What is more beneficial? My requirement is NOT to stay there, but to resell it at a higher value. Advise please!
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  • What is a flat ? Flat = UDS (land) + built up area (concrete, roof etc ) + some common area (where some trees sit or some swimming pool exists + car park).

    So, capital appreciation does happen in flats but that is because of the UDS(land) that comes with it. Otherwise, flat is just about a built up area whose value depreciates rapidly with time.

    So for a same price, a flat will appreciate slower than a piece of land, simply because the flat has a depreciating component as well.


    True. Comparing prices of the flats sold in prime areas in 80's which are quoting at 2/3 of UDS market value today, it is clear that apartments simply don't evaporate the construction cost over time, but it dents the UDS as well.
    Apt cost: 40% for land + 35% construction + 25% builder margin.
    Land cost: 90% for land + 10% for maintenance and upkeep.

    How can "Apt" perform over 35 years with the 60% upfront load which evaporates over time?

    Mav
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  • Originally Posted by maverick007

    How can "Apt" perform over 35 years with the 60% upfront load which evaporates over time?
    Mav


    If a) You can Rent out the APT EFFECTIVELY (effectively means fleece the tenant - sorry, some truths are harsh) and b) Reinvest the Rental income for highest returns, APTS can give some what better returns over long period (20+ years)

    Most people fail in a) or b) or both.
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  • One Last point - b4 I sign off for the day:

    K11, Drakule and many others are indeed right in raising concern on extremely inflated RE prices and surely this is quite unfortunate. But I think more than people the authorities, our Govt itself is to blame.

    In India, RE is just one form of investment. But govt has killed other forms of investment and end result is those with untaxable income put in RE by default and that inflates prices.

    There are simple steps govt can do - no vacant land tax wont help, since it can be easily broken by putting some hut or namesake house.

    1) Banks can stop lending/financing purchasing of housing plots 2) Govt can release the idle land available with it , to market 3) More importantly enforce KYC norms on RE buyers and sellers and see to it that only those with proper PAN and IT returns can sell or buy vacant land.

    Once this all gets done and govt encourages more investment into other avenues, RE prices will start softening. But will govt do?
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  • Plots are very overpriced now. Buying an overpriced asset now will not yeild good returns down the road. Why are we going to 1980's.
    Lets limit the dicussion to last five years.
    I have been hearing Shols at 40-50L or so in 2007 itself.
    Pallikarnai was 55L a ground in 08.

    If you buy shols today at 70-75L a ground, where do you see in next 5 years.
    If you buy Thoraipakkam at 1.25C a ground or Pallikarani at 80L a ground, what is the rate in next five years.

    Returns in plots are bound to slow down in the face of massive supply of cheap flats.

    In short term, Plots are for mostly for flippers, buy at X and sell it at X+Y and take Y as profit.
    End use is limited. In many cases, Building a house is waste of money, depreciating asset, less rental income, most plots are not livable now.
    If it is livable, price is crazy high.

    Developers get plots for much cheaper rates, Construction is done in mass, so there is some efficiency involved. They have profit margin and have also to carry interest burden.

    We need to take example and see, buying plot and building in some place to ascertain the difference.

    For city, Apts are anyway cheaper than land, especially resale. Buy them and see price double in four-five years or even in two-three years like in 2010-2012.

    If we are buying undervalued asset and sell it as undervalued, there is same gain.

    There is an issue if we are buying overvalued asset and selling it as undervalued.

    Most apts are undervalued in many markets.
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  • Originally Posted by k11
    Plots are very overpriced now. Buying an overpriced asset now will not yeild good returns down the road. Why are we going to 1980's.
    Lets limit the dicussion to last five years.
    I have been hearing Shols at 40-50L or so in 2007 itself.
    Pallikarnai was 55L a ground in 08.

    If you buy shols today at 70-75L a ground, where do you see in next 5 years.
    If you buy Thoraipakkam at 1.25C a ground or Pallikarani at 80L a ground, what is the rate in next five years.

    Plots are for flippers, buy at X and sell it at X+Y and take Y as profit.
    End use is limited. In many cases, Building a house is waste of money, depreciating asset, less rental income, most plots are not livable now.

    Developers get plots for much cheaper rates, Construction is done in mass, so there is some efficiency involved. They have profit margin and have also to carry interest burden.

    We need to take example and see, buying plot and building in some place to ascertain the difference.

    For city, Apts are anyway cheaper than land, especially resale. Buy them and see price double in four-five years or even in two-three years like in 2010-2012.

    If we are buying undervalued asset and sell it as undervalued, there is same gain.

    There is an issue if we are buying overvalued asset and selling it as undervalued.

    Most apts are undervalued in many markets.


    Another Long thread and another long story to track
    lets put some skin in the game and test all these theories

    Lets take all of our individual investments and test it on time
    I will take some of my examples in 2013 and measure it in 5 years and publish results, are there any flat takers who have booked their flats in early 2013 we can check notes
    if you want 2012 i can provide some related purchases then as well
    Is there any one to take a real world test for next five years ???
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  • Originally Posted by k11
    Plots are very overpriced now. Buying an overpriced asset now will not yeild good returns down the road. Why are we going to 1980's.
    Lets limit the dicussion to last five years.
    I have been hearing Shols at 40-50L or so in 2007 itself.
    Pallikarnai was 55L a ground in 08.

    If you buy shols today at 70-75L a ground, where do you see in next 5 years.
    If you buy Thoraipakkam at 1.25C a ground or Pallikarani at 80L a ground, what is the rate in next five years.



    If One ground can quote at 3 crores in Neelangarai, 5 crore in annanagar, 6 crores in Cathedral road, what stops perungudi from quoting at Rs 2 crore per ground 5 years from now or Pallkaranai to quote at Rs 1.5 crore per ground?

    Originally Posted by k11

    Plots are for flippers, buy at X and sell it at X+Y and take Y as profit.
    End use is limited. In many cases, Building a house is waste of money, depreciating asset, less rental income, most plots are not livable now.


    if Building house is waste of money and depreciating asset, so is buying a flat. Remember that a flat/GC carries a large common area , and that effectively means you pay something for a piece of land which is not wholly ours and not in your control

    Originally Posted by k11

    Developers get plots for much cheaper rates, Construction is done in mass, so there is some efficiency involved. They have profit margin and have also to carry interest burden.


    The profit margin and interest burden is passed on to buyers of flats. Which again enforces my argument - when you buy plot, you dont need to pay for the builder's profit and interest costs and wage costs.

    Mass construction saving money may be true only if there is lot of automation. And again, this saving also means compromise on quality.

    Originally Posted by k11

    For city, Apts are anyway cheaper than land, especially resale. Buy them and see price double in four-five years or even in two-three years like in 2010-2012.


    Second hand apartments in core CBD already go to 7K to 9K per sqft or even more. Do you suggest that they will trade at Rs 14K to 15K in 5 years? It is possible if rental incomes also go in same rate? Honestly i feel this may never happen...


    Originally Posted by k11

    Most apts are undervalued in many markets.


    That is also because - many old apartments are built for a different era. Like in chennai, many apartments built in 80s dont have car park and even two wheeler parking is open and restricted to one scooter or motorcycle. But if one's strategy is to buy and ensure decent rental income, then i say buying old apartments in city with minimal maintenance costs is worth betting on.
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  • Why don't we take a project like Renuka in Shols and measure results.
    4250 is the 2013 launch price.
    Is there a equivalent plot you want to consider to tag it?
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  • I am ready to give data for a 25 year period, from chennai . In fact, I have given already. But that data (for flat) excludes rental income.

    Let me work on it and let us have a full comparison over long (25 year) period to see how flats vs plots argument works out.
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  • Also, if interested how about comparing RE with other investment forms like share market and debt and also gold?

    This data is also mostly there in public domain. Let us do a comparison over 20-25 year period.
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  • Originally Posted by k11
    Why don't we take a project like Renuka in Shols and measure results.
    4250 is the 2013 launch price.
    Is there a equivalent plot you want to consider to tag it?


    What was the launch time Jan 2013 ? or so
    Lets put notional property

    Ponmar - VEERAPANDI NAGAR Jan 2013 price for property on the main 40 feet road = 1100rs a sqft -- (Cruise / LL can validate the price )
    Second property - SELVA nagar - 800rs a sqft

    lets measure results

    again compariing SHOLS and PONMAR is really apples to Guava comparison ( you should guess by now i have crazy crush on guaava)
    But since its for comparisons on CAGR lets just do it and see hwo it pans out
    Lets measure in JAN 2016 and Jan 2018
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  • Originally Posted by ramki830
    Second hand apartments in core CBD already go to 7K to 9K per sqft or even more. Do you suggest that they will trade at Rs 14K to 15K in 5 years? It is possible if rental incomes also go in same rate? Honestly i feel this may never happen.


    Been there done that. City prices doubled from 2010 to 2012. Two years flat out.

    By the way, do you know how much a 10 yr old resale apt in PG trades for?

    Call your broker and tell him you want a apt in PG in a building like Vishranthi Swaroop Heritage or similar building of 10yrs age. Let me know the figure quoted.

    Similarly check up on Vijayshanthi Raintree in Venus colony or Courtyard in Pycrofts garden. I will be interested in 14K price if we can get.
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  • Originally Posted by SRajagopalan
    What was the launch time Jan 2013 ? or so
    Lets put notional property

    Ponmar - VEERAPANDI NAGAR Jan 2013 price for property on the main 40 feet road = 1100rs a sqft -- (Cruise / LL can validate the price )
    Second property - SELVA nagar - 800rs a sqft

    lets measure results

    again compariing SHOLS and PONMAR is really apples to Guava comparison ( you should guess by now i have crazy crush on guaava)
    But since its for comparisons on CAGR lets just do it and see hwo it pans out
    Lets measure in JAN 2016 and Jan 2018



    No, you will have to compare a inflated market like Shols or Thoraipakkam.

    Ponmar to Shols is not a right comparison.

    Ponmar is a lottery ticket for many. It can either go up or stagnate.

    Shols is 3000-3500 I think.
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  • Plots are very overpriced now. Buying an overpriced asset now will not yeild good returns down the road. Why are we going to 1980's.
    Lets limit the dicussion to last five years.
    I have been hearing Shols at 40-50L or so in 2007 itself.
    Pallikarnai was 55L a ground in 08.


    Why go in to data whose correctness is questionable in the short term with wide ranges? Let's put Occam Razor's theory or KISS (Keep it Simple Stupid) to resolve this. Occam Razor's theory in nut shell is taking the argument with the less no. of assumptions. Taking the data approach is lot of assumptions.

    Apt cost: 40% for land + 35% construction + 25% builder margin.
    Land cost: 90% for land + 10% for maintenance and upkeep.

    Assumptions: Construction value depreciates over time and have finite life (35-40 years).

    RE is a long term asset class and there is no point in checking the pulse in 1, 3 or 5 years.

    How can Apartment return more with "time" tending to 10 years or more ? If yes, what is the fallacy in the above equation?

    Mav
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  • Yes, the comparisons do not make sense.

    Apt should be compared to Plot+House.

    Apts cannot be compared to barren land.

    I think the whole discussion started on end use purpose.
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  • Originally Posted by k11
    Been there done that. City prices doubled from 2010 to 2012. Two years flat out.

    By the way, do you know how much a 10 yr old resale apt in PG trades for?

    Call your broker and tell him you want a apt in PG in a building like Vishranthi Swaroop Heritage or similar building of 10yrs age. Let me know the figure quoted.

    Similarly check up on Vijayshanthi Raintree in Venus colony or Courtyard in Pycrofts garden. I will be interested in 14K price if we can get.


    One or two areas do not make up the RE or core CBD is not a real RE representative for comparison. Why take 2010 and only 2 years? To make the returns look amplified from the lows. It is like taking Mar 9, 2009 to compare how stocks did in 1 or 2 or more years? Answer is obvious even before one attempts at the comparison. One has to use rolling years (5 years) for the right comparison and across the areas to get a meaningful comparison.
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