Hi

In chennai the prices of plots or even a flat for that matter is going beyond the reach of a common man. Is there any chance for the prices to correct in near future?

With a salary of 15k, it is beyond the capacity of common man to buy a house or flat
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  • I'm always surprised by this attitude!

    Originally Posted by Economist
    Economic gloom gone, but it's not boom yet: IMF

    The International Monitory Fund said the global economy is recovering faster than expected.

    The positive report card from IMF yesterday.

    And our Wiseman is talking about a great depression Mark II.

    Guys get over it, The GFC was no way near bad as it was first thought to be.

    Like it or not the global economy is well on the recovery path - even if you are in denial.



    Economist and Abk,

    If you go back to the 2007 timeframe, remember what the IMF was saying? That World will grow over 5% and all is well and blue-skies with the world. Just a few months before the cliff-dive.

    Then fast forward to early-2009 and you find the IMF talking about World Economy (the very same economy that was to grow 5-6%), to initially decline by around 1% this year, before growing.

    Now, they are talking 2.4% - 3% growth.

    As you can see, they are either
    1. Clueless about the economy, OR
    2. Talking with a forked tongue to support someone else's agenda

    Most importantly, did the IMF report tell you why the recovery is faster than expected? And in any case, what was the expected rate? The whole thing is hidden in the why! This recovery, for what its worth, is not by natural cause. It is because of artificial stimulus push.

    So,
    1. the cash-for-clunkers program saw more cars being bought, but it ended in Aug and Sept saw a renewal of a crash in car sales

    2. The Home buyers incentive ($8000) was utilised in a full 80% of all new home purchases since its inception. Who knows how many of those homes might not have been bought otherwise? This is ending in Nov/Dec when the US pulls its program.

    3. The $ 1.4 Trillion soaking up of toxic mortgage-backed securities is coming to a close. Who will soak up the many trillions more lying in bank vaults and getting lower in value every day as more mortgage defaults happen.

    4. Govt has been the only steady increase in job creation. What happens when this ends as it will soon as most state Govts are unable to make ends meet due to reducing revenues from falling taxes due to - surprise! rising unemployment and falling asset values!!!

    So, the problem is not running away. Only growing under us while we are not looking.

    Please understand that the entire cause of the problem - excess credit - has only been worsened by the major Govts of the world throwing even more credit to keep the economies afloat. And the problem has only been worsened because, now we have an even bigger debt problem to resolve with an even weaker world!!!

    I urge you to continue to believe the spin that we are fast coming out of the recession (since it is always easy to be in the comfort zone). This is a strange rally, one in which insiders have been selling massively while retail investors have been lapping it up! Is there something that retail investors (normally the ones to be taken to the cleaners first) know that insiders and managements do not?

    In my opinion, we are probably on the verge of the next leg down, since the markets have speculated themselves far away from reality.

    Most normal Bull Markets end when P/E is around 22 times (empirical evidence). Blow-out market rallies like 2007 end with P/E of around 28 times (remember that as late as March 2007, sensx was only 14000 and a P/E around 20 and in 6-8 short months it shot up by 50% to 21000, so it was all over in a jiffy and this is called a blow-out).

    We are today at a P/E of just over 22. And never has a blow-out year been followed by another blow-out - generally it take around 7-8 years to form another blow-out (recall 1986 ??? blowout, 1992 Harshad Blow-out, 2000 Dot-com Blow-out, 2008 Credit bomb blow-out - Btw, I have seen and been in all of these blow-outs!!!).

    If 2008 was the year of the Perfect Financial Storm, it just got postponed by FED action to 2010 by liquidity injection on a masive, unprecendented scale bigger than anything ever seen before, as well as fixing the rule-book to keep the rotten, stinking credit defaults hidden from public scrutiny and action. But it has to (and will) end when they run out of credit injections to keep the economy afloat - which is around December of this year. Then things should unwind in the real economy. But as the Stock market is 6-9 months ahead, it should start the decline around now ...

    As it was said, it has been an over-exteeeeended rally, but in the US it has kept pace with the way the 1930 rally happened after the 1929 fall, in an uncannily similar fashion, with a 45% rally to the decline. Almost all indicators and charts are eerily similar. So are Govt actions like the recent protectionist moves against China similar to the Smoot-Hawley Act, which is now seen as the real reason to take a deep rercession and convert it into a Great Depression.

    The only argument worth arguing now is whether the US will go the 1930s GD way or the 1990-2000s Japan Deflationary way!

    And how far the emerging economies will continue to be coupled and when and how they will decouple!!!

    Let us see which way the wind blows ... we will know within October, for sure ...

    cheers
    CommentQuote
  • Bangalore, Chennai to lead realty revival: Report

    Bangalore, Chennai to lead realty revival: Report
    Chennai/ Bangalore: Bangalore has emerged as a clear preference for sectors like office and retail, while coming a close third in the residential and hospitality according to Cushman & Wakefield, a retail estate research firm.

    In its report Cushman & Wakefield GRI India Real Estate Investment report 2009: 'Survival to Revival - Indian realty sector on the path to recovery,' the firm said that Bangalore is expected to see the highest demand for office space in the period 2009 - 2013 with approximately 34 million sq.ft.

    The expected recovery in the IT/ITeS sector would have a positive effect on the demand in Bangalore, the preferred location for many IT/ ITeS companies. The demand for retail sector is also expected to be the highest in Bangalore with approximately 7 million sq. ft. while demand for residential is expected to be approximately 570,000 units over 2009 - 2013, with the highest compounded annual growth rate at 14 per cent.

    The hospitality sector in Bangalore too is forecast to register the highest compounded annual growth of about 26 per cent in demand, followed by NCR at 24 per cent and Pune at 23 per cent.

    Chennai to witness second highest demand

    The city of Chennai is expected to witness the second highest demand for office space in India between 2009 to 2013 with a projected cumulative 27.2 million sq ft and the city also holds the fifth largest demand share for retail and hospitality space demand in India.

    Anurag Mathur, managing director, India, Cushman & Wakefield said that the office market in Chennai has seen a renewed interest from the corporate sector, post the economic crisis. While demand will be visibly affected this year, "We expect the five-year horizon (up to 2013) to be upbeat for the commercial markets in the city. The retail and hospitality segments are also likely to see considerable demand in the coming years."

    Chennai is likely to witness the second highest demand for office space after Bangalore of approximately 27.2 million sq.ft. by 2013. Good infrastructure, high quality construction and competitive pricing would be the key reasons for the location to see high demand from corporate sector.


    Hyderabad is expected to witness office demand of 16.6 million sq. ft. over a five year horizon and records the highest compounded annual growth of approximately 28 per cent during 2009 - 2013 in the office sector along with Pune and Kolkata. The residential demand for Hyderabad is expected to be 290,000 units with the highest compounded annual growth of 14 per cent in the next five years akin to Bangalore.

    Mathur, further added that though the high growth trajectory of the previous years saw a setback during the global economic slowdown, the inherent strong economic fundamentals, low exposure to debt and state intervention, would help the sector to gradually return to the path of recovery and witness robust demand for real estate across sectors.
    CommentQuote
  • Where to park the money?

    Originally Posted by wiseman
    Economist and Abk,

    If you go back to the 2007 timeframe, remember what the IMF was saying? That World will grow over 5% and all is well and blue-skies with the world. Just a few months before the cliff-dive.

    Then fast forward to early-2009 and you find the IMF talking about World Economy (the very same economy that was to grow 5-6%), to initially decline by around 1% this year, before growing.

    Now, they are talking 2.4% - 3% growth.

    As you can see, they are either
    1. Clueless about the economy, OR
    2. Talking with a forked tongue to support someone else's agenda

    Most importantly, did the IMF report tell you why the recovery is faster than expected? And in any case, what was the expected rate? The whole thing is hidden in the why! This recovery, for what its worth, is not by natural cause. It is because of artificial stimulus push.

    So,
    1. the cash-for-clunkers program saw more cars being bought, but it ended in Aug and Sept saw a renewal of a crash in car sales

    2. The Home buyers incentive ($8000) was utilised in a full 80% of all new home purchases since its inception. Who knows how many of those homes might not have been bought otherwise? This is ending in Nov/Dec when the US pulls its program.

    3. The $ 1.4 Trillion soaking up of toxic mortgage-backed securities is coming to a close. Who will soak up the many trillions more lying in bank vaults and getting lower in value every day as more mortgage defaults happen.

    4. Govt has been the only steady increase in job creation. What happens when this ends as it will soon as most state Govts are unable to make ends meet due to reducing revenues from falling taxes due to - surprise! rising unemployment and falling asset values!!!

    So, the problem is not running away. Only growing under us while we are not looking.

    Please understand that the entire cause of the problem - excess credit - has only been worsened by the major Govts of the world throwing even more credit to keep the economies afloat. And the problem has only been worsened because, now we have an even bigger debt problem to resolve with an even weaker world!!!

    I urge you to continue to believe the spin that we are fast coming out of the recession (since it is always easy to be in the comfort zone). This is a strange rally, one in which insiders have been selling massively while retail investors have been lapping it up! Is there something that retail investors (normally the ones to be taken to the cleaners first) know that insiders and managements do not?

    In my opinion, we are probably on the verge of the next leg down, since the markets have speculated themselves far away from reality.

    Most normal Bull Markets end when P/E is around 22 times (empirical evidence). Blow-out market rallies like 2007 end with P/E of around 28 times (remember that as late as March 2007, sensx was only 14000 and a P/E around 20 and in 6-8 short months it shot up by 50% to 21000, so it was all over in a jiffy and this is called a blow-out).

    We are today at a P/E of just over 22. And never has a blow-out year been followed by another blow-out - generally it take around 7-8 years to form another blow-out (recall 1986 ??? blowout, 1992 Harshad Blow-out, 2000 Dot-com Blow-out, 2008 Credit bomb blow-out - Btw, I have seen and been in all of these blow-outs!!!).

    If 2008 was the year of the Perfect Financial Storm, it just got postponed by FED action to 2010 by liquidity injection on a masive, unprecendented scale bigger than anything ever seen before, as well as fixing the rule-book to keep the rotten, stinking credit defaults hidden from public scrutiny and action. But it has to (and will) end when they run out of credit injections to keep the economy afloat - which is around December of this year. Then things should unwind in the real economy. But as the Stock market is 6-9 months ahead, it should start the decline around now ...

    As it was said, it has been an over-exteeeeended rally, but in the US it has kept pace with the way the 1930 rally happened after the 1929 fall, in an uncannily similar fashion, with a 45% rally to the decline. Almost all indicators and charts are eerily similar. So are Govt actions like the recent protectionist moves against China similar to the Smoot-Hawley Act, which is now seen as the real reason to take a deep rercession and convert it into a Great Depression.

    The only argument worth arguing now is whether the US will go the 1930s GD way or the 1990-2000s Japan Deflationary way!

    And how far the emerging economies will continue to be coupled and when and how they will decouple!!!

    Let us see which way the wind blows ... we will know within October, for sure ...

    cheers



    Wise Man ,

    I completely agree with you. So what is the safe way to keep the money.?

    FDs or Gold ?

    These countries are pushing the economy using the printed money.Generally Money value will go down If we print money.Then what will happen to the money which we put on the FDs?
    CommentQuote
  • The terrible forecasting record of the IMF

    Originally Posted by Economist
    Economic gloom gone, but it's not boom yet: IMF

    The International Monitory Fund said the global economy is recovering faster than expected.

    The positive report card from IMF yesterday.

    And our Wiseman is talking about a great depression Mark II.

    Guys get over it, The GFC was no way near bad as it was first thought to be.

    Like it or not the global economy is well on the recovery path - even if you are in denial.


    Hi Economist,

    Here is a link to an article by SA Aiyar. ]http://economictimes.indiatimes.com/The-terrible-forecasting-record-of-the-IMF-Swaminathan-Anklesaria-Aiyar/articleshow/5085321.cms. It tells you what IMF is capable of. Never believe the government institutions or any financial institutions forecast after all they have their money in the market and they speak for their survival.

    Regards,
    Sridhar. It tells you what IMF is capable of. Never believe the government institutions or any financial institutions forecast after all they have their money in the market and they speak for their survival.

    Regards,
    Sridhar
    CommentQuote
  • Originally Posted by blogger
    Well said. I wonder if builders are launching 1 crore properties without any buyers! Don't they know the market much better than us (sitting and commenting from distance). Immediately don't come to the conclusion that I'm a builder or broker :D.

    Builders had purchased lank bank with crazy valuations and launcehed numerous high end projects during 2006-2008 and many builders went to the verge of bankruptcy after Lehman crisis.Did they not know the market better than us at that time.
    CommentQuote
  • Originally Posted by Economist
    Guys do not forget the rapid population growth and Real "INFLATION". Today 1C is equal to 10L 7-8 years ago.
    All youngsters of TN move to Chennai.
    KPO & BPO and bringing in people from other states.

    Annual inflation should be 39% if 10L 8 years ago should become 1C today.We are not living in Zimababawe.:D
    CommentQuote
  • Originally Posted by karthikdoss
    CHeck out the rents in the city.My property yields rent of 3 lakhs per Annum.So approximately the value is 3x20= 60 lakhs.So the price is logical.CAn the rent drop from the curent Rs 25000 per month to 2001 levels of 5000 per month? Never.
    Tell me one area where the flat costs 60 lakhs and rent is 25000 per month?
    Tell me one area where the flat costs 60 lakhs and rent is 25000 per month?
    Tell me one area where the flat costs 60 lakhs and rent is 25000 per month?
    Tell me one area where the flat costs 60 lakhs and rent is 25000 per month?
    CommentQuote
  • Originally Posted by rickyofsnow
    Hi Shyame, Even if price crash 50% the same 75% of chennai people will not be able afford. That has been always the case and that will be always the case. Ask your father and grandfather,the property (with in the city limit of there time) was not affordable,That is why they went very very far away and bought in Anna nagar and Besant nagar (Middle of nowhere)

    In our Father and Grandfather age have the price increased 300% in 3 years?
    CommentQuote
  • Originally Posted by abk
    this is what everyone said about the sen when it reached 8000 mark today it is double that,
    it is far too exteeeeeeeeeeeeeeeended for a extended bear rally.;)

    Abk,

    If you still feel property price in Chennai will increase from here why are you planning to sell your 3 grounds in Tambaram?Even if you need money you can take loan against your property as you firmly believe price will only rise much higher than 10-12% CAGR.
    CommentQuote
  • Originally Posted by BigBear
    In our Father and Grandfather age have the price increased 300% in 3 years?


    Yes it did Big bear from 1980 to 1983 - Much more than 300%.
    My father bought 2 G land in Sastri Nagar for Rs 80,000 in 1981 from a private sale, valued at 25 Lakhs in 1985 (For a bank loan purpouse) and again valued at 1C in 1991-92.
    Currently valued around 4C - Do your Maths.
    CommentQuote
  • Originally Posted by Economist
    Yes it did Big bear from 1980 to 1983 - Much more than 300%.
    My father bought 2 G land in Sastri Nagar for Rs 80,000 in 1981 from a private sale, valued at 25 Lakhs in 1985 (For a bank loan purpouse) and again valued at 1C in 1991-92.
    Currently valued around 4C - Do your Maths.


    Very True.1.5 ground land bought by my grandfather in late 1970's at alwarpet for Rs 10,000 is estimated at 4-5 crores today.

    RE has been a sure shot wealth creator in most cases in long term.

    Things are slightly different during our grandfathers days and ours.They were pure cash players while many of us look upto bank loans for purchases today.Our grandfathers bought when they needed and could afford entirely and didnt even look back at how much it appreciated until they wanted to sell it.

    Is that the case today?The appreciation of RE is closely tied to individuals and corporates net-worth because everyone are leveraged.The appreciation or depreciation is goint to affect the individual starting from ability in paying EMI to affecting companies solvency position.

    Another major difference one has to be aware is appreciation need not be always in monetary value.RE investment grows more in worth than in value.During a sale, the worthiness is estimated on relative basis and based on demand the price is fixed using that periods currency value.

    It really doesnt matter if you hold 10 rs today and 1000 rs after 20 years if your 1000 rs then can buy only what your 10 rs can buy today.Its a futile investment if wealth could not be created.

    10K of 1978 can not be compared to 10K of 2009, purchasing power of 10K was way higher during that time.

    In 1975-80, $1 = ~ Rs 8
    In 2009, $1 = ~ Rs 50

    Taking into account the GDP growth over the years, increase in inflation, devaluation of currency, increase in population etc It should be right only to claim that the investment has enabled the person to become around 5-10 times richer than earlier, not 300-500 times percentage as the number would suggest.Getting fixated on numbers can be very misleading.

    In a inflationary period stagnation is a loss while in a deflationary period stagnation is a profit.

    In the past, RE has seen stagnation period substitute and prevent major rise or crash.

    Even today, if one could afford to buy a piece of land at good liveable locality with basic infrastructure amenities and facilities, 10-15 years from now they would see their investment grow many times more in worth than any other avenue available.

    This is the reason why solid assets like RE, gold are deemed to insulate people against inflation and currency value fluctuations in markets.They appreciate in worth.
    CommentQuote
  • Predicting the market slump or boom is different from predicting the size, specs and potential customers for the price tag dude! If people are able to predict slump and boom half of world population would be millionaires now!

    Originally Posted by BigBear
    Builders had purchased lank bank with crazy valuations and launcehed numerous high end projects during 2006-2008 and many builders went to the verge of bankruptcy after Lehman crisis.Did they not know the market better than us at that time.
    CommentQuote
  • Good one. I agree to disagree.

    But RE and GOLD are te most unproductive and illiquid assets.
    The risk premium is almost nil and so returns can never compensate another asset class that has it - for eg stocks. Stocks have risks and have to return higher. Also stocks are used to produce economic worth and have to return more +ve return.

    Agree that Gold is inflation hedge and hedge against natural disasters and manmade disasters (war etc). Other than that in theory it cannot provide any more retur. RE in theory is even worse, historically.
    Inefficient markets and/or bubble periods are exceptions to RE more as compared to gold.
    Bot of these give a feeling of possession though as compared to other investment classes.
    CommentQuote
  • Originally Posted by BigBear
    Tell me one area where the flat costs 60 lakhs and rent is 25000 per month?

    Sylvan county-Mahindar City ,Chennai yields that.Check it out.

    Thats for normal rental...Some corporate deals are yielding Rs 35000 Rental .
    CommentQuote
  • Originally Posted by BigBear
    Abk,

    If you still feel property price in Chennai will increase from here why are you planning to sell your 3 grounds in Tambaram?Even if you need money you can take loan against your property as you firmly believe price will only rise much higher than 10-12% CAGR.


    i sell one to buy another,the tambaram property is in my fathers name and he wants to settle the family share and hence the need to sell.
    anyways i do RE as a business not as an investment.
    CommentQuote