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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

    Interest Rates Need to Stay Higher: Morgan Stanley

    India's economy grew at sub-5 per cent for the second year in a row last fiscal, marking the worst slowdown in 25 years.

    "I think the rates have to be held higher for some more time until the time inflation is seen to be systematically heading towards RBI's comfort zone," Chetan Ahya, chief Asia economist, Morgan Stanley told NDTV.

    Mr Ahya argues that higher interest rates will encourage people to save channelize their savings into financial products which can be used to revive India's growth. "You need to have positive real interest rates, you need to encourage people to bring in financial savings into the financial system and then we can use that to push investment and growth.

    "If we cut rates and leave real rates negative then it will be counter-productive and will not achieve the objective of taking growth higher," he said.

    Real interest rate is the rate which an investor expects after adjusted for inflation rate. In the current scenario, the real interest rate is next to nothing.

    Mr Ahya was also skeptical of arguments that a rate cut is essential to boost India's growth.

    "I don't know why we have this debate in India all the time...if you are going to leave inflation higher and real rates negative, that goes against the same government's interest as far as their promise to the society at large and people at large are concerned to give lower inflation," Mr Ahya said.

    The financial markets do not expect a very quick turnaround in either growth or inflation, he pointed out.

    Interest Rates Need to Stay Higher: Morgan Stanley - NDTVProfit.com
    If you are happy, you are successful.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      NHB residex for Jan-Mar 2014 is out. Pune prices are showing ~2% drop.

      Mumbai shows price rise after gap of 3 quarters: NHB Residex | Business Standard News

      NHB

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Auto, home loans may get cheaper as call rates fall

        Auto, home loans may get cheaper as call rates fall - The Economic Times

        If this happens, then really a welcome news.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by anikale View Post
          This is wishful thinking & the same I have heard on property shows on NDTV & CNBC. Builders behave as if interest rates is the sole reason for all the mess of RE, but in reality it is high prices.

          Today, railway fares have been hiked by 14.5%. With global crude oil prices increasing, things look bad here also. If crude oil hits around $120, then petrol & diesel prices will go up by INR 5-6/ltr, which would mean even higher inflation.
          If you are happy, you are successful.

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Some real ground facts

            Some of the highlights from the article (link below).

            > It is first time since 1991 when India has reported two consecutive years of sub-5 percent growth,

            > Manufacturing fell 0.7 percent, and mining declined 1.4 percent, which means in 2013-14 India Inc produced less stuff in real terms than in the year before,

            > The numbers show that per capita GDP at grew 10.1 percent to Rs 84,938 at current prices, but when you state the increase in constant prices (2004-05) the growth rate falls to 3.4 percent. But even this is at the level of averages, which hide more than they reveal. A 3.4 percent real growth in per capita GDP means that substantial sections of India would have actually seen zero or negative growth, given high inequality,

            > Another interesting number is the difference between the GDP at factor cost and at market prices. In 2013-14, India’s GDP at market prices was put at Rs 11,355,073 crore against Rs 10,472,807 crore for GDP at factor cost. This is a difference of Rs 8,82,266 crore – which is really the net effect of taxes and subsidies. The government has stopped telling us how much the GDP at market price goes up due to indirect taxes and how much it comes down due to subsidies. The reason for not disclosing this break-up is obvious: the UPA simply let subsidies rip through the economy, and feels ashamed of telling us how much it is losing on subsidies, and how much it is gaining on taxes,

            > The only figure the UPA can crow about is the fiscal deficit figure – which has come in at 4.5 percent of GDP, but this is clearly a piece of fiction, for it excludes the subsidy bills left unpaid from the year and rolled over to 2014-15. Arun Jaitley will have to pay P Chidambaram’s uncleared bills.

            Even if we accept this as “normal” accounting practice, the fiscal deficit excludes Rs 70,000 crore of fuel subsidies shifted from the government’s books to the oil companies (ONGC, Gail and Oil India).

            If we add this figure to the fiscal deficit of Rs 5,08,000 crore, we get a figure of Rs 5,78,000 crore. This would work out to 5.1 percent of GDP – which means Chidambaram missed his 4.6 percent target by a mile, or managed to hide his misses by accounting jugglery. And we are not even talking of the expenditures rolled over to Jaitley’s budget this July.

            However, the real scary numbers are these: against net tax receipts of Rs 8,16,000, the government’s expenses have bloated to Rs 15,60,000 crore. This means for every Re 1 that the government spends, it is earning only 52 paise from taxes. It is living on borrowings and extraordinary one-time income.

            Winner's curse: GDP, fiscal data reveal scale of mess left behind by UPA - Firstbiz


            Please see the following link for data on income & expenditure :-

            http://pib.nic.in/archieve/others/20...2014053004.pdf

            Would like to hear RE bulls comments on above.
            If you are happy, you are successful.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by realacres View Post
              This is wishful thinking & the same I have heard on property shows on NDTV & CNBC. Builders behave as if interest rates is the sole reason for all the mess of RE, but in reality it is high prices.

              Today, railway fares have been hiked by 14.5%. With global crude oil prices increasing, things look bad here also. If crude oil hits around $120, then petrol & diesel prices will go up by INR 5-6/ltr, which would mean even higher inflation.
              call rate movements are extreme short term movements..

              broker folks are so desperate to float this kind of news through their sub brokers such as times group...wherein the real news is the interest rates are set to increase...

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                World Bank: 'Now is the time to prepare for next crisis'

                World Bank: Now is the time to prepare for next crisis

                The World Bank has warned that now is the time to prepare for the next financial crisis, identifying markets as still “skittish” and vulnerable to slowing global growth.

                According to the World Bank’s Global Economic Prospects report, emerging markets will experience growth of just 4.8 per cent this year. This is a decrease from its previous forecast of 5.3 per cent growth in January.

                "One other risk in the medium term, also highlighted by the World Bank, is the potential of financial turmoil in emerging markets once the U.S. Federal Reserve raises its interest rates. This could see a pullback in liquidity in global markets, however, this is likely to be an issue in 2015 rather than 2014."

                Likewise, the US economy’s growth forecast for this year has been reduced from 2.8 per cent to 2.1 per cent.

                A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis.

                World Bank: Now is the time to prepare for next crisis | News | Fundweb
                If you are happy, you are successful.

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  JNNURM, RIP: Why we need to invest in new cities and let old ones fend for themselves

                  Venkaiah Naidu, the new Urban Development Minister, is making a bold departure from past thinking on how to make India more urban. He said that the UPA’s flagship scheme, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), will be scrapped. Instead, the new approach will be to build new smart cities. JNNURM will be refashioned with a new name and new orientation.

                  Way to go. India is already 32 percent urban, and in future decades the urban population is likely to grow in leaps and bounds – possibly from over 325 million right now to over 600 million by 2031. No amount of investment in existing cities is going to accommodate a doubling of the urban population. India simply needs many new cities, and not just patchwork investment in old ones.

                  Consider the current stats: we have 50 cities with one-million-plus population, including eight super metros with five-million-plus population. In the next 20 years, we will have 100 metros, including eight more super metros. That’s either 50 new cities or 50 old towns becoming metros by haphazard internal growth.

                  If we had a choice, we should opt for new cities with better infrastructure.

                  The reason for choosing new cities for investment over old ones is simple: it costs more to build infrastructure in old cities with costly land and sub-optimal public spaces than to focus on brand new cities, with no legacy issues and lots of land.

                  There are other reasons to invest in new cities that go beyond merely cost. According to the Ahluwalia report, 59 percent of the growth in urban population is already coming from natural increases – that is existing urban people having kids. Only 21 percent of the growth comes from rural migration and the balance from the expansion of existing urban centres to absorb nearby rural areas.

                  As I have noted before, “if we want moderately livable cities, we need new cities, not old ones with crumbling infrastructure and sprawling slums where land costs are simply unviable (Mumbai, for example, is simply unaffordable even to the upper middle-classes). The additional 300 million people who will head for cities over the next 20 years can either cram the Mumbais and Delhis and Bhopals of the world, or be diverted to new, planned cities with better amenities.

                  The scrapping of the JNNURM, started early in UPA-1, is a vital part of thinking of cities. In its current form, JNNURM seeks some changes in state-level urban policy and injects funds in sub-optimal projects. Despite being in existence for years, our cities don't look any better after JNNURM. It is simply too small and too pointless to make a difference. As at the end of 2012, the centre had allocated Rs 66,000 crore, but less than half of that money had been disbursed. Since then, thanks to the funds crunch, disbursements have not been much better.

                  Now consider the sale of urban investments needed in the next 20 years: Ahluwalia estimates that $620 billion needs to be invested in areas like urban water supply, sewerage, urban roads, storm water drains, transport, and street lighting, among others. In the last five years, the actual investment under JNNURM would not be more than $10 billion.

                  Considering the scale of investments needed as against the actual money going to urban areas, clearly JNNURM is sub-optimal and a waste of effort. It's scrapping makes sense. It's good that Naidu is initiating new thinking.

                  JNNURM, RIP: Why we need to invest in new cities and let old ones fend for themselves

                  ^^ Now if this is the priority for the current Govt, what will happen to lot of PROPOSED stuff on which builders sold or are selling projects in some jungle areas ? PROPOSED METRO, PROPOSED RING ROAD, PROPOSED EXPRESSWAY........PROPOSED SPACE STATION.

                  And if these cities indeed click, what will happen to already large scale inventory of over 11 mn unsold flats in today's cities ?
                  If you are happy, you are successful.

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Inflation strains mount for India's new government

                    New Indian Prime Minister Narendra Modi's promises to revive the economy face a gathering threat from inflation, which is creeping up again due to oil prices, weak monsoon rains and hoarding, analysts say. Food inflation, one of the reasons voters resoundingly ejected the previous Congress government in elections in April and May, is gathering pace with troublesome onion prices in the spotlight.

                    Other inflationary factors are beyond Modi's control. Global oil prices have been rising as worsening strife in Iraq triggers fears of supply disruptions -- a key concern in India, which imports more than 80 percent of its crude oil needs. India is one of the world's top producers of rice, wheat and sugar but relies heavily on the southwest monsoon, which sweeps the subcontinent from June to September to water its crops. This year the annual downpour looks threatened by the El Nino phenomenon, a warming of waters in the Pacific that has in the past -- but not always -- led to a weaker monsoon in India.

                    The India Meteorology Department says rains have been deficient over 80 percent of the country so far. Further price rises threaten to hit tens of millions of India's poor who live on less than one dollar a day, and who have already struggled with high levels of inflation for years. The Reserve Bank of India chief Raghuram Rajan, who has raised interest rates three times to tame consumer prices since coming to the helm in September, told reporters last week that combating inflation would continue to be the priority in the next few quarters. Without the government's help to tackle inflation, Rajan is unlikely to cut interest rates any time soon, despite the clamour from businesses for lower borrowing costs to spur the economy. "One lever which is key to reviving growth goes missing if inflation is not tamed," said D.K. Joshi, chief economist with rating agency Crisil.

                    Inflation strains mount for India's new government | The Asian Age
                    If you are happy, you are successful.

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                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      US Q1 GDP sees greatest fall in 5 years

                      The US economy contracted at a worse pace than previously estimated in the first quarter, marking its sharpest pullback since the recession ended five years ago.

                      Gross domestic product the broadest measure of goods and services produced across the economy, contracted at a seasonally adjusted annual rate of 2.9 per cent in the first three months of the year, according to the Commerce Department's third reading released Wednesday. That was the fastest rate of decline since the first quarter of 2009, when output fell 5.9 per cent.

                      Five years into the recovery, high unemployment and stagnant incomes continue to restrain consumer spending, which accounts for more than two thirds of US economic output.

                      Residential investment -- including expenditures on home construction, improvement and broker's commissions -- fell by a 4.2 per cent pace in the first quarter, revised from the previous estimate of a 5 per cent fall. The housing market rebound, an important growth driver earlier in the recovery, was derailed in late 2013 by cold winter weather and rising mortgage rates.

                      The decline in first-quarter exports was revised to a 8.9 per cent rate from 6 per cent previously, a new sign of a challenging global economic environment. The European economic recovery remains anaemic, while growth in fast-growing emerging markets like China and Brazil has downshifted.

                      US Q1 GDP sees greatest fall in 5 years | Business Spectator
                      If you are happy, you are successful.

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