Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • http://www.indianrealestateforum.com/noida/t-its-official-slump-realty-sales-hits-brokers-really-hard-18580.html

    Correction is official in IREF at least

    Vote your opinion on the link as to how long and how deep the correction would be. My bet was 18 months and 15% downturn for NOIDA.

    Has to be more for Pune and Mumbai because of more excess - maybe 25-30% correction and last 18 months.

    It can only get worse tomorrow after the RBI meeting. Since RBI has to keep its credibility in international fora, after 9% plus inflation, 25 bps rate hike is inevitable.
    CommentQuote
  • Brokers hunt for jobs as sales slump hits realty

    Something related to topic in Economictimes today...

    Brokers hunt for jobs as sales slump hits realty - The Economic Times
    CommentQuote
  • Originally Posted by Venkytalks
    http://www.indianrealestateforum.com/noida/t-its-official-slump-realty-sales-hits-brokers-really-hard-18580.html

    Correction is official in IREF at least

    Vote your opinion on the link as to how long and how deep the correction would be. My bet was 18 months and 15% downturn for NOIDA.

    Has to be more for Pune and Mumbai because of more excess - maybe 25-30% correction and last 18 months.


    When the mainstream media , whether newspapers like ET or channels like CNBC begin flashing signals about slumps & slowdowns, it means that the downturn is well underway. All mainstream media are either influenced by, or outright owned by, or bought-and-paid-for by big business -- and therefore ' news ' that is ALLOWED to trickle down to the mango-man is totally rigged. All forms of media are tools to distract our attention from the real, seething issues that are tearing the world apart and lull us into a state of false well-being. Well, complacency is a dangerous state of being.

    Having a poll is a good idea of further enriching the content of this thread. But contrary to what you say, I do not think that this downturn in RE will last for only 18 months or so, or be just a price ' correction ' of 15 - 30 %. I think this will be a steady, relentless, long-drawn-out and very painful downturn -- how about price drops of 40 - 60 % upto 2018 - 2020 ?

    The global economic situation is in dire straits. When QE 3 is unleashed, it will release another wave of inflation . European banks which were once regarded as solid as rocks have been downgraded yesterday and this might be the spark that ignites Europe The world economy is hurtling towards currency crisis and collapse of the monetary system as we know it -- and these massive fires are not going to calm down anytime soon.

    As regards the extent of price correction in RE, the simple rule of Economics is : The greater the leverage the greater the expansion and greater the resultant recession or depression.

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!
    CommentQuote
  • Originally Posted by SanjanaSingh
    When the mainstream media , whether newspapers like ET or channels like CNBC begin flashing signals about slumps & slowdowns, it means that the downturn is well underway.

    Agree totally. The signals were flashing in March - April. Havent we discussed that enough on this forum

    All mainstream media are either influenced by, or outright owned by, or bought-and-paid-for by big business -- and therefore ' news ' that is ALLOWED to trickle down to the mango-man is totally rigged. All forms of media are tools to distract our attention from the real, seething issues that are tearing the world apart and lull us into a state of false well-being. Well, complacency is a dangerous state of being.

    Disagree. I get 6 papers every day and read them end to end. I also get 5 business/investing magazines and spend considerable time staring at CNBC (Indian version) and its 3 sisters.

    You have to know how to use the information there - as time goes on, you use them better and better and know their problems also - like which stock recommendation to believe and which not to.

    Dismissing them is silly. You need info to operate

    Relying on right wing extreme web sites for information is downright dangerous - I have learnt it the hard way - believed that 2008 was more dangerous than it was and missed the 2009 stock doubling chance.

    Having a poll is a good idea of further enriching the content of this thread. But contrary to what you say, I do not think that this downturn in RE will last for only 18 months or so, or be just a price ' correction ' of 15 - 30 %. I think this will be a steady, relentless, long-drawn-out and very painful downturn -- how about price drops of 40 - 60 % upto 2018 - 2020 ?

    Possible.

    Probability I would estimate around 5% = put 5% of investibles in gold

    The global economic situation is in dire straits. When QE 3 is unleashed,

    US bonds already at 2.9% or so without WE3

    it will release another wave of inflation .

    You cant have both. Chose one or the other

    European banks which were once regarded as solid as rocks have been downgraded yesterday and this might be the spark that ignites Europe The world economy is hurtling towards currency crisis and collapse of the monetary system as we know it -- and these massive fires are not going to calm down anytime soon.

    Currency crisis has a higher probability of around 10-15% -I personally have no doubt that currencies will enter a major crisis within one year. Fed will respond by raising rates - probably after the US presidential election. Rupee will depreciate - I have bet a lot of money on this possibility, so I better be right (within the next 1.5-2 years).

    As regards the extent of price correction in RE, the simple rule of Economics is : The greater the leverage the greater the expansion and greater the resultant recession or depression.

    but there is no leverage in India RE regarding final user. End use flats will stay stable.

    There is lot of leverage in companies and at least 2 biggies are most likely to collapse - probably Unitech is one. Companies like DB realty are anyway toast.

    I am looking forward to a distress sale of Unitech land bank and under construction property. If the slow down is heavy and there is chaos all around, I might be able to pick it up cheap.

    Yes, I agree that if this was a routine price - correction, it would not be too deep, time-wise or price-wise. But with the global depression tsunami crashing upon us, this will be a long, deep, painful downturn in Indian RE. There is no telling how low prices can go -- did you know that during the Great Depression, a Manhattan skyscraper was sold for the cost equivalent to just two of its elevators ? !! And acres of land were sold for a few grams of gold !!



    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.

    Sanjana, point is, getting your prediction right = making lot of money.

    What is the use of information which is not usable? Or information which loses you money?

    I personally do believe in one big inflation of around 50% of all currencies to get out of the current mess. So yes, Gold should shoot up like crazy, maybe 3-5000 dollars if a war also starts. But you need to time your exit right, because it will also drop like silver did not so long ago.

    But making money from Rupee denominated gold will not be easy (since I am unable to invest in dollar denominated gold). Because currencies have a habit of being totally unpredictable.

    We continue to live in interesting times.
    CommentQuote
  • Venky leaving the 2G issues aside how can u say Unitech is heavily leveraged with a debt equity ratio of 0.46???
    CommentQuote
  • Accounting Gimmick OR Fraud ?????

    Indians are not buying homes now like they used to, thanks to high prices and costly loans. There is a 30% rise in the inventories of real estate giants over last year, at Rs 25,000 to Rs 30,000 crore. The developers themselves deny that inventory is piling up, but industry experts say that
    the high price levels are acting as a deterrent for potential investors
    . Mumbai and the national capital region (NCR) are the worst-hit, they say. Three of the top 10 real estate players by market size — DLF, HDIL and Indiabulls Real Estate — have inventories worth Rs 23,197 crore on their balance sheet as on March 31 2011 (see table), with year-on-year increase of 26%, 28% and 93% respectively in holdings.


    Demand down, inventories up: realtors grope for solutions - Hindustan Times
    CommentQuote
  • Looking at a single ratio is dangerous in a bad market!

    Originally Posted by amit001
    Venky leaving the 2G issues aside how can u say Unitech is heavily leveraged with a debt equity ratio of 0.46???



    Amit,

    Have you checked their Liquidity ratios, Inventory Turnover ratio, etc?

    They have taken a huge amount of Capital Premium, loaded further Debt on the basis of D/E ratio, further screwed up by over-building with all that money & are stuck with all that inventory at high cost (input cost + debt servicing costs) & now find the market sliding down & sucking them down.

    To add to this, there is the danger of having to set aside the 6400 Cr money they allegedly fraudulently took out of Telenor in 2G.

    Imagine the flat ground under you suddenly became a steep slope, some oil was poured onto it & a heavy load was put into your hands & nothing to hold on to!:D

    I think they are heading into that position. D/E ratio will not help if you do not generate enough surplus to service the debt & for that you need healthy sales at good margins & with low bad debt situation. Debt at what cost is also important

    cheers
    CommentQuote
  • Happening just as I thought. The escape doors are shutting ...

    Originally Posted by khbarilal
    With home sales plummeting, it doesn't make business sense anymore," he explains. It's the same story in other big cities. In Mumbai, Pranay Shah, a mid-size broker has set up a small fast food joint to make ends meet. In Nagpur, Sashinath Chinchole has quit the real estate business and set up an ice-cream parlour. Their worries are not unfounded. While the large and established players in the property business have managed to stay put even during the slump, thousands of smaller players like brokers and agents are being forced to look for other jobs.

    For whatever business is left in the market, there are hundreds of agents in queue. For instance, there are pockets on the Noida Expressway, near large projects, where real estate brokers can be seen sitting inside small tents, under the sweltering sun, waiting for business. Those who can't afford to set up these tents can be seen on the roadside, running after every car that passes by, with brochures and flyers of projects in hand. Industry refers to them as the broker mandi. "All my friends and colleagues are now looking outside real estate before things get worse," says Chaudhary. Many have returned to the insurance industry and others have found jobs with small call centres. A few have found employment with retail stores, says Chaudhary.

    Brokers hunt for jobs as sales slump hits realty - The Economic Times



    This is a quote from a reader of a news report on latest RBI rate hike ...

    *******************************************************
    It is a big burden to the middle class family, since already we planned other expences by fixing a mind set about the EMI, For the past 2.5 years i have paid 2.4L but it has been reduced 0.1L only in my total amount since because of the frequent increase in the interest rate and further to this again increase in interest means one day it will happen that no body will complete their home loans and our age will exceed 60. This is not fair.
    *******************************************************

    Pls note that all their planning went out of window because this person had no clue where we were headed with the H6me Loan scenario. 2.4L out of pocket with only 10k Principal reduction?

    There are tens of thousands of homeowners who have been brought up on a of, "Buy a home at any price under any financial circumstance & you will be okay".

    This is early days since all we are seeing is the hit due to inflation.

    Then will come serious price reduction from builders who cant service debt.

    Then will come job loss & salary cuts which will make ends NOT meet.

    Then will come a whole lot of premature buyers (at high cost to their means to pay) who can no longer pay & will have gone "underwater" on their loans (loan outstanding > value of house). They will add to supply at increasingly distress prices.

    Exactly as some of us have been saying will happen for so long.

    For those who think knowing whats happening around the world & Macroeconomics has no meaning & value, do you see it now?

    How can anyone not understand that, when globalization can multiply their salaries 5X, the same thing in reverse can also reduce their salary to 1/5X?


    Its not that. Its a typical ignorance of not knowing what makes the economic world go around coupled with the ensuing arrogance that we are worth what we are paid & that is our entitlement!

    Nothing of that sort. All we did was to fill the opportunity for Western Businesspeople to enrich themselves & impoverish their own people & that opportunity is under threat of winding down. Very soon people who thought they are not only worth their current salaries but should also get periodic hikes will soon find exactly what they are really worth. This will be a great revelation & will be a 1-time opportunity to fix this & become really valuable.

    The trap door is starting to shut. Still not too late. But this is going to get uglier than people think! And for guys like me, facing criticism for months & years about "where is that crash you talked about for so long" is more than offset by the opportunity of buying what I need at 30 - 50% discount with no loans!!! All in just 3-4 years! Worth the wait to save 50-70 lakhs, no?

    cheers
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  • Originally Posted by wiseman
    Amit,

    Have you checked their Liquidity ratios, Inventory Turnover ratio, etc?

    They have taken a huge amount of Capital Premium, loaded further Debt on the basis of D/E ratio, further screwed up by over-building with all that money & are stuck with all that inventory at high cost (input cost + debt servicing costs) & now find the market sliding down & sucking them down.

    To add to this, there is the danger of having to set aside the 6400 Cr money they allegedly fraudulently took out of Telenor in 2G.

    Imagine the flat ground under you suddenly became a steep slope, some oil was poured onto it & a heavy load was put into your hands & nothing to hold on to!:D

    I think they are heading into that position. D/E ratio will not help if you do not generate enough surplus to service the debt & for that you need healthy sales at good margins & with low bad debt situation. Debt at what cost is also important

    cheers


    Are the companies like DLF and Indiabulls also on slope, with oil on it ?
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  • Originally Posted by HemantDesh
    Are the companies like DLF and Indiabulls also on slope, with oil on it ?


    Not only that, for them the slope ends in a water pool filled with hungry Crocs and Sharks.!!!

    VK
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  • MUMBAI: Be prepared to pay more every month on your home, auto and other loans, as the Reserve Bank on Thursday, for the 10th time since March, 2010, raised key interest rates by 25 basis points in its effort to control spiralling inflation.

    The RBI has raised the short-term lending (repo) rate by 25 basis points to 7.50% and the short-term borrowing (reverse repo) rate will move up by a similar margin to 6.5%. It kept other rates and ratios unchanged.

    The mid-quarterly policy initiatives, the RBI said, are expected to contain inflation, which is currently over 9%, much above the comfort level of the central bank.

    "The RBI has sought to maintain an interest rate environment that moderates inflation and checks inflationary expectations," the finance ministry said in a statement, adding that this was on expected lines.

    "We need to have price stability for sustaining growth in the medium term," it added.

    Bankers said the move would put pressure on interest rates and may make loans costlier subsequently.

    "It (RBI's move) will put pressure on short-term deposit rates and subsequently on the lending rates. But rate hike by banks would not be immediate," Indian Overseas Bank CMD M Narendra said.

    While announcing the measures, the RBI said that tightening of the monetary policy would impact economic growth, which is already under pressure, in the short term.
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  • Venky

    Just as you have certain bad experiences of certain types of media that you call ' right wing extreme websites' ; I have bad experiences of mainstream media such as business channels, newspapers and periodicals like WSJ. In H 1 of 2005, I came to the conclusion that despite the rosy picture of world economy being painted by this very mainstream media, something was seriously amiss. Through the years, I developed my own sources of info. At the same time I drew out a long-term plan for my investments for the next 10 years ie upto 2015, extendable to 2020. This plan of mine placed as little reliance as possible on data available from the MSM; and instead I source my raw material sometimes from the internet, sometimes from my network of contacts -- but always applying a lot of thought and accrued knowledge to this raw data, and aligning my finances accordingly only when I'm fully comfortable with the final solution. So now maybe ~ 5 % of my info requirements are dependent on MSM -- and since my ROI has been satisfactory from my point of view for the past 5 years, it seems that this policy of bypassing the MSM and yet generating good returns on investments consistently for the past half decade has worked well for me.

    So you get the point ? -- Obviously, one needs data to operate in the financial markets, lots of data. Just that I don't source my data from the MSM because they are beholden to big business and thus unreliable. I have more faith in my sources of info that I've nurtured over the years, and in that peculiar sixth sense or instinct that every investor develops over a period of time


    You cant have both. Chose one or the other


    Both ? Both what ? I clearly said that with the unleashing of QE 3 there will be a new tidal wave of inflation and this wave will not ebb until 2014, and interest rates in emerging economies will continue to rise, thereby accelerating the downturn in RE. This is already happening in China, HongKong, Thailand -- why would India be immune ?


    but there is no leverage in India RE regarding final user. End use flats will stay stable.



    Huh ? Come now Venky, are you suggesting that end users in India buy RE out of their own funds ? No-one, absolutely NO-ONE purchases RE without loan -- not even investors and speculators. Is this not leverage ? What happens when RE prices begin to decline and these debt-slaves are asked to deposit additional margin money ? What happens when these debt-slaves are faced with a double whammy of increasing interest rates and falling RE prices and have their EMIs extended ? What happens when inflation eats into their earnings, and EMIs become burdensome / unbearable, yet they cannot find buyers for their property ? What happens when their salaries / incomes stagnate and ever-rising expenses / EMIs become a nightmare ?

    And finally, what happens when these properties hit the market either as distressed sales or NPAs to be rid of at any price ?

    Indian RE is heavily leveraged, both on the supply side and end-user side, and this leverage will accentuate the downfall in prices.


    Currency crisis has a higher probability of around 10-15% -I personally have no doubt that currencies will enter a major crisis within one year. Fed will respond by raising rates - probably after the US presidential election. Rupee will depreciate - I have bet a lot of money on this possibility, so I better be right (within the next 1.5-2 years).


    Venky, we're already within the currency crisis. As the Fed continues to brew its alphabet soup of paper money printing inflation will keep rising; emerging economies will keep increasing interest rates and some time in 2014 - 2015 the entire fiat system will come crashing down. There is some hope if Ron Paul is elected, otherwise US could be in deep muck until 2030 & beyond !

    But lets not fret over that just yet -- keep your Vulture Fund ready, and when RE prices come down to levels where you sense real value, real bargains; and when you can put down the entire amount without taking ANY loan -- then go for it. Isnt that what our fathers and forefathers did ? Why should it be so complicated and hard ? Is it that we are so conditioned to think in terms of loans when buying property for self-use that we HAVE to ruin our lives just to beget shelter ?? !!!
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  • Originally Posted by amit001
    Venky leaving the 2G issues aside how can u say Unitech is heavily leveraged with a debt equity ratio of 0.46???


    And what were the Satyam results reported by Ramalinga Raju to stock exchange? Do you believe the balance sheets of Indian companies?

    Unitech is a good short term trade. All realty companies have issues of corporate governance and are best avoided for investment

    Sanjana, when I say you can either have high rates or high inflation I mean in India. Of course, it is possible that RBI might keep hiking rates and inflation might be stubbornly high. But this scenario is unlikely in a glbalised world. With high rates we will quickly slip into a recession (the purpose of RBI raising rates) and prices will come down.

    Only caveat is if Rupee stands on that slippery slope full of oil and starts sliding into a pool full of crocs (loved that Wisey). If there is flight of capital and Rupee starts a depreciation spiral, it can keep inflation on the boil while at the same time there will be economic recession.

    But we have been on this slippery slope before in the 70s, 80s and 90s and I think I understand it quite well. I personally am hedged well against these problems - and yes, RE is one of the best hedges agains this problem. Remember the 80s? Our best export - IT - will prosper with Rupee depreciation. And they are the main source of end user funds for RE in India.

    Leverage and overleverage amongst end user is very low in India. There is enough data in innumerable old threads including probably this one - I cant hunt it out all over again. After 2008, there has been great degree of restraint amongt RE end users and I really dont see a problem of over-leverage.

    Among my IT friends, most have made purchase on CLP using only their salary surplus to pay the flat cost. Loans if taken were for 4-6 years and for less than 50% of the flat cost - let us start paying from salary surplus and see if we need a loan was their approach - most wil lnot need loan because of construction delay. If 2 people are earning and salary is 1.5L and 1 L per month, thats about 30L per annum. I they buy a 60L flat, and have 20-30 L savings in the bank - obviously they can afford it.

    India is not USA. Bank loans have significantly tightened norms from 2006 onwards. Dont worry, end user is on a strong wicket - but if his builder has overleveraged and runs away without delivery, what will this well heeled ITG do?

    That is the question - only time can provide the answer
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  • Request not to SHOUT please!

    Originally Posted by SanjanaSingh
    Venky

    Just as you have certain bad experiences of certain types of media that you call ' right wing extreme websites'
    ...



    Folks,

    Whenever I've had to shout in a quiet room to be heard, I found later on that its only because I've shut my own ears!!!:D

    I've also discovered that God designed us with a switch between mouth and ears. When one opens, the other shuts!!! :D

    Further, due to a bug in our operating system, whenever our eyes sees someone arguing with us, by default it inturrupts whatever the other 2 parts are doing, shuts the ear, opens mouth & raises the volume to overcome the other person's volume.

    We must constantly be aware of these design issues & use workarounds t become effective in our lives.

    We must always override the mouth-first logic & use the ear-first logic, with mouth only as an optional tool to be used only when really necessary.

    Finally, when forced to use mouth, we must first fully use brain & only then branch to mouth logic. :D:D:D

    cheers
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  • Editing problems

    Wiseman

    I'm not shouting -- I typed out the text and now I can't reduce the text size ! I tried editing it twice, but like the US debt, it just won't reduce :D

    Sorry.
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