We have been having a lot of conversation speculating on the future prices of RE market, and I have been participating in it every now and then. Many members in this forum have taken different view to predict what could happen to the RE over the next few years.

I think we have thrown the fundamentals out of the window in our discussions. Let's try to find answer to some fundamental questions :

1. Assuming that percentage of workforce earning more than 10 lakhs / annum are the key to move RE (at least in cities) forward. We have had many many times (i.e., few hundreds %) increase in the last few years. Thanks to outsourcing. The sum was very less in before 2004. What is going to be the increase over the next 5 years ? Double ? Triple ? In the past 1 year at least, if at all, that workforce has stayed constant.

2. When it comes to RE, it is all about location. Let's take the case of Velachery. In 2004, many nay sayers said it is a low lying area and the price appreciation will not hold water. It has had a fantastic run since. It beats even central chennai in % returns. It was mainly due to the IT companies investing heavily in Siruseri. So, it is all about location. What areas do you think will attract lot of investments, both from government and private sector and why ? What are the future developments in the offing ? Is it a pie in the sky idea (like the new airport for chennai) ? Hear it out with a discerning ear.

List it the investments in your area. If you have government investments like train station or a market or mall, it will add value in the long run. Of course, when you buy it today, you will pay a premium for that appreciation. There is no free lunch.

3. The regulatory changes happening throughout India will have a say. India is opening up since Narasimha Rao government, we have had huge benefits from this especially in attracting FDI. The changes could change the market significantly. For e.g., the introduction of REIT (Real Estate Investment Trusts). Many small investors in particular like Pooled investments (look how fast the Mutual fund industry has grown in India). So, this could increase the number of players in the market and thereby, affect the market.

(I will try and explain the difference between the land and flat or houses in a minute, )

4. (We have 2 cases here. Read on.) What moves the RE ? To put it more broadly, what moves any market ? Yes, demand and supply, but what causes the demand to raise ? The underlying cash flow generated from it - profits. To be RE specific, the yield or rental yield. Let's forget about RE for a moment and discuss a bit about bonds. Bonds Vs. RE ? Sounds crazy, I know. Please stay with me for the moment.

Case 1 :

When you buy a corporate bond for e.g., 5 yr ICICI Bank bond paying 10% coupon for Rs. 1000. By buying this bond, you are essentially lending money to ICICI Bank to do whatever they want to do for the next 5 years. When their time is up you can sell it back to them and receive your capital back i.e., Rs.100 back. They also pay you (1000*5%=Rs.50) every six months (usually), i.e., Rs. 100 every year. The cash flow is about 10% of capital every year. In between, whenever the RBI raises the interest rates, the price will go down below Rs. 1000 and whenever they decrease the interest rates, the bond will sell at a premium (i.e., above Rs. 1000).

Case 2 :

Another case is Zero coupon bond. The difference is there is no pay off. Let's take a 8 yr ICICI Bank Zero coupon bond. Like it says, there is no coupon generated from this bond. There is no cash flow from it. But the bond is issued at a price less than par value - i.e., say about Rs. 60 and the bond value increases over the next 8 years and you can redeem it at par value - Rs. 100.

Case 1 is flat and case 2 is land. Land is a dead investment, i.e., there is no cash flow generated from it. You should essentially prepare yourself to put it away for many many years.

Now that you know the difference, what do you think the increase in rental over the next few years ? Is a 5% year on year increase sustainable ? If not what do you think is sustainable ? Before you begin to think of yourself as a flat owner, think of yourself as a tenant. Would you be okay if your landlord increases the rent by 5% every year ? If yes, then go ahead and assume it. Would you pay Rs. 20,000 for a 2 bed flat in Velachery ? if not why ? Would you rather buy ? If so, why ? What if everybody thinks your way, at some point in the future there will be oversupply in the rental and the rent income will be down, so is the RE prices.

There are of course, many many things that could move the market for e.g., politial uncertainty. In the next election, we have a hung parliament for next 5 years, you wouldnt be able to sell it when you want to!

But don't buy until you have understood what you are buying or buying into.

Thanks,
Salim.
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  • American market fall and its subsequent effect on American economy was the prime mover for this recession. The rebound has looked inappropriate to many bears on this forum and while they will say the market will tank with some saying in a few months and others in a few years, the truth is market is a moving parameter and is not constant.
    It might make sense for folks to take a look at Bloomberg for information on the state of the American economy. Infact a couple of links I am providing below will show why the recession is coming to an end and with that there is a growth path in US.
    ]http://www.bloomberg.com/apps/news?pid=20601087&sid=aQHpYSoOtSHw
    Also today the Philadelphia Fed Survey index moved from -22.6 to -2.2. It measure of manufacturing.
    This does not mean that US is all hunky dory. Just that it is on the way to that.
    Now take India. Many of the bears were Using US data to browbeat the RE market. With the Jobless claim decrease regular in US and with new jobs being created even in London for financial folks of all, India which has not been in any bad shape will actually REBOUND madly upwards.
    Now corrections are norm in any market that is moving upwards. Corrections can be 5% or 15% that is not the point. However in India there is no bear run, just the first time after rapid growth there has been a period of consolidation.
    With the next upmove I suspect by end of 2010 just 1.5 years from now, we might have RE prices reach dizzy heights that buying a flat in Chennai will become as difficult as buying land is today. Infact what will people do. They will rent or will go for smaller flats.
    All of us know that in Bombay RE was too costly even 10 years back. That has caught with other growing metros like Chennai and Bangalore.
    SO my sincere advice is better start getting in. You never smelt 2003-4 rise until it was over. You wont smell the current rise as well. You need to get it before others get it.
    Cheers.
    Also today the Philadelphia Fed Survey index moved from -22.6 to -2.2. It measure of manufacturing.
    This does not mean that US is all hunky dory. Just that it is on the way to that.
    Now take India. Many of the bears were Using US data to browbeat the RE market. With the Jobless claim decrease regular in US and with new jobs being created even in London for financial folks of all, India which has not been in any bad shape will actually REBOUND madly upwards.
    Now corrections are norm in any market that is moving upwards. Corrections can be 5% or 15% that is not the point. However in India there is no bear run, just the first time after rapid growth there has been a period of consolidation.
    With the next upmove I suspect by end of 2010 just 1.5 years from now, we might have RE prices reach dizzy heights that buying a flat in Chennai will become as difficult as buying land is today. Infact what will people do. They will rent or will go for smaller flats.
    All of us know that in Bombay RE was too costly even 10 years back. That has caught with other growing metros like Chennai and Bangalore.
    SO my sincere advice is better start getting in. You never smelt 2003-4 rise until it was over. You wont smell the current rise as well. You need to get it before others get it.
    Cheers.
    CommentQuote
  • Excellent ...

    Originally Posted by connect2sam
    We have been having a lot of conversation speculating on the future prices of RE market, and I have been participating in it every now and then. Many members in this forum have taken different view to predict what could happen to the RE over the next few years.

    I think we have thrown the fundamentals out of the window in our discussions. Let's try to find answer to some fundamental questions :

    Thanks,
    Salim.


    This is an excellent beginning. There is however one point you missed which seems to be the main reason why property is sought to be bought even now.

    Your main asumption is that property (land as well as flats/houses) is comparable to assets of other kinds. So, you do a relative comparison and decide when and whether to buy.

    Most people on this forum - and in this country, for that matter - do so for completely different reasons. The main one is to satisfy a sentimental rerason, i.e, that as soon as possible you should get out of renting and "save" on the rent by buying - whatever the cost or hardships to you.

    It is almost as if you are not a "mard" if you have not bought a house. And this is drilled into you through various channels from birth. So much so, most people blindly follow this formula and buy at the earliest opportunity.

    In my opinion it will be almost impossible to convince any decent number of people to change this perception even if you taught them the maths of finance. So it is best not to try! :D

    Another important point that may have a significant impact on this sentimental reason in the future is this. India has undergone many changes over the last 30 years. This "buy at any cost" and the simultaneous boom in RE over the last 30 years or so has convinced people that this is the correct formula and there is no other. Most people are convinced that the boom we saw is due to internal reasons and that it will continue on a linear basis forever.

    In my opinion, this assumtion, however, is likely to change dramatically. With the worldwide consumption contracting significantly and there being huge overcapacity for everything, save agricultural commodities, there will be many more dogs fighting ferociously over fewer scraps of meat. This will see our much vaunted superiority and profitability over other emerging economies take a big hit. The huge middle class will probably contract - if not in number terms, at least in buying power terms. This will see most asset classes remain flat over several years, whereby, if you include total cost of acquision (interest at increasing rates), most property buyers of 2007-09 levels will probably be slightly underwater. So, selling will in most cases be a losing proposition and this will keep demand under pressure as well as prices. Recall the hand down the hole analogy. Many people will feel trapped in their homes as they will not be able to sell at a profit when the need arises and they will also be feeling the pinch keeping the mortgage going for the 15-20 years while other costs mount. Very difficult situation to be in!

    I believe that, this is what will most likely change perceptions across a large mass of people into understanding that, in the final analysis, property too is a financial asset and (while sentiment is fine) it should also be evaluated carefully in financial terms before acquisition!!!

    cheers
    CommentQuote
  • Looking angle.

    Hi BOTH R LOOKING AT THE SAME PROBLEM FM DIFFERENT PERSPECTIVE, and arriving at completely different conclusions.

    Salim is looking fm the purely Demand vs supply angle,
    while Nats is looking thro' the INDIA shinning angle.
    Methinks: The way is betwn tilting towards Nats as time pass.
    Remember India has the largest young work force waiting to explore the new frontiers which r openening up.

    Today its IT, tommorow it can be Bio-tech,Agro -tech, Energy-tech, Nano - tech who KNOWS.

    But it will be driven by knowledge rather than manufacture
    Placing India at a unique postion:D

    And this will not be affected much by consumption .
    CommentQuote
  • An interesting twist

    Originally Posted by Sansei
    Hi BOTH R LOOKING AT THE SAME PROBLEM FM DIFFERENT PERSPECTIVE, and arriving at completely different conclusions.

    Salim is looking fm the purely Demand vs supply angle,
    while Nats is looking thro' the INDIA shinning angle.
    Methinks: The way is betwn tilting towards Nats as time pass.
    Remember India has the largest young work force waiting to explore the new frontiers which r openening up.

    Today its IT, tommorow it can be Bio-tech,Agro -tech, Energy-tech, Nano - tech who KNOWS.

    But it will be driven by knowledge rather than manufacture
    Placing India at a unique postion:D

    And this will not be affected much by consumption .



    I don't think the next real estate boom will occur in city limits of metros like mumbai, delhi, bangalore, chennai, kolkata or hyderabad.

    I also don't have much hopes on knowledge industry in terms of employment potential (even IT/ITES has created 20 lacs jobs only since 2000...forget indirect jobs like catering, driving which can be pulled in by other sectors too).

    Only manufacturing, retail, agricultural productivity and infrastructure sectors can create the scale of jobs which India's young population needs. All these are moderately paying and hence those 1 crore flats will not find many buyers. But land may still be good investment since even for affordable housing (given the large scale needed) land is required.
    CommentQuote
  • Originally Posted by contra
    I don't think the next real estate boom will occur in city limits of metros like mumbai, delhi, bangalore, chennai, kolkata or hyderabad.

    I also don't have much hopes on knowledge industry in terms of employment potential (even IT/ITES has created 20 lacs jobs only since 2000...forget indirect jobs like catering, driving which can be pulled in by other sectors too).

    Only manufacturing, retail, agricultural productivity and infrastructure sectors can create the scale of jobs which India's young population needs. All these are moderately paying and hence those 1 crore flats will not find many buyers. But land may still be good investment since even for affordable housing (given the large scale needed) land is required.



    This would mean one should

      avoid buying banking stocks which will not benefit if people are not buying expensive flats. I for one can see that outside big names like SBI, HDFC, PNB there are a hell lot of banks which are in trouble now because of aggressive lending to flat buyers in recent years.
      avoid real estate stocks of luxury & premium apartment builders who are the only ones listed in indian stock exchanges now
      buying pure land is still good investment (but your banker will discourage you saying there are no tax benefits etc...don't listen to bankers)
    CommentQuote
  • India may be shining. But who is buying? :)

    Originally Posted by Sansei
    Hi BOTH R LOOKING AT THE SAME PROBLEM FM DIFFERENT PERSPECTIVE, and arriving at completely different conclusions.

    Salim is looking fm the purely Demand vs supply angle,
    while Nats is looking thro' the INDIA shinning angle.
    Methinks: The way is betwn tilting towards Nats as time pass.
    Remember India has the largest young work force waiting to explore the new frontiers which r openening up.

    Today its IT, tommorow it can be Bio-tech,Agro -tech, Energy-tech, Nano - tech who KNOWS.

    But it will be driven by knowledge rather than manufacture
    Placing India at a unique postion:D

    And this will not be affected much by consumption .



    Sansei,

    There is a propensity to believe that whatever we produce, at whatever volumes, will be consumed with enough buyers demanding all this stuff. And that too at ever increasing prices!!!

    Therein lies the problem. Today, with a large amount of hot money withdrawn from the market (FIIs pulling out money all of last year), we now see that it is external credit (and that too much of it short-term) that has been the real driver of demand as well as exorbitant price levels.

    With the recent Obama (as well as worldwide) initiative to further tighten screws on irresponsible credit creation via tighter regulation, and the continuing contraction of credit all over the world, FIIs will be further pressured to reduce their exposure to emerging markets as a part of overall reduction.

    When you remove all that money from the markets, both FII as well as FDI, AND when you also reduce overall consumption, both export as well as domestic down from the 2007/08 highs, AND when you bring in price reduction due to competition as well as less money available in the economy for profligate spending, AND when you put a cap on Government spending because they can't go much above current levels of deficit without stoking serious inflation,

    THEN you will realise that this huge population of young workers, which may have been a boon when there was a disproportionately high level of consumption, will actually become a bane when there is not enough demand to pick up the production needed to keep all these youngsters employed. With a resultant prerssure on jobs, salaries as well as confidence will continue to be low.

    All of this will have downward pressure on demand and the shine may simply go out replaced by a dull glimmer. Builders will build less and probably sell most of what they build at much lower than previous exorbitant prices (see the recent initiatives on low-cost housing and lower interest rates for smaller loans as a sign). Banks too will remain cautious on lending and will lend much less amounts, thereby making it impossible for the builder/landowner gang to try ridiculous prices.

    Prices as well as volumes will remain under pressure for quite some time to come. Convince me otherwise.

    cheers
    CommentQuote
  • Originally Posted by wiseman
    This is an excellent beginning. There is however one point you missed which seems to be the main reason why property is sought to be bought even now.

    Your main asumption is that property (land as well as flats/houses) is comparable to assets of other kinds. So, you do a relative comparison and decide when and whether to buy.

    Most people on this forum - and in this country, for that matter - do so for completely different reasons. The main one is to satisfy a sentimental rerason, i.e, that as soon as possible you should get out of renting and "save" on the rent by buying - whatever the cost or hardships to you.

    It is almost as if you are not a "mard" if you have not bought a house. And this is drilled into you through various channels from birth. So much so, most people blindly follow this formula and buy at the earliest opportunity.

    In my opinion it will be almost impossible to convince any decent number of people to change this perception even if you taught them the maths of finance. So it is best not to try! :D

    Another important point that may have a significant impact on this sentimental reason in the future is this. India has undergone many changes over the last 30 years. This "buy at any cost" and the simultaneous boom in RE over the last 30 years or so has convinced people that this is the correct formula and there is no other. Most people are convinced that the boom we saw is due to internal reasons and that it will continue on a linear basis forever.

    In my opinion, this assumtion, however, is likely to change dramatically. With the worldwide consumption contracting significantly and there being huge overcapacity for everything, save agricultural commodities, there will be many more dogs fighting ferociously over fewer scraps of meat. This will see our much vaunted superiority and profitability over other emerging economies take a big hit. The huge middle class will probably contract - if not in number terms, at least in buying power terms. This will see most asset classes remain flat over several years, whereby, if you include total cost of acquision (interest at increasing rates), most property buyers of 2007-09 levels will probably be slightly underwater. So, selling will in most cases be a losing proposition and this will keep demand under pressure as well as prices. Recall the hand down the hole analogy. Many people will feel trapped in their homes as they will not be able to sell at a profit when the need arises and they will also be feeling the pinch keeping the mortgage going for the 15-20 years while other costs mount. Very difficult situation to be in!

    I believe that, this is what will most likely change perceptions across a large mass of people into understanding that, in the final analysis, property too is a financial asset and (while sentiment is fine) it should also be evaluated carefully in financial terms before acquisition!!!

    cheers

    Is it not a contradiction that Wiseman who is telling all this holds a property (land) in RK Salai and in Kormangala (land and house). Assuming they are in decent localities in these places they would mean about 5 to 10c total worth (Wisey tells it is 2 grounds in Kormangala and I assume atleast half a ground in RK Salai).
    Why does Wisey not sell these and keep cash? After all he is suggesting that sentiments drive purchases in India.
    Sothule muzhu puzhinikaye maraka pakkara alu evan.
    I am not sure how sane it is to let such a guy even argue for or against anything!!
    CommentQuote
  • Small correction :)

    Originally Posted by Natarajg007
    Is it not a contradiction that Wiseman who is telling all this holds a property (land) in RK Salai and in Kormangala (land and house). Assuming they are in decent localities in these places they would mean about 5 to 10c total worth (Wisey tells it is 2 grounds in Kormangala and I assume atleast half a ground in RK Salai).
    Why does Wisey not sell these and keep cash? After all he is suggesting that sentiments drive purchases in India.
    Sothule muzhu puzhinikaye maraka pakkara alu evan.
    I am not sure how sane it is to let such a guy even argue for or against anything!!



    Nats,

    RK Salai is much more than half a ground!!! :D

    And who told you we're not selling or not already sold and having all that cash parked in interest and capital gains bearing assets, waiting for the right price to jump right back in!!! :D

    You are right. 5C to 10C or maybe even more? All white so I can disclose without fear. Am I joking, or am I serious? Take a guess :D:D:D

    cheers
    CommentQuote
  • Originally Posted by wiseman ="http://www.indianrealestateforum.com/chennai/t-better-to-invest-in-stocks-than-real-estate-4886-post23251.html#post23251"]
    Nats,


    I could buy a 2400SFt plot (land) around half a km from the Koramangala BDA complex for less than 15k - 4 months gross pay for me and I got 2 of them! :D I still hold the view that much of the wealth that people create is more by accident than by their astuteness - unlike you who thinks you dreamt up this 2004-08 boom back in IIT in the early 80s!



    The above is a cut and paste from what you wrote to me just 1 week ago. You think everyone on this board is an idiot to believe your lies?


    Natarajg007, did you take note of the Abusive Language Policy?

    "We notice that some posters are adept at using abusive language. We urge all to keep in mind that one of the rules is to refrain from using abusive language. People have different opinions to express and they should do so in a civil manner. Responses to them should be civil as well. Even if you think a poster has ideas that seem strange from your perspective, do not tell the poster that he is stupid. You should comment on his or her ideas without insulting him. Our Moderators will take action against such users."
    CommentQuote
  • Maybe you should :)

    Originally Posted by Natarajg007
    Originally Posted by wiseman ="http://www.indianrealestateforum.com/chennai/t-better-to-invest-in-stocks-than-real-estate-4886-post23251.html#post23251"]
    Nats,


    I could buy a 2400SFt plot (land) around half a km from the Koramangala BDA complex for less than 15k - 4 months gross pay for me and I got 2 of them! :D I still hold the view that much of the wealth that people create is more by accident than by their astuteness - unlike you who thinks you dreamt up this 2004-08 boom back in IIT in the early 80s!


    The above is a cut and paste from what you wrote to me just 1 week ago. You think everyone on this board is an idiot to believe your lies?

    Maybe you should hang yourself as you suggested Nats. Not advice. Just a thought! :D

    Don't feel "J" that while you have been spending months, if not years, trying to palm off your marshland to some poor sucker for a fortune much beyond its true value, this guy finds it easy to sell all in white! Be a little more realistic and you will find rerady buyers!!!

    All the best :D

    Sorry folks for this digression.

    cheers

    Did you take note of the Abusive Language Policy?

    "We notice that some posters are adept at using abusive language. We urge all to keep in mind that one of the rules is to refrain from using abusive language. People have different opinions to express and they should do so in a civil manner. Responses to them should be civil as well. Even if you think a poster has ideas that seem strange from your perspective, do not tell the poster that he is stupid. You should comment on his or her ideas without insulting him. Our Moderators will take action against such users."
    CommentQuote
  • Excess Money!

    Originally Posted by wiseman
    Sansei,

    There is a propensity to believe that whatever we produce, at whatever volumes, will be consumed with enough buyers demanding all this stuff. And that too at ever increasing prices!!!

    Therein lies the problem. Today, with a large amount of hot money withdrawn from the market (FIIs pulling out money all of last year), we now see that it is external credit (and that too much of it short-term) that has been the real driver of demand as well as exorbitant price levels.

    With the recent Obama (as well as worldwide) initiative to further tighten screws on irresponsible credit creation via tighter regulation, and the continuing contraction of credit all over the world, FIIs will be further pressured to reduce their exposure to emerging markets as a part of overall reduction.

    When you remove all that money from the markets, both FII as well as FDI, AND when you also reduce overall consumption, both export as well as domestic down from the 2007/08 highs, AND when you bring in price reduction due to competition as well as less money available in the economy for profligate spending, AND when you put a cap on Government spending because they can't go much above current levels of deficit without stoking serious inflation,

    THEN you will realise that this huge population of young workers, which may have been a boon when there was a disproportionately high level of consumption, will actually become a bane when there is not enough demand to pick up the production needed to keep all these youngsters employed. With a resultant prerssure on jobs, salaries as well as confidence will continue to be low.

    All of this will have downward pressure on demand and the shine may simply go out replaced by a dull glimmer. Builders will build less and probably sell most of what they build at much lower than previous exorbitant prices (see the recent initiatives on low-cost housing and lower interest rates for smaller loans as a sign). Banks too will remain cautious on lending and will lend much less amounts, thereby making it impossible for the builder/landowner gang to try ridiculous prices.

    Prices as well as volumes will remain under pressure for quite some time to come. Convince me otherwise.

    cheers



    Hi Wiseman,

    Hot money may have withdrawn, decreased leading to downturn BUT....

    There is money waiting to get invested some where? C the comments of fund managers, PE on TV. So money is avble but avenues r less. Also the recent pumping in of money by various Govt to stimulate economies. This money will finally come in the market.

    Right now inflation is lesser of the evil for atleast two years as per experts. So large fiscal deficit will be a norm, inflation will be later once it crops up. ( another crash later ?)

    Regulation is IN. Dont expect zooming RE prices for some time due to subdued eco activity. Affordable houses r IN.

    Last of the bit: Where on Earth the money (incentives) will GO. Exhorbitant prices r definitely out.:D
    CommentQuote
  • I think expectations are very high from this re-elected congress government............the same government which in the previous term created and crashed a stock bubble. Thats ironical????



      I recently sold SBI completely as after doing some research could find that NPAs had built up fast in SBI. SBI now requires capital infusion after some aggressive lending last quarter as they were the only one still aggresive.......sometime next year SBI may face credit crunch
      Was always wondering why many PSU banks like canara bank, bank of india, union bank etc were still trading at low P/Es even after the recent rally doubled many stocks. Then aftersome research found that earnings for these PSU banks have been dropping while NPAs has built up forcing them to reduce lending ....which means furthur earnings drop in next quarters.
      ICICI bank has been in trouble and still they are not out of the woods irrespective of their stock appreciating in recent rally.....still they are reducing lending. Banks reducing lending is not good sign as it means their earnings will drop in future quarters.

      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
      I always look at health of banks as a leading indicator for future liquidity and growth in real estate sector. But many indian banks seem to be in trouble including household names like canara bank.
    CommentQuote
  • Just one small misconception to be cleared ...

    Originally Posted by Sansei
    Hi Wiseman,

    Hot money may have withdrawn, decreased leading to downturn BUT....

    There is money waiting to get invested some where? C the comments of fund managers, PE on TV. So money is avble but avenues r less. Also the recent pumping in of money by various Govt to stimulate economies. This money will finally come in the market.

    Right now inflation is lesser of the evil for atleast two years as per experts. So large fiscal deficit will be a norm, inflation will be later once it crops up. ( another crash later ?)

    Regulation is IN. Dont expect zooming RE prices for some time due to subdued eco activity. Affordable houses r IN.

    Last of the bit: Where on Earth the money (incentives) will GO. Exhorbitant prices r definitely out.:D



    If you see the "growth" in the last few months, almost all of it has come due to the pumping actions of the Govt thru various channels, direct as well as indirect.

    Indirect would imply providing fiscal relief, tax breaks and other incentives. Direct would involve providing jobs and employment. In fact almost all the employment increase has come from Govt jobs, net-net.

    All this money, do you think the Govt has it already as surpluses/savings ready to be deployed, like you have savings to invest whenever you wish?

    Nope!!! The Govt is actually broke - and most Govts worldwide are actually broke on a current account basis. Whenever Govt wants to pump in money, they issue bonds, borrow money and then do it. This has a lot of unintended consequences like jump in inflation, etc when it goes beyond some limits. The Govt is now reaching those limits as the RBI Guvnor is constantly warning. If you or I tried to do it, we would go to jail!!! :) The US is in such a pickle because of the huge borrowings they have done to pump into the banks to fill the humongous holes the bankers created by massive gambling. They should all go to jail as a minimum and probably be shot.

    So, be warned. Govt spending will soon cease since they will not have much more borrowing to do without seeing some serious consequences.

    This Budget will be quite a dampener as a result of this.

    cheers
    CommentQuote
  • The Chinese government have proven to be more focused than indian government in one way.

    The chinese are accumulating natural resources by acquiring large stakes in mining companies, mines, entire countries by using their reserves. Given below is a interesting article

    ]http://www.kitco.com/ind/Summers/jun192009.html

    Even China had a stock bubble which burst, even China had a real estate boom ...very similar and identical to us India their historical/geographical neighbour.

    But China can afford them because they have reserves. Unlike in the past decades chinese are not dependent on foreign money anymore...in fact they are now not only self sufficient in capital they are the world's largest creditor nation.

    India on the other side, has a current account deficit...so we cannot and should not even try to afford stock bubbles and real estate booms. Our country is heavily dependent on foreign money both for stock market as well as real estate booms which is a bad sign. We don't have sufficient domestic capital and are heavily dependent on foreign capital.

    Government of India can only afford very limited stimulus and create very few thousand jobs....anything more will make them broke. So all our youth=> jobs=>demand=>stock boom all depend on foreign capital which is not a good sign.

    If i had the means and permission i would rather invest all my money in chinese stocks than indian stocks.Unlike in the past decades chinese are not dependent on foreign money anymore...in fact they are now not only self sufficient in capital they are the world's largest creditor nation.

    India on the other side, has a current account deficit...so we cannot and should not even try to afford stock bubbles and real estate booms. Our country is heavily dependent on foreign money both for stock market as well as real estate booms which is a bad sign. We don't have sufficient domestic capital and are heavily dependent on foreign capital.

    Government of India can only afford very limited stimulus and create very few thousand jobs....anything more will make them broke. So all our youth=> jobs=>demand=>stock boom all depend on foreign capital which is not a good sign.

    If i had the means and permission i would rather invest all my money in chinese stocks than indian stocks.
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  • Originally Posted by contra

    If i had the means and permission i would rather invest all my money in chinese stocks than indian stocks.


    or even better option would be to buy what China is buying :)......prudent minds would have guessed by now
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