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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 realacres View Post

    Bottom line is builder wants to squeeze as much as possible from buyers, even if land, construction material & labour is given to them for free.

    And you missed the part about removing useless laws. Just giving land wont help. Faster clearances, protection of property rights and a efficient legal system are also needed.

    Haven't seen them in any of the congress or BJP run states so far so no hope that anything is going to change now. Some small changes will be made here and there. After all one does not need to drive structural change to get elected. Look at the 2009 elections. Awesome growth in the preceding yrs was enough even if it was on the back of massive govt spending and favorable global clues.

    Here is another link on the mess that has been created by the central govt over the yrs with regard to land reform

    Planning Commission, Government of India

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by herohiralal View Post
      You are missing the point. I was saying that to lower home prices we need land reform. What we have had till date is just a mess created to help special interests. RE prices are high due to lack of land reform. Read this National Land Reform Policy document to better understand the issue
      hh,
      Thanks for the link.

      Now since you brought this up, I will tell you why this is difficult.
      First we need to see who is lobbying hard to avoid land reforms. Its none other than builders themselves. Surprised ? Well, the fact is once land reforms are kicked in, it will also come with proper demarcation & use of land. This means in advance you will be able to know which area will have what. So, no artificial manipulation by builders who are close to politicians & keep changing DP & PROPOSED stuff to suit their own projects.

      Apart from this, land reforms will make regular retail buyers easy to buy land which has clear title & infra in place. Now if this is there, how many would buy super junk flats at high prices ?? Won't they simply buy land & hire contractor to build a house at cheaper rate than flat ??

      So, to serve their selfish interest, builders are not letting land reforms take place but now the same thing has turned out to be 'Bhasmasur' for them & they are feeling the heat for their own deeds.

      Whatever happens on this aspect, the beneficiary will be home buyer only.
      Last edited by realacres; June 6 2014, 09:39 PM.
      If you are happy, you are successful.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Reality check: Here is why market’s Modi mania is now overstretched

        Reality check: Here is why market’s Modi mania is now overstretched


        With the benchmark indices consistently hitting record highs almost everyday, it may be time to do a reality check as to how long can the Indian stock markets continue to defy gravity.

        Brokerages, who have been singing the Modi tune ever since the BJP victory became imminent, have started cautioning about the irrational exuberance.

        In recent research report, Emkay Global Financial Services said that at the current level of 7300, the Nifty is trading at 15.5x FY15 earnings as against the long average of 13.7x. In other words, the current multiples can be justified only if the real GDP grows over 8 percent. However, estimates for GDP growth has ranged around 5-6 percent in FY14 and FY15. What this means is that the market rally has made the stock market overvalued.

        Deustche Bank too has sounded caution about the Indian stock markets. It has downgraded Indian shares saying the markets are taking too much for granted and that valuations, after the recent sharp rally, appear "very stretched" against lower GDP growth.

        According to a Reuters report, the Nifty has risen 24.4 percent since Sept. 13 when Narendra Modi was declared as the BJP's prime ministerial candidate, with overseas funds pumping over $14 billion in the cash shares over that period.


        “The main point is that the slowdown in GDP is clearly structural in nature as the culmination of a prolonged period with almost no structural reform,” the brokerage has noted. It has listed out four points where the government will have to take hard decisions:

        1) The fiscal situation is much more pressing than the headline numbers would appear to suggest given the poor quality of some of the revenues, in particular the privatisation receipts and the ongoing slowdown in growth.

        2) Inflation is still on a rising trend and may well require further monetary tightening from the RBI.

        3) Industrial output is on a weakening trend, partly due to the lack of confidence and blockages within the system; the inevitable positive impact from the election on confidence of up to 10bps in annual GDP growth is unlikely to last long without some fairly immediate tangible measures.

        4) Most importantly, as the economy slows, the financial position of a number of leading enterprises as well as the state-controlled banks appears ever more precarious, as the banks are forced to ‘extend and pretend’ which also deprives the broader economy of sufficient funds for working and investment capital.

        The brokerage has reminded the BJP that it is the party’s responsibility that it should not interfere with the hard decisions the RBI is likely to take. It also see equities taking a beating if the Modi government states to raise company taxation in a quid pro quo for the adoption of a nationwide goods and sales tax (GST).

        Further, it points out that the BJP has only got 31% of the popular vote, while the party controls 6 out of 20 states. “The elections for the upper house will not take place until 2016, by which time the Modi-led government may have become extremely unpopular, which raises the possibility that either they will hold fire on some of the more painful reforms, or that they will fail to gain control of the upper house to the possible detriment of their structural reform programme,” it cautions.


        So the only way out will be to continue with the subsidy regime and some of the UPA schemes that made it popular among the poor and unpopular among the a sections of the economists. The end result would be holding back hard reforms.

        Deutsche Bank has also drawn parallels to Mexico and China, which witnessed a selloff in the past as reform euphoria in both markets waned. It has also cautioned that Modi's comparison with Margaret Thatcher raises short to medium term risks.

        Reality check: Here is why market
        If you are happy, you are successful.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Worst slowdown in 25 years: India’s FY14 GDP at 4.7%

          Asia's third-largest economy grew 4.7 percent in 2013/14, slower than an official estimate of 4.9 percent and higher than 4.5 percent growth a year earlier. It marks the second straight year of sub-5 percent growth - the worst slowdown in more than a quarter of a century.

          Economic growth for the quarter to end-March came in at 4.6 percent from a year earlier, compared with 4.8 percent estimated by analysts in a Reuters poll and a revised 4.6 percent growth in the previous three months.

          Growth stuck below 5 percent is disappointing for an economy that boasted of a near double-digit economic expansion until a few years back and was widely expected to be one of the main drivers of the global economic recovery.

          It also poses a challenge for the new government to generate enough job opportunities to employ the 10 million people who enter the country's workforce every year. New Delhi reckons the economy needs to grow 8 percent a year to prevent a demographic disaster.

          Stressed loans in India - those categorised as bad and restructured - total $100 billion, or about 10 percent of all loans. The debt-equity ratio of Indian firms, meanwhile, has hit a two-decade high of 97.9 percent, according to Nomura.

          Unnikrishnan of Thermax, cautions against such "irrational" exuberance. "A child is born. It is expected he will do well and earn good money," he says. "But he is not going to earn money today."

          Worst slowdown in 25 years: India's FY14 GDP at 4.7% - Firstbiz
          Last edited by realacres; June 8 2014, 12:06 AM.
          If you are happy, you are successful.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            "So, to serve their selfish interest, builders are not letting land reforms take place but now the same thing has turned out to be 'Bhasmasur' for them & they are feeling the heat for their own deeds.""
            We can launch satellites,we can launch IRBMs but we cannot computerise our land records across the whole country.
            Why???
            Vested interests thrive in opaque documentation and procedures.
            So much of money flows into bribes while dealing with land no one wants clear simple documentation verifiable at the click of a mouse(DO charge a god feee for access).

            one link: Sarpanch kidnapped, released after Rs 47 lakh ‘ransom’ - Indian Express
            Last edited by vaibav123; June 8 2014, 06:22 AM.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by realacres View Post
              hh,
              Thanks for the link.

              Now since you brought this up, I will tell you why this is difficult.
              First we need to see who is lobbying hard to avoid land reforms. Its none other than builders themselves. Surprised ? Well, the fact is once land reforms are kicked in, it will also come with proper demarcation & use of land. This means in advance you will be able to know which area will have what. So, no artificial manipulation by builders who are close to politicians & keep changing DP & PROPOSED stuff to suit their own projects.

              Apart from this, land reforms will make regular retail buyers easy to buy land which has clear title & infra in place. Now if this is there, how many would buy super junk flats at high prices ?? Won't they simply buy land & hire contractor to build a house at cheaper rate than flat ??
              Exactly. Isnt that what is needed to control the bubble? How can the RE bubble crash if the supply of land, the planning and permission process and quality is controlled by a cartel?

              Add it to the fact that we have constant bailout of banks, loan forgiveness schemes and printing money by the RBI and you have a massive scam going on. No sign of it going to stop. Lets see how the new govt deals with Naidu's plan to forgive loans worth 50K crores.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                "Add it to the fact that we have constant bailout of banks, loan forgiveness schemes and printing money by the RBI and you have a massive scam going on. No sign of it going to stop. Lets see how the new govt deals with Naidu's plan to forgive loans worth 50K crores.""
                This is in keeping with our tradition.Write off,give amnesty schemes,VDIS,loan waivers etc.
                Banks are like a permanent free ATM for politically connected people or pressure groups.
                The nation has to make people proud of repaying their loans with interest and not to accept waivers as routine course.

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  @HH - "Exactly. Isnt that what is needed to control the bubble? How can the RE bubble crash if the supply of land, the planning and permission process and quality is controlled by a cartel?"

                  Actually, restrictive planning worsens bubbles and subsequent crashes. It does not prevent crashes. Here is a somewhat long but worthwhile read on this - Texas wins on housing | | MacroBusiness

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by southsea View Post
                    @HH - "Exactly. Isnt that what is needed to control the bubble? How can the RE bubble crash if the supply of land, the planning and permission process and quality is controlled by a cartel?"

                    Actually, restrictive planning worsens bubbles and subsequent crashes. It does not prevent crashes. Here is a somewhat long but worthwhile read on this - Texas wins on housing | | MacroBusiness

                    Yes I am saying dont restrict supply or make approval process too complex. Open up the RE sector by implementing land reform, removal crazy approvals and stop bailing out banks.

                    Texas and other Republican controlled states are really driving US growth. The new Indian govt should enact proper reforms and not just go about throwing away money on crazy schemes - loan waiver to andhra farmers, cleaning ganga and solar plants.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by herohiralal View Post
                      Exactly. Isnt that what is needed to control the bubble? How can the RE bubble crash if the supply of land, the planning and permission process and quality is controlled by a cartel?
                      Bubble bursts when the sentiment reaches a point of inflection and people start believing that the market is overvalued i.e. when people stop buying at lofty levels.

                      By that logic India shouldn't have any bubble bursts till now. But 1997 was the last time the bubble had burst.

                      Cartels can regulate supply and fabricate demand but real demand at the end always remains the king. With runaway inflation, a shaky economy and high interest rates...real demand is going to be low in the coming quarters.
                      ...Thoda Aasman

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