Real estate could be next to crack…but

Gold is under tremendous pressure internationally, so India may also see Rs. 25000 (just speculating, actually no clue) but Swaminathan A Aiyar says so in Economic Times.

http://economictimes.indiatimes.com/opinion/columnists/swaminathan-s-a-aiyar/gold-to-be-a-lousy-investment-in-the-next-decade/articleshow/19537567.cms

I am not commenting on the price of gold at all. I do not think that to be a good investor you need to be playing the forecasting game. I belong to the Warren Buffet school of gold prices, and never believed that it is a good investment. I do hold gold, but that has nothing to do with my market view. It is the gold that my wife brought with her during our marriage. Needless to say I have not seen it AT ALL…it is in a locker operated by my wife….

What about real estate?

Well I do think it is far beyond the reach of the middle class. Why jobs cannot get shifted out of Mumbai? Will shops survive with the kids being able to buy things on Jabong? or Jabong’s equivalents? Ebay, etc. will dramatically alter the margins of the shops.

However SBI, HDFC, ICICI have balance sheets with about Rs. 500,000 crore worth of assets. So if prices of RE fall, these institutions will suffer a big HOLE in their balance sheets…

However R Jagannathan (Jaggi) has some views….like Swaminathan…so read these too…

http://www.moneycontrol.com/news/business/why-property-is-biggest-con-jobinvestors_852422.html

Again not commenting on the price of land esp in urban India. Also it is not always that I agree with Jaggi…but this article is nice – and of course it is worth reading….amuse yourself.

http://jamesaltucher.quora.com/Never-Own-A-Home-Again

 

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9 Responses to “Real estate could be next to crack…but”

  1. Dr M.Chandrashekhar MD on April 15th, 2013 at 6:58 pm

    Excellent article. Jaggi has gone deep into the merits & demerits. I have always liked Jaggi’s views in First Post.

    Politician-Builder Mafia nexus is sure to ruin our economy & us.

  2. Subra, I read all the articles by Swaminathan just like yours 🙂 , but lately he has not been the good economist, at least in financial segment, Guess why ? so I take it with pinch of Salt.

    While his advice to FM sounds good, his view on Gold will not hold true, I bet.

    Nikhil

  3. Gold is PLAYED globally, so the local ppl doesn’t have any way to manipulate it. Just they too PLAY with momentum (is that right word to use?)

    But RE is local PLAY. It MAY won’t come down but stay where it is upto inflation reaches it.(this too is some other’s view which is logical). Bcoz there is not TICKER for RE which say that the price is THIS & IT FELL DOWN FROM UR BUY PRICE.

  4. http://alphaideas.in/2013/04/15/why-property-is-not-the-biggest-con-job-for-investors/

  5. With due respect to alphaideas….picking one anecdotal evidence to prove a point is wrong. Criminally wrong. However if 16% over 36 years is the consideration, there are plethora stocks which have done that. Forget picking a Wipro or a Colgate, the sensex has given 19%+ dividends – clearly about 21%+ kinda return.

    Now go and see the returns of the best share: Wipro. 10,000 is worth about Rs 300 crores. Viola.

    Anecdotal evidence is of no use. Equities all over the world ON AN AVERAGE have outdone REAL ESTATE. If you pick up Defence Colony, pick Wipro. If you pick RE index pick the sensex.

  6. 3 Yrs ago I had invested 2 lacs each at the same time in Gold and FD @ 10.

    Today Gold is valued at 1.4 lacs and FD is of 2.7 lacs.

    My RE returns and MF returns also did not beat FD returns.

    May be I have entered at wrong time. I have started my investment into various portfolios in last 5-7 yrs only. I need some confidence booster about my diversified strategy.

  7. Let me add on one example that I have recently witnessed. My family friend runs a small fleet of light trucks. In the last one year, there was a significant escalation in terms of insurance amounts, higher interest rates from truck finance institutions, govt taxes, fuel price, spare parts, mechanic garage service charges, traffic police fines, tyre price, drivers salaries and even check post service fee.

    However due to competition, there is a double whammy. First, the truck which used to make 30 trips a month is only making 20 trips/month. Second, they are unable to raise the trip cost.

    This is simply unsustainable and the owner has gone bankrupt. What used to be a private organization with 20 employees now does not exist. The owner has turned as driver elsewhere and he is more happy today than he was a owner.

  8. The property crash is so near.

    The gold crash has demonstrated what will happen when unreasonable speculative bubble bursts. The results is all there to see. Gold has easily lost 1/3 of its value in a matter of 1 year. Although personally I believe gold may not fall much from here ( 2300 per gm Indian price), I expect property market to fall like a pack of cards.

    Do not underestimate greedy,cunning Indians of today’s age. They are not like people 2 decades back. If crash comes, it will be ruthlessly play out as Indians are ready to do anything to make money nowadays. Especially after the new economic policy (wrongly attributed to ‘not fit to be clerk’ MMS).

    In internet age the crash can be huge.

  9. The real estate fall will not be steep. The biggest reason is the volatility. So it takes quite sometime to fall. By the time some other issue comes up then the Real estate stay afloat. Last 10 years I’m seeing this trend. I think it is very difficult to imagine 1/3 value eroding on real estate as seen in Gold.

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