What was scary is a recent default by Orbit – that too for an amount of Rs. 96 crores. For a builder with operations in Mumbai…this should not have been a big amount…but well, it did happen.

It is amusing that the middle class keeps its money in savings accounts, fixed deposits, RD, etc. – and banks lend to builders. Builders use that money to buy land – and take the price high.

Then the same people go and borrow from a bank and buy the property WHICH was driven up by them. If you go to any builder he tells you that prices can never come down, and you should always buy a house slightly bigger than you need BECAUSE you will buy only one house in life. Completely wrong.

The lesser amount that you borrow, the lesser interest you pay. Life is as simple as that. And it is not difficult to LEARN TO LIVE ON LESS. Because a lesser house means a lesser EMI and thus lesser pressure of job loss. The generation that is currently in the under 30 year age category need to be worried about loss of job AND NOT BEING ABLE TO FIND a job of similar salary IMMEDIATELY. Not that it will happen to everybody, but please remember some of the old norms are being questioned.

I know of one very big BFSI which has dramatically cut down on the MBA recruits – and shifted to graduates being put through a 18 month training program. They have even tied up with an University to give them a diploma and a degree (later on – 24 months). Thus the industry is coping up with the salary hikes in various ways.

Many jobs may just shift out of Mumbai – be careful about that too.

A recent example of a real estate deal was almost spine chilling. Standard Chartered bank which bought a property in 2007 for Rs. 325 crores (and should have expected about Rs. 1300 crores according to retail optimists!!) sold it in 2014 for a price of Rs. 285 crores (a nominal loss of Rs. 40 crores)- and an inflation adjusted loss of about Rs. 300 crores.

Wake up to the new realities.

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  1. Great Input.Any subra trained and convinced reader got saved…He never kept Huge Money in Banks as the typical unguided middle class…Instead we kept six months House expense in Liquid fund…and then concentrated on Asset allocation…Given our money to Naren,Siva,Kenneth,chirag,Prashant and To Govt (PPF)….we also learned that there is no such thing as the common misconception created by Media and experts about Good Loan and Bad Loan…we subra readers learned ALL LOANS ARE BAD AND THEN STAYED AWAY !Simple !!….we also learned that in most things if we keep Ego Out for owing everything from Pin to Gas Guzzlers to So called dream houses in Metroes by leveraging our 20 years of corporate life….and instead RENT Things as and when required…we not only stay EMI free but also have KING (Cash is King ) at our disposal which we are investing in Great Businesses with sound managemments and thus taking steps to create WEALTH…..Thank You Subra !

  2. Hi Subra
    You are pointing that the money kept in savings Accts/FD, etc in banks by the middle classes are the culprit.
    But even the company funds can be diverted for real estate as it happpened in the case of Satyam, or even the government funds (paid as advance money to contractors), etc.
    The real estate crooks will find all ways to route money from various channels.This is a very big lobby. What can the common man do?

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