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Uninhibited Exuberance

Last updated: December 31 2008
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  • Uninhibited Exuberance

    During 2003 nobody expected realestate to go up especially folks in Chennai. Having seen the super boom in late 2003 I advised relatives in Chennai to buy realestate in 2004. That is the reason my close relative has a house to live today with his retirement savings. Today for that money 20L he wont get a flat in the outskirts of Chennai. When prices went up people went mad in 2007.
    That was irrational exuberance. Now folks on this board are talking bearish day in and day out. Their reason is comparison of US with India as if they are TIGHTLY COUPLED. This is exuberance on the bear side. This can be equally dangerous.
    As far as I have seen realestate price in Chennai has gone up regularly every decade. The first rise in my memory was in late 70s between 78 and 82. Then there was a boom in 85s. In one such occasion my family could triple their investment in a plot on the sides of Mount road in just 1.5years. The next round of upmove was in 94-98. The current trend is 2003 till now.
    After all these rises never did the price fall to the old low. Not even to half the rise, not even by 30% from the peak. The price of land in Abhiramapuram in 1996 at the peak was around 80L to a crore. In 2000 the prices were quoted around 60L but that was desperate sales. In reality nobody was selling then unless they were in trouble.
    I am not stating that prices cant fall. All I want to tell you is dont assume prices are going to fall just because somebody tells you so. Did the same folks tell you to buy in 2004? If they did, then listen to them, not otherwise.
    I think most of the bear thought and negativism for realestate on this board is because NRIs who sold out in 2007 and those of them who never entered before 2006 are left high and dry both in their countries and in India as they thought they knew everything when they probably knew nothing. Their advice based on USA is nothing but worthless. Talk to the local Chennaite who stayed in Adayar, talk to the Chennaite who will say ECR is far away, not to these new bees who know not what Chennai is. Finally such a person is going to say Madras not Chennai.
    In net, if you have the money better buy worthwhile property to live. I am not bothered about speculators and traders. I am talking about genuine buyers. Folks who want a place to live. Go and buy before you are caught in the next upmove. In 2003 nobody wanted to buy a flat in Mylapore for Rs 1000psft. Suddenly in 2007 they were buying flat in Urapakkam for Rs 3500psft. So be careful before you take the advice of NRIs and NRI spokespersons on this board like Wiseman. They know not what they are saying.
    Cheers.
  • #2

    #2

    Re : Uninhibited Exuberance

    A correction to my above message. The superboom in 2003 was in Bangalore. So I could predict the boom in Chennai which normally lags Bangalore on the upmove.

    Comment

    • #3

      #3

      Re : Uninhibited Exuberance

      natarajg077 views

      Originally posted by Natarajg007 View Post
      During 2003 nobody expected realestate to go up especially folks in Chennai. Having seen the super boom in late 2003 I advised relatives in Chennai to buy realestate in 2004. That is the reason my close relative has a house to live today with his retirement savings. Today for that money 20L he wont get a flat in the outskirts of Chennai. When prices went up people went mad in 2007.
      That was irrational exuberance. Now folks on this board are talking bearish day in and day out. Their reason is comparison of US with India as if they are TIGHTLY COUPLED. This is exuberance on the bear side. This can be equally dangerous.
      As far as I have seen realestate price in Chennai has gone up regularly every decade. The first rise in my memory was in late 70s between 78 and 82. Then there was a boom in 85s. In one such occasion my family could triple their investment in a plot on the sides of Mount road in just 1.5years. The next round of upmove was in 94-98. The current trend is 2003 till now.
      After all these rises never did the price fall to the old low. Not even to half the rise, not even by 30% from the peak. The price of land in Abhiramapuram in 1996 at the peak was around 80L to a crore. In 2000 the prices were quoted around 60L but that was desperate sales. In reality nobody was selling then unless they were in trouble.
      I am not stating that prices cant fall. All I want to tell you is dont assume prices are going to fall just because somebody tells you so. Did the same folks tell you to buy in 2004? If they did, then listen to them, not otherwise.
      I think most of the bear thought and negativism for realestate on this board is because NRIs who sold out in 2007 and those of them who never entered before 2006 are left high and dry both in their countries and in India as they thought they knew everything when they probably knew nothing. Their advice based on USA is nothing but worthless. Talk to the local Chennaite who stayed in Adayar, talk to the Chennaite who will say ECR is far away, not to these new bees who know not what Chennai is. Finally such a person is going to say Madras not Chennai.
      In net, if you have the money better buy worthwhile property to live. I am not bothered about speculators and traders. I am talking about genuine buyers. Folks who want a place to live. Go and buy before you are caught in the next upmove. In 2003 nobody wanted to buy a flat in Mylapore for Rs 1000psft. Suddenly in 2007 they were buying flat in Urapakkam for Rs 3500psft. So be careful before you take the advice of NRIs and NRI spokespersons on this board like Wiseman. They know not what they are saying.
      Cheers.
      Dear natarajg007, This is a good piece of communication from you, sounds not unreasonable. I have been looking carefully in the flat rates in Tambaram East area and the prices have only remained more or less same for new flats for the last 10 months or so and not increased. There can be some marginal discounts like Rs. 50 or maximum Rs. 100 per sq. ft. and not like 10% or 15 % type. The maximum builders may offer may be free open car shed or some electical fittings etc. for flats over 1000 sq. ft. and not much. All of them are sticking on to their rates and no appreciable reduction in the rates is seen. Waiting for long, assuming the prices will come down will enable the prospective buyers to lose the good properties most convenient to them in so many aspects. People also should realise, anybody lowering the rates appreciably, will compromise on the quality, progress of construction getting into large delays.

      ks2071746

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      • #4

        #4

        Re : Uninhibited Exuberance

        Well darling KS, please tell this to Wiseman and you will be in trouble! LOL!

        Comment

        • #5

          #5

          Re : Uninhibited Exuberance

          ks and all of you who buy * 2.4 crs/grnd, You are in serious trouble!!!

          ks,

          When you buy a single ground from a shark and a scoundrel (like some guys we know who try to palm off their land at exorbitant prices to unsuspecting people), you only deserve what you get ...

          Well, here is what you are up for if you do so!

          Assume you bought a 1200 SFt for half that price and you put up 20% down payment - thats 24 lakhs. For the remainder 96 lakhs, you took a loan for a 20 year period at an average of 10% pa.

          Well, you are on the hook for Rs 115800 every month which is from your salary after tax. So, pre-tax (of 30% at that kind of income) the amount you will be putting away is Rs 150540 every month! Any tax breaks look marginal / piddly at this level of payment, so ignore it.

          Now you would have paid the owner of the land Rs 12000000. And then, you would have paid the Banker another Rs 15800000 (over 20 years as interest)!!! For a total of Rs 27800000 post-tax. The sum of money paid by you over 20 years Pre-tax will be Rs 36100000 (3.61 Crores).

          So, you will spend 20 years, every year and every month wondering how stupid you were to simply work, work, work to give away Rs 1.50 lakhs of your income because some scoundrel and his banker-partner gyped you of all this money. And if you were to believe this knave who sold it to you cheerfully at 1.2 crores for half a ground, to get the best returns you must hold it for a long period of 20 years and get a 25% CAGR (and not, like the IT people sell it in a short period).

          And, let me see what that will put the price of land to be, 20 years from now if you are to believe this thief and get a 25% pa CAGR.

          You should be able to find another sucker to buy it off you for Rs 104,00,00,000 (yes, thats right 104 crores! If you hope to find a bigger sucker 20 years later to shell out 104 crores, all the best. And at 35% CAGR as this joker insists, you must find an even bigger sucker to buy it off you for Rs 485 crores - yes you heard it right!!!).

          Power of compounding!

          Now, your dear clever Nats did not tell you that hard part, did he? He just told you that in the past 20 years he got 25% CAGR and now he is selling it to you, giving you the idea that you too will get the same 25% for the next 20 years. Then, he compounds the problem for you by telling you that you need to hold it for 20 full years so that you will get that fancy 25% ROI.

          Let me see what return this land will get you in the next 20 years for which you would have paid a total of Rs 3.61 Crores which has a present value of Rs 15730000 (1.57 Crores of today's rupees; to the Seller, Banker, Taxman) . Can you find a buyer for 1200 SFt for ??? crores?

          If you get Rs 10 Crores then your CAGR is just under 10 %!

          If you get Rs 12 Crores then your CAGR is 10.70 %!

          If you get Rs 15 Crores then your CAGR is just under 12 %!

          Even If you get Rs 20 Crores, your CAGR is only 13.6 %!


          So, now after slogging for 20 years and giving away 1.50 lakhs every month for 240 months, you get anywhere from 10% to 13.6% max?

          Well. For all you suckers who want to believe that shameless man, make my day!!! . Buy that property from him today - and become a debt-slave for the rest of your life!!! Seriously.

          Don't believe me? Check with your auditor or any half-decent CA or accountant!!! Even a first year Accounts graduate will validate the computations.

          Do you know of anybody who earns so much that he can shell out 1.50 lakhs per month every month for the next 20 years without missing a beat?

          Even if you tell me that there are 30 year loans, at the same rate you will still be paying 1.05 lakhs post-tax and 1.37 lakhs pre-tax. But this for 30 years!!!

          Nats was right about LOL and ROTFL. But the laugh will be at your expense, people, who believe him and buy property off him at the usurious rates he is quoting!

          Do you see why prices must stagnate for a long time OR decline and then rise slowly for salaries to catch up so that these prices actually become affordable. (actually it will be value of rupee falling so much that your employer will need to pay you bushels of cash every month)

          Everybody is playing with fire hoping that, buying at these prices, the music will continue to play, party will continue to go on and you will forever find a bigger fool. Good luck to all those kind of buyers.

          cheers
          Last edited December 19 2008, 11:18 PM.

          Comment

          • #6

            #6

            Re : Uninhibited Exuberance

            I appreciate your post Wiseman. Your truth is out. You claim to be some big guy in a IT firm but get scared about 1.5L payment per month. So you are not a big guy after all, just some mouse under the floor earning probably 20K p.m. and want to buy a land worth 1crore.
            Now let us look at your predicaments.
            a. 3.2cr will become some massively obscene number as you say....Right. THink about this. In 1966 the same land was bought for 5000 rupees. Do you think 5K was small sum then. Typical salaries then were around 100 to 200 p.m. for Masters in Engineering and the best picked up 400 p.m. Now similar good guys pick up 4 to 5L per month (and that does not include you...dear loser!). So this 3.2cr land is certainly not for you to buy. I dont expect any on this board to be buying it.
            b. In those days with lesser population land was available a plenty. The location of this land in those days was considered absolute outskirt. Today that is part of rip roaring city where the biggest mall is coming up..read Forum. The buyer of the land is not some silly Software guy who by accident picked up 50K a month because he can spell Java. Ofcourse the same plot will be bought by a builder who will then convert flats and sell a flat for 50L to 100L and that will be bought by one of those higher paid Java guys.
            c. Dont try to frighten folks with your ineffective brains. Remember those who have a 3.5Cr property are not those who earnt the last banana by shagging in some SW company. They were well off long ago, before NRIs were able to pay their last fees and scoot to US to work as greenhorns for 1K USD.
            In net Wiseman does not understand Standard V lesson on Ratio and Proportion. If he knew that he will be able to reduce 3.6cr to 36L property and raise it also to 36Cr property. Now if Wiseman cant afford 3.6cr it does not mean property price wont go up 25% and because he can afford 3.6L it does not mean property price will come down to that level.
            In effect, a 3.6cr property is not to be meant to be bought by some silly entry level software guy. The person who bought that land in 1966 has benefited in a lifetime and it is not unfair for him to benefit. THe point Wiseman misses always is PURE MATHEMATICS.
            I am sad that this board allows him to write as if he knows anything. Well with his Java XML skills he is as obsolete as Java is. THe point is he is good in bragging about his incompetence. So let him enjoy.

            Comment

            • #7

              #7

              Re : Uninhibited Exuberance

              FYI.. In 1980s a lakhpathi was considered rich. In 1960 land in Habibullah road was available for few thousands a ground. Today the fellow who earns 30K p.m. is as I said before a clerk of the 1980s. Unfortunately he has been made to think big and is working in the imaginary world. So when the freshie picks a 20K salary he thinks he is big and spends 20K, takes a loan for another 5K and flaunts it. When he loses his job he cries. He deserves to be in trouble for all his crimes just like promiscous people getting AIDS deserve it.
              Wiseman wont understand that there are folks wanting to take 1.5Cr loans. They are not piddley entry level programmers. The typical person is an IIM A graduate of 1994, and is working as a VP in a top company. This is not an imaginary person but a very close acquaintance of mine and I know he cannot buy the 3.6Cr land from me.
              Also remember, even if you took a 25L loan with a 6L annual salary (I have an example of this exact configuration) he is also in the same trouble as described by Wiseman above. He will have to shell out 25K or so p.m. to the loan for the next 30 years and he will also be in trouble if he loses his job. Also after 15 years in these long loans you hardly end up paying even 20% ofyour loan. Please dont forget this. Does it mean nobody is going to take loans.
              THose who take loans (a risk as in investment) need to be rewarded beyond the prevailing inflation rate. So they will be given the reward by escalating property prices.
              The basic problem with NRI junkies is, they are imagining US rates of interest, US inflation (which is now a big deflation) and so imagining that prices in India cant fall. That isbecause they attened EC 101 course from some shady univ in the US and got nothing into their brain! Come to the next course where in India a depreciating rupee has supported India through most of 80s, 90s and early 2000. Now with inflow rupee is steady but then it might mean that interest rates will fall and in that case realestate growth rate will shrink.
              IN OTHER WORDS, REALESTATE IS THE BEST BET AGAINST INFLATION.
              So in US with inflation at 3% or so in past many years, yields will be 5% while in India in the 90s, the inflation was at 20% though govt claimed otherwise. Finance companies gave such returns then! So the 25% growth of RE is justified.
              As I said before Wiseman who is nothing but a Foolishman, who knows neither maths nor economics will confuse US with INdia, using US inflation rate and applying it to India RE. He is just a useless bloke here and those of you who are listening to him are idiots.
              Finally KS, the biggest insult to me on this board was from you. You were asking whether Wiseman and I are same? U should have some shit brain up your head to understand who is who!
              Even if you abused me with the worst words I would have taken it lightly, but asking me whether I am Wiseman is a total insult to my intelligence. I would not want to be born even with a million times Wiseman's intelligence since if you multiply zero with a million you get zero and that is what Wiseman provides. Cheers.

              Comment

              • #8

                #8

                Re : Uninhibited Exuberance

                To give a feel for numbers. I

                Comment

                • #9

                  #9

                  Re : Uninhibited Exuberance

                  To give a feel for numbers I am appending a post from ************
                  Independent House/Villa in Urapakkam
                  Total Area:1070 Sq. Ft. [IMG]http://www.************/images/downdp.jpg[/IMG] | Built-up Area: 700 Sq. Ft.
                  Price: Rs. 30,00,000
                  The post is on Dec 19th. Now to construct this 700sqft 5yr old building would be 7L and todays worth must be 5L (building depreciates). So 1070sqft land is 25L. The fellow who talked about Tamabarm land price when I spoke of URapakkam land was grossly off track.
                  Incidentally the above post in 99acres has nothing to do with me. Just that
                  a. PRices have not fallen one bit.
                  b. People stupidly buy land at high prices when they are given a depreciating asses called building
                  Cheers.

                  Comment

                  • #10

                    #10

                    Re : Uninhibited Exuberance

                    So the real sensible person will buy Land at the right price and build when he plans to live there. That is called investment and not buying flats for investment which many silly NRIs tend to do. Explains why they lost out in US realestate where land is plenty and will be losing again in India when the builders dump their property on these guys.

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