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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  • Excellent information.
    But it has been difficult to make our people accept it.
    I have wandered in many small towns and rural areas especially in karnataka.There only those people who can afford have used solar panels for water heating and very few for lighting.Majority of people can't afford it and that is the problem.Further decrease in price and subsidy may help a lot.Longer sunlight areas are more here in central parts and Deccan plateau and it will help.There is still a long way to go.
    Good tidings.


    Originally Posted by frugality
    There's a lot of potential ... and price has to come down from here on

    Are we on the cusp of a solar energy boom? - The Week

    the patent growth shows ..
    Solar and wind innovation reflected in booming patents .

    India has lot of potential ..

    and certain desi endeavors are on
    Solar energy startups out to power rural India with cost-effective and less toxic solutions - Economic Times

    we are quiet slow in taking up new ideas ...

    except Oil giants don't like it.
    CommentQuote
  • Originally Posted by herohiralal
    TCS is hiring 50,000 resources this yr alone!! Initially had planned to hire 45K but increased that to 50K looking at the strong demand. And how many people are working in in TCS' campus in Hinjewadi? The building is not even complete yet. How many seats is Infosys building in Pune - 8K+. Cogni is building its new campus and look at the parking outside the DLF SEZ to get a feel of the no of people working in Hinjewadi. Its massive and its effects are seen in the surrounding areas.

    TCS plans to hire 5,000 employees more than initial target - The Economic Times


    TCS is hiring 50,000 resources this yr alone - Majority of them in Bangalore, Chennai, Indore :)

    How many seats is Infosys building in Pune - 8K+ - Infy not doing good. Very less hikes.

    Find out how many engineering graduates passed out in 2013 in MH and you will come to know most of them still searching for job. So bridge betweeen rich and middle class is increasing and will not be able to buy inflated 60 lacs flat in areas like wakad.

    Simple to understand but can be hard if one has lot of black money and want to increase profit by Rs 100 sq ft per month....
    CommentQuote
  • Home loan consumers, hoping for a respite from high monthly equated monthly installments (EMIs), will be disappointed after lenders said they will not cut their base rates following the Reserve Bank's decision to cut overnight rates on Monday. Base rate is the minimum rate at which banks can lend to customers. Home loans, mostly floating in nature, are tied to the base rate.

    SL Bansal, chairman and managing director of Oriental Bank of Commerce told NDTV, "It (the RBI's decision) will lower the cost of funds for banks and banks will be encouraged to give more concessions this festive season for retail loans... but there is no possibility of cutting base rates across the board."

    Here's why home loan consumers will continue to sweat under the burden of high EMIs as of now.

    What has the RBI done?

    The central bank on Monday cut the marginal standing facility (MSF) or overnight rate by 50 basis points to 9 per cent. It had last month cut the MSF rate by 75 basis points. The MSF is an emergency window through which banks borrow from the RBI using their statutory liquidity ratio securities as collateral.

    The RBI also said that it will provide additional liquidity to banks through repo windows. The rates for such funds will be auction-based.

    Why RBI cut MSF rate:

    In a growing economy like India, short term rates should be lesser than long term rates so that investors have an incentive to lock funds for longer term. The RBI's decision to hike MSF rates by 200 basis points in mid-July (to defend the rupee), however, upset India's yield curve. So, short terms rates rose over long term rates, making long term investment less attractive. To retain long term investors, banks were forced to hike deposit rates and as a result most lenders also increased their lending (base) rates. Hence, EMIs on home loans went up in August.

    ICICI Bank, India's largest private lender, raised its base rate by 25 basis points (0.25 per cent), while HDFC Bank hiked base rate by 20 basis points. State Bank of India, the country's biggest lender, had raised rates by 10 basis points.

    The two cuts in MSFs are aimed at restoring the primacy of long term rates over short term rates in markets. The cut in MSF also indicates that the RBI is becoming more comfortable about the currency and a bit more concerned about domestic liquidity conditions, Leif Eskesen of HSBS Global said in a statement.

    So, will home loan EMIs come down now?

    Unlikely. Home loan EMIs can come down only when long term rates come down. Long term rates are linked to the repo rate, which is the rate at which lenders borrow from the RBI. The central bank unexpectedly hiked repo rate by 25 basis points in September. Most analysts expect a similar hike in repo rate later this month because the new RBI governor Raghuram Rajan has set his sight on inflation.

    "We expect a 25 basis point repo rate hike at this meeting (October 29) as the RBI's nominal anchor appears to be (implicitly) shifting towards CPI (retail) inflation... and CPI inflation looks likely to remain elevated in the near term," Sonal Varma, India economist of global brokerage Nomura said.

    So, unless banks get a clear picture on the direction of repo rate (policy rate), the base rate may not go down. Besides, for banks to lower lending rates, they will have to cut deposit rates, which is unlikely unless short term rates and liquidity situation improves substantially

    Story first published on: October 08, 2013 13:03 (IST)

    Tags: home loan, EMIs, MSF rate, RBI
    CommentQuote
  • There could be some cheer for domestic IT companies such as Infosys and Wipro with the much-dreaded immigration Bill unlikely to become a law because of the US Government shutdown.

    With the continued standoff between the US Senate and the Congress which has kept the government offices there from working, chances of the Bill being passed by the House of Representatives are remote. Incidentally, the Senate has already passed the Bill. In case the Bill is not passed before this year-end, it is very unlikely that it will get passed next year because of the congressional elections in the US.

    Running out of time

    Kevin A Hassett, an US economist and a former policy consultant with the department of treasury, told Business Line in a telephonic interaction that legislators are running out of time as far as passing the Bill into an Act is concerned. “The problem is the US economy is not doing well and the Government shutdown has already added to the woes. Legislators have much less time for the immigration Bill,” Hassett said.

    Rajkamal Rao, a former director with consultancy firm, PwC who deals with immigration issues, said: “Can you imagine rubber stamping the Bill during an election year. It is not even there in the House calendar.”

    But Infosys CEO and Managing Director S.D. Shibulal said the company is on a “wait and watch” mode as far as immigration Bill is concerned.

    The Bill has already been passed by the US Senate and needs to be passed by the House of Representatives for it to become a law. The Bill seeks to increase costs for software service exporters and restricts placement of H-1B employees in the US.

    In his report on the Bill, Hassett says salary and reporting requirements have been tightened under the provisions of the Bill. Employers will be required to pay H-1B workers higher wages and advertise for the position on a special Web site set up by the Department of Labour.

    Employers will also have to give priority to Americans before turning to foreign workers in their recruiting process, Hassett, who was the adviser to presidential candidate for Mitt Romney in 2012 elections, said.

    Rao, who has authored a book on the immigration Bill, said in the order of priorities right now, the Bill stands last. If there is any possibility at all, then both the Senate and the House of Representatives have to agree on passing H-1B provisions separately but the President Barack Obama has repeatedly said that he is against piecemeal approach to the Bill.

    “The trust between the Republicans and the Democrats has been very, very low. For them to pass the Bill in which H-1B is a part will be a pure miracle,” he said.

    Disastrous for both

    Hassett, who served as a senior economist at the Board of Governors of the Federal Reserve System, said such provisions can be disastrous for both the US and Indian companies.

    He blamed the US politicians for trying to gain leverage from trying to push for such laws. He said it is wrong to suggest that immigrants have taken away jobs from the natives.

    “Immigrants not only contribute to the US economy through innovative ideas and scientific research, but also by starting new businesses and industries and creating new jobs for the natives,” he said in his report.

    giriprakash.k@thehindu.co.in

    “The problem is the US economy is not doing well and the Government shutdown has already added to the woes.” - Kevin A Hassett, US economist

    (This article was published in the Business Line print edition dated October 17, 2013)
    CommentQuote
  • Originally Posted by NCRTalk
    TCS is hiring 50,000 resources this yr alone - Majority of them in Bangalore, Chennai, Indore :)

    How many seats is Infosys building in Pune - 8K+ - Infy not doing good. Very less hikes.

    Find out how many engineering graduates passed out in 2013 in MH and you will come to know most of them still searching for job. So bridge betweeen rich and middle class is increasing and will not be able to buy inflated 60 lacs flat in areas like wakad.

    Simple to understand but can be hard if one has lot of black money and want to increase profit by Rs 100 sq ft per month....


    Have u been to Hinjewadi recently or are u just talking on the basis of newspaper articles? Go inside Infosys Phase 2 or inside the new TCS building or within the DLF SEZ and check and also visit TechM campus where is building a new wing and the big camus cogni is building. Your ability to gain access to all these campuses will tell us a lot of your involvement in this sector.

    Bridge between rich and poor will keep on going up but its the middle class that I am talking about in Hinjewadi. Its one thing to hope for a RE crash and another to check the facts and then make a investment decision.
    CommentQuote
  • Originally Posted by NCRTalk
    TCS is hiring 50,000 resources this yr alone - Majority of them in Bangalore, Chennai, Indore :)

    How many seats is Infosys building in Pune - 8K+ - Infy not doing good. Very less hikes.

    Find out how many engineering graduates passed out in 2013 in MH and you will come to know most of them still searching for job. So bridge betweeen rich and middle class is increasing and will not be able to buy inflated 60 lacs flat in areas like wakad.

    Simple to understand but can be hard if one has lot of black money and want to increase profit by Rs 100 sq ft per month....


    IT is booming. US and Europe demand is very strong. Salaries will not grow at the rate they have grown in 2003-08 era but IT will still be a good paymaster. Maan village near Hinjewadi Phase 3 is also in play with Pawar visiting it recently. Dont bet against hinjewadi and the neighboring areas.

    Infosys to hire over 8,000 new employees in Pune in six months - The Economic Times

    nanafadnavis.blogspot.com/ or @NanaFadna
    CommentQuote
  • Macro economists in India perceive gold as a wasteful asset and as the villain of the Indian economy.

    But gold has repeatedly emerged as the winner against economists, confounded their theories and perplexed them. (Gold: villain or saviour? Business Line, October 4, 2013). The unwavering Indian attitude to gold through history should persuade our economists to rethink their views on gold, particularly in the case of India.

    Theories of economics which the world had trusted for the last few decades are in state of flux ( The Economist , July 8, 2009). Bradford Delong, a respected economist, said that the discipline of economics itself is in crisis ( Economic Times, May 12, 2011).

    In its editorial on the 2013 Nobel Prize winners Eugene F. Fama and Robert J. Shiller, who hold divergent views on asset price economics, Business Line rightly observed that “It is a reminder that economics, which is about human behaviour, is not an exact science and hence not governed by immutable laws.”

    The assertion of economists that economic laws are universal in their application has been heavily questioned by the 2008 meltdown.

    If economic laws are not immutable, why should the economic theories on gold alone be regarded as immutable? Gold obeys economists in the West. But in India it does not. Why?

    Gold rush of the West

    The role that gold plays in Western economics — it plays no role in western society — is vastly different from the role it plays in Indian society and economy.

    In India, the bride is first married to gold, then to the bridegroom. Even the poorest of the poor buys gold for marriage, and every Indian home has a full sovereign or half.

    Indians of all religious persuasions propitiate and decorate their Gods and temples with gold — be it the Tirupati Temple or Golden Temple, or the Jam’at-Khanah mosque in Agra, or Namdrolling Buddhist Monastery Karnataka or the Jain Temples at Ajmer or Falna.

    There is no distinction of caste or religion in gold habits. It does not need a historian to say that India’s hostile policies on gold have not yielded results.

    And it does not need a seer to confirm that gold in India cannot be handled on western paradigm on gold, particularly the US. See the difference between the history and paradigm of gold in the West and in India.

    While gold was the greatest attraction for all nations and peoples, the Westerners fought wars and killed thousands in mad pursuit of gold. The infamous California Gold Rush, which began on January 24, 1848, brought some 300,000 people to California from the rest of the US and the world. It was marked by duels, murders in broad daylight, public hangings and jail breakouts.

    Thousands of Californian Indians were killed in the war to loot and defend gold. The gold in the West was always asset of the mighty elites, rulers and buccaneers. It was not the pursuit or possession of the ordinary Westerner.

    Through trade, culture

    Even as the pursuit of gold by the West was marked by crime, Indians, in contrast, earned every ounce of their gold stocks through trade.

    They stocked gold and preserved it for generations through millennia as not just an asset but as sacred inheritance — as Lakshmi, the Goddess of Wealth.

    See how Indians earned gold — very little of which India ever produced. Rajeev H Dehejia and Vivek H Dehejia say in their research titled “Religion and economic activity in India: Historical perspective” ( American Journal of Economics and Sociology , April 1993) that the Mauryan empire (325-185 BCE) built wealth by export-led growth model like contemporary newly industrialised countries.

    The authors cited evidence of how the booming export trade was found in the records of the Roman Senate where Pliny, a historian and writer, and the Emperor Tiberius complained about the huge drain of Roman gold to India.

    Marco Polo’s travelogue also speaks about huge gold stocks of India in the 13th century.

    A more recent Bank of International Settlement Annual Report of 1934-35 says that India’s gold absorption was 14 per cent world’s gold supplies during the period 1493 to 1930. That is, for four centuries India must have run 14 per cent of the world’s trade surplus.

    Researches of Paul Bairoch (1983) and Angus Maddison (2001), which proved that for almost 16 of the 17 centuries, India ranked world first in GDP and for two centuries India was second only to China, corroborated the historic records.

    India’s gold stock, estimated at 20,000 tonnes on the lowest side and 40,000 tonnes on the higher side, was built by trade and culture — not by war or bloodshed. And a large part of this gold stock — estimated at 70 per cent — is with the ordinary people in villages.

    Here is an interesting comparison of the recent history of gold in US and India. In the wake of the Great Depression of 1930s, US President Franklin Roosevelt outlawed private possession of gold in 1936, nationalised gold and turned into a state asset.

    The US later built gold stocks of over 20,000 tonnes by 1950. It is that huge gold stock which made the US a global economic power when the Bretton Woods meet accepted the US gold-backed Dollar as global reserve currency.

    While the coercive state turned gold into a state asset, with the gold proscribed in 1936, Americans took to banks and property to invest their savings.

    When private possession of gold was allowed in the US in 1976, people who had picked up stock habits, had forgotten gold.

    The share of stocks in household savings in the US rose from 17 per cent in 1953 to 35 per cent in 1968 and then it fell to 15 per cent in 1974. But when it fell Americans rushed to deposit their monies in banks.

    But later the share of stocks picked up and doubled from 17 per cent in 1980 to 34 per cent in 1998. The equity index rose by ten times between 1980 and 1998. So did the real estate index. The share of real estate in US households rose from $2.5 trillion in 1980 to $12 trillion in 1998 and stocks from $3 trillion to $14 trillion — the two accounting for 2/3 of the total savings. .

    By 1998, 58 per cent of US households had held stocks. It rose to 67 per cent in 2002.

    Gold as savings

    But in India, the picture is very different. Indian rulers tried the US model in India when they virtually began war against gold, particularly from 1960s, and almost proscribed private gold.

    But the Indian state failed where the US government succeeded, why? Because gold in India was as much a cultural phenomenon as an economic asset. In the US it was just an issue of economics.

    According to Central Statistical Organisation (CSO) gold and real estate is two thirds of the total households savings, which accounts for over 72 per cent of domestic savings. But only a fraction of household savings gets into stocks. This is despite tax breaks for investment in stocks and despite the stock index rising by four times since 2001. Only 3 per cent of household savings gets into stocks.

    As rightly observed by Aseem Chawla, Partner, MPC Legal ( Business Line, March 1, 2013), Indians are creatures of habits; they save a third of their earning — a phenomenon probably explained by “our cultural values rooted in conservatism” and household savings which constitute large chunk of national savings are normally invested in “safe yet non-productive investments like gold.”

    While gold is just 3 per cent of the household savings in the West, it is estimated at over a third of the savings in India.

    Here is an interesting (but unpublished) study which shows that there is no difference between illiterate villagers and educated savers in how they view gold or stocks.

    P. Kanagasabapathi, an academic with Indian perspective, conducted three studies in Coimbatore regarding the saving/investment preferences of (i) teachers and doctors (ii) businessmen, professionals and bank officials (iii) women academicians specialised in and teaching finance related courses in reputed colleges for the commerce and management students.

    The studies show that, of the ten investment options given, after bank deposits and post-office instruments, gold was the third with 30 per cent opting for it. Stocks come last out of the ten investment options and chit funds came ahead of stocks and bonds.

    This Coimbatore study result matches with the analysis in Global Economic Paper No 187 of Goldman Sachs (October 2010) which also said that only 6 per cent of Indian savings get into stocks.

    Kanagasabapathi’s study showed that finance professors pontificate to the students in the class not to buy gold but invest in stocks, but in the evening they are themselves in Thangamaligai — precisely like our ministers, and even economic writers, do!

    Indians not just love gold. They revere it. Their reverence for gold manifests itself during Danteras and Akshaya Tritiya — the auspicious days for buying gold.

    The lesson: economics cannot change people. It has to change itself.

    The US is wedded to stocks and India to gold. India’s policymakers would be wrong to believe that they can break an age-old tradition.

    (This article was published in the Business Line print edition dated October 18, 2013).

    By 1998, 58 per cent of US households had held stocks. It rose to 67 per cent in 2002.

    Gold as savings

    But in India, the picture is very different. Indian rulers tried the US model in India when they virtually began war against gold, particularly from 1960s, and almost proscribed private gold.

    But the Indian state failed where the US government succeeded, why? Because gold in India was as much a cultural phenomenon as an economic asset. In the US it was just an issue of economics.

    According to Central Statistical Organisation (CSO) gold and real estate is two thirds of the total households savings, which accounts for over 72 per cent of domestic savings. But only a fraction of household savings gets into stocks. This is despite tax breaks for investment in stocks and despite the stock index rising by four times since 2001. Only 3 per cent of household savings gets into stocks.

    As rightly observed by Aseem Chawla, Partner, MPC Legal ( Business Line, March 1, 2013), Indians are creatures of habits; they save a third of their earning — a phenomenon probably explained by “our cultural values rooted in conservatism” and household savings which constitute large chunk of national savings are normally invested in “safe yet non-productive investments like gold.”

    While gold is just 3 per cent of the household savings in the West, it is estimated at over a third of the savings in India.

    Here is an interesting (but unpublished) study which shows that there is no difference between illiterate villagers and educated savers in how they view gold or stocks.

    P. Kanagasabapathi, an academic with Indian perspective, conducted three studies in Coimbatore regarding the saving/investment preferences of (i) teachers and doctors (ii) businessmen, professionals and bank officials (iii) women academicians specialised in and teaching finance related courses in reputed colleges for the commerce and management students.

    The studies show that, of the ten investment options given, after bank deposits and post-office instruments, gold was the third with 30 per cent opting for it. Stocks come last out of the ten investment options and chit funds came ahead of stocks and bonds.

    This Coimbatore study result matches with the analysis in Global Economic Paper No 187 of Goldman Sachs (October 2010) which also said that only 6 per cent of Indian savings get into stocks.

    Kanagasabapathi’s study showed that finance professors pontificate to the students in the class not to buy gold but invest in stocks, but in the evening they are themselves in Thangamaligai — precisely like our ministers, and even economic writers, do!

    Indians not just love gold. They revere it. Their reverence for gold manifests itself during Danteras and Akshaya Tritiya — the auspicious days for buying gold.

    The lesson: economics cannot change people. It has to change itself.

    The US is wedded to stocks and India to gold. India’s policymakers would be wrong to believe that they can break an age-old tradition.

    (This article was published in the Business Line print edition dated October 18, 2013)
    CommentQuote
  • Originally Posted by herohiralal
    IT is booming. US and Europe demand is very strong. Salaries will not grow at the rate they have grown in 2003-08 era but IT will still be a good paymaster. Maan village near Hinjewadi Phase 3 is also in play with Pawar visiting it recently. Dont bet against hinjewadi and the neighboring areas.

    Infosys to hire over 8,000 new employees in Pune in six months - The Economic Times

    nanafadnavis.blogspot.com/ or @NanaFadna


    Hero,

    I wonder how a few thousand hired by a few companies can make or break India's economic condition. Is it really the case ?

    TCS is a stingy payer. Very very stingy. Infy is still having cost cutting by customers (this is real data, not meant to sound like bear but real data). Macro picture presented in company results does not reveal ground level realities as numbers are meant to meet some targets.


    Rupee going down the drain is not a sign of bad economy ? Or will Re keep getting depreciated to keep things going (more importantly, Pune and Hinjewadi RE) ? So people buy houses with lifelong debt and buy automobiles with hope of salaried jobs ?

    Is India's economic vision so short sighted ? Or is this THE way Indian economy is ?
    CommentQuote
  • Originally Posted by herohiralal
    IT is booming. US and Europe demand is very strong. Salaries will not grow at the rate they have grown in 2003-08 era but IT will still be a good paymaster. Maan village near Hinjewadi Phase 3 is also in play with Pawar visiting it recently. Dont bet against hinjewadi and the neighboring areas.

    Infosys to hire over 8,000 new employees in Pune in six months - The Economic Times

    nanafadnavis.blogspot.com/ or @NanaFadna


    More than the effect this will have on our economy I am worried about the Hinjewadi traffic which is worsening everyday with no respite in sight...
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  • Originally Posted by rambler
    Macro economists in India perceive gold as a wasteful asset and as the villain of the Indian economy.

    But gold has repeatedly emerged as the winner against economists, confounded their theories and perplexed them. (Gold: villain or saviour? Business Line, October 4, 2013). The unwavering Indian attitude to gold through history should persuade our economists to rethink their views on gold, particularly in the case of India.

    Theories of economics which the world had trusted for the last few decades are in state of flux ( The Economist , July 8, 2009). Bradford Delong, a respected economist, said that the discipline of economics itself is in crisis ( Economic Times, May 12, 2011).

    In its editorial on the 2013 Nobel Prize winners Eugene F. Fama and Robert J. Shiller, who hold divergent views on asset price economics, Business Line rightly observed that “It is a reminder that economics, which is about human behaviour, is not an exact science and hence not governed by immutable laws.”

    The assertion of economists that economic laws are universal in their application has been heavily questioned by the 2008 meltdown.

    If economic laws are not immutable, why should the economic theories on gold alone be regarded as immutable? Gold obeys economists in the West. But in India it does not. Why?

    Gold rush of the West

    The role that gold plays in Western economics — it plays no role in western society — is vastly different from the role it plays in Indian society and economy.

    In India, the bride is first married to gold, then to the bridegroom. Even the poorest of the poor buys gold for marriage, and every Indian home has a full sovereign or half.

    Indians of all religious persuasions propitiate and decorate their Gods and temples with gold — be it the Tirupati Temple or Golden Temple, or the Jam’at-Khanah mosque in Agra, or Namdrolling Buddhist Monastery Karnataka or the Jain Temples at Ajmer or Falna.

    There is no distinction of caste or religion in gold habits. It does not need a historian to say that India’s hostile policies on gold have not yielded results.

    And it does not need a seer to confirm that gold in India cannot be handled on western paradigm on gold, particularly the US. See the difference between the history and paradigm of gold in the West and in India.

    While gold was the greatest attraction for all nations and peoples, the Westerners fought wars and killed thousands in mad pursuit of gold. The infamous California Gold Rush, which began on January 24, 1848, brought some 300,000 people to California from the rest of the US and the world. It was marked by duels, murders in broad daylight, public hangings and jail breakouts.

    Thousands of Californian Indians were killed in the war to loot and defend gold. The gold in the West was always asset of the mighty elites, rulers and buccaneers. It was not the pursuit or possession of the ordinary Westerner.

    Through trade, culture

    Even as the pursuit of gold by the West was marked by crime, Indians, in contrast, earned every ounce of their gold stocks through trade.

    They stocked gold and preserved it for generations through millennia as not just an asset but as sacred inheritance — as Lakshmi, the Goddess of Wealth.

    See how Indians earned gold — very little of which India ever produced. Rajeev H Dehejia and Vivek H Dehejia say in their research titled “Religion and economic activity in India: Historical perspective” ( American Journal of Economics and Sociology , April 1993) that the Mauryan empire (325-185 BCE) built wealth by export-led growth model like contemporary newly industrialised countries.

    The authors cited evidence of how the booming export trade was found in the records of the Roman Senate where Pliny, a historian and writer, and the Emperor Tiberius complained about the huge drain of Roman gold to India.

    Marco Polo’s travelogue also speaks about huge gold stocks of India in the 13th century.

    A more recent Bank of International Settlement Annual Report of 1934-35 says that India’s gold absorption was 14 per cent world’s gold supplies during the period 1493 to 1930. That is, for four centuries India must have run 14 per cent of the world’s trade surplus.

    Researches of Paul Bairoch (1983) and Angus Maddison (2001), which proved that for almost 16 of the 17 centuries, India ranked world first in GDP and for two centuries India was second only to China, corroborated the historic records.

    India’s gold stock, estimated at 20,000 tonnes on the lowest side and 40,000 tonnes on the higher side, was built by trade and culture — not by war or bloodshed. And a large part of this gold stock — estimated at 70 per cent — is with the ordinary people in villages.

    Here is an interesting comparison of the recent history of gold in US and India. In the wake of the Great Depression of 1930s, US President Franklin Roosevelt outlawed private possession of gold in 1936, nationalised gold and turned into a state asset.

    The US later built gold stocks of over 20,000 tonnes by 1950. It is that huge gold stock which made the US a global economic power when the Bretton Woods meet accepted the US gold-backed Dollar as global reserve currency.

    While the coercive state turned gold into a state asset, with the gold proscribed in 1936, Americans took to banks and property to invest their savings.

    When private possession of gold was allowed in the US in 1976, people who had picked up stock habits, had forgotten gold.

    The share of stocks in household savings in the US rose from 17 per cent in 1953 to 35 per cent in 1968 and then it fell to 15 per cent in 1974. But when it fell Americans rushed to deposit their monies in banks.

    But later the share of stocks picked up and doubled from 17 per cent in 1980 to 34 per cent in 1998. The equity index rose by ten times between 1980 and 1998. So did the real estate index. The share of real estate in US households rose from $2.5 trillion in 1980 to $12 trillion in 1998 and stocks from $3 trillion to $14 trillion — the two accounting for 2/3 of the total savings. .

    By 1998, 58 per cent of US households had held stocks. It rose to 67 per cent in 2002.

    Gold as savings

    But in India, the picture is very different. Indian rulers tried the US model in India when they virtually began war against gold, particularly from 1960s, and almost proscribed private gold.

    But the Indian state failed where the US government succeeded, why? Because gold in India was as much a cultural phenomenon as an economic asset. In the US it was just an issue of economics.

    According to Central Statistical Organisation (CSO) gold and real estate is two thirds of the total households savings, which accounts for over 72 per cent of domestic savings. But only a fraction of household savings gets into stocks. This is despite tax breaks for investment in stocks and despite the stock index rising by four times since 2001. Only 3 per cent of household savings gets into stocks.

    As rightly observed by Aseem Chawla, Partner, MPC Legal ( Business Line, March 1, 2013), Indians are creatures of habits; they save a third of their earning — a phenomenon probably explained by “our cultural values rooted in conservatism” and household savings which constitute large chunk of national savings are normally invested in “safe yet non-productive investments like gold.”

    While gold is just 3 per cent of the household savings in the West, it is estimated at over a third of the savings in India.

    Here is an interesting (but unpublished) study which shows that there is no difference between illiterate villagers and educated savers in how they view gold or stocks.

    P. Kanagasabapathi, an academic with Indian perspective, conducted three studies in Coimbatore regarding the saving/investment preferences of (i) teachers and doctors (ii) businessmen, professionals and bank officials (iii) women academicians specialised in and teaching finance related courses in reputed colleges for the commerce and management students.

    The studies show that, of the ten investment options given, after bank deposits and post-office instruments, gold was the third with 30 per cent opting for it. Stocks come last out of the ten investment options and chit funds came ahead of stocks and bonds.

    This Coimbatore study result matches with the analysis in Global Economic Paper No 187 of Goldman Sachs (October 2010) which also said that only 6 per cent of Indian savings get into stocks.

    Kanagasabapathi’s study showed that finance professors pontificate to the students in the class not to buy gold but invest in stocks, but in the evening they are themselves in Thangamaligai — precisely like our ministers, and even economic writers, do!

    Indians not just love gold. They revere it. Their reverence for gold manifests itself during Danteras and Akshaya Tritiya — the auspicious days for buying gold.

    The lesson: economics cannot change people. It has to change itself.

    The US is wedded to stocks and India to gold. India’s policymakers would be wrong to believe that they can break an age-old tradition.

    (This article was published in the Business Line print edition dated October 18, 2013)

    I now believe world gold prices are driven by the Indian hunger for gold rather than any utility value.
    We slog for the world , sell our best resources and talent and products and buy gold in return.

    But even if we stop buying ridiculous amounts of gold.... why does it have so much value?
    How many currencies in the world are backed by gold? China is buying more gold than anyone. Why?
    In olden days money was gold itself. Then paper backed by gold. What is money now.... the willingness of Central banks to print money?

    Disclaimer I myself own some gold and do invest once a year. I am just trying to get the picture.

    Edit - another thought. what is money itself to the central bank. The one who can print money at will? But cannot produce gold at will.

    I now believe world gold prices are driven by the Indian hunger for gold rather than any utility value.
    We slog for the world , sell our best resources and talent and products and buy gold in return.

    But even if we stop buying ridiculous amounts of gold.... why does it have so much value?
    How many currencies in the world are backed by gold? China is buying more gold than anyone. Why?
    In olden days money was gold itself. Then paper backed by gold. What is money now.... the willingness of Central banks to print money?

    Disclaimer I myself own some gold and do invest once a year. I am just trying to get the picture.

    Edit - another thought. what is money itself to the central bank. The one who can print money at will? But cannot produce gold at will.

    I now believe world gold prices are driven by the Indian hunger for gold rather than any utility value.
    We slog for the world , sell our best resources and talent and products and buy gold in return.

    But even if we stop buying ridiculous amounts of gold.... why does it have so much value?
    How many currencies in the world are backed by gold? China is buying more gold than anyone. Why?
    In olden days money was gold itself. Then paper backed by gold. What is money now.... the willingness of Central banks to print money?

    Disclaimer I myself own some gold and do invest once a year. I am just trying to get the picture.

    Edit - another thought. what is money itself to the central bank. The one who can print money at will? But cannot produce gold at will.

    I now believe world gold prices are driven by the Indian hunger for gold rather than any utility value.
    We slog for the world , sell our best resources and talent and products and buy gold in return.

    But even if we stop buying ridiculous amounts of gold.... why does it have so much value?
    How many currencies in the world are backed by gold? China is buying more gold than anyone. Why?
    In olden days money was gold itself. Then paper backed by gold. What is money now.... the willingness of Central banks to print money?

    Disclaimer I myself own some gold and do invest once a year. I am just trying to get the picture.

    Edit - another thought. what is money itself to the central bank. The one who can print money at will? But cannot produce gold at will.
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  • Originally Posted by McLordGanj
    RE deals this navratras have been much less than 'Shraadh' period last year. This is true for NCR, Mumbai and Pune. Can't say about banglore but situation there also is pretty bad now

    No wonder then several RE projects work has been almost stalled. Hardly handful of labourers seen around. Some medium sized builders are not even pushing for approvals from PMC/PCMC like they used to do earlier. Infact, the chaps sitting in PMC/PCMC who used to earn a lot from builders for plan sanctioning, TDR etc. are also facing big recession in under-table income :D. This info I got from PMC chap.
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  • Originally Posted by herohiralal
    IT is booming. US and Europe demand is very strong. Salaries will not grow at the rate they have grown in 2003-08 era but IT will still be a good paymaster. Maan village near Hinjewadi Phase 3 is also in play with Pawar visiting it recently. Dont bet against hinjewadi and the neighboring areas.

    And will these 8000 PROPOSED EMPLOYEES buy in Pune or afford to buy in Pune ?
    And man, if you think only Hinjewadi is what drives RE in Pune, you should be shocked, if you see how volatile their working atmosphere now has become. Rather than PROPOSED employees, look at current inventory with builders : total no. of ITGs (even if we consider all ITGs will buy flat in Pune).

    Btw, what will be the basic salary of these 8k employees ? 20L/annum ?
    CommentQuote
  • Originally Posted by herohiralal
    IT is booming. US and Europe demand is very strong. Salaries will not grow at the rate they have grown in 2003-08 era but IT will still be a good paymaster. Maan village near Hinjewadi Phase 3 is also in play with Pawar visiting it recently. Dont bet against hinjewadi and the neighboring areas.

    Infosys to hire over 8,000 new employees in Pune in six months - The Economic Times

    nanafadnavis.blogspot.com/ or @NanaFadna

    In 2001, over 6 lakh IT employees were recruited per year throughout India. In 2009 less than 3 lakh employees were recruited. In 2013 , less than 1.5 lakh it employees were recruited . Going forward even this growth rate will be doubtful. With stagnant salaries, I am not sure how can we say that IT is booming.
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  • Builders lure buyers with festival season goodies

    With no takers for nearly 6 lakh homes around the country - according to property research firm Liases Foras - and new projects still being launched, desperate builders are dangling festive season goodies to lure more buyers. Half of home sales every year happen during the three festival months.

    Waiver of stamp duty, registration fees, broker or agent's bills, a foreign trip to celebrate your new house, a sedan, air conditioners, furnishings and modular kitchens, worth several lakhs are all on offer. Two out of every three builders is offering a discount or a freebie.

    Builders lure buyers with festival season goodies - The Times of India

    Also read this one :-

    India has lost confidence of the world: Ratan Tata

    With the economy in distress, leading industrialist Ratan Tata has said India has lost the confidence of the world and the government has been slow to recognise it.

    India has lost confidence of the world: Ratan Tata - The Hindu
    CommentQuote
  • Originally Posted by realacres
    With no takers for nearly 6 lakh homes around the country - according to property research firm Liases Foras - and new projects still being launched, desperate builders are dangling festive season goodies to lure more buyers. Half of home sales every year happen during the three festival months.

    Waiver of stamp duty, registration fees, broker or agent's bills, a foreign trip to celebrate your new house, a sedan, air conditioners, furnishings and modular kitchens, worth several lakhs are all on offer. Two out of every three builders is offering a discount or a freebie.

    Builders lure buyers with festival season goodies - The Times of India



    Hira bhai will probably introduce his fresher's renting theory and reverse price trends in these 22 cities ;)

    "Twenty two cities witnessed a decline in home prices in the April to June quarter, according to Residex, National Housing Bank's housing index. Prices are expected to fall further, says NHB chairman RV Verma. "Developers are now willing to take a haircut on their margins," he told ET last month"
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