Anshu Sharma

India's Exploding Real Estate Market: Shades of the Florida Condo Bubble

I am waiting for someone to paint the other side of the picture. On my own blog and here, I see most of us agreeing to higher valuations than incomes and yields can support.

The South East Asian economic crisis comes to mind when property prices dropped precipitously.

Hopefully, the innocent will not get hurt. History, although, suggests otherwise.

India's Exploding Real Estate Market: Shades of the Florida Condo Bubble

I haven't found a way to short the real estate market in India. The only way (and very round about and with only fractional exposure to real-estate) would be to bet that when real-estate bubble bursts there will be colllateral damage and certain entities (like ICICI perhaps) might suffer but I would be unwilling to use this strategy as I am bullish on the Indian economy and even with a real estate correction, bank stocks may do okay.

India's Exploding Real Estate Market: Shades of the Florida Condo Bubble

I should have said non-resident Indian citizens living in the United States cannot directly buy/sell equities in India. Those living in Gulf Countries (Middle-East) are exempt. ICICI Bank website states "NRIs residing in Gulf Co-operation Council (GCC) countries of the United Arab Emirates (UAE), Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar trade in Indian stocks in an easy, quick and hassle-free manner."

In any case, this has very little do with the asset inflation scenario I describe above.

Thank you for letting us know.

India's Exploding Real Estate Market: Shades of the Florida Condo Bubble

I was advised by ICICI investment rep that she could guarantee 30% return although 70% annual return is the most likely outcome. This is not only too bullish, its outright illegal.

My concern however is not so much from pushy sales people but that the fundamental assets are so overvalued that they create inflationary pressures and over supply.

I don't know when or if a correction will take place but that this does not look very pretty.

Goldman Sachs: Indian/Chinese Institutions Could Buy American Banks

You make some excellent points. Let me respond point by point:

1. Yes, Indian banks don't want competition in their backyard. Who does?
2. Its not just about cost of processing. US banks can outsource to low cost centers too. Smaller competitors (Indian/Chinese banks or even ING Direct in US) are often willing to provide same services for lower costs. This is not about utopia - the Chinese and Indian banks need to globalize if they want to compete with likes of HSBC and ABN AMRO.
3. Yes, branches are needed. In fact, they provide a more sustainable competitive advantage to bigger banks than any online feature possibly could.
4. Yes.
5. Wealth Management and other high-end businesses would be hard to break into. But that is the reason to buy rather than organically build out a global banking operation.

Overall, I agree with your theme and arguments.

(All opinions expressed here are personal.)