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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    The answer always lies within the question!

    Originally posted by neerajbans View Post
    If domestic saving is more than 30% of GDP & only 30% of population has achieved middle class wealth, I am not sure why will the consumption go down.
    The slowdown in economy rather gives a breather to most of the companies & households to balance the books.

    I do agree about Investment outpacing the consumption but predicting doomsday, every other day for past 4 years and still continuing with blind eye is a little too much my friend & that too for a conservatory country like India.

    Gross Domestic Saving (GDS) = GDP - Final Consumption Expenditure (total Consumption)

    Let us not complicate issues with Domestic Capital Investments (which is contributed to from GDS and foreign inflows). Let us stick only to what you have brought up.

    As you can see, GDS and total consumption are INVERSELY related. GDP being constant, if Savings goes UP, consumption goes DOWN (sounds common-sensical). But high GDP growth in recent years has seen the Aam Indian not only raise consumption but also simultaneously raise Gross Savings as well.

    Well, as the rest of the world is slowing down and entering a Double-Dip recession (which could easily slide into a depression because this double-dip has been AFTER pumping in TRILLIONS of Stimulus money created out of nothing by all countries from US to EU to China and India as well), the problem becomes GDP growth.

    We have seen GDP growth come down from targeted 9% to targeted 6% this year. If global situation becomes dire (as it is fairly apparent by now), I do not see why it cannot go down to 5% or even 3-4% from here. As far as I'm concerned, there is a lot of scope for it to go down over the next few years as ALL those trillions start vanishing from the system.

    Second, (correct me if I'm wrong) I think the GDS figure is not adjusted for inflation. The rupee has been constantly going down (40 in 2007 to 56 now against the dollar - 40% in 5 years, and 9500 in 2007 to 30000 in 2012 in terms of gold, thats an even more impressive 215%). As you have said in the other post, the rupee in your hand now does not have the same purchasing power as it had in 2007 and will have much less as you go forward.

    While you may be right about the frequency of my posts being too much , I still think we are on an unsustainable path with relation to consumption and savings - as per your selection of parameters.

    Going forward, its a no brainer that sometime (sooner rather than later) all of this is going to unravel (nothing to do with us but with the rest of the world, who, incidentally contribute to a huge portion of your Foreign Exchange reserves, which keeps India's trade with other countries going as well as adds investments into the country from which future consumption and savings come).

    If we do have GDP growth rate contraction and a dip in confidence, this will encourage aam admi to save more (perhaps in gold), which will lead to serious contraction in consumption.

    Add unsustainable debt burden on most Indians with a home and fancy car and its not too difficult to imagine distress among a substantial portion of the population with those debts and therefore a serious contraction in consumption - especially in those fancy, high-price items.

    I read a report around an year ago that concluded that around 96% of Indians (Urban) did not have even 6 months living expenses stashed away. One more issue is that the a large majority of the 30% "middle-class" fall into this "paycheck-to-paycheck-existence" category and the Gross Savings is hugely skewed and not evenly distributed amongst all of us.

    You may well expect fairly significant contraction in consumption of all kinds (except food and other essential articles, which even may contract in conspicuous consumption - Rs 1000 per head dinners! ).

    Thank you for bringing up your points as it has led to more clarity in my own head about the details of how and why we should lookout for the slowdown. I will now start watching consumption data in these categories to see how the nation is faring.

    cheers
    Last edited by wiseman; August 8 2012, 01:36 PM.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by neerajbans View Post
      The slowdown in economy rather gives a breather to most of the companies & households to balance the books.
      Exactly, it gives breather to corporates & aam aadmi to re-balance their books. But practically, how to they balance it ? Just think about it..

      Aam Admi:
      By reducing non-essential expenditure (foot travellers stick to their buses instead of buying bike, bikers stick to their bikes instead of going for car, diwali expenses curtailed to only sweets, new home furnishings postponed for next year - you can have n number of such examples).

      And focussing only on essential expenses (grocessries, medicare, education etc.).

      Corporates:
      Companies that deal in non-essential items then further rebalance it by reducing/fogetting bonus/increments, no new additions to manufacturing, reducing employee benefits etc.

      Thus employees (aam aadmi) earns lesser which further leads to constrained demand. Add to this rising unemployment and depreciating rupee, you get a perfect DOMINO-EFFECT....
      The knowledge of what to do in a Recession or Boom is more important than predicting a Recession or Boom.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by bhuvang View Post
        Exactly, it gives breather to corporates & aam aadmi to re-balance their books. But practically, how to they balance it ? Just think about it..

        Aam Admi:
        By reducing non-essential expenditure (foot travellers stick to their buses instead of buying bike, bikers stick to their bikes instead of going for car, diwali expenses curtailed to only sweets, new home furnishings postponed for next year - you can have n number of such examples).

        And focussing only on essential expenses (grocessries, medicare, education etc.).

        Corporates:
        Companies that deal in non-essential items then further rebalance it by reducing/fogetting bonus/increments, no new additions to manufacturing, reducing employee benefits etc.

        Thus employees (aam aadmi) earns lesser which further leads to constrained demand. Add to this rising unemployment and depreciating rupee, you get a perfect DOMINO-EFFECT....

        Dont forget companies stop fresh hiring and make do with squeezing more work out of existing employees.

        A very pernicious effect
        Venky (Please read watch a or before posting)

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Sorry but I disagree Wiseman.

          GDP = Consumption + Saving + Investment

          Given the GDP is constant, it's the investment which has taken the biggest hit than the savings. India traditionally is a country which saves, even if we have to cut down on consumption.

          Given our consumption story, ideally we should have been least affected by the global slowdown. However, the culprit had been high oil prices and inability of govt. to pass them on thus raising subsidies & hence the CAD (reason for rupee depreciation) and a huge investment in public welfare schemes raising inflation (this could have better managed by implementing various schemes in a more elongated time period).
          Even if the govt. is really humane and wanted to implement all such schemes it could have balanced the books with some reforms to increase income & increase outside investments which unfortunately it didn't.

          The above has caused investments both at home & from abroad to slow down resulting in the gdp growth to come down.

          Fundamentals still remains the same for our economy & couple of push from the government will bring the GDP growth back within the 7-8% zone.

          In terms of middle class people living their life from paycheck to paycheck, I don't agree again. India's poor are not in the position to save anything. The entire gross savings is build on the back of Middle Class savings.

          I hope we do manage to bring in Modi in 2014 and I am sure we all will see investors coming back.

          Regarding Fed & ECB pumping in money, I am not sure why the house is so much against it. Fed did manage to save America from recession through QE and bring in back to growth. By taking debt off from companies & individuals book and shifting it back to Fed makes it easier for the earliers to invest back in economy and same thing happened. It's the ECB which spoiled the party by not buying the Govt. debt directly and letting sentiments fall down to such levels.
          Also, I read in some of the posts about inflation. The money printing has not added to inflation but rather saved the world from deflation with investments turning negative in most of the developed economies.

          Cheers!



          Originally posted by wiseman View Post
          Gross Domestic Saving (GDS) = GDP - Final Consumption Expenditure (total Consumption)

          Let us not complicate issues with Domestic Capital Investments (which is contributed to from GDS and foreign inflows). Let us stick only to what you have brought up.

          As you can see, GDS and total consumption are INVERSELY related. GDP being constant, if Savings goes UP, consumption goes DOWN (sounds common-sensical). But high GDP growth in recent years has seen the Aam Indian not only raise consumption but also simultaneously raise Gross Savings as well.

          Well, as the rest of the world is slowing down and entering a Double-Dip recession (which could easily slide into a depression because this double-dip has been AFTER pumping in TRILLIONS of Stimulus money created out of nothing by all countries from US to EU to China and India as well), the problem becomes GDP growth.

          We have seen GDP growth come down from targeted 9% to targeted 6% this year. If global situation becomes dire (as it is fairly apparent by now), I do not see why it cannot go down to 5% or even 3-4% from here. As far as I'm concerned, there is a lot of scope for it to go down over the next few years as ALL those trillions start vanishing from the system.

          Second, (correct me if I'm wrong) I think the GDS figure is not adjusted for inflation. The rupee has been constantly going down (40 in 2007 to 56 now against the dollar - 40% in 5 years, and 9500 in 2007 to 30000 in 2012 in terms of gold, thats an even more impressive 215%). As you have said in the other post, the rupee in your hand now does not have the same purchasing power as it had in 2007 and will have much less as you go forward.

          While you may be right about the frequency of my posts being too much , I still think we are on an unsustainable path with relation to consumption and savings - as per your selection of parameters.

          Going forward, its a no brainer that sometime (sooner rather than later) all of this is going to unravel (nothing to do with us but with the rest of the world, who, incidentally contribute to a huge portion of your Foreign Exchange reserves, which keeps India's trade with other countries going as well as adds investments into the country from which future consumption and savings come).

          If we do have GDP growth rate contraction and a dip in confidence, this will encourage aam admi to save more (perhaps in gold), which will lead to serious contraction in consumption.

          Add unsustainable debt burden on most Indians with a home and fancy car and its not too difficult to imagine distress among a substantial portion of the population with those debts and therefore a serious contraction in consumption - especially in those fancy, high-price items.

          I read a report around an year ago that concluded that around 96% of Indians (Urban) did not have even 6 months living expenses stashed away. One more issue is that the a large majority of the 30% "middle-class" fall into this "paycheck-to-paycheck-existence" category and the Gross Savings is hugely skewed and not evenly distributed amongst all of us.

          You may well expect fairly significant contraction in consumption of all kinds (except food and other essential articles, which even may contract in conspicuous consumption - Rs 1000 per head dinners! ).

          Thank you for bringing up your points as it has led to more clarity in my own head about the details of how and why we should lookout for the slowdown. I will now start watching consumption data in these categories to see how the nation is faring.

          cheers

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Could you please cite some references?

            Originally posted by neerajbans View Post
            Sorry but I disagree Wiseman.

            GDP = Consumption + Saving + Investment

            Given the GDP is constant, it's the investment which has taken the biggest hit than the savings. India traditionally is a country which saves, even if we have to cut down on consumption.

            Given our consumption story, ideally we should have been least affected by the global slowdown. However, the culprit had been high oil prices and inability of govt. to pass them on thus raising subsidies & hence the CAD (reason for rupee depreciation) and a huge investment in public welfare schemes raising inflation (this could have better managed by implementing various schemes in a more elongated time period).
            Even if the govt. is really humane and wanted to implement all such schemes it could have balanced the books with some reforms to increase income & increase outside investments which unfortunately it didn't.

            The above has caused investments both at home & from abroad to slow down resulting in the gdp growth to come down.

            Fundamentals still remains the same for our economy & couple of push from the government will bring the GDP growth back within the 7-8% zone.

            In terms of middle class people living their life from paycheck to paycheck, I don't agree again. India's poor are not in the position to save anything. The entire gross savings is build on the back of Middle Class savings.

            I hope we do manage to bring in Modi in 2014 and I am sure we all will see investors coming back.

            Regarding Fed & ECB pumping in money, I am not sure why the house is so much against it. Fed did manage to save America from recession through QE and bring in back to growth. By taking debt off from companies & individuals book and shifting it back to Fed makes it easier for the earliers to invest back in economy and same thing happened. It's the ECB which spoiled the party by not buying the Govt. debt directly and letting sentiments fall down to such levels.
            Also, I read in some of the posts about inflation. The money printing has not added to inflation but rather saved the world from deflation with investments turning negative in most of the developed economies.

            Cheers!

            Neeraj,

            Here we go again ... We were discussing Gross Domestic Savings. Here is one citation which defines it ...

            Gross domestic savings (% of GDP) | Data | Table

            GDS = GDP less (-) Total Expenditure

            You had mentioned GDP = Savings + Expenditure + Investment.

            We both are saying the same thing (if we leave Investment aside).

            So, you cannot disagree with me given we both are stating the same formula (the one I proposed!)

            Second, investment cannot come from thin air. It has to come from surplus (which is another word for savings!). GDP, on the other hand relates to the OUTPUT of the country. Investment is an INPUT, which, in due course of time will result in greater OUTPUT.

            Of course, lately we have taken recourse to investment from borrowings (DEBT), which is the worst form of investment. WE do this to ostensibly push "growth" beyond current limits, but this growth is generally short-term and always leads to greater pain in the future as the debt comes back to haunt us in the future. Humans do not know when to stop borrowing, always over-estimating their own earning capacity and under-estimating their own spending needs in relation to the future.

            The strange situation when savings remains high along with increasing consumption as well as increasing investment is due to injection of a huge amount of DEBT, both from foreign lands as well as our own deficits and domestic borrowings. This has led to a dangerous situation, weakened the rupee and is now threatening to run away in terms of inflation. Please read previous para on the dangers of borrowing to force growth through investment via debt.

            The mini-crisis faced by even our better companies is due to their inability to repay debts (foreign currency borrowings) taken to force growth in the early 2000s. They all thought, "what could go wrong in borrowing cheap and making hay?". Well, rupee weakening, economy slowng and all coming together means, today many companies are in silent crisis and begging for rollovers and soft-bailouts (banks, RE companies, etc are at the forefront in this regard). All you investors think about the "valuation" you are currently giving companies. High debt along with slowing sales and profit growth will lead to ... what valuations in future?

            Savings in India is highly skewed. Are you telling me Urban India has a lot of savings stashed away in general? Ha, ha! Wait for people to start losing jobs or take salary cuts and you will quickly see who was swimming covered (enough savings to tide over debt) and who was swimming naked (insolvency) when the tide (income) runs out! Warren Buffett said this in reference to companies. I believe that a lot of the "savings" in middle-class India today is like how the people in the US were fooled into. People take price of their homes, reduce it from current (inflated) market price and take that as their "saving". So, if you bought for 50L (with a 45L loan) and current market quotation is 70L, they believe that they now have 20L surplus, while they still owe the bank 40L (after paying off 5L in principal and perhaps 10-12L in interest)!!!

            Unless they sell and recover this profit (less the interest they paid, which they often forget to include in the net savings calculation), it remains on paper only. This home is bank-owned till the LAST EMI is paid and the risk (of capital loss) is always present. So, coming back to topic, a huge majority of "middle-class" Indians do live from paycheck-to-paycheck and do not have even 6 months cash savings set aside for emergencies. Averaging Gross Savings Rate (do not confuse this with "per capita Savings Amount" and believing in this phantom figure is a big mistake!

            In my view, Modi is no superman. All he did was to make Gujarat a more investor-friendly place to do business in. Its the enterprising Gujarati who did the rest. Compared to what MMS did in 1990 (some say the real visionary and superman was Narasimha Rao!), what Modi did in Gujarat was child's play. I'm not downplaying what he has reportedly done in Gujarat, but he is not necessarily the superman to take care of our coming crisis. So, lets get off the Modi bandwagon here as an answer to the problems we are going to face shortly. Investors will come when there is money to be made more than in competing investments worldwide.

            Lastly, try to forget this Keyensian nonsense about spending your way out of a high-debt situation. Keynes did not have an answer to the ultimate question we are facing today globally. Fortunately for him WW2 came and he did not have to answer that question as the War and its aftermath resolved the interminable global depression the world faced back in the 1930s (due to exactly the same problem we have created today - too much debt). So, is a global war the only possible solution to an interminable depression going forward? When people (and Govts) cannot borrow anymore because of debt-exhausion, what then? The answer is coming down the road in a short while. Debt implosion, huge deflation and a correction to the imbalance. A lot of our assets will lose paper value. Sometimes they will lose more value than the money we have "invested" in these "safe" assets.

            Forget the hype of 8-9% growth. Even China is staring at a decade of sub-4% growth going forward due to their own Debt and stimulus binge. At least they HAD their double-digit growth back in the last century. Like our Olympics showing, much of our growth is in talk only!

            cheers
            Last edited by wiseman; August 9 2012, 11:18 AM.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by wiseman View Post
              Neeraj,

              Savings in India is highly skewed. Are you telling me Urban India has a lot of savings stashed away in general? Ha, ha! Wait for people to start losing jobs or take salary cuts and you will quickly see who was swimming covered (enough savings to tide over debt) and who was swimming naked (insolvency) when the tide (income) runs out! Warren Buffett said this in reference to companies. I believe that a lot of the "savings" in middle-class India today is like how the people in the US were fooled into. People take price of their homes, reduce it from current (inflated) market price and take that as their "saving". So, if you bought for 50L (with a 45L loan) and current market quotation is 70L, they believe that they now have 20L surplus, while they still owe the bank 40L (after paying off 5L in principal and perhaps 10-12L in interest)!!!

              Unless they sell and recover this profit (less the interest they paid, which they often forget to include in the net savings calculation), it remains on paper only. This home is bank-owned till the LAST EMI is paid and the risk (of capital loss) is always present. So, coming back to topic, a huge majority of "middle-class" Indians do live from paycheck-to-paycheck and do not have even 6 months cash savings set aside for emergencies. Averaging Gross Savings Rate (do not confuse this with "per capita Savings Amount" and believing in this phantom figure is a big mistake!



              cheers
              Great post wisey. Some time ago there was some discussion in GGN about what is the global wealth. After a lot of discussion the answer was - nobody knows!

              One estimation valued all assets (infrastructure and minerals also) prepared by economists with left leaning and environmentalist credentials (very suspect lot in my view) and came up with 200 odd trillions.

              Another estimate was based on investment amounts (prepared by an investment bank - looking to manage some of it!) and again came up with around 200 trillion.

              My own estimate was 400 plus trillions, including "everything" - including gold, stocks, unlisted, infrastructure, minerals and human capital - unscientific but useful ball park figure. It probably grows by about 3-5% and depreciates by about 1/3rd of growth i.e 1-1.5% per annum. Another useful way is that global wealth is 10 times global GDP of 40 trillion.

              Point you have made is this - the same wealth (house) is often counted twice - as 1crore by the owner (thinking it is his wealth) and as 1 crore asset on the bank books against which 1 crore in "lendings" has been created out of thin air by the central bank (which it is).

              Actually it is just one dwelling unit for a few people. All numbers attached to it are meaningless - only its utility value remains when all these mirage numbers are discounted - you can call it 1 crore - or if a river floods over it or a road changes direction, it might become 1 lakh also.

              And if nobody lives in it, it may as well be a rock - sometimes entire cities are empty houses - no matter how much the value, the real value is zero - less than zero because millions wasted their efforts to build a useless thing
              Last edited by Venkytalks; August 9 2012, 12:12 PM.
              Venky (Please read watch a or before posting)

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Note : Keynes has never stated spend till infinity, keynes has only stated that govt. needs to step up spending when the private entities are unable to do so for various reasons.

                This has been b#stardised by the powers to be a sanction to do as willing,
                which has been further extrapolated by the austrian crowd for all evils in the world.
                Last edited by spmohan; August 9 2012, 02:23 PM.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by Venkytalks View Post
                  Great post wisey. Some time ago there was some discussion in GGN about what is the global wealth. After a lot of discussion the answer was - nobody knows!

                  One estimation valued all assets (infrastructure and minerals also) prepared by economists with left leaning and environmentalist credentials (very suspect lot in my view) and came up with 200 odd trillions.

                  Another estimate was based on investment amounts (prepared by an investment bank - looking to manage some of it!) and again came up with around 200 trillion.

                  My own estimate was 400 plus trillions, including "everything" - including gold, stocks, unlisted, infrastructure, minerals and human capital - unscientific but useful ball park figure. It probably grows by about 3-5% and depreciates by about 1/3rd of growth i.e 1-1.5% per annum. Another useful way is that global wealth is 10 times global GDP of 40 trillion.

                  Point you have made is this - the same wealth (house) is often counted twice - as 1crore by the owner (thinking it is his wealth) and as 1 crore asset on the bank books against which 1 crore in "lendings" has been created out of thin air by the central bank (which it is).

                  Actually it is just one dwelling unit for a few people. All numbers attached to it are meaningless - only its utility value remains when all these mirage numbers are discounted - you can call it 1 crore - or if a river floods over it or a road changes direction, it might become 1 lakh also.

                  And if nobody lives in it, it may as well be a rock - sometimes entire cities are empty houses - no matter how much the value, the real value is zero - less than zero because millions wasted their efforts to build a useless thing
                  Global wealth at a given point is the sum total of the net worth of the world population at that given point. Corporations are just entities and the final owner of the corporation (banks, software companies etc) are people.

                  Even the net worth of a country is actually to be divided in to the population of that country. the net worth of a company/corporation would be divided within the shareholders.

                  Each individual would need to have a balance sheet. Physical assets like house, gold, shares will be listed and then in the liabilities things like loans, expense within the next 1 yr, etc will be listed.

                  In the assets section you would need to also have an entry for intangible assets - talent, future earning potential etc.

                  Net worth of a country would have to take into consideration the natural wealth of the country and the debt of the country.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Problem comes with valuation.

                    If Dow falls from 12000 to 6000, does it mean it has wiped out 50% of wealth? From 16 trillion to 8 trillion?

                    If gold falls from 1600 to 800, does it mean that 4.5 trillion out of 9 trillion just ceased to exist?

                    What is the value of unlisted companies? Discounted cash flow? Book value?

                    What is the value of infrastructure? Replacement cost? Increase in output because of it? Or the capital expended?

                    Then we have derivatives - which are supposed to be zero sum - except when someone makes a mistake in the sum and then we get Lehman Brothers or Soc Gen or Nick Leeson.

                    Does Shahrukh Khan create any wealth at all? If so how much? What is intrinsic brand value? How much wealth does Mona Lisa represent and why?

                    We spend our life in pursuit of wealth without ever knowing what wealth is!!!!
                    Venky (Please read watch a or before posting)

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by realacres View Post
                      contd....

                      21.) My wife will divorce me if I don't buy a house or shall I show her the savings by not buying the house.
                      WRONG. She will divorce you if you do buy a house and go bankrupt trying to pay the mortgage. She won't divorce you if you rent a much nicer place than you can buy, and then take her to Paris for a month in an year, which you can do just by avoiding that suicidal mortgage.

                      22.) Drop in interest rates would make people jump into market again which will increase the prices or atleast won't let RE prices crash.
                      WRONG. The RE prices reflect the median income of the area. RE market in Pune was largely driven by IT, NRIs & investors. IT industry is slashing jobs or cutting the pays & perks. Due to global economic crunch, NRIs lack funds today. Several investors have burnt their fingers in stock market & they see no appreciation but a RE correction today (some may call it as rates are ‘Softening’). Hence, all these elements that were the main drivers for RE boom are absent today. At the end of the day what matters is whether one can afford EMIs or not. To what extent is priciple amount & interest component is altogether diferent issue. Try to see to it that what is fixed (RE rates) are low so that interest rates fluctuation won't bother you much. The RBI figs. posted by fellow blogger clearly shows how loan dibersement has decrerased despite hike in RE prices. This only means that people aren't simply taking loans. Home loan NPAs are increasing every day passing by. Hence, banks are in no mood to lend further for a highly depreciating asset.

                      23.) Demand is there hence, drop won't take place.
                      WRONG. Demand is there but definately not at current levels. Current market is dictated by end users & end users alone. Hence, builders can't today enjoy on investors money & neglect the end users.

                      24.) No new projects are being announced. This will lead to low supply hence pushing up the rates.
                      WRONG. Even if 58% of the projects are abandoned, there simply aren't any buyers for the rest 42%. Add to it the investors 40% additional supply which will flood the market this year.

                      25.) Small correction here & there doesn't amount to crash.
                      WRONG. The correction of 20% & more, if is small, then another 'Small correction' is sufficient for crash. Consider this as a 'Whirlpool'. Once you are in, you are not out unless you sink to the bottom.

                      26.) I just want to own my own house.
                      CORRECT. Most people do and that's fine. Buyers will get their chance when housing costs half as much and they have saved a fortune by renting. House ownership is great - unless you ruin your life paying for it. If you can save even just 10% on the price of a house, you can retire several years earlier than you would otherwise. If you can save 50%, then you can easily take a ten year vacation and still come out ahead.

                      Conclusion:-

                      1.) People are simply not spending due to current RE & economic scenario.

                      2.) Investors aren't there, ending the speculation.

                      3.) Current market is end user dictated. End user doesn't find rates affordable/logical.

                      4.) Builder>> End User or
                      Builder>> Investor/speculator>> End user.
                      The chain ends with end user. End user is the king. Hence, expect distress sales from investors too.

                      5.) Result is visible on ground. Builders slashing prices, thus defying PBAP diktat. One builder reduces rates & now it is catching steam that will set off chain reaction for RE crash.

                      6.) Most importantly, the buyers are not homeless. They have a house even if it means rented one. Those who want to upgrade from 2BHK to 3/4BHK have put their plans on hold, as they too are not desperate. Due to several layoffs, people are going back to their native place, thus increasing the number of flats on rent.

                      7.) Several news posted earlier, clearly indicate that bankers, economic analysts as well as realty observers state that the RE prices will come down by 50-60% from their peak value, irrespective of place, location. These people are neither bears nor bulls, but analysts with neutral perspective.

                      8.) Most importantly, the holding capacity of buyers is greater than builders. Builders have taken loans from various finance sources with interest rates as high as 20-35%. These are turning defaulters & if they want the finance institutions not to put an attachment to their properties, they will have no other option but to sell off current inventory a very low rates.

                      Who blinks first was the question late last year. Today we have the answer:- Builders.

                      Like it or not, the current Pune RE scenario is similar to that of a ship heading inside the ‘Bermuda triangle’. What is visible today is just a deflection of ‘Compass’. Once it reaches the epicenter of the ‘Bermuda Triangle’, no one can help it from sinking.

                      To conclude, the builders require your money. So, whom should you believe? Facts or theories put forth by boomers? Think for yourself.

                      I would be very glad if you can share your thoughts on my article.
                      Comments most welcome & I would be happy to hear from you.

                      Regards,
                      Realacres

                      --concluded--
                      Realacres - you wrote this more than 3 years ago. How wrong were you in your analysis? You have deprived many from purchasing their house. Your analysis was so dumb is proven by the following fact . I purchased a 2 bed house in Jasminium in Jul 2009 for 39 lakhs and sold the same property a week back ( had to wait for 3 years - for long term capital gains benefit) for 68 lakhs.

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