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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 am not how true it is but I heard that every builder of Pune gives some commission to Sharad Pawar, otherwise builders don't get permission to build flats. That is why poor builders have no other options to take more money from poor buyers. Poor buyers have no options other than working hard in US to get the dollars in India.
    If they (working hard in US) are poor buyers then what about people like I? Probably we wont exists even . And yes we are not lazy either.
    Last edited by kaushik.v; December 22 2011, 05:34 PM.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Investment Banks Layoffs in India

      Layoffs & restructuring grapple investment banks like UBS, Nomura, Credit Suisse & Goldman Sachs - The Economic Times

      Ankush Sharma (name changed) was sacked in the usual style of his profession. An investment banker in a global bank, he reported to work like every other day, during the course of which he was asked to report to the boardroom for what he thought was a routine meeting. He was handed his severance cheque, and while he was away from his desk, his computer was locked so as to disable any transfer of data. He left in the next half an hour.

      Sharma is a part of what's building up to be a wave of layoffs and restructuring in investment banking in India. The trend picked up in the second half of 2011. And this may be the first time such a major culling is happening in I-banking in India.

      The 2008 subprime crisis didn't result in too many layoffs in Indian operations of global investment banks and they were largely driven by closures at large US banks. Sonal Agrawal, CEO of executive search firm Accord India, says, "In 2009, the domestic economy was not affected as much. Given slowdown in India, it's structurally different now and more severe."

      200 Ex-I Bankers

      How bad is the situation in I-banking now? Industry sources say across all major banks and at all levels, the total number of investment bankers laid off in India would be considerably more than 200. Of the majors, UBS, Nomura, Credit Suisse and Goldman Sachs are implementing restructuring plans. More layoffs are expected soon.

      "The restructuring has been 90% at the junior and 10% at senior levels. Bonuses this year are also predicted by markets to be 25-30% lower," says Puneet Pratap Singh, partner, financial services at global executive search firm Heidrick and Struggles.

      Kotak Mahindra promoter Uday Kotak said in a recent interview to Bloomberg that the money that I-banks are making now no longer justifies the number of employees or their salaries. The industry has 20-40% excess capacity and there is correction underway, Kotak had observed.

      After poor second-quarter results in 2011, banks like Nomura and Credit Suisse announced plans to restructure costs and cut staff across operations. According to a Nomura spokesperson, "at the time of its second quarter results, Nomura announced its intention to reduce its cost run rate by $1.2 billion, and we are in the process of executing that plan as quickly as possible".

      People familiar with Nomura's internal operations said around 100 people have been laid off in the wholesale banking division in the bank's backend Powai, Mumbai office. Nomura denied this figure. The bank said job losses amount to only around 2% of its employees in India.

      Bad Second Half

      In the first half of 2011, many deals in the capital market and the mergers and acquisitions field were concluded. Around 80% of the total Rs 25,000-crore capital market fund mobilisation was raised in the first half. In both business activities, deals in India were far fewer in the second half of 2011.

      "While there were many inbound and outbound deals in the first half of 2011, the second half of 2011 was tough for M&As because valuations came down and there was significant market volatility," says Raj Balakrishnan, head of Mergers and Acquisitions, Bank of America Merrill Lynch.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        How severe will be the RE bust in emerging markets ?

        Foreclosure after real estate bubbles burst in EMs - Moneylife Personal Finance site and magazine

        excerpt from the article.

        A burst real estate bubble in emerging markets would be far more severe and would last much longer. The reason is simple. The legal plumbing in these countries, including foreclosures and bankruptcy laws, is either deficient at best or nonexistent at worst

        It took some time, but they are finally beginning to get it. Leading financial analysts, money managers and economists have commenced to comprehend that real estate bubbles in many emerging markets could crash. The Nobel Laureate economist Paul Krugman wrote in his New York Times column that China was another emerging danger as its credit fuelled real estate bubble burst. The same concept has at last dawned on hedge funds A hedge fund owned by the famous private equity firm Carlyle sent an elite strike team to do a “deep-dive research trip” to China. It won’t help. They might find what is, but they have no idea of what is to be.



        Today the US has a similar problem. Almost 30% of houses sold in the US in 2011 were the result of foreclosures. Over 3 million homes have been foreclosed since the real estate market collapsed. But the market still has not cleared. Although many of the foreclosed homes do get sold, they make up less than one-third of the houses that the banks actually repossess. The banks are slowly leaking these properties on to the market, because they are terrified that too much distressed inventory would depress prices further. The result is that the recovery has been slow. But at least the process is going forward, which is a lot better than nothing at all.
        The US is not the only country that has experienced a real estate bubble. The easy credit sloshing around emerging markets has had a dramatic effect on property. Luxury homes in Mumbai and Singapore have increased by 138% and 144% respectively over the past five years. Real estate in India grew 400% from 2003 to 2008 before the crash and now in some places it is 30% higher than its 2008 peaks.


        Then there is China. Home prices in Beijing have risen by about 150% in the past four years. Like India, they have increased 400% since 2001. Beijing theoretically began to tighten lending especially to real estate two years ago, but their efforts have not been rewarded until the last few months when property prices started to decline.
        Contrary to some true believers, all markets go down as well as up, even emerging markets. Prices are beginning to fall and the falling prices have begun to accelerate.


        The consequences of a real estate bust in emerging markets would create quite a different situation than the real estate bust in developed markets. The rules are much different and so would the outcome. A burst real estate bubble in emerging markets would be far more severe and would last much longer.


        The reason is simple. The legal plumbing in these countries, including foreclosures and bankruptcy laws, is either deficient at best or nonexistent at worst. There isn’t even information on it. Despite diligent search in all financial news sources and general internet search, I have found few if any references to emerging market foreclosures.
        Many economists like to point out that mortgage lending in these countries is still quite small and often requires large down payments. True, but it has been growing at 20% a year in places like India. In China bank-financed construction makes up twice the percentage of the gross domestic product (GDP) as it does in developed countries.


        For a country to grow after the crash of a real estate bubble, the market has to reach equilibrium. To do so requires that over priced homes with delinquent mortgages have to be foreclosed and sold. If the procedure for foreclosure doesn’t exist, then the entire economy gets stuck with massive dud loans and zombie banks as occurred for over a decade in Japan. So when the emerging markets collapse, the recovery will take years.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by realpune View Post
          Foreclosure after real estate bubbles burst in EMs - Moneylife Personal Finance site and magazine

          excerpt from the article.

          A burst real estate bubble in emerging markets would be far more severe and would last much longer. The reason is simple. The legal plumbing in these countries, including foreclosures and bankruptcy laws, is either deficient at best or nonexistent at worst

          It took some time, but they are finally beginning to get it. Leading financial analysts, money managers and economists have commenced to comprehend that real estate bubbles in many emerging markets could crash. The Nobel Laureate economist Paul Krugman wrote in his New York Times column that China was another emerging danger as its credit fuelled real estate bubble burst. The same concept has at last dawned on hedge funds A hedge fund owned by the famous private equity firm Carlyle sent an elite strike team to do a “deep-dive research trip” to China. It won’t help. They might find what is, but they have no idea of what is to be.



          Today the US has a similar problem. Almost 30% of houses sold in the US in 2011 were the result of foreclosures. Over 3 million homes have been foreclosed since the real estate market collapsed. But the market still has not cleared. Although many of the foreclosed homes do get sold, they make up less than one-third of the houses that the banks actually repossess. The banks are slowly leaking these properties on to the market, because they are terrified that too much distressed inventory would depress prices further. The result is that the recovery has been slow. But at least the process is going forward, which is a lot better than nothing at all.
          The US is not the only country that has experienced a real estate bubble. The easy credit sloshing around emerging markets has had a dramatic effect on property. Luxury homes in Mumbai and Singapore have increased by 138% and 144% respectively over the past five years. Real estate in India grew 400% from 2003 to 2008 before the crash and now in some places it is 30% higher than its 2008 peaks.


          Then there is China. Home prices in Beijing have risen by about 150% in the past four years. Like India, they have increased 400% since 2001. Beijing theoretically began to tighten lending especially to real estate two years ago, but their efforts have not been rewarded until the last few months when property prices started to decline.
          Contrary to some true believers, all markets go down as well as up, even emerging markets. Prices are beginning to fall and the falling prices have begun to accelerate.


          The consequences of a real estate bust in emerging markets would create quite a different situation than the real estate bust in developed markets. The rules are much different and so would the outcome. A burst real estate bubble in emerging markets would be far more severe and would last much longer.


          The reason is simple. The legal plumbing in these countries, including foreclosures and bankruptcy laws, is either deficient at best or nonexistent at worst. There isn’t even information on it. Despite diligent search in all financial news sources and general internet search, I have found few if any references to emerging market foreclosures.
          Many economists like to point out that mortgage lending in these countries is still quite small and often requires large down payments. True, but it has been growing at 20% a year in places like India. In China bank-financed construction makes up twice the percentage of the gross domestic product (GDP) as it does in developed countries.


          For a country to grow after the crash of a real estate bubble, the market has to reach equilibrium. To do so requires that over priced homes with delinquent mortgages have to be foreclosed and sold. If the procedure for foreclosure doesn’t exist, then the entire economy gets stuck with massive dud loans and zombie banks as occurred for over a decade in Japan. So when the emerging markets collapse, the recovery will take years.
          In India, if a person defaults on the loan, there is no foreclosure or bank sale.

          Property is blocked in litigation for AVERAGE 7 years. It is impossible to sell such property.

          Effectively, it goes out of the market and is not available in the supply.

          This reduces the supply and so prices of remaining flats go up and not down.
          Venky (Please read watch a or before posting)

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Jittery investors selling flats below "market" rate

            Prices have started going down!
            Investors have started selling at discounted rates already! It makes sense to book some profit for the investors and enjoy 10% returns on the FD or even investing in equity at attractive prices now for 4-5 years time frame.

            Jittery investors selling flats below market rate - The Economic Times

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by Venkytalks View Post
              In India, if a person defaults on the loan, there is no foreclosure or bank sale.

              Property is blocked in litigation for AVERAGE 7 years. It is impossible to sell such property.

              Effectively, it goes out of the market and is not available in the supply.

              This reduces the supply and so prices of remaining flats go up and not down.
              I have seen many such properties on sale by Banks for default loans and these were even within one year of the default. Where this 7 years litigation comes from ?

              Also, when multiple people default bank can't survive without selling such property immediately .

              Buddy, where is the demand ? Everywhere sales is down. You are also missing the affordability factor which is very important. If people can't afford something, they can't buy. That's the reason people can't buy even if they need it for end use.

              Talking about the supply, well the inventory is piling up across all the cities. Add to it, the investors flats coming at discounted rates now.

              To conclude, prices can't keep on going up indefinitely and inflated prices without any meaningful sale can't be sustained, crash is inevitable!
              Last edited by realpune; December 28 2011, 08:14 PM.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Builders sell distressed assets

                Companies go bottom fishing; buy out distressed assets to aid ailing realty sector - The Economic Times

                The heading is a bit misleading. If you see the content, Foreign AMCs are setting up funds to buy distressed assets from builders at a discount of 30% or even more. They expect more distressed asset sale next year!
                Last edited by realpune; December 28 2011, 12:27 PM.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by realpune View Post
                  Companies go bottom fishing; buy out distressed assets to aid ailing realty sector - The Economic Times

                  The heading is a bit misleading. If you see the content, Foreign AMCs are setting up funds to buy distressed assets from builders at a discount of 30% or even more. They expect more distressed asset sale next year!

                  Thumbs Up!!!

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    According to property research firm PropEquity, nearly half of the 930,000 under-construction residential units in the country, scheduled for delivery between 2011 and 2013, are likely to be delayed by up to 18 months. In recent months, secondary market property sales have been higher than primary sales by developers.

                    "This is especially true for projects where a considerable portion of construction work is already complete," says Prashant Kaura, director, GenReal Property Advisers. There has been a rise in secondary sales because many investors are looking at cashing out of projects. The reasons for wanting to exit might differ- while some are facing a cash crunch themselves, others are unsure about the developer they are invested with.

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                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      DLF, partner sell Pune SEZ to Blackstone

                      Realty giant DLF today announced that the company and its partner has sold an IT SEZ in Pune to private equity firm Blackstone for Rs 810 crore. DLF, the country's largest realty firm, is selling its non-core assets to reduce debt, which stood at Rs 22,519 crore as on September 30, 2011.
                      In a filing to the BSE, DLF said that "the company along with its joint venture partner Hubtown have sold 100 per cent of their respective shareholding in DLF Ackruti Info Parks (Pune) for an aggregate consideration of Rs 810 crore to an entity controlled by realty fund affiliated with Blackstone Group, BRE/Mauritius Investments II".
                      DLF and Hubtown held 67 per cent and 33 per cent equity shares in DLF Ackruti SEZ, respectively.
                      "The above transaction is in line with the DLF's objective of divesting its non-strategic assets," the filing added.
                      DLF has so far raised Rs 3,480 crore from sale of non-cor...
                      DLF, partner sell Pune SEZ to Blackstone

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