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Uninhibited Exuberance

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Uninhibited Exuberance

Last updated: December 31 2008
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  • #11

    #11

    Re : Uninhibited Exuberance

    Originally posted by Natarajg007 View Post
    To give a feel for numbers I am appending a post from 99acres.

    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.

    I think u r on eof those who believes an asset class like RE will never come down.. in any case, u seems is even bullish then the real estate developers who themselves are saying that the prices will come down (recent request by CREDAI and other associations) ... in any case, my dear sir, pls go around and ask all these developers and they are ready to negotiate.. now talking of independent plots and bungalows.. well unlike a developer who is bound by cash flow for running his business a lot of these are individiual owners who has higher holding capacity and like u believes that it is a sin to quote lower.. but as RE is a low liquidity asset, in case of some one in distress, he will start selling at a huge discount.. in any case, the ROI u r mentioning in the forum r absurd, and no asset class gives that kind of return for a prolonged period of 15-20 years.. the best is about 18-20% by stocks.. followed by RE at about 10-12% and followed by Gold .. which actually just follows the inflation with a positive bias.. In any case all asset class go thru cycle and RE is no exception... hence starting this year it looks like that RE is getting into downturn and will retract in most likelyhood to 50% and at minimum level of 30%.. looking at the earlier cycles it shall take anywhere between 5-10 years for the upturn to start again... in any case, as long as u r happy with ur investment, all is fine.. but in reality what wiseman is saying is true to some extent but not entirely.. as if u start today with a 40% outgo of ur salry for RE, in next few years it will come down to 30% then 20% and so... as value of money will go down due to inflation and also there is likelyhood of one getting into higher position as time goes by with higher income.. but that does not justify paying the abnormal RE prices of today.. and hence it is better that one shall wait and let sanity come into RE market.

    Cheeeeeeeeeeeeeers

    Comment

    • #12

      #12

      Re : Uninhibited Exuberance

      wiseman vs natarajg007

      Originally posted by Natarajg007 View Post
      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.

      Oh! natarajg007 and wiseman-my seniors in this site. With too big messages in width, length, breadth and height, both of you make us - the other junior/senior members feel sick. Please reduce your messags to half of what they are now so that we get the first desire to read the messages now and slowly you can increase the length and breadth.

      ks2071746

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      • #13

        #13

        Re : Uninhibited Exuberance

        Originally posted by Natarajg007 View Post
        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. .
        I agree that todays 20k salaried (IT/ITES) personnel are nothing but olden days equivalent clerks.
        It is not only they think big, the society also makes them big.'' Fancy and magic word -IT job''.

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        • #14

          #14

          Re : Uninhibited Exuberance

          Completely missed the point!!!

          All you guys seem to be missing the point.

          Nats i the guy who bought (presumably) at a lower price and is now trying to palm off this property to any sucker going down his way.

          So, its natural that he will talk rubbish like:

          If you cannot afford 1.50 lakhs per month, then you are a loser - and rubbish of this kind. If you noticed an interesting thing, Nats always talks in third person about the huge amounts that VPs and others are earning in the IT sector. I've never heard him talk about the crores in salary that he had earned sometime in life. Its very easy to talk about someone else's money. I too can talk about the crores that Nandan put into his house (oh, thats Nandan Nilekani ). That does not bestow any virtue on me!!!

          At the same time, this dude quit the IT race in 2003, when he would certainly not have been earning a gross of even half this amount and he is now asking you to throw your 1.50 lakhs into his pocket so that he will LOL/ROTFL all the way to the bank and you will be stuck with his property and whatever "happiness" he promises you.

          ME:
          In my case, I am trying to tell you guys that, any way you look at it, we are in for a period of serious pain (Manoj seems to be the only one willing to accomodate the alternate point of view in his mind as another possibility).

          I'm not telling you NOT to buy property - like Nats is making you believe.

          I'm telling you to buy property in such a way that you enjoy it as well as protect yourself from being burnt. And that can happen only when you buy it at a much lower price and when you are earning much more than you are now.

          Btw, a quick poll. How many of you are earning 50k gross pm? How many 100k pm? And how many 150k? What about 200k? 250k? Ah, that person with 250k should be listening seriously to Nats since only you can afford to be a sucker for his tricks .

          See which argument fits your style.

          cheers

          Comment

          • #15

            #15

            Re : Uninhibited Exuberance

            Exceptions are not examples

            The properties priced at 3.2 cr and 15000 Rs/sqft all are premium properties.They are for the elite and for those who flaunt their wealth.

            There will be always sellers and buyers for these kind of properties.

            Please note - The owners bought this property with their own money.

            It has to be understood that today the crore's worth of property is not being bought by crorepathis, but by average office going middle class who is taking huge loans and is ******** against so many uncertainities that life may throw at them.

            When affordability has reduced, people defaulting on EMI's, Huge bank loan interest, Global Financial Meltdown, risk of losing job and facing the worst crisis the world has ever seen.It doesnt harm to be prepared for any adversity, and making well informed decisions and taking calculated risk.

            When you laugh, the whole world laugh's with you. when you cry, you cry alone.

            While Natraj and Wiseman both agree flat prices will have to fall.The reasons they are attributing is different.Wiseman says it will be due to the impact of global financial meltdown and RE bubble burst.Natraj says it will be due to increase in FSI and reduced builders profit margin.

            People who are aware of the RE Scenario are realistically expecting reduction of land prices only in the lines of 10-15% within the city limits and 30-40% in the suburbs.Reduction in Flats prices is expected between 30-40%.Which seems very possible.
            Last edited December 22 2008, 12:53 PM.

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            • #16

              #16

              Re : Uninhibited Exuberance

              All I want to tell u is that in the long run, my calculation of CAGR on RE is correct whether u bought at the peak of the 80s RE shoot out or in the depth. In other words ur 10-12% is american bookish story and u r wrong. Anyway nice to hear ur views.

              Comment

              • #17

                #17

                Re : Uninhibited Exuberance

                oops that earlier reply was to Manzb. I think there should be a way to tell whose post one is replying to without quote option which occupies too much space. Is the mod listening!?

                Comment

                • #18

                  #18

                  Re : Uninhibited Exuberance

                  Originally posted by nabishek View Post
                  The properties priced at 3.2 cr and 15000 Rs/sqft all are premium properties.They are for the elite and for those who flaunt their wealth.

                  There will be always sellers and buyers for these kind of properties.

                  Please note - The owners bought this property with their own money.

                  It has to be understood that today the crore's worth of property is not being bought by crorepathis, but by average office going middle class who is taking huge loans and is ******** against so many uncertainities that life may throw at them.

                  When affordability has reduced, people defaulting on EMI's, Huge bank loan interest, Global Financial Meltdown, risk of losing job and facing the worst crisis the world has ever seen.It doesnt harm to be prepared for any adversity, and making well informed decisions and taking calculated risk.

                  When you laugh, the whole world laugh's with you. when you cry, you cry alone.

                  While Natraj and Wiseman both agree flat prices will have to fall.The reasons they are attributing is different.Wiseman says it will be due to the impact of global financial meltdown and RE bubble burst.Natraj says it will be due to increase in FSI and reduced builders profit margin.

                  People who are aware of the RE Scenario are realistically expecting reduction of land prices only in the lines of 10-15% within the city limits and 30-40% in the suburbs.Reduction in Flats prices is expected between 30-40%.Which seems very possible.
                  What u said elite are yday's middle class. Countries go through cycles not just markets. So when to enter or exit is a private decision. In my view in Chennai builders are making super fortune and they will not mind dropping prices a bit to keep cash flow. Other than that RE wont go down. Those investing in flats and expecting long term growth are incorrect right at the beginning. If they buy flats to live then it is fine.
                  So
                  1. If u want to invest, do that only on land.
                  2. If u buy flat to live it does not matter much if the price changes some 10%, it is not as if that will change ur life in the long run of 20years. Buy the right place at the affordable price.
                  3. If u r a punter on flats, u r a fool and I dont care if u lose.
                  Finally 1cr properties are not about flaunting. It is just what u r worth. Nothing is big, nothing is small, just what u r worth u can do and what u aint worth is not for u to try. If u fail after trying beyond ur worth, I can show no pity to u.

                  Comment

                  • #19

                    #19

                    Re : Uninhibited Exuberance

                    Originally posted by Natarajg007 View Post
                    What u said elite are yday's middle class. Countries go through cycles not just markets. So when to enter or exit is a private decision. In my view in Chennai builders are making super fortune and they will not mind dropping prices a bit to keep cash flow. Other than that RE wont go down. Those investing in flats and expecting long term growth are incorrect right at the beginning. If they buy flats to live then it is fine.
                    So
                    1. If u want to invest, do that only on land.
                    2. If u buy flat to live it does not matter much if the price changes some 10%, it is not as if that will change ur life in the long run of 20years. Buy the right place at the affordable price.
                    3. If u r a punter on flats, u r a fool and I dont care if u lose.
                    Finally 1cr properties are not about flaunting. It is just what u r worth. Nothing is big, nothing is small, just what u r worth u can do and what u aint worth is not for u to try. If u fail after trying beyond ur worth, I can show no pity to u.
                    People buy flats taking huge loans hoping to get huge returns of investment later in life.

                    I feel flats should be bought only for self use and for saving on the rent and for a better living.Not as an investment.Investing in land and holding onto it seems a better option.

                    It doesnt make sense buying crores worth flats for self use taking loans because the pain and anguish of paying back the loan for 20 years is far more than renting a house now, investing in different portfolios and buying a home in our own money after 20 years.We are not going to be less richer like that.

                    Even for self use, Flats have become unaffordable for the middle class.I saw an advertisement today from TNHB offering flats in sholingnallur.Please note this is LIG flats of arnd 450 sqft at 2230 rs/sqft.

                    Comment

                    • #20

                      #20

                      Re : Uninhibited Exuberance

                      Originally posted by wiseman View Post
                      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
                      Dear wiseman sir,

                      I am not into RE business at all as a broker or a promoter or an agent or a trader who would does buying and selling. I was looking for a decent 3 bed flat of around 1300 sq. ft. since Jan.08 and have visited a number of localities like Vandalur, Perungalathur, Urappakkam, Madipakkam, Selayur, Pallavaram, Chrompet, Tambaram West, Chitlapakkam, Camp Road, Medavakkam, Vandalur-Kelambakkam Road, Maraimalai Nagar, Guduvanchery, Saidapet, KK Nagar, Manapakkam, Porur etc. etc. for only a flat, not for land or independent house, which are beyond my reach/budget. My budget was within Rs. 40 lakhs. all inclusive. Having spent over 8 months in the process, I finally went in for a 3 bed flat in Tambaram East close to Sanatorium Station. The rate was a little high at Rs. 3500/sq. ft. when people told the rate in this area is around Rs. 3000-3250, but the location was very good, most suited for my son and my coming new daughter-in-law for their commuting to their offices, one at Mahindra City and the other to be at Guindy. The recent rains also proved to us that the site was not affected by water logging. The builder did not reduce the rates since I met him first time in May 08. Having gone round for almost 5 months to different places and builders, I ultimately went to him in September 08 to finalise the flat, one in the I floor of 2 blocks, each block with 4 flats each, 2 in the GF and 2 in th I floor. The finalised flat is 3 beds with 3 toilets and 3 balconies which remained unsold due to higher area for these 5 months. I felt this is the best flat in the whole lot of 8 flats. I had to book the flat at the price indicated with very marginal peanut discount. I was 3 rd buyer to book the flat and thought subsequently, the balance 5 flats will not be sold at least for now at their rate. But to my surprise, as of yesterday, 6 flats have been sold and only 2 remain to be sold. I now feel, these 2 also will be sold shortly, at the price what the builder quotes. The progress is fast and will be ready for occupation by early March 09. I was expecting, the builder will not be able to sell and may offer the unsold flats at discounted prices. To my surprise, this has not happened as I could gather from a recent buyer whom I came across by chance and did even look at the agreement papers.
                      So, as far as the Chennai RE is concerned, there are Builders reducing the rates, there a few sticking on to the prices, there are some more who do not even start the project after announcing the project but book the flats at differental rates , there are also many big ones who may start now and hand over the flats with delay after 24 or even 36 months. For people like me, who is not considering the purchase from pure investment angle but from the utility angle and personal usage, any time is right time. He should not regret the decision once taken, if one has selected a good builder, a decent locality, fast and uninterrupted progress, quality construction, no water problem in the summer, no water logging in the winter/rainy season, better go for that even at a little premium. This is the lesson I have learnt in my limited period search for flat in Chennai South. May be the so called higher appreciation may not be there in the short period of 2 or 3 years, but the flat can fetch a price, say after 5 years or so if one has to sell due to any compulsion, which may give the appreciation of atleast 10 % per annum like an FD.
                      In the case of large projects, let us not forget the high maintanence charges of about Rs. 2/sq.ft, high deposit charges, for a 1300 sq. ft. this alone will come to Rs. 2600 per month, leave alone the club house deposit, 4 % service charges ( please correct me if I am not correct ) etc. etc. In some areas, the rental value will be low, in the order of Rs. 4000 only and how can one take the maintancne charge of Rs. 2600 PM also. For high rise flats, or flats with lifts, the ground floor tenent also should bear the share of electricity charges for the common use especialy lift consuming large power as well as the large lift maintanence charges. To people like me, the swimming pool, club house, super market ( the prices will be very high here as the tenents in the project only will use the shop with limited sales) are upper middle/high class luxuries and I just cannot think of spending for these, out of my hard earned money now or in future. Members may forgive me for the views expressed in this para if I am wrong.

                      This is how I look at this and not worried much by the so called downstrend or uptrend in the economy/market/RE scene. I have heard about the torture, If I am permitted to use this word, the flat/house owners give to their humble tenents, atleast we do not want to be caught with any such owner and lose my mental and physical health ultimately. I do not know if I have done the correct and fair thing by sharing very frankly my mind here in this forum. Regards.

                      ks2071746:p

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