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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 Hairpin View Post

    May people like REinvest go the way they want, but many are listening, many are silently following this thread. It makes them pause and rethink.

    I think in this way, we should evaluate success of this thread.

    On other side many have burnt hands by listening to waiting advise just to realize that prices have raced much farther and the viable places are going away and away from the city center. This is also a side one cannot ignore.


    Originally posted by Carefree View Post
    Nasscom trims software services growth projection to 10-12% - The Economic Times

    from the article

    "This is the third straight year of declining growth projections. It is also the first time in the last five years that the lower end of growth is expected to be as low as 10% — just about making the cut for double-digit growth."


    I was thinking that the decline in growth will be like attack of cheetah killing prey( i mean us IT folks) suddenly...but it seems the decline will be similar to slow constriction of anaconda...people will have enough time to plan for future.....
    Thanks for the post. The decline is projected in the growth, not that growth tself would be negative. Its expected to fall from 14 % range to 12 % range. I think 12% is still quiet cool. If it comes to 5% level I would be thinking a plateau has reached (5% means at worst will maintain current earning figures which itself is not at all bad given the forex revenue IT firms are generating and the level they have reached rising on growth figures of past).
    Currently IT Industry stands at revenue of $ 108 billion with 37 lakh employed in IT sector. Now these are "some" figures to look at. So that means the revenue (taking lower growth figure of 10%) will be nearing $ 120 billion and 40L employed . Now what more a economy could ask for.


    " ... slow constriction of anaconda...people will have .." reminds me of frugality

    Now look at these (for one negative news ... well ... a small mention in one of article which itself is positive) we have many positive stories ignored

    http://economictimes.indiatimes.com/...w/50859462.cms
    http://economictimes.indiatimes.com/...w/50842287.cms

    First GM and now Suzuki .. and Plus Blackrock (financial sector) pouring billions into India market. Its not some money that comes in and goes, this involves investment into land buys, construction of infra/industry, training of personnel . This is all here to stay. Even if they move out, the development stays here (like brits did not take railways with them ).

    Lets talk further
    http://economictimes.indiatimes.com/...w/50848593.cms

    now how much business will it generate for local companies .

    Same newspaper (of same date ), looked with different perspective. This is not something new and been happening since 2009. People have developed gr8 skills to uncover small negative news buried under tonnes of positive news and made this a gloom gyan thread.
    Last edited by compuwalah; February 5 2016, 12:52 PM.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by compuwalah View Post
      On other side many have burnt hands by listening to waiting advise just to realize that prices have raced much farther and the viable places are going away and away from the city center. This is also a side one cannot ignore.






      Thanks for the post. The decline is projected in the growth, not that growth tself would be negative. Its expected to fall from 14 % range to 12 % range. I think 12% is still quiet cool. If it comes to 5% level I would be thinking a plateau has reached (5% means at worst will maintain current earning figures which itself is not at all bad given the forex revenue IT firms are generating and the level they have reached rising on growth figures of past).


      " ... slow constriction of anaconda...people will have .." reminds me of frugality
      the problem i think is as growth slows down to 5% or so , in order to satisfy the shareholders demand for higher profits managements will start cutting the middle level as well as senior level folks and replace them with junior folks with less salaries....so people with more than 10 year experience need to be careful...
      if we take 2% decline per year it will be by 2018 we will reach 5% growth after that give 1 or two years ....after that we will see really hard days for indian IT...this i think is still 4 to 5 years away....till then make merry.....and plan better for future...

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by compuwalah View Post
        So why do you think there will not be such bailout (or some other measure taken) to keep economy on track by major forces ? At the same time you agree that your analysis you could not see that good economy is in interest of major powers and they will not let go down so easily ? So you kept out major powers out of analysis ? What are your views about TPP ? TPP is all set to create a new boom that would not have been seen earlier by anyone. In this new env many old companies will left behind and some new ones will make it big. Just need to watch out.


        Some interesting exchanges of 2010 - https://www.indianrealestateforum.co...2-a-12224.html


        The most sensible post in the thread from Venkytalks back then (on page 2)
        "Coming back to topic, I think inflation will ensure that those who invest in RE will not lose. Those who do not invest will regret.

        It has always been that way in India. Every slow down will shrink construction activities and make RE scarcity come into play to command a valuation."


        (oh man. how more true was this in 2010 than yesteryears as following it 2011 , instead of 30% drop in prices, we saw 30% rise in RE prices and 2012 in 15% range).

        Small , sharp and on the ground. Rest all kept flying high kites of big theories which was blown away by storm of RE prices rise leaving people stranded in high waters who believed messages on these kites. Posts by REinvest and StillSearching are two cases that people need to see (sorry guys to quote you if you are not ok with it - let me know ) and you can see how the two cases have played out over time.


        Also not sure about your comment that people are more worried about their jobs these days etc. How do you infer such things ? Job worries have always been there. If you want to put rating, then recent time only 2009 was major one. Currently with the kind of money pouring it into India (esp Pune) , low oil prices, aggressive [non puppet] govt (on getting investments) not sure howone can derive such conclusions.
        Bailouts are not a good thing. It is like giving a seriously ill patient something to feel better for some time, while the palliative itself makes the illness worse.

        Also, one must study trends over various timeframes, not just see what suits one's position and feel satisfied.

        The biggest factor today is the complete turnaround in the policy view among major Central Bankers led by the US FED. Seeing that all that bailout has done very little to boost global economy and bring it back on so-called "growth" path, while at the same time putting massive pressure due to hugely enhanced debt burden, they are embarking on the tightening cycle.

        This has an immediate effect on all that "free" money (or credit) created by the FED which has found its way into Emerging Markets looking for yield. Recent past, this yield is missing and simultaneously the "free" part of the credit is disappearing, giving a double whammy. The triple whammy is, assets into which this money has flowed (stocks and RE) are showing shakiness and threaten to either stay flat or drop.

        There is as much as $9 Trillion of this money in various EMs and IF the FED tightens rates from current 0.25-0.5% all the way to 3.5-4.5% (considered normal level), a large chunk of this credit will flow back, resulting in the entire base of your stock and RE boom being pulled out suddenly. The immediate impact on weakened stock and RE markets (along with economic output and business - because these work on plentiful and easy credit - will be hugely negative. Business leaders will have "deer-in-the-headlight" moment and with a slight lag jobs too will take a hit as companies retrench. Being global, it will also hit export companies (as will TPP, which is an opaque trade agreement meant to impact mainly China).

        Coupled with the huge inventory buildup in RE (created with the belief that the "demand" for RE at unsustainable prices was genuine - note that the emphasis is on the price and not the demand which is there anyway) and based on continued bailouts of RE by Govt, it will be the final nail in the proverbial coffin.

        Current economic recession worldwide will deepen and current job losses will widen significantly (automation will only make matters worse as managements will fast forward automation efforts to reduce cost and increase productivity).

        This is certainly coming and whenever it gets delayed due to "easing", the debt load increases and makes the upcoming depression even deeper.

        This is like the Turkey story used by Nassim Taleb to describe the sudden crashes in markets (its not sudden, only one chooses not to see it coming).

        Recent buyers of property at high prices who believe that they are sitting on "gains" based on forever rise of prices are unable/refusing to see that the economic climate out there is something we have not seen in our lifetime and are in for a lot of pain when the big one hits, IF they are unable to keep paying their EMIs.

        Under these conditions, it does not matter if one stays out of buying RE and keeps accumulating cash (one is not really missing the runaway RE prices). I will not only get a better price when property prices decline when the big one hits. I'm happier sitting on cash and enjoying the high-priced properties on ridiculously low rentals compared to the "value" of these properties.

        cheers

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by compuwalah View Post
          Ok. One in action now .


          As per your around 2011 analysis , doomsday was around 2013 and best time to buy RE was 2014.
          New doomsday date is _____ ?
          I agree that RE was a good investment before 2014. Prices were rising by almost 100 psft a month in Pune. Lets say I missed the bus. I was not in a position to buy then.

          Maybe it was a good time to buy during 2009-2013. I agree with you. But what about now? Is it a good time to buy now? I assume that you will say yes.

          But if prices remain stagnant or dip or rise very marginally in the next two years, am I at a loss? If prices dip, I will save. If stagnant, then also save because I will gather more down payment amount. If rise marginally, then maybe yes.

          Let the down payment amount earn even 4% return after tax. It is good enough to cover my rent and I still have amount left over to plough it back into savings. If I buy now, I become a slave to the bank. Savings - gone. Monthly EMI burden - added. Even if the EMI would be manageable (I have about more than 50% as downpayment for a 3bhk in wakad), it would still be a burden.

          Some of my friends have bought tiny 2bhk flats (i would call them 1.5 bhk but they believe the builders marketing that calls it 2bhk) for 80L+ in locations like Baner (which is not actually Baner but a village outside Baner) or Susgaon or punawale, where there are broken roads and erratic water supply, and are burdened with EMI. They even had to sell gold and borrow from in-laws. They often ask me for a few thousand udhaar (which I have to politely refuse). Also I have to politely decline invitations to meet up at the bar or pub if they are coming because I know I will have to pay for their beer if they fall short of money.
          The builders price for the flats is still mostly the same after 2 years, but he still has many empty flats. In fact, they could have bought similar flats for a better price in a better location now.

          Many of the IREF members may have started working and earning way before me, and so their perspective is different. For us who started working after 2005, things are not easy. We saw low salaries, a recession, layoffs and now runaway RE prices.

          So right now, I defer my buying plans for 2 years, get some returns, and also gather more down payment, and then think about buying.

          Update -
          Buying an apartment less than 1 Cr - I compromise on location. If I wait for the locality to develop (which may take 10 years), I pay rent elsewhere apart from EMI.
          If I do not wait - I spend more money for water supply, power and vehicle repairs due to bad roads, if I choose to live there. Then I have to avoid pangas with the local villagers, and live in fear (more for my family than me).
          Buying an apartment for more than 1 Cr in a developed locality - Increased EMI burden. More savings destroyed. Older dilapidated flats. The resale value of the flat may not go up at the same pace for older buildings, so that is another concern, if you want to leave Pune.

          More importantly - Do I want to settle in Pune? No.
          In only the down payment part, I can buy a standalone house in my home town and still have enough left. Save enough money, retire early and move there.
          Last edited by BaagadBilla; February 5 2016, 07:21 PM.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            For those who think job cuts are not ramping up and things are hunky dory like in the old days, here is a subset of announcements in the US from just 1 Jan 2016, less than 40 days, down below.

            Then there are he big ones like HP (85000), large cuts in mining, etc.

            And this is before the crisis gets worse. And if we think its going to bypass India, remember that much of our work is simply outsourcing of their work and so we will be next in line for the hatchet.

            And unlike in 2008, where people could jump from their lost jobs to the likes of FB and other Unicorn startups, these are the ones facing the heat now. Just saw Tableau stock get chopped 45% in 1 hour (and thats a profit-making BI product company with a great reputation), GoPro get chopped nearly 80% from peak, etc, etc. There is nowhere to jump this time around and so it will be like the 2000 Tech crash.

            I'm thinking its time people addressed the specific issue of ... how well am I prepared for a job loss, in case I have to fend for myself for at least 1 year! Not joking here, especially if one has a family.

            cheers

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by wiseman View Post
              For those who think job cuts are not ramping up and things are hunky dory like in the old days, here is a subset of announcements in the US from just 1 Jan 2016, less than 40 days, down below.

              Then there are he big ones like HP (85000), large cuts in mining, etc.

              And this is before the crisis gets worse. And if we think its going to bypass India, remember that much of our work is simply outsourcing of their work and so we will be next in line for the hatchet.

              And unlike in 2008, where people could jump from their lost jobs to the likes of FB and other Unicorn startups, these are the ones facing the heat now. Just saw Tableau stock get chopped 45% in 1 hour (and thats a profit-making BI product company with a great reputation), GoPro get chopped nearly 80% from peak, etc, etc. There is nowhere to jump this time around and so it will be like the 2000 Tech crash.

              I'm thinking its time people addressed the specific issue of ... how well am I prepared for a job loss, in case I have to fend for myself for at least 1 year! Not joking here, especially if one has a family.

              cheers
              ------ I'm thinking its time people addressed the specific issue of ... how well am I prepared for a job loss, in case I have to fend for myself for at least 1 year! Not joking here, especially if one has a family.

              There goes the slightest thought I ever had of buying a flat in the next one year.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by BaagadBilla View Post
                ------ I'm thinking its time people addressed the specific issue of ... how well am I prepared for a job loss, in case I have to fend for myself for at least 1 year! Not joking here, especially if one has a family.

                There goes the slightest thought I ever had of buying a flat in the next one year.
                If you have enough to plan for a down payment for a house in the next one year, then you are prepared for the worst!

                cheers

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by BaagadBilla View Post
                  I agree that RE was a good investment before 2014. Prices were rising by almost 100 psft a month in Pune. Lets say I missed the bus. I was not in a position to buy then.

                  Maybe it was a good time to buy during 2009-2013. I agree with you. But what about now? Is it a good time to buy now? I assume that you will say yes.

                  But if prices remain stagnant or dip or rise very marginally in the next two years, am I at a loss? If prices dip, I will save. If stagnant, then also save because I will gather more down payment amount. If rise marginally, then maybe yes.

                  Let the down payment amount earn even 4% return after tax. It is good enough to cover my rent and I still have amount left over to plough it back into savings. If I buy now, I become a slave to the bank. Savings - gone. Monthly EMI burden - added. Even if the EMI would be manageable (I have about more than 50% as downpayment for a 3bhk in wakad), it would still be a burden.

                  Some of my friends have bought tiny 2bhk flats (i would call them 1.5 bhk but they believe the builders marketing that calls it 2bhk) for 80L+ in locations like Baner (which is not actually Baner but a village outside Baner) or Susgaon or punawale, where there are broken roads and erratic water supply, and are burdened with EMI. They even had to sell gold and borrow from in-laws. They often ask me for a few thousand udhaar (which I have to politely refuse). Also I have to politely decline invitations to meet up at the bar or pub if they are coming because I know I will have to pay for their beer if they fall short of money.
                  The builders price for the flats is still mostly the same after 2 years, but he still has many empty flats. In fact, they could have bought similar flats for a better price in a better location now.

                  Many of the IREF members may have started working and earning way before me, and so their perspective is different. For us who started working after 2005, things are not easy. We saw low salaries, a recession, layoffs and now runaway RE prices.

                  So right now, I defer my buying plans for 2 years, get some returns, and also gather more down payment, and then think about buying.

                  Update -
                  Buying an apartment less than 1 Cr - I compromise on location. If I wait for the locality to develop (which may take 10 years), I pay rent elsewhere apart from EMI.
                  If I do not wait - I spend more money for water supply, power and vehicle repairs due to bad roads, if I choose to live there. Then I have to avoid pangas with the local villagers, and live in fear (more for my family than me).
                  Buying an apartment for more than 1 Cr in a developed locality - Increased EMI burden. More savings destroyed. Older dilapidated flats. The resale value of the flat may not go up at the same pace for older buildings, so that is another concern, if you want to leave Pune.

                  More importantly - Do I want to settle in Pune? No.
                  In only the down payment part, I can buy a standalone house in my home town and still have enough left. Save enough money, retire early and move there.
                  You echoed me !!! Love the clarity in your thought process.

                  Dont become slave of emi. It takes away lot of things you can do. #stay happy # travel a lot # sleep with out tension # rental paid is around 15% of over all salary of twin earning couples on an average. So why bother about it so much. Just imagine ur salary ia 15% less and u r living a life on ur terms

                  Doing exactly same . have decided not to take iota of loan for my home
                  Last edited by MANOJa; February 5 2016, 09:06 PM. Reason: Text formatting.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by wiseman View Post
                    If you have enough to plan for a down payment for a house in the next one year, then you are prepared for the worst!

                    cheers
                    Stay tight bagad sail thru the tough time

                    Agree on the job loss /stagnation part. Ecommerce has also started feeling the heat. So this euphoria will also settle in next 18 months

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      BaagadBilla; , saving a lot and waiting for an opportunity to buy is a good idea

                      don't go by theories if you save and retire early you will be left in the lurch after some years and because of inflation your savings won't help much longer.Whether you have a job or not you will have to pay for a roof on your head by way of rent or owning a house

                      In the event of losing a job and not getting one, whether you have a home or not you will be none the better later.You will have to do something to augment your interest income so that it lasts the duration of your life. I have some relatives who saved this way and started something like dairy etc with that money. They left IT field but by then they had saved and had a decent roof on head which helped them to plan something new for them.
                      Last edited by Skittles8; February 5 2016, 09:58 PM. Reason: mentioned user

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