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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  • Originally Posted by suryawork
    I did say we have shortage but rising income levels are driving the consumption .

    By the way , I'm born and brought up in Pune and might be mistaken here , but the infra that you're talking about which has consumed huge quantity of land is nowhere to be found in Pune at the very least .

    US banking regulations allowed banks to lend to people whose repaying capability was low by giving loans at lower rates initially and then the interest rates would reset after a few years making EMIs unaffordable .


    Hi surya, i can't say abt Pune since i'm born & bought-up in Delhi. And Delhi definitely has one of the best infra in India (though it still doesn't stand against Western cities). Roads & seweres at so many places have been widened upto there extreme and simply can't be expanded since there is not enough gap available between them & houses.

    Anyhow, i was taking a macro view and what i believe that considering our future growth requirement, we are not as comfortable w.r.t. land availability as US/EU/China etc., be it for residential or commercial or any other use. Though i do agree that our Govt's laws and policies regarding land development are also responsible for this in a big way.

    406 highway projects stuck in litigation - Indian Express
    CommentQuote
  • Hi,
    I find lot of my chapss here talking about US Sub-prime crisis, and, comparing Indian RE debacle with US just on basis of sky-rocketing prices, high interest rates, and, RE defaults. Think its time to re-visit Sub-prime and understand what it actually was. Below extracts i got from Google Baba, and added few of my lines in-between:
    =======================================================
    The Subprime mortgage crisis arose from 'bundling' American subprime and American regular mortgages which were traditionally isolated from, and sold in a separate market from prime loans. These 'bundles' of mixed (prime and subprime) mortgages were the basis Asset-backed securities so the 'probable' rate of return looked superb (since subprime lenders pay higher premiums, and the loans were anyway secured against saleable real-estate, and so, theoretically 'could not fail'). Many mortgages had a low interest for the first year, and poorer buyers 'swapped' regularly at first, but finally such borrowers began to default in large numbers. The inflated house-price bubble burst, property valuations plummeted and the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed, led to decline in Investors confidence.

    The ratio of lower-quality subprime mortgages originated rose from the historical 8% or lower range to approximately 20% from 2004-2006, with much higher ratios in some parts of the U.S. A high percentage of these subprime mortgages, over 90% in 2006 for example, were adjustable-rate mortgages. These two changes were part of a broader trend of lowered lending standards and higher-risk mortgage products. Further, U.S. households had become increasingly indebted, with the ratio of debt to disposable personal income rising from 77% in 1990 to 127% at the end of 2007. During 2008, the typical USA household owned 13 credit cards, with 40% of households carrying a balance, up from 6% in 1970. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 trillion

    In 2005, the median down payment for first-time home buyers was 2%, with 43% of those buyers making no down payment whatsoever. Mortgage underwriting standards declined precipitously during the boom period. The use of automated loan approvals allowed loans to be made without appropriate review and documentation. In 2007, 40% of all subprime loans resulted from automated underwriting.The Financial Crisis Inquiry Commission reported in January 2011 that many mortgage lenders took eager borrowers’ qualifications on faith, often with a "willful disregard" for a borrower’s ability to pay. Nearly 25% of all mortgages made in the first half of 2005 were "interest-only" loans.

    Most Important or say, Devastating -
    The traditional mortgage model involved a bank originating a loan to the borrower/homeowner and retaining the credit (default) risk. With the advent of securitization, the traditional model has given way to the "originate to distribute" model, in which banks essentially sell the mortgages and distribute credit risk to investors through mortgage-backed securities and collateralized debt obligations (CDO). Securitization meant that those issuing mortgages were no longer required to hold them to maturity. By selling the mortgages to investors, the originating banks replenished their funds, enabling them to issue more loans and generating transaction fees. Securitization accelerated in the mid-1990s. The total amount of mortgage-backed securities issued almost tripled between 1996 and 2007, to $7.3 trillion. The securitized share of subprime mortgages (i.e., those passed to third-party investors via MBS) increased from 54% in 2001, to 75% in 2006.

    In case someone doesn't under CDO, following eg should be good enough.

    Eg: - A small bank TINY gives 100 mortages (20 sub-prime and 80 prime) worth 1 million USD each, so total mortgage of 100 million riding on 100 customers. Now when TINY runs out of money but still getting more interested customers, it goes to a medium bank MIDY with a bundle of its 100 million mortgage called CDO. MIDY finds this high interest business profitable and gives another 75 million against this CDO bundle, so now 100+75 = 175 million riding on same 100 customers. This way MIDY takes multiple CDOs from multiple small banks. And when MIDY runs of money, it goes to bigger bank BIGY with a bundle of this CDO + its own mortgages (say 10 million on 10 customers). Same way, BIGY finds it lucrative and gives 50 million to MIDY. So now, 100+75+50=225 million riding on 100+10=110 customers.

    And the process continues. This way many banks got tied up with that same mortgage which was initially offered to a paltry customer, increasing the actual mortgage value riding on house manyfold. And if this customer defaults, everyone in the chain would take a severe hit. Its still just 1 mortgage, but money has already been multiplied by toxic instrument like CDO.

    Now multiply this situation for thousands of customers and u can imagine how US RE blew up. Besides, situation was also catipulated by lower-end jobs being moved to China/India/Phillipines etc., since these people were the main beneficiaries of sub-prime lending.
    =======================================================

    All the factors explained above (and many others not mentioned) jointly created environment for Sub-prime crisis that shaked the world. Now coming back to India -

    1. Indian Banking regulation currently doesn't allow mortgage-backed securities and collateralized debt obligations (CDO). So if SBI/ICICI runs out of there money, they can't go to PNB/HDFC for more cash on same mortgages. Besides, the capital adequacy ratio for Banks in India is among the highest in world.

    2. Teaser rates started in USA around 2001 (correct me if i'm wrong), whereas in India they have just started and only by handful of banks.

    3. Savings to Disposable Income ration in India is close to 30%, among the highest in the world, so we do have some wealth to fall back on. In US, it was in single digit during entire 1980s & 1990s and fell to negative post 2005. Check research paper - http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf
    I don't have figures for debt to disposable personal income ratio for India, but i'm sure we are much comfortable.

    4. The median down payment in India for a mortgage is around 20-25% currently i think, compared to US which was 2% or 0% at the time of crisis.

    5. Automated underwriting for mortgage is still not allowed in India. You know this better if u've a home loan, since i don't have.

    6. Till 2005, home mortgage debt relative to GDP was just 3% in India, while 51% in US. Source - India needs a better debt market « IFMR Blog

    7. US Job loss to low cost countries like China also played the spoil-sport. The hardest hit were low-cost US workers who were actual recepient of sub-prime mortgage. In India, situation is still not alarming that jobs would start moving out, atleast till next few years i believe.

    8. BLACK MONEY - looks like paltry two words, but holds more that 100 billion USD. And not everything is outside, a huge chunk of it is in India. And we all know, RE is the biggest recepient. Someone on this blog said that money can move out of RE for better returns, but is there any other instrument available that can take such huge amounts of money - Gold, Equity - which one can compete to RE in volume ?

    HOWEVER, if our RBI and Govt. looses it senses and loosens up RE lending by reducing current banking check & regulations, if jobs move out of India or inflation sky-rockets in long-term & our real disposable incomes start going down, if we enter in a state of war with either of our neighbours or something like this misfortunate happens, then YES, our RE may have same fate like US.

    CONTRADICTIONS - MOST WELCOME...... :bab (6):
    CommentQuote
  • See thoughts below.

    Originally Posted by bhuvang
    Hi,
    I find lot of my chapss here talking about US Sub-prime crisis, and, comparing Indian RE debacle with US just on basis of sky-rocketing prices, high interest rates, and, RE defaults. Think its time to re-visit Sub-prime and understand what it actually was. Below extracts i got from Google Baba, and added few of my lines in-between:
    =======================================================
    The Subprime mortgage crisis arose from 'bundling' American subprime and American regular mortgages which were traditionally isolated from, and sold in a separate market from prime loans. These 'bundles' of mixed (prime and subprime) mortgages were the basis Asset-backed securities so the 'probable' rate of return looked superb (since subprime lenders pay higher premiums, and the loans were anyway secured against saleable real-estate, and so, theoretically 'could not fail'). Many mortgages had a low interest for the first year, and poorer buyers 'swapped' regularly at first, but finally such borrowers began to default in large numbers. The inflated house-price bubble burst, property valuations plummeted and the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed, led to decline in Investors confidence.

    The ratio of lower-quality subprime mortgages originated rose from the historical 8% or lower range to approximately 20% from 2004-2006, with much higher ratios in some parts of the U.S. A high percentage of these subprime mortgages, over 90% in 2006 for example, were adjustable-rate mortgages. These two changes were part of a broader trend of lowered lending standards and higher-risk mortgage products. Further, U.S. households had become increasingly indebted, with the ratio of debt to disposable personal income rising from 77% in 1990 to 127% at the end of 2007. During 2008, the typical USA household owned 13 credit cards, with 40% of households carrying a balance, up from 6% in 1970. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 trillion

    In 2005, the median down payment for first-time home buyers was 2%, with 43% of those buyers making no down payment whatsoever. Mortgage underwriting standards declined precipitously during the boom period. The use of automated loan approvals allowed loans to be made without appropriate review and documentation. In 2007, 40% of all subprime loans resulted from automated underwriting.The Financial Crisis Inquiry Commission reported in January 2011 that many mortgage lenders took eager borrowers’ qualifications on faith, often with a "willful disregard" for a borrower’s ability to pay. Nearly 25% of all mortgages made in the first half of 2005 were "interest-only" loans.

    Most Important or say, Devastating -
    The traditional mortgage model involved a bank originating a loan to the borrower/homeowner and retaining the credit (default) risk. With the advent of securitization, the traditional model has given way to the "originate to distribute" model, in which banks essentially sell the mortgages and distribute credit risk to investors through mortgage-backed securities and collateralized debt obligations (CDO). Securitization meant that those issuing mortgages were no longer required to hold them to maturity. By selling the mortgages to investors, the originating banks replenished their funds, enabling them to issue more loans and generating transaction fees. Securitization accelerated in the mid-1990s. The total amount of mortgage-backed securities issued almost tripled between 1996 and 2007, to $7.3 trillion. The securitized share of subprime mortgages (i.e., those passed to third-party investors via MBS) increased from 54% in 2001, to 75% in 2006.

    In case someone doesn't under CDO, following eg should be good enough.

    Eg: - A small bank TINY gives 100 mortages (20 sub-prime and 80 prime) worth 1 million USD each, so total mortgage of 100 million riding on 100 customers. Now when TINY runs out of money but still getting more interested customers, it goes to a medium bank MIDY with a bundle of its 100 million mortgage called CDO. MIDY finds this high interest business profitable and gives another 75 million against this CDO bundle, so now 100+75 = 175 million riding on same 100 customers. This way MIDY takes multiple CDOs from multiple small banks. And when MIDY runs of money, it goes to bigger bank BIGY with a bundle of this CDO + its own mortgages (say 10 million on 10 customers). Same way, BIGY finds it lucrative and gives 50 million to MIDY. So now, 100+75+50=225 million riding on 100+10=110 customers.

    And the process continues. This way many banks got tied up with that same mortgage which was initially offered to a paltry customer, increasing the actual mortgage value riding on house manyfold. And if this customer defaults, everyone in the chain would take a severe hit. Its still just 1 mortgage, but money has already been multiplied by toxic instrument like CDO.

    Now multiply this situation for thousands of customers and u can imagine how US RE blew up. Besides, situation was also catipulated by lower-end jobs being moved to China/India/Phillipines etc., since these people were the main beneficiaries of sub-prime lending.
    =======================================================

    All the factors explained above (and many others not mentioned) jointly created environment for Sub-prime crisis that shaked the world. Now coming back to India -

    1. Indian Banking regulation currently doesn't allow mortgage-backed securities and collateralized debt obligations (CDO). So if SBI/ICICI runs out of there money, they can't go to PNB/HDFC for more cash on same mortgages. Besides, the capital adequacy ratio for Banks in India is among the highest in world.

    In USA the impact was milder as banks did not own all they produced. It would be bad in India as bank owns what they have sold.

    2. Teaser rates started in USA around 2001 (correct me if i'm wrong), whereas in India they have just started and only by handful of banks.

    In India we have scenario of bogus loans. Where by builder can have his friends and family buy the apartment. And builder will have access to capital sale price and will make installment payments.

    3. Savings to Disposable Income ration in India is close to 30%, among the highest in the world, so we do have some wealth to fall back on. In US, it was in single digit during entire 1980s & 1990s and fell to negative post 2005. Check research paper - http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf
    I don't have figures for debt to disposable personal income ratio for India, but i'm sure we are much comfortable.

    In India poverty rates and per capital income is so low. So the saving rate is not very meanigful. I read at if you earn more than Rs. 32 a day - you are not poor which would be $1 in USA. The total savings by country India would be very small.

    Key Trends in Globalisation: Savings in India, Germany, Japan, the US and China - by John Ross, Dong Nan and Li Hongke

    4. The median down payment in India for a mortgage is around 20-25% currently i think, compared to US which was 2% or 0% at the time of crisis.

    In USA people dont care about the houses after prices went down 10% as their equity wiped out. So there was fire sale but not super fire sale. Homes are stuck in foreclosure system. In India with white and black money down payment is high, so home owners have skin in the game. There may be super fire sale in extreme scenario.

    5. Automated underwriting for mortgage is still not allowed in India. You know this better if u've a home loan, since i don't have.

    Equate that too mortage frauds, builders fraud and LIC scam. You can name as many as you want.

    6. Till 2005, home mortgage debt relative to GDP was just 3% in India, while 51% in US. Source - India needs a better debt market « IFMR Blog

    India is 1.3 dollar economy and USA 13 trillion. Size does matter.

    7. US Job loss to low cost countries like China also played the spoil-sport. The hardest hit were low-cost US workers who were actual recepient of sub-prime mortgage. In India, situation is still not alarming that jobs would start moving out, atleast till next few years i believe.

    8. BLACK MONEY - looks like paltry two words, but holds more that 100 billion USD. And not everything is outside, a huge chunk of it is in India. And we all know, RE is the biggest recepient. Someone on this blog said that money can move out of RE for better returns, but is there any other instrument available that can take such huge amounts of money - Gold, Equity - which one can compete to RE in volume ?


    HOWEVER, if our RBI and Govt. looses it senses and loosens up RE lending by reducing current banking check & regulations, if jobs move out of India or inflation sky-rockets in long-term & our real disposable incomes start going down, if we enter in a state of war with either of our neighbours or something like this misfortunate happens, then YES, our RE may have same fate like US.

    CONTRADICTIONS - MOST WELCOME...... :bab (6):
    CommentQuote
  • Originally Posted by amitshah
    See thoughts below.


    In USA the impact was milder as banks did not own all they produced. It would be bad in India as bank owns what they have sold.

    Couldn't understand this, please elaborate.

    In India we have scenario of bogus loans. Where by builder can have his friends and family buy the apartment. And builder will have access to capital sale price and will make installment payments.

    Banks give loans by checking the credentials of a person, not whether he/she is the relative of a builder. Hence if 50 relatives of a builder have sound financials and eligible for loan, bank would definitely give them. This could happen anywhere in the world. How come such loan become bogus ???

    I read at if you earn more than Rs. 32 a day - you are not poor which would be $1 in USA.

    Dude, this benchmark is to define poverty line. Do you think such people invest in RE and buy flats/appt. ?

    Equate that too mortage frauds, builders fraud and LIC scam. You can name as many as you want.

    Agree with this. Corruption is our nation's life-blood.

    India is 1.3 dollar economy and USA 13 trillion. Size does matter.

    Well, so 3% of Indian GDP would be much-much smaller than 51% of US GDP. That itself proves Mortgages comprise of very miniscule part of our GDP. And definitely, not all of them can go bad at one go. Isn't it ?

    :D
    CommentQuote
  • Originally Posted by bhuvang

    India is 1.3 dollar economy and USA 13 trillion. Size does matter.




    1.3 dollar economy :)
    think its a typo .
    CommentQuote
  • Originally Posted by compuwalah
    1.3 dollar economy :)
    think its a typo .


    Aj kal trillion ka koi value nahin hai.

    Ab quadrillion ka jamana ayega
    CommentQuote
  • Originally Posted by compuwalah
    1.3 dollar economy :)
    think its a typo .


    not typo, copy-paste job from amit bhai .... :o
    CommentQuote
  • Nice post Buvang :):)
    CommentQuote
  • प्राइवेट बिल्डर बनाएंगे किराए के मकान

    Originally Posted by mymarji
    Today there are so many properties which we can have on rent. Sometime later, even builders will find it profitable to rent their unsold inventories.

    Seems the builders have now got this point. See the link below:-

    महाराष्ट्र में रेंटल हाउसिंग की स्कीम पुरानी है। लेकिन अब अचानक रेंटल हाउसिंग की स्कीम में बड़े प्राइवेट प्लेयर दिलचस्पी दिखा रहे हैं। बिल्डरों और ग्राहकों के लिए रेंटल हाउसिंग की स्कीम फायदेमंद साबित हो रही है।

    ???????? ?????? ??????? ????? ?? ???? - Moneycontrol
    CommentQuote
  • ‘Bill to regulate real estate by winter session’

    Originally Posted by Saurabh01
    What a news:
    Chandigarh: Real estate industry body CREDAI on Saturday opposed constitution of a regulatory body for the real estate sector, saying that it would become a "breeding ground for corruption" if implemented.

    "The proposed regulatory bill will become a breeding ground for corruption (if implemented)," the Confederation of Real Estate Developers Association of India (CREDAI) President Lalit Kumar Jain told reporters here.
    CREDAI opposes proposal to form regulator for realty sector

    September 23, 2011

    The proposed Real Estate Regulation Bill, 2011, is likely to be taken up during the winter session of Parliament, minister of housing and urban poverty alleviation and culture Kumari Selja said in Mumbai.

    The bill is expected to fill in the regulatory gaps and bring in more transparency in the unregulated property market. Selja said the regulatory bill is aimed at bringing in transparency and fair deal in the sector whose image has been tarnished by several scams and also one-sided agreements with customers.

    Property Pulse - the Realty Plus Newsletter
    CommentQuote
  • Mumbai property deals registration continues to slide, down 25% in August at 27 month

    Property registration in India's biggest real estate market Mumbai continued its slide in August and touched a twenty-seven month low.

    In the past two quarters, property prices in some localities and specific projects of Mumbai have seen a drop of about 5-10%. However, prices are still in not in affordable zone given the rising interest rates that is making buyers delay their decision making.

    Mumbai property deals registration continues to slide, down 25% in August at 27 month low - Economic Times
    CommentQuote
  • Originally Posted by Venkytalks
    Replied in red

    We also need to to see that if US sneezes, India, especially sectors like IT which are heavily dependent on US, catches cold. But it is not the other way round. Therefore, US gong down is not good for IT which in turn is not good for RE as well.

    Other aspect about population density is not just density but even the purchasing power. We are comparing US & India. Look at Australia then, it has population density of just 2/sq km, & population less than Mumbai :D with land bigger than India, yet the avg prices in Australia are more than India. Hence, mere population density doesn't work. The reason for this is not population but avg median incomes (PPP), which is even greater than US !!

    * PS:- The petrol is cheaper in US than India, the same car model is cheaper in US than India. Now is it because the roads are bigger so car density is less, hence cheaper cars ??:D

    Man, the crux of problem is lack of RE regulator & obsolete land laws of the Govt meant to benefit builders.
    CommentQuote
  • Complaints against realtors rising

    Posted: Wednesday, Sep 21, 2011 at 0159 hrs IST

    New Delhi: The recent decision of the Competition Commission of India (CCI) to slap a R630-crore fine on realty major DLF for abusing its dominant position is only a tip of the iceberg. If the records of the Delhi consumer court are taken into account, the maximum number of cases registered are against real estate companies.

    Out of every 10 complaints which get registered at the Consumer Disputes Redressal Commission (consumer court) in Delhi, eight are against real estate players.

    Supreme Court lawyer ML Lahoty, who was the lawyer for the residents’ associations in the case against DLF, said, “Consumers not just from Delhi but from Hyderabad, Kolkata, Mumbai, Pune and many other places have come to me seeking advise against the developers.”

    According to Confederation of Real Estate Developers’ Associations of India (Credai) president Lalit Kumar Jain, transparency is a big issue with the developers. “Most of the developers do not clarify the actual carpet area in their advertisements. Also, there are so many charges that they never mention (these) in their advertisements or their brochures. At the end of the day consumers feel cheated,” said Jain.

    >> This Lallu Jain, himself should introspect before making such statements. It is like a thief saying that theft should not happen :D.

    Read complete story here:-

    Complaints against realtors rising
    CommentQuote
  • countdown to China crash beginning?

    China has had massive mis-allocation of funds primarily by Govt (due to policy) and more so by local Govts.

    But I have always had this feeling that the crash would be triggered off by compulsions of Private Loans - like our "Marwari" loans (no offense to Marwaris), or loans at punitive rates that can never be paid back.

    The most visible of this is in the real estate business where a person has even higher pressure to buy a house/flat at any cost - and they frequently do so with recourse to private loans (I've read these loans have interest rates of as high as 20% per month!

    Here is an article about how this is starting to come apart as it reaches a point of no return ...

    ********************
    I want to bring to your attention on a new development in China: private business owners are disappearing or jumping off buildings because they can no longer pay off black market shark loans.

    According to national new paper Economics Information (part of state media Xinhua), on 9/22, Hu Fulin, owner of the biggest eyeglass manufacture of the city of Wenzhou disappeared, leaving behind 2 billion RMB debt.

    On 9/25, 3 more business owners in Wenzhou disappeared (owners of copper, steel and shoe manufacture).

    On 9/27, owner of "Zhengdeli", a shoe manufacture jumped off of a 22 story building and killed himself.

    Since April this year 29 private business owners have disappeared, all of them had over 100 million RMB businesses. 11 of the 29 owned shoe manufacturing businesses.

    An analyst from China Investment (China's Sovereign investment fund) pointed out that it's because they are squeezed by a rapid increase of component and labor costs. A rising RMB is also a reason why many export oriented companies are hit. In August, Zhou Dewen, President of Wenzhou Small-Medium Business Development Association said the profit margin of Small-Medium businesses in Wenzhou has dropped to under 5% and absent of policy changes, 40% of businesses in Wenzhou will go out of business by next Spring Festival (late Jan 2012)

    The complete article is here (in Chinese): ¾­¼Ã²Î¿¼Íø.

    Another article ?? ????_?_??_ (titled: China's Shark Loans Crashing; "Grey Finance" Brewing the Chinese Crisis) states that most of those owners have borrowed "private" loans (typically 70% of all loans), with MONTHLY interest rate ranging from 3% to 10%.

    About 89% of families/individuals and 59% of companies in Wenzhou participated in such "private loan" schemes. In Erdos (the ghost city you blogged many times), such "private loans" are more than 200 billion RMB with annual interest rate over 60%. Now they are crashing, causing rampant unfinished real estate projects in Erdos.

    Note that Wenzhou is one of riches cities in China (No. 3 in disposable income per capita), and is considered the "Birthplace of China's Private Economy". Wenzhou people are among the first that got in trades, manufacturing, export, and in recent years real estate investment/speculation. The Wenzhou economy is considered the "weathercock" of Chinese economy.

    ******************

    Is this one of the factors that is relentlessly dropping the Shanghai Composite? Which, btw is only 500 points away from the 2009 crash bottom!

    So much for China bailing out the world .... India seems to be doing much better.

    cheers
    CommentQuote
  • Originally Posted by wiseman
    China has had massive mis-allocation of funds primarily by Govt (due to policy) and more so by local Govts.

    But I have always had this feeling that the crash would be triggered off by compulsions of Private Loans - like our "Marwari" loans (no offense to Marwaris), or loans at punitive rates that can never be paid back.

    The most visible of this is in the real estate business where a person has even higher pressure to buy a house/flat at any cost - and they frequently do so with recourse to private loans (I've read these loans have interest rates of as high as 20% per month!

    Here is an article about how this is starting to come apart as it reaches a point of no return ...

    ********************
    I want to bring to your attention on a new development in China: private business owners are disappearing or jumping off buildings because they can no longer pay off black market shark loans.

    According to national new paper Economics Information (part of state media Xinhua), on 9/22, Hu Fulin, owner of the biggest eyeglass manufacture of the city of Wenzhou disappeared, leaving behind 2 billion RMB debt.

    On 9/25, 3 more business owners in Wenzhou disappeared (owners of copper, steel and shoe manufacture).

    On 9/27, owner of "Zhengdeli", a shoe manufacture jumped off of a 22 story building and killed himself.

    Since April this year 29 private business owners have disappeared, all of them had over 100 million RMB businesses. 11 of the 29 owned shoe manufacturing businesses.

    An analyst from China Investment (China's Sovereign investment fund) pointed out that it's because they are squeezed by a rapid increase of component and labor costs. A rising RMB is also a reason why many export oriented companies are hit. In August, Zhou Dewen, President of Wenzhou Small-Medium Business Development Association said the profit margin of Small-Medium businesses in Wenzhou has dropped to under 5% and absent of policy changes, 40% of businesses in Wenzhou will go out of business by next Spring Festival (late Jan 2012)

    The complete article is here (in Chinese): ¾­¼Ã²Î¿¼Íø.

    Another article ?? ????_?_??_ (titled: China's Shark Loans Crashing; "Grey Finance" Brewing the Chinese Crisis) states that most of those owners have borrowed "private" loans (typically 70% of all loans), with MONTHLY interest rate ranging from 3% to 10%.

    About 89% of families/individuals and 59% of companies in Wenzhou participated in such "private loan" schemes. In Erdos (the ghost city you blogged many times), such "private loans" are more than 200 billion RMB with annual interest rate over 60%. Now they are crashing, causing rampant unfinished real estate projects in Erdos.

    Note that Wenzhou is one of riches cities in China (No. 3 in disposable income per capita), and is considered the "Birthplace of China's Private Economy". Wenzhou people are among the first that got in trades, manufacturing, export, and in recent years real estate investment/speculation. The Wenzhou economy is considered the "weathercock" of Chinese economy.

    ******************

    Is this one of the factors that is relentlessly dropping the Shanghai Composite? Which, btw is only 500 points away from the 2009 crash bottom!

    So much for China bailing out the world .... India seems to be doing much better.

    cheers


    China will attack India when they even sense a glimpse of a crash... they have already completed all the groundwork..

    so now we need to be prepared for both situations.. economic issues as well as war...

    of course CREDAI will immediately say that since there is a war going on, everyone needs a roof on their head.. hence more demand and hence we need to increase the RE prices by another 500 rs/psf... :D
    CommentQuote