Please read I said House not flat, not land! Should I have said HOME?
Ok I wanted to write this since last few hours but was as usual stupidly got lost seeing other messages and then thanks to Nabhishek understood editing options in this forum. Looks like tommorow I can edit all my old messages and talk bullish instead of bearish! LOL! However that is a pity with this forum!

Now coming to the point. I was reading a message from someone in another forum telling that he has bought a flat with a loan content of 50L and his EMI was some 46L p.m. and that number was 60% of net salary of his spouse and him. That was devastating information and truth in many cases. Let us analyse EMI carefully. I wont go into mathematics as it will become too complex in a forum where many dont even understand ^ (power) operator and I need to use Finance terms like CAGR (which I know most Finance guys wont know what it mathematically stands for!) just to make it look good!

Now let us take Principal = 50L. EMI = 45K and I assume No. of years = 25! Also let interest be 10%. (This may not fit into EMI formula, but just a good illustration!)
So after first year total payment made by the person who took the loan = 45x12= 5.4L
Now dont be too happy. Since of this 5.4L after one year the Principal would have diminished by just 40K and the 5L was just silly interest.
Now our government and marketing agents will tell us Tax benefits! So they will tell that you save some 20% of 40K or 8K in tax and say 30% of 1.5L of the 5L interest i.e. 50K. So you assume you only paid 5.4L-58K= 482K of which Principal reduced by 40K and interest is 442K.
Think of this differently. You paid 442K to live in this house.
Is that the real rental value?
To the best of my knowledge a 50L flat will get rent of 10 to 12K in Chennai and 15 to 20K in Bangalore. Let me take 20K to please the govt and loan providers.
So 20x12=240K was paid out of 442K towards enjoyment of house BUT WHAT ABOUT THE REMAINING 202K. Were not you the fool who spent 202K towards foolishness?
When will you recover the 202K?
Now take two scenarios.
a. Bull market as defined by yours faithfully and a set of writers on this board.
b. Bear market as defined by Wiseman and his cartel.
Let us take b. first.
In that case property value will fall, fall and fall. So your bought a 50L loan + paid say 10% upfront = 55L flat. Its value depreciates over time. You spend 202K towards foolishness! FANTASTIC.
Now after 10 years your flat value changes to 40L. Then you lost this 202K like interest over the 10 years and also 15L in loss of capital.
Question is...CAN THIS HAPPEN?
Honestly if bear cartel is right this will happen. So you should not buy a flat ever. You should not take a loan for sure (I personally dont believe in taking loans especially as I know the FOOLISHNESS element!)
However everyone you know, Tom Dick and Harry takes a loan? Why?
Now let us see the other scenario a. the Bull market.
Here the foolish value continues but over a period of time the flat worth increases to compensate it. So after 10 years the 50L flat is not 50L but say 80L. Your foolishness component is taken care of and you make a profit. So you can take loans! RIGHT? Yours faithfully yet wont take loans as he is SCARED OF THE BEAR CARTEL...ROTFL!
I wont take a loan as I dont get into a mess which I have no guarantee with as the future can be bull or bear!?
Now without any favour for Bull (a) or Bear (b). Let me compare the two and see what it means.
IF BULL is right
Market wont fall. Prices will go up to compensate the interest eaten by the bank. If someone like me puts in personal cash to buy a house (instead of loan), he will be compensated for his POTENTIAL LOSS of INTEREST by the CAGR growth in RE price. Sounds logical. Someone will tell rent, but well incase of land!!
IF BEAR is right
Now life is not LOGICAL. SO it can happen that FOOLISHNESS COST is not regained. Worse still value of RE decreases. So investing from loan makes you get into DEPRESSION. Investing own cash like me lands you into a negative zone of interest! Can it happen.
If interest from CAGR of RE is negative or low then will I invest in RE? So RE will tank. Correct? This will lead to a vicious cycle. Now why will the bank give interest if they cant invest in anything. (In any depression not only RE will fall but many things will turn negative!) So interest rates will fall down, forcing RE to come out! In other words negative growth is self correcting. However since the BEAR CARTEL has to be right (atleast according to them) RE will fall and fall and I wont get interest. What happens then? I will have to find new investment options. Forget that. What happens to RE investor? He gets into a LOAN PRISON, a MORTGAGE CRISIS. Okey we saw it in US? Well most dont know the US game and the paper transfer of Mortgages by multiple instruments. (I dont deny similar stuff is there in India, read Hindu Sunday edition a few weeks ago!) However this is not LOAN PRISON, it is Mortgage investment that put US into trouble. So the person who took the mortgage will get into a mess, he wont be able to repay the loan. Bank will seize property. Then what happens.
Multiple cases like this will result in Bank collapses. Again we saw this in US say the great Wiseys! Now what is Nationalisation of banks. Is SBI and Lehmann the same? Does the SBI chairman get a super fat bonus like the AIG guys? Hmm our Wiseys think so. NOw let us assume the great bears are right. So banks collapse and then what do we do.
CIVIL WAR.
If that happens then I dont need to discuss further. BUT WILL IT HAPPEN?
In India Civil war can happen for better reasons than mortgage crisis. So in reality the government in India wont let this happen. They will simply depreciate the rupee or let it fall. So your worth internationally will fall. So more money will flow in and keep the price up. Nationalised banks wont collapse easily as it is same as govt collapse.
IN OTHER WORDS. COMPARISON OF US CRISIS WITH INDIA IS LIKE COMPARING MARS WITH VENUS, LIKE COMPARING DONKEYS WITH HUMANS. Like comparing me with Wisey! LOL!
So in all practical situations, in INDIA with nationalised banks, with SOTIC thinking, loan failure wont be allowed to percolate. It is not like Lehmann will happen in India.
Satyam can collapse, Infy can but not SBI or ONGC. Even Reliance wont fail or for that matter Tata Steel? They will be re marketed in different ways.
Ofcourse jobs will go. As I call some Pitchakarans, not derogatorily but in reality. Take the guy who till 2000 will work like a slave for 1K, now will talk as if he was born with a golden spoon. He will go back and work for 1K or that worth of money instead of dreaming of 20K as base salary. So that might yet be bigger than 1K say 5K, but it will be worth only 1K since its PURCHASING POWER will shrink.
(Incidentally with my salary that was many times the net salary of the example person and his wife I never would have taken a 50L loan in my heydays in 2002-3 when I used to work. 50L loan for a 80K salary is Pitchakaran thinking of becoming rich overnight!)
Economics is not simple. However if you can think and use logic it is VERY VERY EASY. And doing an MBA wont improve your economics. It will only give you a few jargons without u knowing the meaning (like CAGR).
So a pitchakaran is one whose real worth has been low but whose imagined worth has suddenly increased because of redefined numbers.
Just think of it like this. In TN there are almost 1lakh engineering seats today. Does it mean that in 1980s with only 1000 seats the rest of the top 1L people with aptitude for physics and maths and chemistry were worthless. Just a degree in engineering cant make you great. And then an engineering degree is not what defines programming unless u did CS. Now the horde of folks in TCS and WIPRO and the bunch are not CS guys. Even if they were they wont know what is a compiler and if they did wont know how to write one. So why do we need them. Sheer knowledge of english and the fact Americans dont UNDERSTAND ANYTHING BUT ENGLISH. Now if this advantage decreases either if AMerica is down like now or if other countries learn English does it mean Indian economy has to collapse. Cant CIRCULATION (Economically) be mainted otherwise. So IT companies will take those who know Japanese for example! Or they will make IT folks work on building cars!!!? After all if Mechanical Engineers can write cant CS grads build cars?
Please think carefully.
In summary, a fall in US RE market means nothing to Indian RE. India is yet primarily sotic, what with IT guys asking for job security. (I never knew what is job security in the IT industry I worked in, just knew how to ask more money...now they want money and security...an incongruity!) So in a sotic economy we cant let the system flounder in fear of civil unrest. So the simple tool from Indira Gandhi to Indus Valley was to DEPRECIATE YOUR WORTH. So get the dollar to 100 rupees or maybe 500!
OR GET THE COUNTRY GOING FORWARD IN A BULL ORBIT without currency depreciation.
So only 2 possibilities are
a. Bull market because India did not sink.
b. Bull market in terms of INR (indian rupee) for sotic reasons but with negative growth in BoP.
In both cases RE wont fall in worth in INR, it just will stay and conquer.
Bye.
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  • Who has time to read all your lengthy essays?

    Whatever you preach no one will buy your urapakkam land
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  • I did have time to go thru Natarajg007 and I am sure many will do. People who do not have time can skip. There have been long post many people already. Someone has written his thoughts pertaining to real estate and if possible read otherwise leave it, as this is a public forum.

    Please do not hit personally. Let the goal be only discussion about RE, nothing else.
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  • Thank you for the article. I appreciate your taking time to write in such detail.
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  • Natraj,

    Your point makes sense to me. And thanks for your article and more importantly your time in writing that.
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  • Dear nats,

    I took time to read your posting above. Leaving apart some comments in between which do not add any value to the post, the reading has been really worth and useful. This is what I used to say, people like nats are those with lot of knowledge in many fields and especially RE related and evey reader, either member or guest in this forum, will be really benefitted. nats should continue and contribute in this forum. Good job nats. Thanks and pl. keep it up.

    ks2071746:o
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  • Originally Posted by G_IVAR
    Natraj,

    Your point makes sense to me. And thanks for your article and more importantly your time in writing that.

    Thanks.
    What I want to bring out is that going with the herd is never good. In 2004 many did not expect a rise. Yours faithfully knew it thanks to the fact he was seeing that happen in 2003 in Bangalore. He made sure may important friends and relatives acted accordingly.
    Yours faithfully felt around 2007 that market might top out in 2008. However he realised that it WONT happen because of a similar behaviour in Japan where after a dip in the 80s market actually skyrocketed.
    Now with everyone talking the bear it probably is the bottom of an imaginary fall where some weak hands sold out and some strong hands bought in. Now there is likely to be a real strong upmove.
    BTW though Stock market is not related to RE directly, one can see the upmove there since past few days. No doubt that is a bear market rally but it will make all shorters extinct.
    So if you are into buying for yourself then no time is better than when you can buy it.
    Also taking loans is almost like a suicidal tendency UNLESS U UNDERSTAND WHAT YOU ARE DOING.
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  • I would like to sign off from this board with this small post. It has been interesting to write on this board.
    1. Because I have vested interest in properties I hold in Chennai.
    2. Because this board before I came in seemed to talking only Bear Bear and Beaaaar.
    3. Because I had an opportunity to present various truths about RE.
    On the other hand writing here has been painful because
    a. The bear cartel does not like anyone opposing them.
    b. They use as barbaric means as creating an id similar to mine (copywright violation! LOL!) to using as abusive a method as they can using different ids. So if ID1 attacked me with as bad adjectives as it could I had to react and to that ID2 will act as if they are so polite and as if I had to wag my tail when abused!
    At the end of it, my various posts have shown the following.
    a. Mathematical analysis of RE prices. Not just hooting about USA or Australia and then talking about India.
    b. Why builders in India make super duper profits?
    c. That RE is a long term option and not a Call or Put option like some would like to believe.
    d. That entry and exit from RE is a slow process.
    e. Taking loans is a sin to be avoided as far as possible.
    f. Buying RE is for usability not for trading.
    I have added many other informations which many like ABK, KS and others have appreciated.
    I dont want to continue writing on a board where there are no censures on unethical means of attacking people and where ids can be anything. Infact I should probably create a dup id of some of those Bear guys and then it will be fun. UNFORTUNATELY I DONT HAVE THE TIME FOR IT.
    Finally let me conclude. As I have always shown. Dont sell RE because of fear psychosis. One person wants me to provide security for a fall. Now who is going to provide security to a person who sells out now and sees his property shoot up to dizzy heights. Is that person going to provide that?
    I make a living out stock trading. I analyse stock markets where information is available clearly. In RE unfortunately the market is not regulated to any extent even abroad since RE is not a trading instrument. So one has to use discretion when buying or selling.
    In my view I am pretty sure that the peak of RE for this bull run is far from over. So if someone thought that 10000 Rs/sqft is the peak price in Adayar he will be made to lick his fingers. Dont compare India with US or Australia. It is a different game, different culture, different view. How many Indians change their spouses? How many will buy or sell RE for fun in India?

    Be sure, that RE is stabilising after a fairly decent bull run. However its likelihood of falling is extremely low. People who sold out in 2003 are licking their wounds. They just cant make the amount of money in any other way that they lost by not enjoying the bull opportunity. Even today it is entry point for RE with a minimum 2 year view.
    Anyway I will let every person decide for himself. Remember it is your money, your property and neither the bulls or the bears on this board will cry for you, ever. ONLY YOU WILL CRY IF YOU MAKE THE WRONG MOVE.
    With this I will sign off. I will visit this board when time permits. I will respond to private messages. However I dont think I plan to write on this board for quite some time to come. Probably for the next 6 months. By then it will be clear atleast to some extent, whether the bulls are right or the bears are right. However the truth will be clear only when you try to buy or try to sell. Today there are no good properties to buy! Yet people are believing that market is GOING TO FALL. One cant help eternal optimists.
    All the best.
    BYE
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  • Dear Nataraj,

    I felt bad to see your post where you said you will be singing off. I am not matured to comment on your decision. Only You know the value of your time. But I want to share my thoughts with you.

    I'd believe you have a fair knowledge of RE, but many oppose you.
    Why? For you only approved, registered land is RE. For some people, just bricks & cement and a few sq ft to park themselves is RE. For this reason, some might have opposed your views.
    Had this been sorted out, there wudn't have been such a tiff like scenario.

    In my honest opinion, some of your points are true. Chief among them is ground value will never fall by 50% in Chennai. Atmost it can go down by 2~3%. But everyone can not buy ground and they end up just looking for flats. And flats will definitely go down. While I accept your view that Chennai RE AND Indian stock market, IT slowdown, Recession, US Real Estate are independent of each other, there would be some dependency between Chennai RE and RE in other Indian Metros. Heey these are just my opinions and there isn't a need for anyone to endorse it.
    And finally, no use in fighting. Even in the worst scenario Alas! one might end up losing a few lacs or gaining it in RE and no more than that.

    Cheers
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  • Originally Posted by ks2071746
    Dear nats,

    I took time to read your posting above. Leaving apart some comments in between which do not add any value to the post, the reading has been really worth and useful. This is what I used to say, people like nats are those with lot of knowledge in many fields and especially RE related and evey reader, either member or guest in this forum, will be really benefitted. nats should continue and contribute in this forum. Good job nats. Thanks and pl. keep it up.

    ks2071746:o

    KS,

    Please dont believe whatever some people with vested interest say.
    No government will allow their currency to depreciate to safeguard RE price.China and Japan can afford to allow thier currency to depreciate because major chunk of their income come from export.But India imports more than it export.So if Rupee is allowed to depreciate against dollar we will end up with huge fiscal deficit.Even now the fiscal deficit is close to 12% of our GDP when excahange rate to dollar is around 52.Cant imagine what will be the fiscal deficit if rupee falls to 100 or 500.India will be bankrupt if it happens.So think twice before falling in these kind of traps.
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  • Originally Posted by BigBear
    KS,

    Please dont believe whatever some people with vested interest say.
    No government will allow their currency to depreciate to safeguard RE price.China and Japan can afford to allow thier currency to depreciate because major chunk of their income come from export.But India imports more than it export.So if Rupee is allowed to depreciate against dollar we will end up with huge fiscal deficit.Even now the fiscal deficit is close to 12% of our GDP when excahange rate to dollar is around 52.Cant imagine what will be the fiscal deficit if rupee falls to 100 or 500.India will be bankrupt if it happens.So think twice before falling in these kind of traps.

    This same Indian government let our INR depreciate from 13 a dollar in 1987 to 45 by 2000. Big Bear must be some lost Grizzly bear of US who has lost his home and knows not what he is talking.
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  • It is not INR deprciated but USD appreciated
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  • Honestly, whether or not we are going to depreciate our currency is something I dont know at this stage. But the upcoming election means that we are going to spend all our savings (ForEx reserves) in the election. After the election, expect the rating agencies like S&P,moodys to downgrade investments in India. If we are going to end up with hung parliament, we may be staring at another election, we definitely can't cope with that one.
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  • Rupee will appreciate

    Originally Posted by Natarajg007
    This same Indian government let our INR depreciate from 13 a dollar in 1987 to 45 by 2000. Big Bear must be some lost Grizzly bear of US who has lost his home and knows not what he is talking.


    Since 1980s India depreciated Rupees following the same pattern as other Asian counterparts like Japan, China etc to encourage exports and create jobs.

    However beginning with 2004 lot of capital has flown into real estate and stocks in India. The politicians, bureaucrats and domestic investors have tasted the juice of local real estate and local stocks. This is the case with China as well. If you look at the mumbai stock indexes even after the fall it is still 210% of early 2004 levels, some individual stocks are still at PE levels of 16 and above. Similarly real estate inspite of all bear talk has just fallen 5% from mid 2008 levels in prime areas ( Jayanagar 3rd block in Bangalore or Besant nagar in Chennai) which is still 6 times of 2003 levels.

    In the above para, I have given reasons why governments is India and China will do exactly opposite of what they did in last 2 decades. They will appreciate their currencies why? A strong appreciating currency is important to get more capital into real estate and stocks.

    Now onwards governments in India and China will talk for domestic consumption, increasing pan asia trade between asian countries and use this reason to appreciate their currencies. IT exporters beware, nobody will save your shirt by depreciating rupee. Tide has changed.

    So buy a house now as RE will only go up in India as we are in a secular growth market. Expect real estate in Jayanagar 4th block bangalore or adyar boat club Chennai to be more expensive then london or beverly hills within next 6-7 years ( a conservative estimate could happen sooner) once dollar and pound collapse.
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  • Originally Posted by Natarajg007
    This same Indian government let our INR depreciate from 13 a dollar in 1987 to 45 by 2000. Big Bear must be some lost Grizzly bear of US who has lost his home and knows not what he is talking.

    Everyone in this forum knows you are a broker trying to cheat innocent buyers and I am not going to respond to your crap from now.
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  • Originally Posted by BigBear
    Everyone in this forum knows you are a broker trying to cheat innocent buyers and I am not going to respond to your crap from now.


    Excatly. This is not brokers' forum
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