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- The Heavy rains in Chennai on 30 Oct 2017 has again resulted in many areas being flooded . Do not know how the rains will be in the coming months and hope another Nov Dec 2015 is not repeated in ChennaiCommentQuote0Flag
- Oops nobody commenting on this page. Wanna know how much the prices have crashed. Can I get land at 1paise psft on Mount road?
Seriously looking for views and not seeing them.CommentQuote0Flag
- Originally Posted by RE KingOops nobody commenting on this page. Wanna know how much the prices have crashed. Can I get land at 1paise psft on Mount road?
Seriously looking for views and not seeing them.
How is 24% projected CAGR coming along in Chennai ? Having a VR sense (Virtual Reality) is good in these markets. :)
Those who want to buy are waiting and saving the carrying cost each year..with each passing year, they feel good and happening since 2014.
Those who want to sell are quoting unrealistic prices not coming to terms with the market and waiting...with each passing year, they will wish they sold last year....CommentQuote2Flag
- RE HITS THE BOTTOM
Very clearly RE has hit the bottom as on Feb 2018. There is no way but for the price to go upwards from here on. Reasons are many and I will try to list a few.
The scenario now is almost like 2003-2005. Bears have created sufficient panic, from complaining about economy to even the seasonal rain and flooding. Job losses were extended to show that nothing can happen etc. The end has been reached.
The prices have stagnated from 2012-14 until now, very similar to price stagnation in 1999-2002. Also like the 1996 peak there was the 2012 peak. These two are clear indicators of things to come.
The most important reason for my post is the number of wants to buy the same piece of land, which had less or no seekers just an year ago. The same broker who was giving all the excuses is slowly calling on his own even without advertisements.
However there is one concern. In city outskirts the desperate buyer calls (broker/buyer) and yet wants you to sell it for the song he quotes. Even when you dont want to sell they are finding reasons to ask you to sell but at their imaginary low prices. This is the best indication of bottoming. I have seen this behaviour in 2005 for sure. So my conclusion is that the bottom of the RE stagnation (or mild fall) has been hit. (One brilliant idiot was trying to explain why my property bought at very low prices in 90s should not get such high prices and I did not deserve it, so I should sell it to him for a low price...an argument in 2005. Same guy got the shock when in 2011 the price was 5 times higher at least.)
Now the advice. When the market bottoms out, the buyers first enter the city centre and that too larger properties. Then they enter the outskirts for large land purchases. This is followed by price increase in apartments and then the boom. From what I perceive it is in the stage of City centre purchases for Land and Houses and City outskirt purchase of larger parcels of land. Those of you who are holding such properties and have held it for the last 6 years or so without much change in prices should hold on for atleast 6 months to an year. If you have deep pockets it is better to hold on for the next few years (typically 5years) to get the best rewards. Those purchasing apartments need to start bargaining and picking the right prices from builders with clearcut price understanding which is written down.
From my perspective based on the data for land since 1960s (based on lands that I have knowledge of), the typical CAGR over long periods (atleast 10 years) is 20% upwards. Typically at the bottom as it is now the CAGR is working out to 18-20%. This can hit the heights of even 35% as I have noticed in 2007-2010 periods depending on the place and the land. To calculate what you will reap by holding land, you cannot use a linear CAGR curve. The CAGR suddenly jerks up. In Bangalore between 2003-2004 prices even shot up 5 times and I am not bluffing one bit. In Chennai it was more gradual between 2005-2010.
To highlight with examples even in apartments which do not have such high CAGR, in Chennai an aparment in Mylapore in 2004 or so was at Rs1200psft and in 2006 had hit Rs6000psft. Infact a brilliant (or crazy!) argument by a IIM A relative was when the prices rise the buyer wants to buy more desperately since he feels it is good to buy. So he even pledges and takes more loans than before. So if you are having the means to buy then this may be the most appropriate time to buy an apartment. An year ago the typical builder was asking for JVs, now he is ready to take the risk. Shows the change in situation. Demonetised, RERAed, GSTed society is now waking up for RE growth.
As for land which is my interest area, I will go back to 2010 prices (around 70% of peak values of 2012 or so) and then escalate it by 20% from then to get fair price in 2019-20. Between 2010-14 prices even shot up by 2 times but then stayed put or even reduced a bit. Now that will get covered up. So unless you are hard pressed for money (I will like to take money off the shelf for business purposes but have held on for the past few years...I will continue to struggle to hold for the next few months for sure since I expect a sudden initial rise!) please dont sell land. You will repent since a 4Cr property might just go to 6Cr in he next 12 months and you wont believe it. The truth is the same property would have cost 5Cr at its peak in the past 8 years but would have sunk and that is compensated in one big burst. Ofcourse in 2022 it might even go to 25Cr but that is another matter.
One should also notice that typically the stock market shoots up creating lots of wealth and that gets distributed into RE and Gold and other asset forms. Nifty has gone up from 5000 or so 2012 to 11000 this year and that money will reenter the market sooner than later. Between 2003 and 2008 the Nifty went up from 900 to 5600. Since this round has been lesser the rise may not be that steep, but the amount of money into the system will be terribly higher than before and a big initial jerk in price is likely to be witnessed.
Finally if you dont agree with me (like Maverick) just keep complaining. I dont have time to argue. Cheers.CommentQuote0Flag
- RE King has done Technical Analysis using historical prices on RE. Have to admit, there was some sense underscoring his post even though I disagree.
Nobody worth the salt can ever predict where is the bottom. Bottoms are always known in hindsight. However, Technical Traders who uses price charts and historical data often predict which lacks fundamental basis and more or less a coin toss.
Why 2018 is not 2003 ?
What led to the price run from 2003-2007?
One needs to have lot of fundamental understanding of macros and interest rates prevailing then. Surprisingly, RE King was completely oblivious to those facts and macros which makes his entire analysis a tarot reading on price charts - even if it turns out to be right. Even a broken clock can be right twice in a day!
I always strived to educate and provide rationale to what I believe in and made the members to form their own decisions - every RE buyer should know all the facts surrounding RE as an asset class and make his buying decision. His money is on the line. Use my post and message not as a recommendation to buy or sell but question yourself before making the decision.
I wrote this post below in 'Busting Real Estate Myths' thread in May 2015...this answers why 2018 is not 2003 and explain why 3-4X between 2003-2007 is an anomaly. In fact, coincidentally the fear I had on interest rate front when I wrote the post in 2015 is turning out be true and the world is beginning to tremble on rising US int rates and India is scratching its head and so are many countries....
Sorry for cut pasting...in the new IREF template, I have no idea how to make a link to an older post -
2000-2010 is an anomalistic decade unlikely to repeat again!
If the RE is to rise with inflation (+/- with in a band of 2-3%), buyers would not have carry the fear of missing the bus. Anomalistic conditions running for years did shake up many and buyers started chasing once the fear of losing out on the bus moving at (inflation +10 %) sets in.
One has to look at what may be the cause for such anomalistic condition and is it sustainable?
Let's take the past 2 decades and am using apartment prices (new) as a proxy to see how stark this anomaly is and decide whether rear-view mirror driving is prudent and worthwhile for those who are investing now in developed RE:
In 1990, one can buy a new apartment in Adyar between Rs400-600 psft. I provided a range to avoid nitpicks. In 2000, the price went to Rs 2000-2500 psft range. Roughly 4-4.5X. Average inflation has been around 13-14% for this decade. 4-4.5X rise indicates 16% CAGR. So, RE returns pretty much hugged the inflation line closely with 1-2% increase.
Fast forward 2010: One can get a brand new apartment in Adyar for 16000-18000 psft. Roughly 7-8X rise between 2000 and 2010. That is sheer abnormal but it happened for a reason. Average inflation for the decade is 8-10%. 8X rise roughly translates to 23% CAGR. So, it is inflation +13%. Wow! Where does the juice for the anomaly come from? Substantial reduction in interest rate ranges in the 2 decades owing to lower inflation and also cheap money flooded from developed markets (US/Europe) which found its way in to emerging markets.
In simple terms, let's see how it affects the EMI and buying power:
Interest for the home loans in 90's hovered around 17-18% and it came down to 8-9% in '00s. How does this translate to higher buying power? Same EMI can cover twice the loan amount - that is lot of unleashing of money power. Several assets around the globe got over-inflated because of cheap money and Indian RE is a significant beneficiary of the regime. In other terms, 4X to 8X anomaly of 1990-2000 and 2000-2010 has some basis and it was predominantly interest rate play coupled. How many of you think our inflation will go to 4-5% in the next decade or US to reduce the interest rate from 0% to -2%? :). As I write, Janet Yellen is preparing to rise the interest rates in US and emerging country economies are devising ways to protect it from the back-lash it can cause - reverse of what brought the flush of cheap money in the decade of '00 and caused the run-up in asset prices.
Is it sustainable? No way. One should be happy if the reversion to the mean does not cause any undue disruption. Best case is the inflation staying in the range of 6-8%. For the decade 2010, where will the juice come from? Nowhere except inflation. So, one can reasonably assume for a developed area RE, keeping up with inflation, very similar to 1990-2000 scenario, appears more plausible. Some restraint on drinking kool-aid is much needed.
So, take off your glasses guiding your expectation with 2000-2010 to repeat again! Already, 2010-2015 is an harbinger of what is to come. Unless, you have a need for a place to live (where govt tax sops help), there is absolutely no point in chasing developed RE for investment - especially taking leverage and loan burden, unless you have significant cash which cannot be kept under a mattress making your refuge-adjusted return looks much superior!
PS: I have not provided 1980-90 data, but my rough assessment shows it is pretty much on the lines of 1990-2000, hugging the average inflation line +/- few percentage points. So, the 2000-2010 will remain a stark anomaly for a long time to come!CommentQuote0Flag
- agree with u maverick. kindly continue to write more articlesCommentQuote0Flag
- RE King; People have to realize in all the bombastic 20+% CAGR claimed in RE over the last 20-25 years, 5-8% is a stealth wealth that is in cash which is illegal to take in today's law. So, one cannot really enjoy all of the return and what is the point in claiming you have 10 cr but only 6cr remains on paper and in the eyes of law. For such a tainted asset, true CAGR is something else. RE King literally spoke in distress tone on how people are unable to get out as good portion of it in cash. Now, he wants all of you to jump in at his 'so-called bottom' and muddy up your accounted money in half cash and half on paper and buy land in the city and enjoy a good CAGR which again remains in stealth. This is simply ridiculous and nonsensical. Unless there is a way out for cash at that scale, it is a risky asset sucking 11% of registration cost on top. RE King will not touch or address any of those and focus on only 'topline'. But, it is the bottomline that counts :). Bottom line leaves you high and dry...
RE King: What would you do with the cash if you can't consume at that scale? Is it even wealth you call it? Are you aware that from Apr 1, 2017, any cash transaction above 2L can invite prosecution for giver and receiver ? So, someone should even risk a jail term for this ordeal. Give me a break.
Apartments which more or less trades with much less cash and something one can invest in a legal framework. Also, how many has 5C to dabble in city RE? Apartment is what predominantly transact and that should be the focus. It is your choice - asset that allows you to deal with less cash has poor CAGR Vs asset that deals with loads of cash gives funny return + a possible jail term. What would you recommend to the members?CommentQuote0Flag
- The black money is a very interesting and relevant point. However a few points to remember. Cash beyond 2L or so is illegal; having money sent into your bank account or via draft is just not illegal. The only point is IT will like to charge you not at 20% LTCG for RE but at 30% highest tax rate. No more, no less. So frightening people with jail etc is a clear bear ploy.Originally Posted by maverick007RE King; People have to realize in all the bombastic 20+% CAGR claimed in RE over the last 20-25 years, 5-8% is a stealth wealth that is in cash which is illegal to take in today's law. So, one cannot really enjoy all of the return and what is the point in claiming you have 10 cr but only 6cr remains on paper and in the eyes of law. For such a tainted asset, true CAGR is something else. RE King literally spoke in distress tone on how people are unable to get out as good portion of it in cash. Now, he wants all of you to jump in at his 'so-called bottom' and muddy up your accounted money in half cash and half on paper and buy land in the city and enjoy a good CAGR which again remains in stealth. This is simply ridiculous and nonsensical. Unless there is a way out for cash at that scale, it is a risky asset sucking 11% of registration cost on top. RE King will not touch or address any of those and focus on only 'topline'. But, it is the bottomline that counts :). Bottom line leaves you high and dry...
RE King: What would you do with the cash if you can't consume at that scale? Is it even wealth you call it? Are you aware that from Apr 1, 2017, any cash transaction above 2L can invite prosecution for giver and receiver ? So, someone should even risk a jail term for this ordeal. Give me a break.
Apartments which more or less trades with much less cash and something one can invest in a legal framework. Also, how many has 5C to dabble in city RE? Apartment is what predominantly transact and that should be the focus. It is your choice - asset that allows you to deal with less cash has poor CAGR Vs asset that deals with loads of cash gives funny return + a possible jail term. What would you recommend to the members?
Yes if 4L in 10L is black, you can walk away and enjoy. If 40L in 1C is black it is pain, with 4C in 10C being black you really suffer. Dont worry, I really suffer! However that is just about management. 10C buyers are not the 4C in notes guys. They are very often draft payers, just that a little coaxing to pay the 11% Stamp duty. Now if you really need to complain about anything being illegal, please tell me how suddenly all Guideline values can fall by 33%. Not 1% or 2%. In such a state (TN) you think it is big deal to rotate cash. A typical seller reinvests in the next patch of land. Simple. So most of your ideas is more like frightening the poor gullible readers here who are going to miss the bus. Remember, the fall cant be identified and even worse a sudden rise cant be identified. If you keep harping the anomaly theory of yours I cant help it.
Finally as I said before, someone like me does suffer, as I like 100% white. Anyway, I am trying to cope with it. Cash is not the payment often, it is by DD or Transfer. So will have to account it against other ideas or simply pay 20% and then wait for the IT guy to call you and ask another 10% to please him since he wont call it is LTCG. I have not gone so far, but I yet insist that those who are missing out now might again rue the run up.
In 2002 a typical 20yr exp in SW industry was getting around 10L today it is typically 10 times that. So RE going up 10 times wont mean a stuff. So if you want RE to come down to 2002 levels you should expect your salary to come to 2002 levels. I bet you wont like it sir!CommentQuote0Flag
- While I would not like to hurt the exaggerated beliefs (anomalous!) of dear Maverick and I will not like him to leave this board, since he provides me with the best laughter of ideas on this board, I plan to give some details of real facts. He had stated that growth in RE means black money and one cant take cash of more than 2L etc.
Land purchased in 1988 at price X.
Price of the land in 2018 based on guideline value (remember it was tampered 33% otherwise it will be 1.5 times the value I mention here) = 68.2X
This gives a CAGR of 1.15 percent. Not sure of another instrument that would have given me that CAGR. Please remember that this is based on PURE GUIDELINE VALUE vs the total price X paid 30 years ago, when part of the money about 40-50% was black and so if that is dropped in X the growth will be even more.
Now if you ask me the price I ask for the property it is 310X or so. I know that it is on the higher side as I dont plan to sell, but I know if I build flats there at Rs2500psft construction cost and sell it at the typical price of flats there then I will get it. If I sell desperately today (infact I checked the price from the most Cheapo of brokers in that area) and he said 110X or so. I know if I wait and sell with patience I will get about 230X.
Now my figures look scary. What 110X and 310X. That is the game in Chennai today. To build and sell one needs to be ready to turn builder, so 310X is normally difficult to achieve unless I dont care to sell. 230X is typical one when there is a genuine buyer. 110X is where the local broker makes a killing out of you. I know inbetween there is a clean but low end broker. His value was around 160X. Hanu Reddy for example will start at 250X and slowly try to get you to 190-200X. Maybe they will settle at the typical 230X!
So ideally I will expect 200X. At 200X the CAGR is 19%. At 310X CAGR is 21%. Now if I sell for 19%CAGR or 200X, I will get 68X in total white without a grumble. A normal buyer who is not the black money specialist will give the remaining in white but will flinch for 11%, so if I give him a discount on the tax, meaning (200X-68X)*11=14X as discount, or rather I pay the stamp duty, he is likely to give me all white. It happens, just that the buyer wants to feel great he got a discount. If I shift to a typical builder and let him (to find a good builder is a job itself like finding a great writer of anomalies like Maverick!) pay in installments, when he pays up you will get the 200X without giving out 14X but cost of delay is there.
For Mavericks sake I will assume that I get only 68X, I yet get 15% So if you invest in land you make tons of white and your black advances as well till you clean up the money. On that one occasion in say 20-40 years you need to patch up the game. Some 2L cash etc, has not deterred the crores in new 2000 rupee notes as I am told by many. If black is bad just because of DEMO and after effects then most of TN business for that matter most of Indian realestate business will not be with 80% black. So if you are like me and dont carry black then find someone who will give you white,but yet you get 19% and if I turn a builder I will get 21%. Will dear Maverick find me another means for 21% CAGR with no tax till the final game. (Infact I know one, the stock market in Options and so plan to sell out from this black market! Can you do that?) Appreciate his anomalous theories and answers to my question. (Dear Maverick if you cant answer it dont leave the board. Write your highly hilarious answers and keep me in good humour. I love your jokes....regards.)CommentQuote0Flag
- Yes if 4L in 10L is black, you can walk away and enjoy. If 40L in 1C is black it is pain, with 4C in 10C being black you really suffer. Dont worry, I really suffer! However that is just about management. 10C buyers are not the 4C in notes guys. They are very often draft payers, just that a little coaxing to pay the 11% Stamp duty.
He..He..You are hiding under 'just about management'. You have no management that is legal that's why you want to cloak it. Come clean and spill the beans on how you would manage.
I know several who are waiting for draft payers to arrive even after discounting 10-15% as asking price in prime areas - all 1-2Ground sizes. Many are willing to pay more than asking price because they find the 33% GV cut too alluring to pass the 'buck' on somebody else. But in hot cash :) Hilarious...isn't it?
On your other topic, 15% CAGR of 68X multiple over 30 years is not great. Why? Between 1988 to 1998 - what was the inflation? Remember the 17-18% FD rates. No, you wouldn't know because all you knew was RE and kept your head buried in the sand all this while :). Do you know that making 50X is nothing if inflation is 50X ? Get the basics first.
Several clean instruments since early 1990s have done 20+% - all white - repatriable - no funky business. Beat the average inflation handily. You will never want to know any of these but claim to know protocol stacks. Does not stack up - something is amiss here !!
Time is up for cash hoarders - there is no place to hide. Don't mislead people in the forum.
B(P)S: You are yet to reveal why do you see 20% CAGR to happen in RE in the next decade or more? Parrot reader also claims the same. You can be the difference if only you spend some time on understanding inflation, how economy works and RE returns do not come from thin air. You are rattling 3x-5X calling the present as bottom - please substantiate and raise the bar.CommentQuote0Flag
- Oh dear Maverick. I seemed to have pissed you off too much with truth and you have gone from Tarrot reader to Parrot reader abuse of me. BTW, did you ever give any logic for fall, just stating inflation.
Do you know in 1990s, I used to make 18%-20% in FDs and regarding Protocol stacks, I dont talk about it to non technies; because I dont talk to illiterates about literacy. Anyway, let me not make it big on hitting out to you. I am here to educate the folks on this forum that folks like you who claim that Flats are brilliant investments compared to Land and that RE is not a good place in general are at best frauds with some hidden agenda, not any bright economist.
Why dont you go and find Japan land price charts of 80s and use that to state that prices will fall back to 2000 levels in India? Maybe I need to give you a link and teach you to talk and then you will talk using my words. Maverick I certainly dont find your insinuations hurting, since I dont find you even a bit intellectual or knowledgeable to comment. However you make a wonderful standup comedian on this board and I wont want to lose it.
Rest in a separate message.CommentQuote0Flag
- Rest in a separate message.
Two pertinent questions in a point blank range (umpteenth time):
1. Back up with some basis on why do you expect 20% CAGR in Chennai RE for the next decade.
2. An individual who has an RE of worth 5C whose GV is 3C is not getting 'draft payment' offers. Wants to use the proceeds in the legal manner. No ploughing back in to the same muddied water. What would he do? Give your 'management gyan' to the seller.
In the last several posts, you have been evading these two pertinent questions. Protocol stacks - won't go that far - someone who has been investing in RE blindly and calling 15% CAGR as excellent without pegging it to inflation - likely would not know beyond 7 layers in OSI they teach you in school.CommentQuote0Flag
- Maverick in his standup wisdom somewhere stated that since Apartment transactions are white more often, than Land it is better to be in Flats than Plots. Let me show the silliness of that thought.
In 1996 an apartment that cost 9L; today costs around 40L. The rental value and adding to it an average interest rate of 8.5% for the past 22 years gives around 58L. Let us say 9L became 100L. 11.5% CAGR. If the same money was invested in any goddamn land in Chennai in 1996 would in the worst case returned 16% CAGR. That is 2.35C. The better ones returned 19%-20% CAGR or 5C. Now I missed telling you that I assumed 8.5% and rental value without tax. If that is reduced then it drops terribly. Also tenants give trouble, you need maintanence issues to face and brokerages for getting tenants.
In 1991 or so a particular land in Habibullah road was converted into flats and the owners procured 3 out of 8. Today at 25K psft that land value if it is X, then the total cost of the 8 flats is nowhere near X. Strange but true. Ignore that and the owners who got 3 out of 8 hardly have 3/8th of the worth. So if you sell your land and get a flat done, it is a business waste for sure. Well they do get to enjoy the building and some spare cash to start with.
However if you look carefully, the truth is not difficult to understand. People sell land when one of these conditions exist
a. Need cash for expenses immediately. Most simple one.
b. Need to distribute wealth among multiple children. Even here sane parents will partition the land, but if the land is too small then it is better to convert to flats. In my example the parents did not think smart. They could have let each child have 2000sqft land! It was a simple mistake.
c. You want to move the plot to another state or place. That is my requirement and am hardly successful with the BLACK Chennai Realestate. I cant move it to say another country (black). If I move it to Bangalore the Black is lesser here and worse still, documentation for land in Bangalore can be tricky. I am stuck holding lands I just dont enjoy!
People buy flats and houses to LIVE. However many foolish people in Chennai and India buy them to rent. I just cant evaluate their IQ level. They hardly get 3% rent and the property appreciates hardly 8%. The reason is multiple.
1. Every flat builder is a cheat without doubt. If land value is X and building cost is Y, then price of flat is not X+Y but about 50% more than that. As if the builder deserves it. To give an example. If I have land 2400sqft and the builder can sell 4200sqft of final product (normally it is more than that even at 1.5FSI) and cost of construction at say even 2500psft gives 1.05C, the net price of flats goes to 2C. As a land holder I recalculate and state the following to a builder
Final value of flats = 2C
Cost of construction = 1.05C
Even giving a 10% for marketing cost = 10L
The cost of land = 200-105-10=85L.
Believe me in the above example the builder states cost of land is 40L. So in summary the flat makes the builder rich, the owner stupid and the buyer of flats stupider. Builder wants to pocket 45L for fun! That is a decent builder. Bigger brands pocket your future too! LOL!
2. Land appreciates, building ONLY Depreciates. So over the years if the land value increased from the Builder rate of say 40L to 100L, and your building depreciates or remains steady in value (though without inflation worth taken into account) at 105L, you break even then. This is in a market like 2014-2018.
To give a real life example Casa Grande project in Sholinganallur completed about 2 years ago, the resale value is much below the final value paid by the original buyers. Is it bad investment? Not really. A good product etc. However the builder pockets the stuff and remember this is a villa project. In flats the loss can be more, terribly more.
So in a steady RE market, flats start becoming cheap once the builder has sold out. SIMPLE TRUTH. Maverick wont understand, maybe he is part of some builder cartel? I dont know.
Now land value is UNCERTAIN. That is because brokers can confuse the buyers always. If Maverick can make it look as if a 2Ground unit in City at say 5 to 8C has takers with CASH not drafts he must explain who these guys are and he must report this to the IT. Mostly, of the 8C, almost 7 to 8C is in DD/Cheque form. Buyers in this range dont dump cash. Even a Seth will give you Gold biscuits not cash! However the registration value is nowhere there. That is because of the silly low level GVs which might be as low as 1C for 2Grounds. At 1C the buyer does not want to register the remaining 7C and pay 11% or 77L. So a sane seller can give a discount of 77L to the buyer. Land deals are happening but just that they take time. Also you can turn yourself to become a builder. Not any great job. So for the 7 to 8C land get 2C to build and you are through. JVs are Just Victory for the builder.
What I additionally said in a previous mail was, very often even 1C sale price of white money, might give you a great 15% CAGR. Now Maverick is talking of 18% in 90s. That did not continue beyond 1996 or so. Today I suspect the number is much below 10%.
Summary, buy land for INVESTMENT. Not TRADING. Investment for minimum 10 years and you get 15 to 30% and I AM NOT EXAGGERATING. Now Japan land prices dipped. Why? I found it out after I suddenly suspected that Maverick the Standup might have by mistake said something right. Alas he was wrong as usual. In 80s Japan gave loans for 100 years. HUNDRED, three generations to pay. Find me an Indian bank to give me 100year loan and then throw me out of this board. (Please dont throw my dear Maverick out of this board as I will lose my fun of the super standup RE comedian. He is the best. Beats Wiseman by kilometers! LOL!)
Another example. A land I know is worth 2500psft today. I prefer 3K but will not get it. Between 2012 and 2016 it was oscillating in 2400-2600 range. Now it has been dropped to 2300. Noticing it, the silly buyer even asks 1500. Let us say the range has shifted to 1500-2500 though I will be unfair about 1500 because that is quote for a total despo to sell it. Now you buy it at 2500 and I buy it at 1500 (means I am so smart to get the lowest priced seller, never possible, the criminal mafia of brokers jack it up and kill the buyer and seller). After 15 years let us say 1.20 CAGR, so the prices become 22.5K and 38.5K. (Cant be both but somewhere in that range!) So the fellow who got it at 1500 thinks he will get 3.85C and so the gain is more than1.20CAGR. The number incidentally is 1.24.
Simply speaking after 15 years it hardly matter if you got 20% CAGR or 24% CAGR. For the latter you need to find some fool to sell at 1500 today. If you are dumb and buy it at 2500 even then it is not a mistake because you will yet get 20% CAGR. The real idiot is one who does not buy it, listened to Maverick and thinks he can keep it in cash. He will get 7% interest and lose 33% tax i.e., 4.6% and after 15 years his 2500 would have become 4.9K. In summary if you are browbeating a seller and expecting price to fall indefinitely and think it will happen for ever, you are a miserable loser. If you got it at 1500 you must be special and 2500 is on the high side. Sane people settle around mid point or higher and they make the killing in years. Your faithfully did not read Mavericks's (plural) ideas. When a land was bought in 1988 at 1L, a couple of years later some idiot around that area said sarcastically that it was worth only 75K. Today it is worth in the cheapest case around 2C and ideally around 3C. So I am not upset I lost 25K of imaginary price. Rather I will try to see how I can get close to 3C when I sell than bother about 25K imaginary idiotic talk.
If you are smart, you will think about it that way. Otherwise you can sing the bear song with Maverick. He can state that if prices go up 20% it is anomalous. Just literary skills, probably wont know water we drink exhibits anomalous explansion. Wouldnt have learnt science or maths ever, but GUPSA they are experts at.
Remember Maverick and other bears write for some pecuniary reason. They dont necessarily follow the rules. They dont buy RE? Yeah? After all if they are not into RE for business why will they carp on this board. They are not like me, writing to educate on wealth creation for FUN. Their purpose is to wean away the last buyer and try to get into a falling market (as they imagine). As I said earlier the change from fall to rise is sudden. It was not rising from 1996 to 2001, fell from 2001 to 2003 and by 2005 if was up and in 2006 the fellow who missed the bus, started cursing those who were in it. So if I come back with an offer of 10K for the 2500 priced land of today after 3 years and you feel cheated, then you should consult Wisemen and Mavericks. As their names state, they are really upto your end. Enjoy.
PS. Wiseman a super bear in 2008-2014 period suddenly disappeared after he sold his RA Puram land in white. Why was he bearish when he was actually trying to sell land and not buy it. Doesnt it sound funny. Bear writers on this board are the privileged lot. They talk like intellectuals, but scratch them a bit and they will start abusing you being a parrot and tarrot reader. Maybe they are looking at that bond movie where that sexy lady picks tarrot cards but bond gives her a lovers card. Do see that film and dont waste time being a bear!CommentQuote0Flag
- 1. Every flat builder is a cheat without doubt. If land value is X and building cost is Y, then price of flat is not X+Y but about 50% more than that. As if the builder deserves it.
I thought you lack knowledge in economics and inflation. Looks like you lack basics in business itself :).
Here is why:
Builder is in the business to sell something which the buyers cannot find on their own. RE King is so dumb to believe that everyone has 5C-10C to buy individual houses. If you want to live in a locality where land is 5C a ground but has only 2C, have to buy an apartment only. Builder thrives on targetting this audience. You don't even get this basic understanding on why there is a demand for a produce.
Now, get back to my pertinent point blank questions - you have been beating around the bush with severe logorrhoea.CommentQuote0Flag