Do Indian Newspapers Report False Real Estate Prices??

Almost all the Indian newspapers that I read on a daily basis have started an exclusive section called 'Real Estate'. This particluar section is a major revenue generator for them because I see a lots of advertisement on the pages.

On the right hand side of the main page there was a column that talked about the rates that are 'prevalent' in the Delhi/NCR region. I was absolutely shocked to read the prices, they were higher than what even the brokers were quoting. The Source of the property rates in various locations of Delhi/NCR was a property website.

So I picked that newspaper and website and started some analysis. (I will not take newspaper or names of the property website for obvious reasons.)

The 'prevelant price of any product be it cement, steel , stocks, food, property is determined by the 'Transaction' price. For the benefit of the starters when a trade happens it has two prices. One is the 'Seller' Price , which is the price at which seller quotes a product. Other is the 'Bid' Price, which is the price which buyer is willing to pay for the product. And when the seller and buyer price matches the product is sold at a price which is called 'transaction' price. The same principle applies across all markets and stock exchanges of the world.

So if a seller wants to sell a house at $200,000 but the buyer is willing to pay only $150,000 the transaction does not happen. Now if somebody asks what is the 'Prevalent' rate of the house. What do you say? Do you quote Seller's price $200,000 or the $150,000 which buyer is willing to pay. We know that no transaction happened. Here the newspapers fool peole by doing a small fraud.

I logged in to the property website whose source the newspaper had quoted and started looking for rates in Delhi/NCR region. I noticed that the 'prevalent' property prices quoted were the "Seller' Price. It was not the price at which the 'transactions' were happening. The property websites in UK always report the 'Transaction' price in an area. It doesn't matter what stupid price the 'Seller' wanted to sell his house for.

If some persons log into a website and wants to sell 1 BHK for 1 million dollars, does it become the so called 'prevalent' prices in that area. who is validating it? No one. And all these newspapers report these ambiguous rates.

Interestingly on the same property website there was Find buyer section where I tried to find what is the price a buyer is willing to pay for the 'property' in Delhi/NCR area. There were more than 45K buyer's and they also had mentioned the price they were willing to pay for the house.
Below is the chart. You can see the number of buyers who have the budget between a price range.

(Click on image to enlarge)

So you have seen that these are the kind of prices a buyer is willing to pay for the house. This is the 'prevalent' rates of property. This is the price at which the supply should come in.
You can see that hardly there is any demand for houses priced at above 60 lakhs INR. But 90% of the prices are above 60 lacs. Even after my IIT degree I am not able to undertand the maths of the property websites, newspapers and the builders. Clearly some nexus exists between them.

Let us create the awareness movement and let us tell to everyone so that these guys are not able to fool us.

India Misleads on Inflation Figures

A very big fraud has been happening right under our nose in India and we were all taking False Claims of Indian authorities all this while.  

Almost every Friday Since last 7 months we are cheering up that Indian inflation is coming down. Is it really true? Prices are going up like anything.

India calculates its official inflation based on Wholesale Price Index (WPI) rather than Consumer Price Index (CPI) based inflation. WPI is never an indication of the inflation simply because the consumers do not buy from wholesale markets. They buy at retail level. Most economies like US, UK, Japan, France, Singapore, and China etc. have selected CPI as its official barometer to weigh its inflation. And hold your breath even Pakistan follows CPI. (And all that while you laughed at high inflation in that country).

But our country, India, is amongst rare countries of the world, which uses WPI as its official scale to measure the inflation in the economy. Simply because WPI is always lower than CPI, thereby painting a false picture to the electorate that prices have fallen. So figures of 2.63% as claimed by Indian authorities are untrue. As per CPI our inflation figures stand at 10.5% in January up from 9.7% in December. Now you can make out the huge difference between WPI and CPI, 6.5%!

If that is the reason why CPI is being used by Indian authorities? I see two main reasons.

1. Since WPI figures are always lower than CPI, the innocent public of India is fooled into believing that prices are coming down and hide the actual price rise on the pocket of consumer.
2. WPI index tells us about commodity producers, manufacturers, bulk sellers and market owners. A low WPI is an indication to them that their selling prices rate is decreasing and gives them all good reasons to raise the wholesale prices. After all money for elections come from these rich people.

If we see Academically also the WPI calculation in India is flawed.

1^st Flaw - At least 1,918 quotations should be received for assessing changes in WPI but Indian authorities invite not more than 1200 quotations. So price information is not even.

2^nd Flaw – From 435 commodities in WPI , more than 100 are no more important from consumer point of view so the price fall in these 100 commodities does not really affect the Indian consumers.

3^rd Flaw - There is a huge difference between the provisional and final index figure!! Once in April 12, 2008, the provisional figure of inflation was 7.33, which were revised as final inflation figure of 7.95 what a healthy error!!

4^th Flaw - WPI measures the general level of price changes at the level of either the wholesaler or at the producer and does not take into account retail margins. WPI does not reflect the actual price hike, which the consumer is paying.

5^th Flaw - Service sectors are not duly accounted in WPI. Service sector like health and education are important as consumers are increasingly spending more money on these items. So if education fee goes up or Doctor fees goes up, it doesn’t matter to Indian government.

6^th Flaw - WPI measures the price changes from the production side and never from the consumption side It is surely a lop sided viewpoint of consumers.

Besides all these Frauds Indian Authorities will thump their chests at bringing down the Inflation. That’s what I call 'Shamelessness'

Realty sector to be under scanner

Real Estate sector in India is undoubtedly the most corrupt sector in India. Even though Satyam Scandal happened in IT sector, one must not forget that its root lied in Real Estate ( Maytas Infrastructure.). Read on this report from Hindu

Striking a note of caution for real estate developers, Mr D. Subrahmanyam, Executive Director of the Housing and Urban Development Corporation Ltd (HUDCO), said, after Information Technology, the real estate sector could next fall under the scanner of regulators in transparency matters.

HUDCO is a fully-owned enterprise of the Government of India engaged in financing housing projects and other urban developments. Addressing a seminar at the Realty Expo 2009, organised by the Confederation of Real Estate Developers Association of India (CREDAI), he said, “The next target of the national regulator after the Satyam scam may be the realty sector as it is known to contain elements indulging in unethical practices.” Speculation on real estate transactions by both buyers and sellers often result in pricing out of genuine buyers from the market, he observed.

The banks and financial institutions refrain from financing real estate projects as company balance sheets and other corporate papers often lack transparency, he said. “The asset agreement is considered a weak ownership document as a mortgage for financing documents,” he said, adding that some developers also deliberately avoid taking completion certificates.

On the strategies to be adopted in a period of slump, he said, “The developers should make a realistic study of demand and supply situation and affordability issues before investing in projects.” The sector also needed a grater degree of regulation, he pointed out.

Mr Harshvardhan Neotia, Chairman of the Ambuja Realty Group, said the current correction in real estate prices and costs is healthy for the industry as it gives leeway for the developers to become more vigilant and quality conscious. Mr Pradip Kumar Chopra, Chairman, PS group, said on the sidelines of the seminar that prices of housing units in Kolkata were down by nearly 25 per cent on an average.

Mr Jayanta Kumar Sinha, Chief General Manager of the State Bank of India, said there is good demand for houses from “genuine buyers” and that the situation would stabilise during the next financial year as cost of loans were being rationalised. ( Note that SBI is hands in glove with the present government to prop up prices and hence comes this statement)

The Realty Expo 2009 is being held here at the Science City grounds from March 4-8.