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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

    Originally posted by mangoman2012 View Post
    I fully agree the government and finance minister is going out of way to save the real estate sharks. But my point is simple.

    If US cannot stop their real estate from crashing, India is nothing a force to reckon with..it is matter of time ..now...we need to look around to see that...

    4 wheeler makers are crying...and putting pressure of government..I love to see the rate cut and still we will fall
    coz there was a credit scam in US. People were buying houses as the interest rates were negligible. In India home loans form a small part of the total property deals. Here people are buying even after paying interest >10%. hence clearly they are the end users.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by mangoman2012 View Post
      I fully agree the government and finance minister is going out of way to save the real estate sharks. But my point is simple.

      If US cannot stop their real estate from crashing, India is nothing a force to reckon with..it is matter of time ..now...we need to look around to see that...

      4 wheeler makers are crying...and putting pressure of government..I love to see the rate cut and still we will fall
      US RE in 2008 and Indian RE today are in a totally different state. US RE problems were made worse by insurance companies selling insurance at a very low price and by the amount of crap securities marked as AAA. Add to that the mature corporate credit market and money markets which meant the crisis spread at a very fast pace.

      None of these problems exist in India yet. The US govt jumped in at the last moment with TARP and mergers and cheap FED credit whereas in India the govt and the builder lobby work together to ensure that PSU banks raise equity every few yrs, supply of land is limited, housing loans are hardly ever rejected by PSU banks etc.

      This means when the bubble does burst in India the impact will be much greater but its not going to happen anytime soon as the govt still has many many options to keep the bubble going.


      No sympathy for the auto industry. They have seen tremendous growth over the last 10 yrs so a few yrs of slowdown should do good in increasing efficiency and better product being launched. We really need some hybrids and compact electric cars to be launched.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Raising Diesel prices every month is a very good move but we also need to see a reduction in railway cargo rates and increase in railway passenger fares. This will allow goods to move from roads to railways and should ideally reduce diesel consumption which should reduce the import bill.

        Any dent to the crude oil import bill will help India at this stage. Reduction in subsidy should result in better liquidity in the markets and hence a stop to the RBI OMO. A reduction on the subsidy bill will allow the govt to increase tax free allowance, reduce corporate rates and generally provide some flexibility in policy making and obviously with elections in 2014 will allow the govt to provide some debt relief to farmers or other voter groups

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by mangoman2012 View Post
          I fully agree the government and finance minister is going out of way to save the real estate sharks. But my point is simple.

          If US cannot stop their real estate from crashing, India is nothing a force to reckon with..it is matter of time ..now...we need to look around to see that...

          4 wheeler makers are crying...and putting pressure of government..I love to see the rate cut and still we will fall
          What crash? ?.. still in bay area/sfo, median home prices are 800k while median salaries are 70k . It crashed only in pockets which didn't a strong economy and good jobs to begin with, Arizona, Florida, Nevada... loans were extended to anybody and everybody with a pulse..illegal immigrants to minimum wage workers bought 300-400k houses without furnishing any proper documents . On top of that debt securitization and unregulated derivative market helped bring the countries economy down , like heroheralal stated.
          Do you see any parallels in India? ?. If unaffordibility is the criterion for bubble burst then houses still aren't affordable even after the so called housing bubble burst of the century/millenium.

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Hi Sheeshu,

            I wanted to clear the air about San Francisco and New York and the US et. al. While it's true that San Francisco avg or New York RE is expensive. The salary figure you quoted at 70k is not even the California SESA authorized wage for a H1B worker. I have lived in NY for 18 years and have a lot of family that owns property in San Fran. Now, the lending standards in the US are so tight and I know- I bought a larger apt in NY recently - It's crazy. If the price of the apartment is more than 3-3.5 times your salary and if you don't have exceptional credit you will not get a loan. Now, the average wage of a Non H1B IT worker in NY is a little over $200K (5-6 years of experience and in financial services) other industries are probably 20-30% less but there are no other industries!. I know of Oracle Senior Consultants being hired at close to that amount in the bay area. I am not even going near Financial Services or the technology guys working in buy side. If you have a spouse that works - you can afford to lease a Maserati - If you choose to (leases start at $900 per month). If you loose your job and or if you get transferred guess what rent that $800k property will fetch - You will clear $4000+ after maintenance and taxes etc. Can you get me over 2.25 lacs of rental income on a property costing Rs 4 Cr in Delhi/NCR - Not even close the Aralias in Gurgaon are renting for 2.25 lacs un furnished and cost Rs 18 Cr. Do you see the great Indian fallacy!

            By the way, I own a few NY properties and yields are phenomenal - They match Delhi commercial yields.
            Last edited by expat101; December 28 2012, 04:47 PM.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Thats why anecdotal evidence is not good enough.

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              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by rembrants View Post
                There are two kinds of assets:

                One is less of "asset" and more of basic need...ie: the first house. Its your right, ur basic need, its like roti-kapda-makaan. You should have a house irrespective of the economic scenario. Only just dont kill yourself by overleveraging. While selecting this asset you should keep in mind things like proximity to work place etc.

                As far as age is concerned, thanks to the MBAs and banks for their future cash-flow models, everything is now priced for the next 20 years. Be it countries, companies, land or human beings, everything is priced by taking into account the next 20 years growth potential. Hence the average age for buying houses has come down from 45 to 25.

                The second is what wiseman is talking about is an investment...his savings. Whether the savings are for retirement or for passing on to next generation...the different assets are evaluated based on returns. Hence he can afford to buy land in the outskirts. he can alternatively also buy gold or invest in PPF or in equities depending on his risk apetite and return expectations.

                On this forum we have people looking for both:-Their first house and those looking for investments. hence the method of evaluating will be different for each.
                Any asset that you buy is an investment. A house that you are currently residing in is..maybe deemed as "basic need" for now..but becomes an investment eventually..you either want to upgrade and move to a bigger house..you want to move to a more developed area in the future..you move to another city and need to liquidate the RE asset in the older city..etc..etc..

                Hence, instead of considering whether your RE purchase is currently for end user perspective or investment perspective..I would look at all RE purchases from an investment perspective..with a fixed horizon in mind over what can be expected as returns from that investment..change is the only thing that's constant..

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  If I were to comment dispassionately on all these posts, then it would be the following:

                  Bulls are getting complacent. This is a surefire bad sign. It is when complacency sets in that the unexpected occurs & that jolts us back to ground reality.

                  In the current scenario, it is being felt that one can invest into anything to do with real estate & make merry...for ever. It is sad people are forgetting the lean patch between 1995 - 2003. That's 8 long years of carrying a zero / negative return asset.

                  All I can say to conclude my view is: whenever this topples over...it is going to leave a lot of people poorer but wiser. Take it as life's tuition fees!

                  Cheers!

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Who feels that "one can invest into anything to do with real estate & make merry...for ever"?

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                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      WAKAD is fast approaching to 5000 psft. from 2500 psft to 5000 psft i saw rates getting doubled in span of 3 years

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