Freedom at Midnight

On August 15th 1947 as the clock stuck twelve a.m Jawaharlal Nehru made a powerful speech exhorting India to wake up to the new world.

To quote Nehru said "At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long supressed, finds utterance. It is fitting that at this solemn moment we take the pledge of dedication to the service of Inida and her people and to the still larger cause of humanity."

On similar lines in the wee hours of April 26th, 2010, BCCI suspended Lalit Modi thereby singling out Modi as the single individual responsible for all the scandals which IPL is a part of.

On one day India attained freedom, on another the party of the powerful have tried their best to severe off their right hand hoping that this surgical procedure will be the best option under the given circumstances.

Everybody knows the levels of corruption in Indian politics and business. As followers of real estate we have seen massive amounts of speculative capital being parked in lands all over the country. There is no accountability since the law-makers and law enforcers are in cahoots with each other.

This is the India we awake to every day. The sooner we realize it the better it is. It is not going to get any better. Modi was made the scrape-goat since he got too big for his own shoes. The Indian political system operates at more nefarious level then even the Bhai's. I have no sympathy for Modi however I am convinced that he people against him are 10x more deep in the muck which Modi finds himself in.

Now imagine if a commission was setup to examine the land-holdings and source of funds of the builders.

That scandal will make Lalit Modi look like King Harishchandra.

Land sharks grab land in Alibaug

One of the most picturesque places in Konkan is now getting destroyed by the land mafia. At this rate there will be nothing left but concrete structures all over the coast. As usual the government does nothing. One more sad tale in a one of the most corrupt states in the country.

Fantastic interview with Mohanish Pabrai

Steve Forbes does a very god job in interviewing Mohnish Pabrai of Pabrai funds. Mr Pabrai's views Chinese and Indian companies with a dose of skepticism as he doesn't trust the accounting balances sheets and the audit process in these countries. Great viewing for anyone who is swayed by the morons on CNBC TV, whether in the US or India. Greed is universal. Here is the full video.

Infosys posts Q4 profit of 1600 cr; to hire 30,000

The hiring number looks ridiculously large. Getting 30,000 employees productive is a challenge of mammoth proportions. Its going to drive recruitment consultants crazy.

Tuhina Pandey and Mokshada Batra, April 13, 2010 (Bangalore)

Infosys, the second largest Indian IT company, kick started the earning season on Tuesday posting numbers quite aligned with the street's expectations.

Infosys on Tuesday reported a consolidated net profit of Rs 1600 crore for the quarter-ended March 31, 2010, a quarter-on-quarter growth of 2.6 per cent and year-on-year decline of 0.9 per cent.

The company registered revenues of Rs 5,944 crore for the March-ended quarter 2010, up by 3.5 percent quarter-on-quarter and a year-on-year-growth of 5.5 per cent.

But investors were, as always, more focused on the keenly awaited guidance for next fiscal which came in healthy at 16-18 per cent for dollar revenue growth but more muted in rupee terms at 9-11 per cent with earnings seen largely flat in FY11.

"We have done very well to what we thought we would. We have been able to take advantage of the opportunities in the market and grow faster due to our investments in capacity and capability building during the economic downturn", S Gopalakrishnan, CEO and MD said on Tuesday. "This quarter we added 47 new clients, the highest in recent times", he said.

Infosys also said it was looking at recruiting nearly 30,000 persons for this fiscal year including over 2000 from overseas.

In India it had already made 19,000 campus offers, T V Mohandas Pai, Member of the Board and Head-HRD and Education and Research said.

The company was planning to induct 5,500-6,500 laterals, he said while talking about Infosys' hiring plans. It was planning to recruit 1000 each for its China and US office and around 400 in Manila.

Infosys also saw one of the largest wage increase. "There has been a large wage increase for middle and junior level employees. In senior level there has been a 10 per cent increase in wages". Overall the average wage hike has been around 14-17 per cent, he said.

All expect Infosys to beat its indicated guidance as it has in the past but the margin contraction by 150 basis points next fiscal on the back of rupee appreciation and wage hikes, and rising attrition are causes for some concern.

An upbeat management at Infosys headquarters and the most widely used phrase "cautiously optimistic” is out of fashion for now. However, as of now it seems like "play it safe" is still the Infosys mantra.

Times of India now calls the bubble in Mumbai

Fools rush in where angels fear to tread. If I had bought in Mumbai in before 2006, I would just sell it and sit on the money. The profits are just too good to be true.

Beneteau yacht for a crore, but not a flat

Anil Singh | TNN

Mumbai: A brand new fourseater Cessna 172 aircraft,a new Beneteau 35-footer coastal cruiser yacht that can comfortably carry a family of six to Goa, three Mercedes ‘C’ class saloons; each of these can be had for one crore rupees. But raised eyebrows and blank stares is all you will get at the ongoing property expo at Bandra-Kurla Complex if you ask what you can get for this sum. “Please pick up the rate charts from that corner,’’ sales executives at several counters told this correspondent disinterestedly on learning that the budget was a mere Rs 1 crore. It was as if a slum dweller had strayed into a mall.

Nonetheless, if one is willing to visit every stall in the 14,000 sq ft air-conditioned hall put up by the Maharashtra Chamber of Housing Industry (MCHI), one can find apartments costing less than one crore in the municipal limits of Mumbai. Only that they may be in under-construction,standalone buildings on the outskirts of the city or in rundown localities. For instance, a 2BHK flat at Bhandup by Neptune builders measuring 1,000 sq ft (carpet area 700 sq ft) comes for Rs 67 lakhs. The 30-storey building, Flying Kite towers, behind Metro mall, is still under construction.

The more affordable options include a 2BHK flat at Mantri Park, Goregaon (E), off Film City road for Rs 70 lakh. A 1,160 sq ft 2BHK flat at Gundecha Altura, Kanjurmarg (W), LBS Marg, is going for Rs 76.5 lakhs. HDIL is selling 1BHK and 2 BHK flats at Galaxy Apts at Kurla East at 5,251 per sq ft. A 1,035 sq ft, 2BHK flat at ‘US Open’ by Nirmal Lifestyle at Mulund (W) will cost you Rs 85 lakh at Rs 6,552 per sq ft if you are willing to wait four years for possession.

According to builders specialising in SRA projects, it is possible to get an 800-sq ft carpet area flat for Rs 80 lakhs in Andheri. MHADA recently sold 2BHK flats with a carpet area of 700 sq ft at Versova for Rs 42.5 lakhs. However, at the MCHI expo, most of the 2BHK flats are tantalising out of reach if your budget is Rs 1 crore. For instance, a 2BHK at Ackruti Shikhar at Parsi Panchayat Road, Andheri (E), will cost you Rs 1.3 cr at Rs 12,500 per sq ft. A 2BHK flat with a carpet area of 775 sq ft at Kohinoor City, which has replaced the Premier auto works at Kurla, comes at Rs 1.18 cr. A 2BHK at Kalpataru Aura at LBS Marg, Ghatkopar, comes for 1.1 cr. Flats at HDIL’s Metropolitan at Andheri are being sold at Rs 11,500 per sq ft and a 2BHK with a carpet area of 765 sq ft costs Rs 1.31 cr. At Ajmera Pristine, Yogi Nagar, Eksar Road, Borivli (W), a 3BHK with an area of 1,595 sq ft can be had for Rs 1.43 cr.

Of course, all these flats come with amenities such as a swimming pool, a gym, a clubhouse, multi-level car parking and the like. But then, it would be much cheaper to live in a trailer, or for that matter in a Beneteau cruiser yacht bobbing on the waves.

Realty check: Rising rates thwart home buyers' plans

The bubble grows bigger day by day. Most buyers are priced out as the flats are sold to investors or with folks with pots of black money. I'm sure the journalist who wrote this article is facing the pinch as well. 13000 is Andheri is 3 times the rate in 2006. Add to that the usual bogus built-up rate the sq/ft rate is over 18,000. Just rent the same property for 30,000 rs and enjoy it. One blogger asked the opinion of SS and BB on Bangalore real estate. I would say that Bangalore real estate is priced right and if you have need an apt you can get one from 40L onwards though you might have to goto the outskirts for that. Apartment sizes are generally larger then Mumbai and it is not uncommon to find rates in the vicinity of 3,000-4,000. Also the built up loading is roughly 20%, unlike the 40%+ loading applied by the Mumbai crooks

DNA reports


Mumbai: If the projects displayed at the annual property fair by the Maharashtra Chamber of Housing Industry are any indication, purchasing a flat will be a daunting task for home buyers this year as well.

Buyers will have to contend with property prices, which have almost doubled, and a dwindling stock of ready properties in “affordable” areas beyond Kandivli in the western suburbs and Panvel on the harbour line.

Take for instance Athena and Astraea buildings being constructed in Rustomjee’s Urbania project near Majiwada Junction at Thane. In a year’s time, the price of the project has increased from Rs4,000 per sq ft to Rs6,143. Similarly, Gundecha Symphony in Andheri (West) has increased rates from Rs8,000 per sq ft to Rs13,000.

The rates were a huge disappointment for visitors. Lillu Asurlekar, a prospective home buyer, said, “I am looking for a flat in Andheri or Goregaon, but the prices are very high. I will now have to go beyond these areas. How can anyone shell out Rs4,000 a sq ft for a flat in Panvel?”

Barring Everest Developers, who offered a discount of Rs100 per sq ft, there were no discounts offered by any top ranking developers. In fact, for the first time, developers like Lokhandwala and K Raheja Universal did not participate in the property fair.

Who Is Jacking Up Property Prices In Mumbai?

Moneylife.in reports on issues much discussed on this blog for quite some time

By Sindhiya, Section Real Estate
Posted on Fri Apr 02, 2010 at 11:42:54 PM EST
A bunch of vested interests seem to be working together to fuel India's new property bubble, especially in expensive real-estate markets like Mumbai

Real-estate prices in India, which are already reaching for the stratosphere, are being further fuelled by a set of vested interests such as established brokerage firms and leading media houses through reports which exaggerate demand and suggest that realty prices may go up even further. Meanwhile, angry investors are struggling to get the regulators to act quickly and decisively to dampen the price escalation.

Recently, ICICI Securities released an all-India survey (across eight cities) which was headlined--`Affordability not a concern--healthy demand for homes at current prices: ICICI Securities survey'. A closer look suggests that things are not so rosy.

In fact, apart from vaulting prices, potential property buyers are outraged at how they are being cheated with regard to the actual usable area that is being sold to them. Moneylife has already reported on how the loading, which used to be anywhere between 20% (built-up) to 40% (super built-up) has now been pushed up to as high as 80% by several builders in Mumbai. With the government showing no signs of setting up a property regulator, builders and developers clearly feel confident that nobody will check their dubious selling tactics.

Another factor that has increased prices in Mumbai is the loading of taxes (in form of value-added tax (VAT) and service tax) on the already high price being forked out by consumers.

Source: moneylife.in Who is jacking up property prices in Mumbai?

Click On "Full Story" For More...

A research report circulated by ICICI Securities says that Ahmedabad has the highest inventory of 59%, Chennai has inventory of 10% while Mumbai has an inventory of 8% and National Capital Region (NCR) has only 1%. However, property experts are sceptical about these numbers. "It is a doctored report to show optimism. In fact, Chennai represents the least inventory and Mumbai & NCR the maximum. I am surprised to see such a false picture being painted by one of the credible brands," said Pankaj Kapoor, founder, Liases Foras.

For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies. A reader has written to point out that some of these headlines sound like "quotes from the builder".

A senior executive of a leading information technology firm has even been writing to the governor of the Reserve Bank of India, pointing to how vested interests are pushing up property prices.

Buy 1800 sq ft, Get 1000, Housing Industry Chamber Says Developers Digging Own Graves

SALEABLE AREA From 40 per cent of carpet area, jacked up to 60-100 per cent; housing industry chamber says developers digging own graves

Aspiring home buyers, already grappling with spiralling prices, have a new problem: developers are jacking up the sale able area in most new projects by "unrealistic proportions".

Developers sell flats not on the basis of carpet area (the net usable wall-to-wall area) but on the basis of sale able area, also known as super built up area, which includes facilities like staircase, lobby and lift as also add-ones like sun decks.

Traditionally, these spaces have been limited to a maximum 40 per cent of the carpet area. Of late, developers have increased this notional "loading" to 60 to 100 per cent of the carpet area. As a result, a flat-buyer paying for a 1,800-sq-ft flat may end up with only 1,000 sq ft floor area to live in.

"We have tried explaining to developers that we are digging our own graves by resorting to such practices. The MCHI (Maharashtra Chamber of Housing Industry), time and again, appeals to developers to stick to selling flats on carpet area basis but we cannot impose any regulation on them," said real estate developer Pravin Doshi, president of MCHI.

Two years ago, the government had approved a Bill, whereby any developer who does not sell flats according to carpet area is liable to face imprisonment for a period of three years, a rule that has failed to take off with no one appointed to oversee implementation.

Developers, on the other hand, get to maximise their profits as the BMC rules allow them to build parking lots, elevators and other frills free of FSI. Also, developers are allowed to build four-foot pro jections in the form of sundecks or flower beds in addition to building a balcony free of FSI and enclosing it as part of the flat.

"We had to discontinue giving permission for such projections as they were mostly misused. But recently the BMC has started sanctioning these once again," said an official from the building proposals department.

This is the very reason why balconies, which had mysteriously disappeared from facades of flats in Mumbai, have made a comeback in new projects along with fancier versions like sun decks, viewing gallery, planter's box and individual terraces.

All these were earlier charged at one-third the rate (per sq ft) for the flat, but now everything is sold at a flat rate. Brochures of new launches by Orbit Corporation, Dheeraj Realty, Wadhwa Developers, RNA Corp, Lodha Group, Oberoi Constructions, Indiabulls, DB Realty and a string of many others show a huge discrepancy between the actual usable space and the saleable space the buyer is made to pay for.

Real estate experts said there is an upper cap of 2 on FSI in the suburbs, but by constructing the components free of FSI and selling them at market rates, developers effectively get an FSI up to 3 or 4.

"In the absence of a regulator, loading is sort of an eyewash by developers to salvage high land costs.

So while per-sq-ft rates in Ghatkopar is Rs 9,000, with loading the rates are as good as being a high Rs 13,500. While actual rates in Bandra-Khar are Rs 20,000 to 25,000 per sq ft, customers end up paying up to Rs 45,000 per sq ft of the usable area due to huge element of loading," said property consultant Sandeep Sadh.

Customer continues to be the king

Realty sector in Mumbai: High prices hit demand

Realty sales in Mumbai Metropolitan Region (MMR) have fallen. The total area (m sq ft) sold in MMR in December 2009 as compared to September 2009
quarter, has come down. Prices have risen or remained flat in some cases. This shows that homebuyers are holding on to their demand and exercising restrain. Demand for big-ticket houses has been the worst hit.

As per the data compiled by Liases Foras, a real estate research agency, flats costing Rs 1 crore to 2 crore have seen a sharp fall in demand which is contrary to what many developers in the region have been saying. Homes costing over Rs 2 crore are also witnessing the same trend. This is in contrast to cities like Bangalore, Hyderabad and NCR, where sales have risen, thus proving again that Mumbai property market defies rules applicable to other markets. The main reason for the same being that prices have fallen in the above-mentioned cities whereas Mumbai based developers have been increasing their prices.


They must realise that ‘Customer continues to be the king’, at least for the time being.

Redeveloped Bandra-Khar buildings lack open space

I have seen many such buildings in Mumbai where balconies jet out to the road. There is no setback and all architecture norms are flouted. Now it appears these guys flout civil aviation norms where the maximum number of floors in the Bandra Khar, SantaCruz, Vile-Parle, Andheri (east) zone is set to be 8-9 floors. Bribe and get away is the age old mantra. Buyers need to be extra vigilant else they may find that their floor is illegally constructed. The best thing is to go for floors below 8 just in case something comes up in the future. Given the prices I wonder who is buying in these areas.

Locals fear that these redeveloped buildings which have their entry points on roads and footpaths could cause serious safety hazards. According to the rules, compulsory space of 15 feet should be left open around the buildings for free movement of people during emergencies.

“From the roadside, at least 4.5m of space should be kept open. If this is not the case, then there is a cause for worry. We first have to verify if the building line is from the inside. This varies from case to case and on how the plans are passed. If buildings are constructed under section 33(7), then relaxation of open space is found. It also depends on whether relaxations were allowed by the municipal commissioner or the SRA commissioner,” said Uday Tatkare, chief fire officer.

According to Right to Information (RTI) replies,these redeveloped buildings without compulsory open spaces are on Linking Road opposite Khatwari Darbar, at the SV Road and Khar Station Road junction, at the Waterfield Road (near Popley Jewellers) junction of 13th and 8th Road in Khar (W) and on 33rd Road.

When VL Joshi, chief engineer (Development Plan) was contacted, he said, “We will call the building proposal officials from H (West) ward and clarify this. We approve certain plans, but if DC rules are not followed we don’t give the occupation certificate.According to DC Rules 1991, the plot potential has increased for builders in Bandra.”

A builder on condition of anonymity said: “If builders have a commencement certificate for six floors, they construct an additional six illegally. Many new commercial and residential buildings have even flouted civil aviation norms.”

Over eight months, property prices at Powai in central Mumbai have almost doubled

Moneylife.in reports

Powai is a tony residential location in central Mumbai. Property prices here are reaching for the stratosphere. Rates have almost doubled over the past eight months. Recently, a two bedroom-hall-kitchen (BHK) of 985 square feet (sq ft) in Lake Homes, a residential complex—developed by Ekta World and Supreme Universal— sold for between Rs 90 lakh-Rs 95 lakh. During the slowdown (around nine months back), an apartment of the same size would have sold for Rs68 lakh. In 2007, when the real-estate segment was at its peak, this apartment would have sold for Rs78 lakh, revealed a source.

Prices have been steadily going up in this apartment complex (Lake Homes). Around a month back, the property was priced between Rs80 lakh-Rs85 lakh; four deals took place at these prices. “Prices have been rising quite rapidly. I have seen four-five deals happening at Rs80 lakh-Rs85 lakh—recently a deal took place between Rs90 lakh–Rs95 lakh,” said a resident of that area, who preferred anonymity.

Subbarao Warns of ‘Hard Landing’ as Goldman Expects Rate Rises

Bloomberg reports

By Kartik Goyal and Anoop Agarwal

March 23 (Bloomberg) -- Reserve Bank Governor Duvvuri Subbarao said India risks a “hard landing” if inflation isn’t reined in as Goldman Sachs Group Inc. and Morgan Stanley said last week’s interest-rate rise isn’t sufficient to curb prices.

“If we don’t tighten now and take action, the adjustment that we will have to make later on will be strong and we might indeed have a hard landing,” Subbarao told reporters in Bangalore yesterday. “Even if there’s a short-term trade-off between growth and inflation, in the medium term it is important that inflation is kept low in order to sustain growth.”

Big ticket land deals end 18-month

18 acres 570crores = ~31 crores per acre in Ghatkopar, with an FSI of 1:1 one can build 90,000 sq ft leading to a price of 3400 per sq ft. With an FSI of 1:2 that is down to 1700 per sq ft. Now with a construction cost of 1000 rs per sq ft, the cost basis is 2700 rs per sq/ft. These properties will be loaded up 35-40% , so a 1000 sq ft apt will actually have 600-650 sq ft living space . An apt with a cost price of 2700 x 600 = 16L will be sold for 10,000 Rs per sq/ft leading to a price of 1 Crore(1000 x 10000) , thereby generating a return of 600% to the builder. Great job guys in looting the Mumbaikar of every available living space.

Livemint.com reports


Raghavendra Kamath / Mumbai March 22, 2010, 0:23 IST

High-value land deals are back in the country’s commercial capital after an 18-month break. The first two-and-a half months of this year have already seen developers, with more cash at their disposal from rising home sales, close half-a-dozen deals worth Rs 4,000 crore.


Three large property deals have already been finalised this year in Mumbai. The largest among these is the bid to develop a 250-acre plot in Kharghar (Navi Mumbai) for Rs 1,530 crore. The deal was won by a consortium of Bhushan Steel and Subhash Chandra’s Essel Group from the City and Industrial Development Corporation of Maharashtra (Cidco).

This is the biggest land deal in Mumbai for the past 18 months.

Soon after came a Rs 571 crore deal by the Wadhwa group to buy 18.18 acres in the Ghatkopar suburbs from Hindustan Composite, and Sheth Developers bought Golden Tobacco Company’s property in Vile Parle for Rs 591 crore.


More mega-deals are expected. For instance, sources said Jet Airways, which bought land in the Bandra Kurla Complex, for Rs 826 crore around two years ago, is close to signing a deal to sell the land in a joint development project.

Despite facing setbacks in land auctions in 2009, government agencies like the Railway Land Authority (RLDA), National Textile Corporation (NTC) and Mumbai Metropolitan Region Development Authority (MMRDA) are planning to auction their land this year again.

Leading the pack is RLDA, which managed to sell only one plot last year due to the property slowdown. In the next financial year starting April, the authority is planning to raise around Rs 4,500 crore from selling 25 sites covering 172 acres.

“Overall participation from developers has also improved,'' confirmed P D Sharma, member, planning and infrastructure, RLDA, the nodal agency for developing surplus land of Indian Railways.

He said RLDA received 20 requests for qualification (RFQ) from well-known developers for its Sarai Rohilla plot and 14 expressions of interest (EoI) for the Bandra land. RLDA is having to re-auction the Sarai Rohilla plot because the previous winner could not pay the bid money.

Though NTC's last attempt to sell its Finlay Mill in Mumbai to the Lodha group is yet to materialise, it is planning to sell two or three more defunct Mumbai mills to developers.

Bolstering the upsurge in demand for commercial land is the rise in home sales. After a 25 to 30 per cent drop from their peak, home prices have gone up 15 to 20 per cent in the last nine months as demand returned to the residential market.

“Finished product (home) sales have gone up. As a result, developers are willing to pay higher prices and buy land now. They would not have paid such prices a year ago when home sales were low,'' said Anuj Puri, chairman of global property consultant Jones Lang LaSalle Meghraj.

“Developers’ liquidity positions are certainly better now than a year-and-a-half ago. We are seeing a lot of non-banking finance companies and mutual funds lending money to developers now,'' added Parry Singh, managing director of Red Fort Capital, an India-focused realty fund.

Most land buyers in Mumbai are planning to build premium residential apartments to make the most of their expensive investments.

“Today an average product does not sell. Only good products by good developers sell. A lot of developers are stuck with title issues, poor sales and so on,'' said Vijay Wadhwa, promoter of Wadhwa group.

Wadhwa has already pre-sold 0.5 million square feet out of 1.6 million sq ft of built-up space in the Ghatkopar residential project and Sheth Developers is planning premium residential apartments on its newly acquired land.

DLF, the country's largest developer, recently changed its plans to build an office-cum-retail complex into a high-end residential complex in Lower Parel because commercial rents have fallen sharply. DLF bought the 17-acre Mumbai Textile Mill land from NTC for Rs 702 crore in 2005.

Puri says developers’ interest and ability to pay have also improved because the floor space index (FSI), the amount of construction permitted on a given plot of land, is increasing in Mumbai. Though the base FSI is 1.33 in the Mumbai suburbs, re-development projects on defunct mill lands, slums and so on get a higher FSI.

This time, however, the revival in land deals is marked by caution. This was evident at the MMRDA's recent land auction when none of the developers turned up because the agency's quoted price of Rs 3 lakh a square metre was considered too high.

“Though markets have revived, deals are being closed only at reasonable levels. There is money to be made but developers have realised that they need to be cautious,'' said Red Fort's Singh.

Developers such as Wadhwa group who bought expensive land parcels, say they are focusing on executing their current projects than buying new land.

Private equity funds are also equally cautious. “Though we are looking at property deals actively, we are focusing on those in which risks have been taken out and proper approvals are in place,'' Red Fort's Singh added.

When we see such articles hitting the mainstream media, we know that the bubble is on its way to pop, sooner or later. Fast money never lasts and Mr Yadav will soon realize this. New York times link. Farmers owing land in outlying areas of all Indian metro's have experienced this windfall. Personally I have witnessed farmers become overnight millionaries in Pune, Bangalore and Nagpur. However as we all know that is just a fraction of the farming population in India.

On the other post of Persistent, that IPO has been oversubscribed 93 times. I would not be surprised if the stock doubles in a few days. Some people are going to be very rich, and others very poor.

NOIDA, India — Bhisham Singh Yadav, father of the groom, is stressed. His rented Lexus got stuck behind a bullock cart. He has hired a truck to blast Hindi pop, but it is too big to maneuver through his village. At least his grandest gesture, evidence of his upward mobility, is circling overhead. The helicopter has arrived.
Kuni Takahashi for The New York Times

At a wedding on Delhi’s outskirts, the groom, Kapil Yadav, and the helicopter his father hired.
Enlarge This Image
Kuni Takahashi for The New York Times

Girls protected their faces from the dust near Delhi as a helicopter carried the groom to his bride’s village less than two miles away.

Mr. Yadav, a wheat farmer, has never flown, nor has anyone else in the family. And this will only be a short trip: delivering his son less than two miles to the village of the bride. But like many families in this expanding suburb of New Delhi, the Yadavs have come into money, and they want everyone to know it.

“People will remember that his son went on a helicopter for his marriage,” a cousin, Vikas Yadav, shouted over the din. “People should know they are spending money. For us, things like this are the stuff of dreams.”

The Yadavs are members of a new economic caste in India: nouveau riche farmers. Land acquisition for expanding cities and industry is one of the most bitterly contentious issues in India, rife with corruption and violent protests. Yet in some areas it has created pockets of overnight wealth, especially in the outlying regions of the capital, New Delhi.

By Western standards, few of these farmers are truly rich. But in India, where the annual per capita income is about $1,000 and where roughly 800 million people live on less than $2 a day, some farmers have gotten windfalls of several million rupees by selling land. Over the years, farmers and others have sold more than 50,000 acres of farmland as Noida has evolved into a suburb of 300,000 people with shopping malls and office parks.

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.”