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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Originally posted by Sansei View Post
    Why Govt is not providing required infra.
    So person does not good roads schools, hospital and transport arrangements.
    Thus location has that much premium. Bad leaders for a great country one can say.
    Because lot of politicians too are involved in RE business. However, now MH state Govt is better, they are now going to build coastal road in Mumbai, a trans-harbor link connecting South Mumbai to Navi Mumbai (earlier Govt didn't do this since they had stakes in S.Mumbai RE) & also planned cities will be built around periphery of Mumbai. Once this is done, current Mumbai will become less lucrative + Pune guys having option to work in Mumbai too can stay in these new planned areas.
    If you are happy, you are successful.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by Tangent View Post
      well then u invested in wrong prpoerty ... i think all made 100%+ from 2009
      Actually FD + MF gave much more real returns than RE in this time.
      And don't forget the loan of atleast 10.50% which is paid to banks & this amount needs to be deducted from whatever gains take place. Man, you didn't consider COST OF HOLDING in your calculations.
      If you are happy, you are successful.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Shopping malls supply in 2014 dips 79%

        The supply of retail space in shopping malls last year fell sharply by 79 per cent to about a million sq ft in the seven major cities of the country due to construction delays, property consultant CBRE said today.

        The supply of organised retail space stood at 4.7 million sq ft in 2013 in the seven cities – Delhi-NCR, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, and Pune.

        A significant number of prominent retail projects were not completed till 2015 as projected earlier, mainly due to construction delays, he added.

        A slowdown in the real estate sector has affected the cash-flow of developers, leading to huge delays in completion of housing and commercial projects.

        http://www.thehindubusinessline.com/...cle6805264.ece

        And see now who is talking about RE price fall even further :- Magic_bricks !!

        Real estate prices to drop, says Magicbricks

        http://www.thehindubusinessline.com/...cle6791992.ece
        If you are happy, you are successful.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Apart from bldrs salesmen/brokers I m getting calls from bank agents also.
          Sales must be in real dump's.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Interest rate cuts won't help RE

            This news if for those RE bulls who think that interest rate cuts will make RE boom (note that only RBI has cut rates, not banks so on ground situation still is same).

            Rajan cut the repo rate by 25 basis points (one basis point is one hundredth of a percentage) to 7.75% and in the process took everybody by surprise. Repo rate is the rate at which the RBI lends to banks.

            Since taking over in September 2013, Rajan has raised the repo rate multiple times to rein in inflation and to protect the crashing rupee. Nevertheless, increases in the repo rate are boring. They only spell gloom and doom. As interest rates go up, corporates don't invest and you and I don't borrow to spend, making things a tad unexciting.

            Repo rate cuts on the other hand are fun - look at the smiles that have come back on the faces of business news anchors for one. The Sensex has also rallied big time. And as I write this, it is up 622.28 points or 2.3% from yesterday's close while government bond yields fell sharply.

            The bankers are all happy. And so are the corporates. At least, that's how things are being portrayed in the media in general and on television in particular.

            Don't be surprised tomorrow morning to read newspapers with headlines “your home loan EMIs are ready to fall,” and how real estate companies expect home sales to pick up again. Or to put it in a language that everybody understands these days: “acche din aane waale hain”.

            Finance minister Arun Jaitley, who over the last few months has vociferously been demanding a RBI rate cut said “[the rate cut] will put more money in hands of consumers. [It will be] positive for the Indian economy will help revive investment cycle.”

            These are fairly simplistic statements. Just because the RBI has cut interest rates by 25 basis points does not mean that corporates and consumers will start borrowing.

            As John Kenneth Galbraith points out in The Economics of Innocent Fraud: “If in recession the interest rate is lowered by the central bank, the member banks are counted on to pass the lower rate along to their customers, thus encouraging them to borrow. Producers will thus produce goods and services, buy the plant and machinery they can afford now and from which they can make money, and consumption paid for by cheaper loans will expand.” This is the logic that has been offered by both Subramanian and Jaitley.

            But things play out a little differently in the real world. “The difficulty is that this highly plausible, wholly agreeable process exists only in well-established economic belief and not in real life. The belief depends on the seemingly persuasive theory and on neither reality nor practical experience. Business firms borrow when they can make money and not because interest rates are low,” Galbraith points out.

            So, corporates are not just going to start borrowing and investing because the repo rate has been cut by 25 basis points.

            As Bhanumurthy told Reuters: "I don't think it will have too much impact because investment is not dependent on interest rates alone.” Further, the Indian corporates are heavily leveraged and they are really in no position to borrow more. Banks have already lost too much lending to them and will be very careful lending more.

            What about consumers? Will they borrow and spend more? Here it is important to go back again to what Galbraith writes in The Affluent Society:“Consumer credit is ordinarily repaid in installments, and one of the mathematical tricks of this type of repayment is that a very large increase in interest brings a very small increase in monthly payment.” And vice versa—a large cut in interest rate decreases the monthly payment by a very small amount.

            An individual decides to take a car loan of Rs 4.25 lakh at 10.5%, repayable over a period of five years. The monthly payment or the EMI on this loan amounts to Rs 9,134.9.

            Now let’s say the RBI decides to cut the repo rate by 25 basis points and the bank decides to pass on this rate cut to the consumers (something that doesn't always happen) and cuts the car loan rate by 25 basis points to 10.25%. The EMI now falls to Rs 9082.4 or Rs 52.5 lower. If the cut is 50 basis points as is being speculated on television channels right now, the EMI will fall by around Rs 105. Is someone going to go buy a car just because the EMI has fallen by a little over Rs 50 or Rs 100? I am sure it takes a lot more than that. For loans of lower denominations the difference in EMIs will be even lower.

            What about home loans? In that case there is some fall in EMIs, but the basic problem with real estate is that its way too expensive and unless a big fall in price happens, people are not going to buy homes, even if EMIs come down significantly.

            So what does that leave us with? Not much. Monetary policy impact is over-rated. There are many other factors that need to go right for the economy to be up and running again.

            Rajan in his statement said: “Key to further easing are data that confirm continuing disinflationary pressures.” This means that if inflation keeps falling, RBI will cut the repo rate more. Nevertheless Rajan also said that “also critical would be sustained high quality fiscal consolidation.”

            This is where things get interesting. What Rajan is essentially saying is that he is waiting for next financial year's budget to see what sort of fiscal deficit number does the government come up with. Fiscal deficit is the difference between what a government earns and what it spends.

            To conclude, for monetary policy to drive private investments and consumer spending, interest rates need to come down by a huge margin (at least around 300-350 basis points). A 25 basis point cut really amounts to nothing.

            Raghuram Rajan no longer a rate cut virgin, but 25 bps amounts to little - Firstpost
            If you are happy, you are successful.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Here is another look to see the same thing. http://profit.ndtv.com/news/your-mon...00-soon-728126

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              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                E-commerce business may need to hire 1 lakh people in next 6 months | Latest News & Updates at Daily News & Analysis

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  New residential launches dip 28% in 2014 despite upward market | Latest News & Updates at Daily News & Analysis
                  Extract:
                  The country's residential property market in 2014 witnessed a 28% decline in launches and 17% dip in sales volume, as compared to 2013, according to a report.

                  Property consultant Knight Frank in its recent report 'India Real Estate Outlook' said due to a slowing demand environment, residential sales across top six cities, including Delhi NCR, Mumbai, Pune, Bengaluru, Hyderabad and Chennai, dropped during 2014.

                  The office space segment, however, performed well during the year on the back of recovery in the domestic market which fuelled higher demand for commercial space.

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Good supply side is going down as well... ^^

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Real estate inventory piles up across 6 cities

                      NCR and Mumbai will take 14 and 12 quarters, respectively, to sell existing units

                      A severe fall in sales has resulted in a huge inventory pile up with real estate developers. According to a report released on 28 January by property consultant, Knight Frank India, the National Capital Region (NCR) has 192,568 unsold residential units which will take approximately 14 quarters to sell (QTS); it means that if no further units are added, the current inventory will take 14 quarters to get sold.



                      But for end user/self use purchase,

                      real inventory = builder unsold flats + investor flats on sale.

                      So actual numbers will be more.
                      If you are happy, you are successful.

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