As per under currents and massive supply and announcement of few megatownships,reality prices are to fall by 20-25 % in NCR.

Even by now,if the investors have earned 10-15% margins they should move out of their properties and invest in gold funds .

End users may gain but that too marginally as higher loan rates will kill the enthusiasm.

Pick and choose in completed projects should be the stategy.

Let the builders bleed ,as they have already taken people for a ride by spending hugely on advertisments.

Constructed realty as a venue for investment has lost its charm due to high mainatainance cost and recurring society fees.
If at all you still feel to invest ,go in for land as it will,have no recurring cost to hold.
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  • We may be heading for the cliff ...

    Originally Posted by ondabhai
    Wiseman, you wisely said the key aspect of crash... overly leverage and inability to serve the liabilities.

    Now look at the players in RE market

    1. Classification of builders
    a. Small players with few small projects in hand, in business for many years. They don't advertise, their projects are sold purely on word of mouth.
    b. Small players but want to expand too fast... Amrapali
    c. Grey builders... with multiple connections... probably their sole purpose is making colored money white... there are too many ..)
    d. Established players, who are in business for many years.

    2. Classification of buyers
    a. True end users ... those middle aged service class person dreaming for their one and only dream home.
    b. Semi end users .. those young chaps started their life with very good salary... they are ready to encash their house for profit.
    c. Small time investors .. like punters, many IT guys etc, who has one or two home and want to make quick money by flipping their RE investments. This category got two sub types, one overly leveraged and the other having multiple lifelines.
    d. Those seasoned HNI type of investors ... (SBajaj bhai comes immediately in mind) These people are toooo rich, they are able to buy an entire area, forget about project!!


    Now you know who is leveraged and how much ..) Not many in Indian RE market are overly leveraged, at least as of now.



    GBhai,

    The key words you used are "overly leveraged".

    This has two parts ...

    1. Having low amount of loans that you are capable of covering with your current income (as well as having high equity in the asset)

    2. Having large enough income that even a high amount of loan can be covered - as of now

    I suspect that the (a) high prices builders are holding up as well as (b) the stable job/salary situation is hiding the cracks in the ecosystem. We may already be overly leveraged but these 2 factors ( which are currently buoyant due to many years of wealth or temporary money transfer from the West in search of earnings) from may be covering that fact.

    In my view India is ecessively leveraged at every level (Govt, Private Individual, Corporates, Farmers) and the soon-to-be-seen slowing down of money pumping into our economy will expose this fact. The recent lack of interest by foreign moneybags in our quest for Trillion Dollars for infrastructure may be a trend developing towards a general slowing down (oe even exiting) of hot money currently lying with us, which is giving Indians such a positive wealth effect!!!

    The high prices (like in RE in the US back in 2005) may be giving confidence to banks that their loan portfolio is well covered by asset value.

    IF (or WHEN), the world's economy starts nosediving again, ad the ripple effect sees a big enough impact on our job scene (especially of high-paying jobsector like IT which is most susceptible to global crises), you will see a sharp shift in sentiment of potential buyers AS WELL AS a crisis in ability to keep paying off those large loans.

    The real problem will start then when the industry enters a vicious downward spiral.

    First volumes will dry up ...

    Then, as distress mounts, many houses will start getting repossessed and come up for auction, just when buyer interest starts declining

    This will suddenly increase oversupply and start putting pressure on prices (you will start seeing discounts in innovative ways; BMW/Porsche cars were being given away for free with houses back in 2007-08)

    Banks will start seeng decline in asset values (as well as NPAs rising steeply) and will pullback in lending - both to builders as well as buyers

    This will put even more pricing pressure all around and the whole cycle will repeat ...

    In addition, since many homes in recent times were bought as investments, these will come to market in greater distress as prices decline to such an extent that the "home debtor" is underwater at least in their investment home. There is real danger of losing everythin in case of repossession (unlike stocks where, even after 60% drop you will at least recover the remaining 40% - the dangers of acquiring a large asset on large debt with your last penny as down payment).

    We are seeing that already in many other parts of the world since 2005 and there is no reason why we should not see it here ...

    I can't say what effect Black Money will have on this. This whole thing about India having billion people and demand will always exceed supply is a little flaky. At least 700 - 800 million of these people will NEVER own a home. A few dozen million already have a home. And most of the people looking to buy can easily put it off when dangers like job/salary uncertainity come around.

    The so-called demand can easily be shifted to next year and will sudden seen to disappear.

    I expect these things are going to happen in the next couple of years as global economy starts sinking again (once stimulus is forced to end due to excess debt OR inflation takes the economies to the cleaners).

    cheers
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  • Originally Posted by wiseman
    GBhai,

    The key words you used are "overly leveraged".

    This has two parts ...

    1. Having low amount of loans that you are capable of covering with your current income (as well as having high equity in the asset)

    2. Having large enough income that even a high amount of loan can be covered - as of now

    In my view India is ecessively leveraged at every level (Govt, Private Individual, Corporates, Farmers) and the soon-to-be-seen slowing down of money pumping into our economy will expose this fact. The recent lack of interest by foreign moneybags in our quest for Trillion Dollars for infrastructure may be a trend developing towards a general slowing down (oe even exiting) of hot money currently lying with us, which is giving Indians such a positive wealth effect!!!



    Wiseman, I completely differ. We Indians are very prudent, specially when you look back just a generation back... our parents!

    Let me share one of my experience during the last recession. Two of my friends were retrenched and both purchased their house recently in overseas, where we stay. The EMI was quite high when you convert into INR, in lakhs. Then again, we all and their parents/relatives helped each other and it was over.

    Again another friend in India, he was retrenched and his father came in to rescue him. Our parents may not be that rich but they can definitely help with few EMIs at any point of time.... and many of them without even going to the bank!!

    Never underestimate the capabilities of your parents and relatives. When there is an emergency, they really help as a family. This is precisely the reason why you never had any distress sale during the last recession by those IT people.

    Definitely no one will prefer to beg to their parents but emergency is different..... and I believe this trend will not change in next 10-15 years, until our old generation is still around us!!
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  • Gbhai,

    your reasoning looks a little flacky....
    i think people in USA, DUBAI , JAPAN , EU all have parents and still...

    when market was at 21000 in fag end of 2007 ,then if somebody tells that
    market is going to be down then people laugh in disbelief...
    and i think you must have said even though everybody positions are down and margins calls are getting activated ,even then parents will come to cater to these margin calls..........

    nothing personal.....
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  • Originally Posted by vatsalbajpai
    Gbhai,

    your reasoning looks a little flacky....
    i think people in USA, DUBAI , JAPAN , EU all have parents and still...

    when market was at 21000 in fag end of 2007 ,then if somebody tells that
    market is going to be down then people laugh in disbelief...
    and i think you must have said even though everybody positions are down and margins calls are getting activated ,even then parents will come to cater to these margin calls..........

    nothing personal.....


    Hope you read the entire thread rather than commenting prematurely based on partial reading.

    I said "We Indians are very prudent, specially when you look back just a generation back... our parents!"

    unfortunately I can not say the same thing about those people in US or EU... they live for today and our parents always lived for tomorrow

    new generation are changing and we are moving toward "live for today as if there is no tomorrow" ..... and thats why I said the trend will not change until our parents are there and then we all will follow the same fate like US/EU/Dubai/Japan .....
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  • Lets see now ...

    Originally Posted by ondabhai
    Wiseman, I completely differ. We Indians are very prudent, specially when you look back just a generation back... our parents!

    Let me share one of my experience during the last recession. Two of my friends were retrenched and both purchased their house recently in overseas, where we stay. The EMI was quite high when you convert into INR, in lakhs. Then again, we all and their parents/relatives helped each other and it was over.

    Again another friend in India, he was retrenched and his father came in to rescue him. Our parents may not be that rich but they can definitely help with few EMIs at any point of time.... and many of them without even going to the bank!!

    Never underestimate the capabilities of your parents and relatives. When there is an emergency, they really help as a family. This is precisely the reason why you never had any distress sale during the last recession by those IT people.

    Definitely no one will prefer to beg to their parents but emergency is different..... and I believe this trend will not change in next 10-15 years, until our old generation is still around us!!


    GBhai,

    I completely agree with you on our Parent's Generation. In fact, India never saw a bear market in RE (I may be wrong on this), till the 90s until the sudden volatile spurt of RE prices in cities like Bangalore, etc turned RE from a stable, slow growth asset to any other kind of "trading" asset.

    After that, I would like to disagree on the practicality of your model.

    First of all, there are not too many Parents around with the kind of earning power (Pensions don't provide much these days and with inflation killing even highly-paid IT employees, what chance does a 75 year old pensioner have?) to provide more than an EMI or two (with EMIs nw-a-days ranging from 50k upwards. Of course, they too are living an asset-rich but cash-por existence because their main asset is an old home.

    Second, this breed will (like it or not) start declining in numbers over the years.

    While both of us are talking without any reliable data as the basis, I think the level of high debt buying of first and second homes are so high that this parent-uncle-brother thing wuld most likely have marginal effect.

    If this slowdown takes longer to go, would the parent-uncle-brother also like to become bankrupt?!

    Please note that in a recent study it was found that over 96% of Indian families did not have a cash cushion of even 6 months!!!

    Now, just let a 12-month serious recession come and we shall see the story unfold!

    cheers
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  • Originally Posted by wiseman
    GBhai,

    I completely agree with you on our Parent's Generation. In fact, India never saw a bear market in RE (I may be wrong on this), till the 90s until the sudden volatile spurt of RE prices in cities like Bangalore, etc turned RE from a stable, slow growth asset to any other kind of "trading" asset.

    After that, I would like to disagree on the practicality of your model.

    First of all, there are not too many Parents around with the kind of earning power (Pensions don't provide much these days and with inflation killing even highly-paid IT employees, what chance does a 75 year old pensioner have?) to provide more than an EMI or two (with EMIs nw-a-days ranging from 50k upwards. Of course, they too are living an asset-rich but cash-por existence because their main asset is an old home.

    Second, this breed will (like it or not) start declining in numbers over the years.

    While both of us are talking without any reliable data as the basis, I think the level of high debt buying of first and second homes are so high that this parent-uncle-brother thing wuld most likely have marginal effect.

    If this slowdown takes longer to go, would the parent-uncle-brother also like to become bankrupt?!

    Please note that in a recent study it was found that over 96% of Indian families did not have a cash cushion of even 6 months!!!

    Now, just let a 12-month serious recession come and we shall see the story unfold!

    cheers


    Dear Wiseman, I am probably optimist and with a positive inclination. So we differ in outlook... it's glass half full and glass half empty.

    We have a long way to go to be compared with US in terms of leverage. Except the current generation, none of our parents used Credit Card... they are still not so used to with ATM.... they still prefer to go to bank, queue up for one hour and see everything done on reliable paper, rather than virtual computer. none ever ventured beyond savings account/FD/KVP... forget about shares ... option/future.... come on... woh log iska naam bhi nehin suna hain.. they live in REAL money rather than PAPER/PLASTIC money.

    Even that pensioner will have few FD/KVP and few more for those rainy days..... believe me, he/she is not like me or you. They never live to the edge of their means.... only time they go towards the edge is for their kids higher education or marriage... rest of the time they are too prudent... so much prudent that we new generation sometime term them as kanjoos bapu ..)

    I am not sure what recent research or study by whom you are referring to... if someone is ready to compromise in worse time... he/she will not have food problem, neither problem with a room to stay. extreme situation require extreme measure to handle.

    So I am quite optimist and don't foresee any catastrophe in near future.

    PS: I still have many things to learn from my humble middle class bapu.
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  • dear gbhai

    no need to get worked up....

    it seems you only believe things when you see them..
    80% of people in india giving on 2 USD/day ,and in a lot of social indicators we are behind sub-saharan africa , it is just that those living in metropolitan
    cities think entire india is like metropolitan cities around him........

    in whatever state you are living in ...tell me more than 10 cities where the so called growth has percolated???

    Even though i live in USA but still i have seen small town life up,close and personal and do not see much positive change rather than inflation eating up peoples savings.
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  • Originally Posted by vatsalbajpai
    dear gbhai

    no need to get worked up....

    it seems you only believe things when you see them..
    80% of people in india giving on 2 USD/day ,and in a lot of social indicators we are behind sub-saharan africa , it is just that those living in metropolitan
    cities think entire india is like metropolitan cities around him........

    in whatever state you are living in ...tell me more than 10 cities where the so called growth has percolated???

    Even though i live in USA but still i have seen small town life up,close and personal and do not see much positive change rather than inflation eating up peoples savings.


    OK, I too don't believe in that theory of "India Shining".

    But there is no denying that village too had improved a lot in the recent few years. IF you really seen villages then you should know just ten years back also there used to be many people living without 2 meals a day. I have seen many families there having great difficulties in arranging two meals a day.... now, we do not have that problem... there are rarely anyone goes without food this days, except few pockets of tribal areas.... I have seen many such cases.
    Transportation in village too improved dramatically, you need not walk 5km to catch the bus... you got some means atleast. Communication/ is not something alien.... most of the village now got current... many villages got gas/tv and so on.

    The most important I would say, not many go hungry this days. It's a fact.

    Come on.. don't be blind and negative.

    Anyway, thats a different story. We are talking about RE market here... and those people don't really buy the kind of RE that we are talking about here. We are talking about two different groups of consumers.
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  • Just butting in on this discussion with an off topic point.

    Regarding India shining, i don't know. But, i have noticed some changes in a few villages that i keep going to once in a year. In my native place, maids were easy to come by and full day maids were available at 500Rs a month. With the introduction of NREGA, there has been a marked change in the social fabric. Nowadays maids are hard to come by and they demand 1.5k plus since NREGA guarantees them much more money, 100 days a year. I see more cycles, slightly better houses, and the odd colour TV in many houses in that village.
    My mom frets over the exhorbitant rates maids are charging, but boy am i proud :-)
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  • Originally Posted by wiseman
    GBhai,

    Please note that in a recent study it was found that over 96% of Indian families did not have a cash cushion of even 6 months!!!

    Now, just let a 12-month serious recession come and we shall see the story unfold!

    cheers


    Ye survey kis bevkoof ne kiya hai ?? What is definition of family ? I mean a person got married is considered as new family ?

    I don't have data but 4% is only politician and businessman, top officers and their family only in India.

    So meaning I am from 96% and can't survive for 6 month ? I believe 50% India can survive for more than a year...

    High inflation is due to electronic trading funds (ETF). Crude price is getting decided in New york stock exchange... Nothing changed but prices touched 150 USD and then came down to 36 USD.

    When the prices of essential item get decided in stock market...be prepared for all that...

    Just think a company/country who bought enough ETF of crude when it was $36.

    Think about if India had bought crude ETF enough for 5 years at $36...

    Atlast don't forget to buy gold...an international currency...
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  • Even in this Forum ,you will observe the 8 hot cities always on hot discussions are all IT destinations.
    Same set of IT people while in offices( say NOIDA) and disussing on investment ,go in for properties which have been discussed endlessly or good bulk deals are available.Same set when get transfered to Bangalore or Hyderabad or Pune after few months get into the same cycle.
    They are more into this due to lack of alternate viable investment options and definitely some loose cash.
    Today if a poll is conducted in this forum 80% would be IT guys.
    As they are the ones who get routinely transfered ,shifted to most of these 8 listed cities.
    Even in Kolkatta most of the development of such housing schemes is taking place in New town as it is close to IT hub of salt lake .Same model of NOIDA , Pune ,Hyderabad was cut and pasted in the area.

    A Similar investment pattern in similar area is being conducted by a similar set of people as in late 90's wearing strange, bright,electric coloured mismatching ties,shirts and coats was started by some geeks.

    Car sales have already started stagnating or falling.

    Is this the sign of the times to come.
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  • Originally Posted by Mikhail
    Just butting in on this discussion with an off topic point.

    Regarding India shining, i don't know. But, i have noticed some changes in a few villages that i keep going to once in a year. In my native place, maids were easy to come by and full day maids were available at 500Rs a month. With the introduction of NREGA, there has been a marked change in the social fabric. Nowadays maids are hard to come by and they demand 1.5k plus since NREGA guarantees them much more money, 100 days a year. I see more cycles, slightly better houses, and the odd colour TV in many houses in that village.
    My mom frets over the exhorbitant rates maids are charging, but boy am i proud :-)


    Thanks Mikhail. Indeed there had been quite a lot of developments in village too. Anyone having an open mind will definitely see the major changes happened in villages in the last 10-15 years.
    The village earlier used to take a whole day to go can now be reached DIRECTLY in few hours, most of the villages has kind of motorable road, few people in village got and at least one STD booth there.. list is too long ..

    Ofcourse you can not expect them to be at par with the cities, the difference was there earlier and will be there in near future.... but the whole yard stick has been changed significantly. I have seen many villages too closely and I can not deny the developments there.
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  • Originally Posted by chandra2034
    Ye survey kis bevkoof ne kiya hai ?? What is definition of family ? I mean a person got married is considered as new family ?

    I don't have data but 4% is only politician and businessman, top officers and their family only in India.

    So meaning I am from 96% and can't survive for 6 month ? I believe 50% India can survive for more than a year...

    High inflation is due to electronic trading funds (ETF). Crude price is getting decided in New york stock exchange... Nothing changed but prices touched 150 USD and then came down to 36 USD.

    When the prices of essential item get decided in stock market...be prepared for all that...

    Just think a company/country who bought enough ETF of crude when it was $36.

    Think about if India had bought crude ETF enough for 5 years at $36...

    Atlast don't forget to buy gold...an international currency...


    Chandraji, cool down!!

    Many so called smart people always try to quote RECENT RESEARCH to prove their point... the most frequent is GARTNER in IT industry..

    Another similar trend is, put a quote and add a Greek name to that .. something like
    "Wise never bluff" ... Plutonius

    Never ask me who is this Plutonius otherwise I will give you a classic look and I am confident that many smart people around me will join me saying ... 'You don't know Plutonius???'
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  • Quite true . Change in the social fabric, way of thinking, standard of living, facilities & amenities available is happening in the villages . The example given is something, i have experienced too .

    ........& interesting discussions .


    Originally Posted by Mikhail
    Just butting in on this discussion with an off topic point.

    Regarding India shining, i don't know. But, i have noticed some changes in a few villages that i keep going to once in a year. In my native place, maids were easy to come by and full day maids were available at 500Rs a month. With the introduction of NREGA, there has been a marked change in the social fabric. Nowadays maids are hard to come by and they demand 1.5k plus since NREGA guarantees them much more money, 100 days a year. I see more cycles, slightly better houses, and the odd colour TV in many houses in that village.
    My mom frets over the exhorbitant rates maids are charging, but boy am i proud :-)
    CommentQuote
  • Originally Posted by wiseman


    Please note that in a recent study it was found that over 96% of Indian families did not have a cash cushion of even 6 months!!!

    Now, just let a 12-month serious recession come and we shall see the story unfold!

    cheers


    This statement holds true not only for India but for almost all the countries. when i was in ME i used to worry about paying bills etc if my salary got delayed by even a week.:)

    Basically it depends on the needs and requirements. Need of a Laborer is only food and thats it. They are still living on Rs. 100/- per day and work for 10 hrs a day.
    In haryana, the govt has announced free food to laborers who register themselves with local authority. Most of these laborers have now vanished from factories/construction sites and dont want to work(8 hrs a day) as they are getting free food. They are happy with that.
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