wiseman

Vishal,

Your argument is correct IF one bought BEFORE the 3X rise. But the volumes jumped in the market in 2007 mainly which was AFTER the 3X rise. So, the 1X decline has people holding property with some kind of loss or maybe at par.

To them, its still a loss, right?

cheers

jadhav_ravi

People who bouhgt in mid 2007 to mid-2008, felt they were underwater between Jan-July 2009. Since then, everybody has come out of the loss.

sreekys

I agree with Ravi that the best time indeed was around July 2009 last year when the market indeed showed a genuine correction. In fact it was the very bottom of the trough. I would like to state some data points to establish this. City of Joy in Mulund actually quoted 4500 psf though only for 2 days. Casa Univis the bhayadarpada project was quoting at a rate of 3500 psf. Today these projects are being quoted in the newspaper 80L and 65L respectively...thats a huge rise. So if you missed the bus in the 2003-04 era your chance was probably in mid 2009. Once the elections threw a clear majority there has been no looking back since then.

rajpatel

Price correction is sure..may be after Diwali...so guys wait and watch....after one year you can get 30% lower rate...thats is a fact and anybody can note down it...then call me after one year to say thanks....another recession is coming as Warren Buffet declared...then price may be even halved.

jadhav_ravi

It is a slow and bumpy recovery. There is no stimulus/shock to trigger any recession for next 3-4 years. After 3-4 years its will be again the bust pasrt of the boom-bust cycle.

MANOJa

I agree to what jadhav_ravi says. Recession is not around the corner. Right now it's boom time, which would be followed by slowdown in the boom time, then stagnation of prices for some period & if things do not change for the better at that time, price fall in certain pockets of RE.

wiseman

Jadhav,

Apart from Govt statistics, where is the recovery?

In the last 3 years (since April 2007) how much has your salary gone up? In the meantime, how much have prices gone up? Petrol, Vegetables, Rice, ...

Also, as far as I know most Industries out there (lets forget Tata Motors, REliance, Infy, etc who are riding on their cash hoard and cornering the market) are seriously cash strapped and either going sick or closing in large numbers.

What you say is recovery is mainly adriven by the following ...

1. Banks (in collusion with builders and retailers) loosening their purse to go back to dangerous levels of lending (given the NPAs and drop in purchasing power of people over time)

2. Builders jacking up prices in order to recover from their near-death experience back in 2008. Due to stimulus they have not got over their debt problem or inventory problem but merely postponed their crisis by a couple of years.

3. The Govt desperately using every dangerous and short-term expedient mean to keep the "recovery" story going

But, given the lack of volumes in RE we can safely assume that price increase is not based on real demand and only quotations used to scare some gullible people to buy in haste! Real growth happens when demand has healthy growth along with prices which is missing this time around.

Here is my take (and its been the same since 2008) ...

Back in 2008 I had posted my earliest post talking about home prices declining between 50% - 80% (in areas with the largest rise in prices) n the basis of my understanding that the coming depression was going to be the greatest in modern history. That fact is now commonly accepted (among the people who predicted the last recession) and they are now talking about this depression going on for quite a few years more.

What nobody banked on was that the FED and other Central Bankers would make it much worse by creating insane stimulus programs and blowing the bubble bigger. Now, with the second leg of the depression threatening to open up, they are talking of yet more Quantitative Easing.

Please note that this QE has not changed the original target but has merely postponed it because the global economic vehicle had got some more fuel to go a few more months (at a very heavy cost).

While the rest of the world experiences depression (including China as we shall see), India cannot escape substantial pain, especially given our own precarious Fiscal situation. We do not seem to have the pain because a lot of money from all over the world is currently parked here to squeeze out little returns from one of the few places in the world which has some steam left. Given the lack of any upside in the markets in the last 10 months, the FIIs are getting edgy about the India growth story. And to make it worse, the Govt is squandering this money away in populist, feel-good schemes, and in corruption like the CWG, etc.

The fact that major export segments like IT are facing serious hits to growth (except the top 10 companies which may have crossed the threshold and survive, most small/mid tier companies are facing significant difficulties which says a lot about where IT is going; apart from the fact that massive cuts in budget like BT - 50% - will inflict further hits on this sector). Shipping is a natural target as will be Textiles, Gems/Jewellery and Auto ancillaries. Much of the profit growth in the last 2 years could be credited to severe cost cutting and increased lending to stimulate demand, both of which do not last long (in fact most companies are done with cost cutting and this will show up in Sep Qtr results and more so on Dec results when the next leg of the depression takes hold.

You will soon see FII money start to leave in serious numbers as money always seeks safety when things go wrong. And Industrial and Services sectors will take significant hits. What the Govt did not tel you is that the big IIP numbers in first half of this year was due to Low Base Effect as well as Stimulus Spending Peaking simultaneously!!! Now we will see the other side of the story ... High Base Effect and lack of Stimulus AS WELL AS second leg of the Depression!

Once fear hits in big numbers we will see the same old stories about job loss and banks cutting down on lending and a natural contracting cycle.

This scenario is unfolding quickly starting in US and EU and will not take long to hit our shores (1-2 quarters from the time it starts in the US). It is specifically when job losses threaten that you will see prices unravelling. If this decline takes longer to run (as there may not be another QE like before to stop it and blow another bubble) then you will also see distress sales by new entrants in RE (people who bought in 2007-10) with high leverage and poor job security which could compound the problem.

The common man is not a fool. This is why, despite the MF industry trying to talk up the markets (unsuccessfully), MF NET flows are NEGATIVE and all the talk about midcaps and smallcaps and very long term investing is not holding any water with small investors. The stupidest thing to do is to put your money in smallcaps (highest risk of failure) and midcaps (decent risk of failure) especially when markets are in such a precarious state and this is what our geniuses in the investment business are recommending. Sure, in the next 25 years everything will go up. But will I be alive then?

I will go out on a limb to state that I believe that this will happen starting this Sep and probably hit peak in 2H 2011 - 1H 2012 coinciding with the peak in US RE declines. Probably the best thing to do today is to shun RE and stocks (even sell them) and get into Gol.d, silver and short term fixed income securities.

After a significant fall in prices, it would be best time to get into stocks and RE (especially agricultural land).

This is not a period to be overconfident. Its a period to be circumspect and very cautious.

Let us see.

cheers

jadhav_ravi

Meet the people rather than base you opinion on TOI/HT/NDTV

rajpatel

Agree with wise man. I add that American recession will surely affect India RE.
http://www.telegraph.co.uk/finance/e...n-in-2012.html

fundoo158

When the ppl feel that "ALL will be well" and nothing can go wrong...thats the time "overconfidence" has set in...A clear sign of reaching peak...

What r u talking abt...? 70 -110% increase for IT folks...Man u must be kidding...The ppl u know either r bluffing or have got exceptional raises...

Folks - 2008 & 2009...On an average ...there was no hike & no promotions..(I am talking about SWITCH companies). Market picked up in Nov -09. From Nov 09 - till date....if any1 has switched ...he would have seen 40-50% increment..(even in extreme cases)...and those who haven't have got paltry hike of 10-20% ....

So effectively..there r 2 sets ...those who switched have 13-14% hike p.a.

those who have sticked with their company have -5-6% p.a

Now coming to other industries...take banking, insurance,real estate etc etc....All these sectors are seeing growth because of IT...these folks have highest disposable income and most care free lot....

IT has been bane in a sense as it provides 30K per month to freshers who don't even know how to use that amount with no maturity....

I am running out of time...I will revert back on other points in some time...

Too much of anything is bad...

My prof(Chief Investment Strat of a major bank) says...High risk..high return statement used in incomplete....It should be high risk, high return, high losses...

IF we r seeing high return...its quite easy that we r having high risk...as vice versa is true...