I have decided to avoid getting into UNWANTED discussions with folks who any way wont reform. So let me discuss the mathematics of Chennai realestate in a new Thread.
An hour ago, I called a Builder in Saligramam asking for the price of his flat. He quoted 5600 psft. I asked him about UDS and FSI and road width. He was building a clean property on 2 grounds, 8 flats with stilt and road width was 30ft. He was using an FSI of 1.67 which is perfectly understandeable.
Then I asked him " what is the price of land here ?"
Builder: 1.5crores to 1.25crores.
I: So I can offer you land there in a much better place than you are building.
Builder: I cant buy outright now sir, but 50:50 is ok.
I: How is 50:50 fine? For 3200sqft that I have you can build minimum 5000sqft even though I know you will build 5400sqft at 1.67. So what is your cost of construction?
B: 1500psft.
(Now this price is terribly high but I was ready to let him go with the price?)
I: So how can it be 50:50? You need only 75L to build 5000sqft?
B: See if I give you 2 flats worth 2500sqft you can yet get at 5600psft.
I: That is just 1.4cr for 3200sqft.
B: I can maybe give you another 10L or so.
I told him that even if I turned a builder and sold one flat I would have built the entire 4 flats but he was telling WITHOUT ANY MATHEMATICAL BACKING that he will need 1.5 flats. Then he said well I cant sell 1250sqft flat to which I said you can make 6 flats with new rules.
This went on till I said "get lost" or rather a "bye" and left him.
Now let us see the mathematics.
If I can get 5600 psft for 1 flat then cost of 1250sqft of flat is 70L. Let us assume I throw one 5L more and I will have the property ready even if I use this builder's rate of 1500psft. That rate is ridiculous and includes profits. In today's "builder in trouble" market, you can find a good contractor to build you at 1200psft.
Now if one flat sold at 70L then 4 flats cost 240L, so the builder should give you 240-75(his construction cost even at 1500psft)=175L.
He is throwing in 2 flats at 140L and maybe another 10L. So you might think it prudent to lose the 25L and take it.
However what guarantee do you have that you will get your money? Secondly in joint venture, your money is not in your hand. So if I got 150L outright now, in 2 years that will be worth 180L at 10% interest rate.
In other words, builders in Chennai are super cons! And remember, his investment is ZILCH (Zero).
So if I turned a builder with my own land, I can get the best of construction at 1200psft. Also I used 5000sft, which in reality can move to 5400sft even at 1.67 FSI. Today you can get even more since the third floor can be built after 3 years and if you keep those rights for yourself, then you got that too.
Let me ignore even the 3rd floor. With 5400sqft and price of 5600psft, I will need 5400x1200=64.8L to complete the project. I will find JUST ONE BUYER and charge him 5600psft, which means 5600x1350sft(since total built up area is 5400sft for 4 flats). I will get this 75.6L. I can use this 75.6-64.8=10.8L as pocket money for any price changes or troubles or legal charges or whatever. Net I get 3 flats all for me. I can sell them at the prevalent price after 2 years or get them booked at current rates and et 75.6x3=227L or 2.27Cr.
Now does it make sense to get 2.27Cr or just 1.5Cr is the question. How many of you earn 75L for 2 years? I bet most of you dont! Again you don’t need to be a fulltime builder. Just employ a good contractor and MANAGE him!
BETTER BECOME A BUILDER IS YOU HAVE YOUR OWN LAND!
(PS. Hope this helps some folks who wanted to sell their land in Mylapore!)

Incidentally if I reduced the price of flat by even 600 rupees my net gain is 2.27cr-600x5400=1.95cr. So all I need to do is SEARCH for one serious WORTHWHILE (meaning has a safe job) buyer.
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  • Dont worry about Buffett. As I have told for the past 6 months, if you sell your Land you are mad, unless u r really in dire straits or u have some personal reasons to do so.
    Now that RE has started to rise again and if RE is defined by RE stocks as bears always used to say, DLF has gone to 250 from 140s then RE has to rise again, I mean land. In Chennai where prices did not even correct a bit, in the next few months it might start shooting up!
    Now I will encourage the folks who sold their land for a song and are now crying that the missed out the fortune!
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  • As pointed out in the below article in Dnaindia boom in India from 2004-08 was caused by easy credit from overseas and not due to any major macroeconomic changes in India.Now easy credit have dried up we are going back to pre 2004 era.So whoever thinks RE will repeat 2004-08 performance again is buildng castles in thin air.

    Gurgaon: Sumit Sapra is a member of that ambitious, impatient generation of young Indians who rode the crest of the global economy. In five years, he changed jobs three times, quadrupling his salary along the way.
    Even when satisfied with his position, he kept his resume posted on job sites, in case better offers came along. And he splurged. In three years, he bought three cars, moving up a notch in luxury each time. For weekend jaunts, he bought a motorcycle.
    Sapra's last and best-paying job was at the Indian headquarters of the financial services arm of General Electric, investing western money in Indian energy projects. But last December, foreign money dried up and Sapra, with a prestigious degree, was laid off.
    "Earlier it was money chasing a few projects," Sapra, 30, said of the change that seemed to come virtually overnight. "Now it's the other way around."
    Not long ago, Indian leaders confidently predicted this country would emerge largely unscathed from the global economic crisis. It is now becoming clear that that view was too optimistic, nowhere more so than in this city south of New Delhi that
    was once the symbol of India's economic boom.
    A few short years ago, construction sites here buzzed 24 hours a day, crews working through the night, cramming down food from onsite trucks during breaks in the twilight. Now real estate sites lie fallow. The once-booming art market has slowed to a crawl. And charmed professionals with coveted degrees, like Sumit Sapra, are unemployed or taking pay cuts to hold on to their jobs.
    India's phenomenal growth of the last five years was powered in large part by huge injections of cash and investment. Investment accounted for about 39% of the country's gross domestic product in the 2008 fiscal, up from 25% five years ago. At its peak, more than a third of investment came from abroad, according to Credit Suisse.
    But in the last three months of last year, foreign loans and direct investment fell by nearly a third, to their lowest level in more than two years.
    In a recent report, the International Monetary Fund said Indian companies were among the world's most vulnerable, after American firms, because they borrowed aggressively during the boom. Using data from Moody's, the credit rating firm, the IMF estimated in a recent report that defaults among non-financial South Asian firms could climb to 20% in the coming year, up from an expectation of 4.2% a year earlier. American firms, in comparison, are expected to default on loans at a rate of 23%.
    The decline in foreign investment has taken a big toll on sectors like real estate, manufacturing, infrastructure and even art, which was bolstered by demand from globalisation's nouveau riche here and abroad.
    In the last quarter of 2008, the economy's growth rate plummeted to about 5.3%, the lowest in five years. While consumer demand, particularly in the countryside, has kept the economy growing, the sudden slowing in the flow of foreign funds will make it harder for the country to grow fast enough to pull hundreds of millions of people out of stifling poverty.
    "If India wants to go back to the 8-9% growth rate, private investment and low cost of capital is essential," said Jahangir Aziz, the chief economist for India at JPMorgan Chase.
    Indian policymakers say they believe the country will grow at 6% in the coming year, but the IMF forecasts growth of 4.5%.
    To help fill the gap left by foreign investment, the government is spending more on infrastructure and social programs. The Reserve Bank of India, India's central bank, has slashed its benchmark interest rates, but the cost of private loans has not fallen by as much.
    After a wrenching 58% drop in the Indian stock market last year, the market is up 42% since its March low and some foreign money has started to flow into equities. But economists like Aziz say the government needs to do a lot more, though few expect bigger interventions until the current elections end and a new government takes power in late May or early June.
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  • Dear friend,

    Every industry/field is facing the downtrend. Except the Govt. employees who will never see downtrend as they are taken care well with a very good salary, more holidays, job security, good pension scheme like 50% of last pay drawn per month after retirement etc. etc. with minimum work/job responsibilites. I do not talk about the side income at all.

    ks2071746
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  • When I first initiated this discussion there was an election coming. Now with a stable govt. which is also a continuity of the earlier govt. one should realise that if you sell your land now then EVEN GOD WONT BE ABLE TO HELP U! LOL! (Rajni fans dont crib that I have taken this out of your superstar's mouth!)
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  • Putting the cart before the horse!

    Originally Posted by Natarajg007
    When I first initiated this discussion there was an election coming. Now with a stable govt. which is also a continuity of the earlier govt. one should realise that if you sell your land now then EVEN GOD WONT BE ABLE TO HELP U! LOL! (Rajni fans dont crib that I have taken this out of your superstar's mouth!)



    The psuedo-knowledgable amongst us seem to make everything so simple - and end up becoming so simplistic!!! :D

    If people think that the mere existence of a "stable" govt will bring about economic boom, well pigs will fly one day on their own, won't they?!

    Please note the following and ignore at your own peril:

    1. Nothing has changed for the World Economy in the last 4 days. Things are simply going from bad to worse and will continue to do so for quite some time to come.

    2. Nothing has changed in the Indian Economy as well in the same period. The only thing that has changed is that desperate hope has turned to unwaranted euphoria and this will end in a short while when reality begins to bite again!!!

    The RBI Guv'nor, who probably is more qualified to talk about this more than any politician or business leader is continuing to warn once a week about the precarious fiscal situation this country is facing! With 4,00,000 Crores already created and thrown into the economy, there is no more room for further printing of money to provide so-called stimulus. This stimulus is like trying to wake up a comatose horse by asking it to smell the grass and wake up and eat. Unless genuine demand picks up, the virtuous cycle of increased consumption, production and creation of genuine surpluses will not happen!!! And there is absolutely no reason for the organic pickup of demand in the near term.

    Read the above highlight again and again! This is what Reddy is warning about.

    cheers
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  • I dont think these MukkuMen understand that nothing went so wrong for Nifty to fall from 6300 to 2500 and nothing justifies RE in Chennai or Bangalore to even dip! It is not about 4 days, it is just the same knee jerk reaction of foolish bears that brought market down and a similar knee jerk takes it up. We are not talking about 4 days like Makkumen. We are talking about ESCALATED SALARIES, LACK OF USABLE RE and THE DEMAND FOR THE SAME.
    Anyway Mesaile mann ottinalum, Makkuman will say it is not there.
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  • I wrote this thread months ago. Now those who did not follow it are already on the verge of slaughter and with GOOD LAND almost unavailable (read the post by anandxx) u will repent selling ur land. Cheers.
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  • Originally Posted by ks2071746
    Dear friend,

    Every industry/field is facing the downtrend. Except the Govt. employees who will never see downtrend as they are taken care well with a very good salary, more holidays, job security, good pension scheme like 50% of last pay drawn per month after retirement etc. etc. with minimum work/job responsibilites. I do not talk about the side income at all.

    ks2071746

    KS, Missing for sometime now?
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  • Don't sell land in Chennai NEVER

    Never, Never sell land in Chennai.


      Real estate(RE) developers faced with high debts are reducing flat prices which will bring down their margins but also reduce some of their debts. But these are flats which are being offered at discount. On the other hand, there is no land available for discount.
      Many RE developers are selling equity stakes through qualified institutional placements. But all this is eyewash as their immediate focus is to pay back lots of short term debt with equity dilution. (I have sold most my stocks now after making handsome profits in last 3 months rally;)). The stocks rally will end soon, it is a short term suckers rally as companies are using the rise in their share prices only for equity dilution via stake sales to pay back huge short term debts.
      Even gold will fall in India as Rupee rises(Gold is inversely proportional to Rupee).

      The biggest beneficiary of the Rupee rise is Land. Never sell land

      Agricultural land is the next big boom. Don't miss it.
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  • Originally Posted by contra


    Agricultural land is the next big boom. Don't miss it.


    what is the rational behind it?
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  • Originally Posted by Maheshk
    what is the rational behind it?

    Well I aint sure if agricultural land will boom in TN given their archaic laws favouring the tiller. However I might want agricultural land given the way price of food is rising. One day agriculture maybe again the most profitable business.
    We can live without malls, without computers, without silly IT guys, without stock markets! However can we live without food?
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  • fantastic interview with legend Mr.Jim Rogers.

    ]http://economictimes.indiatimes.com/Features/Fund-Managers-can-become-farmers-Jim-Rogers/articleshow/4610704.cms

    fantastic interview with legend Mr.Jim Rogers.

    fantastic interview with legend Mr.Jim Rogers.
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  • Temper you enthusiasm with realism :)

    Originally Posted by contra
    ]http://economictimes.indiatimes.com/Features/Fund-Managers-can-become-farmers-Jim-Rogers/articleshow/4610704.cms

    fantastic interview with legend Mr.Jim Rogers.


    Well, crude went from $45 to $145 per barrel. In that period, petrol prices in India went from Rs42 to Rs57.

    There are somethings in India that are tightly controlled and regulated. Agriculture is one of them. Prices of food will not be allowed to go very far up due to obvious reasons. Besides, the vagaries of the monsoons also put a big risk factor on agricultural economics. A third thing is about ability of non-agriculturists to buy agri-land (apparently this may be eased along with removal on tax sops on Agri-income, but all these are conjecture right now).

    While Jim Rogers may be right regarding today's bankers becoming tomorrow's farmers, I don't see there being much imcrease in agri-land due to increase in prospects for agriculture in India. Of course, if you buy agri-land and convert it into a urban RE speculative thing, then its a completely different animal we are talking about, right?

    cheers. Of course, if you buy agri-land and convert it into a urban RE speculative thing, then its a completely different animal we are talking about, right?

    cheers. Of course, if you buy agri-land and convert it into a urban RE speculative thing, then its a completely different animal we are talking about, right?

    cheers. Of course, if you buy agri-land and convert it into a urban RE speculative thing, then its a completely different animal we are talking about, right?

    cheers
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  • My family still practices agriculture in my native, Its a prime land on the banks of cauvery river, abutted by canal that provides water for irrigation, the whole year.

    Lots of people have sold their land as plots, without even converting it into residential and getting it approved.The demand is high because lots of schools/colleges is nearby, basic infrastructure/connectivity available and the small town cannot extend anywhere else.

    The sad part is even the local agricultural officer suggests to convert the land.His expert suggestion, if tomorrow there is food scarcity, people will grow rice in ships like they do in japan, they dont need this land.

    Make hay when the sun shines.

    We are holding on because, we dont have the need to sell and the land has benefitted us in more ways than anything else.

    Agriculture is currently not a profitable business, farmers are heavy on debt and depend on insurance companies and government for relief for their crop failures.

    Today, unless the farmer himself does all the work from ploughing, irrigation, harvesting and selling at the market.The money earned wouldnt even equal the amount of interest the bank gives in FD.

    I personally know many farmers who sweat their blood to educate their children and even send them overseas to study, so that they dont have to continue the ordeal they are going through.

    We need another Green and White revolution and regulated wholesale trading to see any ray of hope for the most neglected sector, ever since 90's.

    Even today food prices are high, only because the middlemen and retailers are the one's who are making money not because farmers are earning more.

    Lets not confuse investment opportunity with occupation.

    If RE provides good investment value, people look to buy plots to benefit from the boom, not start a RE company.Starting a RE firm, construction company etc are for people who know the business and not for everyone.

    Similarly, if one feels agricultural holds promise in future, they should invest in companies that produces energy,oil,medicines,paper etc from agro products.Same for commodities.

    Buying agricultural land and holding them is like buying a cow for a glass of milk.
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  • Sane advice!
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