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Are Real Estate Prices Going To Fall 40% by Mid 2007?

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Are Real Estate Prices Going To Fall 40% by Mid 2007?

Last updated: February 21 2009
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  • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

    Originally posted by chataara View Post
    Mr. Wiseman

    Flat prices have started declining already.

    Those who want to sell their flats dont find buyers.

    Now, they are losing their patience and have started quoting lesser rates.

    Thanks

    chataara
    Flat prices can decline for sure. Infact buying a flat for anyother purpose but to live is in my opinion stupidity. The reason is a. Construction depreciates, Land appreciates b. Those who bought these flats were conned heavily by the builders.
    To take an example, a builder gave flats at 6000psft in 2007 say in place X. He bought the land at 5K rupees a square feet. So it is like 1.25C per ground. His construction expense was 1K psft and even if he took a profit of 500psft his net construction overhead is 1.5K psft. Now each of the 5K land psft could allow 1.5 times (FSI even for the most decent builder). So the net expense for the builder is 5/1.5+1.5K = 4.8K psft. So his margin of safety was 7K-4.8K=2.2K. What I call margin of safety can actually be called as Margin of CONNING. U foolishly bought flat at that price and then let him con your 2.2K psft. Now when demand has reduced and u want to sell your flat the best you might get is 4.8K. Even that will diminish since your construction is old and the 1.5K cost you put in there will reduce. If you rent, in Chennai you hardly get 10Kp.m. for a 50L flat a super lousy return on Investment.
    SO FOOLS BUY FLAT AS INVESTMENT. If you need the flat to live then you should have bought it, in which case the idea of reselling it makes no sense. FOR INVESTMENT BUY LAND and not Flats.

    Comment


    • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

      Originally posted by Natarajg007 View Post
      Flat prices can decline for sure. Infact buying a flat for anyother purpose but to live is in my opinion stupidity. The reason is a. Construction depreciates, Land appreciates b. Those who bought these flats were conned heavily by the builders.
      To take an example, a builder gave flats at 6000psft in 2007 say in place X. He bought the land at 5K rupees a square feet. So it is like 1.25C per ground. His construction expense was 1K psft and even if he took a profit of 500psft his net construction overhead is 1.5K psft. Now each of the 5K land psft could allow 1.5 times (FSI even for the most decent builder). So the net expense for the builder is 5/1.5+1.5K = 4.8K psft. So his margin of safety was 7K-4.8K=2.2K. What I call margin of safety can actually be called as Margin of CONNING. U foolishly bought flat at that price and then let him con your 2.2K psft. Now when demand has reduced and u want to sell your flat the best you might get is 4.8K. Even that will diminish since your construction is old and the 1.5K cost you put in there will reduce. If you rent, in Chennai you hardly get 10Kp.m. for a 50L flat a super lousy return on Investment.
      SO FOOLS BUY FLAT AS INVESTMENT. If you need the flat to live then you should have bought it, in which case the idea of reselling it makes no sense. FOR INVESTMENT BUY LAND and not Flats.
      In the article above I can say a typical example of place X is Saligramam. Builders asked me for my land at 1.25C to 1.5C but will sell flats at 6K. Even today I wont sell it at that price since if I became a builder and found one guy to book one flat I can build the entire 4 flats in a typical ground and then resell the rest at liesure and lo and behold my land price will work as follows.
      Cost of construction = 1K
      Cost of sale per sqft = 6K
      So cost of 1/1.5 (FSI) sqft of land = 6-1=4K
      So cost of 1sqft of land = 5x1.5= 7.5K
      Now if the FSI can be moved to 2 then the cost of 1sqft of land

      Comment


      • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

        Sorry could not complete the last line in the prev article.
        With FSI of 2 cost of 1sqft of land = 5x2=10Kpsft.
        So either as land owner I deserve close to 10kpst, even if I give a 15% discount for 1 year time of construction it should be 8.5Kpsft or the price of flat should be 4.8kpsft instead of 6K psft.
        In other words if I were Wiseman and wanting to sell land in Mylapore I wont be crying like a baby. I will rather make flats myself and use that to generate huge rate for my land. Ofcourse you will have to wait and go through some hassles.
        Hope this example helps all on this board to understand what is the SUPER CUSHION that BUILDERS HAVE HAD and even now if they take out the cushion they will yet be VERY PROFITABLE. Also note that builders like land price to fall but in reality even at current (or for Wiseman's imaginary sake price in 2007 or whatever he calls as peak)l prices of land builders can reduce their prices easily by 20% and yet make fair profits. As I showed the flat of 6K psft actually costs only 4.8K psft to construct even after the builder makes a sweet profit of 500psft.
        I hope in future the IDIOTIC CRY BABIES ON THIS BOARD who just imagine that price of flat as DICTATED by some shit BUILDER dictates realestate price will shut up and go and LEARN MATHEMATICS.
        PLEASE LEARN CLASS 5 or 6 MATHEMATICS AND TRY TO USE UR BRAIN. WISEMAN PLEASE DO THAT AND YOU WILL BE ABLE REALISE YOUR MYLAPORE DREAM.

        Comment


        • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

          Nice calculation,but in reality u cannot achieve 1.5FSI in small plot.In order to achieve 1.5FSI ur land should be square in shape like 60x60 or u shud have atleast 55sq.ft frontage and facing atleast 30sq.ft road width and ur plot coverage should not exceed 65%.If u have 1grnd plot with 40x60 size on less than 30ft road u can achieve only 1.25 r 1.35.so ideally u shud have approx 2 grnds with 60sq.ft frontage on a 30ft road to achieve 1.5FSI.
          cheers
          Arun
          Last edited February 8 2009, 10:39 AM.

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          • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

            Originally posted by arun1288 View Post
            Nice calculation,but in reality u cannot achieve 1.5FSI in small plot.In order to achieve 1.5FSI ur land should be square in shape like 60x60 or u shud have atleast 55sq.ft frontage and facing atleast 30sq.ft road width and ur plot coverage should not exceed 65%.If u have 1grnd plot with 40x60 size on less than 30ft road u can achieve only 1.25 r 1.35.so ideally u shud have approx 2 grnds with 60sq.ft frontage on a 30ft road to achieve 1.5FSI.
            cheers
            Arun
            As Arun said Calculation nice. But we can not achieve it

            Comment


            • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

              Nataraj007
              "
              Hope this example helps all on this board to understand what is the SUPER CUSHION that BUILDERS HAVE HAD and even now if they take out the cushion they will yet be VERY PROFITABLE. Also note that builders like land price to fall but in reality even at current (or for Wiseman's imaginary sake price in 2007 or whatever he calls as peak)l prices of land builders can reduce their prices easily by 20% and yet make fair profits. As I showed the flat of 6K psft actually costs only 4.8K psft to construct even after the builder makes a sweet profit of 500psft.
              I hope in future the IDIOTIC CRY BABIES ON THIS BOARD who just imagine that price of flat as DICTATED by some shit BUILDER dictates realestate price will shut up and go and "

              Your own admission builders can reduce price and still make profit. so there is no reason they should not opt to do that and people buying flats see reduction in prices. which is what most of them are redicting.

              I don't have as passionate views as yours, but its hard to believe that with all the things going on around the world TN realestate will be insulated

              I do agree in longterm these corrections might even out

              -SRI

              Comment


              • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                Arun, I tend to disagree with it. Remember FSI does not include landing space, wardrobes jutting out and hell a lot of such things which are calculated in the Area provided by a builder. Also even at 65% coverage which again has got revised to 70% or so 1.5 is just the minimum any ordinary person would achieve in most simple plots. ACtually a smart builder will build at close to 2 times.

                Comment


                • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                  Originally posted by Natarajg007 View Post
                  Arun, I tend to disagree with it. Remember FSI does not include landing space, wardrobes jutting out and hell a lot of such things which are calculated in the Area provided by a builder. Also even at 65% coverage which again has got revised to 70% or so 1.5 is just the minimum any ordinary person would achieve in most simple plots. ACtually a smart builder will build at close to 2 times.
                  A smart buyer wudn't buy that

                  Comment


                  • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                    There aint no smart buyers...in American or there are no smart buyers...in British english!
                    Just go and find out how many flats really give you less than 1.5 FSI?

                    Comment


                    • Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                      its like "upto 50% off" sale, worthless

                      Originally posted by GoccaMacca
                      BANGALORE: Will India’s realty giant DLF lead a wave of residential price correction in Bangalore’s upscale apartment market? The company, which
                      virtually single-handedly created Gurgaon, has slashed its rates for an upcoming project in Bangalore’s Bannerghatta Road by a whopping 32%. In a move that surprised many, the rates have been cut to
                      Rs 1,850 per sq ft, a price last quoted in 2000.
                      have you checked for other proj in that locality,have you checked other charges,like chennai pattinam,off OMR base price is 1600/- but all incl is 2075/- (a whooping 30% more)
                      on one hand we dont trust builders on the other we take their word for it.
                      Like OMR is a vast stretch have checked bannerghatta road,where on banner ghatta road??? and in 2000 such far off places were a rarity.
                      so on what basis have you said 2000 prices? have you any data to back it up.

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