Anyone think that the prices of flats will fall 40% from the mid 2007 prices ?
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  • Originally Posted by Natarajg007
    For all those silly doomsdayers on this board. Many of those Wisemen probably dont understand mathematics. So for the rest.. News is that Carborundum Universal Ltd, the Murugappa Group company, has sold 4.4 acres at Pallikaranai for Rs 58 crore. 58cr for 4.4acres means 13.18cr per acre. An acre is approximately 20grounds. However if somebody takes an acre and creates a layout with roads he will be forced to have only 10 to 12 grounds of usable land. So if we go by 20ground logic then one ground in this place costs 13.18cr/20=66lakhs. However if we use the logic of 12 grounds effective usable area then the cost of a ground goes to 1.1cr.
    In other words on Dec 1st when this article has come up in Hindu, land price in a place as far away as Pallikaranai is 1.1cr per ground.
    Just to give a feel of the price in this area even an year ago. It was costing no more than 40L per ground. So are the doomsdayers WANTING A FALL or is there really a fall?
    Now one must realize there is a clear difference. Builders are quoting astronomical profit margins, not today, not yday but for the past many years. So if you buying a flat and if the fella sold it for 5200psft and then reduced it to 4800psft, it only means the builder is fooling u lesser nowadays. So going back to this Carborundum land. Miles away from this property India bulls is selling flats for 2700psft. If this land of Carborundum is constructed even fairly at 3.5 FSI for Multi storey building then the price will be (3.5x1200+4000)/3.5=2350psft. 1200 is the cost of construction and 4200 is the psft cost of land there (1.1cr/2400=4000approx). However a typical builder will quote a price of Rs 4000psft given Indian bulls price of 2700 at a much lousier location. So the margin is Rs 4000psft - Rs 2350psft = Rs 1650psft. In other words if the person quotes 4000 or 3600 he is yet in mighty profit. This means that builders are lowering their prices and profit margins but realestate price, the intrinsic price of land is not going down. It is yet to shoot much higher much against the wishes of the STUPID Wise cartel.


    Natrajg007, Thanks for the math.I was not aware of this method of calculating directly the flats rate from the lands price and vice versa.It really explains well how prices are being calculated in the current market.

    I couldnt help noticing a paradox, and was hoping if you could clarify and help me understand the same.

    Let me use the same numbers and do a reverse calculation.

    If 20 grounds was sold for 13.18 Cr i.e 66 lakhs/ground at 4000 Rs/sqft.wasn't it because the buyer also took into consideration the 3.5 FSI while making the deal?

    (20*2400) * 3.5 * rate/sqft for land = 13.18 Crore

    Therefore, the intrinsic rate/sqft for land is approximately only Rs 785, which is more or less the guideline value there in pallikarnai.

    As you said, the builder can cover up this huge premium/bet only by selling the flats/apartments at huge profits.Had the builder bought the 1 ground land at 4000 Rs/sqft, he would have to sell the flats above 3800 Rs/sqft to break even.Does that mean the value of the land in that locality is 4000 Rs/sqft?

    If there is a plot of 2400 sqft, the maximum FSI allowed is 1.5 to 2 depending on the road width etc.

    hence the market price should be

    (1.5 * 2400) * 785 = Rs 28,26,000 which is approximately 1200 Rs/sqft.

    If a flat is constructed, applying the same logic.It has to be sold at

    (1.5x1200+1200)/1.5=2000 Rs/sqft

    How can land of two different size and extent be compared and the same rate applied to both?if it can be done then FSI should not be considered at all and land transactions should be done only on 785 Rs/sqft.

    Am I missing anything here?
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  • Chennai RE

    Originally Posted by Natarajg007
    What a over simplistic approach? People hold land not for fun. It is not easily tradeable like stocks. There are fellas holding Reliance shares for 2 decades. In case of land, people hold it for generation/s. So your idea is not correct even one bit. Flat buyers are todays beggars, also called as IT, BT etc employees. Land owners were yday's kings, they may not have all become beggars. So many wont sell it. BTW the return on plots is not a silly 10%. I have an example of multiple lands where the return over 20+ years works out to anything from 25% to 35% cumulative per annum. This with the added fact of no tax until it is sold makes it an ideal investment. Cheapos buy flats to get next month return but long term returns are only available on land.
    I find most on this board belong to this IT group, PUDU PANAKARAN or PAZHAYA PITCHAKARANS. So they dont understand reality!


    Do not sell any land you hold unless untill it is the extreme necessity for the hard pressed funds.
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  • Chennai RE

    Originally Posted by Natarajg007
    What a over simplistic approach? People hold land not for fun. It is not easily tradeable like stocks. There are fellas holding Reliance shares for 2 decades. In case of land, people hold it for generation/s. So your idea is not correct even one bit. Flat buyers are todays beggars, also called as IT, BT etc employees. Land owners were yday's kings, they may not have all become beggars. So many wont sell it. BTW the return on plots is not a silly 10%. I have an example of multiple lands where the return over 20+ years works out to anything from 25% to 35% cumulative per annum. This with the added fact of no tax until it is sold makes it an ideal investment. Cheapos buy flats to get next month return but long term returns are only available on land.
    I find most on this board belong to this IT group, PUDU PANAKARAN or PAZHAYA PITCHAKARANS. So they dont understand reality!


    Dear natarajg007- You need not be so harsh on IT chaps?
    Real Estate investment at any point of time is a good investment whether in down or uptrend time, seen from a longer period perspective if the documents and ownership are clear and genuine. No one would lose in the long run and only the return may vary, in any case much higher than 10% per annum if seen in a period of 10 years and above. Different opinions?

    ks2071746
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  • Yes. Long Term ROI is at best 12% or so ...

    Originally Posted by ks2071746
    Dear natarajg007- You need not be so harsh on IT chaps?
    Real Estate investment at any point of time is a good investment whether in down or uptrend time, seen from a longer period perspective if the documents and ownership are clear and genuine. No one would lose in the long run and only the return may vary, in any case much higher than 10% per annum if seen in a period of 10 years and above. Different opinions?

    ks2071746



    I have taken an extreme case. This is a property 105 years old. It also happens to be in one of the top 3 expensive areas in Chennai - so the buyer got it almost perfectly right in terms of hitting the jackpot over the very long term :D.

    Property was bought for around 10 paise per SFt. Today it is around Rs12000 per SFt. This is a compounded growth rate of 11.8% pa over the term. When it was 15000 a short while ago, the ROI is still amounting to only 12% pa.

    In fact ks, properties will show significant variations from this mean (say 12%) only in the short term. Longer term, the compounding factor will actually smooth the curve making it very difficult for higher returns.

    Yes, as you had mentioned in another post, the postings ARE rather long and boring. Will keep it short - and necessarily pass on less info and gyan if that suits everyone else ;).

    And don't bother about Nats. He is so harsh on IT chaps because he is a failed IT chap :p having left this business in 2003 after 18 years of being in it and missing the Golden Era of Indian IT !

    cheers
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  • Originally Posted by wiseman


    Yes, as you had mentioned in another post, the postings ARE rather long and boring. Will keep it short - and necessarily pass on less info and gyan if that suits everyone else ;).

    cheers


    Hi Wiseman,

    Are you going to make your postings short just because one man has complained about it. Other 99.99% of the forum are excited by the amount of information you give in your posts. Please don't make your posts short and keep up the good work.

    Thanks,
    Sridhar
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  • Originally Posted by sridharchennai
    Hi Wiseman,

    Are you going to make your postings short just because one man has complained about it. Other 99.99% of the forum are excited by the amount of information you give in your posts. Please don't make your posts short and keep up the good work.

    Thanks,
    Sridhar


    stats should not be used as a drunken man uses a lamp post, for support rather than illumination.
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  • What utter rubbish!!!

    Originally Posted by Natarajg007
    What a over simplistic approach? People hold land not for fun. It is not easily tradeable like stocks. There are fellas holding Reliance shares for 2 decades. In case of land, people hold it for generation/s. So your idea is not correct even one bit. Flat buyers are todays beggars, also called as IT, BT etc employees. Land owners were yday's kings, they may not have all become beggars. So many wont sell it. BTW the return on plots is not a silly 10%. I have an example of multiple lands where the return over 20+ years works out to anything from 25% to 35% cumulative per annum. This with the added fact of no tax until it is sold makes it an ideal investment. Cheapos buy flats to get next month return but long term returns are only available on land.
    I find most on this board belong to this IT group, PUDU PANAKARAN or PAZHAYA PITCHAKARANS. So they dont understand reality!



    Folks,

    Let me take a "serious" claim made by Nats here - and I want to show how shallow this guys claim is, that others are frivolous while he is a serious dude! Having been a failed IT guy, he is spewing all his poison on other IT guys who are still raking it in ;)!

    So, let us get down to some Math:

    For a land which was Rs 50 per SFt originally, in 20+ years (let me assume 25 years to be on the safe side) the price today at 25% per annum compounded should be Rs 13235. And for return to be 35% ROI in the same period current price should become Rs 90640.

    Original Period(Y) CAGR(%) Current
    Rs 50 25 25% Rs 13235
    Rs 50 25 35% Rs 90640

    Well, if any of you people are looking for these returns that Nats is talking about, wish you all the best!

    Besides, there is no asset on which Capital Gains tax is levied until it is sold! So, what is he talking about? Part-knowledge is very dangerous, especially when you flaunt it in public (might become a case of the Emperor's clothes ;)!

    Besides, to get a plot at Rs 50 you have to go to the boondocks and we all know that risks of outlying property NOT booming, increases radially outwards from city center. Meaning, as you go out and buy cheaper land, the probability that development and price increases NOT happening in your locality increases. So, in a sense, what you pay for is what you get.

    So, the case is very clear about whether CAGR (Compound Annual Growth Rate) is 12-15% or 25-35%!!! Especially, as our resident geniushere says, should be held for long periods.

    What our friend (who thinks he can lecture others on Economic 101, while he does not know the simple rules of Compounding - which many accountants, CAs and generally smart people in this forum take for granted) does not know is, that CAGR plays a tremendously damping role as the number of periods increase - because it has a geometric and not an arithmetic impact on the result! Forgot the difference between Geometric and Arithmetic (actually linear and inverse-asymptotic) progression from your basic math class in IIT days? :D

    Another thing is that with the new reality, the younger IT crowd is increasingly seeing RE as a short/medium-term investment rather than the once-in-a-lifetime investment like our father's generation did (whether it is good or bad is not being discussed here).

    So, before going around talking about IT group and their PUDU PANAKARAN or PAZHAYA PITCHAKARANS comments, what will you become?

    PAZHAYA PITCHAKARAN who is going to become PUDU PITCHAKARAN as well?

    Do you recognise Dr. LC Gupta? What about Dr. C Rangarajan? Or IM Pandey? If you don't, ask your friends who know and they will tell you.

    I had the good fortune to learn Economic and Finance (and other things as well) from people like these. And even then I do not go around talking about how great my Economics is or how bad others Eco 101 is. I have never heard either of these learned gentlemen crow about their knowledge of Economics even once.

    This quality is called humility, which I'm afraid is missing in you.

    cheers
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  • I like this quote :)

    Originally Posted by abk
    stats should not be used as a drunken man uses a lamp post, for support rather than illumination.



    Whether good or bad, I really like this quote and take your permission to use it later in my life :D

    cheers
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  • parsvnath put on hold 12 major projects

    Dear friends,

    Real estate major parsvnath put on hold 12 major projects due to financial crunch (Economic times- flash news)

    Thanks
    Chataara
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  • Not interested in your long mail with lots of crap. Let me just give a real example.
    Plot price in 1988 = Rs 11,000 (1800sqft). Today the price is Rs 25L.
    Now calculate if you know ln and exp and find the rate of growth. 31% to be precise. This is not some imaginary figure.
    Wiseman, you dont know maths, why are you bothering about it. You can check out if they needed maths for you to get into that so called imaginary 2nd ranked Business school in INdia a non IIM as per you. ROTFL
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  • Wiseman, this single message of yours shows how incompetent you are to talk about realestate. First as you mentioned before you are a silly software guy who will talk about currency trading incorrectly as you might never have traded all your life. About realestate you paste CAGR from some site since you do not know what is exponentiation. Instead of pasting all that crap all you need to do is take Principal and mulitply with (1+interest%)^no. of years. Well that you wont think of given your silly school which would have taught you to even mug mathematics.
    Now I have given an example above. I can give you more. If you are competent I will give you price of a land in 1966 at 5K which costs 2.5Crore today. 22% is the yield. Ofcourse for you I need to do the maths to get it into your numbskull
    5Kx1.22^42=2.12Cr (approx)
    First remember something. You certainly have very little aptitude for maths. That is getting clearer and clearer to everyone. High time you keep your fights with me more practical. Otherwise you will not be able to sleep with the abuses you get. Remember, you parents have given you limited brains. Dont expose it too much for all and sundry to laugh at you. Gotcha?
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  • For all on this board. Realestate prices for investments made in 1960s till today over a period of 15years plus do yield a return of 20 to 35% annually or CAGR for the bookish oriented. Now this return is for land, not for building. Building depreciates as I have already taught to the featherbrained Wiseman. Also land does not appreciate instantly or in regular fashion. So to get the right picture you need a minimum waiting period of 5% but the best especially in outskirt lands happens only over a period of time. For example in one piece of land I bought in 1988, the return did not even match bank interest rates for the first 10 years and now it is around the 25% rate.
    Realestate booms happen in bursts, they are not contigous as some stupid folks on this forum tend to believe. Finally most SO CALLED EDUCATED and WORSE STILL NON RESIDENT INDIANS do not even have the faintest idea about Indian realestate. Their views should be used like toilet tissue. Typical example is Wiseman. Cheers.
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  • Originally Posted by nabishek
    Natrajg007, Thanks for the math.I was not aware of this method of calculating directly the flats rate from the lands price and vice versa.It really explains well how prices are being calculated in the current market.

    I couldnt help noticing a paradox, and was hoping if you could clarify and help me understand the same.

    Let me use the same numbers and do a reverse calculation.

    If 20 grounds was sold for 13.18 Cr i.e 66 lakhs/ground at 4000 Rs/sqft.wasn't it because the buyer also took into consideration the 3.5 FSI while making the deal?

    (20*2400) * 3.5 * rate/sqft for land = 13.18 Crore

    Therefore, the intrinsic rate/sqft for land is approximately only Rs 785, which is more or less the guideline value there in pallikarnai.

    As you said, the builder can cover up this huge premium/bet only by selling the flats/apartments at huge profits.Had the builder bought the 1 ground land at 4000 Rs/sqft, he would have to sell the flats above 3800 Rs/sqft to break even.Does that mean the value of the land in that locality is 4000 Rs/sqft?

    If there is a plot of 2400 sqft, the maximum FSI allowed is 1.5 to 2 depending on the road width etc.

    hence the market price should be

    (1.5 * 2400) * 785 = Rs 28,26,000 which is approximately 1200 Rs/sqft.

    If a flat is constructed, applying the same logic.It has to be sold at

    (1.5x1200+1200)/1.5=2000 Rs/sqft

    How can land of two different size and extent be compared and the same rate applied to both?if it can be done then FSI should not be considered at all and land transactions should be done only on 785 Rs/sqft.

    Am I missing anything here?

    Natarajg007, can I get your response for my query please?thank you.
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  • Dear Nataraj, the details you have given (11000 inr became 25 L); but the point is what was the return upto 2004, you will also agree that the prices shoot up like this only during the last 3-4 yrs, because of the excess liquidity available through out the world. (May be the same NRIs are one of the reason). That is why, like many others in this forum I also feel the prices will correct. Nobody is against investment in land but like any other asset class there is no point in chasing them when everybody wants to have a piece of action. Also speculative investments (leveraged) should be avoided at any cost. Coming back to the CAGR game, I have invested in a stock in 1996 and even after the correction of 50% in the markets the investment still gives me a CAGR of 22%. BUT if you ask me if the same stock is going to give 22% CAGR for next 10 yrs my answer would be a definite NO. However I am pretty much sure that this investment will be give 2-3% over the inlation rate per year for the next 10 years (on an average) and I will be very happy and contended with this kind of an investment.
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  • i have been a silent reader of this forum. i liked the way wiseman has been replying. anyways coming back to the topic, i dont know by how much it will go down. but i always wondered how foolish it was/is to buy at such exorborent levels. In my opinion its caused by the IT employees. (I agree there are other things like blck money, etc etc. but the demand was driven by IT people). There are 2 things to consider. 1)are these properties worth the price quoted?. (i agree it was healthy in 2003 and before). No buyer even asked themself this and jumped in. Many bouht because eveyryone was buying and they thought it was a shame to live in a rented house. 2) Are these software engineers worth the salary they are paid?. Certaiinly not. In my opinion only about 20% of the people are of quality. I have been taking interviews in my current company. In the last 5 years, i have only recommened about 6 people sofar. I am not saying i am great or anything. But i was shocking to see their knowledge,skills etc. Btw i work for an MNC which is a very stable company and goofd revenew and all. But i believe i am one of the top performers in my team. But still i am consevative. One the otherhand i still people still buying or trying to buy flats/plots etc despite an uncertain future. This has really taken me by surprise. The other day i saw a mail from a friend in group enquiring about some project. And he was insisting on others to join in so that we can get some discount. Most of the people are still not aware of economy slowdown. They also dont know that they will not be needed by the employer when there is no business.
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