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Is it Recession in Indian R E ?

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Is it Recession in Indian R E ?

Last updated: January 16 2010
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  • #41

    #41

    Re : Is it Recession in Indian R E ?

    Guys,

    Did you ever hear of Tulip Bulb Mania?

    There was such an incredible demand for Tulips that the market went nuts.

    People were selling everything they owned to buy a Tulip in the same way like people want to buy a house now without thinking about quality, roads, amenities, value for money etc. In the end, the price of tulips had dropped from a high of $76,000 to less than a dollar in just 6 weeks!!!! Check the link below to understand.

    ]http://economics.about.com/od/financialmarkets/a/tulip_mania.htm[/URL]

    It can be hard to understand why market manias occur. It seems strange to value tulips so much that you would sell your house to get one. But it is not that different from other market manias. In these markets investors start to act irrationally. They often begin to invest because they see other people doing it and making money. Eventually people invest far more money in an item, than is sustainable. So is the RE market getting irrational... i believe to some extent it is irrational.

    VK

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    • #42

      #42

      Re : Is it Recession in Indian R E ?

      Stagnation

      Its more like a case of stagnation than recession.

      Its not going to appreciate much, inspite of huge demand of affordable housing.

      Till bldrs understand eco logic, they will be stuck up in hunt for their profit margin for a looong time. The interest rates will eat up their margins, and their cash is stuck up in these slow moving asset.

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      • #43

        #43

        Re : Is it Recession in Indian R E ?

        What is recession?

        Originally posted by Sansei View Post
        Its more like a case of stagnation than recession.

        Its not going to appreciate much, inspite of huge demand of affordable housing.

        Till bldrs understand eco logic, they will be stuck up in hunt for their profit margin for a looong time. The interest rates will eat up their margins, and their cash is stuck up in these slow moving asset.

        Recession in my mind is a level of progress that is relatively lesser than

        1. What would have been considered the level under normal circumstances OR

        2. what the rest of the world is progressing at

        Therefore, let us take an example to see how many different variations recession can produce ...

        A. Assume we produced 100 units in 2007. Then in 2008 we produced 85 and in 2009 we produced 90.

        In 2008 the growth rate would have been -15% and everyone would have been beating their heads and predicting the end of the world ...

        In 2009 the growth rate would have become +5.9% (approx) and everyone would have become super bulls ... despite the fact that 2009 is still 10% lower than 2007!!!

        We are in that state now. Compared to 2008 we look like we are roaring into a new bull market. But compared to 2007 we are still in a bear market.

        And whats more. The current sentiment and feeling in the market is still telling us that, while the Govt is singing rosy tunes, the man on the street is still finding it difficult to sell his products unlike during boom times when he didn't have to sell at all (the customers were breaking down his door to snatch it from his hands with easily borrowed money from the bank!)

        So, stagnation, or even growth based on a low base value can still mean we are in a recession (only probably a lesser recession).

        Also note that, if a few years pass by without significant growth, we would have lost a lot of value based on the simple fact that the assets we hold would not have appreciated at the same rate as money in the bank and therefore would have become relatively cheaper!

        So, if we start with 2 people and one having a 1C house and another with 1C in cash. Assuming that price of house went down to 85L and came back to 1C in 3 years. Meanwhile the cash party invested his 1C at 10% (assuming no tax). His amount would now be 1.33C. He can now buy the house at 1C and still have 33L left in hand.

        Therefore, relative to the cash party, the house party has lost value in the house to the tune of 25%! In the 3 years his house value stagnated at 1C, relative to 10% per annum increase in value of cash, the house lost 25% of its value.

        So, even if you see 2-3 years of stagnating prices, your house might have lost 25% (and you are still seeing a recessionary period based on our earlier definition of declining value). And if you are further paying interest on 85% of your property on loan at 11%, then the house would have lost as much as 50% of its value relative to if you held cash only and deposited it for interest!!!

        Very interesting, right?

        cheers

        Comment

        • #44

          #44

          Re : Is it Recession in Indian R E ?

          Positive outlook

          Some people c in a different light.

          Every one must be aware of the story of two people watching a half water filled glass. The psychologist asked them what have they observed.

          One says glass is half filled with water.
          Other says it is half empty.

          So small growth for some is like a half filled glass water in a recessionary world ( Atleast some growth).
          While for some like Wise one its other way round.

          But in terms of investments, its fool hardy to think of RE investment in current scenario.

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          • #45

            #45

            Re : Is it Recession in Indian R E ?

            very well said, but if a person has plenty of funds to invest, what will you suggest to him... Bank's i.e. FD's, Gold or Real Estate ... and if real estate ... whether commercial, residential, IT, Mall etc etc ....

            regards

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            • #46

              #46

              Re : Is it Recession in Indian R E ?

              Advice

              The stocks have run away literally on back of strong FI flow from May onwards. But the Gold has also picked up, indicating unease in investors.

              The RE is in stagnation mode due to mainly bldr greed. Till the stocks correct its fool hardy to invest in them. If one has long perspective Land is better investment. The best would be commodities which would surely pick up once the eco activity picks up. But if the growth falters which looks unlikely, everything except food articles would deflate.

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              • #47

                #47

                Re : Is it Recession in Indian R E ?

                Real estate prices run in cycles world over - pretty much sine wave types - but at an angle to base of the graph! the degree of which is the historical rate of inflation!
                The length of the peak to peak being about 18 years approx stretched sometimes a bit because of excess liquidity , note printing by govt, bailouts etc..
                The Indian real estate scene peaked around 2007-2008 , so by this theory we should see a low point ind about 18/2+2007=2016 and an high at 2007+18=2025 - any bets guys?
                Its has happened in the past for hundreds of years , and will happen again!
                Check out this graph
                http://newbridgereorealty.com/markettiming.html
                to get an idea of the " angle" of inflation funda! The black line is the angle thingee.
                If u believe this - yes, u can time the real estate market - and make plenty of money for ur next generation!!!!

                If u r interested check out these web sites on r s cycles:

                http://www.foldvary.net/works/cycle.html

                http://aux.zicklin.baruch.cuny.edu/j...03/v14p233.pdf

                And the scariest one of them all :
                http://www.calculatedriskblog.com/20...set-chart.html

                2010 - 2012 is going to bad by this one.

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                • #48

                  #48

                  Re : Is it Recession in Indian R E ?

                  till the time we have this govt. no hope of real prices - only cartelized

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                  • #49

                    #49

                    Re : Is it Recession in Indian R E ?

                    huh? Did I miss something?

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                    • #50

                      #50

                      Re : Is it Recession in Indian R E ?

                      do u guys think that we are out of recession now . The realty prices have started moving north ward once again though not like earlier / boom period. The rise is there though marginal

                      Well, this time it's on the name of affordable housing ...there are no luxury and super luxury projects these days ...... and I have a strong feeling that most of these projects wont be delivered on time and a few may run away once again ..... one needs to be cautious at this time..

                      Pl. do comment..

                      Comment

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