The Stock Market As Propaganda

The Stock Market As Propaganda

Since 91% of stocks are owned by the Plutocracy, the much-ballyhooed rise in the stock market as proof the recession is over is perception management/ propaganda.

The 75% rise in the stock market from its lows a year ago is ceaselessly offered as "proof" the economy is recovering. Too bad very few Americans are drawing any benefit from this stupendous rise. As I detail below, the Great Middle Class owns at best only 7% of all stocks and mutual funds.

So the constant, breathless heralding of the stock market's carefully manufactured ascent has only one purpose: to create perceptions of "recovery"and distract the populace from the fact that in terms of employment and tax revenues, the U.S. economy is still shrinking rapidly.

Let's begin with the facts presented in the Wealth, Income, and Power website (G. William Domhoff).

In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers).

In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2009).

In terms of types of financial wealth, the top one percent of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America. (end of excerpt)

Here is a chart from the website:
wealth distrubition

According to the asset class breakdown on Wealth, Income, and Power, the bottom 90% owned 18.8% of all stocks and mutual funds in 2007. Since the bottom 60% own very little (only 22% of the bottom 60% own stock/mutual funds worth more than $10,000), and the bottom 80% own a mere 8.9% of all stocks/mutual funds, then the top 10% owns 81% of all stocks (of which the top 1% own 38%) and the "managerial/professional" slice between 80% and 90% owns about 10%.

Some 47% of the "middle class" (those between the bottom 40% with few financial assets and the top 20% with the vast majority of the assets) own stocks/mutual funds worth more than $10,000, but since the bottom 80% own a mere 8.9% of all stocks, it seems the Great American Middle Class owns about 7% of all the stocks and mutual funds in the U.S. (with the bottom 40% holding the remaining 2%).

According to BusinessWeek, the profits of the S&P 500 corporations rose in 2009 to over $500 billion--a vast sum presented as "yet more proof" that the recession is over.

Over for some perhaps, but not for the bottom 80%. It is no secret that the spurt in productivity which fueled those gargantuan profits was made by reducing headcounts and getting more work out of the remaining workforce. Bully for the S&P 500 managers and those who reap the profits.

Since there are about 130 million U.S. households and total corporate profits are around $1 trillion, we can do some simple math to see where all those profits flow.

If you dig through the BEA website and other sources, you find that Corporate profits were about 13 percent of GDP in 2007, their highest level in 40 years and significantly above the post-World War II average of 9.4 percent of GDP. Nonfinancial profits for 2006 were $1.08 trillion. Real GDP peaked in Q2 2008 at 13,415.3 billion; in Q3 2009 GDP was 12,973 billion (calculated annually).

Even assuming corporate profits have dropped back to 9% of GDP, we still get a number around $1 trillion in profit for 2009.

Based on the ownership of stock and mutual funds, we can estimate that 9% ($90 billion) of all that profit flowed to the bottom 80% of households (104 million), $100 billion flowed to the 13 million Managerial/Professional households (the 10% of all households between 80% and 90%), and $810 billion flowed to the top 10% (13 million households), of which $400 billion flowed to the top 1% (1.3 million households).

Since total household income runs about $9 trillion, then the $90 billion distributed among 104 million households doesn't really ring a lot of chimes when the estimated loss of wealth in the U.S. as the credit bubble popped has been estimated at $15 trillion.

The rise in the stock market and corporate profits benefitted the relative few--yet is touted in the mainstream media as heralding the end of the recession for the entire nation. That is pure propaganda. How easy it's been to manufacture a rising stock market, compared to engineering a recovery in the economy.

Indeed, the biggest problem facing the manipulators is the lack of participation by the professional and middle classes which have steadfastly kept their cash in money-market funds ($3 trillion) and put money in "safe" bond funds (about $350 billion went into such funds in 2009) while they withdrew money from the stock mutual funds.

The Grand Game has always been to engineer a rising stock market, sell to the middle class suckers and then go short, making a fortune as the bubble pops and the middle class loses the "sure bet."

Now that the middle class isn't responding to the endless propaganda about how great the stock market is doing, then the Powers That Be are forced to trade between themselves--hence the low daily volume and high-frequency trading.

The stock market isn't about building middle class wealth, and the middle class seems to have finally figured that out. The equity market is all about concentrating wealth and managing perception: if the top 10% is doing well, then the bottom 90% are supposed to feel better about the whole thing, too, even if they are poorer by every financial metric.

Charles Hugh Smith has been an independent journalist for 22 years. His weblog, www.oftwominds.com, draws two million visits a year with unique analyses of global finance, stocks and political economy. He has written six novels and Weblogs & New Media: Marketing in Crisis and just released Survival+: Structuring Prosperity for Yourself and the Nation.

Impact of Persistent Systems IPO on Pune real estate

The Persistent Systems IPO opens today and is intended to raise over 167 crores. I have known about Persistent Systems for a long time and know some people who work there. Dr Deshpande the CEO is different then the rest of the businessmen in India, most of whom are ready to scam the people and make a quick buck in the stock market. I remember visiting the Persistent office in the PCMC MTDC STP in Aundh in Jan 93 when Pune was a sleepy town and everything used to shutdown at 7:00 pm. It has since grown organically as they kept building on their core strengths of systems programming as their niche rather then become the jack of all trades.

My feeling is that quite a few employees in Pune will have excess of 10-20L post the IPO as their options become liquid. With 4400 employees on their payroll, I have a feeling atleast 70-80% of them will cash out their options and buy some real estate in Pune, but I am also guessing that the Mumbai style purchases by investors with 10-20% down is going to eat up supply as people start to get greedy.

I think Pune builders are going to benefit big time in the short run as this mania is induced by the builders thereby driving other fence sitters into taking the plunge. Remember Pune is still cheap as compared to Mumbai and a lottery of 20L is almost a once in a lifetime opportunity.

If this blog has ever given a bullish signal it is giving now, only for Pune real estate. The key would be to negotiate prices before the Persistent folks start cashing out. I don't know the lock-in period of the IPO but I presume that it will be atleast 3-6 months before they are eligible to cash out. In essence investing in Pune real estate is a proxy for investing in the Persistent IPO, where you can leverage the bank for 80% of the amount. I would only advise this only to serious buyers in Pune and not those who would like to flip in 6 months. Livable areas close to Persistent, Pashan, Baner , lesser degree Hinjewadi, Wakad should be good bets

If we have any readers of this blog from Persistent I would like to know what they are doing with their liquid stock options

L.K Advani wants to get back black money from Swiss accounts

Here is your chance to comment in the blog and urge Mr Advani to generate pressure on the government to recover lost assets rightfully belonging to the Indian people. Corruption is the root cause of disproportionate assets in India and this is a way to fix it. Here is a link to Mr Advani's blog. Apart from Switzerland there are hundred other places where one can launder money. In this age of the internet it is not hard to know where all money can be stashed. Just the other day UBS released a statement of data theft of account names and numbers which were stolen by an employee. HSBC reported a similar theft few days ago. In this age there is no privacy and employees can be easily swayed by easy money to get hold of critical account data. Banks will try to tighten security policies and restrict access but to a motivated data thief, getting few megabytes of data is a cake walk.

We are going to see a lot of skeletons tumble from the black money cupboard. Its not a question of 'IF, its a question of 'WHEN'.

Indian inflation is real nasty

One will never see such articles in India's self censoring media. Editors and columnists think that the big three of Indian finance are demi-gods like Tendulkar or SRK. Not to mention leaders in the opposition who have their head stuck in the 19th century. Here is what is happening to the salary of the Indian citizen. Link

Factory gate prices are not a true reflection of cost-to-consumer, but these WPI figures, as the best available data, seem to indicate that the Singh Administration grossly underestimated the potential for inflation as the desired stimulus led output and investment gains have exacerbated the agricultural complex after last year’s disastrously dry monsoon season. The public assurances of Singh’s administration and Central bank Governor Subbarao that food prices will moderate in the new year (March to March) is meaningless if this year’s monsoon rainfall disappoints. Note that ,with agriculture accounting for nearly 20% of GDP but employing over half the population, water is the most volatile commodity in the Indian economy.

Sheela Murthy's interview on the latest USCIS

I found this recent video of Ms Murthy's interview with Sneha TV. Some people might find it off topic, however given the number of Indian IT professionals in the US and/or aspiring to go to the land of opportunity I thought it would be of interest to a wider audience. She makes some excellent points and it is a must see. Here is the link

Twenty-25 per cent toh market tootega

The brokers have a vested interest to drop prices since at current prices there are no buyers. Builders launch projects and sell to investors, now investors get greedy and are not ready to drop prices to the higher levels held by the builders. Brokers are squeezed in between as there are no transactions as investors are not ready to drop prices. Builders have no incentive to drop prices as they have sold to the investors and if they drop prices, investors will start bailing out and demanding a reduction in prices, similar to the DLF fiasco in Chennai. End-users cannot buy since they are not eligible for bank loans. Its a catch -22 situation which this ponzi scheme has now reached. The bubble will unwind one apt at a time, as investors realise that they have been fooled by the builders. There is no denying the fact that there is demand, however the price at which the demand is satisfied is in the range of 4k - 6k per sq/ ft in Mumbai. There are always exceptions to the rule however in the general locations where income levels don't cross 10-15L this is the range.

The same scenario will unfold all over Mumbai. This article in the mainstream media is what I was waiting for. I have been crying myself hoarse over the past few years and a 25-30% reduction in investor prices will bring apts down to under 5k per sq ft.

Congratulations buyers for being sensible. I woudn't mind paying the broker 2% if he can convince the investor that the bubble has burst and ask him to drop prices to the 4,000-5,000 range.

Goregaon-Borivli to house 30,000 new homes by 2012

Buyers can expect a correction in realty prices soon, say experts

By Alka Shukla
Posted On Saturday, February 20, 2010 at 02:05:39 AM

According to data collated by suburban brokers, around three-crore square feet of residential property could be up for grabs between Goregaon and Borivli over the next three years.


Going by the average apartment area of 1,000 sq ft, some 30,000 houses could be ready for possession in the next two to three years. That’s almost three times the average supply of homes seen in this belt. The current real estate rate in this region is between Rs 7,000 and 9,000 per sq ft.

“Many developers were sitting on land banks for the past two years. Holding on to land also involves its own costs and post-downturn, it’s prudent to capitalise on it. So you’ve seen a slew of launches.

Even as of today in the said belt, there is an unsold ready stock of one crore square feet,” says Pankaj Kapoor of Liases Foras, a realty research firm, indicating that there will be a glut in the market in the next two years, bringing prices down by 25-30 per cent.

Another real estate expert Ajay Chaturvedi concurs, “Builders are not really seeing the kind of demand that is being projected. Prices are bound to drop in the range of 15-25 per cent,” he says.

Picture for representational purposes
In fact a survey done by Liases Foras suggests that there will be nine crore sq ft of homes by 2011-2012.

This translates roughly to 90,000 homes, around 30 per cent of which will be in the extended suburbs from Dahisar to Virar, Thane and Navi Mumbai.

Developers claim there is enough demand to absorb the supply. Niranjan Hiranandani, MD, Hiranandani Group which has launched a seven lakh sq ft project in Malad says, “I strongly disagree that there will be an over-supply situation. What we have today in fact is gross under-supply. Although it is difficult to speculate on prices.”

Vijay Wadhwa of Wadhwa Group which has launched eight lakh sq ft of residential construction in Borivli and 10 lakh sq ft in Goregaon feels the sudden surge in supply will shake the smaller players. “Lot of projects have been launched recently, but only few are that good. There is enough demand in the city, but only the ones will a steady track record will sustain. Over-priced products will suffer,” says Wadhwa.

Property consultants however sound a word of caution. Says Pranay Wakil, Chairman, Knightfrank, “It will depend on what segment these houses cater to.

If 30,000 houses in one region are in one particular segment, say over Rs 75 lakh, there could be an over-supply. There needs to be a healthy mix of affordable and premium housing.”

Local brokers, however feel prices will fall. “Twenty-25 per cent toh market tootega,” says a Malad-based broker, continuing, “Many local developers are trying to sell flats at the rate of Rs 4-5,000 per sq ft to investors first and then selling only part of the stock in phases to the buyers for a higher rate. That’s how they are holding on to high prices.”

India's Real Estate Boom Is on Shaky Ground .

The Indian version of Forbes magazine lists the 100 richest Indians. Apart from the usual suspects, what intrigued us was that most of the new entrants in it were from the real estate industry. India is a services-based economy and a lot the people were from technology or other export services and products. But real estate?

India's Real Estate Boom Is on Shaky Ground

It is a bricks and mortar industry that caters to the local market. Yet it is so vast that it is creating untold riches. As people move to cities to build their careers, builders are fueling their aspirations for a dream home. The builders themselves have built their companies with successful initial public offerings and by attracting foreign investment. It's a good time to be in Indian real estate, with buoyant prices and never-ending demand.

Builders cry foul play as Govt imposes service tax

Finally the builders are getting the short end of the stick, the same stick they have used when they hiked prices indiscriminately every week. The best line is from Niranjan Hiranandani who shedding crocodile tears for affordable housing.

"The budget proposals are death knell for the affordable housing in the country. If housing will be taxed so heavily, how can you expect us to build homes. There is no other option before us than going to the government and ask for roll back," said Niranjan Hiranandani, managing director of Hiranandani Constructions.

Now Mr Hiranandani has never built homes for the middle class and prices in Hiranandani Powai are upwards of 18,000 per sq ft. If they don't like the proposals I would urge all the builders to quit this business and leave it to the individuals to build their own houses

Withdraw move on service tax, say developers

Raghavendra Kamath / Mumbai February 28, 2010, :01 IST

Stung by new service tax proposals on property transactions, real estate bodies such as CREDAI (Confederation of Real Estate Developers Associations of India) and Maharashtra Chamber of Housing and Industry (MCHI) are planning to approach the finance ministry to seek a rollback of some of the proposals.

The government yesterday brought transactions such as leasing vacant land and commercial spaces, payment made to developers before the grant of completion certificate and imposing preferred location charges among others under service tax net.

The transactions now attract a service tax of 10.3 per cent. Developers complain that levying service tax on payments during construction will push up prices and reduce home sales.

The proposal, according to developers, could push up prices by 10 per cent in Tier-II and Tier-III towns and 0.5-4 per cent in big cities, which have higher land prices. Service tax is calculated on construction cost.

For instance, in South Mumbai, where apartments are priced at Rs 35,000 per square feet, the effective tax burden will be 0.5 per cent (10.3 per cent on construction cost Rs 2,000 per sq ft). A house of 1,000 sq ft will attract a tax of Rs 175,000.

But in Umargaon, which is around three-hour drive from Mumbai, where apartment prices are around Rs 1,200 per sq ft, the service tax burden will be 7.25 per cent (on construction cost of Rs 900 per sq ft).

Developers have already increased prices by 15-20 per cent in the last nine months as demand for homes pick up. This has resulted in demand tampering off in the last two months.

"Either prices have to correct now or developers have to pass on the burden to buyers. I think the second option is most likely to happen. If that happens, home sales will certainly go down," Krishnan, partner, real estate practice, Ernst & Young.

Adds Kumar Gera, chairman of CREDAI and Gera Developments: "It is a burden on buyers and not on developers. Anything that increases prices reduces affordability. If developers have margins, they will absorb it, otherwise they can\'t." "We will approach the government to reconsider the proposal."

Krishnan said that by levying new service tax, the government had sent out a signal to the developers to reduce prices and clear their inventory.

Developers said the increase in excise duty on cement and steel, the key ingredients in construction, is also likely to see increase in prices. Excise duty on cement and steel have gone up by 2 per cent. Cement prices are likely to go up by around Rs 8-10 a bag of 50 kg, while the prices of steel are likely to increase by around Rs 600 a tonne.

"The budget proposals are death knell for the affordable housing in the country. If housing will be taxed so heavily, how can you expect us to build homes. There is no other option before us than going to the government and ask for roll back," said Niranjan Hiranandani, managing director of Hiranandani Constructions.

Montek says Goldman Sachs analyst is wrong

“We think the Reserve Bank of India will need to raise effective policy rates by 300 basis points in 2010 to bring policy rates to neutral, in the face of rising domestic demand and inflationary pressures,” Goldman’s Mumbai-based economist Tushar Poddar said in a note on Feb. 26 after the budget was announced.

“300 basis points is quite a huge increase but certainly I don’t expect that kind of increase to take place,” Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, an agency that sets India’s growth and investment targets, said in an interview. He added that a narrowing budget deficit will help restrain any rise in corporate borrowing costs.

>>>

Lets take a hypothetical example

Principal 75L
Interest 10%
Tenure 10 years
EMI ~1L x 120 months = 120L
Total interest paid = 45L

With an increase of the interest rates to 12%

EMI = 1.076L

Total payments 1.076L x 120 = 129 L

Total interest paid = 54L


What about builders who finance the projects thru loans ? They are hit as well. Now if they pass on this cost to the end-user by a 20% increase in prices, the sky-high prices now will reach the Gods and only Indra will be able to afford these prices.

What a mess the UPA government has created.

Lets hear the detractors on this.


Here is the Businessweek article

Jim Rogers says high spending to haunt Indian economy

To quote Rogers, "India has nothing to show except a bunch of rich politicians". I am expecting sharp deceleration in the growth numbers coming out of India as the stimulus is rolled back. The stock market is headed to the previous lows and 12500 doesn't seem too far. Here is the link to the video. Be afraid, be very afraid.

The Budget - Dr Jekyl and Mr Hyde

The Finance Minister of India seem to have mastered the fine art of writing suspense thrillers, only here we know who is to blame. Giving direct IT tax breaks and taking it back using indirect forms like service tax, excise tax, petrol tax is pulling wool over the eyes of the millions of middle class Indians. With farmers he can write off loans, with this stupid NREGA scheme he pump thousands of crores into rural India without accountability, but when it comes to the middle class he has magically suckered it into believing that he is doing them a favor.

The news media is in the cahoots of the Congress government and is unable to make unbiased assessment of the budget. The stupid corporate CEO's don't care since they know they will pass the tax to the consumer, and the stupid consumer is happy to watch Tendulkar and SRK heroics instead of seeing that he is being robbed in broad daylight.

Consumer inflation is running at 18% which will spike by another 5% due to hikes in duties and petrol. How does a 10% reduction in income taxes help you when there is a 25% increase the cost of living ? This is the most regressive budget I've seen as the money supply with the consumer will decrease due to record inflation.

And to add icing to the cake, the Finance Minister will eliminate whatever peanuts can be deducted off the taxes once he implements the uniform tax code in 2011. That will roll back the tax cuts for the middle class to zero thereby causing a 50% drop in savings over 2 years with this rampant 25% inflation Y-O-Y. For government employees who had just begun to see the benefits of the sixth pay commission, you will soon see all the extra cash vanish at a record rate thereby negating the impact of any hike.

Add to this the interest rate hikes for floating rate home loans, and we have a case where the Indian savings rate will now be competing with the Americans to see who is the lowest of the two.

In summary the Finance minister has magically created money by lowering interest rates and the sixth pay commission salary hikes and now has taken that same money away by higher taxes and record inflation. To combat inflation he will raise interest rates, thereby siphoning off more money from the borrower, however inflation wont reduce as he has increased indirect taxes on the economy. This is truly the case of the left hand not knowing what the right hand is doing, or a split personality like Dr Jekly and Mr Hyde.

On one had we have Obama fighting for the American middle class with tax cuts, increased unemployment benefit spending, curbs on foreign visas, speaking tough to China to revalue its Yuan and trying hard to get health care for a vast majority of uninsured, and on the other had we have the 3 idiots who are ready to bite the middle-class hand which has been feeding it over the past 40 years.

A finance minister is known by how well he manages inflation, interest rates and taxes. With Mr Mukerjee (Manmohan and Sonia included) this will be year which they will be remembered for and that too not very fondly.

Frustrated buyers, Why not take some Action !!!

I have read many stories on this board about House buying related issues. The main one is un-affordability. The second one is scrupulous nature of unregulated business of Builders. Third one is on Banks and Loans.
I was thinking what can be done to make any impact. Here is a simple thought,

Why not write a small petition to Prime Minister of India. On their website, there is online form to write your petition. In my opinion, once you have written it, post what you sent in Comments section. This way other can see what is being sent. lot of comments are posted, we can send link to all Newspaper editors.

Wite to PM

I posted following, Honorable Prime Minister,

I would like to point out one concern from large number of citizens. Today home prices in most urban cities in India has become totally un-affordable to most indians, even those who are well educated and contribute significantly to country's economic growth. In addition to that, buyers face lot of issues like timely delivery and quality construction with un-regulated builder lobby. Home is necessity to everyone. Please do the needful to bring necessary changes.

Please do not use Comments in this post for any other purpose.

Ripoff by Indian banks

Passing the buck, this is what banks do. I remember asking for a fixed rate loan and the bozo's didn't even know the details of their own product. Floating rate loans are the ARM mortgages of India. Interestingly in the US, most loans are 30 year in duration. In India they are betweeen 10-20 years and if one looks at the interest payments for the loan at high interest rates, the amounts are staggering. Indian banks have suckered people into these products and soon borrowers will be paying 10-20 extra EMI's. With 50k on average, a nice 5-10L extra for the banks. If a 48 year old Chartered Accountant is running into these problems, what about lesser educated folks in the finance field

Livemint reports.

In the ocean of disagreement about India’s economic indicators—gross domestic product growth, inflation, share prices—there is an island of consensus: the direction of interest rates. “Going up” are the words on everyone’s lips. The governor of the Reserve Bank of India pithily stated: “The direction of policy is clear—we had to ease at the time of the crisis, we have to tighten now.”

While the average Indian will get indirectly affected in many ways by rising interest rates, there is one area where the impact will be direct. And severe. This is in home loans.

I asked one of my senior colleagues, Francis D’souza (name changed), about the home loan that he had taken from a respected private sector institution (Francis is a chartered accountant, all the more surprising!).

“What was the kind of home loan product that you took?” I asked.

“Well, they only had one standard product, a floating-rate loan that was priced off their PLR (prime lending rate). The choice of tenor was flexible—I took a 10-year loan, since I am already 48 years old.”

“So you got a your credit score, which resulted in a discount to their PLR, and this EMI (equated monthly instalment) was for 120 months?” I asked.

“Yes, that’s right.”

“And what happens now, if interest rates go up? How do you get to know, and what impact will it have on your EMI?”

“The loan document said that the PLR gets adjusted every quarter, and it’s apparently on their website, but frankly, I don’t get any communication on it at all. But yes, if the rates go up, I will be affected—the EMI will remain the same, but I will have to pay more than 120 instalments, maybe 130 or so, depending on many factors that I don’t understand.”

“When you took the loan, was there any discussion about this exposure? And also, did you have any alternative—say, a fixed-rate home loan—that was discussed with you?”

“No, the floating-rate loan was their only product, and no, there was no discussion about the exposure that I had to moving interest rates.” He paused, and added, laughing nervously, “Frankly, I don’t look at the statements, we just hope that we will be done in 120 months!”

Francis’ situation is similar to hundreds of thousands of Indians who have taken out floating-rate home loans over the past several years. The home mortgage business today is around Rs2 trillion, growing at 35-40% a year, according to data from the National Housing Bank. Precise data on fixed/floating mix is not available, but Adhil Shetty of BankBazaar.com tells me that “over 90% of it will be floating-rate-based. Banks don’t market fixed-rate products, and sales people are generally trained to sell floating-rate home loans”.

A detailed check of the market suggests that most banks offer only floating-rate home loans, and a few offer hybrid fixed products. There are no pure fixed- rate loans—one large public sector bank offers a fixed-rate loan for 20 years, but it resets after five years.

Many market observers have written about how India’s mortgage market is unfair to customers. But these debates have invariably been about one particular issue—that of the arbitrary and subjective nature of PLR setting by each individual bank.

However, the fixed versus floating exposure issue has received little attention. Some argue that this is because there is no demand for fixed-rate mortgages—customers invariably choose to pay a few per cent less for floating-rate loans.

But this issue cannot be dismissed as one of informed choice and caveat emptor. There are two critical aspects that need attention: One, the deeper systemic issue underlying the absence of fixed-rate home loans; and two, the issue of consumer rights and financial literacy.

Current market practice clearly proves that banks have no incentive to sell fixed-rate home loans. But they don’t do this because there is no deep long-maturity debt market in India that allows banks to offset their duration exposure. Essentially, the banking system has no way to offset the risk of long-dated assets on their balance sheet.

The solution? Pass on this risk to the customer. In essence, what a sophisticated banking industry cannot manage is now being handed off to the man on the street. There’s something wrong here. In the medium term, the answer will clearly come from a deepening capital market, one that can absorb longer dated assets such as home loans.

This brings us to the second point—while deeper markets and so on will take time, banking practice needs to change right away: to educate customers about the implications of their choices, and the extent of the exposure. EMI calculators can easily have “what-if” scenarios going out over the life of the loan.

In the meantime, my message to Francis was: “Please get in touch with your loan officer and understand your exposure. Don’t rest on the hope that ‘all is well’.”

Telangana stir worsens outlook for realty sector in Hyderabad

Where are all the morons who said that the Satyam/Maytas fiasco and now the Telangana agitation will have no impact on business and residential real estate ? 100 storey buildings in a city where land is abundant was the signal that Dubai and Hyderabad are no different when it comes to greed.

Hyderabad: Dotted with the sprawling campuses of information technology (IT) firms such as Microsoft Corp. and Wipro Ltd, Hyderabad’s fast-moving growth corridor—the Gachibowli area—looks skeletal with half-done buildings, yellow construction cranes and giant billboards that promise delivery of homes on time.

Skeletal buildings: One of the many incomplete realty projects in Hyderabad’s Gachibowli area. Bangalore is gaining from Hyderabad’s loss. Many real estate investors consider the Karnataka capital a safer bet. Madhurima Nandy / Mint


Hyderabad was hailed some years ago as one of India’s hottest property destinations, with firms such as US-based Tishman Speyer Properties and Malaysia’s Sunway City Bhd coming in to launch their maiden projects in the country.

In its present condition, Andhra Pradesh’s capital city remains the lone realty victim of the slowdown.

“Other cities are already on the recovery route. But Hyderabad has been in the news for all the wrong reasons,” said George Johnson, city head (firm management), Jones Lang LaSalle Meghraj, a property advisory.

The downturn perhaps shook Hyderabad more than it did other large cities due to certain disturbing events.

The first was the unravelling of a multi-crore accounting fraud at Hyderabad-headquartered Satyam Computer Services Ltd last January, followed by the death of chief minister Y.S. Rajasekhara Reddy in a helicopter crash in September.

And just as the sector was beginning to recover, the struggle for a separate Telangana state that includes Hyderabad, intensified.

“Whether the market bounces back depends on if they can control the Telangana agitation,” said N.R. Aluri, managing director, NCC Urban Infrastructure Ltd. “The residential segment particularly looks uncertain though we are expecting some demand in the budget category.”

City-based NCC Urban, a subsidiary of Nagarjuna Construction Co. Ltd, has moved its focus to Bangalore, where it is building four projects, compared with one in Hyderabad.

Read more at Livemint.com

Thackarey vs SRK vs Thackarey

Thousands of articles have been written about the issues surrounding the movie 'My name is Khan'. Hundreds of celebrities have voiced their opinion on it. Tens of politicians have expressed their support for SRK and the Shiv Sena stands isolated on the issue with no one expressing support apart from their own clan.

However as this issue dies down with the Sena having tactfully withdrawing the campaign it has Sena achieved its goal. The very fact of the Chief Minister having to summon all policemen to duty prior to release of the movie proves that the congress is very fearful of the Sena and its ability to disrupt things at will.

I remember the days when I was growing up in Mumbai in the 80s and early 90's, the Shiv Sena had a history of muscle power and citizens used to go to the Shaka pramukh to solve their problems instead of the police. When they won the elections in 1995, the Sena realized that they couldn't continue their rowdy behavior against the ruling government since they were now the party in power.

I now believe that Sena is on its way to those bygone days Raj and Uddhav are leading the aggressive charge in the name of the Marathi Manoos.

I would like to quickly point out that while I detest the tactics of the Raj and Uddhav I find that Congress and the NCP are equally incompetent to handle issues dealing with the ethos of Maharashtra and the Marathi people.

Politics has turned into a game where the party in power is a broker for grabbing land and handling out contracts at a fee. There is no attempt made by the government to 'govern' or take a stand on the 'right' side. This pattern repeats itself at every level, whether it state, central or the city.

We see this is action in the rampant inflation in India where Mr Pawar blames the sweet tooth of citizens for the doubling of prices of sugar. What about Onion prices, maybe Indians like to shed tears more often while the peel more onions then the citizens of other countries.

We now will have the IPL coming up and the tamasha of cricket and movies will drive the news flow. The SRK issue will be forgotten and delirious fans will be rooting for Tendulkar and Sehwag as SRK and Shilpa Shetty egg them along.

India is country of short memories. We have forgotten the deluge which killed thousands in Mumbai in 2005. We've dont remember what happened in the Tsunami in Chennai, the 26/11 attack in Mumbai and the recent floods in AP/Karnataka which almost sunk the famous Raghavendra Swami mutt in Mantralaya and we will soon forget the Pune blasts of Feb 2010.

Jai Ho

Mumbai builders hit sand trap

Business Standard reports

Construction in Mumbai has come to a near halt due to a serious shortage of sand, the most essential component. Ready-mix concrete production units in and around the city have also closed temporarily for want of sand.

A revenue department official said against 4,500 sand spots across the state, only 1,300 which had been cleared by the respective gram panchayats are available for auction. The government proposes to increase the royalty rate to Rs 200 per brass from the next financial year from the present Rs 100 per brass.

This is because the Maharashtra government has made it mandatory for the area’s gram pachayat to approve any sand auction.

As a result against a daily sand demand of 600-1,000 trucks, hardly three to 10 trucks are now coming into the city and that, too, from neighbouring Gujarat. Sand prices, earlier Rs 2,500 per truck of 2.5 brass (1 brass is equal to 100 cubic feet of sand), have surged to Rs 12,000 per truck.

If the shortage continues, says the the realty and construction industry, construction cost will surge and projects will be delayed.

A leading builder and developer, who did not want to be quoted, told Business Standard, “The licences used to be extended every year. There was no monopoly, as any person could buy from any of the sand dredging villagers and from various village,s depending on their quality, quantity and price. The royalty for the dredging used to be collected by the revenue department, for the extent of sand dredged. Local villagers were granted dredging licences, under which they used to dredge and sell the sand to any supplier in bulk.”

He said an average building of 14 floors with two wings, of 100,000 sq ft, requires 2,500 trucks of sand for just the civil work.

Dharmesh Jain, chairman and managing director of the Nirmal Group and vice-president of the Confederation of Real Estate Developers Association, confirmed the shortage had brought realty development in the city to a standstill. So did Pravin Doshi, president of the Maharashtra Chamber of Housing Industry. Navin Kothari of the Bhakti Group, a Mumbai based real-estate developer, said over 90 per cent of construction activity in Mumbai’s suburbs had been affected by the acute shortage for over a fortnight.

Now, even Mira road is unaffordable

Property rates have gone up by 20-25 % in the last six months

Savita Rijhwani (24) is all set to get married in the coming months -- the families are ready, shopping is on in full swing -- but one major hindrance, despite a budget of Rs 30 lakh, is a house. She was earlier looking for a two-bedroom hall kitchen flat in the Mumbai region up to Dahishar and Mira road, but now, with real estate prices moving northwards again, she has to look even beyond Mira Road.

During the recession, property rates in the city had come down by 20-35 per cent depending on the location.

However, in the last six months, the rates have escalated by 20-25 per cent. V Sharma started looking for a 1 BHK flat in Mira Road nearly six months ago and the owner was demanding Rs 13 lakh for the flat. Two months later, the prices shot up to Rs 15 lakh and currently the rate is nearly Rs 19 lakh. Sharma says he has to act now, "I cannot wait any longer as the prices are escalating and very soon the flat would become unaffordable I wish I had bought the flat last time itself."

Builders are a happy lot with the growing prices but are also careful and understand that if the rates reach an astronomical high, the market will fall soon. Abis Rizvi, Director, Rizvi builder, said, "The prices in areas like Bandra have gone up by 30 per cent in locations, the real estate market is back on its feet. But the prices has to be checked, if they rise above affordability then it won't be a good sign."

Vibhoo Mehra, a real estate consultant from western suburbs, claims prices have gone up in the last three months and have touched a peak.

Stone shortage to push housing prices up in Pune

This is by far the most ridiculous conclusion one can reach when it comes to the co-relation of stone with housing prices. In the past cement , steel, shortage of land. labor costs, electricty and loan costs were listed as the reasons for prices to move higher. Now add stone to the mix. Dagad ani Dhonde are equally precious when it comes to housing. The Indian Express article is below

Crushed stone is set to become costlier in the city, which may give another reason for builders to jack up prices of projects yet to take off.
The Pune Stone Crushers and Mine Owner's Association has stopped supplying crushed stone, an unavoidable commodity for the construction industry as use of sand is restricted, saying they want to hike prices. "Our association has stopped supplying crushed stone to the construction industry with effect from today.
The supply will resume only when prices of crushed stone are increased," said Pradeep Kand of the association.
He justified the move saying the government had increased royalty on stones, their raw material extracted from mines, and the power tariff too was going up. The other variables, employee salary, cost of diesel, tyre and spare-parts of machines have been on the rise for the last few years, Kand said.
The builders are caught in a bind, as they cannot do without crushed stone since the government has imposed restrictions on use of sand for construction. The move also caught the city builders unawares as there was no prior communication from the association.
Satish Magar, president of the apex builders body in Pune, CREDAI, said if there is no supply of crushed stone for the next few days, then construction activities in the city will come to a halt.

"We will hold a meeting with the suppliers of crushed stone to resolve the issue," he said.
Magar admitted there has been an increase in royalty of stone, but argued that it would not have a big impact on price of crushed stone. "We are yet to be apprised of the exact demand by the association and the hike they seek," he said.
"We can discuss the issue with the association, but one thing is sure, that it will have a cascading effect on property rates. Home buyers will have to shell out more as builders will need to recover the extra cost," Magar said.
However, Kand said builders should not complain as the demand to hike rates of crushed stone was coming after a long gap. "Property rates in the city have more than doubled in the past few years and builders have been making money out of it but stone crushers continued to supply at the earlier rate," he said.
Kand said it was up to the builders to bear the extra cost and not pass it on to customers as they have been doing each time the cost of some raw material went up. The builders so far have been attributing the increase in property rates to increase in rates of steel and cement as also shortage of labour.

India Swaps to Rise on Record Jump in Rate, Morgan Stanley Says

Let the party begin. BoooYaaah. Loan interest rates will go back to 12-13% from 9-10% a jump of 20%. Expect EMI's to rise by greater then 20%. Borrowing costs for builders will jump too and they will want to pass this to the customer, thereby forcing a further decline in affordability. There are no political compulsions for the government to keep rates low. They will use the next few years to reverse the bogus interest policy implemented by the supposedly independent RBI over the past few years. I feel sorry for speculators in Mumbai as the crash in stock markets is going to resonate loudly in the real estate sector. Be very careful of under construction projects. They will hold the biggest risk to the buyer.

By V. Ramakrishnan and Anil Varma

Feb. 1 (Bloomberg) -- India’s swap rates will surge as the central bank increases the benchmark borrowing costs by a record 1.5 percentage points this year to curb inflation, Morgan Stanley said.

The cost of swaps that mature in a year will rise 0.52 percentage point to 5.5 percent by April, Morgan Stanley India Primary Dealer Pvt. Ltd. said. Reserve Bank of India Governor Duvvuri Subbarao on Jan. 29 estimated wholesale-price gains will quicken to 8.5 percent by March from as little as 0.5 percent in September. He also raised reserve requirements for banks and said interest rates will increase “in future.”

“Inflation is becoming a bigger worry and that sets the tone for higher interest rates going forward,” Manoj Swain, Chief Executive Officer at Mumbai-based Morgan Stanley India Primary Dealer, said in an interview. “Upward pressure on swaps will increase because of the rising requirement to hedge against higher rates and tighter liquidity.”

Read more here

Schiller's Bubble diagnosis

Shiller’s List: How to Diagnose the Next BubbleJanuary 27, 2010, 7:33 am —

Sharp increases in the price of an asset like real estate or dot-com shares

Great public excitement about said increases

An accompanying media frenzy

Stories of people earning a lot of money, causing envy among people who aren’t

Growing interest in the asset class among the general public“New era” theories to justify unprecedented price increases

A decline in lending standardsIf your asset class is suffering from these symptoms, consult your neighborhood economist or licensed broker, and maybe a good psychotherapist, too.

Here is the link

Outsourcing dollars fund real estate in Bangalore

The big headline in the following story is that Sobha has called off his deal with Shriram properties but the bigger headline is that Infosys founder N.S. Raghavan sold off his Infosys stock and now is investing in land and my guess is in locations close to Infosys campuses all over India. One has to read between to lines to see the impact Infosys, Wipro and other outsourcing companies have on Bangalore real estate. The investment made by Raghavan to the tune of 225 crores is the entire turnover of Sobha for a fiscial year. It appears that Raghavan got a bargain for his price. Will Raghavan get into the consturction business ? Only time will tell.

Sobha Developers calls off land sale talks with Shriram Properties
Text:
BANGALORE: Sobha Developers, which was in talks with Shriram Properties for the sale of around 400 acres in four cities, is learnt to have called
off its negotiations following differences over price, people familiar with the matter told ET. While Sobha confirmed that talks have been called off, it did not provide details. Shriram Properties MD M Murli said his company was "not pursuing the deal aggressively." Some of the land the firm had put up for sale include 100 acre at Hinjewadi in Pune, 3.8 acres on St Marks Road, Bangalore, 7 acres of NBCC land behind the Bangalore railway station, 330 acres comprising two islands of Valanthakad & Nadukeri and adjoining lands in Manakunnam & Thekumbaghom villages in Kochi. The total value of these land could be between Rs 600 and 800 crore, according to estimates by Mumbai-based research firm Enam Securities. The latest move by Sobha Developers comes after it managed to strike a deal with an investment fund owned by Infosys co-founder N S Raghavan to raise Rs 225 crore by selling a part of its land bank. The company has also managed to reschedule a substantial part of its loan portfolio. Last year, Sobha raised around Rs 530 crore by diluting close to 22.5% equity through a qualified institutional placement (QIP). Sobha MD J C Sharma had earlier told ET that the company was looking at a stake dilution of up to 25% at the project level through a special purpose vehicle. While the deal would have generated the much-needed cash for Sobha to develop its projects, it would have also helped Shriram Properties, a part of the $5.5-billion Chennai-based Shriram group, scale up its size in the residential market. In fact, Murli of Shriram Properties had earlier said that the firm was in talks to buy 1,500 acres of distressed assets which could be land with development rights, projects under development or mid-sized real estate company. The company was eyeing bad assets in Mumbai, Pune and Ahmedabad which were available at throwaway prices to expand its presence in the market. Shriram has completed projects covering 4.5 million sq ft in Bangalore, Chennai, Coimbatore and Kolkata and has 9 million sq ft of residential space under various stages of development in Bangalore, Chennai, Vizag and Kolkata. Sobha has sold 3.92 lakh sq ft space in Q2 of this financial year compared to 2.5 lakh sqft in Q1. Currently, it has about 9 million sqft of ongoing projects. The company's Q2 net profit was down to Rs 27.5 crore versus Rs 51.3 crore in the corresponding quarter last year. The turnover during the same period was Rs 226.3 crore as against Rs 230.4 crore last year. Walton Street Capital made its first investment in India through Shriram Properties.

Bubble Bursts for India's Once-Booming Real Estate Market

Bubble Bursts for India's Once-Booming Real Estate Market

(MUMBAI, INDIA) -- After nearly four years of aggressive growth, India's once-booming real estate market is in a freefall.

In an eye-opening analysis, Business Monitor International of Blackfriars, London, and Fast Market Research of Williamstown, MA are reporting:

Prices have dropped 20-40% since their peak.
Property sales have fallen over 50% year-on-year.
Developers are burdened with many unsold and unfinished projects.
Bank lending has tightened.
REITs have lost 80% of their value.

"Potential buyers are delaying purchases in the hope that prices will go down further," according to the report. First-home buyers are seen as a major driver for the residential segment. Luxury residential prices fell dramatically in early 2009.

Demand is sharply down. "Affordability is now one of the main drivers in the residential market," the report notes. "There has been resurgent interest by developers in affordable housing schemes, especially as the market has stalled for luxury houses and apartments."

The report cites Chanda Kochhar, the incoming chief executive of the ICICI Bank India's largest private bank, who said in February 2009 that real estate prices still need to fall by at least 20% if the market is to pick up.

The share prices of Real Estate Investment Trusts have fallen in value by up to 80% since their peak.

There’s a cloud over middle-class dreams of affordable homes

Reaching The Roof


Unaffordable Housing?
Around 15% price escalation in last six months hitting demand for affordable housing projects
Low appetite for risk, commute distance or drawbacks in infrastructure is holding back buyers
Perceptions of affordable housing differs across cities and income groups
Price is a starting point, but most consumers are also seeking quality and infrastructure

Similarly, PropEquity’s report till early November 2009 indicates that there has been better offtake in the sub-Rs 15 lakh category, particularly at locations closer to large cities. Overall, of the 90,000 units available in the ‘affordable’ category, only 40,000 had been bought. Describing 40 per cent absorption as not bad by industry standards, Jasuja adds that with market sentiments improving sales have since inched up.

Developers point out that land cost is a big decider in the final price tag. That’s why many projects are coming up further away from big cities. Where transportation and other facilities compensate, there is no lack of takers. Falcon Realty Services has got good response for its 2,500 units priced at Rs 5.9 lakh-Rs 28 lakh at Global Eco City, a 45-minute drive from Delhi international airport. Good facilities, including transportation, is proving the clincher.

As Rajiv Mehrotra of Noida-based Sunshine Enterprises puts it, “Demand is there, but there are hardly any houses below Rs 20 lakh available.” Already staring at rising inflation, people’s euphoria over affordable housing looks likely to fade—unless the government lends a helping hand.

Buy a house, get mesothelmia free

This land deal proves the absolute callous disregard of the BMC to heath and the environment of its citizens. Asbestos is well documented to cause lung cancer and there are thousands of lawsuits filed in the US against companies which flouted asbestos health regulations. Mesothelioma is one of the deadliest types of cancer caused by asbestos here we have BMC approving the building plan of 1100 apartments on contaminated land. I'm assuming that these 18 acres housed a factory which made chemical products including asbestos. It is indeed a shameful day in Mumbai today.

Here is the wikipedia entry for Asbestos.

Mesothelioma is a form of cancer that is almost always caused by exposure to asbestos. In this disease, malignant cells develop in the mesothelium, a protective lining that covers most of the body's internal organs. Its most common site is the pleura (outer lining of the lungs and internal chest wall), but it may also occur in the peritoneum (the lining of the abdominal cavity), the heart,^[1] the pericardium (a sac that surrounds the heart) or tunica vaginalis.

Most people who develop mesothelioma have worked on jobs where they inhaled asbestos particles, or they have been exposed to asbestos dust and fiber in other ways. It has also been suggested that washing the clothes of a family member who worked with asbestos can put a person at risk for developing mesothelioma.^[2] Unlike lung cancer, there is no association between mesothelioma and smoking, but smoking greatly increases the risk of other asbestos-induced cancers.^[3] Compensation via asbestos funds or lawsuits is an important issue in mesothelioma (see asbestos and the law).

and here is the entire DNA article.

Ghatkopar land sold to Wadhwa for Rs571 crore

In a major land deal in the city, asbestos products maker Hindustan Composites announced, on Monday, that it would sell its 18-acre property on LBS Marg, Ghatkopar to the Mumbai-based Wadhwa Group for Rs571 crore. Including the stamp duty, the value of the land is expected to go up to Rs600 crore with the land rate roughly working out to be Rs4,000 per square feet.

Vijay Wadhwa, chairman, Wadhwa Group said that they have taken a loan of approximately Rs300 crore from IndiaBulls Financial Services Ltd and raised the balance Rs271 crore by way of sales and discounting a few of properties they had leased.

Realty experts said the deal would provide Wadhwa with the much needed confidence. Coupled with global slowdown, the group had over-stretched itself after it had successfully bid Rs831 crore for a plot at Bandra Kurla Complex in 2007.

Many funds like Morgan Stanley had refused to back Wadhwa in the Composites land deal as they did not agree to the costing and profits projected by the developer.

“I always knew that the project cost will go over Rs7,000 per square feet as the plot is strategically located and also with the kind of development we have planned,” Wadhwa said. “In fact I have already sold 2.5 lakh square feet at Rs8,500 per square feet.”

The developer has plans to set up at least 15 residential buildings with over 1,100 apartments on land, which has a development potential of about 15 lakh square feet. Also, this development potential could go up substantially if Wadhwa takes advantage of the government’s parking FSI of 4.

Indian economists are dumb - Asian Development Bank

ADB economists are practically saying that the RBI and the Indian government are the main characters in the Bollywood remake of the movie Dumb and Dumber. Who cares about wholesale inflation when citizens have to face consumer price index inflation every time they visit the store. The CPI numbers are staggering and the government is doing its best to hold interest rates low, to allow for big projects to take off at subsidized loans. They are afraid to upset the apple cart, lest they be seen as the reason for the collapse of the Indian stock market. With huge vested interests in real estate all over the country, Indian politicians are responsible for the mayhem caused to the common man whether it is to run his household or to buy his long cherished dwelling.

Business Standard reports

India's inflation indicator confusing, inconsistent: ADB
Press Trust of India / New Delhi January 15, 2010, 22:05 IST
The Asian Development Bank (ADB) today suggested that policy makers in India should consider making the Consumer Price Index the main barometer of inflation as the current system of measuring the rate of price rise on both retail and wholesale prices is creating confusion.
Inflation measured in terms of the Wholesale Price Index (WPI), experts say, is irrelevant at a time when the retail prices are very high. And there is at present a huge gap between retail and wholesale price inflation indices. The difference is due to the high weightage of food items in consumer price indices than wholesale price index.
"Policymakers should make the consumer price index the primary indicator of inflation instead of current two-tier measurement system which leads to inconsistencies and confusion," the multilateral lending agency said in a study.
The Consumer Price Index (CPI) measures the retail prices, but in India there are many measures of this index.
Inflation measured by wholesale rates vaulted to more than a year's high 7.31 per cent in December on higher food prices, mainly sugar, pulses and potato, adding to the government's worries about price rise.
Sugar prices rose 53.98 per cent in December. Sugar in the retail market is selling at nearly Rs 50 a kg.
However, consumer price inflation for agriculture labour and rural labour stood at 15.65 per cent each in November, while retail inflation for industrial workers was 13.5 per cent.
Rising food inflation-- close to 20 per cent -- has been a cause of concern for the government.
Finance Minister Pranab Mukherjee too had voiced concern at a recent pre-budget meeting with the states Finance Ministers here.

The price for bravery

Brave RTI activist hacked to death by Pune goons
Prashant Aher / DNA

Mumbai: A prominent right to information (RTI) activist was murdered in Talegaon Dabhade district of Pune on Wednesday morning.

Satish Shetty, 38, was attacked by three to four masked men with butcher’s knives when he was reading a newspaper at a kiosk at around 7 on his way home from a morning walk.

Shetty had shot to fame after exposing corrupt land deals and illegal constructions in Lonavala and Pimpri-Chinchwad. Recently, he had complained against a Lonavla sub-registrar, Ashwini Kshirsagar, to the inspector-general of registration and commissioner of stamps, following which the official was suspended.

Shetty had alleged that Kshirsagar was involved in illegal land transactions worth lakhs. “Shetty had filed an application a few days back with the Talegaon police station claiming he was facing a threat to his life,” said Pratap Dighavkar, superintendent of police (rural), Pune.

“We sent the application to Lonavala’s deputy superintendent of police for investigation.” He said Shetty had met him two days ago, but did not specifically speak about the threat.

After he was attacked, Shetty started running away from the kiosk, with the goons in pursuit.

But they soon overpowered him and repeatedly stabbed him with the knives in the head and hands, before fleeing. The local residents contacted Shetty’s brother Sandip, who rushed him to hospital, where he was declared brought dead.

The police pressed into service sniffer dogs and fingerprint experts to identify the suspects. Dighavkar said four police teams have been formed to probe the incident.

Non Congress governed states prone to less scams and bubbles

Looking at the ease at which Yedurappa made the announcement about $27 Billion dollars of investment makes me wonder if BJP is more business friendly then the pro-liberalization Congress party. Gujarat and Karnataka both BJP governed states have been attracting business investment by the likes of Tata and Mittals. Even Tamil Nadu under DMK has a good track record for being business friendly. Compare this to Maharashtra and AP under Congress and those two states have been under turmoil for years with scam after scam being reported involving the government officials and politicians. If one has to bet on jobs I would say Chennai and Bangalore would lead the job-growth in India for the next few years.

Here is IBNlive's article on the investment

Cement to steel, K'taka clears $27.5-bn projects

New Delhi: Karnataka has cleared 38 big-ticket projects worth Rs 138,000 crore ($27.5 billion), and hopes soon to finalise the mega investment proposals from global steel makers ArcelorMittal and South Korea's Posco.
Speaking to reporters after a meeting with the chairman of Arcelor Mittal, L N Mittal, Karnataka Chief Minister B S Yeddyurappa said these projects collectively have the potential to generate employment for 92,000 people in the state.
"Nearly 60 percent of these investments would be in north Karnataka," said Yeddyurappa, explaining that the primary focus of his government was to ensure development in the most backward regions of the state.

Read more

Strategic Defaults rising

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.

Human Empire

Such voluntary defaults are a new phenomenon. Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?

Read more

Mall mania fades in Mumbai

Among the biggest developers to make this switch is realty firm Dynamix Balwas (DB Group), which shelved its ambitious retail venture to build the country’s largest shopping mall (over 10 lakh sq ft) in Dahisar after spending over a year planning and designing it.

The developer is now constructing low-income, budget homes on the land purchased for the Rs700-crore Dahisar mall, which was to be called Ozone Orchid. The group had earlier converted a mall project in Kandivli into a housing complex.

Orbit Corporation, a south Mumbai realtor, has also decided to convert a 2.5 lakh sq ft commercial development called Hafeez Contractor House in Lower Parel into a residential project. Ackruti City converted its more than 7 lakh sq ft mall space at Andheri into a residential and commercial complex. Dreams Mall, spread across

Mall mania fades in Mumbai

Predictions for 2010

Hi all,

The blog has gone little dormant. How about your predictions for 2010?

What will be status of Housing in India?
Will RE boom continue or Bust start?
How much?
Best growth areas in India?

any other predictions....

Firemen in Mumbai cannot go beyond 20th floor

How is the BMC approving building plans with more then 20 floors ? Every new building coming up has more then 20 floors. Expecting the builders to comply with fire-safety requirements is asking for the fox to guard the chicken. Is there anyone who believes this will happen ? I guess with the 100% water cut in future, one can only hazard a guess in the event of an unfortunate fire in the upper floors of a high-rise. Like all things in India, politicians won't face the music unless there is a catastrophic incident. Buyer beware is all one can advise.

DNA India reports.
Mumbai: The growing number of skyscrapers in Mumbai has given the city's skyline a facelift, but it will prove to be a headache for the Brihanmumbai Municipal Corporation (BMC). The civic body is ill-equipped to handle fire threats to most skyscrapers in the city.

The BMC has told buildings with more than 20 floors to arrange for their own fire safety.The civic body has made it clear that it is not in a position to help high-rises in case of a fire, particularly if the fire is on the 20th floor or above. The Mumbai fire brigade is not equipped to douse fire above 20 floors as the tallest snorkel available with it is 60 feet high. Using the snorkel, firemen can climb up to 20 to 22 floors (i.e. 68 meters).

The city, approximately, has 186 tall buildings - which have more than 20 floors - and about 59 under-construction buildings that are expected to be more than 20 storeys. Two of the under-construction skyscrapers are expected to be more than 100 floors.

The BMC is now changing its policy to make sure that all buildings are safe in case of a fire. "BMC will allow the new high-rises to come up only if they are equipped with modern fire fighting equipment - especially on the top floors," Manisha Mhaiskar, additional municipal commissioner, said.

Mhaiskar added that the occupants of the building will also have to be equipped with the fire fighting installations. "It is very difficult to douse a fire which breaks out on the upper floors. There will be another change in the policy, which will hold the residents responsible for any mishap in the skyscraper," she said.

Vastu junk in the Times of India

Here is another junk article in the Times of India, property times segment, only meant to fill up space as the advertisements have dropped drastically. The Vastu quack talks about Indian being under economic distress as it is surrounded by water on the east, south east and west and southwest. There is another country which has similar geographical boundaries and has enjoyed great economic progress in the past 50 years - USA

Water makes a difference

Water in East, Southeast, South, Southwest and West. India is surrounded by water in five directions. It is one of the largest peninsulas in the world. Out of eight directions five directions are surrounded with water.
As per the principles of Vastushastra water element in North, Northeast and East is considered as the best for prosperity.
In the case of our country, it is only the East direction which matches with this.
Water element in the rest of the five directions is bad, out of which South, Southwest and West is extremely negative.
Water in the Southeast leads to delay or lot of obstacles in every work. At the same time, water in the Southeast is also responsible for unproductive expenses, malpractices as well as corruption. Increased cost of the projects due to malpractices or corruption is a major obstruction in our progress.
Water in South, Southwest and West hampers the stability of the nation. Repeated aggressions on this nation caused instability and foreigners ruled this country for a long period.
It also leads to financial losses on large scale almost leading to bankruptcy.
If we look at the progress of Indian economy it was always under the pressure of foreign borrowings.
Dr.Raviraj Ahirrao (Ph.D), Pune 020 – 30266435 Website: www.vasturaviraj.co.in, Sms: VASTURAVIRAJ at 56767

Learning From the West/ Why does India suck ??

In a speech to students at a management institute NR Naryaran Murthy delivered a scathing attack on the Indian culture and its supposedly superiority. I've been critical on NRN on a few issues however here I tend to agree with him. All his points are extremely valid given the current context of business and political nexus in India. However I find it hard to believe that Infosys has acquired thousands of acres of land in Bangalore and Hyderbad without any special favors to the powers at hand. These speeches would be more useful if they were directed towards government beaurocrats and ministers as these folks are responsible for more damage to Indian society then anyone else in modern India. It is interesting he brings up the Milan subway example in Mumbai. I've travelled by that sub-way thousands of times and each time the traffic is more horrible then before.

To surmise Indians according to NR Narayana Murthy are

1. Irresponsible towards community

2. Corrupt

3. Tax evaders

4. Cheaters

5. Bribers

6. Apathetic in attitude

7. Arrogant about own intellect

8. Poor listeners

9. Responsibilty dodgers

10. Unaccountable for actions

11. Unprofessional

12. Thin-skinned

13. Feudal thinkers

14. Not independent

15. Dishonor contractual obligations

16. Intellectually dishonest

17. Lack of commitment.

18. Hypocrites

19. Prejudiced

20. Unpunctual

Learning From the West - N R Narayana Murthy

Download pdf file: web.iitd.ac.in/~mamidala/HTMLobj-142/LearningFromTheWest.pdf

Ladies and gentlemen:
It is a pleasure to be here at the Lal Bahadur Shastri Institute of Management.
Lal Bahadur Shastri was a man of strong values and he epitomized simple
living. He was a freedom fighter and innovative administrator who contributed
to nation building in full measure. It is indeed a matter of pride for me to be
chosen for the Lal Bahadur Shastri Award for Public Administration and
Management Sciences. I thank the jury for this honor.

When I got the invitation to speak here, I decided to speak on an important
topic on which I have pondered for years - the role of Western values in
contemporary Indian society. Coming from a company that is built on strong
values, the topic is close to my heart. Moreover, an organization is
representative of society, and some of the lessons that I have learnt are
applicable in the national context. In fact, values drive progress and define
quality of life in society.

The word community joins two Latin words com ("together" or "with") and unus
("one"). A community, then, is both one and many. It is a unified multitude and
not a mere group of people. As it is said in the Vedas: Man can live individually,
but can survive only collectively. Hence, the challenge is to form a progressive
community by balancing the interests of the individual and that of the society.
To meet this, we need to develop a value system where people accept modest
sacrifices for the common good.

What is a value system? It is the protocol for behavior that enhances the trust,
confidence and commitment of members of the community. It goes beyond the
domain of legality - it is about decent and desirable behavior. Further, it
includes putting the community interests ahead of your own. Thus, our
collective survival and progress is predicated on sound values.

There are two pillars of the cultural value system - loyalty to family and loyalty
to community. One should not be in isolation to the other, because, successful
societies are those which combine both harmoniously. It is in this context that I
will discuss the role of Western values in contemporary Indian society.

Some of you here might say that most of what I am going to discuss are actually
Indian values in old ages, and not Western values. I live in the present, not in
the bygone era. Therefore, I have seen these values practiced primarily in the
West and not in India. Hence, the title of the topic.

I am happy as long as we practice these values - whether we call it Western or
old Indian values. As an Indian, I am proud to be part of a culture, which has
deep-rooted family values. We have tremendous loyalty to the family. For
instance, parents make enormous sacrifices for their children. They support
them until they can stand on their own feet. On the other side, children
consider it their duty to take care of aged parents.
We believe: Mathru devo bhava - mother is God, and pithru devo bhava - father
is God. Further, brothers and sisters sacrifice for each other. In fact, the eldest
brother or sister is respected by all the other siblings. As for marriage, it is held
to be a sacred union - husband and wife are bonded, most often, for life. In joint
families, the entire family works towards the welfare of the family. There is so
much love and affection in our family life.

This is the essence of Indian values and one of our key strengths. Our families
act as a critical support mechanism for us. In fact, the credit to the success of
Infosys goes, as much to the founders as to their families, for supporting them
through the tough times. Unfortunately, our attitude towards family life is not
reflected in our attitude towards community behavior. From littering the streets
to corruption to breaking of contractual obligations, we are apathetic to the
common good. In the West - the US, Canada, Europe, Australia, New Zealand -
individuals understand that they have to be responsible towards their
community.

The primary difference between the West and us is that, there, people have a
much better societal orientation. They care more for the society than we do.
Further, they generally sacrifice more for the society than us. Quality of life is
enhanced because of this. This is where we need to learn from the West.
I will talk about some of the lessons that we, Indians, can learn from the West.
In the West, there is respect for the public good. For instance, parks free of
litter, clean streets, public toilets free of graffiti - all these are instances of care
for the public good. On the contrary, in India, we keep our houses clean and
water our gardens everyday - but, when we go to a park, we do not think twice
before littering the place.

Corruption, as we see in India, is another example of putting the interest of
oneself, and at best that of one's family, above that of the society. Society is
relatively corruption free in the West. For instance, it is very difficult to bribe a
police officer into avoiding a speeding ticket.

This is because of the individual's responsible behavior towards the community
as a whole On the contrary, in India, corruption, tax evasion, cheating and
bribery have eaten into our vitals. For instance, contractors bribe officials, and
construct low-quality roads and bridges. The result is that society loses in the
form of substandard defence equipment and infrastructure, and low-quality
recruitment, just to name a few impediments. Unfortunately, this behavior is
condoned by almost everyone.

Apathy in solving community matters has held us back from making progress,
which is otherwise within our reach. We see serious problems around us but do
not try to solve them. We behave as if the problems do not exist or is somebody
else's. On the other hand, in the West, people solve societal problems
proactively. There are several examples of our apathetic attitude. For instance,
all of us are aware of the problem of drought in India.
More than 40 years ago, Dr. K. L. Rao - an irrigation expert, suggested creation
of a water grid connecting all the rivers in North and South India, to solve this
problem. Unfortunately, nothing has been done about this. The story of power
shortage in Bangalore is another instance. In 1983, it was decided to build a
thermal power plant to meet Bangalore's power requirements. Unfortunately,
we have still not started it. Further, the Milan subway in Bombay is in a
deplorable state for the last 40 years, and no action has been taken.
To quote another example, considering the constant travel required in the
software industry; five years ago, I had suggested a 240-page passport. This
would eliminate frequent visits to the passport office. In fact, we are ready to
pay for it. However, I am yet to hear from the Ministry of External Affairs on
this.

We, Indians, would do well to remember Thomas Hunter's words: Idleness
travels very slowly, and poverty soon overtakes it. What could be the reason for
all this? We were ruled by foreigners for over thousand years. Thus, we have
always believed that public issues belonged to some foreign ruler and that we
have no role in solving them.

Moreover, we have lost the will to proactively solve our own problems. Thus, we
have got used to just executing someone else's orders. Borrowing Aristotle's
words: We are what we repeatedly do. Thus, having done this over the years,
the decision-makers in our society are not trained for solving problems. Our
decision-makers look to somebody else to take decisions. Unfortunately, there
is nobody to look up to, and this is the tragedy.

Our intellectual arrogance has also not helped our society. I have traveled
extensively, and in my experience, have not come across another society where
people are as contemptuous of better societies as we are, with as little progress
as we have achieved. Remember that arrogance breeds hypocrisy. No other
society gloats so much about the past as we do, with as little current
accomplishment.

Friends, this is not a new phenomenon, but at least a thousand years old. For
instance, Al Barouni, the famous Arabic logician and traveler of the 10th
century, who spent about 30 years in India from 997 AD to around 1027 AD,
referred to this trait of Indians. According to him, during his visit, most Indian
pundits considered it below their dignity even to hold arguments with him. In
fact, on a few occasions when a pundit was willing to listen to him, and found
his arguments to be very sound, he invariably asked Barouni: which Indian
pundit taught these smart things!

The most important attribute of a progressive society is respect for others who
have accomplished more than they themselves have, and learn from them.
Contrary to this, our leaders make us believe that other societies do not know
anything! At the same time, everyday, in the newspapers, you will find
numerous claims from our leaders that ours is the greatest nation. These
people would do well to remember Thomas Carlyle's words: The greatest of
faults is to be conscious of none.

If we have to progress, we have to change this attitude, listen to people who
have performed better than us, learn from them and perform better than them.
Infosys is a good example of such an attitude. We continue to rationalize our
failures. No other society has mastered this part as well as we have. Obviously,
this is an excuse to justify our incompetence, corruption, and apathy. This
attitude has to change. As Sir Josiah Stamp has said: It is easy to dodge our
responsibilities, but we cannot dodge the consequences of dodging our
responsibilities.

Another interesting attribute, which we Indians can learn from the West, is
their accountability. Irrespective of your position, in the West, you are held
accountable for what you do. However, in India, the more 'important' you are,
the less answerable you are. For instance, a senior politician once declared that
he 'forgot' to file his tax returns for 10 consecutive years - and he got away with
it. To quote another instance, there are over 100 loss making public sector
units (central) in India. Nevertheless, I have not seen action taken for bad
performance against top managers in these organizations.

Dignity of labor is an integral part of the Western value system. In the West,
each person is proud about his or her labor that raises honest sweat. On the
other hand, in India, we tend to overlook the significance of those who are not
in professional jobs. We have a mind set that reveres only supposedly
intellectual work.
For instance, I have seen many engineers, fresh from college, who only want to
do cutting-edge work and not work that is of relevance to business and the
country. However, be it an organization or society, there are different people
performing different roles. For success, all these people are required to
discharge their duties. This includes everyone from the CEO to the person who
serves tea - every role is important. Hence, we need a mind set that reveres
everyone who puts in honest work.

Indians become intimate even without being friendly. They ask favors of
strangers without any hesitation. For instance, the other day, while I was
traveling from Bangalore to Mantralaya, I met a fellow traveler on the train.
Hardly 5 minutes into the conversation he requested me to speak to his MD
about removing him from the bottom 10% list in his company, earmarked for
disciplinary action. I was reminded of what Rudyard Kipling once said: A
westerner can be friendly without being intimate while an easterner tends to be
intimate without being friendly.

Yet another lesson to be learnt from the West is about their professionalism in
dealings. The common good being more important than personal equations,
people do not let personal relations interfere with their professional dealings.
For instance, they don't hesitate to chastise a colleague, even if he is a personal
friend, for incompetent work.

In India, I have seen that we tend to view even work interactions from a
personal perspective. Further, we are the most 'thin-skinned' society in the
world - we see insults where none is meant. This may be because we were not
free for most of the last thousand years. Further, we seem to extend this lack of
professionalism to our sense of punctuality. We do not seem to respect the
other person's time.

The Indian Standard Time somehow seems to be always running late. Moreover,
deadlines are typically not met. How many public projects are completed on
time? The disheartening aspect is that we have accepted this as the norm
rather than the exception. In the West, they show professionalism by embracing
meritocracy. Meritocracy by definition means that we cannot let personal
prejudices affect our evaluation of an individual's performance. As we
increasingly start to benchmark ourselves with global standards, we have to
embrace meritocracy.

In the West, right from a very young age, parents teach their children to be
independent in thinking. Thus, they grow up to be strong, confident
individuals. In India, we still suffer from feudal thinking. I have seen people,
who are otherwise bright, refusing to show independence and preferring to be
told what to do by their boss. We need to overcome this attitude if we have to
succeed globally.

The Western value system teaches respect to contractual obligation. In the
West, contractual obligations are seldom dishonored. This is important -
enforceability of legal rights and contracts is the most important factor in the
enhancement of credibility of our people and nation.

In India, we consider our marriage vows as sacred. We are willing to sacrifice in
order to respect our marriage vows. However, we do not extend this to the
public domain. For instance, India had an unfavorable contract with Enron.
Instead of punishing the people responsible for negotiating this, we reneged on
the contract - this was much before we came to know about the illegal activities
at Enron.

To quote another instance, I had given recommendations to several students for
the national scholarship for higher studies in US universities. Most of them did
not return to India even though contractually they were obliged to spend five
years after their degree in India.

In fact, according to a professor at a reputed US university, the maximum
default rate for student loans is among Indians - all of these students pass out
in flying colors and land lucrative jobs, yet they refuse to pay back their loans.
Thus, their action has made it difficult for the students after them, from India,
to obtain loans. We have to change this attitude.

Further, we Indians do not display intellectual honesty. For example, our
political leaders use mobile phones to tell journalists on the other side that they
do not believe in technology! If we want our youngsters to progress, such
hypocrisy must be stopped. We are all aware of our rights as citizens.
Nevertheless, we often fail to acknowledge the duty that accompanies every
right. To borrow Dwight Eisenhower's words: People that value its privileges
above its principles soon loses both. Our duty is towards the community as a
whole, as much as it is towards our families.

We have to remember that fundamental social problems grow out of a lack of
commitment to the common good. To quote Henry Beecher: Culture is that
which helps us to work for the betterment of all. Hence, friends, I do believe
that we can make our society even better by assimilating these Western values
into our own culture - we will be stronger for it.

Most of our behavior comes from greed, lack of self-confidence, lack of
confidence in the nation, and lack of respect for the society. To borrow Gandhi's
words: There is enough in this world for everyone's need, but not enough for
everyone's greed. Let us work towards a society where we would do unto others
what we would have others do unto us. Let us all be responsible citizens who
make our country a great place to live. In the words of Churchill: Responsibility
is the price of greatness. We have to extend our family values beyond the
boundaries of our home.

Finally, let us work towards maximum welfare of the maximum people -
Samasta janaanaam sukhino bhavantu. Thus, let us - people of this generation,
conduct ourselves as great citizens rather than just good people so that we can
serve as good examples for our younger generation.
Speaker : N R Narayana Murthy

Editors Guild plans to check paid news

One of my pet peeves is finally getting noticed by the media. The Times of India Property Times supplement is a prime example of planted 'paid' news stories. Lets see if this Editors guild directives makes any difference. Indian Express reports

The Editors Guild of India, an industry body representing senior media editors across the country, has declared the issue of “paid news” as its focal agenda for 2010. Expressing shock and serious concern over the news reports on the increasing menace of “paid news” in media, the guild, in its annual general meeting held Tuesday in Delhi, announced the setting up of an “ethics committee” that will draft a code of conduct on the issue.

“To begin with we will send out letters to editors across the country to mobilise consent on the steps to be taken to check this menace,” said Rajdeep Sardesai, president of the guild and editor-in-chief of IBN Network. The code of conduct will list the do’s and don’ts on the issue, said Sardesai.

The ethics committee that will draft the code will be headed by T N Ninan, editor of financial daily Business Standard. The other members of the committee include noted columnist B G Varghese, Sumit Chakravarty, editor of Mainstream, and Madhu Kishwar, editor of Manushi.