Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book
“When everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”
“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” -
a senior executive at an international financial services group, who did not wish to be named.
"Most people told us
house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." -
John Paulson, trader, who bet against subprime market and made $15 billion.
The most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. -
Sanjeev, comment from another site
Prachi Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting.
- Mumbai Mirror
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Wake up Mr. RBI Governor and Mr. Finance Minister. It is you who hold the reins to prevent mishaps in the Indian economic story, before elections come about. If you sit aside and watch cheap PE funds sloshing around in to hideous real estate schemes, then I am certain you will not mind opening your ears a bit and listening to man who will not hesitate a bit from playing vulture to the carcasses of the stock markets.
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2 Comments:
Your articles about Real Estate are really good. And this article about Soros is spot on. But i'm somewhat weary of taking such a gloomy outlook on real estate. Granted that prices went to unreasonable levels in 2007,,but prices have corrected by as much as 20% in areas like Gurgaon already due to double whammy of high-interest rates and sky high property prices. So don't you feel that the bubble is self-rectifying in the medium term?? In any case,,most realty stocks are already well down from their peaks and only DLF/Unitech and Mumbai players are still quoting at a PE premium.
Hi Karthik,
Thanks for your message. I think prices far outstrip the demand. I am not sure about Delhi, but Mumbai, the shortage is a hoax. It is only the desperate or the egoistic who are buying. And of course, the believers that the same return is possible on real estate as the last 2 years. A drop in margins awaits real estate companies for sure, but this is more a back of hand pitch. Over the next 5 years, reasonable land prices will keep margins of companies in place. Days of astronomical prices is went!
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