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Real Estate Bubble ? A curse.

Chidambaram claims the inflation in India is only 4%. Most industrialists and thought leaders in Indian including our theoretical economists praised the budget. We have in India, a sychophancy spiral, the minister says something and everyone praises him without a mind of their own. At a social dinner with old friends, the host who stays in a fast growing suburb of Aundh, bought his apartment for Rs 1400 sq ft 3 years back is now selling for Rs 3500. As I look outside his house nothing has changed, unplanned development everywhere, traffic jams, power cuts in Pune averaging 2-3 hours. Average productivity of the Indian worker is going down, one has to deal with traffic jams going to work, one loses time deal dealing with corrupt Indian government servants for basic services, cost of housing and utilities has gone up. So how can India cope with providing efficient manpower to the global economy. I do not agree with the inhuman China manufacturing model, but it is driving the world mad. There is a constant supply of electricity, hundreds of young girsl are packed up in dorms and do 12 hour shifts for 6 days a week for 50 weeks, efficient road and ports bring in and ship out material.

In India until recently everyone had an opinion on cricket, religion and politics. Now it is superceded by real estate and for those that have an internet connection, we have star day traders. These traders have no clue what the company does, but a good session of black jack or a game of rummy, is the order of the day. In a market that keeps going up of course winners will outnumber losers.

If you are buying a house to stay, buy with caution, if you believe this rise is going on forever, very likely you will wake up to a bad morning, and no one likes to be woken up from a good dream.

Chidabaram is one of the biggest liars this country has seen in a finance minister. Petrol prices have gone up, food prices have gone up, real estate prices have nearly tripled and our clueless finance minster says inflation is 4%. This proves the fact we are stupid people, not individually but as a society yes.

A good response from Shekar who is in the food business

Inflation! the biggest farce. I have been in the food industry from the day i was born. When i steped into business in 1994 the price of Maida was 420.00 per bag. The same bag is now 1250.00. Just last year the wheat cost has been 9 % lower than todays price. What exactly is the Finance minister talking about. Everything that touches a comman man has increased in excess of 8 % and he claims the inflation is 4. A big joke. Diesel – the back bone of all transport has increased dramatically. Crude seems to be rising every other day. Power charges goes through the same yearly drama and lands up increasing by 10%. Earlier the KEB was paying interest on the security deposit now it pays none. Think about anything, rents, car prices, food, potato, onion, atta just anything. you will be surprised about the quantum of increase.

12 thoughts on “Real Estate Bubble ? A curse.”

  1. Inflation! the biggest farce. I have been in the food industry from the day i was born. When i steped into business in 1994 the price of Maida was 420.00 per bag. The same bag is now 1250.00. Just last year the wheat cost has been 9 % lower than todays price. What exactly is the Finance minister talking about. Everything that touches a comman man has increased in excess of 8 % and he claims the inflation is 4. A big joke. Diesel – the back bone of all transport has increased dramatically. Crude seems to be rising every other day. Power charges goes through the same yearly drama and lands up increasing by 10%. Earlier the KEB was paying interest on the security deposit now it pays none. Think about anything, rents, car prices, food, potato, onion, atta just anything. you will be surprised about the quantum of increase.

  2. Have you ever heard about growing demand? Inflow of money? Increase in aspirations? More number of working individuals? Reduction in savings mentality? Urban Migration? Mentality away from agro-economy? It might alter your opinion about Mr. Chidambaram.

  3. The real estate bubble is for real.

    Consider this:

    50000 sites in MYSORE alloted by MUDA are empty. Can you imagine it? 50000 is a big residential area / colony. And you know what ? Electricity is used to light up the streets in all these areas during nights. Everyday.

    And prices are at all time high. With its lazy population, and laid back environment, Mysore is the last place any fast growing company would liek to be in.

    There have been a spate of press releases by the Govt. that there are some 40 applications from big companies for land. (Why Land?) Let them set up offices and then claim exemptions and land.

    Honest people are at the receiving end.

    India has become a den of corruption. Black money is driving the market to a large extent. The second biggest factor is easy availability of loans from major private banks. The third factor is Home loans. Last but not least is greed of people that every thing is OK. Like the PM being pally pally iwth Mushraff. What abotu the 187 people who died in Mumbai.

  4. India’s booming growth spurs inflation, putting squeeze on consumers
    By RAJESH MAHAPATRA
    THE ASSOCIATED PRESS
    (Original Publication: April 29, 2007)

    NEW DELHI – From hefty pay hikes and foreign vacations to new houses bought with cheap mortgages, India’s middle class had never had it so good, riding the past four years’ unprecedented economic boom.

    But now, a spike in inflation is playing party pooper.

    High economic growth, averaging more than 8.5 percent annually since 2003, has spurred demand and caused prices to rise so much that consumers are starting to get squeezed. That could make it more difficult for people to repay loans, which have grown at a faster rate than incomes have risen.

    With real estate and stock prices at record highs, fears are growing that a financial crisis might be brewing if borrowers can’t repay loans. If that were to happen, it would dash hopes that India’s rapid growth would lift millions out of poverty. Overseas investors who have been dumping billions into the economy, would also be hurt.

    To cool growth, the central bank has raised interest rates several times over the last year, forcing commercial banks and housing lenders to increase lending rates, causing consumers with adjustable rate loans – popular among the urban middle class – to see their monthly payments balloon.

    Sushil Aaron, a researcher at a diplomatic mission in New Delhi, bought an apartment last summer even as housing prices soared. But now he has put off plans to replace his old car and has stopped buying books because his monthly mortgage payment has jumped more than 20 percent to $1,000.

    “It’s a double whammy,” he said, referring to surging housing prices and rising rates.

    People like Aaron are complaining despite forecasts from consulting firm Hewitt Associates that salary increases at Indian companies will average 15 percent in 2007, topping Asian countries for the fourth straight year.

    But the millions of poor laborers, who have seen only meager pay hikes, have been hit particularly hard as costs of basic commodities such as cooking oil and vegetables have nearly doubled in the past three years.

    The inflation rate, based on wholesale prices, touched a two-year high of 6.73 percent on Feb. 17 and has since mostly stayed above 6 percent, but retail prices have risen as much as 10 percent from a year ago.

    Virender Negi, a driver for a New Delhi-based export firm, has stopped buying milk for his two children because his monthly salary of $130 is no longer enough to pay for grocery and house rent.

    “At this rate, I will never be able to make my ends meet,” said Negi, who has been borrowing from friends and relatives for about a year to balance his family budget. “I have no money to pay my (6-year-old) daughter’s school fees.”

    The Reserve Bank of India, the nation’s central bank, first spotted what it called “signs of overheating” in November. But officials in the federal government brushed it off until the governing Congress party lost elections in two states because of voters’ resentment over rising prices.

    The government then reduced import duties and banned futures trading for several essential commodities to ease supplies. It also ordered state-run oil companies to cut fuel prices.

    But the impact of those moves, which some analysts saw as coming too late, has been limited, and much of the inflation-fighting task is left to the Reserve Bank of India, which has raised rates three times since December.

    The RBI has also increased the cash reserve ratio, the proportion of deposits that commercial banks must hold in cash, three times since December so to lower the amount of money in circulation.

    Exacerbating the central bank’s problem are the billions of dollars in foreign investment and remittances that have flowed into India in recent years, leaving banks flush with funds.

    In the past two years, bank loans have surged nearly 30 percent annually. Loans to commercial real estate grew as high as 80 percent last year.

    If asset prices crash, borrowers could begin to default on repayments, setting off a chain reaction that could plunge the banking system into a crisis.

    Some of the country’s largest banks have already started reviewing what could potentially turn into risky assets.

    “If you don’t worry now, then you will end up with a price bubble,” said Shankar Sharma, head of Mumbai-based brokerage firm First Global. “And when the bubble bursts, you will have a problem that will last for years.”

    Meanwhile, top officials no longer talk about accelerating economic growth, although until recently the government believed India’s growth rate could move close to China’s 10 percent rate.

    Announcing the latest rate increase March 30, the central bank said its focus has shifted to “reinforcing price stability” from the previous stance balancing growth with moderate inflation.

    “There is a desire to slow things down. The question is to what level,” said Saumitra Chaudhury, a member of the Indian prime minister’s economic advisory council.

    Most factories are operating at full capacity, and ongoing investments would take 12 to 18 months to bring new capacity on stream to match rising demand from consumers, according to a recent RBI survey.

  5. Situation in Pune has gone worst. Affrodability of common man has become negative. High end flats are not getting buyers. IT may also shrink which will lead to reality bubble burst

  6. Inflation in India is decided over a game of bridge and a drink of cognac. Chidambaram should be a doctor instead of an FM. Consider the ways and times the inflation number is doctored each week.

  7. A regulatory system must be brought around by the Govt. to control the current real estate trends.According to the rates at which developers are buying property from individuals ,the selling rates of developed property will be seen going through the roof.

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