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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 BlotJab View Post
    I agree on that.

    I don't understand why do many people in India think that prices of RE can only go up? Is it because of the fact that India has not noticed some thing like what happened to US in 2008 (subprime crisis)? People say, it can't be possible in India (well people used to say that it is not possible for human to reach moon) but the fact is Indian RE market is in real danger (if not today, but any time in next 5-10 year).
    Dude, comparing Indian RE with US/EU RE is like comparing Mangoes and Bananas. One is seasonal, while other is all time favourite.

    Below are the reason why Indian RE is not destined to be like US RE (atleast in current decade) -


    1. US land mass is three times that of India, while population is less than 1/3rd of what India has. So double whammy: Huge supply per demans vs Limited supply per demand for land bank.


    2. About 3/4th population of US is already urbanized compared to roughly 30% in India. And urbanization is the only known way of development in human history. No nation has ever grown without rapid urbanization (pls tell me if any). And no need to say, India is growing.


    3. Demand in US is shrinking due to rising unemployment and reducing wages in US. Whereas demand of India in increasing due to increasing salaries and employment. As per economic survey estimates, current unemployment rate in India is close to 10% which is all time low since independence. Surprisingly, 2011 unemployment rate in US is also hovering around 10% which is all time high in last 4 decades. Besides in India, wages during entire 2000s decade have increased in double digits (10-20%) annually, while in US they have hovered between 3-5% annually. Need evidence, check your salary slip of last 10 yrs vs your American frnd's.


    4. More than 50% population of India is in the working age group of 20-40 years, compared to ageing population of US. i.e. - Means increasing productivity and wealth vs Reducing productivity & increasing dependency on state/society.


    5. Majority of Indians simply don't like to stay on rent forever their life, they prefer to have their own home, atleast one. This is in stark contrast to western lifestyle, where rental living for entire life is very well socially acceptable.

    6. We are already 1150 million+. Do you think we have enough dewelling units for everyone ?

    7. And don't forget the parallel BLACK MONEY economy we have. Its our huge cushion which US/EU don't have.

    I may have forgotten some more points, but don't think need to say any more.

    Short term (1-1.5 yrs) RE impact may be negative (i expect not more that 20% correction), but medium to long term RE is a complete thumbs up from my side.

    And yes, those who say that US banks lended blindly without considering the earning capacity of a person, i respectfully disagree with them. But then its another topic of discussion.
    Last edited by bhuvang; September 27 2011, 03:58 PM.
    The knowledge of what to do in a Recession or Boom is more important than predicting a Recession or Boom.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by kingmanish View Post
      I visited A few properties over the weekend....

      The builders seem to be in no hurry to sell their flats...

      The prices are skyhigh ....and though they hint that the price is negotiable but only a few rs......

      No major correction
      Agree with you man, no major correction in Indian RE, though few exceptional deals could be there. It would just remain a dream.
      The knowledge of what to do in a Recession or Boom is more important than predicting a Recession or Boom.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by bhuvang View Post
        Dude, comparing Indian RE with US/EU RE is like comparing Mangoes and Bananas. One is seasonal, while other is all time favourite.

        Below are the reason why Indian RE is not destined to be like US RE (atleast in current decade) -


        1. US land mass is three times that of India, while population is less than 1/3rd of what India has. So double whammy: Huge supply per demans vs Limited supply per demand for land bank.


        2. About 3/4th population of US is already urbanized compared to roughly 30% in India. And urbanization is the only known way of development in human history. No nation has ever grown without rapid urbanization (pls tell me if any). And no need to say, India is growing.


        3. Demand in US is shrinking due to rising unemployment and reducing wages in US. Whereas demand of India in increasing due to increasing salaries and employment. As per economic survey estimates, current unemployment rate in India is close to 10% which is all time low since independence. Surprisingly, 2011 unemployment rate in US is also hovering around 10% which is all time high in last 4 decades. Besides in India, wages during entire 2000s decade have increased in double digits (10-20%) annually, while in US they have hovered between 3-5% annually. Need evidence, check your salary slip of last 10 yrs vs your American frnd's.


        4. More than 50% population of India is in the working age group of 20-40 years, compared to ageing population of US. i.e. - Means increasing productivity and wealth vs Reducing productivity & increasing dependency on state/society.


        5. Majority of Indians simply don't like to stay on rent forever their life, they prefer to have their own home, atleast one. This is in stark contrast to western lifestyle, where rental living for entire life is very well socially acceptable.

        6. We are already 1150 million+. Do you think we have enough dewelling units for everyone ?

        7. And don't forget the parallel BLACK MONEY economy we have. Its our huge cushion which US/EU don't have.

        I may have forgotten some more points, but don't think need to say any more.

        Short term (1-1.5 yrs) RE impact may be negative (i expect not more that 20% correction), but medium to long term RE is a complete thumbs up from my side.

        And yes, those who say that US banks lended blindly without considering the earning capacity of a person, i respectfully disagree with them. But then its another topic of discussion.
        I agree with almost everything you have said.

        But I dont get your last statement - would you care to elaborate on the "separate topic of discussion"????
        Venky (Please read watch a or before posting)

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by Venkytalks View Post
          I agree with almost everything you have said.

          But I dont get your last statement - would you care to elaborate on the "separate topic of discussion"????
          Absolutely sir, i said it bcoz of two things -

          1. It would've made my already long post futher longer, and i know many ppl simply hate to go thru so much in one go (i'm one of them)

          2. US RE crisis was not caused ONLY bcoz of huge lending to economically weaker people and teaser rates, but also bcoz of budling of sub-prime and regular mortages and there trading in secondary markets, a practice currently not prevelant (i think not even legally allowed) in India. And yes, job movements from US to cheap mkts like China, India, Phillipines also have big role to play in that.

          Though we can have an elaborate discussion on that as well, just wanted to segregate it.
          The knowledge of what to do in a Recession or Boom is more important than predicting a Recession or Boom.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by bhuvang View Post
            Dude, comparing Indian RE with US/EU RE is like comparing Mangoes and Bananas. One is seasonal, while other is all time favourite.



            We are already 1150 million+. Do you think we have enough dewelling units for everyone ?


            I may have forgotten some more points, but don't think need to say any more.

            Short term (1-1.5 yrs) RE impact may be negative (i expect not more that 20% correction), but medium to long term RE is a complete thumbs up from my side.

            And yes, those who say that US banks lended blindly without considering the earning capacity of a person, i respectfully disagree with them. But then its another topic of discussion.

            1. No , we have shortage - but most of these factors were existing in India - substantial income level increase in the last decade is the major factor behind RE boom . Abt 20 years ago in Pune you could get 3 guntha plots in 10-15 k but how many people were buying and how many builders were there ?
            Today , every third person is a builder and everybody wants multiple RE as investment , nobody is content with one .

            2. US banking regulations are different than in India , so I dont agree with this .

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by suryawork View Post
              1. No , we have shortage - but most of these factors were existing in India - substantial income level increase in the last decade is the major factor behind RE boom . Abt 20 years ago in Pune you could get 3 guntha plots in 10-15 k but how many people were buying and how many builders were there ?
              Today , every third person is a builder and everybody wants multiple RE as investment , nobody is content with one .

              2. US banking regulations are different than in India , so I dont agree with this .
              Sir ji,

              a. 20 years ago, India's population was 85 crores, recent 2011 survey pegs it around 117 crores. Hence, growth of around 27%.

              b. Land bank is not used only for homes, but for everything. Construction of streets, roads, highways, and public utilites; factories and industries; business office space; bus depots, stations, airports, ports; agriculture, horticulture; u just name it, everything needs land. India's GDP was close to 5500 billion INR 20 yrs ago, today it stands around 67000 billion. Do you think we reached here without wide-scale consumtion of our land-bank ? I don't.

              c. You are correct when u say that everybody wants multiple RE, which again proves that RE is in long term bull phase due to demand far outstripping supply.

              d. I couldn't understand when u said "US banking regulations are different than in India , so I dont agree with this". When did i say they are same ?
              The knowledge of what to do in a Recession or Boom is more important than predicting a Recession or Boom.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                When to buy a house

                1) Do I have a steady source of income? Have I been regularly employed for the last 2 to 3 years? Is my source of income reliable and credible?

                2) Do I have a good past record of paying my credit card bills, other EMIs and payments? Remember that each loan provider will check your CIBIL report and any discrepancy is likely to show up there and obstruct a smooth home loan sanction!

                3) Do I have a few long term debts like a car loan or a personal loan? If your repayment of these have been good, you are more likely to get that home finance sanctioned.

                4) Do I have money saved for a down payment, registration and other extra charges? These will, as a thumb rule work out to be about 30 percent of the total home value. So, if you are planning on buying a home worth INR 20 lacs, you should have INR 6 lacs ready with you to go ahead. Banks and home loan institutions will only offer 80 percent finance maximum depending on your repayment capability.

                5) Finally, do I have the ability to pay the home loan EMI every month, plus the other costs that come associated with owning a home?

                If your answer to all the above questions is a yes, its great news. You are ready to buy your home now. Happy house hunting!

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Are these clauses illegal now??

                  Are these clauses illegal now??

                  * Forfeiture of amounts paid by buyers in numerous cases.

                  * The builder can change land use or layout plan and alter the structures unilaterally.

                  * No exit option for the buyer except for non delivery of possession. This option merely entitles the buyer to refund of the amount paid without interest.

                  * The builder would control all common areas and maintenance.

                  * The builder can unilaterally create third party rights.

                  * No transparency on External Development Charges.

                  * The builder can cancel the entire project and get away without paying any penalty.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by bhuvang View Post
                    Below are the reason why Indian RE is not destined to be like US RE (atleast in current decade) -


                    1. US land mass is three times that of India, while population is less than 1/3rd of what India has. So double whammy: Huge supply per demans vs Limited supply per demand for land bank.
                    This is the first excuse by RE bulls. We have ample of land to house each & everyone in the country with spacious homes. Problem is with land laws & develop-able land. Today, there are large tracts of land getting stuck due to some pathetic govt laws. This is deliberately done by Govt to benefit the builders. If land laws are like US, building house on own (like in US) will be preferred & flats will be the last option & especially for those who want to stay in CBD areas. Man, show me a single project like BR where highrises are coming in remote areas in US.
                    Eg. In New York, the highrises are in Manhattan....shift towards Bronx, about 1.5 km from here, the height of building dips. Go to Staten Islands, you start seeing independent houses & further towards New Jersey, there will be Villas around.

                    Finally, the RE prices rose by 400% from 2004-2008, did the population of country too rose by 400% or did the land mass got reduced by 400%, encroached due to sea, river etc. ?? Also, this being the case, why did US prices fall by 50% ?? Did their population fell by 50% or land increased by 50% ?

                    2. About 3/4th population of US is already urbanized compared to roughly 30% in India. And urbanization is the only known way of development in human history. No nation has ever grown without rapid urbanization (pls tell me if any). And no need to say, India is growing.
                    Take the classic case of UK. There are so many developed areas outside London ? Same is the case with Italy, where development has taken place outside Rome & Milan.

                    It is not urbanization which makes country grow. It is more equitable distribution of infra across the country which helps the things move. Take case of Gujarat, where infra has developed to smaller towns where several industries have come up, thanks to better infra being developed there.

                    3. Demand in US is shrinking due to rising unemployment and reducing wages in US. Whereas demand of India in increasing due to increasing salaries and employment. As per economic survey estimates, current unemployment rate in India is close to 10% which is all time low since independence. Surprisingly, 2011 unemployment rate in US is also hovering around 10% which is all time high in last 4 decades. Besides in India, wages during entire 2000s decade have increased in double digits (10-20%) annually, while in US they have hovered between 3-5% annually. Need evidence, check your salary slip of last 10 yrs vs your American frnd's.
                    And what about their take home income : home loan EMIs ratio ?? It is just because they over-leveraged that sub-prime crisis took place. Do you feel that Indians too should do the same & have such version 2.0 here too ?

                    4. More than 50% population of India is in the working age group of 20-40 years, compared to ageing population of US. i.e. - Means increasing productivity and wealth vs Reducing productivity & increasing dependency on state/society.
                    And the per capita income is not even 1/10 of that of US.

                    5. Majority of Indians simply don't like to stay on rent forever their life, they prefer to have their own home, atleast one. This is in stark contrast to western lifestyle, where rental living for entire life is very well socially acceptable.
                    Agreed, but take a survey & find out how many people want to work for builders & banks for 20 yrs.

                    6. We are already 1150 million+. Do you think we have enough dewelling units for everyone ?
                    Yes, if policies are set right. Not only 1150 mn, we can fit in 2300 mn too, in same land mass.

                    7. And don't forget the parallel BLACK MONEY economy we have. Its our huge cushion which US/EU don't have.
                    But black money holders too want returns from their investment. Had this not been the case, why did many HNIs withdrew from RE ??

                    Short term (1-1.5 yrs) RE impact may be negative (i expect not more that 20% correction), but medium to long term RE is a complete thumbs up from my side.
                    RE demand will always be there provided there is no big difference between EMIs & rent, as it was during 2004-05.

                    And yes, those who say that US banks lended blindly without considering the earning capacity of a person, i respectfully disagree with them. But then its another topic of discussion.
                    Forget US banks, see the NPAs in balance sheets of Indian banks after 30th of this month. I have confirmed news that SBI & ICICI are leading banks having large NPAs in RE segment.

                    Btw, here are some other factors you need to consider between US & India:-

                    In US, you can file for bankruptcy & walk away. Same is not the case in India,

                    In US, you have social security. In India, if something happens to you say job loss, you are left alone to fend for yourself, which means you need to save more than US citizens,

                    Interest rates are very low in US, so at the end of the tenure, the principal amount is far more than interest component. It is inverse in case of India where for long duration, interest amount is more than principle amount.
                    If you are happy, you are successful.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Another exhibi

                      DNA had RE exhibi this week. Ad mentioned something like 'Sun rises from East, so how about having a home in East ???'

                      Did anyone go to this exhibi ? Why are builders having some many RE exhibis one after another ? Guess .
                      If you are happy, you are successful.

                      Comment

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