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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

    Yes REAL ACRES I agree with you that even the politicos need to do an exit. And even I am waiting on it. Builders in mumbai have indirectly started to reduce thou not directly. I will quote one real e.g.
    6 months before one very big luxurious builder 'gaddha' was getting an enquiry to the tune of 25-30 enquires per day. Today they call up prospective buyer 10-12 nos per day.
    As of black money is concerned you might be aware that I can turn Rs 100 into Rs 80 as white. Details of which cannot be discussed on a public forum. It is another complex dimension just as RE prices.
    There are many projects in mumbai which are 100% financed by politicos. Again would not name them but there are.
    Again if we refer Real History related to benami properties and their future the moment the main person goes away the second in command is not able to gain all of it as is.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by vhaldavnekar View Post
      Yes REAL ACRES I agree with you that even the politicos need to do an exit. And even I am waiting on it. Builders in mumbai have indirectly started to reduce thou not directly. I will quote one real e.g.
      6 months before one very big luxurious builder 'gaddha' was getting an enquiry to the tune of 25-30 enquires per day. Today they call up prospective buyer 10-12 nos per day.
      As of black money is concerned you might be aware that I can turn Rs 100 into Rs 80 as white. Details of which cannot be discussed on a public forum. It is another complex dimension just as RE prices.
      There are many projects in mumbai which are 100% financed by politicos. Again would not name them but there are.
      Again if we refer Real History related to benami properties and their future the moment the main person goes away the second in command is not able to gain all of it as is.
      Yes, a classic eg. of benami properties is of Late Pramod Mahajan, who made over 2000 Cr & most of these benami properties are unknown & those who have those registered in their name, why the hell will they go to their kins informing about the same ? Even they know that the money used to buy such property was of ill-gotten wealth, so why bother ?

      Btw, what I have seen closely is - 'Paap ka paisa, paap main chala jaata hain'. (I have made the statement sober, actually the word starts from H & ends with M in Hindi).

      One may feel good in the beginning but as time approaches, you don't know where it vanishes !! Same would be the case when the leader of 'Watch gang' is bumped off.
      If you are happy, you are successful.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Interest Rate Trap by HDFC

        Though home loan interest rate market looks competitive, how institutions are taking advantage of lacuna in the system.
        2009 Dual Interest rate scheme:
        1st year fix rate 8.25%
        2nd year fix rate 9.00%
        From 1st April 2012 onwards, RPRL -4.5(spread) = 16.5 – 4.5 = 12%
        1st Aug 2011 Scheme: [ RPRL=16.5% ]
        Applicable Rates
        (Monthly Rest Basis) Fixed rates% Variable rates% Basis%RPLR
        Upto and including Rs 30 lacs 12.25 10.75 RPLR - 5.75[10.75]
        Rs.30.01 lacs to Rs.75 lacs 12.50 11.00 RPLR -5.50[11]
        Over Rs.75 lacs 13.00 11.50 RPLR - 5.00[11.5]
        It means people who took loans(>30lacs) in 2009 scheme have to pay 1% more compared to current market rate. Whereas institutions advertised that from 3rd year it will reset the rate to market’s floating rate.
        We are not teasing anybody, we are trapping them.
        India needs Dodd Frank regulation like US to protect buyers.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Why Prices are not Correcting Sensibly?

          Despite low sales volume prices are not correcting sensibly (30-40%) ,
          1. Govt. running the deficit due to corruption & fraud do not want to stop the revenue from inflated properties.
          2. Banks do not want to declare the bankruptcies.
          3. Investors can’t admit openly.
          4. Foreign funds managers are giving rosy picture to investors & delaying the recognition of losses.
          How the scheme works,
          In stock market every company has to match the analyst predictions else stock value falls down. So companies cook the book within the allowable accounting principles & postpone the recognition of losses. Similarly, currently by hiking the rate persistently builders are showing artificial return to investors. If prices are sustainable then it should reflect in volume, it should reflect in rent. If regulators will force the mark to market valuations for investors, funds, banks & builders we will see bigger crisis than US.
          mark to market valuation = property can be sell in arm’s length transaction.
          It’s only a matter of time, who holds the inventory & delay the problem.
          Based on my personal survey, in one of the project in Baner which is completed, 35% flats are sold, in 35% only 10% people are interested in living rest are investors or purchased it for future use.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            On sunday I met an NRI investor who bought 3 BHK in some GINI Construction property in Hadapsar at the price of 2750 psf 2 years back. He offered me 2800 psf 2 months back and I denied the offer because I did not like the location. And now last week he sold that property 2350 psf. Loss of 400 psf + 2 Years interest.

            This is the reality. Pune is no more property investors town and they are exiting very quickly even at huge loss.

            Originally posted by khbarilal View Post
            Despite low sales volume prices are not correcting sensibly (30-40%) ,
            1. Govt. running the deficit due to corruption & fraud do not want to stop the revenue from inflated properties.
            2. Banks do not want to declare the bankruptcies.
            3. Investors can’t admit openly.
            4. Foreign funds managers are giving rosy picture to investors & delaying the recognition of losses.
            How the scheme works,
            In stock market every company has to match the analyst predictions else stock value falls down. So companies cook the book within the allowable accounting principles & postpone the recognition of losses. Similarly, currently by hiking the rate persistently builders are showing artificial return to investors. If prices are sustainable then it should reflect in volume, it should reflect in rent. If regulators will force the mark to market valuations for investors, funds, banks & builders we will see bigger crisis than US.
            mark to market valuation = property can be sell in arm’s length transaction.
            It’s only a matter of time, who holds the inventory & delay the problem.
            Based on my personal survey, in one of the project in Baner which is completed, 35% flats are sold, in 35% only 10% people are interested in living rest are investors or purchased it for future use.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Came across one good article explaining how new Union budget will slow down the reality sector further! Putting whole article as it is.


              The latest national budget has given India?s realty sector a short shrift, despite its stated objective to create conditions for growth, focusing on domestic-driven growth recovery. It has sadly even ignored the prescription given by the Economic Survey for 1011-12 that has projected the share of the country's realty industry to grow from 5 percent to 6 percent soon.
              What is really disappointing is that barring some window dressing, the budget has not taken any concrete measures to address the twin crucial issues of increasing supply and boosting demand. This was the primary requirement given that the industry has been reeling under high property prices, liquidity crunch, costly debt, muted foreign capital inflows, increasing inflation coupled with low business sentiment.
              Today, residential properties, principal demand driver for real estate remains restrained with key indicators like sales and absorption hit by high prices, spurred by increasing inputs and debt costs. This is clearly evident from the industry statistics showing almost 50 percent of unsold inventory in top cities like the National Capital Region, Mumbai and Bangalore. So much so that even affordable housing has been facing a slow down.
              In this backdrop, the real estate sector that is under stress required a booster dose in terms of fiscal incentives supported by enabling development and regulatory environment. But that has clearly not happened in the budget.
              Liquidity crunch has been the bane of real estate but budget has not addressed this serious issue of low bank credit flow and high funding cost. The long pending demand of the sector for granting industry status and giving infrastructure status to big township projects has been ignored, denying easy credit access at cheaper rates.
              High property valuations are having negative impact on flow of foreign capital especially as investors abroad are already wary of ambiguous policies and lack of transparency in real estate transactions in the absence of a regulator. And the budget has done nothing to liberalise such investment and exit norms. The brakes on foreign equity in multi-brand retail will further retard the growth of retail real estate.
              The budget does not hold much hope with high home loan rates contributing significantly to slow down in housing demand. The recent cut in cash reserve ratio by the Reserve Bank of India (RBI) does not mean anything unless interest rates are cut ? by at least 1 percentage point in home loan rates to boost demand. Also no attempt has been made to increase loan to value ratio or housing loans, especially when the recent RBI directive has excluded stamp duty, registration fee and other levies for total home cost, thereby bringing down the value from 80 percent to 70-75 percent.
              Moreover the much expected increase in the Rs.1.5 lakh cap on interest payment and Rs.1 lakh cap on principal home loan amount has not happened in the budget, thereby dampening the spirit of home buyers. Though the budget has a proposal to set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loan may be useful in the long run, it will however have no immediate impact on the housing loan scenario.
              There is a major hurdle to the growth of real estate due to high taxation structure, which in the residential segment, amounts to 30 percent of the total cost of the home. This calls for a viable tax structure by way of rationalisation of goods and service tax, stamp duty, service tax and local levies. Even 1 percent tax deducted at source has been imposed on property sellers on transactions worth Rs.50 lakh in big cities and Rs.20 lakh in smaller cities.
              But instead of providing any relief, the budget has further hiked the service tax which together with increase in excise duty, will further push up property prices, thereby dampening demand. The exemption on capital gains tax on property, if proceeds are invested in small and medium enterprises may be of little use. No tax benefit or incentive has been given in the budget to cover up high cost of green buildings with a view to give fillip to green realty. Nor has it looked at duty structures to ensure that middle and lower income housing is not a revenue source.
              With housing for all a tall order for the government in view of about 25 million shortage of low cost housing, the government has rightly put focus on affordable housing in the budget. Allowing borrowings from overseas for low cost housing, extension of interest subvention for one more year for loans up to Rs.15 lakh on property cost up to Rs.25 lakh, service tax exemption on low cost mass housing up to 60 sq mt and Rs.4,000 crore fund for rural housing are the steps that will give a boost to affordable housing.
              Even on the infrastructure front, budgetary provisions like external commercial borrowings for road, power projects, Rs.60,000 crore allocation for infrastructure projects, Rs.5,000 crore for creating warehousing facilities and one year extension of sunset clause on tax incentives for infra projects are growth-oriented moves.
              However there is no policy initiative to boost rental housing. Also in view of rise in affordable housing cost, property price cap of Rs 25 lakh should have been increased to benefit homebuyers in Tier I and II cities. Moreover, the budgetary provision to bring affordable housing under priority sector lending would have gone a long way in giving much needed push to affordable housing.
              All in all, with marginal increase in income tax limit and with additional burden of service tax and excise duty further bringing down disposable and investable income, it may well prove to be a setback to demand, with budget bringing hardly any cheers to realty.



              Realty industry has little to cheer from budget - Yahoo! India Finance

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                ..... increase in excise duty, will further push up property prices, thereby dampening demand.

                This is one of the false assumtion on which bears have been sitting on for many years now and the facts have been exactly opposite. The increase in prices have rather boosted the demand as the speculators also jump in the fray. Just do a quick review of past few years and you will find nowhere price increase have dampened the demand.
                On the contrary the demand drop when prices drop as everyone enters waiting game.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  False assumption?

                  Originally posted by compuwalah View Post
                  ..... increase in excise duty, will further push up property prices, thereby dampening demand.

                  This is one of the false assumtion on which bears have been sitting on for many years now and the facts have been exactly opposite. The increase in prices have rather boosted the demand as the speculators also jump in the fray. Just do a quick review of past few years and you will find nowhere price increase have dampened the demand.
                  On the contrary the demand drop when prices drop as everyone enters waiting game.

                  We are still in the bull phase of the RE market. Therefore, it still is the Bear's continuing position that, when cycle ends demand will reduce sharply and bring down prices significantly.

                  Now demand can be "own use" or "investment". It is still not known what would be the reaction of investors to a sharp or prolonged bear phase, though it may be fairly assumed that own use buyers may continue to hold on mostly.

                  To label the bear's assumption as "false" is also an assumption which might turn out to be itself false. And it is jumping the gun with a per-supposition.

                  Its just too early to say (though the bear may have suffered notional loss from not buying into a rising market). We will really know about the "false" part of the bear's assumption only when the bear market really hits!

                  Let us see!

                  cheers

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by wiseman View Post
                    Its just too early to say (though the bear may have suffered notional loss from not buying into a rising market). We will really know about the "false" part of the bear's assumption only when the bear market really hits!

                    Let us see!

                    cheers
                    Agree to few of your statements. However even if prices fall by 10-15% as well, a major part of notional loss will be ralized even when on strikes a deal at that level.
                    The main issue here is that people have been hanging on "the fall is just two month down the line " for quiet sometime now and these false promises of falls have done greater harm than helping potential buyer (inadventantly these steatements themselves would have helped in keeping prices jacked up as the buyers enter the fray at controlled pace ... [some ego boost to IREF ]).

                    I am not justifying to go and buy at these prices but lots of people have missed good oppurtunities in 2008/2009 . Looking at current prices, it looks like steal ao those price levels. "Baner is not worth over 2500 at best" hang on people are paying 3.5K at Ravet.

                    Hope you got the point.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      I was only picking on that single point!

                      Originally posted by compuwalah View Post
                      Agree to few of your statements. However even if prices fall by 10-15% as well, a major part of notional loss will be ralized even when on strikes a deal at that level.
                      The main issue here is that people have been hanging on "the fall is just two month down the line " for quiet sometime now and these false promises of falls have done greater harm than helping potential buyer (inadventantly these steatements themselves would have helped in keeping prices jacked up as the buyers enter the fray at controlled pace ... [some ego boost to IREF ]).

                      I am not justifying to go and buy at these prices but lots of people have missed good oppurtunities in 2008/2009 . Looking at current prices, it looks like steal ao those price levels. "Baner is not worth over 2500 at best" hang on people are paying 3.5K at Ravet.

                      Hope you got the point.

                      Compu,

                      I was only nitpicking on that single point, thats all!

                      Also, there is another way, but given the inability of people to be disciplined, its most likely not to work in most cases.

                      If people do not want to buy at these levels, OR find that they are highly and should decide later when they have settled a bit more, one can rent, while having the discipline to SET ASIDE the equivalent EMI amount into savings every month.

                      If this is done and if the person does some homework and spreads this money into other investment in Stocks, PMs, fixed income securities, I have pointed out, with a spreadsheet long ago, that this strategy ensures that the person can keep pace with RE price rise and still buy at anytime in future without suffering increase in cost to him/her.

                      The problem is, without the property forcing people to pay EMI, savings do not happen and thus the home runs away in terms of affordability as people perpetually suffer from low savings.

                      cheers

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