Interesting calculation for RE Speculators:

Bought a 2BHK flat 1100sq ft1600psf in Jan2006. Total package:Rs.21L
Home loan of 20L (Rs.25,000 EMI) (Mistake: Went for minimum down payment)

In Jan2006-June2010 (4.5yrs=54months) total EMIpaid : 25,000*54months=Rs.13.5L
Outstanding Principal in June2010 was Rs.17L.

Got tired of heavy EMI and prepaid Outstanding Principal of Rs.17L in July2010.

Total Cost of flat = Total EMI + Outstanding Principal = Rs.13.5L+Rs.17L = Rs.30.5L

Earnings from flat
Rent:
Got possession in Jan2008. Avg Rent = Rs.10,000 pm-Rs2500 (maintenance+property tax) = Rs. 7,500pm
Jan2008-June2010 = 30months * Rs.7,500pm = Rs.2.25L
Income Tax Deductions:
Rs.1.5L interest per annum (availed for 2009, 2010) in 30%tax bracket.
Rs.1.5L*2yrs=Rs.3L (non taxable income). Tax saved = 30% of Rs3L = approx Rs.1L

After 4.5 yrs, cost of flat to me is:
-- = Rs.30.5L-2.25L-1L=Rs.27.25L

Similar resale flat in the scheme goes for approx Rs43L.

SO, If I sell flat now, my profit is Rs.43L-Rs.27.25L=approx 16L (in 4.5 yrs on investment of Rs.27.25L) before capital gains tax.

Assuming capital gains tax is 25%, net profit after tax is Rs.12L

CAGR:
One Time Investment: Rs.27.25L
Current Value: 27.25L+12L(profit): approx 39L
Over duration of 4.5yrs
CAGR of my investment: 8.3%
( http://www.jagoinvestor.com/calculators/html/Return_Calculator.html )

Considering inflation of 8%PA, my net profit is almost 0%.

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?

Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?
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  • Originally Posted by sno247
    Interesting calculation for RE Speculators:

    Bought a 2BHK flat 1100sq ft1600psf in Jan2006. Total package:Rs.21L
    Home loan of 20L (Rs.25,000 EMI) (Mistake: Went for minimum down payment)

    In Jan2006-June2010 (4.5yrs=54months) total EMIpaid : 25,000*54months=Rs.13.5L
    Outstanding Principal in June2010 was Rs.17L.

    Got tired of heavy EMI and prepaid Outstanding Principal of Rs.17L in July2010.

    Total Cost of flat = Total EMI + Outstanding Principal = Rs.13.5L+Rs.17L = Rs.30.5L

    Earnings from flat
    Rent:
    Got possession in Jan2008. Avg Rent = Rs.10,000 pm-Rs2500 (maintenance+property tax) = Rs. 7,500pm
    Jan2008-June2010 = 30months * Rs.7,500pm = Rs.2.25L
    Income Tax Deductions:
    Rs.1.5L interest per annum (availed for 2009, 2010) in 30%tax bracket.
    Rs.1.5L*2yrs=Rs.3L (non taxable income). Tax saved = 30% of Rs3L = approx Rs.1L

    After 4.5 yrs, cost of flat to me is:
    -- = Rs.30.5L-2.25L-1L=Rs.27.25L

    Similar resale flat in the scheme goes for approx Rs43L.

    SO, If I sell flat now, my profit is Rs.43L-Rs.27.25L=approx 16L (in 4.5 yrs on investment of Rs.27.25L) before capital gains tax.

    Assuming capital gains tax is 25%, net profit after tax is Rs.12L

    CAGR:
    One Time Investment: Rs.27.25L
    Current Value: 27.25L+12L(profit): approx 39L
    Over duration of 4.5yrs
    CAGR of my investment: 8.3%
    ( http://www.jagoinvestor.com/calculators/html/Return_Calculator.html )

    Considering inflation of 8%PA, my net profit is almost 0%.

    Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

    What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    Good Post!!!

    But most of the speculators go for the flat only when they have a huge down payment in place!! Also i feel Stock Market is beeter mode of investment if such a large volume is involved..
    CommentQuote
  • Originally Posted by sno247

    Considering inflation of 8%PA, my net profit is almost 0%.

    Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.


    Good post sno.
    It reminds of a person saying "Daru peena khraab hain". Although he eats sugar in spite of blood-sugar, BP (silent killers).
    Some are totally ignorant of EMI (silent killer), advice others not to rent (they think renting is wasting money) :D
    CommentQuote
  • You got all your calculations wrong.

    You invested 13.5 lakhs - 2.5(rent+tax saving) = 11 lakhs over period of 4.5 yrs. Average period 2.25 yrs for investment of 11 lakhs.

    So your profit is 12 lakhs over invsetment of 11 lakhs in 2.25 yrs.

    so CAGR is 38%. Be happy . you have done good job.

    But yes there is no point ininvesting at 3900 psf.



    Originally Posted by sno247
    Interesting calculation for RE Speculators

    :

    Bought a 2BHK flat 1100sq ft1600psf in Jan2006. Total package:Rs.21L
    Home loan of 20L (Rs.25,000 EMI) (Mistake: Went for minimum down payment)

    In Jan2006-June2010 (4.5yrs=54months) total EMIpaid : 25,000*54months=Rs.13.5L
    Outstanding Principal in June2010 was Rs.17L.

    Got tired of heavy EMI and prepaid Outstanding Principal of Rs.17L in July2010.

    Total Cost of flat = Total EMI + Outstanding Principal = Rs.13.5L+Rs.17L = Rs.30.5L

    Earnings from flat
    Rent:
    Got possession in Jan2008. Avg Rent = Rs.10,000 pm-Rs2500 (maintenance+property tax) = Rs. 7,500pm
    Jan2008-June2010 = 30months * Rs.7,500pm = Rs.2.25L
    Income Tax Deductions:
    Rs.1.5L interest per annum (availed for 2009, 2010) in 30%tax bracket.
    Rs.1.5L*2yrs=Rs.3L (non taxable income). Tax saved = 30% of Rs3L = approx Rs.1L

    After 4.5 yrs, cost of flat to me is:
    -- = Rs.30.5L-2.25L-1L=Rs.27.25L

    Similar resale flat in the scheme goes for approx Rs43L.

    SO, If I sell flat now, my profit is Rs.43L-Rs.27.25L=approx 16L (in 4.5 yrs on investment of Rs.27.25L) before capital gains tax.

    Assuming capital gains tax is 25%, net profit after tax is Rs.12L

    CAGR:
    One Time Investment: Rs.27.25L
    Current Value: 27.25L+12L(profit): approx 39L
    Over duration of 4.5yrs
    CAGR of my investment: 8.3%
    ( http://www.jagoinvestor.com/calculators/html/Return_Calculator.html )

    Considering inflation of 8%PA, my net profit is almost 0%.

    Note that I bought flat at approx Rs.1900psf(all inclusive) and able to sell at 3900psf(all inclusive) and my profit is still negligible.

    What if you buy the same flat now at 3900psf for investment? AT what price you need sell this flat to make some decent profit?
    CommentQuote
  • Originally Posted by mahesh pune
    You got all your calculations wrong.
    So your profit is 12 lakhs over invsetment of 11 lakhs in 2.25 yrs.
    so CAGR is 38%.


    This calculation also seems incorrect. Profit is 12L over investment of 11 + 17(pre-paid loan) = 28L in 2.25 yrs.

    Adding another perspective. If "sno" wants to buy another house for self-use, he will have to pay mkt price. Right?
    CommentQuote
  • Originally Posted by hitmady
    This calculation also seems incorrect. Profit is 12L over investment of 11 + 17(pre-paid loan) = 28L in 2.25 yrs.

    Adding another perspective. If "sno" wants to buy another house for self-use, he will have to pay mkt price. Right?


    17 lakhs were paid in june 2010 so for period of 0 months and so no need to consider. So my calculation is correct.
    CommentQuote
  • Originally Posted by mahesh pune
    17 lakhs were paid in june 2010 so for period of 0 months and so no need to consider. So my calculation is correct.


    If we do not consider 17L pre-paid loan, then all profit is on paper :D
    CommentQuote
  • Originally Posted by hitmady
    If we do not consider 17L pre-paid loan, then all profit is on paper :D


    This is already considered while calculating profit. Profit of 16 lakhs is after deducting this pre paid loan.
    CommentQuote
  • tell me any other 20L investment you did at that time that is now worth 40L. Tell me any other investment, where you can leverage for such a long time. The point is that you can now own a flat anywhere in Pune, and you won't have to put anything upfront. At the same time, the rents will keep increasing with inflation, and maybe after 5-6 more years, the return on your investment of 25L compounded at 8pcpa will be better.

    Again, I absolutely do not subscribe to buying at 3500 levels, I am just saying that buying 5 yrs back was a good decision for this specific case.

    ~D
    CommentQuote
  • Originally Posted by mahesh pune
    You got all your calculations wrong.

    You invested 13.5 lakhs - 2.5(rent+tax saving) = 11 lakhs over period of 4.5 yrs. Average period 2.25 yrs for investment of 11 lakhs.

    So your profit is 12 lakhs over invsetment of 11 lakhs in 2.25 yrs.

    so CAGR is 38%. Be happy . you have done good job.

    But yes there is no point ininvesting at 3900 psf.



    Agree with you Mahesh. Principal payment of 17L should be kept out the CGAR calculation. So good profit earned here, no doubt.

    Same is the case of any one who bought 2004-2006. They all made profit.
    CommentQuote
  • They all made profit. But they were plain lucky. 90% of the ones who bought during those times, probably never went in with investment on their mind.

    When the prices rose to 2wice,the investor mentality kicked in :)
    CommentQuote
  • Originally Posted by harshalx
    They all made profit. But they were plain lucky. 90% of the ones who bought during those times, probably never went in with investment on their mind.

    When the prices rose to 2wice,the investor mentality kicked in :)


    Infact, this is the only time you SHOULDNT BUY as the juice is already out, when the builder/agent tells you the price would double in 3 years...Until they stop saying that, and until people start to believe that these prices are going to stay either the same or will go down, it will NOT be a good time to buy.

    I would simply say to the builder - why you want to sell it then, as anyways no new schemes are getting launched and built within 3 years to garner >100% profit, why not hold this inventory.... :) :)
    CommentQuote
  • I agree

    Originally Posted by harshalx
    They all made profit. But they were plain lucky. 90% of the ones who bought during those times, probably never went in with investment on their mind.

    When the prices rose to 2wice,the investor mentality kicked in :)


    Yes all the buyers are lucky and yes investors kicked in later on. That is the precise reason, I keep saying 2007 there were mostly investors, with intention of selling the property after getting possession or after few yrs.

    In 2007 most of the prices were already unaffordable for genuine buyers!!

    Most of the 2007 projects would be(or have already) getting possession this year(after the delay) and we should see plenty of re-sales. Investors who bought in 2008 are in loss already and even if they might have got possession, they must be holding that property expecting rise in prices which is struggling to rise.

    That is why I say 2012 will be good time to buy, home sweet home:)
    CommentQuote