Natarajg007

As I see various threads in this forum, everyone seems to debate if the PRICE is WORTH or not? How do you measure worth? For once let me not give the answer. I will ask all the bears and bulls to come out with worth. For example Nabhishek states that price of land or flat in Chennai is not worth it? He says prices went up from 6L to 60L in the past few years so it is not worth! Now what about salaries that have also gone up 5 to 6 times in similar periods as also development of roads and infrastructure. So a land in Medavakkam was not accessible in 2002, today it is well accesible.
So can anyone define worth. Let me ask the Goofy of a bear, Mr Wisey to explain how to calculate worth. For example why does he feel Mylapore or to be precise RK Salai is worth 2.5Cr per ground while he feels Saligramam is worth peanuts.
Hope those bears who write all sorts of rubbish come up with some LOGICAL or MATHEMATICAL basis for WORTH.
By not answering this, I am sure it will prove that Wisey is just as I always said a paid Liar Writer!

ramg

We want you to define Natarajg. Please do for every body 's benefit.

wiseman

For a worthless guy you sure do have a lot of worthless words to discuss worth!!!

I have already discussed in detail (in past posts) why RK salai property is worth what it is and your (worthless) Saligramam property is worth what it is - despite your best attempts to equate it to RK salai property.

Stick to facts, you worthless guy

cheers

nabishek

My apprehension while evaluating a property is always whether its rightly valued or priced.

Till now I havent come across any scientific instruments that can guide me to estimate whether the price/value of the property is right.

I have been using the rough instruments like guideline values, calculating property price using the land value, using CAGR as 20% to get feel of the price etc.

By applying all the methods, I find RE needs significant correction for the industry to stabilize.

If someone can tell me how valuation of property is done scientifically, I will really appreciate it.

Worthiness of a property is perceived differently and is rather an individualistic opinion.

Depending upon the person, it maybe value for money,investment value,locality and infrastructure/facilities,affordabality, rental value, resale value etc.

It is similar to how beauty lies in the eyes of the beholder.

If a property has even one taker, It is worthy.

When I find properties being quoted >400% more than what it was sold few years back.I wonder whether the rate is sustainable and whether its justified.

Today, Even if the price crashes 50-80%,its only over the increased price and the price will never fall back to what it was few years before.

From what I gather Real Estate for significant number of years gives very less returns year on year, During the boom or when demand increases considerably, the property's value rises sharply compensating for the dormant period.

This time the boom is not only because of the demand or increase in per capita income or economic growth.It was largely fueled by easy credit, speculation and overleveraging by the different supporting industries of RE.This makes me believe that maybe the prices are inflated more than it actually rose during the boom period.

How the RE industy is going to behave and react is what I am waiting and watching.

wiseman

Abishek,

Your argument can be applied to almot everything in this world, including the more resilient of assets since time immemorial - Gold!

Value is completely relative and -as you say - is in the eye of the beholder. Only, I will qulify it additionally as follows (as I have done already in other posts --

Land has only 2 types of monetary value.
1. The surplus it can generate from Agriculture
2. Its value as a base for you to be near to your place of work (or earning)

Of course, there is another value in terms of what it can provide in terms of resources like minerals, etc. But I'm talking about Residential/Commercial land in urban areas.

Therefore, although land in RK Salai is same as land in Saligramam, it is the proximity to CBD (as well as access to attendant infrastructure like Roads, Sanitation, Hospitals, etc, etc, notto mention being accessible all-round) that makes RK Salai many times more expensive than Saligramam as well as more resilient to price declines.

Of course, when people thought that IT would boom forever and tons of money will flow towards Saligramam (greed has many forms), they concentrated in jacking up that area within a few years to heights that an RK Salai took many decades to gain. This ensures that it is unsustainable and thus you see the total decline in volumes (lack of interest once the IT boom is seen as suspect) and subsequent crash in prices (as buyers at high prices and high leverage dump due to inability to hold - this is another factor in favor of RK Salai as most assets are held in cash with low/no leverage and so holding capacity is greater).

In conclusion, price declines radially outward from city center and normally follows a Bell Curve as distance increases radially. Of course, there are temporary aberations when money follows rumors and floods a certain area temporarily (also when politicians bend "development" in certain directions) but these soon revert to the mean.

Right now every asset is reverting to the mean after this artificial and unsustainable boom. Therefore, the Saligramam guy is more likely to be hit by a bigger stick as his boom was bigger and he was more leveraged. The RK Salai guy is also being hit - but to a much smaller extent.

My thoughts.

cheers

panther

Economics 101.

The worth of anything is what someone is willing to pay for it.

So as long as we have idiots willing to shell out huge amounts of cash for lands in crappy areas, the 'worth' of that land continues to be high. Therefore, the primary trick that an owner/seller needs to pull off to maintain the high prices is to find such idiots.

Natarajg007

Good. Even after the first sneer by Wisey in his Wisey id and in his original name id (Ramg) he is coming up with some sane discussions thanks to Abhishek. Now if Wisey can hold his senses atleast in this thread, let me ask further questions.
CBD is a definition. I have lived in Singapore and used to live in a place called Choa Chu Kang which took me 50 minutes+ to go to my office in Alexandra road. However a friend of mine in Queenstown could reach office in 20 minutes or lesser. However I consider my place excellent (way back in 1997) since it provided me with a verdant environment. Now I could get everything I needed in Choa Chu Kang as much as my friend in Queensland, except the commute time. However the HDB flats in Queensland were of inferior quality, the crowd there was old Singaporean with funny way of life etc.
Now as any city and now let me talk of Chennai matures, it is no longer useful to stay in the OLD CBD. One tends to move out. Unlike Malleswaram in Bangalore where one of our property is yet in a sublime surrounding, in Mylapore the roads have got crazier the place is nauseating. Now I will add that Arcot road is even more crowded than CP Ramaswamy road. However CBD itself has changed in Chennai. While my sister having a house in Mylapore can claim to a set of shops on CP Rams road, does she need it. Does the jewellery shop there important? Now in Saligramam to pursue the argument the best malls are turning up there. Its connectivity is fantastic. While TNagar is nauseating to the core, KK Nagar, Vadapalani etc provide a more serene atmosphere to live.
NOW I AM TALKING ABOUT LIVING. So to me though the price of Mylapore (or to please Wisey,,, RK SALAI) will be higher than Saligramam for the next 10 years, its rise in price in percentage will fall very much below Saligramam. To put it simply, while Wisey thinks I am leveraged (God save his brittle brain!) I am the last man that takes a loan! I am 100% debt free if that mean anything for an individual and the best leverage I do is in trading in the stock market where again I dont have to bother as it is the broker's headache!
Given that what Wisey tells about higher % of growth is correct in Saligramam but it is sustainable. So when RE grows it grows in bursts as Nabhishek rightly explained. Each burst will make newly developed areas catch up in price with earlier developed areas.
So in 2003 if ratio of land price in Mylapore:Saligramam was at 3:8, today it is at 3:5 meaning that its worth is growing. Now if you take slightly outward areas like Medavakkam or Urapakkam the growth is even more pronounced. To put the ratio of Saligramam: Urapakkam it was 15:1 in 2004 to 6:1 today.
The problem with Wisey is he is old fashioned and tends to have rigid views. This is not to insult him but to encourage him to think more pragmatically. So like many oldies he thinks when there is a fall prices will revert back to the old ratios. Unfortunately it is not true. So if Wisey is a RE trader he should swap his Mylapore land to a Saligramam land with almost zero risk or to a Urapakkam land with slightly higher risk and expect higher growth. It is like moving from one share to another or from one option strike price to another. However in RE the trouble of transactions is not worth trying this out.
In summary though I am going to let others to decide what is WORTH, one must admit that this is becoming an interesting discussion.
Finally if this WORTH question is answered then the TRUTH about RE will be clearer. Until then one can talk Bull shit or be a Bear mutt!
Please continue to throw in your views on WORTH as each of you will realise that what you were talking about all along is actually not what is PRAGMATIC.
Cheers.

Natarajg007

Bet you are right from Economics. Unfortunately in this forum people all of whom claim not to have vested interests tend to use EMOTIONS to define worth! So someone feels prices have gone up too much. Even you seem to be lost Panther in trying to cry about prices being held. Are you saying this is not a Monopolistic Competition or Free market environment? I wont agree on that. Is it a Oligopoly? Certainly not, since land in particular is sold by individuals. Monopoly is ruled out as you see! So why do the folks feel that if price in Chennai does not fall down it is INCORRECT? Obviously by your definition it cant be incorrect.
However I will hasten to add that one transaction cannot define everything about our market! However in today's world worth of many big shots are measured by that silly transaction on the share market. So if MicroSoft is at 26 dollars and Bill Gates is worth 45Billion (I aint accurate on these numbers ... just an illustration!) then does it mean that if Gates dumped his so many million shares in one go, he will get his 45 Billion?
No way!
So whatever Economics will say, the truth is unless the transaction happens rest of the discussion is PRESUMPTIVE. So unless Chennai RE prices fall, there is no reason to believe it will just because LOSERS (what I called as Pitcha karans) do not have the means to buy in though they want to!

Natarajg007

Ramg, first of all I know you are Wiseman! Your name is Ram. As for me I am G.Natarajan. Hope that defines what is NatarajG. Now if you can comeout with your name that will help. BTW, dont tell us that you aint Wiseman. That will be the most shameful thing you did!

ramg

Sir, I am not wiseman, I was reading your posts on Builders profits and how builders made ridiculous profit. I also came to know how to calculate the sqft cost using FSI through your posts.

I just wanted to define the term "Worth" from you since you are so knowledgeble. Other than that I had no other intention.