Received a ton of email from regular readers of this blog and decided to cover most of the questions related to investments etc., through this blog post. So here I share a few moves we made. Let me know if you have any recommendations ..
On how I fared overall….. Luckily I was shielded from the drop to a large extent due to a few moves I made knowingly or unknowingly before and during my return to India
I still have upto 50% of my investments in US and the decision we made in 2006 to leave them in metals and energy before moving to India helped us get good returns in VGPMX ( Vanguard Precious Metals ) and VGENX ( Vanguard Energy fund ). Recently, Oil at $100 was too much for me, so I dumped my position in Energy and decided to sit on cash. I had enough to tap into Home Builders ETF ( ITB ) and VGSIX ( Vanguard Real Estate Fund ) and a chunk of C ( Citigroup ) at their 52 week lows during the recent pullbacks in the US market. I continue to have a high exposure to precious metals and GLD and am actively working on a plan to reduce that. What do you think? .. Should I move out of Metals now ?
I never seriously got into the Indian stock market until recently. Black tuesday was a great opportunity for me… Infosys at ~1300, Neyveli at ~100, Prithvi at ~210 and a lot more. For the first time we also picked up a few Nifty futures and made some cool cash in the short term at 5100. Right now, I am long in all my positions and have started nibling at Long Nifty Futures. We made a few long term investments in 2 Real Estate funds.. ILFS Milestone [ yield driven fund ] and Peninsula [ development focussed ]…. Also opened SIP’s for kids in BNP Paribas and UTF, and plunked a good chunk of money in Reliance Power Fund on black tuesday at a pretty decent NAV. I continue to be bullish on Energy, Infrastructure sectors of India and am expecting real earnings and returns to roll in another 2 years. At this time, I feel that IT and Banking have been oversold and I am accumulating at every available opportunity in large caps like INFY, TCS, ICICI and others like Canara Bank etc.
Did I apply for Reliance Power .. Most popular question in the last 2 weeks.. LOL!!! .. Yes, I did with the partial payment option and got an allocation of 16 shares.
Lots of questions about Hyderabad Real Estate.. Will gather the latest details and post it in the next 1 or 2 weeks. You all already know whats happening with Telangana..
In a series of steps, the finance ministry is clamping down on the flow or foreign funds into the Real Estate Sector. Government firmly believes that the overseas funds are contributing to the asset bubble in India.
Recently the finance ministry barred those setting up integrated townships from raising ECB ( external commercial borrowings ) and made it difficult for small players to raise such borrowings by lowering the ceiling on the interest rates to be paid on such debts.
Today’s Finmin is proposing to impose FDI status for foreign investments in realestate pre-ipo deals. Anything falling under the FDI guideline will have a 3 year lock in period and the investor cannot withdraw before 3 years. RBI is also trying to identify ways to curb the misuse of funds, by proposing new norms to monitor the use of the funds raised for real estate investments.
Technorati : finance, india, realestate
Indian rupee has finally touched the much awaited 42.x mark. It clocked at 42.87 today and appreciated over the 43 rs per dollar mark. Thats almost a 10% gain in 9 months.
View the graph
This is a short post to keep you updated on the monetary situation in India… Inflation at 6.5%, CPI at 8%
RBI feels that there is too much liquidity even at this stage and is concerned about the Inflation pressures.. so, they have reacted yesterday by raising CRR [ Fed Reserve Requirement ] and Repo Rate [ Fed Funds Rate ] .. ( Equivalent Us terms have been provided as links for reference.
CRR has been raised to 6.5% [ 2 phases to be in place by April end ] while REPO to 7.75%.
So, get ready for another hike in home loan, auto loan and other loan rates. Also bank deposits will fetch a much better return than investing in many other instruments in the short term. Bank profitability and small and medium size companies will be hurt most due to this squeeze..
This may also be a chance to buy that dream house or plot at a lower price.. will update the situation once the banks announce their decisions on interest rates.
Indian economy is overheated and its particularly visible in the metro’s and Hyderabad. Frenzied M&A, Over valued real estate, Rising prices in commodities etc., shows why the finance ministry is worried. Inflation today at 6.75%, Recent increase in CRR and Repo rates by RBI is a very clear indication that the government is concerned about the common man not being able to afford anything anymore.
Bank lending rates have moved from a range of 8 - 10% to 10 - 14%. As banks are in a squeeze since increased CRR will drain 14000 crores out of the banking system as committments to RBI for their existing loan base. So, banks are willing to pay above 9% for deposits compared to the 5% they were paying when I landed here 6 months ago. May not be too long before it reaches the good-old 18% rate. It is not a distant possibility, considering the issues that RBI and the finance ministry are constantly warning about the over heated and overly liquid economy.
Hyderabad realestate prices according to realtors are still booming, but the reality is that they have softened more than I expected. Try to sell a plot and you will get a dose of reality. I have seen folks get offers of 50% of what the paper value was when they really wanted to get rid of it. In the recent days areas like Jubilee, Banjara, Kavuri Hills seem to have softened more than I wanted to see. 6 months ago no one was willing to even consider talking about less than 60-70K in these areas and now many options are available at 40 and above. Even gacchibowli and kondapur have pulled back considerably, and we recently took advantage of the low prices and acquired a small plot.
Coming to the builders, No doubt, there is a demand for apartments and houses, but with the interest rates inching up every day, there are very few people left with cash to invest. Anyone who has put into land is waiting for it to recover back to the 2006 levels. I dont mean any disrespect, but dont believe the realors and builders that are still looking for the 4000 - 7000 per sqft in Hyderabad. They must be really out of their mind. Recent announcement of L&T phase II at 4000/sqft and some complexes in Banjara Hills asking for 7000/sqft is way overblown. Villas are reasonably priced in the gopanpally area, but there is still room for negotiation since the area is not that close to the business areas like the builders seem to potray. Also, land around / behind chirec [ Some have clearances and some dont .. please be weary of narne and other lands with issues there.. but it may not make a difference in the long run since the govt is looking to get rid of ULC soon .. ] is available for good prices now a days if you look for bargains, you will certainly find them.
On the financing front.. I recently dealt with a large bank to get a loan to cover one of my apartment purchases from a long time ago. This was purely to get the basic deductions that I needed which I discussed in my prior post about tax deductions etc. Banks seem to readily agree to a loan of 60 times the net monthly income. Now lets take a techie who gets 50K Gross per month [ Which I feel is the median salary of some what experienced techies in hyderabad ], after taxes he/she ends up with 30K per month as net … and that equates to a 18Lakhs of loan eligibility. How many sqft do you think they will be able to afford at the Rs4000/sqft ?.
That was a quick rant about hyderabad .. will try to blog more this week.. Keep reading..
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