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Real Estate Bubble Set to Burst Again in India

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  • Re : Real Estate Bubble Set to Burst Again in India

    80% dip in gold imports linked to rampant smuggling - The Times of India

    THe current account woes are never going to solved...RBI and government have to pay the price for their foolish policies....but I guess even at the cost of decreased savings RBI is not gonna to bothered except doing some lip service....

    Gold is being imported/smuggled and govt is happy to see the white component of current account is looking ok..so that share market is taken care of...

    what a comedy country???

    Comment


    • Re : Real Estate Bubble Set to Burst Again in India

      Originally posted by Magadh_Pride View Post
      You mean the lenders/ banks overseas let go of the defaulters? No recourse to recover a bankrupts' money, or seize their assets to proceed with recovery?
      Yes sir they do. And this happened in USA. People walked out of their properties. When banks asked them for money, they mailed back their home keys to the banks. That is why their banks had to be rescued.

      There are well defined bankruptcy rules in the west.
      Look at the hilarious case of Kingfisher Airlines. Their planes are no longer flying but Mallya is still not allowed to close down the company. As a result, the staff is still on the rolls and expect to be paid for sleeping at their homes.

      In USA, Mallya would have filed chapter 11 and started bankruptcy proceedings. Shut down the company, sell all assets of the company to pay the lenders and kick all employees out, all within a few weeks.

      Comment


      • Re : Real Estate Bubble Set to Burst Again in India

        Originally posted by Jai_Singh View Post
        When things are going that bad...law would really not work that well, for bank or the borrower.

        Borrower would liquidate everything, lodge a FIR of robbery and stash the cash somewhere. Have bring some elders to home, now it becomes a case of confiscate, evacuation with poor elders. now court will take its own sweet time.

        Also, when a man has lost the job and economy is shattering, he will do everything possible to save the rest but who will fight for bank. the manager who would be getting life threats from job less people.

        Dont know what would happen,,,,but things would not be so one-sided that bank would go on auctioning the homes and sucking the blood for rest....not possible in india atleast
        You should be in politics Sir!

        Comment


        • Re : Real Estate Bubble Set to Burst Again in India

          Originally posted by cb4u2nv View Post
          All over the world, vast amounts of money printing is going on, to finance the irrationale govt. spending on wars & weapon stock piling. This will never stop. Property price will go up as the paper money loses its value. So buy only what you can afford, before being called a KHOTA.
          What's opposite of khota ? Khara ?

          Sent from my A210 using Tapatalk HD

          Comment


          • Re : Real Estate Bubble Set to Burst Again in India

            The only point hilarious in the KFA case you have quoted, is that Mallaya would have paid people for sleeping at home, when he did not pay those slogging through the day. We all know the facts and this is not up for debate here !!

            I wish getting out of a bankruptcy was limited to a postage stamp cost of mailing back the house keys.. huh. Here is some weekend reading..

            http://www.justice.gov/ust/eo/public...s/nms_faqs.pdf

            Sorry Sir, but Ignorance is no excuse for rants.


            Originally posted by pkk077 View Post
            Yes sir they do. And this happened in USA. People walked out of their properties. When banks asked them for money, they mailed back their home keys to the banks. That is why their banks had to be rescued.

            There are well defined bankruptcy rules in the west.
            Look at the hilarious case of Kingfisher Airlines. Their planes are no longer flying but Mallya is still not allowed to close down the company. As a result, the staff is still on the rolls and expect to be paid for sleeping at their homes.

            In USA, Mallya would have filed chapter 11 and started bankruptcy proceedings. Shut down the company, sell all assets of the company to pay the lenders and kick all employees out, all within a few weeks.

            Comment


            • Re : Real Estate Bubble Set to Burst Again in India

              Originally posted by mangoman2012 View Post
              Fully agree. Exactly because of this reason RBI vehemently denying there is an bubble. They know in case of crash its ass is on line.

              But sadly if Japan cannot stop it, US cannot stop it..India is nothing ....

              RE while it is going down is gonna to take Indian Banking sector with it...Yes..the celebrated HDFCs and ICICIs also have to paythe price for their arrogance and their role in boosting the unhealthy bubble
              I am floored with the innocence or ignorance of the people saying all this. What is the percentage of the property financed by the banks? 80 to 85% at max. which means people still need to do funding of the remaining part.
              Which bank has not checked the credentials and loan paying capacity of the individual before sanctioning the loan? Atleast I am not aware of any such Indian bank. Do let me know for improving my knowledge.
              Vast majority of people do not over leverage themselves here in India as compared to US where everyone tends to live a life on credit.
              market value of the properties is much greater than the bank loan whenever it was taken by the individuals due to ever increasing circle rates, fresh inventory at higher prices, construction cost increasing, inflation, increased compensation for farmers and other so many factors.
              Salary class is not the only class investing in RE, there is a vast number of people who are channeling black money into the system and big businessmen who have plenty of surplus to keep fueling it. At best they would sell their holdings at discount to market when not getting enough returns or when not comfortable with the future prospects. Let me tell you then there are plenty of people looking for such deals who would be interested to make a killing including lot of boarders in the forum, dealers and even end users.
              the other day one of the moderators sent a link to a story trying to our banking system desperately trying to bail out RE builders and lenders in crisis time. Simply why would Sonia not interested to save the system as his son in law is having direct and indirect interests in so many real estate companies. sabke profits mein percentage set hai bhai? people have very short memory it seems.....

              Till we have NRI's inflow of 50 billion$ plus, Mauritius route for FDI, a parallel economy of black which is much larger than our white system, our finance ministry hand in glove with bankers and having vested interests in real estate investments, it seems quite tough to me. I am no RE pundit and dont have any aspiration to do so but sharing common plain facts only.

              PS: people may disagree with me but that may be their own personal opinions.

              Comment


              • Re : Real Estate Bubble Set to Burst Again in India

                Originally posted by ashish18 View Post
                What's opposite of khota ? Khara ?

                Sent from my A210 using Tapatalk HD
                I guess he meant donkey . Opposite of that would be swan.

                Comment


                • Re : Real Estate Bubble Set to Burst Again in India

                  Originally posted by mangoman2012 View Post
                  Fully agree. Exactly because of this reason RBI vehemently denying there is an bubble. They know in case of crash its ass is on line.

                  But sadly if Japan cannot stop it, US cannot stop it..India is nothing ....

                  RE while it is going down is gonna to take Indian Banking sector with it...Yes..the celebrated HDFCs and ICICIs also have to paythe price for their arrogance and their role in boosting the unhealthy bubble
                  IMHO while the bubble is indeed there, it is no where near to the bursting stage yet. It will burst eventually but the bigger question is "when"? Houses are over priced but that is not necessary and sufficient condition for the bubble to burst?

                  When price of anything over stretches, it corrects back to a level where buyers start showing interest again. At the best, we are in that phase. We can see 15-20% correction but then there are always bargain hunters out there in the market.

                  For a bubble to burst, a lot of air has to go into it. We need to have ultra low interest rates for a long period of time and every tom dick and harry has to think that RE is once in a lifetime opportunity. A lot of weak hands have to take loans in droves to buy properties priced at 7x 8x or even 10x of their annual incomes. And you have to see the average Joe's buying multiple properties on leverage. Prices have to go ballistic like there is no tomorrow.

                  I am taking about the "greed" element in the market. Its not there guys! Right now, its only the people who can afford are buying. Average Joe's are staying away. We can call the peak only when half of the bears say screw this damn forum and screw the bubble talk...I am buying it or else I can never afford it.

                  When the buyers go missing in the market, it causes some some correction. But for a bubble to burst, it not only requires the missing buyers but also requires the distressed sellers. Agreed it happened in US, it happened in Japan and it even happened in Europe but when the conditions were ripe. We are not there yet. All the bubble burst talk is premature.
                  Last edited July 21 2013, 11:43 AM.

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                  • Re : Real Estate Bubble Set to Burst Again in India

                    Some myths to be busted here

                    Originally posted by smart111 View Post
                    I am floored with the innocence or ignorance of the people saying all this. What is the percentage of the property financed by the banks? 80 to 85% at max. which means people still need to do funding of the remaining part.
                    Which bank has not checked the credentials and loan paying capacity of the individual before sanctioning the loan? Atleast I am not aware of any such Indian bank. Do let me know for improving my knowledge.
                    Vast majority of people do not over leverage themselves here in India as compared to US where everyone tends to live a life on credit.
                    market value of the properties is much greater than the bank loan whenever it was taken by the individuals due to ever increasing circle rates, fresh inventory at higher prices, construction cost increasing, inflation, increased compensation for farmers and other so many factors.
                    Salary class is not the only class investing in RE, there is a vast number of people who are channeling black money into the system and big businessmen who have plenty of surplus to keep fueling it. At best they would sell their holdings at discount to market when not getting enough returns or when not comfortable with the future prospects. Let me tell you then there are plenty of people looking for such deals who would be interested to make a killing including lot of boarders in the forum, dealers and even end users.
                    the other day one of the moderators sent a link to a story trying to our banking system desperately trying to bail out RE builders and lenders in crisis time. Simply why would Sonia not interested to save the system as his son in law is having direct and indirect interests in so many real estate companies. sabke profits mein percentage set hai bhai? people have very short memory it seems.....

                    Till we have NRI's inflow of 50 billion$ plus, Mauritius route for FDI, a parallel economy of black which is much larger than our white system, our finance ministry hand in glove with bankers and having vested interests in real estate investments, it seems quite tough to me. I am no RE pundit and dont have any aspiration to do so but sharing common plain facts only.

                    PS: people may disagree with me but that may be their own personal opinions.

                    @Pkk - It is called "Jingle mail" as the keys returned to bank jingles!
                    I know some senior doctors today who recounted their experience with this kind of mail in UK back in 1980 (of all places).
                    I also know a cousin of mine (another senior doctor doing very well now) who made a surprising statement to me a few years back ... "It took me 24 hours to buy a house and 2 years to sell it; and I was completely cleaned out in the process". This was in the US back in the 1979-81 period.

                    YEs, banks do follow process of ascertaining your repayment capacity. But this is during good times when you have other assets at high valuation (like Jayakumar Gitanjali Gems case recently) and a good paying job. Then Gitanjali Gems which was pledged at that valuation lost 80%, the derivative bets taken against that capital went wrong and (say) you lost your job - all easy possibilities today with the first 2 already happened. Then say your home went down ONLY 30% (and buyer bargaining hard for another 10%) - again easy as you go a little more down in the markets.

                    And that case was with Jayakumar - a darling of the Fund Management business with I-Bank experience. Today he is facing a 100 Cr deficit and is probably finished as he is also accused of mixing client copllateral with his own (same as MF Global). If it can happen to him, surely it can happen to many of us who are not conservative in pur outlook and want to make the easy crores via "sure-shot" RE bonanza?!

                    Then, how does it matter what dilligence the banks did back then? You still lose the home!

                    Then again assuming that in a bear market cost of construction will go on rising and THEREFORE price of homes will go on rising is a falacy. Either, like in US construction business will go into deep decline and/or there will be huge oversupply due to foreclosures and distress sales. All of these are happening for last 5 years in the US and likely to go on for a full decade at least.

                    The $50 Billion coing is getting increasingly doubtful right now. EMs have completed their love-affair with Western Capital and the 10-12 year bull market in EM investment is over. With China likely to have sub-4% growth over the next decade (you got that number right) its quite evident that there is going to be a deep and long bear market worldwide for as much as a decade. So, write off the continuation of that $50 Billion (or whatever) as the weaknesses in our setup makes investors even more scared (which they conveniently refused to see in the bull days).

                    It is always better for the buyer to do common-sense diligence for the ENTIRE PERIOD OF THE LOAN - before jumping in due to bull euphoria.

                    More I look at it, more our RE greed looks like a mini-case of the US RE situation. Only thing, I'll agree with you that American are completely screwed due to their double jeopardy of excess debt with zero savings and a collapsing job market. Indians would probably be saved a little due to good savings, not so bad debt levels, still functioning (but under-stress) job market, living within our means generally and a family network to save our ass coupled with a little black money stashed away somewhere. Did I miss that gold that was not disclosed in the asset list?

                    Also, I'm noting that there are many more bears emerging (that says there is something going on - smoke leading to fire) and these bears are even more bearish than me!

                    cheers
                    Last edited July 21 2013, 12:25 PM.

                    Comment


                    • Re : Real Estate Bubble Set to Burst Again in India

                      Originally posted by smart111 View Post
                      I am floored with the innocence or ignorance of the people saying all this. What is the percentage of the property financed by the banks? 80 to 85% at max. which means people still need to do funding of the remaining part.
                      Which bank has not checked the credentials and loan paying capacity of the individual before sanctioning the loan? Atleast I am not aware of any such Indian bank. Do let me know for improving my knowledge.
                      Vast majority of people do not over leverage themselves here in India as compared to US where everyone tends to live a life on credit.
                      market value of the properties is much greater than the bank loan whenever it was taken by the individuals due to ever increasing circle rates, fresh inventory at higher prices, construction cost increasing, inflation, increased compensation for farmers and other so many factors.
                      Salary class is not the only class investing in RE, there is a vast number of people who are channeling black money into the system and big businessmen who have plenty of surplus to keep fueling it. At best they would sell their holdings at discount to market when not getting enough returns or when not comfortable with the future prospects. Let me tell you then there are plenty of people looking for such deals who would be interested to make a killing including lot of boarders in the forum, dealers and even end users.
                      the other day one of the moderators sent a link to a story trying to our banking system desperately trying to bail out RE builders and lenders in crisis time. Simply why would Sonia not interested to save the system as his son in law is having direct and indirect interests in so many real estate companies. sabke profits mein percentage set hai bhai? people have very short memory it seems.....

                      Till we have NRI's inflow of 50 billion$ plus, Mauritius route for FDI, a parallel economy of black which is much larger than our white system, our finance ministry hand in glove with bankers and having vested interests in real estate investments, it seems quite tough to me. I am no RE pundit and dont have any aspiration to do so but sharing common plain facts only.

                      PS: people may disagree with me but that may be their own personal opinions.

                      A simple math to show the innocence of the people here...

                      If a loan repayment is not happening for 90 days the loan has to classify as NPA and 100 percent provision has to happen.

                      Make no mistake, Indians wont pay if the value goes below the market prce..forget about the emotional attachment of indian with house..those days are gone..becos now Indians not buying house but 'invest'

                      So only 500-1000 loan accounts goes to NPA, the bank's balance sheet hit by 500 crores. Imagine the number of loans ( sub standard loans) in these bank's book...

                      RBI is hell bent to save the ass of banks not without reason..

                      btw...I worked in a bank for 10 years and I think I am qualified to make this statement....

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