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Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

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Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

Last updated: August 7 2017
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  • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

    Originally posted by humble_guy View Post
    Your personal experiences may differ so you may have taken offense, but that does not justify your making judgements or direct confrontational stance.
    Buzz off buddy. If this would be a personal offense, I would have reported the post. But even a general statement should be at least based on common decency. Judging a person's quality by the amount of % increase in salary is not my style. But a person can definitely be judged on how he looks at others.

    ...that person should not even attempt to buy a Blue Ridge property, wrong target segment.
    This is not my statement, it's yours. So pls refrain from smart commenting and unnecessarily tainting your post, but rather keep the discussion on level.

    The "present value" of a 80L flat underconstruction over 6 years would cost 42L at present rates, add the "present value" of all rent paid over the next 6 years is 5L approx.(assuming they increase 5-10% each year) so total = 47L only [all inclusive]
    The present value calculation is wrong. Pls share your valuation. Present value is always derived by risk free rate, not housing loan rate. You need to adjust it by 8%, so it comes around 54 Lakhs. Also, since you are not paying 80L after 6 years, but rather paying in staggered payment, this will be more. Assuming equal payment over next 6 years, it comes around 66.5L.

    For rent: Present rent: 15,000 increased at 10% p.a., risk free rate of 8%. So total value of all rents for next 6 years is 12L, and present value adjusted yearly is 9.5L.

    Whereas, the present value of a flat in resale is 80L. [all inclusive]
    Therefore difference of 33L.
    Subtract the saved rent for next 6 years, the saved IT, and correct the calculation for present value. I am sure the difference would be much less.

    (Assuming both are self funded.)
    This is a very strong assumption. We are talking about loan or self funding? For self funding, the more staggered the payment, the more you earn on your saved money. However in case of loan, it is not the case. Irrespective of payment, in initial years at least, the EMI + rent outgo will be same, though the principal part will get fast.

    Also, I noticed you are assuming 15 years loan. The 65k EMI is applicable on 25 years of loan, for less tenure the EMI will increase.

    Some exact pointers form my side:

    Yearly gross salary: X
    Value of property to buy: 1.25 * (X*6)
    Loan amount: X*6
    Tenure: 20 years
    EMI: Loan amount/100
    Rent: Cost of property / 500 (or 600 in case of BR)
    Rent appreciation: 10%
    Inflation: 10%
    Risk free rate for adjusting for present value: 8%

    This is calculation as per govt banks, which give 6 times gross yearly salary as loan, and give 80% loan on total value of flat. That's why the original calculations.

    Can you work on these lines? If your assumptions are different, pls state them explicitly.

    I think this calls for a new thread, rather than populating this thread which was being updated beautifully by actual photographs and status updates.
    Last edited by TheTruth; December 31 2013, 01:01 PM.

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    • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

      The funny thing is You are again contradicting your own point.
      You said that rent is 1/600 of the cost of property in Blue Ridge, still you insist that buying in resale and paying full interest on day 1 of 100% of the loan amount is better than paying for a staggered loan disbursed over 6 years along with rental outgo

      Calculations as per your data:
      rent is 1.5% (with hra savings) of 100% of capital value compared to 10.5% interest on 80% value of property. that means every year a loss of (10.5 *0.8 - 2)% on 80L - 50k tax savings on interest repayments
      = 6.4% of full value of 80L - 50k tax savings on interest repayments
      = 5.12 Lakhs - 50k tax savings on interest
      = 4.62L Loss per year


      And above all you are still taking it personally... I have no intention of getting drawn into a one-on-one confrontation with anyone.

      If you believe that the salaries would remain exactly the same for 6 years, but rents would increase at 10% each year on an increasing base Y-O-Y in Blue Ridge. well I would suggest let us each keep our own views which we are so convinced of. I have nothing to prove to you.

      of course, All the real estate investors are stupid with no financial sense, that they prefer to put money in underconstruction or prelaunch, rather than buying in over tens of thousands of ready to move flat inventory in Pune.

      I am sure the general viewers of this thread will find some value in the analysis presented in earlier pages. At least it would give people an idea on how an investor makes money in real estate and how an end-user can use financial engineering in the same manner to reap serious gains like an investor, while able to own and stay in blue ridge at the same time.

      I had presented the analysis on this thread here, because it is targeted at Blue Ridge, as it is a unique township project in the middle of its lifecycle, with no project risk and a defined trend of capital values and rentals and overall inventory overhang data. That means this analysis may not hold true for many other projects in Pune.


      Rest everything depends on one's financial assumptions.
      Last edited by humble_guy; December 31 2013, 03:07 PM.

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      • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

        Originally posted by humble_guy View Post
        I am sure the general viewers of this thread will find some value in the analysis presented in earlier pages. At least it would give people an idea on how an investor makes money in real estate and how an end-user can use financial engineering in the same manner to reap serious gains like an investor, while able to own and stay in blue ridge at the same time.
        1. Any CLP property will give better return than ready to move property as long as 1) CLP price < ready to move price at the time of purchase and 2) property doest see a price drop


        if second condition is not met then this leverage can produce extreme negative returns too

        more the time taken to complete property ...more the % returns in CLP

        builders have become smart over the years and now most CLP plans take 50% plus in first year itself and that has made CLP plans less attractive

        also there were times (like in NCR around 2010 when CLP plans had overall cost less than 20-30% than that of RTM properties but somehow Pune builders never had such steep discounts)...

        when I came to Pune...I too was very surprised to see that BR new and old towers were priced same....in such a situation CLPs are not that attractive...but BR has almost zero execution risk and hence they are able to afford this lack of dscount for CLP plans

        end of the day...in all this debate, we should not miss that demand supply decides pricing of all components of an asset class


        2. Any property with part debt (loan) will give better ROE as long as annual property price rise % > post tax cost of debt

        this condition is probably tough to be met in next few years due to ongoing RE slump

        ...........
        Also realize that extra returns in CLP doesnt come free...it is essentially a compensation for taking execution risk

        in that sense people buying in CLP (popularly known as investors) should be seen as the people who provide risk capital to this unorganized industry and they fill a very big gap between cash starved builders (RE indutsry is not classified as infra sector and cost of fund for builders from baking channeles is very high) and risk averse end-users

        in this scheme of things...anyone should not have a bad feeling about other set of people...everyone has a role to play...
        Last edited by Baruch; December 31 2013, 02:50 PM.

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        • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

          Baruch: Thanks for providing a balanced view. The decision to buy under construction and stay on rent, or to buy ready possession, depends on risk appetite and utility of available funds. Both ways are profitable, one in terms of money, other in terms of stability and lowered risk.

          Comment


          • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

            New way of analysis presented below.
            (Like earlier analysis, this is targeted at Blue Ridge only, as the project completion risk is not there, and many other unique project related factors.)


            The main misconception among end-users is that if buying in resale, they are the owners of the property. It is wrong. The bank is the owner of the property and you are paying rent to the bank for the money it has lent you.

            This is the crux of all irrelevant emotional attachment with resales and also the main cause of financial losses.

            When a person buys a home with 80% homeloan, then they are the owners of only the 20% of the property that is self funded.
            When a person books an underconstruction property with 20% downpayment, they are the owners of 20% of the property.

            Now in the case of resale [80L price, 20L self funding, 60L loan at 10.5% for 20 years, with emi of 60k/month]:
            In year 0: bank owns 80% and you own 20%
            at the end of year 1: bank owns 78.5% and you own 21.5%
            at the end of year 2: bank owns 76.7% and you own 23.3%
            at the end of year 3: bank owns 74.8% and you own 25.2%
            at the end of year 4: bank owns 72.7% and you own 27.3%
            at the end of year 5: bank owns 70.3% and you own 29.7%
            at the end of year 6: bank still owns 68% and you own 32% only.
            overall equity of 32% of 80L = 25.6 L

            So eventually what is the use of paying emi of 60k x 12 x 6 = 43 Lakhs to save on rent of say 8-12 Lakhs [say 11 lakhs] for 6 years, just to get 32% of the ownership of the house which is only 5.6L more than what you initially had 6 years ago.

            Whereas, underconstruction booking along with staying in rent in Blue Ridge would result in:
            initial corpus= 20L [same as above]
            savings on interest - rental costs = 43-11 = 32L

            Overall equity = 52L in 80L total cost
            which is equal to 65% of total flat when it is ready for possession at the end of year 6.

            So you own 65% of your own house in scenario 2 compared with the 32% ownership in scenario 1, even with the most conservative of estimates.

            And also, the rate of appreciation of both the properties would be the same, hence at the end of 6 years the market value of the both flats would be the same, there is a strong upside possibility that the newer flat may be worth more than the 6-8 year old flat.
            Last edited by humble_guy; December 31 2013, 03:12 PM.

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            • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

              @humble_guy, @Truth,

              With given prices, it does not really matter whether to buy at CLP or ready possession, whether you are investor or end user
              1.3 Cr for BR is not at all justified.

              Comment


              • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

                Originally posted by Sat234 View Post
                @humble_guy, @Truth,

                With given prices, it does not really matter whether to buy at CLP or ready possession, whether you are investor or end user
                1.3 Cr for BR is not at all justified.
                Justification isn't really key here. Some people feel that a Rs. 60,000 price tag for an iPhone is not justified, however, there are people in the market who are buying it so there is no reason why the product price will be lowered by the seller.

                As Bharuch said, at a high level, it's a simple matter of supply and demand :-)

                Sent from my GT-I9100 using Tapatalk 2

                Comment


                • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

                  Originally posted by humble_guy View Post
                  New way of analysis presented below.
                  (Like earlier analysis, this is targeted at Blue Ridge only, as the project completion risk is not there, and many other unique project related factors.)


                  The main misconception among end-users is that if buying in resale, they are the owners of the property. It is wrong. The bank is the owner of the property and you are paying rent to the bank for the money it has lent you.

                  This is the crux of all irrelevant emotional attachment with resales and also the main cause of financial losses.

                  When a person buys a home with 80% homeloan, then they are the owners of only the 20% of the property that is self funded.
                  When a person books an underconstruction property with 20% downpayment, they are the owners of 20% of the property.

                  Now in the case of resale [80L price, 20L self funding, 60L loan at 10.5% for 20 years, with emi of 60k/month]:
                  In year 0: bank owns 80% and you own 20%
                  at the end of year 1: bank owns 78.5% and you own 21.5%
                  at the end of year 2: bank owns 76.7% and you own 23.3%
                  at the end of year 3: bank owns 74.8% and you own 25.2%
                  at the end of year 4: bank owns 72.7% and you own 27.3%
                  at the end of year 5: bank owns 70.3% and you own 29.7%
                  at the end of year 6: bank still owns 68% and you own 32% only.
                  overall equity of 32% of 80L = 25.6 L

                  So eventually what is the use of paying emi of 60k x 12 x 6 = 43 Lakhs to save on rent of say 8-12 Lakhs [say 11 lakhs] for 6 years, just to get 32% of the ownership of the house which is only 5.6L more than what you initially had 6 years ago.

                  Whereas, underconstruction booking along with staying in rent in Blue Ridge would result in:
                  initial corpus= 20L [same as above]
                  savings on interest - rental costs = 43-11 = 32L

                  Overall equity = 52L in 80L total cost
                  which is equal to 65% of total flat when it is ready for possession at the end of year 6.

                  So you own 65% of your own house in scenario 2 compared with the 32% ownership in scenario 1, even with the most conservative of estimates.

                  And also, the rate of appreciation of both the properties would be the same, hence at the end of 6 years the market value of the both flats would be the same, there is a strong upside possibility that the newer flat may be worth more than the 6-8 year old flat.
                  I agree with you that staying on rent and buying in future towers is a better financial decision, because the rents are CRAP, not just in BR, everywhere. But pls note they take 80% in first 1.5 years so it's not as profitable as one might think. Plus you have the risk of possible compromise in quality, delay in possession etc. also they dont price existing and new differently but with the slowdown becoming more pronounce, one shouldn't be surprised to see discounts on new, and ready posession demanding premium, and that's justified too - afterall the existing 1 cr se jaada rokda ek saath diya hai

                  Comment


                  • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

                    Originally posted by RP Pune View Post
                    But pls note they take 80% in first 1.5 years so it's not as profitable as one might think.
                    80% in first 1.5 years! This will mean the buyer will pay almost full EMI from day 1, whether or not he avails the EMI holiday period. Add to this the uncertainty and possibility of delayed possession, I think the risk premium should be high in such cases.

                    Comment


                    • Re : Blue Ridge by Paranjape Schemes in Hinjewadi, Pune

                      @TheTruth

                      >> 80% in first 1.5 years! This will mean the buyer will pay almost full EMI from day 1, whether or not he avails the EMI holiday period.

                      It is generally more than 80% and generally in less than 1.5 years !! RP_Pune has given the lower estimate, it can be higher.

                      Plaster brickwork tiling etc are the last 10-15% and they drag it on for 2 years. The slabs are put up within a year, and you have already paid the slab wise payment upto 85-90% in one year. Ek saal kaise jaata hai, pata bhi nahi chalta hai.

                      I am unaware of how EMI holiday thing works. I was under the impression that you pay EMI for whatever amount that has been disbursed. Full EMI starts when bank has disbursed the loan amount completely.

                      @bigbloodyt

                      >> Justification isn't really key here.

                      True.
                      Last edited by Sat234; December 31 2013, 05:54 PM.

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