spaul

I keep hearing numbers pulled out of thin air that RE appreciates annualy 20%, 30%,...50% take your pick.

I would rather prefer numbers to be based on real data. Gut feeling is good, but they are not reliable as our gut is formed based on what we consume!

Typically we read newspapers articles, listen to others..who have opinions similar to ours. So if we have a certain opinion we tend to filter out opposing opinion. So the point being that gut feeling is NOT objective data, but a very subjective guess.

The Indian Ministry of Finance releases objective numbers which shows that in Bangalore for instance from 2002-2007 RE prices rose 20% per annum.

1. We cannot extrapolate this overshooting period as the norm, we should base our numbers on the expectation that prices will revert to the mean, which means in 2008 and beyond the appreciation will come down. Bringing down the overall RE price appreciation over a longer period much lower than the 20%

2. The counter to this objective number could be that black money purchases might not be reflected in price appreciation. Infact this objective data has been getting numbers from public websites which the public uses to list their RE and also from banks based on their loan advances. So its not perfect but it tries to get an accurate number.

3. Ultimately prices goes up as much as people's salary which is captured in Per Capita Income. So the house price increase should be in line with income increase over a longer period of time. Per capita income takes inflation into account because as inflation increases income will also increase. As ultimately houses have to be purchased by people with incomes and if house prices rises more than income then how are people to afford it? And based on this metric Indian per capita income has only gone by 9% during the RE boom time of 2002-2007. So over a longer period of time RE will appreciate as much as per capita income growth.

In this post i am trying to get OBJECTIVE data. If you have objective data to back up your numbers do clarify any flaws in my understanding. As always do refrain from ad hominem responses.

nabishek

Paul,

Good Initiative, If successful, This will help people in setting the right expectations on the returns from RE.

I am citing an example from the guideline values prevailing in chennai.

Crescent road, Adyar, Chennai - Residential Area - Class I

Year 2003 - 1093/sqft
Year 2007 - 3000/sqft

CAGR = (3000/1093) ^ 1/4 - 1 = 0.2871 = ~ 29%

Source : Tamilnadu Registration Department.

http://www.tnreginet.net/igregn/guideline_value.htm

During the Boom period Returns from RE has clearly surpassed the per capita income growth.

Sustainability of the same growth rate is debatable.

spaul

Excellent source nabishek. An objective data point from my side is the Residential Index prepared for Indian Ministry of Finance.

This index initially got the price from 5 cities Mumbai, Delhi, Bhopal, Kolkata and Bangalore. The have price values from 2002-2007. Numbers for 2008 will be released in Mar 2009.

What no Chennai? Yes. Good news is that they will be adding 20 more cities to their index, so hopefully we should be getting Chennai too soon. Their stats are available at http://www.financegurukul.com/2009/0...dex-bangalore/. I assumed that the closest place to Chennai is Bangalore in that index. Hey not perfect, but thats the best we have at this time

surla

http://timesofindia.indiatimes.com/B...ow/4199147.cms

India's growth reduces to 5.3% in oct-dec period. The govt has been living in its palace of dreams that india is insulated from the global slowdown.

Even if the RE price increases were due to IT boom, shouldn't the slowdown reduce the RE prices too? For 9% GDP the RE prices seem to have zoomed by 200%. Lets see how much RE reduces on doom...

In chennai its all black money thats why RE prices don't seem to follow marker dynamics and corrections. There seems to be only one way for the prices which is towards north.

Natarajg007

Actually what Nabhishek has said is the simplest answer and infact he used Guideline values which are mostly inaccurate.
Now I will ask SPAUL to find CAGR of a land I have bought in 1966 for 5000, today quoting 2Cr. If he does not know the mathematics then he can go and search one of my old posts where I have shown atleast 2 to 4 such examples with CAGR calculated. Note Wiseman would have responded in his usual (me lost the point..sob sob) way trying to remove the focus from my post.

spaul

Natarajg007 can you point me to your CAGR post. I am not able to search and find it.

Natarajg007

Appreciate your interest. I dont think I have the energy to search it too. JUst to make life simple let me state two examples which are land I have.
a. Bought in 1989 for 1.15Lakhs. Today's minimum price is 1.5 crores. CAGR = 27.5%
b. INvested in 1966 at 5K, today quoting 2cr. (What I stated before)
CAGR = 21.2%
I have atleast studied another 4 properties of mine/relatives. All these are lands. Remember flats dont appreciate so much, since in a flat the appreciation happens for the UDS and depreciation happens for the building.
Hope it helps!
I may not be visiting this site often in the future as I am bored of having to deal with a bunch of idiots. So bye for now.

ks2071746

Dear nats,

Happy to note that you are not altogether quitting this forum but will be visiting once in a while rather than frequently. Please do visit frequently and give your valuable points/views/experiences. Regards.

ks2071746

lovebird

A good but delayed decision

spaul

So looks like at this point all we have is anecdotal evidence which i do not want to rely on to decide.

Still looking for objective numbers. Maybe this is the best we can get in India as far as data is concerned and make common sense conclusions based on other RE markets.

Thanks everybody