gone_mad

Am I trying to be really smart? or I am just another wannabe around? I don't know!


Well, I am really new here, and I am in to get some suggestions/ideas about my 'dream home' plans. To brief about me and my earning power, I am 25, living in Chennai with my parents, working for an IT major and, earning around 50-55K rupees pm.

I want/wishfully think to buy a property in Chennai, not as an R2I but for my own residential usage. After seeing, analyzing the property rates, cost of living, proximity to places, I have decided to stick to the southern part of Chennai, particularly Madipakkam (Northern part - Sadhasivam nagar, Ram nagar north etc). The reasons are - The locality is quite good, close proximity to Velachery MRTS and Vijayanagar bus depot, closer to OMR, rates are kind of affordable*.

*Affordable - Here is my plan / definition
- There are CMDA approved lands available for approximately 55L to 60L per ground whose guideline value stands upto 45L to 46L per ground.
- I along with 3 friends of mine are planning to buy around 2700 sqft of land, register it sharing equally (SBI gives out 80% loan for the total land + construction)
and the repayment would be approximately 22 to 25K pm for my salary
- The plan is to build two 3BHKs in the first floor, and car parking + 2 2BHKs in the ground floor

I am in the process of seeing lands now. I checked with a legal advisor of a builder about how this is workable and got some very high level inputs from him - the abstract is that this is doable legally. From the perspective of the banker, also this is doable, and I might get a loan for 80% of the total cost involved. I am yet to check with the architect/designer on this.

I thought it would be nice to get some advice from experts, advaced RE investor people around - Kindly advice me on
1. Is this plan totally workable? Are there any major, legal or other vital points that I have missed out?
2. Is this the right period to do this? Since this is for my (same with the case of other friends involved) own usage, should I wait in to see the speculated downfall of the RE market?
3. Market rate for a flat in those areas is 3800 to 4000 Rs per sq. ft.
If I work out this way, I will have to spend 16L (64L land price + registration / 4) + 15L for construction (lets keep 1100 sqft for 1300 rs per sq ft) - total 31L Rupees for a 1100 sqft flat with 700 sqft of land in my name.
By this way, I will end up saving approximately 10L rupees with a larger land share.
4. Am I overlooking things anywhere?
5. What could be the potential problems in doing so - at this stage, or in the future?
5. Any suggestions / advice on how, what to do and what not do do is appreciated.

*Cheers*
Newbie

wiseman

Dear gone_mad,

Contrary to your name you are quite sensible. Plan looks good and sensible on paper.

But by now you would have got your cues from the world around you collapsing in the financial sense.

The greatest risk to you is your salary of 50k. I'm not trying to get personal here. I have known managers in IT in 1999 who were getting 14 lakhs who got their salaries down to 7 lakhs in 2001-02. I even know a ceo of a dot-com earning over 1 crore then (when a 4-5 year developer was getting 8-10k) who got cut down to 20 lakhs. I have been in the IT business for over 23 years and don't believe these kind of salaries are going to last for very long in these times. I have personally seen salaries of over 5 lakhs pm but still live within 6-8 lakhs.

Times are getting tough. Taking risks is out. Why not put off the plan for
2 years or so and revisit? You may get the land for 50% less? And if your salary then covers the risk, and you can find a bank to fund it (will banks give loans today?) it may be a much better bet.

It will also make you sleep soundly for next 2 years at least!

cheers

Natarajg007

Your plan is excellent. How secure your job is, is for you to decide and not for Wiseman. So you can execute it, if you know ur job is safe. Remember, there is no tommorow if you cant go through today. Wiseman is always talking about tommorow without thinking of today. Who knows if you will get this land next year for half this price or twice this price? I can assure you for certain Wiseman knows not, so dont go by his futuristic advices.

connect2sam

Are you crazy ? It is about the future. I lost a lot of money just because I dont know how high price I was paying a companies shares when I was in buying spree last December. Lo behold ! within a month stock market tanked. I bought it because every tom, dick and harry was doing so. Had I known that I was buying at a heavy premium for these stocks, I wouldnt have done so.

Apply the same to realty. One good thing about the stock market is price discovery happens very fast, but that is not the case in RE. In few months, a plot goes up in value only after after a neighbouring plot is sold. Similarly downhill, it will take time to play out in RE.

gone_mad your plans look good - except that it is a few years late. Never mind. If your friend has bought a house and talks (rather braggs) to you, how his house has appreciated, do not get carried away.

I know many in India have an opinion, the RE market never loses out. In reality, never say never and there is always a first time and this could be it.

Do stick around in this forum, you may find it useful.

Thanks,
Salim.

ks2071746

At times both wiseman and natarajg007 talk "wise" and some times go "nuts". You understand what I mean:p But both the guys seem to have quite good knowledge on variety of subjects. They should give their expert views/comments/advise on the queries of different members. Both of them have not responded to my query on the reasonable carpet area on the saleable area.

ks2071746

Natarajg007

Salim, Nifty fell from 6300 to 2500 in last 1 year. So realestate will fall by the same percentage is it? Realestate for speculation is an NRI game. Realestate for living is an Indian game. Hope you know what you are talking!

Natarajg007

You got your answer but if you dont go look for it I cant feed it into your mouth. Go and search ok!

Natarajg007

KS you need to tell Whattheheck about the Pee joke. Cheers.

gone_mad

Sorry for the late reply. For some reason my post took time to appear in the forum and by that time I had already stopped checking the forum. Surprisingly I found my post with loads of answers now.

I went mad after checking the realty prices in and around Chennai and now the ball seems to have turned to the buyer's court.

After seeing all what is happening around in the world, I have decided to just save some money in FDs atleast for a couple of years (decided this before seeing your post wisey - anyways now it looks to be right) monitoring the land prices and to buy after that. By that I can save some loan interest amount.

Madipakkam and Velachery were literally drown in the last month's rain. I can now say that the money they quoted is way too much for such areas and not worth the deal.

Wiseman, your other posts are very insightful most of the times, cheers and keep 'em coming!

gone_mad

Nataraj,

Thanks for your piece of advice.
I read your other posts in various other topics as well. I am sure you are very knowledgeable and insightful. Keep up your points coming.

As far what you've said - I have seen the land prices in the areas I had mentioned in the original post have come down significantly in a couple of months now. With huge job cuts, economic crisis around, how can we say that the land will go twice the quoted price in the next year? If not it decreases further down, I guess it will stagnate for the least.

PS: I don't want to be called as a member of bear cartel as you had called few others. I'll agree with your points if you can say why do you think so.