25p - 1 Re
Milk 1 liter 8 - 25
Eggs dozen 12 - 40
Rent typical 2bhk (Bangalore) 3.5k - 15k
Min Auto Fare 4-10
The only things that have become cheaper are stuff like TV, Refrigerator etc. It's called biflation, inflation in essentials and deflation in gizmos and crap.
Going by this a house should cost 2-5 or maybe 6 times it's 2000 price, not 15 times.
"""A lot of food grains are subsidized by the Govt. and the real prices are not reflected.
Let's compare, in 2002:
-A flat worth 15 lacs is worth 2 cr now.
-A cup of tea at nukkad was 2 rupees and is worth probably 15 rupees now.
-Lot of clothing is worth 10 times more.
-People use to spend 10-15lacs for a good wedding in 2002. Now 2 crore for a similar wedding.
-Salaries used to be 1/10th of what people make now. Even a sweeper who used to make 1K rupees in 2002 makes 15K rupees today in Govt. job.
Help needed from others for comparison."""
Apart from the flat price sir, you are mostly wrong.
See below:
-A flat worth 15 lacs is worth 2 cr now. 100% Correct.
-A cup of tea at nukkad was 2 rupees and is worth probably 15 rupees now. Its 6 rupees now
-Lot of clothing is worth 10 times more. ???? I do not shop a lot for clothes here, but I doubt the prices are more than 15-20% higher than earlier.
-People use to spend 10-15lacs for a good wedding in 2002. Now 2 crore for a similar wedding. The 2 crore wedding used to cost about 50 Lakhs. The 15 Lakh wedding today will cost about 60-70 Lakhs.
-Salaries used to be 1/10th of what people make now. Even a sweeper who used to make 1K rupees in 2002 makes 15K. No sweeper made a 1000 rupees in 2002. Salary for that position was about 4000 then and is about 7-8000 now.
You obviously have a slight disconnect with the reality around you. Go out sometimes, it can be nice on days when the weather is good.
Aam Admi said:
"Going by this a house should cost 2-5 or maybe 6 times it's 2000 price, not 15 times."
So the value of the 2 crore flat should be 60-80 Lakhs??
Let us say there is actually a bubble burst, do you really think the price will go down this much?
>Salaries used to be 1/10th of what people make now.
Infy/Wipro used to pay freshers about 1.8L pa in 1999. Now they pay 3.4L. This has not even kept pace with inflation. Managers post used to pay around 8-10L then probably pays about 20L today.
So salaries have largely kept pace with inflation. The difference is that the industry expanded rapidly so that more higher paying posts were created.
It is unlikely we will see the same kind of job growth over the next few years. The IT industry is noticeably slowing down now.
http://economictimes.indiatimes.com/tech/ites/it-companies-like-infosys-hcl-and-others-promote-mini-ceos-trim-down-entry-level-hiring/articleshow/19178825.cms?adcode=50
Remains to be seen whether this is temporary or a slow, steady and permanent change.
@Polt
Infy/Wipro used to pay freshers about 1.8L pa in 1999. Now they pay 3.4L. This has not even kept pace with inflation.
Don't forget to add that USD was about 35 Rupees in 1999 and is 55 now.
Back in the 1990s double income families were not the norm. Now it has become very common. Within 10 years an IT couple can easily make 40L per year combined. This does not even include foreign assignments. With incomes like these for a period of 30 years I dont think RE will ever come down
>Back in the 1990s double income families were not the norm. Now it has become very common.
Not really.
http://business.rediff.com/report/2010/mar/08/india-has-least-number-of-corporate-women-employees.htm
http://industrialrelations.naukrihub.com/women-employment.html
Female participation in workforce was 19% in 1981, and has increased to about 25% today. So, unlikely that we have experienced a great increase in double income families.
// Female participation in workforce was 19% in 1981, and has increased to about 25% today. So, unlikely that we have experienced a great increase in double income families.
You done need every woman to work for RE to go up. A significant number of families have double incomes to absorb the new houses hence RE will always increase in India
“Hence RE will always increase in India”
“I dont think RE will ever come down”
“So RE will keep on doubling ever 2 years due to these super rich NRIs”
Funny how the bulls are the only ones who can make absolute and definitive statements regarding the future of RE.
Crystal Ball?
@Anon - "You done need every woman to work for RE to go up"
I did not say that. I only countered your original point that double income families were uncommon ten years ago and are very common now.
The stats do not support your statement.
Let us say there is actually a bubble burst, do you really think the price will go down this much?
Maybe or maybe everything else will catch up to RE prices. Who knows ? The latter one will be a horror show. Such distortions in pricing are not sustainable. All bubbles collapse sooner or later
Maybe or maybe everything else will catch up to RE prices
There won't be any RE bubble burst and neither will everything else rise up to catch up to RE prices.
About time Indians acknowledged and accepted this 3rd world reality.
Maruti sales may go down but at the same time super luxury vehicles see the biggest demand.
This dichotomy will be mirrored in RE as well. No builder is interested in making affordable housing for the 80%.
The top 20% (which itself is a 200+ million strong market) are grabbing all the wealth and it makes business sense to target them.
I happened to visit this foreclose India website. I see lot of house and flats for auction in my area
http://foreclosureindia.com
If market is hot, why would anyone go through bank to pay off their debt?
They should be able to sell for high price in the market and walk away with the difference.
Anon at 11:34
What makes you so sure about the fact that there will not beany RE bubble burst. At least you believe there is a bubble. And if you believe there is a bubble my belief is all bubbles eventually burst.
Many Indian people are waiting for the shock of their life waiting like a time bomb.
It is your money and your neck. If you stay invested, you cannot pay back the loans at least in this lifetime even if you are 35 years old. Reason being, why would you pay loan on a property that would be half the price soon. You would just walk away if allowed legally after bankruptcy or Diwaliya.
Stay tuned. It is coming soon.
Ofcourse there is bubble in Indian RE, especially in big cities like Mumbai.
IMHO, Mumbai may become a template for rest of India where in next 20-30 years time there will only be two options:
Luxury high rise towers and golf course communities with 1st world infrastructure and amenities for the few
and
the slums with rundown or missing infrastructure that would put Africa to shame for the many.
Reference:
http://www.censusindia.gov.in/2011census/hlo/HLO_Tables.html
About time Indians acknowledged and accepted this 3rd world reality..
A reality that has only existed since the economy opened up, a reality that depends on flow of cheap money from central banks and the west. A reality that depends on continuous flow of cheap resources and oil from outside.
I think reality is on my side.
There is version of reality for aam aadmi and then there is version of reality for the ruling class.
US-based real estate major Trump Organisation is looking to expand presence in Indian market and is in discussion with developers in Mumbai and NCR for two Trump-branded housing projects, its India representative said.
“This is the first of its kind tie-up Trump has ever done. This signals how important Indian market is for Trump. India would be the top three market outside of North America for Trump in the next 3-5 years,” Tribeca Developers managing partner Kalpesh Mehta told PTI.
Trump is also looking at Pune, Bangalore, Chennai, Goa, Hyderabad and others where there is demand for super luxury real estate.
The police on Tuesday night booked the drivers of two high-end sports cars -a Ferrari and a Lamborghini -for speeding along Worli sea face. The drivers, Nitin Musale and Alok Maskare, have been booked under Section 279 of the Indian Penal Code for rash driving.
The drivers were accompanied by the owners of the vehicles, but the police refused to reveal their identity. The cops are trying to ascertain if it was the owners who were driving the cars at a high speed.
The police said the Lamborghini had a Jharkhand registration number. -JH08-E09.
As there have been several cases of cars with fake Jharkhand registration numbers, the drivers have been asked to produce all relevant documents.
"The Worli police received calls from residents of the area, saying two imported cars were moving along the sea face at a high speed. The residents said the loud noise from the cars was disturbing them," said investigating officer R Raorane.
By the time a police team reached Worli sea face, the cars were on the sea link. "Our patrolling team waited at the Worli end of the sea ink and intercepted the cars when they returned," said an officer. Both were brought to the Worli police and were booked said investigating officer R Raorane. Both the drivers were accompanied by the owners of the vehicles but the police refused to reveal their identity despite repeated request. However the police have booked the two drivers Musale and Maskare but they are not sure whether this two drivers were driving this cars or the real owners.
A hilarious example from a few days ago to help illustrate my earlier point.
If this was a Maruti or a Tata being raced and intercepted, there would be no question about the identity of the driver. This is the reality of aam aadmi.
Now, if you're a Lambo or Ferrari driver you can create your own reality. Thankfully this incident ended without anyone losing life or limb but I'd risk a guess that even if these morons had run over a dozen pedestrians in the process their version of reality would still reign over the peasants who were mowed down.
So the question to ask in India is, What is your reality rather than What is THE reality :-)
@Anon
You went off on a tangent, I didn't say that life didn't suck before. Life always sucks for those at the bottom of the ladder, it's as true now as it was 2000 years ago.
The difference is the sheer amount of wealth that people possess nowadays. Today I enjoy a lifestyle that is richer than what the richest king enjoyed 400 years ago. That wealth is a function of incessant industrialization and rampant consumption of non-renewable resources and it's going away whether you like it or not.
Life will still suck when the housing bubble bursts, but if you mentally prepare yourself you will be able to mock someone who wasn't prepared and derive some pleasure out of it.
"Life will still suck when the housing bubble bursts, but if you mentally prepare yourself you will be able to mock someone who wasn't prepared and derive some pleasure out of it."
That is why you are here all this time for your 2 minutes of pleasure.
Well my life will rock when the bubble bursts. I will be able to afford a house. Life still rocks though im renting.
Yes and there will be lifelong pleasure to know that my assumptions were based on calculations.
Ah! the joy scientists get to get calculations right. No amount of money can beat the pleasure.
That is why you are here all this time for your 2 minutes of pleasure.
Oh c'mon that was a joke. I already mentioned here once that anyone who is betting against the bubble has already lost in the short term, a lot of 'ignorant fools' have ridden the bubble and made a lot of money.
A life spent waiting to see other people live in misery is a very poor life indeed. I have nothing against buying a house if you want to actually live in it, I personally refuse to participate in this because it looks like a hamster wheel to me.
To each his own.
Even i was jokin :)
A life spent waiting to see 'greedy' people live in misery is a good life which is im assuming 90% of the homeowners in india.
But we deserve the last laugh after waiting it out. Dont we :)
what a sadist...
Real estate firm Supertech today announced a tie-up with Italian fashion brand Armani group for interior designing of 100 super luxury residences in one of its project at Noida to be sold through invitation.
Asked about the criteria to be adopted for selling these Armani residences, Arora said: “People who have not only money but also class and a taste for luxury.” On prices, he said the company is in discussion with the Armani team to finalise rates of these residences.
“It will be 75-100 percent higher than other product in the Supernova project,” he indicated.
Price range: 70 lakhs to 15 crores!
You see bubble, I see Indians with money to burn (at least 100 of them :-D)
This is the second RE assignment for Armani in India indicating a penchant for the wealthy to differentiate themselves.
http://www.supernova.in/
Interesting choice of name though, Supernova = star in a death spiral
I'm sure will be appreciated by the discriminating Indian elite who will no doubt line up for this offer!
Mumbai developers, having sensed the increasingly evolved tastes among buyers, are using differentiating strategies to sell projects.
Exposure to international home concepts among many of India's well travelled property buyers is raising the bar on differentiation in residential projects here as well. Lifestyle aspirations have risen, and there's a lot of demand for theme housing projects.
"Sports, in general, and golf, in particular, are a recurring concept among India's more affluent home buyers," he said.
A private golf course residence is fast becoming a status symbol and lifestyle statement for India's super-rich. Golf courses that are large, flawlessly landscaped and regularly maintained add to the living comfort and premium value of residential projects.
In other news, researchers have warned that half of India will not have drinking water by 2030.
Not being able to afford RE should be the least of your worries. Start digging holes in your backyards to store water.
Meanwhile, the elite can continue to play golf for which I have a feeling there will be plenty of water to keep the greens up to date.
Welcome to the new reality...
The more the "amenities" like swimming pool, clubhouse, golf course etc..the more the maintenance cost is going to be. Wouldn't it be simpler to buy a house to live and join a club? The club would provide swimming pool, club house golf...etc. Clubs would do a professional job of cleaning and maintaining at the lowest price to attract clientele.
Golf courses and swimming pools ?? LOL
I hope they don't ruin the golf courses with chemicals, I would like to grow some vegetables on them one day.
http://economictimes.indiatimes.com/tech/ites/us-revival-may-bring-mega-deals-worth-over-100-mn-for-indian-it-cos-like-tcs-infosys-clsa/articleshow/19249544.cms
Indian IT is going to grow further. Soon 20% hikes will be the norm. RE bubble burst will have to wait atleast for one generation
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