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Monday, January 2, 2012

Happy New Year 2012 and refinements of long term predictions

Politics and Military: The main changes seen this year have been with regard to the Jasmine revolution. Most of these have taken place in Arab countries with low per capita GDP (Egypt 2000$, Libya 3000$, Tunisia 1000$, Syria 10000$, Yemen similarly low).

In all of these countries, military dictators with erstwhile super power support have fallen – Libya and Syria remainders of Soviet empire, Egypt American empire. The main reason for superpower involvement has been oil economy of middle east. Egypt, Syria and Tunisia don’t have much oil, Yemen and Libya have antiquated oil infrastructure requiring capital infusion, making cost of extraction much above 25$ per barrel.

While much has been made of non-militant Islamic nature of the revolution, it is likely that most if not all of these countries might degenerate into sectarian conflicts. Violence even in non-oil producing countries is likely to have a spill over effect into Soudi and Kuwaiti administration.

This revolution is therefore deleterious and will damage the stability of the entire region. This is a big negative for India and for oil prices going forward.

Broad long term directions emerging out of this middle east churning are likely to be:

1. Increase in cost of oil production. This is likely to emanate from the increased social sector spending required from Saudi and Kuwaiti rulers to placate their population. So real cost of production will include the increased welfare expenditure. This is a big cost compared to the rock bottom prices of extraction currently.
2. Increasing distancing of US from the crisis. US has greatly improved the oil infrastructure of Iraq but US has benefited little. US is now shifting to Mexican and Brazilian Crude, Lousiana Crude, Gasification of coal, Shale gas and fracting extraction methods, and Canadian tar sands as their main energy source.
3. Increasing competition for middle eastern crude between Europe and China, with USA standing aloof is now likely. US will not invest in a region where it is not getting returns in terms of oil
4. Increasing premium for Brent Crude, currently 10$ above WTI on Nymex. In times of stress this is likely to increase to a high of 20-25$ above WTI in times of geopolitical tension
5. Chinese growth even during these recessionary times is likely to push the remaining excess capacity in Soudia (currently producing at 85-90% of total capacity) to full capacity utilization within 3-4 years.
6. India will be a passive spectator, deeply affected by this premium for our own crude, benchmarked to Brent.
7. By 2016, Chinese growth is likely to be stifled by increasing energy prices. US will stand unaffected because of their national resources. Chinese growth is likely to moderate and be around 7-8% per annum because of these two stifles i.e. 1. Oil price increases in Brent and 2. Decreased capacity for Europe and USA to consume Chinese manufacture, lack of markets.

Chinese responses to this situation will be two fold.
1. Increased conflicts in South Chinese oil exploration
2. Increased links with Iran.

US is unlikely to expend capital on a situation which does not benefit directly. Decreasing production of North Sea oil is likely to push UK and Norway to increased dependence on Brent. France, Germany and Italy also heavily dependent on Brent and are likely to see no growth. Increased military co-operation between European nations is likely from 2014 onwards, probably under British leadership – so UK is likely to stay out of the Euro but is likely to lead military adventurism in Iran, Iraq, Baluchistan, Algeria and Libya. Of the Euro zone, it has the strongest military and blue water navy. They are likely to acquire a Aircraft carrier (currently lacking) and increase fighter jets and cruise missile production. These military expenditures might get ready ‘army” recruits from the less developed Euro zone and Eastern Europe, since employment generation is likely to be sluggish in these regions.

One can expect at least 2 hot wars in the next decade. One is likely to be in Argentina, since, the Falklands might generate enough possibility of new oil resources – this war is likely to push UK to get a Aircraft carrier. Chinese are likely to acquire 2 aircraft carrier groups, one for Indian Ocean Arabian sea and one for south Chine sea, to protect their oil economy. The second is probably Iran.

Exact flash points in the likely war is difficult to predict. Most likely to be Israel/UK joint attack on Iran expecting to effect a regime change. Probable in 2016. Possible scenario is Iran causing sectarian destabilization of Iraq, along Shia Sunni lines, with civil war and Hezbollah like activity by Shia militants, resulting in an oil spike. Since USA is likely to disengage from Iraq, civil war or partition of Iraq is likely. Finding it impossible to tolerate this situation, UK and Europe will attack Iran with Israeli support. Iranian meddling is likely to increase only if it is sure of Chinese offtake of its oil through transKashmir oil pipeline. This pipeline is likely to be built in 2014, after the current recession gets over and oil prices shoot above 150$ per barrel. War is very likely if Brent shoots above 300$ per barrel thanks to Iraqi instability.

Other possible flashpoints are Saudi Arabian militance/Jasmine like event.

n India’s own backyard, two main flash points will be

1. Baluchi militancy. The origin is the Pakistani highjacking of the baluchi gas fields for their own use giving little to the Sunni Baluchi. Iran also suppresses the Sunni Baluchi, resulting in them being poor tribals. Chinese intervention in this situation is likely to defuse the crisis, since Chinese have interests in piping the Baluchi gas to China.
2. TransKashmir pipelines from Pakistan to China are likely within 3-4 years and will ratchet up India China tensions. Damming of the Brahma putra will also cause tensions.

Meanwhile the Pakistani situation is fast becoming intolerable for whole world. A general degeneration of Pakistan, Afghan, Uzbek/Tajik, Baluchi regions into internecine tribal warfare is likely. Pakistan, like India, is corrupt and inefficient and very populous. Economic failures of Pakistan very similar to India but the people of the tribes are more aggressive and war like, making the situation more explosive than UP/Bihar, where people are like cattle and accept the crap.

Again, exact flash points and exact way the situation will deteriorate are difficult. Broadly, a complete fissure with USA is likely within next three years. Pakistan military is likely to join lock stock and barrel with Chinese dictatorship, but this will cause great hardship to the common people because of economic failure. Volatile situation is inevitable.

Ultimately, China, Pakistan, Iran, Shia Iraq, Syria, Afghanistan rump, North Korea, Burma and parts of French Indochina will form an Axis with probable productivity of 10 trillion combined (including 2-3 trillion from Russia which will give outside support).

Against this axis will be the Euro zone, Soudi and similar oil dictatorships, Japan and sundry affected east asian economies of some 20 trillion combined GDP. USA will stand away, but sell military hardware to the allies and India, Bangladesh, Lanka and many isolationist east and south east asian countries will also stand away, although they will diplomatically support the European alliance.

Probablilities:

1. One hot war in middle east in next decade = 90%
2. Hot war within 3 years = 30% (probably pre-emptive strike against Iran by retreating US and Euro powers with Israeli help – before the alliances and ententes are sewn up)
3. Iran withstanding the strike without regime change = 70%. Iran is too populous and powerful to crumble like Iraq, the people are solidly behind the regime and are patriotic.
4. Chances of Iran rebuilding efforts with Chinese help after strike = 90% (Iran will definitely seek help away from Western alliance and Chinese are sure to accommodate)
5. Degradation of Egypt into economic turmoil with militancy within 3 years with economic failure and loss of productivity = 40%
6. Libyan turmoil with poor oil productivity continuing for many years = 40% (situation already exists and is likely to deteriorate)
7. Turmoil in Afghanistan = 70%
8. Turmoil in Pakistan = 90%
9. Turmoil escalating in Baluchistan = 60%
10. Chinese solution for Baluchi turmoil = 10%
11. Iran transkashmir pipeline = 80% by 2015, 100% by 2020
12. US strike against Paki Nukes = 20%. They are unlikely to face the strong Pakistan military, who have already taken counter measures and have moved their nukes.
13. US leaving Pakistan within 2014 = 60%

Economics Global.

1. US slow growth for next decade with subpar to nil growth = 100%. Total per capita GDP has hit peak productivity and is unlikely to improve from here
2. Europe is likely to decline because of oil pressures and decadal growth might be nil or even negative because of aging.
3. Japan likely to show nil growth or a decrease of GDP per capita as aging continues
4. China might show moderate 7-8% growth but will grow year after year, because of good economic policies and good governance. Doubling or GDP to 10trillion $ is inevitable by 2015 or 2016, with luck by 2010 they might be 15 trillion economy, on par with US and Europe. Good place to invest.

Risks: Geopolitical ambitions might cause very volatile stock market. Risk of another cold war (10%) with US and Euro and Japan might limit the possibilities.

5. Russia likely to double per capita GDP to 25000$ and a final 2-3 trillion output, despite aging/declining population, over this decade. Good place to invest

Risks: Geopolitical adventurism with China might endanger their economy. (2% chance – Russians are smart enough to stay away and reap the rewards of oil and mineral wealth)

6. Brazil will show strong growth to 25000$ per capita GDP over this decade . They will probably reach 4 trillion with luck if enough price escalation for their resources is achieved. Best place to invest

Risks: Communistic tendencies might resurface with corruption and crony capitalism. Poor governance might reduce stock market return

7. India. Likely to show 6-7% long term growth as detailed later. Good place to invest.

Risks: Multiple governance deficits and geopolitical stupidities are likely, limiting growth to no more than 6-7 %. Returns in dollar terms are likely to be more moderate than in Rupee terms.
8. Small emerging markets: Turkey, Malaysia, Indonesia, Vietnam, Thailand likely to be the best emerging markets for returns. Middle east unlikely to get investment because of turmoil = further pressure on oil economy as their population has no other resource or human development possible.

Best dollar portfolio for long term = Brazil 30%, Russia 25%, China 10%, small emerging markets 30%, India 5%.

Probable size of global investment portfolios over next decade = 1 trillion per annum for a total of 10 trillion over next decade = 50 billion per annum of foreign capital into India as FII, FDI etc.

Indian Political situation:


Continues to be challenging. Original scenario continues to play out. Congress and BJP have deteriorated rather than improved over last one year. Chances of poor political governance probably 100%

India economic situation.


India is the poorest and least developed large country in the world. My simplified understanding of the situation (see Venkytalks for a more detailed discussion as posted elsewhere in RE bulls thread, stock advice thread etc of this site) is as follows.

Most countries have achieved 10,000$ productivity including Mexico, Brazil, Malaysia and Russia. China and Indonesia re at 5000$ productivity levels.

India is much lower at 1000$ per annum levels. Our total GDP of 1.6 trillion comes from 1 billion people at 500$ per capita productivity (= 25000Rs per annum) with output of 500 billion, 200 million at 5000$ per annum levels (= 20,000Rs per month) for 1 trillion $ and 5 million people at 25000$ per annum productivity (=1 lakh per month) for 125 billion $ for a total of around 1605 billion = 1.6 trillion $ using ball park figures.

Our middle class is therefore at 5000$ productivity and manager class is at 25000$ productivity. Our poor classes at 500$ per annum are unproductive subsistence level of productivity.

Assuming a 7% growth, in 10 years, output of 1 billion people will be 1000$ per annum.

The middle class of 200 million will double to 400 million people with output of 5000$ per annum or 200 million with output of 10000$ per annum, both scenarios resulting in output of 2 trillion.

In the former situation, more inclusive growth will take place, but people already at 20000 pm productivity will continue to earn only 20000 pm after 10 years which is a pernicious situation.

In the latter scenario, there will be no increase in number of people in the middle class, but their productivity will increase to 40000 pm levels. Since the poor will be still at 1000$ per annum = 5000 Rs pm levels, this will increase disparity.

In the manager class, again, either the populations will double to 10 million people at 1 lakh per month productivity or population will remain same at 5 million with 2 lakh per month productivity. Since these are the people who can afford proper real estate, getting an exact handle on which of the two scenarios is likely is important.

My estimate is of course the middle of the road. So from 5 million they will become 7 million at 35000$ per capita, amounting for 250 billion dollars of productivity. 35000$ is close to the peak productivity levels of Europe, Japan and USA and as explained earlier, it is unlikely to exeed this level in a country like India.

Most of this doubling will come from the children of already existing manager class and engineers.

An analysis of these numbers assuming 7% growth per annum meaning a doubling after 10 years reveals the economic failures inherent in our low grade economic growth. Without growth above 10% (i.e 3 trillion economy in 2017 vs 2020 in above scenario) India faces a disaster. Governance failure is costing us a terrible price indeed.

The poor quality of politics witnessed in 2011 is indicating that India cannot grow consistently above 7%. All growth above 7% is a mirage – caused only by high inflation and currency depreciation hiding the subpar performance.

Already, the 1.4$ trillion economy of 2010 has failed to translate into 1.6 trillion in 2011 – instead, the currency depreciation has wiped out our growth and real growth is probably negative. Assuming 7.5 % eventual growth in 2011 and 15% currency depreciation in 2011, our GDP is probably now 1.2 trillion instead of 1.6 trillion, i.e negative growth of 7.5%.

Probable long term trends over next decade:


1. Inflation will be 7-10% per annum for this decade
2. Currency depreciation of 5% per annum can be assumed, contributing half of the anticipated inflation
3. Growth will be 6-7% over the decade. Any growth above 7% will be accompanies by higher inflation and Rupee depreciation which will be above the norms causing degrowth rather than growth as seen in 2011.
4. RBI stimulus of rate reduction will fail because any growth ahead of fundamentals by such artificial stimulation will cause inflation and depreciation to wipe out the growth in dollar terms

Extreme long term trend – inevitable growth of India over next 3 decades causing a 5 fold increase of productivity from 1.2-1.4 trillion currently to about 15 trillion eventual output of 10,000$ per capita.at a population of 1.5 billion.

This will compare to Chinese output of 50 trillion with population of 1.5 billion at output levels of 35000$ per capita in the next 3 decades in best case scenario and worst case scenario of 30 trillion at 20,000 $ per annum per capita productivity.

Note: Growth from 1 to 15 is a 15 times growth while 5 to 30 is a 6 times growth and 5 to 50 is a 10 times growth.

Inevitability of India increase in production has reduced somewhat given the much higher levels if misgovernance witnessed in 2011, while best case scenario for China has improved, given the great performance of its govt in 2011.

I have come up with some new concepts for asset allocation.

1. Asset of multiple (3) decades: This is the One asset which will decide whether your investments will sustain you during your retirement or not i.e, if you entered this in your thirties, you will be very comfortable in your sisties and beyond.

In the 1960s, it was real estate (plot in South Extension), in the 1970s it was real estate (Janakpuri and Munirka flats), in the 1980s it was real estate (DDA flats everywhere), in the 1990s it was real estate (Gurgaon) although it is still not 3 decades, but already it has proved to be the investment of 3 decades from returns in 20 years itself.

So in history of India, you cannot afford not to be in real estate. You cannot retire without owning your own home at least

My prediction for asset of multiple decades for 2000s (by 2030) = real estate.

This is because I feel that 2010 to 2020 will be a bad year for stocks and with high inflation and depreciation of currency and probable wars in the region, stocks will be more risky and real estate should do equally well or better than stocks even into 2030.

My prediction for asset of multiple decades for 2010s (by 2040) = stocks.

It is inevitable as India matures that the hinterland will be opened up for real estate development, which will reduce the premium for RE. After 2020, real estate will lose its charm and stocks will outperform.



2. Asset of the decade: This is the asset which on holding for many years in a buy and hold strategy, delivers best and safest returns. Safest is important because if another asset gives better returns with less risk, it is preferred.

In the 1960s it was FD (not real estate because it was a difficult market to enter), in the 1970s it was FD (not real estate because of same reason, not gold because it was too volatile), in the 1980s it was real estate (safer options and increased income made it possible to reduce risk, gold was volatile and depended on Rupee depreciation), in 1990s it was FD, in 2000 it was stocks (safer and more liquid than real estate, safer than gold due to lack of currency risk).

My prediction for 2010-2020 = real estate.

Stocks will be volatile and risky. this current decade is the decade when real estate will guard against inflation. Poor governance and corruption and black money will ensure that real estate will still be the best investment. I think FDs will also be a good investment over this decade. I prefer real estate over FD because currently, real estate is better regulated than in the 1970s and 1960s and safer investments are possible

3. Avoidance of a decade: The asset you should avoid in a whole decade because it kills the return - the rest are OK

In 1960s it was gold and stocks (FD and real estate were OK), in 1970s it was stocks (Gold, FD and real estate were OK), in 1980s it was gold (stocks, FD and real estate were OK), in 1990s it was gold and real estate (FDs and stocks were OK), in 2000s it was FD (stocks, real estate and gold were great).

My prediction for asset to avoid for 2010-2010 is again gold. Stocks, real estate and FDs should be OK.

4. Asset of the year:

This is the asset for either short term trading or the asset in which long term investors should increase exposure because it will give the best return.

Asset of the year in 2009 was stocks, in 2010 it was real estate, 2011 it was FD.

My prediction for 2012: Asset of the year is FD.

5. Asset to avoid for the year: This is the asset which is likely to kill returns.

For 2008 it was stocks, for 2009 it was FD, for 2010 it was nil (everything was good), for 2011 it was stocks.

My prediction for asset to avoid in 2012 is gold

Gold is self evident - risky and multile currency event risks which are unpredictable. Real estate should be OK if later this year, if prices correct and RBI lowers rates. Stocks should be OK if they fall some more and Rupee depreciates some more. FD is anyway best for the year.

Predictions for 2012

Politics: Samajwadi and Congress form govt in UP. Based on poor performance of BMW so far - firing ministers has only confirmed that they were corrupt. Extreme stupidity. Minority reservation should pay rich dividends for Congress. Ajit Sigh might perform very well in Western UP, Congress and SP might have informal seat sharing and increase muslim vote share. BMW will lose muslim and brahmin votes - congress will get brahmin votes. SP plus Ajit plus Congress is a winning combination. BJP will be wiped out in UP (also in Uttarakhand and Punjab). Mayawati seems to have blundered and her game plan has boomeranged. UP everything is caste. Muslim - Yadav - Brahmin - Jat combination for SP+Congress+RLD will definitely win the election. This is already seen on the ground. With splitting of remainder of votes - BJP getting Thakur/Bania and BSP getting Dalit votes and the rest evenly divided, there is little chance of BSP returning.

Her firing of ministers has only confirmed her corruption - it shows her in bad rather than good light. Her statehood division is seen as a ploy which fell flat after initially trumping the congress. Rahul efforts are largely seen to be bearing fruit.

Basically, the new combination is becoming the wisdom on the ground and is commonly acknowledged. This prediction is nothing new - many have already done so and is commomplace now.

Farmers of Bulandshahar and NOIDA are essentially not happy and will go with Congress/RLD combine. This was supposed to be the big benefit for BMW which has failed to materialise.

A lost election spells big trouble for BMW. CBI disproportionate asset case will be active again. New cases will be filed. Many big developers like JP, 3C, Wave, NRI etc will be troubled with new bribes needed = big losses.

Rapproachment between Mukesh (congress) and Anil (SP) Ambani is also acknowledgement of shifting in power equations in politics. Mukesh was being hounded for bribes by Congress and if SP winds, the two brothers will emerge again as kingmakers (after Mukesh was in minor difficulties)

It may cause project abandonment in NOIDA and GNOIDA area in 2012. Until election results, one should stay away from NOIDA RE. One should also avoid JP and JP infra stocks

Inflation: Will stay firm. Food prices will fall but imported inflation will continue. I expect about 7-9% inflation for 2012. inflation will be fed by NREGA - farmers will earn less on crops but their NREGA money will go a lot longer with low food prices, making the rural economy buoyant.

Currency: Dollar will stay firm. Rupee will be stable with negative bias. Rupee at 54 chance is 60%, Rupee between 54-60 chance is 30% and Rupee below 60 is 10%

Ecconomy: It will degrow for one quarter till budget and then bounce back very strong. Rural economy will be strong and will lead the bounce. Final growth for 2012 about 6%

Stocks: Will be stable or fall 5-10% in first half of 2012. Second half is likely to outperform. Sen should fall below 15000 in the first half (50% probablity - great buying opportunity). It should cross 18000 at some time in the year (60% probability). It might cross 20000 (30% probability - will be a sellin opportunity and a chance to rebalance stock portfolio and shift mutual funds to more defensive bets)

Bonds: Should be stable. Any rise is unlikely. I dont think RBI will be able to lower rates, since it has to defend Rupee and that requires rates to be high. Stable to mild fall is likely. Best asset in bonds is a bond fund - will benefit from any fall. My prediction for yields at end of 2012 is above 8% (30%) and above 7% (70%). Not more than 1% fall in other terms.

Gold: It should be stable with negative bias - I expect no change with gyrations of plus minus 10% over the year. Avoid this asset.

Sector allocations for 2012:

Maintain Bonds 30% (shift maturing FDs and FMP to short term funds, shift some 10% interest into equities when markets fall)

Stocks 30% (should have fallen from 2011, increase exposure at falls)
Real estate 25% (no fresh allocations after 2011, maintain previous, dont sell existing investments))

Gold 0-5% (cut exposure to 5% now, get rid of rest if gold reaches 28000-30000 levels)

Global Funds: 10-15% (shift gold into Latin American funds, energy funds, global real estate fund)

Equity allocation: Mutual funds 50%, direct stocks 50%

For direct equity

Banks 15%
IT 15%
FMCG 15%
Pharma 15%
Auto 10%
Power 2-5%
Plastics 2-5%
Metal 2-5%
Utility 2-5%
Paints 2-5%
Gems 2-5%
Services 2-5%
Agro 2-5%
Misc 2-5%

2012 Recommendation (choose from following stocks according to sector allocation)

1. HDFC Bank, (now)
2. Yes Bank, (now)
3. ICICI Bank, (after 3 months)
4. SBI (after 3 months)
5. Infosys, (now)
6. TCS, (now)
7. HCL, (now)
8. eclerx (now)
9. Godrej, (after 3 months)
10. Bata, (now)
11. ITC (after 3 months)
12. Sun, (after 3 months)
13. Cadila, (after 3 months)
14. Lupin, (after 3 months)
15. Divi (after 3 months)
16. Bajaj, (now)
17. Bajaj Electricals (now)
18. Mahindra, (now)
19. Exide (after 3 months)
20. BHEL, (after 3 months)
21. Crompton greaves, (after 3 months)
22. Cummins (now)
23. HiTech, (after 3 months)
24. Sintex (now)
25. Hin Zin, (after 3 months)
26. Tinplate (after 3 months)
27. IGL, (after 3 months)
28. Power Grid (after 3 months)
29. PTC(after 3 months)
30. Asian Paints (after 3 months)
31. Gitanjali, (after 3 months)
32. Rajesh (after 3 months)
33. ICRA (after 3 months)
34. United Phosphates (now)
35. Talwalkars, (now)

In any asset allocation, stock/RE will always be there. To increase the allocation in a particular year, one can always find a specific stock or a specific location/RE type (land/flat/commercial) which is undervalued - and one should allocate in that specific sector of the asset.

For stock I have already posted above.

For real estate, while I dont think RE will do well in 2012, if one mush allocate, some sectors are still attractive.

Real estate reccomendations:

1. In Gurgaon, I feel HUDA plots in developed areas, G99/Amstoria plots, resale purchase of Emmar/Pioneer flats in GCX, resale purchase of DLF/Tulip in SPR, Most of the new luxury launches in GCX between 6500-7500 price range are good bets. Also, resale of Vatika and other NH8 flats and resale plots at 55000 to 60000 prices will make a lot of sense.

Avoid extreme overpriced luxury specs beyond 7500 psf in GCX flats, all flats in DEway, commercial (all), overpriced plots in GCX beyond 70,000 (i.e original white purchases at company prices to be avoided). Also avoid Daruhera plots. Manesar plots also doubtful.

2. NOIDA I think will have a troubled 2012 because of political change. Prices in resale and distress re-sales in some instances may throw up good opportunity for buying at low prices.

For investment, expressway resale purchases at 3000-3500 psf in BSP in good builders are a good opportunity (137. JP, Today 135 etc). Plots in GNOIDA pari chowk area might be available at lower prices by end of 2012 when it might be an attractive entry at 30000-35000 psy. Commercial in the form of NA shops or mixed commercial/residential areas might see good appreciation. Buying RTM villas and flats in old NOIDA sectors might give the best returns in 2012 through 2015.

Avoid new launches completely. Avoid luxury in 2012 unless there is significant correction and distress sale (likely soon).Avoid LB/LP, mall type commercials. Avoid plots in Yamuna expressway or any purchases in expressway area - likely to be stressed in 2012. If BSP is defeated, JP plots in expressway might see problems and distress sales unless enough bribes are forthcoming - even then JP will be in trouble because of identification (old favourites have to be troubled - that is the unwritten rule of politics).

3. Kundli, Faridabad, Main Delhi - Avoid all.

Shop purchases in Dilshad garden Vikaspuri etc might be the best bet in Delhi - although prices are too high, one can strike a good shop deal in periphery. Shops in old colonies like Gulmohar park, Niti Bagh etc might see a sudden traction with prices shooting from 70L to 1 Cr plus - many businesses might suddenly start renting these shops in good areas with parking and facilities - including restaurants which dont get enough parking in lal dora areas.

4. Ghaziabad - best destination for small time investors and rental property. Expect good lift in prices in 2012 with major deliveries. Shops are also good investment here.

5. Bombay - avoid flats. Expect plateau to downward prices for 2012. Commercial RE in various locations are currently down and form the best bet for 2012 through to 2015. Old city locations might be the best followed by mulund, thane, Kalyan etc.

6. Pune - I think it will be down. But dont follow the RE scene there.

7.Bangalore, Chennai likely to be up in 2012 as rates are lowered (more linkage to IT firms).

8. Tier 2 and tier 3 towns should stay plateaued.
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