Monday, January 20, 2014

Opinion: Real Estate prices in India: Running out of fuel?

Intro: Real Estate has been the most desired asset of poor’s and the dearest asset of wealthy. There were several reasons for its spectacular performance as an asset class, like opening of Indian economy two decades ago took out many from below the poverty lines, newly created jobs provided a descent income for the educated class, towns got bigger, consumption patterns and lifestyle changed, aspirations only got bigger. That was the period during 2000 to 2008.
a.  Healthier growth (2000 to 2008): Economic growth of the last decade led to a steep rise in demand for housing, and land requirement for infra projects. Real estate prices soared overnight but the valuations were justified. There were lenders lined up for all these projects which were expected to produce superior returns. Real Estate, construction and infrastructure industry created the new billionaires. (But many are off the list already). There were real estate brokers on every street helping the buyers and sellers conclude deals in a hurry. Govt. registrar offices got a new lease of life with ever increasing transactions. Banks thrived. Any new housing project would be sold off in a few hours. All rich and poor thought they would miss the bus if they did not do something in this space.

b.   Liquidity & fight against inflation (2008-2012): Along with growth, inflation too made its mark. Crisis in 2008 after the fallout of Lehman and the subsequent impact to housing sector in US led to a slow down in global growth rates affecting India’s own growth story. Many other financial issues suppressed until then began to surface. A term ‘PIIGS’ started doing rounds on the newspapers and TV channels. Central banks, Fed and ECB, took the route of easy monetary policy attempting to revive growth or at least avoid the possibility of a break down in the financial system. This led to a stubborn inflation during the times of a slowing growth. Gold and Real Estate became instruments to lock the wealth for those who prospered and who were already rich. A portion of the easy money flowed into commodities and also to emerging countries. This higher liquidity helped to maintain the real estate prices high.

Forming a top:

So what changed by the end of 2013? It is the reducing optimism and the belief in India’s growth story. 5% growth rate had become the new norm. Banks had to lick their wounds inflicted by Infra sector in the form of non-performing assets. US Fed announced tapering of QE3. Credit growth became tight with the measures taken by RBI. And the appetite in the house buyers reduced significantly. Small builders who could not hold on had to sell to bigger developers. This made the real estate prices stop from reaching new highs or at least it appeared so. Gold, another asset we are looking in tandem appears to be in correction zone.

Reducing new loans. Source: HDFC Sep'13 Quarterly results.

Declining sales trend at Unitech. Source: Unitech Q2'13-14 results
Has everything turned bad?
No and cannot be. The fall in Rupee had made the property in India cheaper by 20% for the Non-resident Indians. Those NRIs who earlier thought they missed the bus had an opportunity to board it again. And there were many new projects being launched to cater to this market segment.

What are the warning signals for the sector?

                           i.          RBI in its latest 'Financial Stability Report’ warned that, in the event of a credit risk due to failure of a major corporate, banks would fall out and the contagion would spread leading to a major collapse in the financial system. It identifies infra and construction sectors as being most risky and public sector banks being more vulnerable to this. If Govt. rescues these public sector banks it owns partially, it would avoid the collapse of but profitability of these banks would be gone. While this may or may not happen, this would limit the funds flowing into the reality and infra sector.
                          ii.          Liquidity would reduce as Fed increases the pace of its QE3 program. This would mean the end of easy and cheap money and markets will witness those funds leaving India back to their home country. This would make the cash king again at the expense of gold and real estate prices.
                         iii.          Drop in demand to due to slower economic expansion, fewer jobs being created than earlier decade, salaries not rising like in the last decade will impact the demand. A slump in new car market during last year proves that purchasing power of consumers has taken a hit.
                         iv.          Many (well most) real estate companies are running in losses, their stock prices are trading at multi-year lows and they are struggling to raise funds for their new projects. They may not be in a position to hold on the rising inventory for long if demand does not come back.

An analysis by Liases Foras shows correction is due. Source: Liases Foras company website


While it is difficult to say whether there will be a correction or not, which depends on how long the co-operation or nexus of banks and developers last, one can be sure that this industry is in troubled times. If it is a bubble already, it may not get any bigger this year.   

Sunday, January 19, 2014

Free to choose: A powerful documentary by Milton Friedman

Milton Friedman, winner of Nobel prize in Economic sciences, is more than a scholar understood by enlightened few. He was an advocate of a free economy, a market governed by price and its consumers than the policies of Governments.

His documentary ''Free to Choose" is meant for a common man, where-in, he explains the basic concepts of economics, and how they go on to bring the desired sociological changes in a nation and psychological changes in the individuals. He had a great influence from Adam Smith's 'Wealth of Nations', so we will find ample references to it throughout the video. His unique style of picking up a subject and explaining it in plain English by breaking it into minuscule matters with sufficient reasoning, and breaking many myths in between, gets the viewer very involved in the subject, clears misconceptions one had on the subject of Economics before watching this video.

After watching the full series (10 videos), I see the value he brings to the table. Is it the subject powerful or his explanation making it more interesting? I am sure to spend more time on his works.

Sunday, January 12, 2014

Book Review: In a free state by V S Naipaul

This novel is set in Africa and the whole story is told through conversations between two characters Bobby and Linda, who are on a long drive in a car. It explores the attitudes of main characters of this novel who are English (but are in Africa to aid the colonial set-up) towards Africans and vice-versa. The tribal conflict makes the African land unsafe to outsiders. Violence and rage erupts which the story has to witness.    

In the introductory note of this book, author Naipaul confesses he had conceived this novel during a period of his intense personal depression. I think that would have made this novel hard and full of pity. But his sentences are chiseled and writing style is precise, he can convey a complex emotion in a concise way. This book won third Booker prize in 1971.

Saturday, January 11, 2014

Book Review: A book of memory (Autobiography) by Sudhir Kakar

When a psycho analyst writes his memoir, it will sure to be more than his life story. This autobiography by Sudhir Kakar is an analysis of personalities and events which made him the person he is as an adult. This book begins with a characteristic narrative, remembering the day he lost his father and then moves on to formal style of biographies, a start with childhood memories. His childhood had influences of both maternal and paternal grand-parents and siblings of both of his parents. As he grew up he got more attached to his father ideologically. After he moved to a boarding school, letters become his way of regular communication with his father. This book also includes the account of lifestyle of the people lived in and around Punjab and few colonial places during pre-independent India. The pain separation of India and Pakistan brought during independence to the lives of Punjabis is well documented.

He got pushed to study Engineering against his own wishes but to obey the wishes of his father and he does not do so well in that although he completes the formal education. His travel to Germany for an internship  appears to be the time Sudhir took his life into his hands, became more expressive and begin to find an identity of himself. The five years he spent in Germany shaped his personality and he realized beyond any doubts that he is no more interested in a career in Engineering but wanted to be a Psycho-analyst. Despite resistance from his immediate family, he found support in Kamala, a relative and Vikram Sarabhai, a popular figure and also a friend of Kamala.

Living in Ahmedabad, brought him near to an interesting person in his life, Erik Erickson, an established author and psycho-analyst, who was in Ahmedabad to write a book on Mahatma Gandhi. Sudhir found a mentor in Erik and requests him to accept him as a trainee under him. Erik suggests to Sudhir to complete his PhD and join him at Harvard. Sudhir gets back to Europe to complete his doctorate and then heads to Harvard to be with Erik. That completes the formative years of Sudhir and his first book gets published during that time and puts him on the path where his passion is, to be a writer and a psycho-analyst. After his return to India, his associations got extended to many reputed organizations IIM Ahmedabad, IIT Delhi and others and his books also earned him name and fame, made him a mild celebrity. He was also summoned to provide services to Government which brought him closure to the inner circles of Indira Gandhi and Rajiv Gandhi.

In the midst of all his professional life and bizarre experiences, he got married to Apeksha against the wishes of both of their families and had two children, a son and a daughter. But after 25 years into marriage, marriage ran into trouble and they were separated. He then found Katharina, his second wife and made Goa his home. He currently lives there and the count of books he wrote are increasing and his contribution of the field psycho-analysis is being noticed all around the world.

This book is more than the account of author’s life as the author analyses many of the personalities he gets associated with in his growing up years and aftermath. While reading this, any reader can be put into melancholy, made to look back into his past life and analyze what made him/her or who were the greatest influences at important junctures of one's life.

Tuesday, January 7, 2014

ಪುಸ್ತಕ ಪರಿಚಯ: ಭಾರತೀಪುರ (ಅನಂತ ಮೂರ್ತಿ)

ಕರ್ನಾಟಕದ ಪಶ್ಚಿಮ ಘಟ್ಟಗಳ ನಡುವಿನ ಒಂದು ಊರು ಭಾರತೀಪುರ. ಆ ಊರಿಗೆ ಪ್ರಸಿದ್ದಿ ಬಂದಿದ್ದು ಅಲ್ಲಿನ ಮಂಜುನಾಥ ಸ್ವಾಮಿಯ ದೇವಸ್ಥಾನದಿಂದ. ಊರಿನ ಎಲ್ಲ ನಿವಾಸಿಗಳೂ ಮಂಜುನಾಥ ಸ್ವಾಮಿಯ ಭಕ್ತರು. ಎಲ್ಲ ಜಾತಿ, ವರ್ಗದ ಜನರು ಮಂಜುನಾಥ ಸ್ವಾಮಿಗೆ ಭಯ ಭೀತಿ ಯಿಂದ ನಡೆದು ಕೊಳ್ಳುತ್ತಾರೆ. ಆ ದೇವಸ್ಥಾನಕ್ಕೆ ರಾಷ್ಟ್ರಪತಿಗಳು ಭೇಟಿ ನೀಡಿದಾಗಿಂದ ಅದರ ಪ್ರಸಿದ್ದಿ ಇನ್ನು ಉದ್ದಗಲಕ್ಕೂ ಹರಡಿ ಇನ್ನು ಹೆಚ್ಚಿನ ಸಂಖ್ಯೆಯ ಭಕ್ತರನ್ನು ಆಕರ್ಷಿಸಿಕೊಂಡಿದೆ.

ಭಾರತೀಪುರದ ಶ್ರೀಮಂತ ಕುಟುಂಬದಲ್ಲಿ ಜನಿಸಿದವನು ಜಗನ್ನಾಥ. ಅವನೇ ಈ ಕಾದಂಬರಿಯ ಕೇಂದ್ರ ಬಿಂದು. ದೂರದ ಇಂಗ್ಲಂಡ್ ನಲ್ಲಿ ತನ್ನ ವಿದ್ಯಾಭ್ಯಾಸ ಮುಗಿಸಿ ಊರಿಗೆ ಮರಳುತ್ತಾನೆ. ಆತ್ಮ ಅನ್ವೇಷಣೆಯಲ್ಲಿ ತೊಡಗಿರುವ ಆತನಿಗೆ ಸಮಾಜ ಸುಧಾರಣೆಯ ಹಂಬಲವಿದೆ. ಅವನಿಗೆ ತನ್ನ ಪೂರ್ವಜರಿಗೆ ಇದ್ದಂತ, ಕುಟುಂಬದ ಜಮೀನ್ದಾರಿಕೆಯನ್ನು ಉಳಿಸುಕೊಂಡು ಹೋಗುವ ಮತ್ತು ಇರುವ ಆಸ್ತಿಯನ್ನು ವೃದ್ಧಿಗೊಳಿಸುವ ಬಯಕೆ ಉಳಿದಿಲ್ಲ. ಬದಲಿಗೆ ಭಾರತೀಪುರದ ಜನ ಜೀವನವನ್ನು ಪ್ರಗತಿ ಪಥದ ಹಾದಿಗೆ ತರುವ ಕನಸಿದೆ. ಅಲ್ಲಿನ ಜನರಲ್ಲಿ ವೈಚಾರಿಕತೆಯನ್ನು ಬೆಳೆಸುವ ಪ್ರಯತ್ನ, ಅಲ್ಲಿನ ಹರಿಜನ ಮತ್ತು ಹಿಂದುಳಿದ ವರ್ಗಗಳಿಂದ ಪ್ರಾರಂಭ ಆಗಬೇಕು ಎನ್ನುವುದು ಅವನ ಅಭಿಪ್ರಾಯ. ಆದರೆ ಜನ ಎಲ್ಲಿಯವರೆಗೆ ತಮ್ಮ ಕಷ್ಟ-ನಷ್ಟಗಳೆಲ್ಲ ಮಂಜುನಾಥ ಸ್ವಾಮಿ ಕೊಟ್ಟಿದ್ದು ಎಂದುಕೊಳ್ಳುತ್ತಾರೋ ಅಲ್ಲಿಯವರೆಗೆ ಆ ಜನರ ಜೀವನ ಶೈಲಿ ಬದಲಾಗದು ಎನ್ನುವುದು ಅವನ ಅನಿಸಿಕೆ. ಜನರ ಮೂಢ ನಂಬಿಕೆಯನ್ನು ದೂರಗೊಳಿಸುವ ಪ್ರಥಮ ಪ್ರಯತ್ನವಾಗಿ, ಅದುವರೆಗೆ ಹರಿಜನರಿಗೆ ಪ್ರವೇಶ ನಿಷಿದ್ಧವಾಗಿದ್ದ ಮಂಜುನಾಥ ಸ್ವಾಮಿ ದೇವಸ್ಥಾನದಲ್ಲಿ ಪ್ರವೇಶಿಸುವದರೊಂದಿಗೆ ಆರಂಭವಾಗಬೇಕೆಂದು ಪತ್ರಿಕೆಯಲ್ಲಿ ಬರೆಯುತ್ತಾನೆ. ಆ ವಿಷಯ ಕಾಳ್ಗಿಚ್ಚಿನಂತೆ ಎಲ್ಲಡೆ ಹರಡುತ್ತದೆ. ಜಗನ್ನಾಥನ ಪರವಾಗಿ ಮತ್ತು ವಿರೋಧವಾಗಿ ಅಭಿಪ್ರಾಯಗಳು ವ್ಯಕ್ತವಾಗುತ್ತವೆ. ಅವಕಾಶದ ಸದುಪಯೋಗ ಮಾಡಿಕೊಳ್ಳಲು ರಾಜಕೀಯ ಪಕ್ಷವೊಂದು ಜಗನ್ನಾಥನ ಪರವಾಗಿ ನಿಲ್ಲುತ್ತದೆ. ಆದರೆ ಈ ಪ್ರಯತ್ನಕ್ಕೆ ಹರಿಜನರು ಸಿದ್ಧರಿದ್ದಾರೆಯೇ? ಈ ಪ್ರಯತ್ನ ಜಗನ್ನಾಥ ಬಯಸುವ ಬದಲಾವಣೆ ಸಮಾಜದಲ್ಲಿ ತರಲು ಸಾಧ್ಯವಾಗುವುದೇ? ಅದನ್ನು ಈ ಕಾದಂಬರಿಯನ್ನು ಓದಿ ನೀವೇ ತಿಳಿದುಕೊಳ್ಳಿ.

೧೯೭೩ ರಲ್ಲಿ ಪ್ರಥಮ ಬಾರಿಗೆ ಮುದ್ರಣಗೊಂಡ ಈ ಕಾದಂಬರಿಯ ವಿಷಯ ವಸ್ತು ಇಂದಿನ ತಲೆಮಾರಿಗೆ ಹಳೆತು ಎನಿಸಬಹುದು. ಆದರೆ ಲೇಖಕರ ಶೈಲಿ ಮತ್ತು ಸಾಹಿತ್ಯ ಅನುಭವ ಈ ಪುಸ್ತಕದಲ್ಲಿ ಅನಾವರಣಗೊಂಡು ಒಂದು ಉತ್ತಮ ಓದು ಎನಿಸುತ್ತದೆ.

The story begins with Jagannatha, son of a landlord, who had been to England for higher studies returning to his native Bharathipura. Bharathipura is a village situated in the western hills of Karnataka, famous for it's temple. All the village residents are devotees of Lord Manjunatha. All castes and classes are fearful of the God. A visit to temple by President of India had made the temple and Lord Manjunatha even more popular and acceptable across the regions and religions attracts even higher number of devotees to the place.

Jagannatha, who is on the path of self-discovery, has socialistic bent of mind too. He does not find comfort in remaining a landlord and protecting and growing his assets. He wants to bring in a meteoric change in the society he lives in. He wants the thinking, lifestyle and the way people of Bharathipura lead their life to change for better. He thinks it has to start with Harijan or the backward class people. And he strongly believes that as long as common people fear Lord Manjunatha and hold him responsible for what happens in their life, good and bad but not themselves, their lives would not change. For breaking this belief he plans to take Harijan into Lord Manjunatha’s temple by breaking the tradition followed from old ages. He writes to newspapers about his plan and the message spreads across. It attracts both support and criticism. An opportunistic political party joins hands with Jagannatha. But are Harijan ready for this? Can this really bring in the change Jagannatha expects? Read this novel to find out yourself.

This novel was first published in 1973, so the subject matter may seem old to the readers of the current times but the gripping style and literary capabilities of the author are amusing and makes the novel a good read.