jay2008

The Chennai real estate prices did not fall too much. It got corrected to some extent in the range of 10-20% depending upon the location. In my opinion, the Chennai RE has appreciated too much and there is less room to move upward. The higher income (IT and others) job losses make the situations worsens further.

The beaten down stock market shows some improvement. I think it is wise to invest in stocks now. I bought suzlon at 40 Rs. (6000 stocks). In 2 months, the stocks price jumped to 90 Rs. I got my investment doubled and it may increase further. This may not possible with RE unless we are heading for collapse.
I bought Bank of Ireland ADR (IRE) for 1 dollar (1800 stocks). It is now at 9 dollars.

contra

Many people assume that just because stocks can fall by 90% in one month real estate should also fall by 80-90% without understanding the difference that stocks are a high risk highly liquid market while real estate is an illiquid market.

Even now developers of premium apartments and completed projects in chennai are not reducing prices. I have recently enquired for premium project in chennai which is already completed and price is same as 8 months back. Another famous developer in Chennai, Olympia have launced villas project just now at Siruseri with each villa costing Rs.4 crore.

Only developers like DLF, puravankara, indiabulls who have soft launced (with land still in approval process yet) and may take another 4-5 years to complete only such projects are available at discounts to last years price.

contra

If stocks have risen sharply in last 2 months it is not just because they were cheap but because there was anticipation of lot of liquidity to get into the system. By the way even in oct 2008, when BSE index reached low levels there were companies like HDFC, SBI which were still having high P/E ratios of 20, 12 respectively. Now after sharp rally P/E ratios of HDFC, SBI have hit even higher 30, 17 respectively making them more valuable than western banks.

lets take 2 scenarios

1. If this rally in stocks is a bear market rally and the anticipated liquidity does not come and central banks disappoint stock markets all over by not releasing liquidity, the rally will end. Stocks will again fall. This will make central banks nervous and will end up with them releasing lot of liquidity. That lot of liquidity will first get into stocks as this is a liquid market. After some months same liquidity will get in real estate and make chennai real estate prices shoot upwards.

2. If this is a bull market, then it means central banks releasing liquidity is granted. In this scenario now that liquidity is already flowing in stocks after some months you will find chennai real estate prices going up and developers becoming even more adamant as same liquidity has to get into real estate.

jay2008

Anyone can double or triple their investment in stocks as long as they do their homework, at least to a smaller extent. This type of opportunity comes once in a lifetime. Take for e.g. Conseco, Inc (Symbol: CNO), the stock price was 26 cents two months before, now it was trading at 2.41 dollars. It looks riskier, but the rewards are more.

This opportunity was in RE from 2003-2006. Whoever invested in RE got huge returns (~400%). I am seeing the same opportunity exists in stocks now.

I am planning to buy an individual house in Chennai. When I looked at the price, I found that there is no way I can get that with my current savings. My plan is to invest in stocks for sometime to build up my savings. If I achieve my target level, I can easily grab the land I am looking for.

Natarajg007

Jay, you clearly are in the 22 to 28 age segment, knowing nothing about Stocks or RE. Just that you have seen some money, probably better than what your dad did and you think you are king. U will soon know how excitingly you will be losing money in stock markets. Anyway you can curse me but u will never forget what I said.
To be simplistic. Stock market is fast both ways. It is for folks who know what they are doing. RE is for investment and primarily to live. U dont certainly seem to know what u r doing.
All the best.
PS. Contra is spending his might trying to teach people. If people learn as easily as Contra would then the world would be different. Many million Jays have to lose money for someone to make money. That is the way life is.

jay2008

Moderator : Please approve this post early. The delay in approval gives an impression that I am not active in this forum. Thanks.

Nataraj,

I clearly mentioned that it is riskier to some extent. Entry point, exit point is very important and STOP LOSS is a handy feature to minimize loss. In any field if you want to make success you should know what you are doing, same thing applies to RE. I hope you will understand this point.

I am holding my opinion that investing in stock market is better than RE now. In Chennai, I am thinking RE has appreciated too much and there is less room to move upward. If someone invests in RE primarily for investment, they can better invest in stocks (Disclaimer: know what you are doing).

wiseman

Nats,

You are right about the 22-28 year olds not knowing the long-term trends in either stocks or RE. But here are my questions to you in particular:

You say that putting your money in stocks is for "investment". While putting it into RE is for "living".

Could you please define why one should put money into buying a property instead of simply renting out all your life. After all, if you buy property in some place, it may become a slum and you may have a hard time moving out. But renting? You can move any time.

As far as I can see, you also put money into property - especially after leveraging it 10 times - mainly as an investment. Because, if you have no investment interest in it, you wouldn't be putting money into buying it, right?

To take an example, how about you? Have you bought only one property to live in? Are you living in the property you bought? Have you no other properties you might have bought? And if you did buy more property, do you live in more than one place at the same time, since you only buy property to live in it?!

You obviously don't have to answer these questions as they are of personal nature. But I was merely taking an example to point out the obvious paradox in your argument and to indicate that - contrary to your hypothesis - you do in fact buy property to appreciate in value (in addition to staying there when convenient), just as you would buy stocks or any other investment vehicle. Otherwise, there would be no reason to buy a property!!! And if that were the only reason, there would be no reason to buy multiple properties.

Of course, I know that others would weigh in about sentiment, about deep attachment to a location, etc. But most of these come after the purchase and therefore are a function of the purchase decision itself and so the purchase is the cause and subsequent attachment is the effect!!!

cheers

strongsville

Nats,
For the first time you have spoken the truth.

Natarajg007

Hi Wiseman,
I dont think your question was personal and I can answer it.
1. I have said this before. I have bought house or flat to live and land for investment. So I dont question buying land, but as you and others often talk about RE as flat, I will strictly suggest flats are for living. Even renting will not give you the right benefits in the long run and the nuisance of maintaining it is high.
2. Yes you are right. If living is the only reason, then you can just rent a house. As you rightly said you can change it and so why buy a house or flat. Only that you cant be driven out of your own house and you can do many things which your landowner may not permit. So ownership of house is not a facility, it is more of a feeling of possession.
3. The leveraging question is something where I dont really disagree with you even in all my fights. You must notice I am talking about RE investment in Land and I dont even imply leveraging. To me leveraging is dangerous.
4. IN stock market leveraging is easier and not as dangerous. Especially if it is futures. Even on the worst day when the market crashes and u r long the broker tries to get ur margin money and I know from top brokers, they lose clients, never really chase up for money! Atleast in India that is the case.
5. Finally to explain what I said earlier. All I want to say is,when buying RE dont try to be a TRADER, be an INVESTOR. What is a trader? One who buys to sell in a very short period of time. Who is an investor? One who thinks that putting money into some article is a LONG TERM NECESSITY as also a LONG TERM BACKUP. That bold explains most of it. So while some think holding INFY or RELIANCE for life is also a backup I think holding land is a much better backup as in the worst case u can atleast stand on it!
6. ANd regarding me. As I said earlier I wont buy another house for investment. I will buy another land for investment. I might buy another house to keep it as a guest house, as a place for a near and dear one etc. NOT AS PURE INVESTMENT. ONly the land portion is for that. Sometimes u r forced to convert land into house to get some rental income, but to the best of all calculations one should be a fool to build a flat/house in Chennai to rent. The rental value does not even give u the interest on the building investment, leave alone the worth of the land.
Hope I answered you. Take care.

jay2008

It looks like there are lots of negative sentiments towards stocks. I am not advocating investing your entire savings in stocks. At the time of writing this, "Bank of Ireland (ADR)" reached to $10.50 from $9.00 and suzlon energy reached 105 Rs. I know “exit” matters.

Most of us find RE as a safe investment, which is true. But one should think how much return they will get if they invest in the already much appreciated RE. Decide yourself.