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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

    Buy petrol. It is in bull market

    Petrol has gone up 7 fold since 1990. Buy petrol it is going to go up.


    Image from blog capitalmind.in

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by abeerbagul View Post
      When this bubble crashes in Pune, i.e. soon, cash is going to be king. Banks will drastically increase the downpayment requirement, and middle class, reacting out of fear will stop taking home loans.

      At such a time, if you have 50% downpayment or more ready, you can come to the negotiating table with ready cash.

      Believe me, for a distress seller, the sight of ready cash combined with a clean and honest buyer, is a great motivator.

      Whenever I buy second hand white goods, and vehicles, the power of ready cash and promise of a clean and friendly transaction always puts me on top of the seller's list.
      Possibility of crash is remote but stagnation will increase. Sow economy, unstable rupee , increased inflation due to rate hikes in petrol (and possibly in diesel) and probable increase in interest rates will hamper the finances of common man.

      People are forced to restrict expenditures. Interesting thing to see is what happens if situation of bad loans (default loans) occurs.
      But I think, this hike will hit people until people start to adjust accordingly

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Increasing desperation?

        2 days back I read that Goldman was booking 1.2 million SFt in Bangalore and that brought about some cheer in the RE business.

        Why do they hire complete idiots to post such nonsense? This idiot does not even have the smarts to hide the real reason why Goldman is doing this.

        In the following para there is mention that they want to consolidate their 6 spread-out offices into one location.

        But the hidden kicker is this ...

        1. In all probability they will use the weak market to drive much lower lease rates and much better financial terms.

        2. They may also use this opportunity to become more ergonomic and save space.

        For RE, this means perhaps more than 1.2 million SFt coming back to market from higher rates into lower rates! Double kicker.

        And if THIS is news for cheer, they better start praying!!!

        cheers

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by wiseman View Post
          In the following para there is mention that they want to consolidate their 6 spread-out offices into one location.
          And the old 6-spread out location will lose the rent!! So sad for those owners. Its like taking from 1 pocket and putting in another, but at a cheaper rent.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Property sales fall by 36% y-o-y; eighth consecutive month of volume decline - The Economic Times

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              this drop is just peanuts before what property builders have already earned.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Its just delayed!

                Originally posted by chaman007 View Post
                And unfortunately high inventory doesn't exactly bring prices down!
                High inventory DOES bring down prices using ploys like "Clearance" sales, "Closing Down" sales, etc. This happens under "normal" circumstances when businesses are allowed to float or sink on their own merit.

                Today, for various reasons the Govt, Banks and other investors do not want to allow the RE business to run on a standalone basis. So they keep fiddling with RE loan interest rates, and so on. Also other investors via FDI, QIPs, etc have too much at stake now for the party to end.

                On the buyers side they provide props to keep buyers fooled into thinking that somehow they are suddenly worth more (more loan amounts sanctioned) and aiding them to take more risk by buying homes at ever higher prices.

                Therefore the RE business is kept propped up exactly like the European, US, Japanese and Chinese (not to mention Indian) economies are kept propped up!

                But all this has a cost. Debt is piling up on one side (this includes new debt as well as interest added to principal). Interest rate is rising all the time.

                So, while the music is playing in India the sector won't sink and high inventory will not bring down prices.

                But just like the Sovereign Debt Crisis, when our economy starts tanking - which has already started - the debts will start getting recalled (or rates will shoot up to cover perceived increased risk).

                When simultaneously, debts start getting recalled, buyers get into greater trouble due to jobs, income slowdown and expenditure shooting up, then the gaps will start getting exposed.

                Then normal business climate will return and high inventory will result in price declines till inventories return to "normal".

                This is similar to what happened to the RE sector in the US. But their level of fraud (lack of oversight at all levels), demand Vs supply situation, etc made it much worse in the US - much deeper fall as well as much longer to recover.

                We might have a smaller fall as well as a quicker turnaround than in the US. It will still be painful though.

                cheers
                Last edited by wiseman; May 26 2012, 01:00 PM.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Even a known congress loyalist editor Shekhar Gupta of IE has written how UPA is pushing India towards bankruptcy. Read here.

                  UPA’s dismal political management turns a belated (and much needed) petrol price hike into an ‘event’

                  More than two months after the prime minister said we needed to bite the bullet, and a couple of weeks after the finance minister talked of hard decisions, we finally have one: the petrol price increase. Even more encouraging, there is no talk of a rollback yet. Petroleum Minister Jaipal Reddy even showed some old-style political skill in asking people to wait a few days before a price reduction might be considered. Crude has been slowly moderating lately and the oil marketing companies are supposedly free to reset the petrol price on a fortnightly basis anyway.
                  The question to ask, therefore, is: why have they not been doing that lately? Because if they were, this week’s approximately 10 per cent hike would not have become such a story, or rather, event. Before this, the last increase of Rs 1.80 per litre in petrol prices was carried out on November 4, 2011, followed by reductions of Rs 2.22 and 78 paise in the following two fortnights. And then the process stopped. Why? Because, apparently, the UPA was getting ready for the Uttar Pradesh elections. We suspended that fortnightly rhythm in search of cynical electoral gains which never came. Then we waited even longer as nobody wanted to give the silly Opposition a chance to scuttle the Budget Session of Parliament. At the same time, crude kept rising, and the dollar falling, the deficit widened and inflation peaked, so the voter all over the country got angrier anyway. Even at the risk of some over-simplification (but we are talking political governance, not statistical perfection), look at it this way: in the same period, overall inflation has been running at around 10 per cent, and nobody, not even Mamata Banerjee, has been out in the streets protesting. Would anybody, even the voter of Uttar Pradesh on whom this fiscal suicide is being blamed, have noticed?

                  How would a more political government have handled this? It is lazy now to say that Atal Bihari Vajpayee’s NDA had an easy time because they had crude running at $12 a barrel. The fact is, Vajpayee carried out 33 (yes, 33) fuel price increases over his six years. Of course, the average increase was so tiny nobody seemed to notice too much — while there were token protests by the Congress and the Left. Yet, in the process, the price of kerosene, the most politically sensitive fuel, was taken from Rs 2.52 to Rs 9.01 per litre, an increase of more than 350 per cent. The second most sensitive, diesel, was more than doubled from Rs 10.25 a litre to Rs 21.74 and the equally troublesome, LPG, was nearly doubled, from Rs 136 to Rs 241.60. Petrol went up only by 50 per cent, from Rs 22.84 to Rs 33.71 and, in the process, the distortionary gap that is rapidly — and destructively — dieselising our economy and environment, was narrowed to manageable levels.
                  In comparison, in the eight years of the UPA, crude has risen nearly 170 per cent, the rupee has fallen more than 20 per cent, yet prices of kerosene and LPG have been increased by 65 per cent only and diesel and petrol by 88 per cent and 114 per cent respectively. In the process, the fisc has been vacuum-cleaned, and yet, for its spasmodic but headline-making price increases, the UPA has got much more bad press. Diesel, meanwhile, is back to being the evil polluting king of all fuels.
                  The inherently indecisive style of this establishment is compounded by the fact that its administrative and political authority is so scattered — so scattered, in fact, that the buck has to make a dozen halts en route, like a DTC bus, before it finally stops with somebody. This results in even routine decisions dragging themselves out into public controversies and, finally ending up as “events”. Thirty-three fuel price hikes, one every two months or so on an average, can never be events — in fact the frequency and the tiny size of the increases make them relatively non-newsworthy. But that is not the style of the UPA. It dithers and meanders into making everything out to be a story, a controversy, an event.

                  The current plight of civil aviation is a pretty good case. Every day there is a speculative headline somewhere saying that FDI in private airlines will soon be allowed. Nobody reminds anybody that it is already allowed, to the extent of 49 per cent. So what is the story? It is just that this FDI policy was customised to the “needs” or “demands” of one private airline known for legendary “persuasive” powers in New Delhi then. So if you are a chappal, apparel, automobile, candy manufacturer, in any business whatsoever, you can invest in an airline in India. But not if you are a foreign airline. Now, would you call that incredibly stupid? No, it is incredibly smart of an Indian capitalist who found the right cronies and had the law customised for him so that all competition is kept out. This incredibly unique restriction is not merely the most striking example of Indian crony capitalism, it makes us look like a banana republic. Changing this should have been a minor, routine editing correction. Yet, we have dithered over this for so long that it has been allowed to grow in the popular mind as some kind of a bailout for an Indian capitalist as “effete, decadent, wasteful and incompetent” as Vijay Mallya. So when this FDI policy is indeed rationalised, it will be another event.
                  Because the UPA takes so long with its deliberations — in fact, it usually prefers deferring a decision a lot more than taking one — it has forgotten the virtue of political management by boring routine. In state after state now, electricity utilities have gone bankrupt (their combined losses now top Rs 2 lakh crore and the banks are bracing for another shock) while the regulators have either sucked up to their governments and not allowed tariff increases or because the chief ministers have also caught the UPA virus. It has taken two really powerful chief ministers, J. Jayalalithaa and Mamata Banerjee, to make abrupt, sizeable tariff increases of 37 and 25 per cent recently. Most of the others — except Rajasthan — are letting the monster grow. You do not have to be an economist to see how, with new capacity being added, India will be power surplus by 2015. Yet, by then, everybody involved in the electricity business, from producers to distributors to their banks, would have gone bankrupt. We will not address these tariffs and deficits as a matter of routine now, and one day everybody will need a giant bailout — may be from the IMF. Now that will be some event, not witnessed since 1991.
                  'LIVE FOR INDIA'

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    abeer,
                    I agree that cash is the king. Already if you see, the chaps who were eligible for X loan amount 1 yr back are now not eligible for the same amount. Reason - Their savings have reduced which is reflected in bank statements.
                    Some of my friends informed me that MBA fees are going to be hiked this year & school fees too. Fuel is already high & don't see any correction happening unless crude oil prices dip or rupee appreciates. I got update in morning that Congress led UPA2 is planning for hike in diesel & LPG in June. LPG may well go upto INR 100/cylinder, while diesel is still unknown. Lets see.

                    The planning commission led by idiot Montek has gone into hiding & so are the economic advisers to the PM . Due to flip-flop on critical policies, foreign investment is not coming in & Indians cos are investing abroad.

                    wisey,
                    The situation of lease in similar in Mumbai where cos are shifting offices from South Mumbai to Navi Mumbai, Nerul or Andheri. All this to cut costs. Almost 33% commercial spaces in cuffe parade are vacant in major complexes like Maker Chambers. Situation at BKC is not different.

                    khabarilal,
                    Banks are now on verge of issuing notices to builders. The situation is already grim in Delhi-NCR & I pity those buyers who are now stuck when they booked in 2009 as no constro development is seen on various projects.
                    High inventory will surely make builders reduce prices more than what market expects. It is here when watching shows like 'Property Show' on NDTV etc. will be humorous.
                    If you are happy, you are successful.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      The India story is falling apart as a clueless government gets it all wrong

                      Not long ago, the India story was a fairytale. No large economy other than China was growing as fast. Few had weathered the 2008 global crisis better. Trade was booming, incomes were rising. Then, it seems, the storywriter changed his mind and decided to script a horror story.

                      Now, the rupee is sinking. Foreign institutional investors (FIIs) have decided to take a break from India. Exports are stagnant. Industrial growth is minimal and GDP growth projections are being revised downwards with depressing regularity.

                      Complete news here :-

                      The India story is falling apart as a clueless government gets it all wrong - The Economic Times
                      If you are happy, you are successful.

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