You've got a suicide note !

“It appears I am destined for something; I will live.” - Robert Clive

In a recent alarming study, The Economics of Suicide, researchers have tried t unravel as to why trying to kill yourself may be a smart business decision. Here’s an excerpt from Slate on the economics of suicide:

Marcotte’s study found that after people attempt suicide and fail, their incomes increase by an average of 20.6 percent compared to peers who seriously contemplate suicide but never make an attempt. In fact, the more serious the attempt, the larger the boost—”hard-suicide” attempts, in which luck is the only reason the attempts fail, are associated with a 36.3 percent increase in income. (The presence of non attempters as a control group suggests the suicide effort is the root cause of the boost.)

The economics of suicide were largely ignored in the ensuing decades. But last year Dave Marcotte, a professor of public policy at the University of Maryland, Baltimore County, pushed the field forward when he wondered what happens to people like Jones who attempt, but do not achieve, suicide.* There are about 20 attempts for every successful suicide. (Approximately 2.9 percent of the U.S. population has attempted suicide—1,760 attempts per day.). Previous studies had demonstrated that as personal incomes rise, the propensity for suicide falls (presumably, money does buy some happiness). Marcotte's insight was that individuals contemplating suicide do not just choose between life and death. Rather, they choose between three alternatives: life, death, and the gray area of unsuccessful suicide, which may be negative (expensive injury and permanent disability) or positive (a "cry for help" that elicits attention).

Why should suicide be an economic boon? Once you attempt suicide you suddenly have access to lots of resources—medical care, psychiatric attention, familial love and concern—that were previously expensive or unavailable. Doubters may ask why the depressed don't seek out resources earlier. But studies have demonstrated that psychological and familial resources become "cheaper" after a suicide attempt: It is difficult to find free medical care when you are sad, but once you try to kill yourself, it's forced on you. Read more.

But take a look at this with reference to India! You’ll be shocked! 1,00,248 farmers have committed suicide between 1993 and 2003. 195 farmers committed suicide after the PM’s two day-visit to Vidarbha. Ninety committed suicide in July and 105 in August, 2007. All these suicides were unfortunately successful and couldn’t quite fit in the report cited above. Even the unsuccessful ones have not brought in any ray of hope for hapless debt ridden producers of India.

Tehelka quotes

that the overwhelming cause of death is debt, sometimes less than Rs 10,000. While repayment of his(farmer) debt is impossible, he still requires money to feed his family, and prepare for the next sowing season. Blacklisted by the bank, or offered only a portion of his requirement, he must turn with leaden feet towards a private moneylender. Whoever this may be, he will possesses the ability to wring personal advantage from desperation — a first right on produce; a land sale deed, which may not be returned even after a debt is repaid.

Mainstream quotes,

that Most farmers’ suicides are desperation-driven due to heavy debt combined with inability to face usurious creditors, many of whom keep harassing his family members with insults and threats. He sees no way out of the debt-trap situation, because only a fresh, larger loan can pay off a previous one that has bloated due to unpaid interest, and he has already pledged his wife’s jewels, his land and even household utensils as security for previous loans. Money borrowed for social reasons usually leads to ruination, which is more rapid if a crop, the expected income from which is to service the loan, fails due to meteorological or technical causes. But excluding the social-cause loans, poor farmers’ survival-cause loans are on the order of several thousands to purchase seed or fertilisers and pesticides or draft or milch animals, or ten-twenty thousand to drill a borewell and buy a pump.

Mint adds

that amid concerns over suicides by debt-ridden farmers, RBI governor Y V Reddy has said the problem “goes beyond credit” and blamed the lack of risk mitigation mechanisms against natural calamities and other failures like pesticides for the crises. In India, Reddy says, there are not enough risk mitigating mechanisms either against natural calamities or against failures like seeds or pesticides or power supply by the government or water supply. “There are so many uncertainties, there are so many risks,” he said. Reddy says financial penetration doesn’t not mean just credit. “It is transactions and as people are moving in we have to see the whole penetration of the banking system.” Bank lending to agriculture is 18% but the RBI chief pointed out and that “in aggregate the rural areas give more deposits and take less money”.

So which ever way you look at it, whatever perspectives you may delve deep into, role of economics is a paradox of sorts when you talk about suicides. If you escape it(suicide), you’ll be well off, as the report points out. If you’re successful and that too in country like India, you’ll not just leave behind a family but also more economists working out the number game and politicians banking on their vote-numbers game. The eternal tussle between life and death will go on and who ever wins numbers will emerge. For the lucky ones numbers will be encouraging, for others numbers will just be a mere statistic left to languish in books, reports, news etc. leaving behind the trail of oblivious families in some forgotten village trying to make a living and remembering the dear ones who left.

At the "dead end" of the day numbers will resurrect from the ashes like some Egyptian mythic and shout silently.

Because numbers never die! People Do!

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From Commercially‘Try’-able to Commercially Viable?

Commercial Real Estate Investments in '2008

Promises are the uniquely human way of ordering the future, making it predictable and reliable to the extent that this is humanly possible. - Hannah Arendt

The indications point that the Indian economy will moderate a bit in 2008, and the flow of capital into real estate will probably will remain focused on developing new properties. So we will continue to see the new commercial property development boom similar to what has already occurred in housing. And at the same time sustained increases in supply of such properties will decrease the profitability of commercial real estate within the next two years.

A report by DTZ suggests that

the NCR could have an surplus supply of 18% by early 2008, while Bangalore will witness an oversupply of 32%. Kolkata will have an surplus of 40% while Pune will see the maximum vacancy at 68%, followed by Chennai at 66%. Hyderabad too is expected to see 23% over supply by the first quarter of 2008. But the estimated oversupply is only in specific sub-markets of these cities.

The continued supply of new space for several years, could create enough new options to dishearten existing and new space markets by the way of increased vacancy rate and moderate rents in the mid term scenario. Consequently it’ll dampen the higher value appreciation that real estate has enjoyed in the past three years.

For tech savvy investors they’ll eye the higher initial yields from new Tier II/III city properties than rather than the existing ones. It is amply clear that the returns on a commercial property investment have a higher yield at 7 to 12% vis a vis a 5% rental yield in the residential sector, And if you were to chose amongst the best property investment options in today’s scenario, commercial real estate comes across an ideal choice.

Last two years have given a yield of 30% and 40% for any prudent investment in Real Estate. India's real estate industry has also gone from strength to strength. But now prospects for potential returns are moderating between 12% and 20% for next few years. Looming with uncertainties the Indian real estate market has only seen very negligible cut in interest rates while the land prices have gone galloping ahead with a gap which still lies unexplained.

For now, any short-term gains are out; and long-term scenarios still remain attractive riding on India's strong fundamentals. Optimism is the what the future indicators point to for Indian Real Estate in 2008. But Guarded Optimism is what it takes to succeed today as the market still needs to self regulate and organize.

Ms. Indian Economy needs the Sunscreen!

Can anybody remember when the times were not hard, and money not scarce? - Ralph Waldo Emerson. Surely the Sun is out and shining scorching bright but there is a need for precaution or a "sunscreen" to avoid the bad weather being predicted by the global economists.

The World Bank said the slowdown in the US, the world’s largest economy, is being partly offset by the resilience of developing countries, which have powered through four consecutive years of record expansion. After modest growth of 3.3 % in 2008, global output should expand by 3.6% in 2009 as the US economy rebounds, the report said. US economic growth is expected to have slowed to 2.2% in 2007, from 2.9%. The World Bank forecast a 1.9% expansion in 2008, then a rise to 2.3% in 2009.

In the recent tehelka study Will Wall Street’s Flu Make India Sneeze?

The effects of US recession on India are brought to light. “India has become more integrated with the US and the rest of the world, but we have also become more resilient and our growth engines are very strong,” says DK Joshi, principal economist at rating agency Crisil. He believes that India’s strong purchasing power, growing in tandem with rising income levels, could act as a counterfoil to the dip in demand in the US and parts of Europe. Economic Advisory Council (EAC) chairman C Rangarajan also suggests that Indian companies can offset the disadvantage of a US slowdown by focusing on productivity gains and the domestic markets.

Not all experts are sanguine about the Indian economy’s ability to ride out the storm without some serious damage. If the slowdown balloons into a full-scale recession, the adverse impact is obviously going to be more severe. Many economists believe that there could be pressure on capital inflows — despite the fact that Indian markets offer among the highest returns in the world.

DESPITE SOME optimism, others point out that though India may be relatively insulated, sentiment plays a strong role in market behaviour. Negative sentiment, therefore, could adversely impact domestic markets.

In a study released by Goldman Sachs, Can India ride out the US recession storm?, authors Tushar Poddar and Pranjul Bhandari make a case for cautious optimism: “We think that the economy has sufficient internal ballast so that it won’t be blown off course, but it will lose some momentum. In particular, we believe merchandise and software and other services export growth will halve in FY09 due to the global slowdown, with negative implications for employment growth. The structural growth story remains intact and opportunities to invest in one of the more dynamic economies will remain plentiful and, as a result, our equity strategists remain overweight on India.”

While most experts and industry-watchers are either doomsayers or holding out the hope that India will be somewhat battered but safe, , there is a small minority that actually believes that India and other emerging markets might well ride out the storm largely unscathed, much like a champion surfer. What is the possibility that a recession in the US could actually work to India’s advantage? Infosys mentor NR Narayana Murthy is optimistic: he feels that a recession will create opportunities for Indian corporations, including IT companies, emphasizing that a focus on better allocation of money means a greater opportunity for India. Guruswamy categorically feels that a recession in the US will see organisations such as banks cut jobs, which means more BPO operations in countries like India. Kamdar agrees with the possibility that in the long-term, a prolonged recession in the US may well wean Indian industry from its heavy dependence on US markets and capital and push the development of other markets and sources of capital within Asia and across the world. “This diversification could be a good thing for India’s economy,” she says.

Livemint reports that globalization has brought more competitors and more threats. For many companies, the threat of new competitors in low-cost environments is real. Profitability and cost efficiency has become vital, as has customer relationship quality. So, people look to different models. A model that has been vastly adopted by many businesses is outsourcing and offshoring. India clearly has, over a relatively short period of time, demonstrated itself as being the expert in that area.

However, the US recession could “lead to a decline in capital inflows and weaker exports particularly of services. This could affect the capital and current account and put pressure on the balance of payment surplus,” said the S&P report ‘Asia Pacific sovereigns brace themselves for headwinds from US’. The report further pointed out that “economies with a relatively small export sector and a large domestic market, such as India ..., are going to be much less vulnerable to a US recession-induced fall in export demand”.

The Year of The Band Wagon!

Blue skies smiling at me. Nothing but blue skies do I see. - Irving Berlin

Optimism is the what the future indicators point to for Indian Real Estate in 2008. But Guarded Optimism is what it takes to succeed today as the market still needs to self regulate and organize.

According to Economic Times predictions for Year 2008,

“The realty sector in the country is all set to enter into a new era in 2008 with a plethora of investment options lined up in the coming months. Investors may invariably be in a dilemma as to where to invest and what percentage should be earmarked for each category in the investment portfolio. It is one area where both yield and capital appreciation is assured for investors. What is more, today, one can use the asset acquired over the years to raise short term funds for a rainy day through multiple options like mortgage loan against immovable property , loans against rental income and reverse mortgage for senior citizens.

Those looking at residential property should remember there are three pertinent factors which are beyond investors’ control like increase in land cost, input cost and registration fee. They are moving up at regular intervals irrespective of the government in power and its policies to supplement the revenue for the exchequer . Though the return on investment may not be relatively lucrative in the short term, capital appreciation in the long-term will compensate the investors well.

For commercial property, developers themselves want to retain the premises and are keen on leasing. This is because they can realise substantial investments through rent discounting scheme offered by various banks. Leased commercial properties are sought-after and ideal for high net worth individuals. The yield varies from 10 percent and more, depending on the location, amenities offered, specification and proximity to landmark areas.

Investments in Tier II cities would be a viable proposition due to anticipated improvement in connectivity levels and infrastructure. Commercial property is currently exempt from the purview of payment of wealth tax and it is hoped that it would continue to remain so in the coming budget as well.

Rentals of office space in most of the markets of metropolis like NCR, Mumbai and Chennai went up by around 80%. CB Richard Ellis pointed out that amidst all the hype in the Indian real estate market, there are concerns now being raised about the viability of cost, amongst the MNC ranks, and all eyes are now intently looking at where rentals will move in 2008. The increased availability of office space in NCR and other metropolises will help bring down the prices in near future. The overheated markets of Mumbai and Gurgaon are in for a marginal rationalization in 2008.”

But come to think about it, there are lingering concerns about the credit markets for both residential and commercial real estate. Fact remains, that availability of finance remains crucial so does the policy. High interest rates and global liquidity crisis in all asset classes that is going to make financing much more difficult. Earlier anyone with his hear ticking could get a loan and could buy real estate, but now the loans have made even breathing that much more difficult. In addition to healthy fundamentals, commercial property valuations are well-supported by replacement costs. Because it still costs far more to build a building than it does to buy an existing one, not to mention the difficult approval process in most markets. The robust re-sale of existing supply is the key to the continued sustainability of the market. Also read Never Tell Me Odds! to know how speculators always have an important role in boasting the prices with their underwriting and long holding skills.