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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  • @Hero - 'realacres, its good to debate and discuss but when data changes a person should change his/her opinion.'
    Has the data really changed? Has the sun started shining on our RE industry? Early Diwali sales numbers suggest not.
    Prices rising without underlying volumes is rarely a good sign.

    Besides its not like RA is making up stuff. He is posting links (as are you) that support his position. It seems that many of the RE investors on these forums are getting worried about RE prices and hence have taken to targeting RA who is simply the messenger. His opinion will not make or break the market, why target him?
    For the record, the Telegraph piece that you posted is as much opinion as the one RA posted. The author on his own concludes that Saudi Arabia is getting into a price war to hurt Shale gas producers. That is opinion not fact.

    As for him being wrong for 5 years
    1. He has not been wrong. Prices are falling. Maybe not everywhere (yet!).
    2. RE cycles run for longer periods. Too early to call either way.
    3. He has conviction. Not a bad thing for a long term investor.
    CommentQuote
  • Originally Posted by southsea
    @Hero - 'realacres, its good to debate and discuss but when data changes a person should change his/her opinion.'
    Has the data really changed? Has the sun started shining on our RE industry? Early Diwali sales numbers suggest not.
    Prices rising without underlying volumes is rarely a good sign.



    Has the sun set on the RE industry? Has it crashed? RA and others have been claiming for 5 yrs its going to crash. Where is the correction to that analysis or prediction?? Zilch, nothing... we still have the same old posts and same old flawed logic.. BJP will crush RE, no BJP win in Mah will crush RE, NPA in RE are very high, US eco is down so IT is down, Hinjewadi is crap area etc etc.. The list is endles..



    Besides its not like RA is making up stuff. He is posting links (as are you) that support his position. It seems that many of the RE investors on these forums are getting worried about RE prices and hence have taken to targeting RA who is simply the messenger. His opinion will not make or break the market, why target him?


    How does NPA about infra impact RE prices??? How does car sales impact RE prices??? People have posted 1000s of time the rational behind high RE prices. All of those are ignored and we still have endless posts on unrelated opinions and predictions


    For the record, the Telegraph piece that you posted is as much opinion as the one RA posted. The author on his own concludes that Saudi Arabia is getting into a price war to hurt Shale gas producers. That is opinion not fact.
    I woul suggest u read a little about what the Saudi's have done and how much they have reduced oil prices for US customer in recent days and what they decided at the OPEC meeting recently. Then pls comment.


    As for him being wrong for 5 years
    1. He has not been wrong. Prices are falling. Maybe not everywhere (yet!).
    This is exactly what I am talking about. Denial of the highest degree. And people are supposed to take such posters seriously :)


    2. RE cycles run for longer periods. Too early to call either way.
    3. He has conviction. Not a bad thing for a long term investor.

    markets can remain irrational longer than one can stay solvent. Even a broken clock is wrong twice everyday. Hammering the same point for multiple yrs and being wrong about them is not a sign of long term investor :)
    CommentQuote
  • Originally Posted by southsea

    For the record, the Telegraph piece that you posted is as much opinion as the one RA posted. The author on his own concludes that Saudi Arabia is getting into a price war to hurt Shale gas producers. That is opinion not fact.


    Facts....

    Saudi Arabia

    “The data confirms that there’s a battle over market share,”


    OPEC Boosts Oil Output as Prices Slide to Four-Year Low - Bloomberg
    CommentQuote
  • @Herohiralal - “The data confirms that there’s a battle over market share,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone yesterday. “The members are playing chicken with the market.”

    So some random hedge fund guy is your source of truth. That is you basis for countering previous posts. Really !!

    Where are the facts? All you have so far is opinion. When the Saudi minister for petroleum comes out and says we will do what it takes for market share, I will trust your posts. Till then, everything else is conjecture. Another one I heard on the always entertaining ZeroHedge site is that this is a US+Saudi plan to batter Putin. Equally reasonable, but still conjecture.

    The fact is that Saudi Arabia produces only about 11% of the worlds oil. Is it a market maker? Maybe sort of. I conjecture here :).

    >How does NPA about infra impact RE prices??? How does car sales impact RE prices???
    Unhealthy banks = weak economy. Plus RE more than any other sector is driven by credit.
    The car sales one is a plausible correlation for a weak economy.

    >And people are supposed to take such posters seriously

    Folks can easily chose to ignore him. And yet they continually respond to him at length. Perhaps his words make them uncomfortable. Perhaps he strikes close to the truth. Who knows.

    Besides, it is a free forum. It is not like he is posting ads for health supplements. I dont agree with everything he says, but he is (ultra?)-bearish, that is his prerogative.

    >Hammering the same point for multiple yrs and being wrong about them is not a sign of long term investor
    It took 6 years for the equity cycle to turn from 2008. So people who bought and held, were till last year wrong and now are what? Give the RE cycle some time to play out.
    CommentQuote
  • Amazon may end operation in India due to complicated laws | Latest News & Updates at Daily News & Analysis

    If this news becomes a reality,it will be bad sign for economy.People who keep claiming that India and China cannot be ignored due to huge population will be in for a shock.
    Complex laws,overlapping laws and jurisdictions and time consuming legal processes+ the actions of government in bringing in retrospective changes of law,all could spell doom for Foreign investments in certain fields.
    CommentQuote
  • Originally Posted by Sj2013
    This is developers and investors data, if you look at actual buyer's (who are end user) data from NHB resided you will see different picture. For example pune RE, actual end user transaction cost rose to 15%, HJW, Wakad, PS it is 25% rise

    You see?

    Could be that nhb Data is mostly based on official developer announced prices or the registry declaration prices ? I understand it won't be easy to get official data for an opaque sector like RE.
    I feel nhb data has a long way to maturity and considered reliable for making investment decisions for reit's/ pe's. They might still be relying more on a crisil or a liases fora.
    CommentQuote
  • Originally Posted by vaibav123
    Amazon may end operation in India due to complicated laws | Latest News & Updates at Daily News & Analysis

    If this news becomes a reality,it will be bad sign for economy.People who keep claiming that India and China cannot be ignored due to huge population will be in for a shock.
    Complex laws,overlapping laws and jurisdictions and time consuming legal processes+ the actions of government in bringing in retrospective changes of law,all could spell doom for Foreign investments in certain fields.

    Less likely, although I think sec filing can pressurise the Indian govt. Into doing some legwork. There have been instances earlier where a us company who had difficulty adjusting to bribe culture had raised apprehensions but hardly anyone really closed shop. Amazon is such a patient company in its financials, I am sure they will show same patience in this matter.
    CommentQuote
  • Originally Posted by southsea
    @Herohiralal - “The data confirms that there’s a battle over market share,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone yesterday. “The members are playing chicken with the market.”

    So some random hedge fund guy is your source of truth. That is you basis for countering previous posts. Really !!

    So you would trust a nameless and faceless user ID on a forum over a professional??

    The main point is that normal people change their opinion and analysis when the data change. e.g. for months we were told on this forum on how falling car sales were a sign the RE bubble will burst.

    Then for 4-5 months the car sales rose. No mention of that on this forum. Logic would suggest that if RE was going to burst cause car sales were falling then RE would prosper or stablize when car sales started rising again. Did we see that logic being followed?? No RA moved on to find another -ve news item. BJP winning in Maha or China slowing or god knows what.



    Where are the facts? All you have so far is opinion. When the Saudi minister for petroleum comes out and says we will do what it takes for market share, I will trust your posts. Till then, everything else is conjecture. Another one I heard on the always entertaining ZeroHedge site is that this is a US+Saudi plan to batter Putin. Equally reasonable, but still conjecture.


    Here is from Alwaleed bin Talal. You might not consider his opinions and analysis imp but the world markets do.

    I have


    The fact is that Saudi Arabia produces only about 11% of the worlds oil. Is it a market maker? Maybe sort of. I conjecture here :).

    Ever heard about how rebels in Niger delta used to move oil prices or how Iran alone can cause a jump in oil prices??


    >How does NPA about infra impact RE prices??? How does car sales impact RE prices???
    Unhealthy banks = weak economy. Plus RE more than any other sector is driven by credit.
    The car sales one is a plausible correlation for a weak economy.

    For the last 24 months we have seen NPAs go up and infra projects stuck. Hasthe RE bubble crashed. A sane person looks at this data and tries to figure out what was wrong with his/her logic. They do not go on posting the same flawed logic forever!!


    >And people are supposed to take such posters seriously
    Folks can easily chose to ignore him. And yet they continually respond to him at length. Perhaps his words make them uncomfortable. Perhaps he strikes close to the truth. Who knows.


    You are right. Thats why I said that I cant keep on correcting flawed logic. The value of the thread is -ve as the effort on correcting someone is more than having a logical discussion.



    >Hammering the same point for multiple yrs and being wrong about them is not a sign of long term investor
    It took 6 years for the equity cycle to turn from 2008. So people who bought and held, were till last year wrong and now are what? Give the RE cycle some time to play out.


    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    Would you consider people who saw the value of their investment drop by 90% as smart and informed just because they refused to understand or analyse that the previous govt was causing tremendous damage to the economy??

    If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????
    CommentQuote
  • ashish18,
    Amazon has filed these details in order to keep their American investors,regulators informed about a potential business development.This development has a scope for reducing their earnings and then their share prices in American market.
    Such events affecting operations needs to be filed and public informed and in USA such things are taken seriously.
    One cannot assume that Amazon is making a noise and will mould itself to our culture.
    Amazon Isn’t Discontinuing Its India Operations; Is Likely To Expand Further | Business Insider India
    Indian government has to fix up standard laws,rules to help business function in commercial manner.
    Grand announcements of red carpet is impressive but will not bring in green bucks but proper framework with certainty in rules will help.
    Grand standing in foreign countries is not good enough.
    Ashish,
    It is not an easy task to lay out a frame work,make laws,institute a proper working culture when for decades we have been used to jugaadu culture and paan stained offices,it takes time and political will to enforce modern management and introduce dynamic thought processes.
    CommentQuote
  • Originally Posted by realacres
    Pankaj Kapoor, chief executive of property research firm Liases Foras, believes both investors and buyers are not participating in the market due to unaffordable prices and downward pressure on prices.

    Developers have spent money on marketing and even attended exhibitions abroad but response hasn't been too good, he said.

    "Across India, there is a red zone. Earlier, Bangalore and Chennai were doing well. Now, they also have peaked. We have already seen investors cutting prices by 20-25 per cent in NCR," he said.



    High prices, interest rates make this a dull Diwali for realtors | Business Standard News

    ^^ This clearly shows that sales have fallen in Pune by 31%.


    Good charts RA. But do we have similar kind of charts for earlier years ?
    CommentQuote
  • ""So you would trust a nameless and faceless user ID on a forum over a professional??""
    The faceless user ID has been posting nearly 10000 posts and so cannot be called unknown,while the professional being quoted is really unknown professionally to most of the forum members.
    CommentQuote
  • So you would trust a nameless and faceless user ID on a forum over a professional??
    You are twisting words. My contention was that whatever herohiralal posted from the Telegraph was as much conjecture as what RA posted from Bloomberg. So far I have not seen facts about the oil story on this thread. Opinions, yes. All plausible, but still opinions. And all equally good.
    >Here is from Alwaleed bin Talal. You might not consider his opinions and analysis imp but the world markets do.
    I fail to understand why you posted this link. There is no evidence in it about some purported price war to bring down shale producers. (which was what Hero claimed as the real reason behind oil's fall)BTW, it is not just oil that is falling. Iron ore is too. Maybe it is just the commodity cycle turning and not some attempt to bring down shale/Putin/"put you favorite theory here".

    >
    The value of the thread is -ve as the effort on correcting someone is more than having a logical discussion.
    You, Hero, me are not arbiters of what makes a thread positive or negative. It is a free forum, feel free to critique posts or ignore someone, but why criticize someone for posting?

    >If you had DLF shares and the whole market knew how bad its book were would you still invest in it cause you consider urself a long term investor and believe that the company would turn around.
    If I were a contrarian I certainly would. Are you saying that companies in their death throes never turn around? (Apple comes to mind here)

    And would you go posting about the +ves of the company for 5-6 yrs and use every +ve news article on RE to claim that DLF shares were going to double by diwali????

    If I held DLF shares, I sure as hell would. I would speak my book. All investors do it. The home owners do it here too, by claiming that RE will continue to boom. I do not fault them for doing it. Nothing wrong with it?
    CommentQuote
  • Restructured loans of banks may zoom by
    Extract:
    Ind-Ra based its estimates of restructured assets on an analysis of the credit metrics of the top 500 corporate borrowers, who accounted for the largest debt in the financial year that ended in March 2014.

    The aggregate debt of these 500 corporates is ₹28,76,000 crore, which is 73 per cent of the total bank lending to the industry, services and export sectors.

    Financially distressed

    Around 82 of these 500 top borrowers have already been formally tagged as financially distressed (as a non-performing asset, corporate debt restructuring case or restructured asset).

    Another 83 (17 per cent) of these 500 borrowers, accounting for 9 per cent of the overall debt of the group, have severely stretched credit metrics, said Ind-Ra. The credit rating agency observed that within these 83 corporates, operating profitability barely covers the interest required to be serviced in most cases. These corporates have limited expectation of an immediate improvement in profitability.

    However, thus far, these borrowers with severely weak credit metrics have not been publicly tagged as financially distressed. But one out of every four could be tagged as stressed by the end of March 2015.

    Incremental restructuring

    Ind-Ra assessed that potentially one-third to half of the 83 accounts could be in the category of SMA 2 (special mention accounts), with delays in debt servicing ranging between 61 and 90 days.

    Loan accounts, which may be tagged as SMA 2 during the October-December 2014 period, would be either normalised or put up for restructuring. This decision is to be arrived by the lenders by March 31 next year, it added.

    If some of the corporates are unable to generate significant cash flow or infuse significant equity in the near term, they may be identified by their lenders for restructuring pursuant to RBI guidelines.

    Some borrowers may even deteriorate further, to be tagged as NPAs. The cumulative impact may be an incremental ₹60,000 crore to ₹1 lakh crore of restructured assets in the banking system in the next five months, the report said.

    A senior public sector bank official said given the tough situation in the economy, whereby infrastructure projects are stalled because of external factors and de-allocation of coal blocks will impact metal, power and cement companies, the central bank needs to come up with a special dispensation for asset classification.

    “If the RBI sticks to its deadline of April 1, 2015, for complete withdrawal of regulatory forbearance, then banks will get impacted as not only will an asset be downgraded once it is restructured, they will also have to make higher provisions. This will shake investor confidence in banks,” he said.

    VS Seshagiri Rao, Joint MD and CFO, JSW Steel, said banks have to take a practical call and come out with a special sector-specific dispensation on stressed assets.

    Each sector, such as infrastructure, power, steel and textiles, is affected by different problems, largely due to factors beyond the purview of company promoters.

    For instance, delays in project clearance and high pricing of raw material in domestic markets, especially coal, is eroding profitability of Indian companies

    My view:
    NPAs are real area of concern for the economy asa whole,though RE NPAs are relatively smaller in size.
    PSU banks have largest slice of NPAs which is due to lax checks,political influences and may be corrupt practises in sanctioning loans while Private banks had been more diligent in loans.Bad loans and the manger looses his job.That accountability has helped Private sector.PSU banks have the eternal tax payer to fall back on.
    Whatever it is it show poor management of public deposits.Earlier all these NPAs were hidden under banking secrecy but now it at least in public domain putting pressure on banks to work more efficiently.
    CommentQuote
  • ""For the last 24 months we have seen NPAs go up and infra projects stuck. Hasthe RE bubble crashed. A sane person looks at this data and tries to figure out what was wrong with his/her logic. They do not go on posting the same flawed logic forever!!""
    The postings by RA have some logic when backed by such news items:
    Sobha Q2 sales bookings drop 12% to Rs 559 cr | Business Line
    Real estate firm Sobha Ltd’s sales bookings fell by 12 per cent to Rs. 559 crore during the second quarter of this fiscal due to poor demand. The company had posted sales bookings of Rs. 632.3 crore in the year-ago period.

    “The company during the quarter achieved new sales of 8,33,991 sq ft valued at Rs. 5.59 billion with an average realisation of Rs. 6,703 per sq ft,” Bangalore-based Sobha said in its operational update for the July-September quarter.

    Sales volume dropped to 8.33 lakh sq ft during the second quarter of the current fiscal from 10.03 lakh sq ft in the year-ago period. However, sales realisation improved by 6.32 per cent to Rs. 6,703 per sq ft.

    “During the quarter, the company has delivered a stable and consistent performance in all its southern markets. The real demand in the northern and western markets as a whole continues to be weak and the company remains cautious about these micro-markets in the medium term,” Sobha said.

    The company said there has been an uptick in the general business sentiments post formation of the new government at the Centre
    Opinions of RA could be negated by green shoots like this:PE investment in realty sector jumps over 2-fold to Rs 8,900 cr | Business Line
    Getting personal about his opinions is not the way forward.
    CommentQuote
  • Originally Posted by vaibav123
    Restructured loans of banks may zoom by
    Extract:
    Ind-Ra based its estimates of restructured assets on an analysis of the credit metrics of the top 500 corporate borrowers, who accounted for the largest debt in the financial year that ended in March 2014.

    The aggregate debt of these 500 corporates is ₹28,76,000 crore, which is 73 per cent of the total bank lending to the industry, services and export sectors.

    Financially distressed

    Around 82 of these 500 top borrowers have already been formally tagged as financially distressed (as a non-performing asset, corporate debt restructuring case or restructured asset).

    Another 83 (17 per cent) of these 500 borrowers, accounting for 9 per cent of the overall debt of the group, have severely stretched credit metrics, said Ind-Ra. The credit rating agency observed that within these 83 corporates, operating profitability barely covers the interest required to be serviced in most cases. These corporates have limited expectation of an immediate improvement in profitability.

    However, thus far, these borrowers with severely weak credit metrics have not been publicly tagged as financially distressed. But one out of every four could be tagged as stressed by the end of March 2015.

    Incremental restructuring

    Ind-Ra assessed that potentially one-third to half of the 83 accounts could be in the category of SMA 2 (special mention accounts), with delays in debt servicing ranging between 61 and 90 days.

    Loan accounts, which may be tagged as SMA 2 during the October-December 2014 period, would be either normalised or put up for restructuring. This decision is to be arrived by the lenders by March 31 next year, it added.

    If some of the corporates are unable to generate significant cash flow or infuse significant equity in the near term, they may be identified by their lenders for restructuring pursuant to RBI guidelines.

    Some borrowers may even deteriorate further, to be tagged as NPAs. The cumulative impact may be an incremental ₹60,000 crore to ₹1 lakh crore of restructured assets in the banking system in the next five months, the report said.

    A senior public sector bank official said given the tough situation in the economy, whereby infrastructure projects are stalled because of external factors and de-allocation of coal blocks will impact metal, power and cement companies, the central bank needs to come up with a special dispensation for asset classification.

    “If the RBI sticks to its deadline of April 1, 2015, for complete withdrawal of regulatory forbearance, then banks will get impacted as not only will an asset be downgraded once it is restructured, they will also have to make higher provisions. This will shake investor confidence in banks,” he said.

    VS Seshagiri Rao, Joint MD and CFO, JSW Steel, said banks have to take a practical call and come out with a special sector-specific dispensation on stressed assets.

    Each sector, such as infrastructure, power, steel and textiles, is affected by different problems, largely due to factors beyond the purview of company promoters.

    For instance, delays in project clearance and high pricing of raw material in domestic markets, especially coal, is eroding profitability of Indian companies

    My view:
    NPAs are real area of concern for the economy asa whole,though RE NPAs are relatively smaller in size.
    PSU banks have largest slice of NPAs which is due to lax checks,political influences and may be corrupt practises in sanctioning loans while Private banks had been more diligent in loans.Bad loans and the manger looses his job.That accountability has helped Private sector.PSU banks have the eternal tax payer to fall back on.
    Whatever it is it show poor management of public deposits.Earlier all these NPAs were hidden under banking secrecy but now it at least in public domain putting pressure on banks to work more efficiently.



    Though the declared number of NPA in RE is low the devil is in details.

    The perceived value of RE in our eyes are high and it is the same for banks so bankers think they have the security to fall back on and hence they are not shown in NPA. They can easily fudge the books IMHO.

    But how much of their assets ( RE backed ) are realisable is highly questionable..if the situation continues and if the banks go to market to sell the RE assets then more skeletons will tumble out..

    corporate cheats along with political crooks are trying to avoid such a situation. Brokers are supporting them...that is what happening...
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