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 realpune
    How many of such examples do you have 1 in 100 or 1 in 1000 ? Is it so trivial to start a business ? If you have worked in technical ladder for years in indian IT, just with technical expertise, anyone will offer you business opportunity :) ?. Why would they prefer you over CMM level 5 companies ? Cost is not the only criterion to give business. Your credibility about timely execution is equally important.
    Moving into business side dosent mean starting a IT business. It means moving from the IT division of the business to the actual business side of the business e.g. If a person is working in the IT division of a insurance company then moving into the business side of that sector. IT is nothing but automation of the processes and good people who have moved into IT 15-20 back have a tremendous chance to move into a higher role other than you typical project manager, delivery manager and other crap roles which are going to go to people will less experience as such roles are driven by cost and not quality.

    Once you move into the business side your talent is compared people who earn 150-200K $ and there Indian IT professionals still command labor cost advantage. A lot of captive units in India are doing such kind of recruitment. People earning 40 lakhs in India is not unheard of now and people who have stayed in US or UK or Europe and moved into either the purely technical side or the business side are today doing very well for themselves. Checkout the demand for good technical software engineers in the silicon valley - 200K $ is not a uncommon amount anymore.

    Also, most of the folks with 10+ years technical experience move into managerial ladder as there is no meaningful future for technical folks over 15 years experience given the fact that Indian IT is being looked upon as cost saving outsourcing entities and not for technological innovations.

    Often during the boom times, redundant managerial positions are created and it busts, the redundant positions are eliminated.


    Companies hire talent and hence talented people who have spent 15-20 yrs in the IT industry should be doing very good for themselves. If they are not then some wrong choices have been made. Good technical who can understand the business side of things are in shortage today like never before.

    Companies dont hire based on how others see the IT sector.


    Many want to be India due to their personal preferences parents, kids, spouse etc. What questions would you ask if 20 years if someone with 15-20 years of experienced has to compete with someone with 12+ years - Please tell ? Its a hard fact of the IT industry, you simply don't have so many openings as you move up in the pyramid.


    Again openings in the career path defined by the IT majors in India might be limited and people who trusted the career path set for themselves by such IT companies have been tricked whereas people who specialized in either the technical side or the business side are minting money. The people who sat on the fence - doing a little bit of technical stuff and a little bit of managerial stuff are the one who will suffer the hardest.
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  • Originally Posted by ankitnagpal
    Most of my friends who passed college in 2006 are earning in the Rs. 40-60K/month range barring a few exceptional talents and I do not see it increasing for next 10 years or so. Income can not increase for ever.


    Income is a reflection of talent and execution skill of an individual. So income will increase if the person is talented and can execute really well. Most of your friends who passed college in 2006 are 7 yrs old in the industry and their time will come to earn big money if they can learn more and understand the domain and how businesses work.

    A person earning 1.8 lakhs per annum 10 yrs ago is able to earn 20-22 lakhs today not by just doing the same old stuff that he/she did back in 2003 or 2006 but by learning new things. Just joining a IT firm dosent guarantee success and salary increases more than inflation. Its a private sector which is very competitive and
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  • Originally Posted by herohiralal
    A person earning 1.8 lakhs per annum 10 yrs ago is able to earn 20-22 lakhs today not by just doing the same old stuff that he/she did back in 2003 or 2006 but by learning new things. Just joining a IT firm dosent guarantee success and salary increases more than inflation. Its a private sector which is very competitive and


    It can be talent and good timing too. If a company is expanding fast then people get out-of-turn promotions to make space for new recruits. And Rs. 1.8/yr. package was very a under-valued salary package just like real estate of 1990's and early 2000's. I think as India's infrastructure and brand image improved, the salaries earned a respectable level of 1/2 - 1/3rd of a US engineer salary by late 2000's. But do you think everyone in India will earn equal or more than a US engineer?
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  • Guys start to move into people management roles at 8+ years and start to have a comfortable life ...................>
    It shows your bias and proves that you have no experience in project/people management and financials. 99% of jobs we have in India do not need technical expertise of 15-20 year experienced. Best experienced mix every company expects is between 3 to 8 years.
    Most of the 10+ year experienced technical people - find it hard to do coding.
    Anyone who is in financials of IT companies or managing a project will be able to tell you that clients and IT management is focusing on supporting the work with least experience possible. If work can be supported by 4 year experienced - there is no way 8 year experienced will be engaged for the same.
    The only thing which adds value to 15 years of IT expertise is domain expertise and application/business knowledge. Due to policy or tendency to switch projects/jobs every 2-3 year - most of the technical guys loose this advantage.
    While I know there are good people technically 10-15 year experienced. I find newer generation much more intelligent and fast learning.


    Summary - If IT continue to grow(as it is till today) - it is not an issue - pyramid keeps growing. But if growth is stagnated - surely we will see high cost people getting laid off and hiring happening at the base of the pyramid. It is a simple common sense.

    Originally Posted by suryawork
    Talking of pyramid in IT if you maintain your technical skills then there is demand irrespective of 10/12/15/20 years of experience and this is from my personal experience . There is a severe shortage of senior people with good technical skills especially in services organisations since guys start to move into people management roles at 8+ years and start to have a comfortable life .

    No private job will pay you based on years of experience but on what value you bring to the company . Making and keeping money is not easy and thats why this RE rot is not stopping...all stakeholders want to earn their lifetime in a few years , so dont blame them - its the public who has to make wiser decisions - remember , no pensions , social security , health care benefits on retiring(and your career might last only for 20 years) - dont over leverage based on your future uncertain income !!!
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  • Originally Posted by tushart
    Guys start to move into people management roles at 8+ years and start to have a comfortable life ...................>
    It shows your bias and proves that you have no experience in project/people management and financials. 99% of jobs we have in India do not need technical expertise of 15-20 year experienced. Best experienced mix every company expects is between 3 to 8 years.
    Most of the 10+ year experienced technical people - find it hard to do coding.
    Anyone who is in financials of IT companies or managing a project will be able to tell you that clients and IT management is focusing on supporting the work with least experience possible. If work can be supported by 4 year experienced - there is no way 8 year experienced will be engaged for the same.
    The only thing which adds value to 15 years of IT expertise is domain expertise and application/business knowledge. Due to policy or tendency to switch projects/jobs every 2-3 year - most of the technical guys loose this advantage.
    While I know there are good people technically 10-15 year experienced. I find newer generation much more intelligent and fast learning.


    I agree. But still a few make it up to CEO, Principal Engineer levels to earn good and work less. I think Suryawork and herohiralal are in USA where there is strict 8*5 hrs. week with good salary and are at a very senior level in a good company. But not everyone achieves that level.
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  • Originally Posted by fatichar
    Ankit,

    Can you share your experiences of starting and doing business in the thread Entrepreneur : Share your experience here for mutual learning - Property Discussion - No Buy or Sell



    - tapatalk free


    Thanks for the link. But bhai, I am no big-shot and doing a very small business of USD 3-4K/month for the last 2.5 years. If you still want me share my exp. then its fine. The only reason I had to start a business and leave job was a pittance salary of Rs. 40K/month in-hand (6L CTC) in 2010 at 25 yr. of age and I knew that I need to save at least 10 lakhs for marriage within 2 years which was impossible with that salary, alsoI was not getting good marriage proposals because Rs. 40K/month is not enough to raise a family in Delhi. I knew I can not make it up to the golden group of 1L+ salaries ever in job (which I achieved very easily and quickly in business) as I neither had calibre of working 12 hrs/day nor ass-licking capabilities like others in my company. Anyways, thanks for the link.
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  • Yes. When we talk statistics and generalize it - we need to consider general population assuming skills as a neutral entity.

    Originally Posted by ankitnagpal
    I agree. But still a few make it up to CEO, Principal Engineer levels to earn good and work less. I think Suryawork and herohiralal are in USA where there is strict 8*5 hrs. week with good salary and are at a very senior level in a good company. But not everyone achieves that level.
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  • ankithnagpal, I can't agree with you more.What you said has always been lurking in my mind. Yet what bugs me is that if all think like this will we ever get the likes of Bill Gates,Narayan murthy,Amabani,Jerry rao, et al ?

    "A note for future entrepreneurs:"
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  • Originally Posted by tushart
    Guys start to move into people management roles at 8+ years and start to have a comfortable life ...................>

    Not sure how long the comfortable life will last as the market is will demand change and everyone who wants to grow will have to be effective.

    It shows your bias and proves that you have no experience in project/people management and financials. 99% of jobs we have in India do not need technical expertise of 15-20 year experienced. Best experienced mix every company expects is between 3 to 8 years.
    Most of the 10+ year experienced technical people - find it hard to do coding.
    Anyone who is in financials of IT companies or managing a project will be able to tell you that clients and IT management is focusing on supporting the work with least experience possible. If work can be supported by 4 year experienced - there is no way 8 year experienced will be engaged for the same.


    Yes thats correct cause the normal IT job a 8 yr person does today can be done by a 4 yrs old. So that 8 yr old will either have to be satisfied with below inflation salary rise or improve his / her skill set. That is the beauty of the industry and the new skills can quite easily acquired using the same set of tools that are used for the job today - internet, phone and laptop / tablet

    The only thing which adds value to 15 years of IT expertise is domain expertise and application/business knowledge. Due to policy or tendency to switch projects/jobs every 2-3 year - most of the technical guys loose this advantage.
    sorry why cant one carry forward their technical expertise?


    Summary - If IT continue to grow(as it is till today) - it is not an issue - pyramid keeps growing. But if growth is stagnated - surely we will see high cost people getting laid off and hiring happening at the base of the pyramid. It is a simple common sense.


    IT is a umbrella for a host of jobs that have been off-shored. The point is that 15-20 yrs back people looked at indian IT as application development, testing and maintenance. Today companies are ready to hire IT folks from IT companies to do a whole host of other jobs which are high paying than your old IT jobs. 15-20 yrs back manufacturing people who joined IT would have done it cause the pay for good in IT and then that motivated them to learn new skills. The same will happen now with people who want to earn more.

    Just dont look at the number of people IT companies are hiring or firing and then extrapolate it to how the Indian RE prices will react.
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  • Originally Posted by ankitnagpal
    I agree. But still a few make it up to CEO, Principal Engineer levels to earn good and work less. I think Suryawork and herohiralal are in USA where there is strict 8*5 hrs. week with good salary and are at a very senior level in a good company. But not everyone achieves that level.


    Not there yet but I can see no reason why one cant make it to that level. A lot of jobs are now available for talented people and it dosent matter what their citizenship is and where the job executed from.

    Globalization has surely worked wonders for the Indian IT sector and the future is quite +ve for people keen to learn and adapt.
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  • Agreed but in practical consider the following scenario. Assume in your company - you are a CEO and 100 positions

    20 for starter skills/experience paid 10 units
    50 for average skills/experience paid 20 units
    20 for excellent skills/experience paid 30 units
    10 for super excellent/experience skills paid 40 units (I believe you belong here - great indeed - rather everyone wants to belong here)

    Assume that
    1. Number remains constant for next 10 years (equivalent to IT getting stagnated)
    2. Share holders are not in a position to allow impact to current profitability rather they want to increase profit.
    3. Client is not going to pay you extra for the same skills/experience than what it is paying you today.

    2 and 3 are actual reality today and 1 is a fear standing on the door front.

    Question 1>
    As a CEO of the company what are you going to do about it to survive the 10 years?

    Question 2>
    30 % of the skills required today are going to be obsolete in 10 years and 30% different skills are going to come to market. How would you decide policy as to how to fulfill this demand?

    Now you may have to come out of your comfort zone of excellent technical skills to answer that.



    Originally Posted by herohiralal
    Not sure how long the comfortable life will last as the market is will demand change and everyone who wants to grow will have to be effective.


    Yes thats correct cause the normal IT job a 8 yr person does today can be done by a 4 yrs old. So that 8 yr old will either have to be satisfied with below inflation salary rise or improve his / her skill set. That is the beauty of the industry and the new skills can quite easily acquired using the same set of tools that are used for the job today - internet, phone and laptop / tablet
    sorry why cant one carry forward their technical expertise?

    Summary - If IT continue to grow(as it is till today) - it is not an issue - pyramid keeps growing. But if growth is stagnated - surely we will see high cost people getting laid off and hiring happening at the base of the pyramid. It is a simple common sense.

    IT is a umbrella for a host of jobs that have been off-shored. The point is that 15-20 yrs back people looked at indian IT as application development, testing and maintenance. Today companies are ready to hire IT folks from IT companies to do a whole host of other jobs which are high paying than your old IT jobs. 15-20 yrs back manufacturing people who joined IT would have done it cause the pay for good in IT and then that motivated them to learn new skills. The same will happen now with people who want to earn more.

    Just dont look at the number of people IT companies are hiring or firing and then extrapolate it to how the Indian RE prices will react.
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  • Originally Posted by tushart
    Agreed but in practical consider the following scenario. Assume in your company - you are a CEO and 100 positions

    20 for starter skills/experience paid 10 units
    50 for average skills/experience paid 20 units
    20 for excellent skills/experience paid 30 units
    10 for super excellent/experience skills paid 40 units (I believe you belong here - great indeed - rather everyone wants to belong here)

    Assume that
    1. Number remains constant for next 10 years (equivalent to IT getting stagnated)
    Any CEO thinking about growth in terms of just number has already lost the battle. Like I have said in my post before IT today is an umbrella used for outsourcing of many kinds of job and not just IT.

    2. Share holders are not in a position to allow impact to current profitability rather they want to increase profit.

    3. Client is not going to pay you extra for the same skills/experience than what it is paying you today.

    2 and 3 are actual reality today and 1 is a fear standing on the door front.
    This is a fact of any business and so its not particular to just IT so lets keep this one out. This is the base on which any business is run. These 2 points always exist in every industry.

    Question 1>
    As a CEO of the company what are you going to do about it to survive the 10 years?

    Question 2>
    30 % of the skills required today are going to be obsolete in 10 years and 30% different skills are going to come to market. How would you decide policy as to how to fulfill this demand?

    Now you may have to come out of your comfort zone of excellent technical skills to answer that.



    Lets me take an example to explain what should be done. Take Coke or Mc Donalds and see what they have done. Great brands even 10-15 yrs ago. All of them had their key products - carbonated soft drink and burgers. Faced the same issue as IT is facing today. Their key offering was seeing too much competition and margins are under pressure. There is only so many burgers that a person can eat and anyone can mix soda and water and flavour and sell it as less than half the prices as coke (no one has been successful so far but that doesnt mean Coke should not prepare itself for that eventuality)

    So what do they do? Mc Donalds sells food. Already had tons of outlets and the supply chain in place with chefs and the whole army of people ready to serve. So it starts selling coffee and shake and breakfast and what not. Same supply chain needs slight modification, same outlets, new ads using the same trusted brand.

    What does Coke do? Goes and invests in fruit juice and water and everything that is liquid - may soon enter alchohol and beer for all we know - Coke already has plants which purify water. But Coke does not have outlets. Its strength is its relationship with big retail players so it launches new brands and gets shelf place in retail outlets like walmart, tesco and what not.

    So McD uses its same brand and same outlets but moves into different selling different kinds of food whereas Coke diversifies into the same sector - water + anything - to grow.

    What can a IT company do? use its supply chain - HR process to tap talent from colleges and its factories - vast amount of campuses connected to the globe and filled with amenities for employees - to move into other professional services. Indian colleges continue to produce armies of MBAs, HR execs, marketing, financial and legal professional,

    IT for the last 10-15 yr has been nothing but hiring cheap labour here in India and renting them to US or European clients and making profit on the difference between billing rate and cost of resource. Can this be done in offshoring of HR or finance departments of big MNC? Say for example Infosys says to Exxon. let us provide u HR or finance people who will sit in India and do all the low level tasks that you have people in Houston for? Can this also be done in marketing, legal, media, entertainment, food and then have a small army going after that holy grail - consulting.

    There are so many jobs that can be outsourced and off-shored that any IT company which cannot grow 10-15% for the next 7-10 yrs should look very hard at their top management - we have already seen some changes already in the 2nd largest IT company in India. Cogni and TCS seem to be growing well inspite of all the news about the world falling apart. Tech Mahindra is growing its non-BT business very rapidly in a sector where high debt is really killing the European and Indian telecom companies.

    I am not even going into the world of software products and apps that these companies could develop - not the big stuff that oracle, IBM, Microsoft or SAP sell but the cloud and 4g will open up vast opportunities for these players in building solutions and produces for the medium and small sector of the developing world. TCS has started it but it didnt go well.
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  • Good thinking - though we should not do a mistake of comparing Indian IT with Food and Retail giants.

    Anyway I guess I have no doubt that Indian IT and people employed in it will do exceedingly well if it keeps growing/innovating which is what you are explaining in beautiful words. And that is what I said - if IT grows we have no issues - pyramid keeps growing.

    The problem is only when it stops growing or grows at a slower rate. This is a fear at this point and all we are saying is that if it comes to reality for whatever reason, then we would see people with high cost(high experience) getting laid off and hiring happening at the bottom of the pyramid.


    Originally Posted by herohiralal
    Any CEO thinking about growth in terms of just number has already lost the battle. Like I have said in my post before IT today is an umbrella used for outsourcing of many kinds of job and not just IT.
    This is a fact of any business and so its not particular to just IT so lets keep this one out. This is the base on which any business is run. These 2 points always exist in every industry.



    Lets me take an example to explain what should be done. Take Coke or Mc Donalds and see what they have done. Great brands even 10-15 yrs ago. All of them had their key products - carbonated soft drink and burgers. Faced the same issue as IT is facing today. Their key offering was seeing too much competition and margins are under pressure. There is only so many burgers that a person can eat and anyone can mix soda and water and flavour and sell it as less than half the prices as coke (no one has been successful so far but that doesnt mean Coke should not prepare itself for that eventuality)

    So what do they do? Mc Donalds sells food. Already had tons of outlets and the supply chain in place with chefs and the whole army of people ready to serve. So it starts selling coffee and shake and breakfast and what not. Same supply chain needs slight modification, same outlets, new ads using the same trusted brand.

    What does Coke do? Goes and invests in fruit juice and water and everything that is liquid - may soon enter alchohol and beer for all we know - Coke already has plants which purify water. But Coke does not have outlets. Its strength is its relationship with big retail players so it launches new brands and gets shelf place in retail outlets like walmart, tesco and what not.

    So McD uses its same brand and same outlets but moves into different selling different kinds of food whereas Coke diversifies into the same sector - water + anything - to grow.

    What can a IT company do? use its supply chain - HR process to tap talent from colleges and its factories - vast amount of campuses connected to the globe and filled with amenities for employees - to move into other professional services. Indian colleges continue to produce armies of MBAs, HR execs, marketing, financial and legal professional,

    IT for the last 10-15 yr has been nothing but hiring cheap labour here in India and renting them to US or European clients and making profit on the difference between billing rate and cost of resource. Can this be done in offshoring of HR or finance departments of big MNC? Say for example Infosys says to Exxon. let us provide u HR or finance people who will sit in India and do all the low level tasks that you have people in Houston for? Can this also be done in marketing, legal, media, entertainment, food and then have a small army going after that holy grail - consulting.

    There are so many jobs that can be outsourced and off-shored that any IT company which cannot grow 10-15% for the next 7-10 yrs should look very hard at their top management - we have already seen some changes already in the 2nd largest IT company in India. Cogni and TCS seem to be growing well inspite of all the news about the world falling apart. Tech Mahindra is growing its non-BT business very rapidly in a sector where high debt is really killing the European and Indian telecom companies.

    I am not even going into the world of software products and apps that these companies could develop - not the big stuff that oracle, IBM, Microsoft or SAP sell but the cloud and 4g will open up vast opportunities for these players in building solutions and produces for the medium and small sector of the developing world. TCS has started it but it didnt go well.
    CommentQuote
  • Originally Posted by techynt
    I don't think the rent is going to keep on increasing. Currently there is an oversupply of housing, it’s just that it is too expensive for most end users. For rent to increase, salaries have to increase, which may happen once pay commission starts doling out to govt employess, but in pvt sector that’s going to be hard, because there may be too many unemployed people to take your job, so I don’t think you are going to ask for a raise.

    Even if rent increases, we are a long way from rent becoming equal to even 70% of EMI(home ownership will be worth 30% more payment). Currently EMI for a 50 lacs apt is around 50k, but rent will be around 10k.


    Most of the vacant inventory at least in north India is not inventory for renting but kept locked.

    Rents move up when the baseline bench mark which in Delhi is the lal dora 2 room set, moves up. It is related to inflation in an unbelical way because the small time landlords are dependent on the income and are prompt in changing the tenant for a 1000 Rs per month advantage.

    REst of the rent inflation feeds on the benchmark. In 2009 I used to discuss this with Wiseman and said rent will go up a lot.

    Right now, the rent which was 7000 per month for the bench mark is at 14000 per month = doubled in 4 years. Exactly as predicted and directly related to flat prices which have also doubled.

    Real inflation in rents will not be visible at your level because IT and middle class folks are not so prompt in raising the rent for 3BHK unlike the 2 room sets. There is a lag in rentals for middle class because landlords are more opportunistic people = speculator turned landlord rather than people dependent on rental income.

    Originally Posted by herohiralal
    Any CEO thinking about growth in terms of just number has already lost the battle. Like I have said in my post before IT today is an umbrella used for outsourcing of many kinds of job and not just IT.
    This is a fact of any business and so its not particular to just IT so lets keep this one out. This is the base on which any business is run. These 2 points always exist in every industry.



    Lets me take an example to explain what should be done. Take Coke or Mc Donalds and see what they have done. Great brands even 10-15 yrs ago. All of them had their key products - carbonated soft drink and burgers. Faced the same issue as IT is facing today. Their key offering was seeing too much competition and margins are under pressure. There is only so many burgers that a person can eat and anyone can mix soda and water and flavour and sell it as less than half the prices as coke (no one has been successful so far but that doesnt mean Coke should not prepare itself for that eventuality)

    So what do they do? Mc Donalds sells food. Already had tons of outlets and the supply chain in place with chefs and the whole army of people ready to serve. So it starts selling coffee and shake and breakfast and what not. Same supply chain needs slight modification, same outlets, new ads using the same trusted brand.

    What does Coke do? Goes and invests in fruit juice and water and everything that is liquid - may soon enter alchohol and beer for all we know - Coke already has plants which purify water. But Coke does not have outlets. Its strength is its relationship with big retail players so it launches new brands and gets shelf place in retail outlets like walmart, tesco and what not.

    So McD uses its same brand and same outlets but moves into different selling different kinds of food whereas Coke diversifies into the same sector - water + anything - to grow.

    What can a IT company do? use its supply chain - HR process to tap talent from colleges and its factories - vast amount of campuses connected to the globe and filled with amenities for employees - to move into other professional services. Indian colleges continue to produce armies of MBAs, HR execs, marketing, financial and legal professional,

    IT for the last 10-15 yr has been nothing but hiring cheap labour here in India and renting them to US or European clients and making profit on the difference between billing rate and cost of resource. Can this be done in offshoring of HR or finance departments of big MNC? Say for example Infosys says to Exxon. let us provide u HR or finance people who will sit in India and do all the low level tasks that you have people in Houston for? Can this also be done in marketing, legal, media, entertainment, food and then have a small army going after that holy grail - consulting.

    There are so many jobs that can be outsourced and off-shored that any IT company which cannot grow 10-15% for the next 7-10 yrs should look very hard at their top management - we have already seen some changes already in the 2nd largest IT company in India. Cogni and TCS seem to be growing well inspite of all the news about the world falling apart. Tech Mahindra is growing its non-BT business very rapidly in a sector where high debt is really killing the European and Indian telecom companies.

    I am not even going into the world of software products and apps that these companies could develop - not the big stuff that oracle, IBM, Microsoft or SAP sell but the cloud and 4g will open up vast opportunities for these players in building solutions and produces for the medium and small sector of the developing world. TCS has started it but it didnt go well.


    Good analysis.

    But a behemoth like Infosys or TCS will not be nimble enough to manage small groups of highly trained people - smaller start ups will overwhelm and outcompete the biggies who try to stray from their specialised domain.

    Managers of the IT biggies are not good enough to select manage and retain the kind of small specialised companies.

    Even if multiple small subsidiaries are seeded by the biggies, talent will see more benefit in working in small groups for themselves over working for a scrooge like Infosys. Working atmosphere and sense of freedom also matters a lot at higher levels.

    Poland, Russia, Israel, Ireland etc will be able to do this better - they have very talented programmers who are better than code coolies, but ready to work at Indian salary expectations.

    A lot of talent haemorrhage from India to more business conducive atmospheres like Singapore, Kuala Lampur, Shangai, Manila etc which have good law and order or even Western developed countries is also likely.

    Turning a car and turning a train are two different things.
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