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| USD INR in the last year v/s USDCNY (Chinese Renmimbi Yuan) |
From the International press
http://money.cnn.com/2013/08/19/news/economy/india-rupee/
"HONG KONG (CNNMoney)The rupee is trading at record lows and stocks have lost 10% in a month, even as the Indian government insists the country's faltering economy is not in crisis.
The slide that has rocked Indian markets accelerated Monday, with the rupee hitting a new record low against the dollar. The Mumbai Sensex, the country's benchmark index, dropped 1.6% on Monday and has now lost 10% of its value in the past month.
Investors are worried about India's large current account deficit, which reflects the nation's tendency to import many more goods than it exports and leaves it heavily reliant on foreign capital.
Talk of tighter U.S. monetary policy has seen some investors pull out of emerging markets in recent months.
Prime Minister Manmohan Singh has tried to calm nerves, saying the government has enough foreign reserves to defend the rupee for months.
"There is no question of going back to the 1991 [balance of payment crisis]," Singh told the Press Times of India, referring to an episode that nearly resulted in India defaulting on its debt payments.
But with elevated inflation, a sky-high government deficit and the economy slowing, some are worried that recent government attempts to shore up confidence may have had the opposite effect."
- Source: CNN Money
http://www.businessweek.com/news/2013-08-18/india-markets-plunge-pressures-singh-as-economic-crisis-deepens
"India’s biggest two-day stock market slide since 2009, surging bond yields and a plunge in the rupee to a record low are pressuring officials for fresh steps to stem capital outflows and support the economy.
The S&P BSE Sensex (SENSEX) Index sank 1.6 percent at the close in Mumbai, extending the 4 percent loss on Aug. 16. The rupee tumbled 2.3 percent against the dollar, touching an all-time low of 63.23. The yield on the government bond due May 2023 rose 34 basis points to 9.24 percent, the highest on a 10-year note since 2008.
The market rout underscores the failure of months of measures to contain outflows, from higher interest rates to gold import curbs. Foreigners sold a net $3 billion of Indian stocks and bonds in July as the slowest growth in a decade made Asia’s third-largest economy vulnerable to a pullout of funds from emerging markets, spurred by speculation the U.S. Federal Reserve will cool stimulus"- Bloomberg BusinessWeek
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Now in $ terms any crore rupee property is back to being 80 lakh property and so on.
continue discussion below
307 comments:
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aam aadmi said...
Maybe this is all temporary volatility, but it shows signs of serious stress in the system.
It's hardly temporary, we've had such a long bull run in the credit markets, why should the bear phase be temporary ?
http://www.moneycontrol.com/news/business/reversing-trend-axis-bank-hikes-base-rate-by-25-bps_937760.html
Interest rates have nowhere to go but up.
http://www.business-standard.com/article/opinion/broken-news-113081700763_1.html
The news industry is probably not a large employer, but the fact that advertising is slowing points to the distress in the economy.
Writing was on wall for quite some time.
Relatives have updated passports and renewed visas to escape pods in Dubai, Singapore and Hong Kong, just in case.
This news story is a metaphor for how crisis is caused and (mis)handled in India:
http://www.nytimes.com/2013/08/20/world/asia/train-kills-dozens-of-religious-pilgrims-in-india.html?_r=0
Just make the following substitutions in the story to get my prediction:
Economy = high speed train
Raghuram Rajan = train driver
Middle class = pilgrims on track
Poor = villagers
Government = railway and government officials (really no one can replace these blokes who're in a class of their own!)
Anti-corruption crusaders= firefighters, rescue workers
Scant respect for rules, merrymaking by all while going is good. When SHTF, fury is misdirected at some hapless scapegoat. Complete breakdown of law and order. Completely inept politicians and "senior" government officials calling for calm. In meantime, irreversible collateral damage has occurred.
Yep, all izz well...
To carry my analogy further:
Railway official Arunendra Kumar said the train was not supposed to halt at Dhamara Ghat and had been given clearance to pass through the station. However, some pilgrims waited on the tracks thinking they could stop the train, he said.
These masterpieces of devotion (GOD will stop this train) are like the die-hard RE and stock market bulls who continue to believe in rosy outcomes even when all signs indicate otherwise.
PS: Yes, unnecessary loss of any life (human or otherwise) is a tragedy. By the same token, a reduction in average human stupidity on this overpopulated planet is a blessing in the grand scheme of things.
Rupee futures at this time in NY are at 64.50.
I think the party is really over this time. There is nothing more GOI/RBI can do to keep the last 7-8 years of insanity going. Chickens have come to roost.
Rupee will be 65 this week and who knows as soon as the Federal Reserve announces its QE3 taper plan, another drop of 5 rupees.
Stock market may go down till 14K. RE will take time to fall but would eventually fall by almost 60% in the coming years.
Save your jobs and major layoffs are on the horizon.
A significant economic slowdown lasting at least five years is what India has to face.This would mean job losses in IT,Manfacturing,Engineering,Retail,Education etc.This will reduce consumption of all discretionary items.Housing is a purchase of a lifetime and will definitely be put off by many in this environment.I am of the view that crash will be very similar to Ireland,Spain etc ie rather abrupt as majority are speculative investors who will be all running for the exit at the same time.Even if they wanted to hold on it will not possible due to rising EMIs.It is time for the bears to rejoice and celebrate.Start making low ball offers and see how far that takes you.
Suresh
I switch on TV and I see analysts calling for a rate cut to save the rupee, what a joke.
I guess it's difficult to make someone see the reality if their job depends on not seeing it.
BTW Rupee at 64.
Are we missing a point here?
INR is down because investors are pulling out money from EM and putting it in US. Why? Because they hope that US economy will give them good returns than EM. If that is true then US economy will do good. Good US economy, more work to India and China. So better salaries to IT people. More costlier will be the commodities including RE. Hence, fall in INR will favor RE and overall economy.
What do you think?
More costlier will be the commodities including RE. Hence, fall in INR will favor RE and overall economy.
If all the money goes back from the emerging markets, there will be lot of pressure in their currencies in the short to medium term. But the moment this money floods the US markets, inflation will start rising there and eventually USD will be out of favour. It would be interesting to see how this plays out.
Those who think US economy is doing well should consider that from past 1 year, 10 year treasury yield have increased from 1.43 to 2.74. Since the entire US lives on debt, there will be increases in interest rates from credit card debt to car/home loans. US treasury bubble which is the biggest bubble today is bursting.. we will see the results in a few years to come.
Nails in the coffin.
http://profit.ndtv.com/news/your-money/article-home-loans-to-get-costlier-as-banks-start-increasing-rates-326032?pfrom=home-lateststories
Hence, fall in INR will favor RE and overall economy.
In theory it looks great. In practice, no country became great with weak currency. May be currency is just the egg not the chicken but in either case strong country == strong currency.
Hence, fall in INR will favor RE and overall economy.
By that logic indonesia,philippines etc must be booming because of their weak currency.
Well going by that logic Zimbabwe should have 100% GDP growth, the only place this can happen is inside an economists head.
This is why fall in INR was much needed. Now efficiency would return in the system to an extent. I wouldn't trust the NRIs rushing part of the news but for the companies setting up local units and stop importing, this is real push.
http://www.livemint.com/Money/H6UQn6cCZTWKgXvNtNhuTM/Firms-revive-plans-to-set-up-local-units-NRIs-rush-to-buy-p.html
Dollar value is going to reach 70 by the end of this year. Money is required for upcoming elections and this will help the UPA govt. Kill 2 birds with one stone. Some BJP backers are going to see hard time
Some BJP backers are going to see hard time
Really? So you're one of the useful idiots who actually believe in the charade...
20 minutes of critical thinking will cleanse your mind of such misconceptions.
Here's a couple of articles to get folks started:
http://www.rediff.com/news/report/interview-arun-shourie-on-the-real-meaning-of-the-radia-tapes1/20101201.htm
http://articles.timesofindia.indiatimes.com/2013-06-05/india/39763744_1_govindacharya-saffron-congress-bjp-jd
Can you hear the loud noise of the currency with the stupid symbol being flushed out in the toilet....Ever since they got the symbol which is supposed to represent strength, there is nothing but weakness
^^ Are you hinting that reverting the symbol would bring it back to 40-45 range!
With such brilliant minds, no wonder the country is destined for glory!
people in india have become really rich. they dont mind shelling out 150-200k USD for a rat hole in a s$$t place. no water, electricity or any semblance of road, traffic control, pollution control.. man india has truly progressed.
Checked latest move by RBI?
http://www.firstpost.com/politics/decoder-how-rupee-stocks-and-govt-gain-from-rbis-liquidity-infusion-1048791.html
They are trying to induce liquidity in system now. Till 2 days back they were trying to remove excess liquidity. PM, FM, and both RBI chiefs met and the policy changed.
How do you look at it?
Now, banks wont increase interest rates on loans. So no real stress for borrowers. US looking improving, at least today; so no job cuts in IT in near future at least. RE folks (read politicians) will be able to sustain at least till dec-jan. Then elections. RE crash will unfortunately be a dream.
What do you think?
Do you think RBI is the only source of liquidity?
And leashing liquidity can not be achieved without stoking the inflation higher.
So my thinking is - liquidity infuson is temporary while shitty fundamentals are permanent.
Checked latest move by RBI?
I think you will drown in information if you think about the implication of everyday actions, a lot of it is noise, the poster above is right, the fundamentals haven't changed.
We are looking at a long term bear market after years of bull run.
They are trying to induce liquidity in system now
That was bound to happen as the bond yields touched 9.5%. It's a vicious cycle now, decrease liquidity and interest rates increase, NPAs increase across the board and the banks fail. If you increase liquidity, rupee declines immediately but at least financial system is safer.
The Govt is trying to avoid diesel/petrol price hike and trying all crazy things. It's the end game now, checkmate is near ! People who funded real estate purchases with dollars, or politicians who transferred black money from Swiss Banks to put it in Indian real estate are screwed big time !
The question is how far the Rupee will fall before it stabilizes. All indicators point to 70 to 75 by the end of 2013. UPA govt is directly complicit in the weakening of currency , the reasons unknown . If BJP comes to power that is likely, the Rupee value will further decline to 100 mark.
In a country which is one of the poorest in the world, the demand for luxury cars like mercedez, bmw, rolceroyce, jaguars etc outstripd the production/import capacity. Apartments are prices $1 million and above. 75% of real estate buyers in UAE are from India. They shell out $1 million to 10 million to apartments and keep them locked for 6 months in a year. Highest spenders in Singapore are tourists from India. The list goes on.
One doesn't have to be an Einstein to know what is happening. In word it is CORRUPTION. 0.01% of the population is enjoying at the expense of the rest 99.99%
Now, say 'JAI HO' Bharat Mata ki jai
One doesn't have to be an Einstein to know what is happening. In word it is CORRUPTION.
I guess we need an Economics 101 class in the schools to teach people that it is incompetence rather than corruption that is responsible for today's state of affairs. Now a days it is fashionable to attribute every problem to the 500 odd people sitting in the Parliament. The answer lies in productivity and competence. If Indian people were spending lavishly without being productive, it was a bubble and it has no started bursting.
http://www.moneycontrol.com/news/real-estate/mumbai-mktmuch-better-shape-than-perceived-db-realty_939045.html#toptag
Dream on. Of course, you never ask a barber for a hair cut...blah..blah..blah
The answer lies in productivity and competence. If Indian people were spending lavishly without being productive, it was a bubble and it has no started bursting.
What part about 2G spectrum scam, coal gate scam, doctored defense contracts and unchecked loot of country's wealth into private pockets you do not understand?
Spouting off MBA jargon about productivity and competence make for good cocktail party conversation but do not change the fact that India has the least conducive environment for foreign companies who want to do business.
All companies pay bribes in India, but unlike Indian corporates, MNC officers can be prosecuted in their respective country of origin in Europe or US. Not to mention the PR harm to their carefully constructed brand and reputation.
Here's from the horses mouth:
More than half of the respondents surveyed agreed that it is the lack of will of corporate enterprises to obtain licenses and approvals the right way encourages bribery and corruption. Around 83% of the respondents felt that the recent spate of scams would negatively impact FDI inflows into the country.
The respondents represented a mix of Indian enterprises with domestic operations, as well as Indian and foreign multinationals in the US and the UK, whose annual incomes range from Rs 5,000 crore to Rs 10,000 crore. The principal respondents were from various departments internal audit & finance, legal & compliance, and vigilance & risk management from banking and financial service institutions, technology, media and entertainment, and manufacturing sectors.
http://timesofindia.indiatimes.com/business/india-business/India-suffered-Rs-36400-cr-loss-due-to-corruption-Report/articleshow/21252592.cms
What part about 2G spectrum scam, coal gate scam, doctored defense contracts and unchecked loot of country's wealth into private pockets you do not understand?
You know how much were the kickbacks payed in 2G spectrum scam - just 2500 cr rupees in comparison to projected loss of revenues. The amount of loss as per the TOI report is a small fraction of GDP. FDI has always been coming in this country irrespective of corruption. And now suddenly if it stops coming we start finding a scapegoat such as corruption.
I have observed it in depth, corruption is nothing but the result of incompetence, pure and simple. It is short sightedness, insecurity, selfishness, lack of belief in one self, evasion of duty due to incompetence, which together contributes to corruption. And are the 500 politicians sitting in Parliament only corrupt and the rest of the country is honest. If you introspect, you will find corruption ingrained in most of Indians. Make no mistake, if Indians would have been competent, corruption would have been minimal.
To add to the arguments here is an interesting observation.
http://www.livemint.com/Money/H6UQn6cCZTWKgXvNtNhuTM/Firms-revive-plans-to-set-up-local-units-NRIs-rush-to-buy-p.html
"Zicom Electronic Security Systems Ltd, an electronic security provider, is considering an option of setting up a factory in Himachal Pradesh. “We import a lot of products and are impacted by the rupee’s depreciation. Earlier, we did think of an option to manufacture locally, but lack of support from government and local rules acted as deterrents,” managing director and chief executive Pramoud Rao said. “However, given the kind of volatility rupee is seeing now, we are reviving our plans to set up a factory in Himachal.”
See how Zicom changes tone, are they now getting Govt support or the local rules have changed which deterred them earlier from setting up a local plant than importing ? The only thing that is at play is pure economics and dollar-rupee rate. Now when they are finding it economical to produce rather than import, they forgot everything - corruption, lack of support, ...
I have noticed that social pressures and cultural differences in running organizations hurt/help both competence and productivity -
-IT sector -
the IT sector has done well mainly because it adopted American/Japanese work ethic strictly (at least in early days)
You have 40-45 hours work week - with 21 days vacation - and 9 paid holidays - done.
Lunch time is mostly fixed. When deadlines arrive - people will put extra effort and do "what it takes" to get the product/deliverable out.
Layoffs are common - unions arent
- Govt sector/PSU -
1) If you compare that to Indian state run enterprises/govt offices/PSU - they have 6 day work week for 3 weeks a month and 1 week with 5 day work week.
However no one does anything till 10 am and then go to lunch. In the more smarter PSUs there is unnecessary red tape and no efficiency.
If you ask for a soft copy of a document the peon will print the document in one room - take the printout to other room and scan it and give you scanned copy.
(I keep out the mai-baap behavior, corruption, wasteful expense and
Thats how entire public sector works in India. People know they can never be fired, so deadlines dont matter unless india is at war with Pakistan or something.
- non-IT Private sector -
Here the advanced manufacturing and automation industries including electronics try to emulate IT sector - they are doing fine. The regular manufacturing of other goods (includes builders) has issues with labor laws, trade unions, poor quality, tax evasion and the same logjam of government approvals for the sake of approval, bureaucracy etc.
Hiring and firing is hard if you have to deal with trade unions & archaic labor laws.
-- the unorganized sector--
These are the builders & construction industry, merchant shops, restaurants, agro and small scale industries, maids, istriwallah, dabbawallah, rickshawwallah etc -
IMHO over the years these sectors have become smart and efficient but operate within the demand, supply and government oversight / police tyranny/goon slumlord's diktat.
So it comes down to the fact that India needs better labor laws for private industries and better efficiency in the government. That alone can solve the productivity problem on a long term basis.
Sadly high productivity without growth will mean growing Joblessness as seen in Europe.
Or might lead to zero growth like Japan.
Manmohan Singh had all the desire to do it in 10 years but he didnt do jack. That is a different story.
I have observed it in depth, corruption is nothing but the result of incompetence, pure and simple.
Classic case of putting cart before horse.
Corruption breeds incompetence. Not the other way around. Corruption ensures the incompetent are promoted and the competent are punished. Take a look at Ashok Khemka, Durga Shakti, for a sampling of what happens to competent folks operating in a corrupt system.
On the other hand, in a transparent (non-corrupt) regime, the incompetent are weeded out and fired. The corrupt are prosecuted. This ensures the competent people can not only do their damn jobs but excel.
Even in private sector where bosses demand favors and bribes from underlings when making hire or promotion decisions, good luck being a competent person in such an enterprise. Infact, no competent person would associate with such an organization unless s/he was truly desperate.
Coming back to business, a few years ago there was news report about how a competent foreign infrastructure firm had given up and had to wind down it's India operations after not winning a single contract despite bidding on countless tenders in 2+ years.
Reason was pure and simple, they refused to pay any bribes. These businesses operate the world over and didn't see it fit to compromise their ethics to make money. Ultimate loss is to Indian people.
I can't get to the news article now but they were reporting it in the context of the delhi metro bridge collapse.
There would be hundreds of such top notch businesses who simply say "no, thank you" when they encounter our corrupt system.
And the rest who do bend rules will have their own breaking points.
the kickbacks payed in 2G spectrum scam - just 2500 cr rupees
Please don't add insult to injury. No need to justify greed and thievery with contorted arguments.
And are the 500 politicians sitting in Parliament only corrupt and the rest of the country is honest.
Complete straw man. But to humor you, 500 sitting in parliament should be blemish free. They have risen to leadership positions so the system (if it was working) should have picked the cream of the crop, not the lowest common denominator.
Even if I grant you that MOST Indians are corrupt (which I don't believe for a second) we should have 500 out of 1.2 billion who are honest and ethical and a system in place which will help surface the best of the best if we are to indeed make progress.
If you introspect, you will find corruption ingrained in most of Indians.
Simple test. Most Indians when they immigrate to Western countries, do not pay bribes or engage in unethical activities. In fact, in many Western societies, Indians are viewed as a "model" community.
Even in India, many folks suffer great consequences, indeed entire communities of people pay a tremendous price, simply for not compromising on their ethics.
So corruption is not ingrained in Indians. That's just a scapegoat for those looking to justify their own misdeeds.
Another example of corruption in our government destroying a competent organization (i.e. Indian defense forces)
Do you think any ethical individual will be motivated to enlist and put his life on the line if he is being led by corrupt generals who profit from shady deals and give away secrets for a night of booze and hookers?
What type of individual will the Indian army attract in a few years once all it's top brass has been compromised?
Answer: The same type that is currently attracted to politics. They will all join for a chance at raping the country instead of defending it!
http://week.manoramaonline.com/cgi-bin/MMOnline.dll/portal/ep/theWeekContent.do?channelId=&contentId=14744876&catId=
RBI and government are working in tandem to rape the real savers of economy. To help a handful of people who get benefited from the banking system, they keep the entire Indian population to ransom by resorting to keep the interest rate artificially low for extended period for may be about 5 years now.
The system is screaming for rate hike but RBI is resisting the temptation to support the people who are in power. Also the government is successful in creating a section in media and as well as general public who can support rate cut. Most of them are idiots and few of them are interested parties who think that their real estate 'investment' will not lose value if the rates are cut. How pity?
Now yesterday RBI tried something and Mangoman thought that markets may rally for 1-3 days. But markets ( how cunning this animal is..) gave it right back at RBI and fell for about 2%. so now what?
Rupee is touching new low everyday. This is kind of record of sorts.
You have to read foreign media about the real damage to Indian economy.
wall street journal, economist, reuters etc are rapping india down. And many of them in the opinion that India deserve a downgrade. So what? WE WANT TO SAVE OUR REAL ESTATE GOONS. LET COUNTRY GOES TO HELL. am I right?
We don't care what the world says. India is different. We always tell US has double standards but we don't. We want our RE bubble very high because India is shining and will become a superpower in the next 5 years.
I read a interesting piece of view in Economic Times editorial few days back.After shedding crocodile tears about the fall in Indian currency in few sentences the newspapers says that
' we knew about this (collapse of rupee and markets) much earlier. But not to make people panic we did not write this in our newspaper. we have ethics blah..blah..blah..'
My comments
Most idiotic statement has come from times. We know times is interested party in propping up the bubble . The own artha property and are neck deep into real estate business also. Be informed that this newspaper always paints a rosy picture about the economy and had a huge role in propping up the real estate bubble in the country. Many insuspecting news readers would have fell for the advertisements and recommendations given by the paper.
Remember with every monetary easing, this newspaper is used to write 'your home loan rate is coming down' even though the benefits are not passed on by banks. Now they are taking credit on both sides. There is a saying in tamil.
பேய் ஆட்சி செய்தால் பிணந்தின்னும் சாத்திரங்கள்...
Probably they are a part of the scamsters.
The same was happening in US.
Media kept painting rosy picture because owners of these outlets knew where money was coming from (RE agents and homebuilders bought a lot of ad space during the US bubble)
This is also the same reason why you will never hear a peep out of any news outlet against the corporates who are working hand-in-glove with our dear leaders in looting the nation.
There are plenty of reporters with ideals but there is heavy censorship at the editorial and managerial level.
At the audience level, the attention span has been twittered away to 140 words or less. I know of relatives who subscribe and religiously read 3 different publications and watch the news diligently and yet are completely ignorant if not outright brainwashed about so many important subjects. They've given up on questioning motives, doing independent research, even applying basic logic. And these are non-ideological and highly educated successful professionals. No wonder the average Joe doesn't have a clue!
http://mrzine.monthlyreview.org/2013/amr160813.html
On January 3 2012, the Mukesh Ambani-led Reliance Industries Limited (RIL) -- India's biggest privately-owned corporate entity with a turnover of Rs. 2,58,651 crore in the financial year that ended on March 31, 2011 -- announced that it was entering into a complex, multi-layered financial arrangement that involved selling of its interests in the Andhra Pradesh-based Eenadu group founded by Ramoji Rao to the Network 18 group headed by Raghav Bahl and also funding the latter through a rights issue of shares. The deal will make the combined conglomerate India's biggest media group, according to Bahl -- bigger than media groups such as STAR controlled by Rupert Murdoch, and BCCL controlled by the Jain family.
On May 19, 2012, the Aditya Birla group announced that it had acquired a 27.5 per cent stake in Living Media India Limited, a company headed by Aroon Purie. Living Media acts as a holding company and also owns 57.46 per cent in TV Today Network, the listed company that controls the group's television channels (Aaj Tak and Headlines Today) and a host of publications (including India Today).
On December 21, 2012, Oswal Green Tech, formerly Oswal Chemicals & Fertilizers, acquired a 14.17 per cent shareholding in New Delhi Television in two separate block deals from the investment arms of Merrill Lynch and Nomura Capital.
According to research conducted by Dilip Mandal and R. Anuradha, published in Media Ethics (Oxford University Press, 2011), the boards of directors of a number of media companies now include (or have included in the past) representatives of big corporate entities that are advertisers.
So Mangoman. What is it that you typed in tamil. Can you please explain it to us non Tamilians
http://www.youtube.com/watch?v=2IuVnr5ahUo
Dekho, suno, samjho, phir jao aur padho...
Watch, listen, understand, then go and read...
500 sitting in parliament should be blemish free. They have risen to leadership positions so the system (if it was working) should have picked the cream of the crop, not the lowest common denominator.
The incompetent will always choose the lowest common denominator, it's democracy. Imagine if there was democracy in private sector and the CEOs were choosen by employees, then Apple, Google, General Electric,...all these companies would have closed very early.
About corruption...
Yes it's a problem, but it's not the only problem, it's a democracy and that's how the system works. Talking about corruption all the time is a distraction, there are multiple issues within the system, for example no one talks about the fact that the structure itself is too big or that democracy doesn't scale up infinitely, a system designed for 30 crore people won't work for 150 crore people or that we are consuming too much. It's just corruption all the time.
Politicians are just ordinary people who have risen to the top so what they do isn't so different from what you and I'd do in their position, they also have pressures, money to recover etc etc.
My landlord is a small time politician and he's not a bad chap, he helps people in need. He tells me that without throwing money around you can't win elections and unless you 'recover' that money through the system you can't win the next election. So it's a vicious cycle.
Well that's the big picture and pondering about it only gives a headache, the problem comes because media has created this version of a utopia which doesn't exist, comparisons with Switzerland don't help either.
Long story short, we are in for a big correction. Diesel under-recovery has shot up to Rs 13-14/Liter and there is no way that the government can avoid raising prices now. Once prices go up consumption will come down automatically and rupee will stabilize but it will also drag the economy down with it. Interest rates will probably have to go up by 2-3% in short term and maybe more in the long term.
Aam Admi you are right.All the natural forces like inflation,low growth and now the currency collapse have aligned themselves to make this correction invetiable now.This correction is much needed for the poor people in the country.It will make the country more effcient,hardworking and less corrupt
Regards
suresh
@Above
Yes it is, and the faster you adjust your expectations to future the better it is for your mental health.
See this link
http://www.moneycontrol.com/news/business/jsw-steel-to-hike-price-by-4-6-as-coal-gets-costlier_939339.html
This is just one of the many price hikes to come, it will ripple through the economy, but will prices rise indefinitely, no, there's something called a negative feedback.
Very interesting thread. One factor overlooked in these thread is the role of 'Hawala' in rupee slide. Seeing the situation, the parallel underground banks have been busy buying Rupees for as low as 68-72 per dollar and crediting their customers accounts in certain countries . The traded rupees are eventually will be invested in real estate and a price rise will be seen in the near future. I wont be surprised that 10000 sq ft current rated flat would fetch 15000 in 6-12 months time . Builders are plush with funds. It is you and I are going to be in the receiving end
On a hindsight, Rupia or Rupee should be pegged to 100 for a dollar. This will make bank tellers and foreign currency dealers life easy as they need not use calculator.
Gamapati bappa Maurya
>> I wont be surprised that 10000 sq ft current rated flat would fetch 15000 in 6-12 months time . Builders are plush with funds
What makes you think that a similar hawala transaction didn't happen at much lower rates?
They're plush with funds and still the major builders are defaulting on loans and interest payment.
@Anonymous 5:26
What the earlier guy said was black money. To pay repay the loan installments to the bank, builders need accounted money or white money, whatever you call it. It takes time for them to turn black into white. In other worls, the default business is just a gimmick. Bank guys are as much involved as builders, money lenders in this racket.
Interesting stuff.
http://www.firstpost.com/economy/rupee-hawala-link-find-out-who-will-rule-india-next-1052137.html
Seems like it's all planned. Declare the election, let congo win. Then please stop sucking blood of mango man for 4 more years.
What do you think?
RBI allowed banks not to make provisions for restructured loans for infrastructure loans. This along with tweaking in the bond loss accounting saved more than 1 Lakh crore loss in Indian banking industry this quarter alone
Apparently this is done to show(prop) up the bank balance sheets.
Shame on you guys. Why not removing the prudential accounting norms altogether?
The stuff I typed in tamil can be translated into ' a lawless country'
http://www.business-standard.com/article/finance/hdfc-icici-bank-hike-lending-rates-by-25-bps-each-113082200730_1.html
In 1947 when India became independent, the Rupee rate was
$1 = 1 Indian Rupee
In 2013, after 66 years of independent :
$1 = 66 Indian rupees
Amazing, but it is true
In 2013, after 66 years of independent
When rupee was at 61, I thought 66 - 5 = 61 where 5 years was NDA rule. Now that equation is invalidated. Hopefully this equation will be broken too.
Btw, you know rupee was 2 dollars in 1937 !
Until 1989 US$ was not the world's FOREX reserve currency unit. After WW2 through the cold war GBP, German Deutschmark, Swiss Franc and Japanese Yen had equal weightage as storage of wealth.
After the Soviet collapse and Japan meltdown, people had no faith other than US$ because US is the sole superpower on earth still (in purely Military terms).
So any comparison pre-1989 is worthless
Seems like NRI's are making a beeline for Indian Realty. :))
http://timesofindia.indiatimes.com/business/india-business/Realtors-expect-bigger-play-from-expats/articleshow/21990988.cms
Realtors are expecting a 35% increase in enquiries from expatriates this year, says a study by the Associated Chamber of Commerce and Industry of India ( ASSOCHAM).
^^^ HAHAHAHAHA...
Realtors are expecting a 35% increase in enquiries from expatriates this year, says a study by the Associated Chamber of Commerce and Industry of India ( ASSOCHAM).
पूछने में कौन सा टैक्स लगता है भाई?
I think rupee will reach till 70 in future as per the condition.
The incompetent will always choose the lowest common denominator, it's democracy. Imagine if there was democracy in private sector and the CEOs were choosen by employees, then Apple, Google, General Electric,...all these companies would have closed very early.
Total bullshit again. All corporations die. Countries never (unless they are run as corporations) Country cannot be run on personal profit motive. If leaders think they can become millionaires and billionaires by leading the country, that country is truly screwed.
What do you say about Enron, WorldCom, Satyam, All the bailed out Banks and thousands of other examples the world over. Were these democracies? Run by incompetent people? Or were they simply the victim of corrupt leadership?
Even your flawed comparison does not stand the test of time.
Mumbai builder cooks up fake railway station, bridge to sell property
Buyers beware: Builders are getting too inventive to sell their projects to homebuyers in this slump of a realty market.
Since 2009, Lodha developer has been selling Casa Bella, its project near the Kalyan-Shil Road in Dombivli on two prime claims: that it is close to the railway station of Usarghar and that it is connected with a foot over-bridge.
It turns out both are figments of the builder's profit-driven imagination. Neither is there a railway station by the name of Usarghar, nor any such bridge for pedestrians.
Total bullshit again. All corporations die. Countries never
What are you trying to debate here - you mean to imply India is poor and third world whereas the population is still very competent ? The govt is incompetent whereas the populace is competent and it's still possible in democracy ? And I never made a one to one comparison between corporations and countries - all I said was the smart corporations we know of today wouldn't have been known today were they run by their employees ! I never said there is one to one relationship between corporations and countries. Countries have physical boundaries and corporations don't, corporations change headquarters, countries don't....one can write 100s of differences.
Never mind, all you need to be smart in data collection - unfortunately not many people have this skill in today's world. Three examples that would help you :
1. In 2009 people said congress won with heavy votes because of muslim & rural class votes. I took time to do a survey and shockingly found that most of the middle class people I know in Delhi, Haryana, Up all voted for congress. BJP lost *so badly* because of these middle class people, not muslim & rural votes.
2. As claimed by many that RE bubble in India is because of black money, politicians/ builders nexus. I find that it is only the middle class & NRI population that is heavily invested in this asset class. All my previous and present landlords are middle class. Without this middle class there can be no bubble. If anyone disagrees with this, I need to check his/her IQ level.
3. If you were to make assessment of competence of Indian population, all you need is to interact with locals where ever you travel. I have done my bit - I have seen taxi driver in US talking about capitalism, socialism, and how bank bailouts by FED is against capitalism. Another Taxi driver in US talking about books read by Deepak Chopra. A taxi driver in Singapore talking about laws of permanent residency in Singapore, how Singapore is reclaiming land from the sea and the technology used in building high rise...you need to look no further to deduce why their currencies are stronger than ours !
What do you say about Enron, WorldCom, Satyam
Let me continue my post to answer your question. It's actually a good question so lets take the case of Satyam . I would say his founder was incompetent in comparison to founders of peer companies like Infosys, Wipro,...No competent person on this earth chooses path of corruption for quicker gains. The only way for him to create more wealth was therefore corruption. An incompetent person chooses corruption because he knows he can not legally acquire so much wealth !
@Mumbai builder cooks up fake railway station, bridge to sell property
Looks like they are finally catching up to Pune builders.
Talk to any sales agent in Pune, all kinds of bullshit will be thrown in. Key word will be "proposed". Proposed road, school, mall, railway station, golf course and what not.
When you visit the site, it will be in middle of nowhere. Still people are booking. There is no logic bhai.
@ "Proposed road, school, mall, railway station, golf course and what not."
Bangalore is worse. We have 'proposed water supply !' .
Some folks fell for this and have been waiting for the proposed (Kaveri) water supply for years now.
I have a bridge to sell.. Anyone interested...
Any price corrections, Any sign of builders blinking? Or are the bears getting excited over nothing again?
"Any price corrections, Any sign of builders blinking? Or are the bears getting excited over nothing again?"
Price corrections are already there...in Dollars or Euros. Nothing gets its price corrected in INR, not even cow poop. The price of cow poop (denominated in INR) has been marching relentlessly higher since independence.
Those whose lives may be affected by rupee exchange rate, please note that the 'up and down' game played by the govt is for people to absorb any shock slowly that they get it accustomed to it when Rupee reaches or breacges 70 mark. The govt has decided to support the rupee by hook or crook if the benchmark of 70 is reached. The 70 will remain long time to come but once BJP comes to power, that is likely, all hell will break loose and Indian rupee may not be better of than Pak rupee. the rising inflation , BJP may last a little longer than muslim brotherhood in egypt but once the govt changes we will be back to square one, that is at the mercy of crooked industrialists and politician .
Jai Jind
Price corrections are already there...in Dollars or Euros.
Even in INR terms RE is correcting though selectively.
Surprisingly for some, prices of floors in Delhi have corrected which had the maximum black component while areas like Gurgaon where there was little black involved, prices are still firm.
That demolishes the 'black-money-will-hold-RE-up' theory.
Additionally, RE bulls are now at least acknowledging that market is not booming. That's a start.
The market is stagnant in large parts of Bangalore, what do you call it if inflation goes up but the value of something does not.
I am seeing a lot of ads for ready to move flats, something I didn't see 5-6 years ago.
Anon at 7:33 PM
I have a proposed bridge to sell. Anyone interested?
Indian real estate is at the stand off phase.In the stand off phase buyers are aware that prices will drop so are not willing to commit but sellers have not come to grips withe reality a sale can not happen at their expected price.I expect this to go on for at least a year in the abscence of any black swan event.Sellers will go into despair at some point of time and will start to wither.With majority of the owners being in the investor category,the stampede for exit will happen when least expected.
who cares what the bottom 99% make, top 1 % will still make huge $$$$$. Indian real estate not going to correct much. India still has 50-100 billionaires, after the recent hair cut and about 150,000 millionaires and climbing. 400,000 million make less than 2 dollars a day, hahahaha, and they vote these idiots in. It is the chicken or the egg.
http://www.business-standard.com/article/opinion/back-to-the-past-not-so-easy-this-time-113082500475_1.html
Rupee not undervalued, government 'brain-damaged': Marc Faber
"If someone says that rupee is undervalued we have to put in the proper perspective, maybe in some sectors of the economy the rupee is undervalued but I don't think the rupee is undervalued if you look at the prices of high-end luxury Mumbai properties," Mr Faber said.
Mumbai property prices are amongst the highest in world, he added.
I support Food Security Bill.
We should appreciate congress for giving back atleast a fraction of money they have taken from the general public. General public is looted by government by the artificial inflation engineered by RBI and government to support a handful of corporates and real estate mafia.
I hate the corporates who oppose the food bill. When this parasites got stimulus package of 6 Lakh crore of Lehmann collapse they did not complain. When common man asks his due these idiots are shouting from roof top.
Feel like vomiting when Kiran Mazumdar Shaw speaks ethics on behalf of Corporates
^^ Elites are digging their own grave. I say get out of the way and let them dig deeper.
We should appreciate congress for giving back atleast a fraction of money they have taken from the general public
And what about me who have with difficulty come up to being a middle class person, who pays 30% tax + 14.5% Vat + High fuel prices + Inflation tax + Hafta. Add to it, I am forced to take large loans just to afford to roof over my head. And when I get fired from my job, neither I get unemployment insurance, nor social security or medical insurance on retirement.
Rupee touched 66 today, interesting to see how long the govt can afford oil subsidies, as I understand diesel under recovery is close to Rs 13-15/Liter and LPG is 500/cylinder. There is also immense pressure on the NG and Coal front.
There are two options in front of the govt, desist from a price hike till the next election, in which case I see diesel and petrol shortages and a bankrupt exchequer as the OMC's bleed internally and a price hike right now in which case the economy will nosedive immediately. Either way this charade cannot last more than a year.
There are very fine blog and post.Victory We are a well accommodation society that has been residential totally for the people who aspire to high classify living. Victory We project which developed by Victory Infratech Pvt Ltd. This is a fully comfortable housing apartments at an affordable price. People here can benefit from with different features of living. The project provides all fulfillment and provide happiness residential society with natural form. The project located in Sector 75 A where every important destination of Delhi NCR. Victory We is offering 1/2/3/4 Bhk living apartment. For more details contact to property frames.
Rupee touched 66 today, interesting to see how long the govt can afford oil subsidies, as I understand diesel under recovery is close to Rs 13-15/Liter and LPG is 500/cylinder. There is also immense pressure on the NG and Coal front.
These are crazy times, I think the main cause of today's problems, of which housing bubble is just a symptom, has manifested. Lack of productivity, excess money printing and passing money through various entitlement schemes, is the cause of bubble. I see the rupee at 100/- in a few years at most. Surprisingly or not surprisingly, Gold made a new high. Lot of pain ahead in the system and as you pointed out there will be supply disruptions in oil. People will be hiding Gold fearing Govt actions. Would be interesting to see how housing pans out in such a scenario, but that is now the least interesting part. Because people's rupee savings have been already wiped out with dollar at 66. The whole economic bubble will collapse ! Everyone who makes dollars(including me and other friends) are fearful of rupee and with capital controls in place we have no option other than emigrating.
As usual our Govt takes the most unproductive shortcuts :
http://blogs.wsj.com/indiarealtime/2013/08/26/can-temple-gold-help-the-rupee/
Here it comes...
http://www.moneycontrol.com/news/cnbc-tv18-comments/oil-ministry-mulls-one-time-diesel-price-hike-by-rs-5litre_941315.html
I think this is just an interest rate hike by proxy....people will neither spend nor invest money, they will just hoard as much of it as possible. Liquidity is going to disappear.
REBear Bhai,
Emigrate where ? Timbaktu ? It is easier said than done. Thanks to gang rapes in India, all Indians in western eyes are viewed gang rapists, crooked and not to be trusted in commerce. If you go there with lot of money, they f*ck you without remorse until your money is over as in their eyes you are a criminal and deserved to be screwed. east or West, India is the best for us.
Will seem inevitable now.
http://economictimes.indiatimes.com/markets/real-estate/news/housing-prices-see-downward-trends-in-22-major-cities-national-housing-bank/articleshow/22098730.cms
Prices mostly flat or slightly down over the last quarter. If the economic troubles continue, expect the fall to accelerate.
No amount of black money, govt manipulation, etc can hold up a overvalued market for ever. As Victor Hugo said (in a different context) - 'No force on earth can stop an idea whose time has come' .
Mean reversion is here. Whether it will be in nominal terms or real terms remains to be seen.
@ saurabh kumar
Growing RE ads on this site shows , how desperate builders to find the buyers !
Emigrate where ? Timbaktu ? It is easier said than done.
Singapore, Mauritius, Dominica, Lithuania, Canada, Ireland, and many more. You are safe in almost all of these places.
One thing is certain. NRIs are not going Flock the real estate market in a hurry, as they expect Rupee value is going to steadily erode. Current events like the middle east war can take the oil price to $150-$200 straining the economy thus making the Rupee more vulnerable. UPA govt may take drastic measures to hold on inflation as the election is fast approaching. I dont think, they are thinking or planning beyond the election date. The resultant effect will be massive inflation, Rupee going rock bottom and probably some sort of civil strife. There could be a scenario where the owners of unoccupied flats would be forced to sell them to the govt. This has happened before in 1970s and it wont be a surprise that it is going to happen again. Same scenario like the share market crash.
@Pawan
Prices mostly flat or slightly down over the last quarter. If the economic troubles continue, expect the fall to accelerate.
It would be interesting to see how much, if at all, there is a fall in RE prices measured in INR with a drastic fall in INR and Gold prices all time high. I can clearly see savers punished harshly with a sudden fall in rupee. For those who want to spend in INR, inflation would catch up with lag. And for those who want to spend in dollars now, they have been badly bitten.
Having said that there is no obvious way to judge if and how Indian real estate is a hedge to falling rupee.
The damage to the rupee is a self inflicted wound. If India had focused on job-growth, manufacturing, new cities and top notch infrastructure in the last 10 years, things would be different.
I don't blame the government alone because the Indian public reelected them in 2009. If you hadnt voted for UPA in 2009 you should have quietly moved your assets to USD/CHF or gold/land etc.
Else you are a going to suffer - All people with savings accounts getting 8%-9% have still lost 50% of their value in US$ terms. so suck it savers.
Real Estate is like a consolation prize in a losing economic battle. Countless times we have discussed on how scarcity of housing is artificially created by the UPA govt by curtailing supply and pricing out land from common buyers.
Low interest regime is never going to return to India even if we face a lost decade of stagnation for fear of inflation.
And without low interest there will never be growth.
Whatever good was done from 2001 to 2005/06 has been lost in the last decade.
http://www.theguardian.com/commentisfree/2013/aug/26/india-debt-bubble-boom-bust-pattern
Prices of Indian RE have to correct to their true (real) market value one way or the other. Either they correct through a decline in nominal values or the currency has to fall hard enough to make the actual value of the property reasonable in USD or EUR terms.
It is not sustainable for a poor country like India to have cities like Chennai with house prices higher than London, New York or Tokyo. Those cities are global centres of finance and commerce with world class art, entertainment, educational, tranportation and health facilities that Indian cities possibly can't shake a candle at.
A luxury 2BHK in a nice flat in a posh neighborhood in an Indian city should not cost more than US$150,000 (max). A "normal" flat should not cost more than US$75,000, again MAX. Once prices adjust to those levels (either through currency depreciation or through a decline in nominal prices), I might get interested. Otherwise, Indian RE is still too way too pricey given all the hassles associated with buying, maintaining and selling Indian RE.
Please update the headline of the article to It's almost Rs 68 now
@Anon
Don't worry RE will correct both in Dollar as well as Rupee terms, the economy does not operate in a vacuum.
The current depreciation is overdone because we are not seeing the effects of the depreciation in terms of price rise in essential goods. There is a small lag in there. I expect the full impact of this depreciation to hit us in 8-12 months. Once that happens consumption will tank and RE will correct in Rupee terms as well.
Don't worry RE will correct both in Dollar as well as Rupee terms, the economy does not operate in a vacuum.
Well, I have been constructing my house past 1 year which is close to completion, but I can say the raw material prices have increased by at least 15% and most of it from past 1 month. We will watch for the effect of Rupee depreciation on demand, but with energy prices shooting up not sure whether any of the input costs will come down.
@GSM
Well no raw material prices won't come down and neither will labor but the value of RE has a lot of speculative component, if I were to hazard a guess I'd say 40-50% of it is speculative, which is why a flat in Mumbai costs so much while one in Kolkata costs so less, it's not like flats in Mumbai are made with granite.
It's the speculative portion which will come down significantly.
Spot on aam madmi.You nailed it correctly.It basically boils down to speculative value of land which is bulk of the cost of housing.This will certainly go down once the music stops(or rather has already stopped).
The building cost can only go up from here.
We are seeing the results of inflation already. One of my friend bought an under-construction property in 2009 for 1 Cr. The builder is now asking for another 10L before handing over the possession. After all someone has to pay the inflated cost.
What are the debt slaves and kool-aid drinkers to do when their cash outflow starts to exceed their EMI payments. I foresee a tremendous increase in foreclosed properties in the future.
NHB Residex shows residential index down across the board, save for few markets
http://nhb.org.in/Residex/Data&Graphs.php
Commerce minister Anand Sharma said there was no reason for panic.Challenges are there but our macro fundamentals are strong, Anand Sharma said. There are some signs of recovery across the globe and that gives us hope that things will also improve in India
WHAT A BULLSHIT. The oil prices are expected to skyrocket due to middle east war and No one in the right mind is going to invest India, the govt will be forced to gig into the reserve and adwindling asset as it is, is not going to last . Then what ?
The only way out is to rope in the black market guys, gold control, some India gandhi measures like those taken in emergency, totally cut foreign pleasure tours etc etc. Even then, we are too deep in the shit and no light is seen at the end of this dark tunnel
The only way out is to rope in the black market guys, gold control, some India gandhi measures like those taken in emergency, totally cut foreign pleasure tours etc etc.
Typical Indian way of solving problem - protectionism, insecurity, short sightedness. That is why I have no hope for this country. Problem with India is not Govt, problem of India is Indians and their way of thinking.
Anonymous 3.25
What are your suggestions to rope in the inflation. Common man in India (99% of population) isn't interested rupee-dollar equation. He is more worried about Roti-Kapda-Makan. This blog essentially deals with the subject 'MAKAN' . Do you have any constructive suggestions or are you one of those feeling proud that India too has billionaires/millionaires just like the west, and majority population is fool and desrve no roof on their head
What are your suggestions to rope in the inflation.
Central bank should raise rates and control money supply. Govt should contain fiscal and current a/c deficit. Nothing much in the hands of people.
This blog essentially deals with the subject 'MAKAN' .
No, this blog is about cause of housing bubble, its consequences, & effects of bubble burst. It has no objective to think of ways to provide affordable housing to everyone.
Do you have any constructive suggestions or are you one of those feeling proud that India too has billionaires/millionaires
There is no free lunch, plan & simple.
http://www.business-standard.com/article/economy-policy/is-real-estate-next-in-line-to-collapse-113082800322_1.html
I'm afraid there's a lot of optimism (or pessimism - depending on your perspective) on this board.
I will tell you exactly how events will play out over the next month. The Bernank will soon (perhaps as early as next week) come out and say whatever he says when the markets are tanking. He will say......that he will print more money (what else did you expect, this is the Bernank, this is all he knows how to do) - or rather in this case, there he will not stop printing money, i.e. no tapering or very limited tapering (say 80 billion instead of 85 billion, as though that makes a BIG difference). Once the announcement is made, the markets will stop falling and the hot money will flee once again back into emerging markets in desperate search of yield (i.e. exactly the same play book that has transpired over the past 4 years). Bonds will go up in the emerging markets, yields will compress and asset prices will stabilize.
I will go out and make a bold prediction here: INR will be at 60 or less before the end of October. As for RE, any dent on nominal prices will not be anything more than just that: nominal, percentage declines in the low single-digits.
Sorry to be the one to switch on the lights, stop the music and tell everyone to go home. The party is over.
Yes, it was fun while it lasted.
I will go out and make a bold prediction here: INR will be at 60 or less before the end of October
The way it is falling quickly indicates speculative trading which will be unwound at some point. So recovery will also be quick. Having said that if it comes to 60, I will be the first one to take my money out of India through LRS.
And yes, FED will never stop printing money, instead they will have to print more to serve the debt. One day, USD will see the same fate what INR is seeing today.
Bernanke retires next month. He wanted to get out before the next collapse with good pension - so it's Larry Summers' problem to deal with US deficit.
Interestingly US consumers are buying only essentials like homes and cars and no more unnecessary stuff.
I often see Maserati and Porsche owners buying cheap car accessories in Walmart, Costco and even Big Lots.
If the richest people aren't spending it only means that Americans have become extra cautious in the last 5-6 years.
Given that US is still the worlds topmost consumer - I don't see economic activity slow down than what it is now. It will keep fluctuating.
Earlier I was worried about a lost decade for the entire world, it seems less likely now.
I predict prolonged wind down to mean for all superleveraged asset classes.
http://www.business-standard.com/article/opinion/restoring-credibility-113082801101_1.html
The begging bowl (to the IMF) may soon be needed. Will this govt do it or will they delay it just until after the next election ? Possibly some other FinMin may have to bear the humiliation then.
The begging bowl (to the IMF) may soon be needed
IMF, or any other bailing institution, would first ask for reducing deficit by cancelling food security bill, etc.
I will go out and make a bold prediction here: INR will be at 60 or less before the end of October!!!!!!!!!!
Based on what ? The economy is in bad shape. Gavt doesn't want to take steps to curtail spending for fear of upsetting the population when elections are close. If US attacks syria or Iran, oil prices may reach $200. Hawala has been resurrected and money remittances from banking channels has seen a drop of 10% in just 3 months.
I will go out and make a counter prediction here: INR will be at 80 or more before the end of of this year
"A Business Standard report points out that of the 26 cities surveyed by the National Housing Bank (NHB), as many as 22 including Delhi, Mumbai, Pune, Bangalore and Chennai saw a drop in property prices during the April-June quarter, compared to the first quarter of this calendar year."
http://www.business-standard.com/article/economy-policy/is-real-estate-next-in-line-to-collapse-113082800322_1.html
absolute mayhem!!
http://www.business-standard.com/article/economy-policy/is-real-estate-next-in-line-to-collapse-113082800322_1.html
Average life of private equity in real estate is seven-eight years.
would love to see Real Estate collapse, would love to see all these corrupt bastards go bankrupt, would love to see all these politicians go down in a plane and die, but i live in realville, and it is not going to happen. Oil will not touch 200, INR will not hit 80, and it will be the same thing over, and over and over again. Hard working guy will get hosed, no matter what.
The only way crisis can be averted is US Fed do not taper. Otherwise, all your wishes may come true except the politicians in a plane thing.
Looks like the NRIs are not going to be saviours of our RE. Nobody likes to catch a falling knife.
RE Bulls - Black money and liquidity has disappeared, interest rates are rising, NRIs not buying - So whats next?
Forgot to post link in previous comment
http://www.firstpost.com/economy/rupee-fall-indias-diaspora-stay-away-as-economic-outlook-darkens-1068465.html
Here is my take:
I bought a flat in 2005 in Delhi just at the border of Noida. It was 25 lacs for a 3BHK flat.
Now the same flats were selling for close to 2CR last month. I think something really bad has happened in the past 8 years that prices rose like crazy.
My take is that a combination of Rupee decline and RE price declines would happen. The price may go back to 60-70 lac range, at least for the next 3-4 years till the powerful start a new cycle of lies and scams to prop it up again.
I would say that we are in REAL CRISIS mode in India. If RE falls, Rupee falls it is all okay as long as there are no riots on the street. Looks like there would a lot of pain among masses (1Billion people, rest are having fun) due to inflation, unemployment and corruption.
Toilet paper is now more expensive than Indian Rupee.
But wait, Indians don't waste money in toilet paper or trash bags.
I think RE bears should desist from making predictions of an imminent collapse, I see a correction in order but it's likely to be opaque and drawn out given how the system works in India.
It's going to be a slow painful affair with bouts of euphoria and recovery.
It's going to be a slow painful affair with bouts of euphoria and recovery.
Lost decade going on!
Friend bought Bangalore flat for 60L in 2008 (during recession). After 6 months on the market, asking 80L, he offloaded it for 55L last week!!! He desperately needed the cash.
He got two serious inquiries in 6 months. He made a loss of 5L in absolute terms, and a huge loss after
inflation adjustment.
I am wondering if people are getting any response to ads after putting properties on the market?
http://profit.ndtv.com/news/economy/article-india-might-buy-gold-from-citizens-to-ease-rupee-crisis-report-326456?pfrom=home-topstories
"We will start a pilot project among some banks where we will allow them to buy back gold from individual households," the source, an official familiar with the central bank's gold policymaking, said. "This will start soon, we have discussed (it) with banks."
The RBI will ask the banks to buy back jewellery, bars and coins for rupees. Lenders will have to offer better rates than pawn shops and jewellers to lure sellers.
"We will start a pilot project among some banks where we will allow them to buy back gold from individual households
Any attempt to either sell Gold holdings or refraining from Gold imports via domestically available Gold might cause collapse in Gold prices. If 500 tonnes of Gold is used, rupee will appreciate in short term, Gold prices will fall in INR terms and deflation would start kicking in, and it could have unintended consequences for the RE prices. Not something that our Govt would like in election time.
Rupee set for 69, RBI helpless: 75 a possible?
http://economictimes.indiatimes.com/markets/forex/rupee-set-for-69-rbi-helpless-75-a-possible/articleshow/22121605.cms
I am a NRI based in Gulf. Please advise me if the time is opportune to buy a flat in mumbai. What is the black component of the flat price in percentage. current hundi rate in dubai is 22 for dhiram. ( approximately 80-81 for dollar. )do the builders accept hundi.
Your help is greatly apreciated
I am a NRI based in Gulf. Please advise me if the time is opportune to buy a flat in mumbai.
Oh man don't look at the price, it's really cheap in your currency. Send your money fast to India because otherwise rupee will sink. We need support of people like you to prop up rupee. First transfer money to bank account in India and then negotiate prices.
@Anonymous 1053
I suggest that you wait. Your currency will increase that wii offset any real estate appreciation. As for Hundi, I dont know much about it but you may be taking a risk as the people involved in it may be dangerous. Onr thing is certain , that is, Indian population is increasing at an alarming rate, poverty is also increasing, high inflation, civil unrest combined with highly corrupt govt. With all these factors, the Indian Rupee will keep on depreciating as has been from its inception. Therefore, dont worry about your money as long as it is in any non Indian bank
on these pages, few months ago I had stated that Rupee was way overvalued (then 52) and expected it to reach ~75-80 level...I still do.
Also I had stated that indian RE will have considerable impact in the indian society thru 2016-17 as some on the margins lose their homes and NPA of few banks reach as high as 10% and would need bailout...Indian RE itself will adjust by 30-50% in the next 2-4 yrs...
Bhandari came up with report recently ..http://connectvallum.files.wordpress.com/2013/08/valuenomics-real-estate-2013.pdf
Playing fiddle while Rome burns, are we?
How about this for a prediction:
In 12 months time, every Indian will be panicking about water, food and safety.
Congress led govt. will impose emergency and cancel the elections. There will be civil war as each splinter group declares autonomy for themselves.
Congress led govt. will impose emergency and cancel the elections
Yes, that can happen and is exactly what I have been fearing. Financial emergency can be imposed, the trigger can be default on external short term debt - 170 billion is due by March 2014. Incidentally, today few experts on CNBC TV18 were casually speaking about financial emergency.
The only hope of crisis aversion is a sudden fall in dollar and at the same time it should also cause inflows coming back to India.
And don't be surprised to see rupee touching 150/- in that case. For those who argue demand would adjust before that, look at Indonesian currency in 1997 when it was trading at 3000/USD and people were saying it is highly undervalued. It finally found a bottom at 18000 per USD.
http://articles.economictimes.indiatimes.com/2013-08-29/news/41582435_1_rupee-rohini-malkani-fiscal-deficit
I think housing bubble is the last thing to worry about now.
Anon at 4:45
Interesting. So here is a real instance of someone making a loss in actual terms on RE , that too in a place like Bangalore ! Which area is this apartment in and was it by a reputed builder ?
I always used to wonder why would anyone buy a used apartment (say over 4-5 years old) at a premium when there are so many brand new apartments in the market.
Anyway, looks like the cookie has started to crumble now..
Emergency under Article 352 needs to be ratified by parliament with 2/3rd majority of members present and voting.
Financial emergency under Art. 360 needs ratification by parliament but no majority definition is made (simple or 2/3). This seems like a grey area that the UPA can exploit.
Any constitutional experts on this forum?!
As a foreign currency dealer since 1990, I somewhat agree with 'Anonymous 11.37 pm' except the emergency scenario. There is a great rush for gold and dollars, as the traditional money hoarders/lenders in India are trying to protect their family businesses. Those who are in financial market , understand what I mean. Indonesia is an extreme example for taking as a model for Indian currency. However, one thing is certain. The currency value is going to erode steadily. This may have a drastic effect on real estate as the traditional money lenders are becoming more cautious in lending stagnating the building growth. Those who are holding assets in real estate will be forced to sell for less to pay the exorbitant interest rates charges by money lenders/gangsters.
Let us hope that India is not heading towards IMF bailout
***The only hope of crisis aversion is a sudden fall in dollar and at the same time it should also cause inflows coming back to India.***
We all know that the probability of such a thing happening is like winning a lottery ticket.The only positive asset India holds is the IT industry because of cheap labour/english knowledge. The rate of growth of IT professionals has become exponential and soon the availability will outstrip the demand plus there is competition from other developing countries. The money generated by IT industry is being used to import luxury goods like high end cars, designer items, foreign travel etc etc.None is put for productive use that would benefit the poor. Everything has a critical point and when it is reached, all hell will break loose
I would still stick to my prediction that the Rupee will not touch 90-100 as some are predicting, unless the Govt is hell bent on committing suicide. Prices will go up before that happens and consumption will slide, interest rates will also go up sharply.
If the govt doesn't allow the bubble to burst and a deflation to happen there will be an emergency down the road and Congress will be out of power for three terms at least.
The govt knows this very well.
@aam aadmi
http://www.dnaindia.com/money/1881777/report-rupee-rebounds-on-dollar-swaps-for-oil-cos-logs-record-gains
"Am writing this so that you can bring to the market’s attention another fraud that has unfolded - surprisingly from the Indian central bank this time. Ivy educated fund manager here in amchi Mumbai.
This concerns the swap arrangement between the oil companies and the RBI on foreign exchange that the oil companies require for oil imports.
The RBI is basically telling India’s currency market – “Look guys we don’t like the exchange rates the currency market is producing, so guess what, we’re suspending a large part of the market.”
They are doing this by making the oil companies buy dollars directly from the RBI, and not from the market.
This takes the oil companies off the currency markets, and reduces demand for dollars and selling of rupees in the currency markets. This presumably strengthens the rupee temporarily. The specimens who call themselves traders in Indian currency markets are actually happy with this.
But notice the absurdity. The RBI in effect has created a two tier market for the currency. It has also prevented genuine price discovery of the most important price in the economy – the exchange rate. It is slowly and gradually suspending current account convertibility in India.
Note another absurdity. This means the monthly 9 billion in US dollars the oil companies need has to be bought from the RBI. This directly draws down the country’s foreign exchange reserves in the middle of a currency crisis. So the RBIs forex reserves should reduce by 9 bln a month. In 6 months, that’s over 50 billion in reserves.
Clearly this is unacceptable to the RBI. The RBI could therefore look for trading partners with whom India has a trading (ie) current account surplus and then swap the rupees they get from the oil companies for dollars, thereby maintaining their reserves.
But notice these countries are few and far between. It is impossible to arrange 9 billion dollars a month in swap deals with trading partners with whom we have a trade surplus. After all the overall current account is in a massive deficit ! So this avenue is not possible.
So the next stage of the con game. The oil companies have to REPAY, yes REPAY, the RBI at some time in the future the reserves they have drawn down. They have to do this by accounting for the arrangement as a “swap” deal.
Basically since the oil companies have bought dollars and sold rupees their accounting is complete. So presumably, they have to treat the swaps as an off balance sheet item. Presumably the RBI will also treat it as an off balance sheet item. So technically the RBIs reserves are not touched as they can claim the amount will be repaid. So the RBIs balance sheet will also reflect the swap as an off balance sheet item, and the foreign exchange reserves will not be affected !!
Analysts will now have to ask the RBI if the declared foreign exchange reserves are before - or after - accounting for the swap arrangement.
This is ofcourse the same sort of nonsense that destroyed Enron. The Indian central bank is now reduced to Enron type accounting and finance measures to hide its exposure. Enron tried to hide debt this way, and the RBI is trying to hide forex reserve losses this way !!
Notice also that this exposes India’s oil marketing companies to exchange rate movements and effectively makes them speculate on future exchange rates. If the rupee dollar pair goes to say 75, the OMCs will have to take a hit, as they buy at this rate and repay the RBI in dollars.
Conveniently, that is also taken care off. The OMCs are allowed to INDEFINITELY keep rolling over the swaps in the event of this happening.
This is typically Indian nonsense at its worst.
This is the reason the world simply does not trust us anymore. At some point the markets will see through this nonsense, and the rupee will continue its slide."
@aam aadmi
I would say one has to be extremely optimistic about rupee to say it will not cross 100/-. 170 billion dollars short term debt is to be repaid or rolled over by March 2014 and unless the capital flows return there is no way other than selling Gold (temples, citizens, institutions) to avoid default.
And to add to the woes Govt has now adopted the following interesting financial jugglery to count forex reserves. Read the comment above.
Just as I predicted in my 8:57am post, the INR has enjoyed a strong recovery. I stick by my previous prediction. INR at around 60 or lower (i.e. less than 60 to the Dollar) by the end of October. But before that, the INR will suffer some volatility. The route to 60 will not be linear.
The INR is still hopelessly undervalued at 65 given current price levels (except for RE).
8:57am
Gents,
I have close to 80 lakhs in NRI fixed deposit.What is the best option for me now?Should I convert all of it to US or some other foreign currency now?Which foreign currency will be best?
Regards
Anil
@Anil,
I don't know about other currencies, but the dollar is undervalued right now (Dollar Index of 82 or so and should appreciate to 87-89). Rupee is going to be pounded much more. Euro is overvalued,GBP is in for some pounding and so is Yen etc...I would recommend that you consider converting to USD and holding it for some time. It looks like rupee might go to 75 if not more. But investigate and take your own decisions. All the best!
I would say one has to be extremely optimistic about rupee to say it will not cross 100/-
The rupee may well go to 100 but it will be in stair steps and over medium to long term not in 2-3 year time period.
From 65 to 100 is a lot of inflation, and it's not just inflation I am worried about, there are systemic knock on effects, troops get less fuel for trucks, helicopters can't be run, there is less patrolling on the seas, all sorts of things.
The reason I made that statement is because governments tend to deal with panics, they are however not equipped to deal with slow moving disasters. Just see how governments dealt with 2008 disaster, everyone was saying that the global economy will go into deep freeze and blah blah blah but governments essentially monetized the world economy...at the cost of it's long term health of course.
The move by RBI is also an emergency measure, and there will be plenty of emergency measures in the coming days again at the cost of the economy's long term health.
Anony@10:23 PM,
I very much appreciate your insight on currency conversion options.I think I should convert it all to US$ before it gets worse.Many thanks for your help!
This is very informative post. i loved to read this.
Real Estate India
Do not, now and ever keep your hard earned money in INRs in your NRI account. Convert it into US dollars at the earliest. Do not fall for high interest rates offered for INR deposits. Rupee fate is sealed. It wont surprise anyone if it reaches 150 for dollar in couple of years. Indian govt does not help NRIs. It is evident from the treatment meted to them at indian airports/customs/immigration etc. Take care of your hard earned money
NRI from dubai
"Anony@10:23 PM,
I very much appreciate your insight on currency conversion options.I think I should convert it all to US$ before it gets worse.Many thanks for your help!"
So let's get this straight. You are making a Rs. 80 lakhs financial decision based on comments from "Anony@10:23 PM" on an anonymous internet discussion forum?
Advice that costs nothing is worth exactly as much. You richly deserve whatever is coming to you.
Anony@3:15 PM
What are you meaning to say?I should pay a bunch of crooks who will advise me to invest in the overpriced indian real estate or share market?The person who has advised to go for US$ has clearly stated his reasons for his logic and I agree with his logic.If you have a different view on the matter please state it with reasons rather than sitting in judgement of others opinions or decisions.
If a free society cannot help the many who are poor, it cannot save the few who are rich!
-- JFK
Shit is about to hit the proverbial fan.
There will be huge rush for the exits. Obviously only the well connected and the lucky will be able to escape.
Rest should prepare for martial law.
http://timesofindia.indiatimes.com/india/Govt-mulling-proposal-to-shut-petrol-pumps-at-night/articleshow/22210774.cms
Govt mulling proposal to shut petrol pumps at night
I had mentioned more than two years ago at this forum that in future if prices cannot go up then there will be rationing.
Well it's here, prepare accordingly.
@above
There will be no martial law, that's wishful thinking. It's exactly the kind of prediction that will get you an egg on the face later.
http://economictimes.indiatimes.com/news/economy/finance/india-should-keep-option-open-for-imf-credit-bimal-jalan/articleshow/22203502.cms
http://economictimes.indiatimes.com/markets/real-estate/news/slowdown-in-real-estate-forces-builders-to-cut-prices-and-dole-out-freebies/articleshow/22216644.cms
The slide has started folks. Be very careful about buying now. Esp the 'under construction projects'. It might stay under-constructed for a long time if the builder defaults.
The 1970s had a poignant movie about the middle class aspirations for a home in Mumbai. If you have time check out 'Gharonda'.
@aam aadmi
I am convinced looking at the accounting fraud by the RBI for counting forex reserves that the rupee is expected to slide much lower and very quickly. I also know RBI doesn't have much actual forex reserves and what we see today in the figures we don't know how much of it is in the form of swaps. I will better post as anonymous rather than using Name or pseudonym because I see some kind of emergency coming in the country - the situation is just serious ! Real estate is the last thing I will worry about.
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Guys,
(Specially anon at 2:26AM)
Don't you think you are just trying to create a panic? I cannot understand why such doomsday situation will come. There will be volatility for sure. But, you are talking as if we will be starving for food.
Recently been around Lonawala. Saw people using e-class as taxis. :) Just chill. Nothing bad will happen.
RBI swap is the most dangerous one I could see whic happend ever since Chandrasekar's government sold gold in 1992. It is based on a speculation that rupee will strengthen or dollar will devalue in near term or a foolish desperate attempt to stop the bleeding. Either way the momentum or distrust builds around the world. When FM and RBI governer fights on the street it is a done deal already, a blame game at the highest level.
Dear Anon @ 6.10 AM,
I agree with the gentleman above.
Although a doomsday scenario may not play out, the shit is going to be serious enough to make worrying about RE look like chewing gum.
I am surprised it is hard for people to read between lines.
We have a central government minister making proposals like shutting off fuel supply at night and you think all is well.
I believe we are headed into a maelstorm and these bastards that rule us are scared shitless themselves.
Let us see how it plays out but it certainly won't be pretty.
@above
There will be no martial law, that's wishful thinking. It's exactly the kind of prediction that will get you an egg on the face later.
LOL, talk about egg on face. Bears have been consistently wrong about everything for last 5+ years.
Recently been around Lonawala. Saw people using e-class as taxis. :) Just chill. Nothing bad will happen.
All izz well...
Are you MMS or one of his chelas by any chance?
Subsidy is big talk nowadays. Interestingly, it is discussed as always and I am referring to tv very selectively if not deceptively.
Noone ever talks of Corporate subsidy. I was seeing the debates on NDTV and CNN IBN even when certain speakers quote of Corporate subsidy it is conveniently being ignored, swept under the Carpet by posing diversionary questions and keeping time space to minutest to brush aside its relevance.
The only subsidy they discuss is food or LPG subsidy. Subsidised Diesel is swept aside. Subsidy on Diesel was always faulty from the beginning and should have been dismantled long ago. It has definitely caused the poor themselves large harm. What about the price of other Goods and services it doesnt effect the rich for they pass that burden to consumers which goes down to the poor ultimately who have to pay the price
No one discusses what is subsidy? What are different forms of subsidy? What is the sum total of all subsidies in a given budget across all items? What will the percentage of every subsidy of sum total subsidy given ? eg the fuel subsidy, food subsidy what percentage of sum total subsidy ?
No one discusses this. They select topic and keep on harping on those subject to titillate to audience, never discussing the real topics circumventing it and general public are as stupid as them to talk about this all the time.
We once had discussion of state of malls in India Is this paid news dated 12 Aug 2013
http://m.economictimes.com/news/news-by-industry/indl-goods/svs/construction/mall-developers-build-big-despite-slowdown-study/articleshow/21702597.cms
http://www.constructionupdate.com/News.aspx?nId=OO4Tx0ZP++L+F4S0Y/uREg==
http://timesofindia.indiatimes.com/business/india-business/Malls-more-than-double-in-five-years/articleshow/21696915.cms
Or is this the truth
http://www.business-standard.com/article/companies/as-slowdown-bites-malls-suffer-high-mortality-rate-113081000056_1.html
http://www.forbes.com/sites/markbergen/2012/07/30/watching-indias-slowdown-from-its-malls/
Conclusion
Footfalls doesn’t mean purchases. Many in go especially in Delhi, Gurgaon for Airconditioning during severe heat. People just go out to hangout. Many exist partly and ofcourse at losses to many establishments because of Hypermarts and multiplexes. The only time when there massive purchase is during Sale season two times a year. The doomstime has begun look for many scams like NSEL defaults by builders and Corporates. Huge NPAs and bailout for banks who get paid by taxpayers money of course. Not for those whose homes are repossessed or defaulted in credit Card debts.
It is very true what you are saying. I have come across a very interesting piece of report on 'The collapse of Indian Real Estate'. It says that the favorable demographics, acute shortage of housing, easy credit condition and high velocity of illicit money in the economy over the last few years has made Real Estate as one of the most preferred investment in India. Today, Indian Real Estate is one of the most expensive pieces of land in comparison to cross country per capita income. You can find the entire report on http://connectvallum.wordpress.com/2013/08/30/valuenomics-2013-collapse-of-indian-real-estate/
http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8366&Mode=0
http://capitalmind.in/2013/09/rbi-warns-banks-funding-builders-with-upfront-or-8020-loans/
LOL, heres an intersting metaphor for India's "leaders".
http://abcnews.go.com/International/wireStory/indias-sonia-gandhi-us-health-check-20140174
Indian leaders and elites have no interest in making India world class. As long as they can exploit the country to ensure their personal bank accounts are world-class so they can jump ship to a foreign destination at the slightest sign of trouble.
REBear Bhayya,
Please stop cut & paste crap . If you have some your own news or suggestions, please post them. Do not pollute this board with useless links
Thanks
REBull
@ 4:13 PM above,
Please scroll your mouse a bit and read the many original news posted by REBear. This is not your old RE market where you could mint money without lifting a finger. Please start to work out atleast your fingers on your mouse or scroller.
Thanks.
@Above
It's called the Kubler Ross model for grief. It has five stages
1. Denial
2. Anger
3. Bargaining
4. Depression
5. Acceptance
We are at stage 1.
I have met several people who are at stage 1 as well as 2.
Seems like the only hope for this country is _huge_ dollar inflows every year, else it sinks !
http://economictimes.indiatimes.com/news/economy/indicators/GDP-growth-may-slip-below-1-2-if-CAD-halves-Jefferies/articleshow/22287614.cms
"Indian leaders and elites have no interest in making India world class"
- We elect our leaders.
If we elect the wrong leaders over and over again, whose fault is that ?
Dear Friends,
There are many people actively involved in making propaganda about india's economic decline. There are some people in this blog contributing to such negative propaganda. I need not tell you that chinese and pakistani agents have infiltrated in the media and paying some people to create panic. India's economy is sound and already we are a super power.
Just go on the streets of Mumbai or Delhi and count the number of luxury cars like mercedez, bmw, jaguar, lexus etc. Just visit the malls. 20 years back, no such things were there. So many foreigner are seeking employment in India. What does this indicate.
Please stop worrying. India will overtake china, singapore, uk and canada shortly
Be proud to be an Indian
Jai Hind
Bharat Mata Ki Jai
I am not an economist nor as well qualified to speak on this but it does not make sense to increase FDI as a way of fighting this crisis. its like kicking the can down the road.. it would shift this crisis to a later date and make it even bigger. the only sustainable way to fight this is to increase domestic productivity.. aur kitna aur kya kya bechoge yaar?
FDI will prevent Rupee decline.
dimwit, for how long?
"Just go on the streets of Mumbai or Delhi and count the number of luxury cars like mercedez, bmw, jaguar, lexus etc. Just visit the malls. 20 years back, no such things were there. So many foreigner are seeking employment in India. What does this indicate. "
Bhenchod, chori ke paison se Mercedes lene se Chor sharif nahi banta
Most show off kind people are netas, baboos and incompetent chamchas and managers.
http://economictimes.indiatimes.com/markets/real-estate/realty-trends/gen-y-techies-who-invested-in-bangalore-15-years-ago-now-finding-it-difficult-to-service-their-home-loans/articleshow/22304732.cms
Bangalore IT crowd wants to book their profit and cash in before the crash
Anonymous skeptic's ghost said...
"Indian leaders and elites have no interest in making India world class"
- We elect our leaders.
If we elect the wrong leaders over and over again, whose fault is that ?
It's not as simple as that ghost bhai.
We want daal chawal (healthy choice) but instead we're only allowed to choose between burger OR pizza (unhealthy but made to look glamorous and appealing by creative marketing aka lies)
Elites and vested interests have hijacked our politics and they will not relinquish this power without a maha yudh.
Aam aadmi has too many distractions (conveniently provided by corporate controlled media and entertainment) to recognize the danger let alone gear up for such an epic battle.
http://www.youtube.com/watch?v=EY-Rk_TweuY
andar ke dushman ho ya bahar ke dushman.
full scale loot is on.
China grabs 640 sq km. of Indian Real Estate...
China is not dumb. They plan decades ahead and don't make random or impulsive moves like this without a big game plan. They've sensed weakness and are pouncing on the opportunity.
Even a minor conflict with China will drop rupee by another 10-20% as foreigners rush for exits.
This is a desperate time for our nation but sadly it's citizens are being misled by their own government/leaders OR they are willingly ignoring reality.
If we elect the wrong leaders over and over again, whose fault is that ?
Who knew that a well educated world class economist will turn out to be a weakling?
@Pawan
You put too much faith in higher learning institutions. I learnt long ago that the more 'educated' a person the easier it is to con them.
In other news US 10 year has hit 3%. It may not be much historically but under current circumstances it's a lot.
A few weeks ago I had mentioned that my colleague put his duplex house for sale in Bangalore. Well he wanted 50 but he's only getting 42, he bought it for like 34 and including interest payments and other miscellaneous items he's making a loss. If the headache of buying and selling is included it's a very big loss.
So that's the short story, I've heard similar things from other resellers.
RE always goes up....yea right.
aam aadmi said...
You put too much faith in higher learning institutions. I learnt long ago that the more 'educated' a person the easier it is to con them
Quite agree with that .The academic types seldom have any enough practical wisdom.They tend to hang on to their theories and twist facts to suit them.
//RE always goes up....yea right.//
It does..you have conviniently ignored the rent, tax, relocation, commuting savings that your friend had all these years
It does..you have conviniently ignored the rent, tax, relocation, commuting savings that your friend had all these years
Savings from rent gets more than offset by interest payments (which were big) and maintenance costs, tax savings were meager, commute was actually very costly as it was on the outskirts of the city.
For 40% of the EMI he would get a good renting option near the office and since prices are not appreciating as much it's a loss in the long run, I'd say he made a good decision by dumping it.
>In other news US 10 year has hit 3%. It may not be much historically but under current circumstances it's a lot.
Historically, the spread between the US-10yr and the India-10yr has been around 6-7%.
Currently the 10 year gilt here is at 9% (so mostly inline with historical trend).
If the US 10 year rates rise further, then the RBI will either have to raise rates or the markets will weaken the rupee further.
Remember, just 10 years back US rates were around 5%. And that was considered low !
@"a well educated world class economist"
MMS probably has some skeletons in his closet and is too weak to confront them, which is why he's such a good puppet.
Leaders must have a strong moral character over any other qualification. They should be above reproach, only then can they command the respect and attention of those they lead.
If you have to use force, coercion or threat to make someone obey or follow you, you're NOT a leader. That's why I don't have any hopes in Modi or similar "strong man" types either.
Here's an example of someone I will be proud to call my leader:
http://www.youtube.com/watch?v=1s6-i3vEMGE
If I could cast a vote for this braveheart I'd do that in a heartbeat. Here's a world-class leader: pure, honest, with a no-nonsense attitude and maturity to boot!
There are plenty of Malala type bravehearts in every society to save us all, if the rest of us only rallied around them instead of getting fooled by con artists and their propaganda of fear and hatred.
There are plenty of honest, upright people right here in this blog but....
When it comes to standing up no one does. Indians are inherently timid. They would prefer to be lead by someone than actually lead.
Crooks like asaram and sathya sai baba and others fool gullible people. Everyone feeds on 'FEAR'
Hence no innovation, no manufacturing. Just people who reuse existing code and make some money.
A rally in FII controlled stock market. A marginal retracement in the badly battered Rupee. That is all it takes for the economic pundits to say that Indian economy has bottomed out and the Raghu magic has started.
Is it true? In my opinion it is too good to be true. What is true is that Raghu has done some home work and has come well prepared. He has taken a gamble. Whether that is a calculated gamble or not will be known in due course. The outgoing Governor is spot on when he says Raghu should try to come out of the chakravyuga in Indian Economy. We will see in detail later in the article.
Let me summarise clearly. What is the problem now?
1. High Current Account Deficit
2. High Fiscal Deficit
3. Low Rupee Value
4. Corporate Balance Sheet Stress
5. Banks Asset Stress
Simply put this is all due to a single reason, and that is corporate greed. The growth which we see now is a myth and you ask anybody. Except a handful of people everybody else is feeling a lot insecure today than 10 years back. Even for the rest, the secure feeling they have is mostly false. The perceived value of their real estate asset is the reason for their brave face and that too will go in few months time from now.
Before go into further details, please read the following article http://www.thehindubusinessline.com/opinion/the-qe-that-no-one-noticed/article5101290.ece?homepage=true which says that the The size of the RBI’s balance-sheet in March 2002 was close to Rs 3,50,000 crore. In March 2013, it had ballooned to as much as Rs 22,00,000 crore.
(contiued)
This mindless expansion has increased the inflation hugely and any economist who has a different view should be either a idiot or a cheat. In India the problem is without applying the basic economics everybody is talking about out of box solutions. Because these cheats very well knew that the basic economics is not supporting their cheating ways. Hence, if any corporate or bank guy says that RBI is following a tightening monetary policy, either he should be a lunatic or cheat. And since a majority of them falls under the category of cheats. What are their arguments?
1. India needs 9% growth every year because the population is huge and inflation is not at all a problem and many people has come out of poverty because of monetary expansion.
I am asking why there should be 9% growth and how it can sustain? The corrupt politicians fell into the trap and to satisfy the corporate crooks they made this expansion happen and now we are in the situation where we are now.
In 1990 if they fix 10 Rupees per day as poverty line limit and if they use the same 10 Rupees per day as poverty limit now in 2013, then we have no other option then to doubt their pa knowledge. The figures I use may differ. But the matter of fact is we need to calculate accurate figures there and try to fix the poverty line and then decide how many came out of poverty? This should also includes the life style of current years. This should also include the kind of social security we have. Even a dog cannot believe that quality medical facilities and education facilities are available free in India.
Let us see, how this expansion spoiled the country. This is nothing new.Easy money flows to banks first because rates are low. Due to inherent weakness in the Indian system the money is not properly monitored and so most of this money went into unproductive areas. This very well explains that except the Golden Quadrilateral which is the contribution of BJP, we have not built any infrastructure. The money thus printed only helped a select set of corporates and they are the people who having tasted the cheap money is still asking for cheap money. I can give some names. You can add entire CII and FICCI goons in that. Not to forget the Real Estate Mafia. The easy money flows into real estate naturally because the sector is run by black economy. The easy money finds real estate as the parking space. The 2000's is the time where government pushed the housing loan in big way. This along with the balance sheet expansion shows that it is a planned conspiracy by the government. The government supported real estate by giving income tax concessions and also it gives virtually free hand to the real estate goons to loot the country.
One interesting observation I make here is that entirely 90% of Indian upper middle class is heavily invested in real estate and 50-60% of middle class in invested in real estate. Now these people who has heavy presence and influence in media and other places are supportive of government's expansion policy only because it further increases their real estate asset value. This personal interest is stopping them from seeing the real effects. 'The emperor is naked' effect.
Coming back to the point, the bad thing about the easy money is that it asks for blood continuously. This we are seeing in US and Japan as well. First you reduce rates. Then when you hit 0 % rates, then you buy bonds ( Japan). We are going against the basic economics here and these countries are finding it hard way. In India's case, this is further complicated. These countries with huge money printing still do not have run away inflation. But we do have all the extra problems.
We, Indians by nature are not disciplined. So now almost all corporates lost the ability to do the business with decent returns. We found real estate is the best investment and almost all the corporates in India dabble in real estate. The problem is that the corporates compare the profit they make in their core business with real estate and conclude that real estate is the best business, or conversely they expect the same profit margin of real estate in their core business also. We do not know who spoiled whom. Finally everything is spoiled.
The effects are showing now. This has become a ponzi scheme. Now to continue this business we need the following:
1. The inflation has to go up in the same rate ( 10% per annum)
2. People earning also should go up in the same pace
We know the later cannot happen. Even the inflation also cannot go up at this rate, and if we continue at this rate, then we are staring at Zimbabwe kind of situation in few years from now. Please google search for inflation in Zimbabwe to find the scary things.
To cut the story short, the income levels are not increasing. The government cleverly avoided investing in education and health care. It is strange that Indian governments, instead of building hospitals giving insurance cover to people for private hospitals. We, like a beaten to death dog, not asking any question. All education is privatised and shamelessly ask us to go for education loan in nationalised bank which again has our money.
Now to cut the story further, Raghu is expanding our balance sheet further. Basically in my opinion he is buying time for Congress until the elections.
But still I trust Raghu for the following reasons
1. He may know all this and he may want to really help the country.
2. Based on the above assumption, by buying time he may want to
a) Prick the RE bubble
b) Discipline the corporates
c) Control the inflation
3. The noises he made so far made me think that he intends to do all this given above.
But again, he has to face heavy opposition from
1. Corrupt Government
2. Corporate Mafia
3. People ( yes, having invested huge in Indian real estate, we Indians ourselves may not allow him to do right things. It is strange but it may happen)
However in short term, the SWAP things can go against him if he cannot deliver in Rupee front. Because the hedging cost is borne by RBI now and he is giving fixed cost of 3.5% to the banks now. As usual banks are going to splash the money to real estate brokers as we are in brokocracy ( we are not a democracy). So the real risk is that RBI will have to borne the hedging cost. That may complicate the situation further.His brave pitch against corporates (promoters) may look good initially. But he will be taught a lesson or two from our corporates shortly.
www.mangoman2012.blogspot.in
But again, he has to face heavy opposition from
1. Corrupt Government
2. Corporate Mafia
3. People ( yes, having invested huge in Indian real estate, we Indians ourselves may not allow him to do right things. It is strange but it may happen)
Truth is, in India's democracy you don't have citizens, you have 2 broad classes, rulers and subjects.
1 & 2 are flip sides of the same coin. Big corporate houses control both media and politics.
Politicians keep the lower classes engaged in trivial matters, media keeps the intellectuals sedated.
The handful who are awake and agitate are ruthlessly suppressed.
Regarding #3, in India 90 and 95th percentile folks euphemistically define themselves as middle class.
Rest assured, vast majority (> 80%) of the country has not speculated in real estate. But they are paying the heaviest price (inflation in basic goods and services) of all this mindless speculation.
For the last 10+ years or so Indian RE has been the playground of the white collar professionals, NRI crowd and black moneyed interests.
Stepping back and looking at the big picture, the following thoughts appear:
1. It seems that the government, brokers and bankers can control nominal RE prices but not real prices (as can be seen by the beating the Rupee has taken).
2. If history is any guide, upon seeing conditions of market stress, Bernanke (who is really the source of the emerging world's problems) will come out and promise more QE or, in light of current circumstances, not to taper ongoing QE. This means that that asset prices will remain high (at least in nominal terms) in the world with the QE money returning to the emerging world in search of the non-existing yield in the West. The Fed is not going to give up its hard-won reflation of the US housing bubble without a fight. This means that 10 Yr Treasury rates well above 3% will soon be beaten down by the Fed. The Fed cannot and will not let mortgage rates go up substantially without fighting tooth and nail and running the money printing presses on overdrive if necessary.
3. It is now amply clear that central bankers worldwide want high asset prices and will not tolerate any decline in nominal asset prices (they don't seem to give a toss about their currencies though). It is illuminating that despite the precipitous declines of the currency, the India reserve bank did not see fit to raise interest rates. At all. Not even by 25 basis points. We will never see meaningfully high interest rates (i.e. rates higher than domestic inflation rates) in our lifetime. Never. The global Central Banking system will never allow it. Sorry to pour cold water on the hopes of people waiting for interest rates to go up so that they can park their money in FDs. Sorry.
4. Indian real estate seems still massively overvalued in real terms despite the steep correction of the INR. For a developing country that produces essentially nothing of value to the rest of the world, it is troubling that even today a decent flat in a city like Chennai still costs over half a million US dollars (even after factoring in recent INR declines).
5. The INR is, at least in the short term, very oversold (see my earlier post 8:57 above which correctly predicted the rebound of the INR). The fact is that the domestic purchasing power of the INR has not gone down anywhere close to the kind of decline that the INR has experienced in the global markets. The resulting arbitrage should slowly force Dollar-INR closer to the 60 level. In the long term of course, the INR will continue to slide lower owing to our poor rates of productivity, inefficient economy and gross misallocation of resources (the latter of which has been exacerbated by the housing boom/bubble) but not I think without a corresponding increase in nominal wages. By way of illustration, ten years from now a roadside bhel puri could cost Rs. 200 but by then an office boy will then be making close to Rs. 40,000 per month.
6. The fate of the housing boom/bubble will ultimately depend on whether the rate of depreciation of the INR proceeds faster than the natural increase of RE prices in the country. If the INR declines faster than the rate of increase of RE prices, then this will result in a decline in real prices of RE thus bursting the bubble. Please note that I’m talking only about real (i.e. Euro or Dollar denominated prices) and not about nominal prices. In terms of nominal prices, I do agree with the bulls that Indian RE (which remains the last bastion of wealth protection for the middle and upper classes) will never go down meaningfully. Please see paragraph 3 above.
There are plenty of honest, upright people right here in this blog but....
When it comes to standing up no one does. Indians are inherently timid. They would prefer to be lead by someone than actually lead.
Before you can summon the courage to stand up, you have to be informed. How many have listened to and understood the implications of these conversations:
http://www.outlookindia.com/article.aspx?268214
Contrast that with how many are up to speed with the latest Bollywood gossip, IPL scores, movie releases etc.?
What is more important and what will directly impact not only you and future generations?
Devgan ho na ho, India ka asli hero:
http://www.youtube.com/watch?v=g_5OvKyMM_8
State Govt are enjoying
http://www.punjabnewsline.com/punjab/is-punjab-heading-towards-bankruptcyij/86035
Anonymous suresh said...
aam aadmi said...
You put too much faith in higher learning institutions. I learnt long ago that the more 'educated' a person the easier it is to con them
Quite agree with that .The academic types seldom have any enough practical wisdom.They tend to hang on to their theories and twist facts to suit them.
Education can either open a persons mind or shut it down completely. In my life experience, you can be Harvard educated and behave worse than someone who studied in a madrassa.
One encounters these hollow people everywhere.
If their own god men are caught doing "balatkaar" someone is out to defame their religion. If other religion leaders are caught, these same clowns are quick to condemn billions for the sins of a few.
If their political party leader is caught in corruption or criminal activity he was framed. Well, you get the drift...
http://economictimes.indiatimes.com/markets/real-estate/news/south-delhis-property-prices-down-by-20-35-defence-colony-and-vasant-vihar-worst-hit/articleshow/22445800.cms?curpg=2
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