Economy & Nation Exclusive
Foreclosure procedures and global housing markets

What is true for the US is true for countries. While countries like Canada and Spain might be able to deal with a housing price collapse in a few years, a housing collapse in India and Brazil might take decades to clear. In China with few laws at all, the impact could be devastating and long lasting

How do you determine when a real estate market hits bottom? Determining the strength of any particular housing market may be difficult when an overhang of distressed properties represents a drag on the market. But this is not only a problem between various markets in the US; it is also a major issue in determining the strength of markets around the world.
Recessions caused by a real estate collapse all have a major problem. The market can inflate rapidly, but the recovery can take a very long time. This occurs for a very simple reason. Buying a piece of property can take days or weeks. Foreclosing on a piece of property can take months or years. Add to the issues of foreclosure to the dissimilarities between properties and you end up with a very inefficient or ‘sticky’ market.
The problems with the housing market in the United States have also exacerbated the jobs market in two ways. First, since the property construction market makes up a large percentage of GDP (gross domestic product), a downturn causes massive unemployment. This is especially a problem in China where it makes up about 13% of the economy well over twice the percentage of more developed markets. Second, the inability of owners to sell their homes makes movement to local—where jobs are more plentiful—difficult.
A lengthy foreclosure procedure can exacerbate the level of distressed property. A large number of distressed properties create asymmetries of information. Buyers do not know the size of the overhang, when the properties will come to market, how many properties will come to market and the prices. Without information, the markets freeze up and cannot clear. If the market cannot clear, there is no way to know when it hits bottom.
Obviously the best way to increase the efficiency of these markets is to make the foreclosure process as fast and efficient as possible. However, efficiency of the market is not really on the minds of a large number of the populace who are in danger of losing their homes. The political issues produce large differences in property rights between jurisdictions. This is true not only between countries, but also between different states in the US.
Basically there are two types of foreclosure processes in the US. One is a judicial process that requires the supervision of a court. The other is a non-judicial process that does not. Although a court might provide better protection of the property owner’s rights, judges and courts everywhere are not known for their speed.
In the US the time necessary for foreclosure can vary substantially depending on the jurisdiction. The faster procedures are found in Georgia at 37 days or Maryland with 47 days. The fastest is Texas at just 27 days. In contrast a foreclosure in New Jersey and Pennsylvania take 270 days. In Illinois it takes 300 days and the slowest is New York, where it takes 445 days—almost 15 months.
As one might expect, the real estate markets in states with faster foreclosure laws have probably already bottomed out. Phoenix, a city in the state of Arizona, was one of the worst hit by the housing bust. Its foreclosure procedure lasts only about 90 days. Thanks to an improving local job market and people often from Canada looking for warmer weather, the inventory of unsold homes has declined to about the pre-crash average. After price declines of as much as 55%, the market has most likely cleared and house prices are rising again.

Where the market is the most rigid in places like New York, prices are probably still falling. For example, the median house price increased substantially from 2000 thru 2006 in California and New York. But after the crash, California prices in 2011 fell back to the 2000 level, while New York prices remain well above the prior level. California’s foreclosure procedures take about one quarter of the time required for a foreclosure in New York. So the presumption is that California prices are nearer equilibrium while New York prices are expected to fall further.

What is true for American states is true for countries. The US is hardly the only country to have a real estate bubble. There are possibilities of real estate bubbles in diverse countries including China, India, Canada, Brazil and Spain. Although I have not found a comparison of global foreclosure laws, the World Bank Doing Business report does give a rough guide to insolvency procedures.

These indicate that countries like Canada (ranked 3rd) and Spain (ranked 20th) might be able to deal with a housing price collapse in a few years. However, in India and Brazil, ranked 128th and 135th respectively, a housing collapse might take decades to clear. In China with few laws at all, the impact could be devastating and long lasting.

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at or



Service tax exemption to leave advertisers with surplus funds

“It is good news for growing sectors like outdoor and digital. The service tax exemption would ultimately benefit the advertisers who spend a lot on outdoor and Internet,” Madison World chairman and managing director Sam Balsara said.

Service tax exemption on advertising on media platforms, excluding TV and radio, could result in availability of up to Rs1,500 crore more to advertisers for spending on campaigns, according to industry experts.

“Given that marketing budgets of companies always take into account the service tax component, now there will be more money available to be spent on media other than TV and radio (which are not exempt from service tax),” ZenithOptimedia managing partner Navin Khemka said.

According to him, the total annual advertising spend in India is currently estimated at USD 5 billion (around Rs26,000 crore), of which around 45% is spent on television and radio.

“Now if other advertising media (like print, outdoor, digital) are exempt for service tax, around Rs1,500 crore, which was earlier spent on service tax by marketers will now benefit advertising and media planning companies,” he added.

In the Budget for 2012-13 Finance Minister Pranab Mukherjee announced that “selling of space or time slots for advertisements other than advertisements broadcast by radio or television” will come in negative list and will be exempt from 12% service tax.

“It is good news for growing sectors like outdoor and digital. The service tax exemption would ultimately benefit the advertisers who spend a lot on outdoor and Internet,” Madison World chairman and managing director Sam Balsara said.

According to the 'Pitch Madison Media Ad Outlook 2012' (PMMAO) report the Indian media advertising industry has been pegged at Rs25,594 crore in 2011.

Commenting on the impact of the Budget proposals on media and entertainment sector, KPMG partner Himanshu Parekh said: “Earlier advertising in print was only exempt from service tax, while TV and radio were not exempt. Now even other media like outdoor and digital are exempt.”


Public Interest Exclusive
Aviation ministry denies receiving Praful Patel’s letter seeking a probe in Air India’s ‘irregularity’

Despite statements of both Mr Patel and the present aviation minister Ajit Singh being shown prominently on various TV channels, the ministry informed RTI activist Subhash Aggrawal that “no information is available”

About a month ago, a palpably embarrassed Praful Patel wrote a letter to the present civil aviation minister Ajit Singh, seeking a probe into allegations that in 2010, the national carrier Air India had deployed bigger aircraft to and from Male in Maldives to accommodate Mr Patel’s family. Despite the wide media coverage Mr Patel’s letter got, now the civil aviation ministry says that it has no knowledge of its existence.

In reply to RTI (Right to Information) activist Subhash Chandra Aggrawal, who had asked for a copy of Mr Patel’s letter, the PIO of the ministry replied “No information is available.” Similarly, Mr Singh’s comment, which too was reported in the media that deploying of larger aircraft is an ‘irregularity’—is also not available with the ministry.

“It is indeed adding further to the impropriety now by Union civil aviation ministry to decline providing Praful Patel’s letter seeking a probe in the matter despite statements of both the concerned Union ministers in this regard having been shown prominently by various TV news channels. Instead of hiding the facts, the ministry should probe the matter,” said Mr Aggrawal.

In April 2010, Air India had deployed larger aircraft to apparently accommodate the family of Patel on their trip to Maldives from Bangalore. The matter was revealed via a RTI petition. The larger Airbus deployed to accommodate Mr Patel’s daughter and her in-laws for their vacation, however, had to operate under loss because many seats were empty on the two-way trip. Read the details here: Air India must disclose details of planes rolled out for VIPs

Despite a Central Information Commission (CIC) directive, Air India refused to supply all details, and asked for a review of the CIC decision. Finally, Air India had to disclose the passenger list and the names of officers who validated the decision. Moneylife had written about it. Air India finally admits that it gave bigger plane to Praful Patel’s family

The matter received good amount of media attention, as Mr Patel, who was the then civil aviation minister himself had ordered this misuse and caused losses to the national career. As public sentiment built up against him, Mr Patel was forced to write to his successor and urge a probe into the matter.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine)