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what makes you think property rates will be down?

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what makes you think property rates will be down?

Last updated: April 12 2013
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  • #31

    #31

    Re : what makes you think property rates will be down?

    Also, the other reason is - emotional attachment, people get very emotional once it gets to RE, and they dont think about the price they are paying to satisy personal or family emotions.

    Also, most people earning good salaries DONT know what to do with their money and hence opt for EMI - think it as an "disciplined investment"...however they are just making sure the banks and builders are earning on their hard earned monies...

    This is the reason I am postivie on bank shares as well - they are VERY transparent and earning decent profits bcos the people in India are emotionally motivated.

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    • #32

      #32

      Re : what makes you think property rates will be down?

      Originally posted by pcpune View Post

      Also, most people earning good salaries DONT know what to do with their money and hence opt for EMI - think it as an "disciplined investment"...however they are just making sure the banks and builders are earning on their hard earned monies...
      .
      This I agree with. I have seen people I know earning 1L per month salary and blow it up on parties, eating out, clothes, s, gadgets.

      If a person cannot be disciplined in investing, EMI is better - at least it enforces some saving - better than nothing.

      Other people are fooled by insurance agents into all kinds of expensive insurance plans - just because they have a big salary. Other agents fool them with mutual funds - but flavour of the season type and then asking them to keep shifting to another fund to keep in touch with the new flavour.

      Of course, such people are liable to be fooled by bank agents and builders as well .
      Venky (Please read watch a or before posting)

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      • #33

        #33

        Re : what makes you think property rates will be down?

        Originally posted by Venkytalks View Post
        Hi Small Fish,

        I was appreciating Wiseman's timeless wisdom more than anything, not finding fault with your post.

        You are right, there are any number of posts in this forum where people have said RE prices will fall 50% etc - some by Wiseman too. You just picked the wrong one to comment, thats all.

        In my opinion (which could be wrong) they gave importance to extreme scenarios which have small probability of happening. So someone may say - if a global double dip 20 year depression comes, property prices will dip by 50% of current levels in India.

        But there are multiple ifa and buts. Probability of such an event might be 5% or even 1% - nobody knows. Even if globe goes into deflation, india might stagflate or even inflate. Even with depression, prices might not fall 50%, because there is no direct correlation.

        So having multiple ifs and buts, each of which has small probability, is used as justification, how can you predict anything?

        But if you follow Wiseman's wisdom, you will buy what you can afford without taking a loan. For that there is no need to time the market.

        Can you put down 50% of the cost of apartment from savings, take a loan for 50% of the flat cost which should come to 20-25% of your take home salary going in EMI?

        If you can do that today, buy today. If you cannot, wait to accumulate some capital, wait for a salary rise and buy what seems affordable with that much amount of money.

        If not - heavens are not going to fall. Rent a flat, accumulate money, dont worry, be happy. If you have a good job, you wont be without a roof.

        Timing a flat purchase is based on your finances, not on global events and market gyrations, not even on peer pressure.

        In 2003 my father put a lot of pressure on me to take a loan and book a flat. I refused. I did not want my current living standards curtailed by an EMI which amounted to 50% of my salary.

        My capital multiplied as much in the stock market and in FDs as it would have done in RE.

        I lost nothing, enjoyed life without an EMI. And 2003 was probably the best time ever for investing in RE, still I lost nothing.

        Now much better quality flats are being built, I can afford a flat without straining my finances. I am much older - but so what?

        I live on rent and will do so for the next 20 years, because I live 5 minutes walk from my workplace.

        PC Pune,

        I agree with your prediction of flat RE for the next 3-4 years. I believe, if booking a new underconstruction flat, today is the best time to book - so that your flat is ready by the time prices seriously escalate a few years from now.

        If buying a ready made flat, maybe 2-3 years wait wont harm you - still prices will not rise so much.

        Current 1L/m salary =20,000 Dollars per annum. US median salary is 40,000 dollars per annum or so - so people are already earning close to half od US salary. Not much room left for salary rises. Plus, US cost of living is higher.

        IT people or trained pros can probably earn much more in USA. ITGs are capable of 60-80,000 dollars easily. Doctors, dentists, accountants, lawyers and Finance pros maybe 200,000 dollars per annum. So there is a lot of salary difference still, no cause for alarm, we are still quite poor by US standards, the best have a lot of room to expand

        But our quality of workers are not adequate to earn more than 40-60,000 dollars per annum in USA. So average people are near their salary ceiling already. Its the average wage which will determine RE prices.
        Venky,
        Thanks for the detailed informative post. +1 for that.
        My post was not after picking the wrong comment - as I mentioned earlier, it was not based on a specific comment, but the whole thread (read the title)..
        Also, your logic (which is sound) is applicable to the guy who wants to own his first flat. It should be within a budget one can manage, and your alternatives are worth exploring.
        My query was (if you had read my post completely) about investing in a second flat. I already have one (got it at a nice value in '05 - so it was a good deal). Last year's posts mentioned that it was not a good time to buy, and this year's posts mention that this is not a good time to buy. My investments are currently in MF / , and I am thinking what would be the right time to move some investments to RE.
        Hope I was clear...but appreciate the informative posts by you, pc, and Man... thanks

        Comment

        • #34

          #34

          Re : what makes you think property rates will be down?

          Originally posted by pcpune View Post
          Also, the other reason is - emotional attachment, people get very emotional once it gets to RE, and they dont think about the price they are paying to satisy personal or family emotions.

          Also, most people earning good salaries DONT know what to do with their money and hence opt for EMI - think it as an "disciplined investment"...however they are just making sure the banks and builders are earning on their hard earned monies...

          This is the reason I am postivie on bank shares as well - they are VERY transparent and earning decent profits bcos the people in India are emotionally motivated.
          Agree completely. I have seen many in the younger generation (I am 40 now, so guess I am in the older lot) start saving only if it is forced through EMIs or ULIPs (both of which are designed to suck your money...). I tried to get some of my younger cousins to start saving in a PPF account, but they are not interested. So their fathers start pestering them to buy a flat, knowing that atleast some saving starts

          Comment

          • #35

            #35

            Re : what makes you think property rates will be down?

            Originally posted by SmallFish View Post
            Venky,
            Thanks for the detailed informative post. +1 for that.
            My post was not after picking the wrong comment - as I mentioned earlier, it was not based on a specific comment, but the whole thread (read the title)..
            Also, your logic (which is sound) is applicable to the guy who wants to own his first flat. It should be within a budget one can manage, and your alternatives are worth exploring.
            My query was (if you had read my post completely) about investing in a second flat. I already have one (got it at a nice value in '05 - so it was a good deal). Last year's posts mentioned that it was not a good time to buy, and this year's posts mention that this is not a good time to buy. My investments are currently in MF / , and I am thinking what would be the right time to move some investments to RE.
            Hope I was clear...but appreciate the informative posts by you, pc, and Man... thanks
            In second flat, you should ask some more questions:

            1. Is it for my children
            2. Is it for rental income
            3. Is it for flipping
            4. Is it for long term hold
            5. How much of my net worth am I putting into it?

            For your children, purchase considerations are same as for 1st flat. Leverage also same principle. I bought for this reason.

            For rental income - it is extreme foolishness, better put money in a FD. At least in North India, I dont know about Pune - here in Delhi you will lose your flat if the prices are so high. Rental return maybe 2.5% plus risk - extreme stupidity.

            For flipping, the time has already gone, you should have done it in 2009. You have to trust your instincts. I booked twice in 2009, (though not for flipping) despite all that doom and gloom that the Wisemen here and many others in other fora threw at me and despite my pessimistic outlook on world and India. One has to be logical and look at downside. 2009 was a fantastic flipping opportunity.

            Despite temporary lift and getting in at good prices, I look at my investment as risky - downside can still come. Plus I lost an extra-ordinary stock investing opportunity because I went with RE instead of stock in early 2009.

            For long term hold, you can still buy if you can afford it, 2009 would have been better - I bought for long term hold.

            For allocation, I recommend no more than 30% in RE. So if you already own your flat outright (no EMI left) costing 50L, you should first have 50L in Shares/mutual fund and 50L in bank FD/PPF. If you have more money coming in, then think of buying another flat from your money, betting that you can rebuild your stock and bonds back to 50L levels after a while.
            Last edited by Venkytalks; July 28 2010, 04:59 PM.
            Venky (Please read watch a or before posting)

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            • #36

              #36

              Re : what makes you think property rates will be down?

              Venky,

              Thank you. Great post, and very helpful. One question - what is flipping?
              Thanks...

              Comment

              • #37

                #37

                Re : what makes you think property rates will be down?

                Flipping is make a booking for 3L, sell in in a few months for 6L and make 100% profit on a capital of just 3L (10% of actual flat cost).

                In USA, they dont have booking, people flip with full purchase of house on loan, paying only a small percent - or even nothing, just a sign on loan paper
                Venky (Please read watch a or before posting)

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                • #38

                  #38

                  Re : what makes you think property rates will be down?

                  Originally posted by Venkytalks View Post
                  In second flat, you should ask some more questions:

                  1. Is it for my children

                  For your children, purchase considerations are same as for 1st flat. Leverage also same principle. I bought for this reason.
                  I don't know why people buy houses for their kids? Do they think that the kids will stay away or kick them? Or is it that the parents don't want to stay with them? And what if your kids becomes a NRI? All investment & current time wasted, right?

                  Buying houses & all for kids.....this is not good for social system man, better give them best education & opportunities & make them purchase a house on their own 'dum'. Why make kids parasites? Man, rather than buying two flats, I would buy a 6BR bungalow. Everyone fits in, including the guests as well.

                  Hey, am I lecturing on parenting without any experience....hmm felt as if I am local MP.
                  If you are happy, you are successful.

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                  • #39

                    #39

                    Re : what makes you think property rates will be down?

                    Originally posted by realacres View Post
                    I would buy a 6BR bungalow. Everyone fits in, including the guests as well.

                    Hey, am I lecturing on parenting without any experience....hmm felt as if I am local MP.
                    Now its my turn to lecture: "Rather than having multiple-houses, it's better to have a house at place with good-infra".
                    Remember: House is for you. You're NOT for house .
                    Last edited by hitmady; July 29 2010, 01:05 AM.

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                    • #40

                      #40

                      Re : what makes you think property rates will be down?

                      Originally posted by realacres View Post
                      I don't know why people buy houses for their kids? Do they think that the kids will stay away or kick them? Or is it that the parents don't want to stay with them? And what if your kids becomes a NRI? All investment & current time wasted, right?

                      Buying houses & all for kids.....this is not good for social system man, better give them best education & opportunities & make them purchase a house on their own 'dum'. Why make kids parasites? Man, rather than buying two flats, I would buy a 6BR bungalow. Everyone fits in, including the guests as well.

                      Hey, am I lecturing on parenting without any experience....hmm felt as if I am local MP.
                      My Dad bought one flat - where I plan to retire also. So I dont need a flat for myself.

                      Why shouldnt I buy for my children -? I have to do something with my earnings after all.

                      Where I live, buying bigger is impossible - there are only builder floors which are bigger, and big ones will cost 3.5 Crores - even more for ground floor. That for me is astronomical. Also, I believe in simple living. Big houses are for rich people - in Delhi, most such people are corrupt greedy and not worth knowing or living with. I am middle class, live with other people like me and survive on my brains and hard work only.

                      As for an education, cost is now huge. You can sell one flat and it will pay for his education. After that he will get a job and build a flat for himself where he works/wants.

                      If he doesnt study, he can live in the flat itself - without ever selling it. Or sell it and move where he wants.

                      Either way, I believe in affordable flats which cover one's basic necessities with 2 or 3 bed rooms only. More rooms is not "need" but "greed".
                      Last edited by Venkytalks; July 29 2010, 11:00 AM.
                      Venky (Please read watch a or before posting)

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