The Everyone Wins Indian Lottery

I was once offered a million dollar lottery for a thousand dollars with an assured prize of at least hundred thousand dollars. Great odds. When things are too good to be true, they almost always are. The lottery fine print stipulated a payout of a dollar a year for a hundred thousand years. However lame this joke may be, there is a real lottery joke being played in the Indian real estate market and the end result may not be funny for many who fall for it.

image credit:
http://www.zerohedge.com/contributed/2013-08-15/housing-bubble-bungle

A wealth manager who hasn't done much in years to make any wealth for me (maybe for himself - yes) called me to say he had a great wealth creating idea that would yield a 100% IRR in less than 18 months. I am always a sucker for such great ideas. Intrigued, I asked him to tell me more.

He said that there was a real estate project in an up coming area of a growth city in India being developed by a very reputed developer, and that there were just a few apartments left for sale, being made available at exclusive and below than market rates to exclusive buyers like me. Wow! I did not know I still qualified for that title. I asked him why the favour and his response was that the developer was not interested in tapping the local market and were looking at gentry from out of town as the development would be marketed to upmarket transient communities (meaning foreigners domestic and international). He explained the growth dynamics of the place and why it would make a great rental market in the future. Okay, I bought all he said, but did not understand how I would fund the Rs. 6 million apartment and get a 100% IRR at least in the next 18 months.

He look surprised at how ignorant I was on the way the financial markets worked. "Just pay 5% of the 6 million now and the stamp duty and registration charges. At the end of 18 months, pay just 15%, and that too if you wish to keep the apartment. If you sell on completion which will happen in 12 months, your IRR on cash flow can be as high as 500%, and if you cannot sell, then the builder will take it off your hands by giving you a 100% return on the 20% you invested. Mind well the developer will service the interest on the 80% borrowing until completion or 18 months whichever comes later" he said with a grin that would have done a Cheshire cat proud.

I asked if the entire arrangement would be documented and was told that the buy back could only be covered by a comfort letter from the honourable developer.

I told him to give me a couple of days to think about it. I did it and thought that the risk reward situation may be worth it and decided to meet the developer. At that meeting, I was told that there were only 2 apartments left at the Rs 6 million price point and maybe I should look at the larger and better Rs 8 million apartment that would be completed in 24 to 30 months as they were yet to break ground. I told the developer that I may not be eligible for the higher quantum loan based on current commitments. I was told not to worry and that it had a tie up with a NBFC (Non Banking Financial Corporation) that would fund me. I once again went into think mode.

I called up a few friends in the City and asked them about the project. "Don't even think of that area for now. No water, no infrastructure, its a development in the middle of the corn field, and the construction is not the greatest." I was told. Now I understood why the same was not making the local rounds. But, the market would surely change after 24 months, I felt. I did my math and realized that in the event I was unable to sell myself or the builder failed to keep his commitment (which was quite likely) then I would be left with an asset that would not return more than a 3% yield on my buying price. There was a very low probability of a 100%+ IRR and more a chance of me being stuck with a lemon that no actual user may want. I laid these arguments with the wealth manager who had slipped into a RE broker avatar realized that his commission was slipping away fast.

Right or wrong decision; I don't know. But I do know that the developer was playing with what was potentially my balance sheet and my asset as collateral to secure a cheap retail housing loan for himself which for all practical purposes was my liability as well. Servicing interest of 10% on a housing loan is certainly much cheaper than servicing a 24%+ interest on a commercial paper secured by direct collateral and personal guarantees. I also see that the morning newspaper is full of such schemes from cheap to expensive and exclusive houses that make people believe that all investors will win the real estate lottery based on the potential good days for the Indian economy.

image credit:
http://amazingstuff.co.uk/other-amazing-stuff/flying-balloon-house/#.VeGnySWqqko

All I can see through such schemes is that the development community is hurting across the board, and this is one more technique of trying to market goods at unrealistic rates to gullible investors looking for returns rather than real buyers. Sooner rather than later, irrespective of the way the Indian economy moves, the RE market will crash and will burn scores of well meaning middle class investors like those burned in the Chinese stock market crash. I don't have to say it but a lottery works on the principle of a few winners and many losers. Question is which side of the equation do you think you will end up should you decide to subscribe to the Great Indian Real Estate Lottery?

China Dragon Flu and Indian Elephant Flew?

http://imgarcade.com/1/sick-dragon

With our big neighbour's economic flu worsening by the day, India's political and economic think tank is surely worried. A small economy like that of Greece shook the world, China's woes could be catastrophic, right? The US seems to disagree. But then, for most of the nations that classify themselves as part of the developed world (the USA included), China is still an emerging market. Never mind that it is the second largest economy in the world today, and will continue to be one for quite some time; even if it treads at an annual economic growth rate of about 2% per annum (the present average of the developed world).  The US feels that China can look after itself and it is Europe that needs its tender loving care. the Chinese government has decided to stop interfering in the market and currency dynamics, at least officially. Don't know if that stand will send any form of positive signals to the rest of the world.

Thankfully for a fuel import economy like India, the global price and demand for all manufacturing related commodities have gone down as has global consumption. If it looks at it more from an opportunistic point of view, the Prime Minister's "Make in India" dream can actually come true. The PM must have extracted investments commitments of over US$ 200 billion from the several nations he has visited in the last 12 months. US$ 75 billion from UAE alone just a few days back. It was very heartening to see the welcome accorded to the Indian PM by the UAE Royalty, and citing the importance of strong ties between the two nations based on economic, political, and security synergies. The Middle East as a region has to follow the example of UAE recognizing that deploying petro-dollars in the developed world has lived its times and the region's future lies aligned with the emerging world.

elephant dragon

allsortsemporium.net

One may question if the commitments made will hold good, specially from China  given the current context. The commitment in actuality holds more relevance now than ever. One look at India's massive infrastructure growth plan of about US$ 1 trillion is enough for any nation to align with it as an economic ally, China will behave no differently. There is already word on the streets of China of  Chinese companies migrating to India. Politically, the elephant and dragon may still glare at each other, but economically, it may be the age of "Hindi-Chini Bhai Bhai" (Indian - Chinese are brothers). While some pundits predict the end of the Asian super cycle, I personally feel they have blind sighted India.

There is no gain without pain, and India will certainly contract some of the flu from its big brother. India having gone through many more economic shocks is hopefully more prepared to firewall itself thanks to the prudent measures of checks and balances in the form of an independently governed Central Bank and regulatory bodies that monitor the markets. The Indian Rupee has behaved itself well so far and has slid enough to maintain the Nation's competitiveness. Yes, it will slip more and make imports dearer. Maybe that's just what the doctor ordered to change the Nation's mindset from a CBU/CKD culture to build truly "Made in India" products. I have already started chalking out places to visit in India and sourcing local produce for cooking up food from around the world.

Finally, an old Chinese proverb (or at least will sound like one) - "An elephant growing wings does not become a dragon". As much as we may dream of surpassing China economically, that country is way too ahead of us. It will take some 21 years to catch up even if India were to progress to a 10% growth rate year on year. Too many moving parts need to come in place for that to happen. Not impossible, but honestly quite improbable. But then, we never saw unicorns in India before - now we do. 

Ha! and you think by growing wings you will fly?
Never underestimate the might of a common elephant.
http://fr.board.goodgamestudios.com/bigfarm/showthread.php?110954-Un-Jour-un-Th%C3%A8me/page217

                               The Chinese Economic melt has cost investors around the world some US Dollar 10 TRILLION in lisses. That is more than the entire GDP of China of US             $9.7  trillion. The flaming of DOW index should wake up the US for sure. The economic epidemic is real.                

The Trump(it) President; entertainment guaranteed.

This is what I got when I keyed in his name:

Donald J Trump for President: Make America Great Again!

https://www.donaldjtrump.com/

... real estate and entertainment. Show support for his presidential campaign here . ... Trump Banner. Show your Support for Donald Trump. Join Us. Donate ...

At least here is a man who is not afraid of admitting that America needs to be made "great" again. Most powerful nation in the world - it is; but "great" it is not - at least in the eyes of most people in the world. But again; the word is very subjective, and I don't intend to debate it. In my opinion there has been no greater nation than the US of A despite its many flaws. Ah! ah! ah! Subjective.

Hillary Clinton dismisses Trump campaign: 'It's entertainment'

CNN‎ - 12 hours ago

And she is right. After all an entertainer (which he himself admits to being) will do what he is best at doing; specially when it's not just America; but the whole world watching the election. Entertainment is good. Actually; it is great. Specially for an easy to bore global audience that gets its high from a drug called excitement thanks to technology.

Dismissing Trump may not be such a great idea as this man has been written off several times in his business avatars, and each time has returned back larger than life.

Then the trending question

How will Donald Trump's campaign survive this one*, strategists wonder

By Eric Bradner, CNN 
* referring to his attacks on Fox News host Megyn Kelly, his steadfast decision to lash out at anybody who questioned him, and Roger Sone's exit from his campaign.
Has anyone of the above wonderers bothered to check how many Donald Trump jokes are floating on the net? He insults and gets insulted just like McEnroe did each time he was on the tennis court. Even then; people cheered more for McEnroe despite him loosing to his iceberg opponent.

One can only speculate if DT thought he was playing "apprentice" with Roger Stone or if the later was playing "double or quits" with him. I am pretty sure there are many who would have emailed their CVs to DT in a flash to fill the spot. I heard a few from India applied too; but given his remarks on the immigrant community; doubt if any of my brethren will qualify.

Since it is a time for wondering about DT, let me do 5 of my own. Yeah! everyone is into numbers now:

1. Has he been influenced by Hitler on immigrants? And, does he know that virtually everyone in the US is an illegal immigrant - technically - historically.
2. Will he choose a woman as his running mate to win back the women to his side? Actually, his track record on loosing and getting women on his side is quite good too.
3. Think of it - if he became President; what would the value of all the "Trump Towers" around the world shoot up to?And, would he have time to run his business empire in addition to making US great again?
4. Then again - if he did not; would he write a bestseller "100 ways to loose a winning Presidential campaign".
5. After winning; would he play "The Apprentice" in the Senate and fire everyone not in agreement?

Actually "apprentice" reminds me that there is a young politician in India who could learn a lot from DT and his campaign. Specially how to turn negative into positive. So; rather than wasting his time shouting slogans from cheat sheets outside Parliament, and wasting tax payers money in disruption of proceedings (I can tell him for sure that it's not at all entertaining); he should contribute a large sum to DT's campaign (DT will even do an advert for that contribution) and buy-in an apprenticeship. (Otherwise, given our boy's record, may not be possible).

There was time when the Reagan campaign was written off as a bad joke and we all know what happened. Maybe America needs a businessman who knows how to get out of trouble. I don't think anything is going to bother him in his pursuit to be Mr. USA No.1 and let's get used to Mr. Trump blowing his trumpet for some more time to come; entertainment guaranteed.

The Porn and Corn of being Indian.

Well the Govt. of India went one up on the Govt. of Maharashtra's ban on beef and put a blanket ban on viewing the buff (porn) on the internet. Some 857 internet sites carrying pornographic material have been shut down with the official explanation being that the ban is directed to put an end to child pornography and women abuse that is on the rise in this great Nation of ours. A noble purpose and I am not being hypocritical here in stating that.

Trending questions: Is it constitutional? Will blocking sites succeed in curbing the distribution of such material? How can the Govt. generalize that all watchers of porn are perverts or will succumb to the unacceptable and bizzare excesses? Will it put a stop to child trafficking or curb/reduce pedophilia? Is pornography responsible for abuse against women? Is this not an attack on personal liberty?

Well; I could fill this blog with the angst views being expressed in various mediums by several intellectuals. The answers to most of these questions are rhetorical too. But; if you are a follower of "conspiracy theories"; then the Govt. has super succeeded in shifting the Nation's attention from "Lalitgate", "Vyapam", the dysfunctional monsoon session in the parliament; and other such irksome issues like the debate on the death penalty post the hanging of Yakub Memon. Sex; one may admit it or not, evokes the same impact across all class, creed or religion.

India; it possibly gave the world its first acknowledged treatise on sex and erotica; the "Kama Sutra". Several ancient temples across India sport sexual imagery by way of carvings. So; when did such an evolved civilization that could handle the beauty and art of sex become a Nation of debauched perverts? If propaganda is to be believed then the blame falls squarely on the rise of the internet and smart-phones. Expensive and hard to procure magazines have given way to free and easy access of smut. That's a big - big laugh. I know from my own growing up days that acquiring porn was never a high cost nor difficult. Likewise, all the related ills of present time prevalent even then. Except for the fact that the media fraternity and mediums for distributing was not that large; and there were more compelling issues to stick as headline news.

But; that is still not the answer to its ever growing demand. One could start pinning the blame on the increasing male:female gender gap or the influence of foreign and now media or films or TV shows, travel overseas to sexually "liberated" countries, or even sex education in school for the demand in content to satisfy the very base carnal instinct in mankind (women included). Reality is that it may all be true; so what do we do?

Yes; of course; blame the law for being ineffective in curbing the menace caused by the dark side of pornography. India has been governed under a Indian Penal Code as far back in time as 1860 which lists homosexuality too as a punishable offence. The law of the "Raj" was never thrown out, but was adopted and revised several times based on the supposed needs of society; and each revision left the previous one intact and operable to the point where even the keepers of the law are confused on how to act on them.
                                                                                                                                   
http://static.sify.com/cms/image/pidrIpcdhbeef_small.jpg
Indians are not the only followers of kink. There are probably a lot more warped minds in other nations too if one was to measure it on a  percentage of population scale. Nor is a growing majority of India afraid of being labeled as promiscuous; and this is not just an urban phenomenon. Morality is a very subjective matter and the old school definition of a just and moral society went out of the window a long time back. Unfortunately, many who claim to be the guardians of culture and morality have no qualms against corruption or unethical practices. If prostitution is illegal becuse it corrupts morality; then by that argument corruption too is a form of prostitution as it is a blot on India's morality?

One can keep arguing this never ending debate just like that of capital punishment or scam or anything that has a counter view. For now; I will stick to believing the conspiracy theory. Now why is that song "Let's talk about sex baby" playing in my mind? As of now thinking about sex is not banned I hope...moreover.....Can you believe this.....

Government climbs down, says ban on pornography temporary. Hey! While the Govt. decides on Porn let's figure what's hahappening to Indian Corn? I am told it has been corrupted too by a technology of the biological kind to make it look and taste sexy and sweet. How orgasmic?  Food Porn better watch out.




https://asiafoundation.org/resources/pdfs/StanfordHumanTraffickingIndiaBackground.pdf