NRIs watch out. Buy if you want to live, if you want to *invest* there are far more safer avenues.

Below article from economic time today.

IT slowdown & consumption: Fewer jobs and smaller pay hikes force techies to cut back spends - The Economic Times

In the past six months, 30-year-old Rajesh Prabhu has gone from considering buying a new flat to mulling the idea of moving back in with his retired parents. In that time, the software engineer by training has seen his testing job, which paid him nearly Rs 25 lakh annually, disappear, replaced by a BPO job that pays him Rs 15 lakh a year.


Burdened by loan payments for his car and a weighty credit card bill, Prabhu is looking to cut corners. In the past three months, he has passed up countless offers for parties, a holiday to Southeast Asia with friends and has almost given up eating out.

The global economy is sluggish and the $110-billion Indian IT industry is in the throes of an upheaval. There is little chance that the likes of Prabhu will have it easy anytime soon. A pall of gloom hangs over many of India's three million IT executives. Better paid than their peers in less glamorous industries, IT workers were once big and easy spenders, contributing to a substantial chunk of India's multi-billion dollar consumption story. But now, they are ruthlessly cutting back on discretionary spending.

Their pain is also felt by a range of consumerfacing industries that had profited from IT-driven consumption. "People in the IT industry had managed to couple desirability with affordability," says Ankur Bisen, head of consumer and retail for Technopak, a management consulting firm. Now, some of this desirability has come unstuck. Faced with singledigit pay hikes - at best - these employees are cutting back spends.

Consumers Trade Down

Arindam Chakraborty, 31, project manager with a Gurgaon-based technology services and consulting company, is an avid gamer. He has a collection of about 90 PlayStation 3 (PS3) games, with titles ranging from Madness Returns, Army of Two to Alone in the Dark. Each game sets him back by about Rs 3,000 and, till recently, he bought about three new games a month. Now, it's one game in three months.

"It's tough to cut corners on what you like, but that's the reality today," says Chakraborty. "The mood is sombre. Job portals are running dry and the fear of pink slips hangs like the Damocles Sword." It's a far cry from the times he got a 70% increment back in 2004 and an average of 12%-15% in recent years. "Now, it's down to 6%-8% a year."

The bigger fear is ending up on the 'bench' - the term used by IT companies to describe employees on their rolls, but without project work. "You can't be longer than two months on the bench unless you are an exceptional talent," says Chakraborty, recalling how a friend of his was asked to go as he was on the bench for two months. "Naturally, I've become conservative in spending. I bought a Honda City a couple of years back. Now, whenever I'm behind the wheel, I kick myself for not having bought a cheaper, smaller car," he says.

Like Chakraborty, there are many others feeling the pinch. Ravi R is a 26-year-old IT professional at a mid-tier firm in Bangalore. Ravi, like any other well-paid IT employee, bought a car six months ago, for which he pays an EMI (equated monthly instalment) of Rs 15,000. His wife is earning too, but without annual increments of 25%-30%, their finances are struggling to keep pace with their lifestyle.

For the past few months, the couple have wanted to move out of their current locality, Marathahalli, because of a spurt in crime, but hesitated after poor hikes. "I want to move into a gated community... (but) we have to shell out Rs 25,000 (compared with Rs 15,000 now) as rent and another Rs 1 lakh as deposit," he says. And now, there is also the fear of a job loss.

This fear is silently reverberating across IT hubs in Bangalore, Gurgaon and Hyderabad - and trickling down the chain. Hotels and restaurants are reporting thinner attendance, malls lower footfalls and realtors are finding it tougher to get customers. The IT worker was once a prime customer for the local realty broker. No longer.

Says Vikas Bhargava of Iris Realty Services, a real estate broker in Gurgaon: "Overall (property) transactions have dropped by 40% in the past one year. Speculators lifted the market beyond sustainable levels. Genuine buyers are there now, but at such high costs (a 3BHK for about Rs 1.5 crore in central locations) and jobs uncertain, there are very few buyers." Investors who made purchases just two years back also want to exit for two reasons - little appreciation in value and difficulty in paying steep EMIs.

As the affluence of real estate buyers from the IT industry has waned, so has their influence on the market. In his office in Ulsoor in central Bangalore, Ashish Purvankara, joint managing director of Purvankara Properties, says that today, barely 37% of his business comes from clients in the IT sector in Bangalore, compared with nearly 70% three or four years ago. While other sectors such as engineering and manufacturing have picked up some of this slack, there is a slowdown in the air - there's a rush to buy budget housing from its Provident Housing unit and sales are sedate in the crore-plus market.

As companies hold back on hikes and incomes are strained, it is the heavy purchases such as real estate that are the worst hit. Amit Bansal, 37, sales head with an IT-telecom services company in Mumbai, put together money to buy a house, but has now deferred it. "I'm not certain about the future. And I do come across lot of distress sales - people who bought property in the past three or four years, who are now willing to sell at original price as they need the cash," he says. "Besides, I can't risk a high EMI. I will wait for another two years."



x09

'New Normal' In IT

The last 12 to 18 months have been a difficult time for the likes of Bansal, who had become used to big pay hikes and bonuses, and lavish spending, when the industry was growing at 30% annually. That story may be unravelling. Last year, the IT industry grew barely 10% (compared with 19% two years ago) and hired 200,000 people, 20% less than two years ago.

Anecdotal evidence suggests that employees are taking longer than companies to adjust to the 'new normal'. "People used to think that it is easy to become wealthy in the IT industry and over-commit based on this assumption," says Srinivas Kandula, HR chief for the 28,000-strong iGate. "They have now seen friends and colleagues struggle and today everyone wants to be cautious." Employees too need to adjust to this changed landscape.

The industry has been caught in the midst of a two-phase transformation. One, it is pursuing non-linear opportunities, which require fewer employees and is causing companies to go slow on hiring. Second, as it struggles in a global slowdown with reduced spends, it is paying employees smaller hikes. For example, industry leader TCS will pay offshore increments of 7%, a long way from the days of robust double-digit hikes. Others such as HCL Technologies, the fifth-largest player, have actually decreased their overall headcount over the past year as the business model has taken hold.

"Earlier, employees looked at IT jobs as an entitlement - you do an engineering course and are assured of a job," says Som Mittal, president of Nasscom, the industry grouping. "That's no longer the case. Technology changes are rapid. There are newer opportunities in data analytics, cloud services, mobility and plenty of new jobs that require new skills. Employees need to re-skill and evolve."

Deferred Gratification

As they struggle with this re-invention, they are putting consumption on the backburner. Manish Advani, 36, a project manager, used to eat out eight times a month, spending Rs 18,000-20,000. Now, it's down to four times a month, spending about Rs 12,000. While he is keen to upgrade his five-year-old Chevrolet Aveo, Advani says, he won't rush the decision, given the tough business environment.

For Sabrina Sharma and her husband Arjun Sharma (she with a leading IT services company and he with a travel portal), this summer holiday might be at a drivable destination from Gurgaon, not an overseas one. "In 2008 it was Johannesburg, 2010 was in Mauritius, 2012 was in London. Now, at most to Goa or more likely something that is drivable from Gurgaon," says Arjun.

"International airfares have gone up (almost 30% in the past one year), increments are down and there's no talk of performance bonuses. We are already eating out less, and with an EMI of Rs 60,000 to pay for a property bought two years back, if either of us gets the pink slip, we'll be at sea."

In Bangalore, consumer-facing brands are struggling to shore up sales as consumers desert stores and defer purchases. There's been a glut in supply too, with around 1.8-2 million square feet of new retail space. With fewer people visiting malls, rentals have fallen 13%-43% in some areas in Bangalore, according to Cushman and Wakefield, a real estate consultancy.

According to Asipac, another real estate consultancy, Bangalore will have 27.6 million square feet of operating space, an oversupply of 141% over the next two years. Hyderabad, too, is facing a supply glut, with 18.9 million sq ft of mall space, leading to a potential 114% oversupply by 2014. As a result, in the next year or so, rentals are expected to climb as little as 4% in Bangalore, Hyderabad and Chennai.

In Bangalore, Whitefield, one of the oldest hubs for the IT industry, for example, had just one mall until recently. Today, there are around four and the strain is beginning to tell. Even on the traditional high streets of Bangalore, brands have moved out, faced with lower sales.

Coming Down From A High

Over the past two decades, the outsourcing sector has been a sponge for engineers, hiring about half of the 400,000-odd engineers who graduate annually. As the industry has grown from over $6 billion in 2002 to over $110 billion in 2012, the industry has hired thousands of engineers, paying them generously (and training them for weeks) to keep the wheels running smoothly.

Entry-level software engineers were paid as much as 50%-100% more than their peers in other industries. "The IT industry expanded the consumption basket from six basic goods (with a chunk of it in real estate) to some 20 items," says Bisen of Technopak. "In the past two years, with slowing growth and a squeeze on margins, people in the IT industry have begun to reduce and downgrade their consumption."

J Suresh, managing director of Arvind Retail, clearly sees this trend within his portfolio. For one, the business of Megamart, Arvind's budget apparel chain, has flourished as other brands have declined by at least 2%-3% in key IT hubs. "We opened 150 in the past year and will open only 100 this year," he says. "Bangalore has been clearly hit by this consumption crunch." Despite this, Megamart's sales have grown, as consumers alter their buying preferences in lean times.

In Bangalore, Manu Chandra, the founder of restaurants such as Monkey Bar and LikeThatOnly, has had a ringside view of this decline. As techies cut back on consumption, he says there has been a 15%-20% drop in sales across restaurants in Bangalore. Coupled with other factors such as high rents and soaring costs of staple food items, this has been bad news for restaurateurs: a dozen or more joints, including Sunny's in Indiranagar, Manchester United Bar and one of the outlets of Tangerine, an upscale continental restaurant, shutting shop in the last year. "There has been a clear decline in bookings from the IT crowd... and without strong volumes, it's hard to build a profitable business," Chandra says.
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  • Mr.Family Guy,

    Ever since you started in IREF, i see majority of your posts trying to discourage people to invest in real estate.

    Just curious to know, any reasons?

    (Don't tell me you are advising people to be cautious, every one is supposed to do their due diligence)
    CommentQuote
  • Originally Posted by bhavesha
    Mr.Family Guy,

    Ever since you started in IREF, i see majority of your posts trying to discourage people to invest in real estate.

    Just curious to know, any reasons?

    (Don't tell me you are advising people to be cautious, every one is supposed to do their due diligence)

    It's the exact same reason that you are telling me not to tell you.

    My friends in Amrika and London keep asking me to see apartments for them. I post news for the benefits of people like them.

    IT guys have been on a spending spree in RE for far too long without basic economic sense. Even if my advice helps save one guy, I would consider these threads time well spent.
    CommentQuote
  • The music had to stop some day. Looks like the countdown has already begun. There is absolutely no economic sense in the pace at which Bangalore (or other cities) has grown in the last 10-12 years. Those who have invested recklessly now have the 'Optimism Bias' where as those who have gotten used to the posh lifestyle during the boom years have the 'Normalcy Bias' thinking that things are going to improve some day. Improve it will but unfortunately not without causing massive disruption in the lives of many people.

    Further down the line after 10 years if people looked back to identify one single element that killed IT in India it will be this real estate mania. At the moment, the economy is locked in a stalemate. With ever increasing RE prices, the IT in Bangalore is no longer viable. Employees want hikes to beat the inflation but Real estate surpasses it soon enough. The next decade or 2 is going to belong to Manila and other cheaper SE countries. Even they will have their day some day in the future but that's a topic for some other day.

    Whether you are a investor in RE or not, you only need to take a step back and take a rational look to get the bigger picture. Was it all sustainable in the first place? Then why was this unrealistic growth quarter after quarter, year after year. The arithmetic simply did not add up.

    There wasn't that kind of "real" money to begin with. It was all borrowed from thin air, with a promise to paying back in the future but that "future" now turns out to be uncertain. It was in fact counterfeit credit. Banks have been borrowing short to lend long. People deposit their money for 2-5 years but the banks lend that money on a 20 years mortgage. This asset liability mismatch is bound to create problems in the future. With the spineless assumption that the good times of IT were going to last forever people went into a state of denial. Government did not have a clue to understand the situation, banks wanted people to take on more counterfeit credit in order to declare fictitious paper profits based on the debt collateral and builders wanted to corner the market in connivance with the banks, media and the politicians. Now that the IT boom is fading, it is the time to live through the hangover. Don't worry, the smart money of the speculators at the top of the pyramid will escape in no time while the speculators at the bottom end of the market will be the one left with the baby in their hands. Those smart speculators know when to enter and exit the market. They know how to smell it from a distance.

    The basic premise of the ever-increasing house prices was the root cause of this problem, which economically does not make sense but the ponzi, classic economics of Keynesianism with debt at its core gave the central planners the wrong notion of growth.

    When every commodity fluctuates in prices why should the real estate be an exception? As I said in an earlier thread why should a pile of bricks be considered a cash cow? House is a basic necessity. If you see that as a speculation medium you deserve everything that's heading your way.

    And I keep hearing this argument about ever increasing population coming from the villages to the cities putting further upward pressure on the house prices. This is absolute nonsense. Besides demand and supply, affordability is also a factor. Otherwise we wouldn't have had millions living in the slums. Even they want to have a house of their own. At the current prices, availability of credit is the lifeline to the RE. When that vanishes, game over. Which bank will lend you when they know people are on the verge of losing their jobs? They do not want NPA on their balance sheet do they?

    I can only empathize with those who have bought a flat for their use at the height of the market but were unaware of these market mechanics. If people had paid a little more attention to what had happened in the West back in 2006-07 many would have survived. At least it would have contained the property bubble in India. Now the horses have long bolted.

    With the kind of economic mess the West is in currently I am yet to figure out where the next growth cycle is going to come from. The domestic IT demand is minuscule. Nobody can expect the kind of money companies were making so far. All the ongoing recovery talk in the West is nothing but "talking up the titanic". None of the problems surfaced back in 2007-08 have been resolved. Instead they have gone on the hyper-drive in creating more debt. Pouring more petrol to douse the inextinguishable fire. US Fed printing "money" does not create wealth. In a irredeemable paper currency paradigm (i.e. fiat money), debt does not vanish. It can only change hands. The liability of the currency in hand ultimately lies with the central bank that issued it. So, more credit expansion is not the solution. So all the talks of Chidambaram increasing liquidity in the coming months is nothing but hogwash. Nobody will take on more debt if they are already saturated. If people do not borrow there is diddly squat the governments can do about it. Massive deflation in RE prices is in the air. To make any noticeable difference all the government can do is credit 1 crore each in every person's bank account like a Santa on the Christmas night but that will lead into hyperinflation (ask Gideon Gono what happened in Zimbabwe few years back).

    Those who want to buy an apartment and have genuine capacity, do not want to get into the waters in this climate where as those who already have debt can not get more as banks won't lend to them, so this whole exercise of easing liquidity is going to be a pointless exercise by Subbarao.

    So far the builders were facing the liquidity crunch but soon there is going to be a time when banks won't trust each other leading into the liquidity crisis in the overall economy. That time the over-leveraged borrowers and the builders will hit the insolvency crisis. If it can happen in Spain and Dubai why it can't happen in India? After all the principles of economics are universal.

    Consider a scenario where one bank does not understand the real worth of assets (i.e. debt/mortgages) of another bank it wants to do business with. Why would it want to make business with it in that case? More job losses of the mortgagees will lead to more bad loans which will bugger up the banks balance sheets. So how can they be in business? The confidence in the system vanishes. In fact that's how Bear Sterns, Lehman and Northern Rock went belly up. There are plenty more skeletons in the closet. They will come out eventually. So my question is, why it can't happen in India when the banks are so highly leveraged and the assets they are holding are slowly losing value?

    Buckle up for the deflationary spiral and enjoy the ride.
    CommentQuote
    3 Comments
  • FamilyGuy has put the facts (actually exerts from an article in the paper). Who all are in IT industry must have realized its actually true. Many of the IT giants have lost big market share in Europe and US. Also some have changed their business model to off shoring as much as possible of their onsite works. Due to financial crisis many of international banks wants to cut down their operational cost and encouraging offshore to India with straight forward reason, "give work to those who are ready to as low as possible". Result, margins for IT companies have shrunk substantially. For obvious reasons it will reflect on every employee and thus we hear 'no hikes', 'no bonus', 'no promotion' etc. etc.

    This all will eventually affect individual financial planning and risk taking. Inflations have gone higher but not the wages. Cost of living, petrol and other basic needs are costly.

    Many of these IT industry are service based industry which works completely on demand & supply and margins. If these are affected it straight a way reflect from top to bottom.
    CommentQuote
  • Everybody easily blames IT people. Our IT people are the real lower middle class people. Only those who go to onsite atleast make enough money to buy some property without loan. Those without onsite oppotunities or limited opportunities remain loan emi slaves for another 10 to 20 years.

    However discretionary spending like travel, rentals, big cars, eating out frequently, frequent shopping etc. Definately is a bad habit by IT people. For this blame work pressure and office politics which creates stress and forces them to spulrge on other activities to ease tension.

    Blame the policies of big IT companies and MNC who have no clarity on salary and recruitment policies. The founders of great IT industry have already made crores for another 3 to 4 generations, they will sleep now. Rat race will continue.
    CommentQuote
  • everybody has to take decision based on his own strengths and weaknesses. also nothing moves in one direction only. so still someone who has the wherewithal shudlook for opportunities and others can wait for the right time.
    CommentQuote
  • Originally Posted by BullBearDude
    The music had to stop some day. Looks like the countdown has already begun. There is absolutely no economic sense in the pace at which Bangalore (or other cities) has grown in the last 10-12 years. Those who have invested recklessly now have the 'Optimism Bias' where as those who have gotten used to the posh lifestyle during the boom years have the 'Normalcy Bias' thinking that things are going to improve some day. Improve it will but unfortunately not without causing massive disruption in the lives of many people.

    Further down the line after 10 years if people looked back to identify one single element that killed IT in India it will be this real estate mania. At the moment, the economy is locked in a stalemate. With ever increasing RE prices, the IT in Bangalore is no longer viable. Employees want hikes to beat the inflation but Real estate surpasses it soon enough. The next decade or 2 is going to belong to Manila and other cheaper SE countries. Even they will have their day some day in the future but that's a topic for some other day.

    Whether you are a investor in RE or not, you only need to take a step back and take a rational look to get the bigger picture. Was it all sustainable in the first place? Then why was this unrealistic growth quarter after quarter, year after year. The arithmetic simply did not add up.

    There wasn't that kind of "real" money to begin with. It was all borrowed from thin air, with a promise to paying back in the future but that "future" now turns out to be uncertain. It was in fact counterfeit credit. Banks have been borrowing short to lend long. People deposit their money for 2-5 years but the banks lend that money on a 20 years mortgage. This asset liability mismatch is bound to create problems in the future. With the spineless assumption that the good times of IT were going to last forever people went into a state of denial. Government did not have a clue to understand the situation, banks wanted people to take on more counterfeit credit in order to declare fictitious paper profits based on the debt collateral and builders wanted to corner the market in connivance with the banks, media and the politicians. Now that the IT boom is fading, it is the time to live through the hangover. Don't worry, the smart money of the speculators at the top of the pyramid will escape in no time while the speculators at the bottom end of the market will be the one left with the baby in their hands. Those smart speculators know when to enter and exit the market. They know how to smell it from a distance.

    The basic premise of the ever-increasing house prices was the root cause of this problem, which economically does not make sense but the ponzi, classic economics of Keynesianism with debt at its core gave the central planners the wrong notion of growth.

    When every commodity fluctuates in prices why should the real estate be an exception? As I said in an earlier thread why should a pile of bricks be considered a cash cow? House is a basic necessity. If you see that as a speculation medium you deserve everything that's heading your way.

    And I keep hearing this argument about ever increasing population coming from the villages to the cities putting further upward pressure on the house prices. This is absolute nonsense. Besides demand and supply, affordability is also a factor. Otherwise we wouldn't have had millions living in the slums. Even they want to have a house of their own. At the current prices, availability of credit is the lifeline to the RE. When that vanishes, game over. Which bank will lend you when they know people are on the verge of losing their jobs? They do not want NPA on their balance sheet do they?

    I can only empathize with those who have bought a flat for their use at the height of the market but were unaware of these market mechanics. If people had paid a little more attention to what had happened in the West back in 2006-07 many would have survived. At least it would have contained the property bubble in India. Now the horses have long bolted.

    With the kind of economic mess the West is in currently I am yet to figure out where the next growth cycle is going to come from. The domestic IT demand is minuscule. Nobody can expect the kind of money companies were making so far. All the ongoing recovery talk in the West is nothing but "talking up the titanic". None of the problems surfaced back in 2007-08 have been resolved. Instead they have gone on the hyper-drive in creating more debt. Pouring more petrol to douse the inextinguishable fire. US Fed printing "money" does not create wealth. In a irredeemable paper currency paradigm (i.e. fiat money), debt does not vanish. It can only change hands. The liability of the currency in hand ultimately lies with the central bank that issued it. So, more credit expansion is not the solution. So all the talks of Chidambaram increasing liquidity in the coming months is nothing but hogwash. Nobody will take on more debt if they are already saturated. If people do not borrow there is diddly squat the governments can do about it. Massive deflation in RE prices is in the air. To make any noticeable difference all the government can do is credit 1 crore each in every person's bank account like a Santa on the Christmas night but that will lead into hyperinflation (ask Gideon Gono what happened in Zimbabwe few years back).

    Those who want to buy an apartment and have genuine capacity, do not want to get into the waters in this climate where as those who already have debt can not get more as banks won't lend to them, so this whole exercise of easing liquidity is going to be a pointless exercise by Subbarao.

    So far the builders were facing the liquidity crunch but soon there is going to be a time when banks won't trust each other leading into the liquidity crisis in the overall economy. That time the over-leveraged borrowers and the builders will hit the insolvency crisis. If it can happen in Spain and Dubai why it can't happen in India? After all the principles of economics are universal.

    Consider a scenario where one bank does not understand the real worth of assets (i.e. debt/mortgages) of another bank it wants to do business with. Why would it want to make business with it in that case? More job losses of the mortgagees will lead to more bad loans which will bugger up the banks balance sheets. So how can they be in business? The confidence in the system vanishes. In fact that's how Bear Sterns, Lehman and Northern Rock went belly up. There are plenty more skeletons in the closet. They will come out eventually. So my question is, why it can't happen in India when the banks are so highly leveraged and the assets they are holding are slowly losing value?

    Buckle up for the deflationary spiral and enjoy the ride.

    It can and will happen in India too.

    People say India RE is different than other Countries RE. I disagree totally. It's the same with an Indian accent.
    CommentQuote
  • Originally Posted by sandym
    FamilyGuy has put the facts (actually exerts from an article in the paper). Who all are in IT industry must have realized its actually true. Many of the IT giants have lost big market share in Europe and US. Also some have changed their business model to off shoring as much as possible of their onsite works. Due to financial crisis many of international banks wants to cut down their operational cost and encouraging offshore to India with straight forward reason, "give work to those who are ready to as low as possible". Result, margins for IT companies have shrunk substantially. For obvious reasons it will reflect on every employee and thus we hear 'no hikes', 'no bonus', 'no promotion' etc. etc.

    This all will eventually affect individual financial planning and risk taking. Inflations have gone higher but not the wages. Cost of living, petrol and other basic needs are costly.

    Many of these IT industry are service based industry which works completely on demand & supply and margins. If these are affected it straight a way reflect from top to bottom.

    Totally. I just am completely amazed by the mad big purchase people get into when they return from onsite. Some manage to do them without an onsite on loan ;) What about saving for the rainy day. Savings then would have helped them survive the coming onslaught.
    CommentQuote
  • Originally Posted by iforpunto
    everybody has to take decision based on his own strengths and weaknesses. also nothing moves in one direction only. so still someone who has the wherewithal shudlook for opportunities and others can wait for the right time.

    Agree in principal.

    Limited point is, even if you have the money, you should invest in what makes sense. Many don't believe RE makes sense now.
    CommentQuote
  • This isn't new. I have experienced the same thing about 5 years ago.
    CommentQuote
  • Once Bernanke steps down in Jan 2014, the music will stop. Lack of easy liquidity will cause Euro to break up first leading to collapse in emerging markets and outflow of all money to the USD. Gold will spike again. India's CAD will become unsustainable and RBI will be forced to do rapid rate hikes which will give a shock to the Debt markets. Real estate will then crash like a pack of cards.
    CommentQuote
  • Invest in what that makes sense??

    Originally Posted by familyguy

    Limited point is, even if you have the money, you should invest in what makes sense..


    Well, the real question faced by those that have the latitude to invest is - WHAT TO INVEST IN?!!

    1. Fixed Deposits: Parking money in Fixed deposit is like earning negative returns. With real inflation at double digits, INR is losing value quick & fast. I'm not talking in terms of fancy apartment prices, but basic essentials like Healthcare/Hospitalization, Travel, Electricity, Fuel, even Food & Clothing etc. If you take a broader view at this, this is nothing but the Government stealing from the hands of the salaried or retired middle class - typically people that park money in FDs. No doubt, people have woken up to this reality and the deposit figures are coming down.

    2. Gold: Bigger culprit than real estate. Dead investment. Large potential for HUGE downside given the sharp curve/height it has reached in a short span of about 5 to 6 years.

    3. Business: Given the red tape and milching attitude of every single entity, be it private or government, business is not a fair game. Try talking to people that have tried investing in business. They'll tell how much of a cheat-all game this is. Franchises etc. So many ponzi. The genuine ones cost a mountain.

    4. Farming: More than 90% of the population of India have an Agricultural descent, but with modern jobs and urbanization and the prestige associated with not touching mud, people have moved away from this. Few could be second generation, but most of us are first generation dropouts. Having gotten all comfy and fragile with moden jobs, do you really have it in you to sweat it out? Today there are far too many consumers than producers. The demand supply economics is catching up. Quite honestly, I see this as the only segment with potential to invest, sow and reap (with hard work, that is).

    5. Ponzi Schemes like Chit funds: :D. Period.

    6. Self-Education and self-improvement: I see this as a good option as long as jobs stay and there's ROI. But got to be careful here too... If there are not too many job profiles requiring top notch education, many could end up in the Over-Educated Under-Employed loop.

    7. ANY OTHER INVESTMENT OPTION? Please pitch in.
    CommentQuote
  • US Fed is already talking about QE exit policy. The thing with QE(Quantitative Easing) is that it is like drug addiction. You need more and more doses of liquidity to just maintain the status quo, leave alone growth. Bank of England governor recently told British Parliament that QE is now like a painkiller(palliative) not an antibiotic(cure). For those who dont know, if cancer is in the 4th stage(terminal), then there is palliative medicine(just to reduce the pain, since there is no cure and death is certain).
    So, this money printing is running out of steam and the endgame is arriving soon. Almost all top global economists are unanimous that the coming crisis will far surpass the 2008 crash. 2008 was merely one bank(Lehman Bros) that collapsed, this time the whole countries(Eurozone) will collapse.
    CommentQuote
  • Familyguy, Bullbeardude

    After a long time, seeing some good value discussion on the forum. The whole system - media, politicians and even people- hide the reality and portray hype to promote their vested interest. Infact I am shocked that Economic Times has put up this article. ET and ToI are the biggest players in the RE market. If they are saying, then things must be even worse.

    Under any circumstance, 1cr is a big amount of money. People talk of it as small change and builders quote 1-1.5 cr for a piddly apartment with no real value. In a previous post, I had mentioned the question which each and every "investor" or end user should ask - If one buys an apartment at INR x today and the registration charge is y, can he/she sell it tomorrow (the next day) at x+y to at least recover the costs. The answer - at today's rates - is NO. People are buying blindly on leverage with no long term vision. 15-20 years is a long time - not only can things change from a country perspective but also from an individual perspective. Taking a 80L-1C debt for such a long time is a complete nightmare situation. A single event can wipe you out forever.

    As regards investment, blue chips or top rates Mutual funds are better. They give 8-10% tax free return but considering the risk in RE, it is pretty ok since there is no loans involved and can be exited easily.
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  • Originally Posted by aviiii
    Well, the real question faced by those that have the latitude to invest is - WHAT TO INVEST IN?!!

    1. Fixed Deposits: Parking money in Fixed deposit is like earning negative returns. With real inflation at double digits, INR is losing value quick & fast. I'm not talking in terms of fancy apartment prices, but basic essentials like Healthcare/Hospitalization, Travel, Electricity, Fuel, even Food & Clothing etc. If you take a broader view at this, this is nothing but the Government stealing from the hands of the salaried or retired middle class - typically people that park money in FDs. No doubt, people have woken up to this reality and the deposit figures are coming down.

    2. Gold: Bigger culprit than real estate. Dead investment. Large potential for HUGE downside given the sharp curve/height it has reached in a short span of about 5 to 6 years.

    3. Business: Given the red tape and milching attitude of every single entity, be it private or government, business is not a fair game. Try talking to people that have tried investing in business. They'll tell how much of a cheat-all game this is. Franchises etc. So many ponzi. The genuine ones cost a mountain.

    4. Farming: More than 90% of the population of India have an Agricultural descent, but with modern jobs and urbanization and the prestige associated with not touching mud, people have moved away from this. Few could be second generation, but most of us are first generation dropouts. Having gotten all comfy and fragile with moden jobs, do you really have it in you to sweat it out? Today there are far too many consumers than producers. The demand supply economics is catching up. Quite honestly, I see this as the only segment with potential to invest, sow and reap (with hard work, that is).

    5. Ponzi Schemes like Chit funds: :D. Period.

    6. Self-Education and self-improvement: I see this as a good option as long as jobs stay and there's ROI. But got to be careful here too... If there are not too many job profiles requiring top notch education, many could end up in the Over-Educated Under-Employed loop.

    7. ANY OTHER INVESTMENT OPTION? Please pitch in.

    Sorry can't help. Please continue to invest in RE if you feel it's the best bet.
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