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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Originally posted by vaibav123 View Post
    Thodsizamin,
    When the first flush of higher income flows in,people generally rush for consumerism and and enjoyment.That is understood.What we should try and do is start planning our first major asset.
    Having a good chunk of money when we approach a builder for buying a flat is indeed a good feeling.Loan should be minimum required(if not avoidable)
    As far as entreprenuership is concerned,it is an inbuilt mindset.
    We have some good examples of people setting up shops,business and flourishing,besides giving employment.
    Once you are in a position to give employment to many,that is indeed an index of achievement.Your ability to generate revenues,sustaining a productive team should be the capability which system and business environment should encourage.Licensing,inspector raj should be reduced,but whatever regulatory raj remains should be effective and not for harassment.
    The whole thing boils down to change in administrative setup and encourage development of ideas,convert ideas into workable commercial products and generate employment.
    Directional change in our economy and industry can only make India grow in the league of nations
    I agree. India needs to change its mindset. Running a shop and employing 10 people should be considered a more honourable pursuit than working an an accountant - with regular salary - is a big shop!!!

    Sadly middle class (at least south Indian) still considers job as better than shop or business. But Bania community in north do both excellent studies and business in the same family.

    Originally posted by wiseman View Post
    If you re-read what I said, I said we seem to have reached the high plateau levels. By this I meant that our growth from now on would be in the low teens tending towards single digit levels - not beating inflation.

    Apart from that you will notice that profitability has decline by more than 50% from the 90s or even early oughties.

    In any case IT is only part of the economy and I was talking about the whole economy.

    We are now at a very slippery phase of global "recovery". Growth is not taking off and adding debt is not paying off. Now Central Banks, facing the possibility of rising interest rates - which, given the much higher debt levels will bite into revenues in a much bigger way - are alarmed and hurriedly shutting off the debt tap - which is leading to a debt trap anyway .

    If you noticed, Europe is starting to slide into recession again. Italy is officially in recession, Germany has seen 1 Qtr negative growth and France is not growing at all. EU measures to kick off growth is failing and Japan is in deep trouble with enormous debt, rising interest rates, rising taxes and crashing GDP growth.

    See what Sikka is trying to do. Get his managers to become "Design", "Innovation" and "Customer" focused as a medicine to get Infy out of the rut of "factory" environment and start on a new tack.

    Typical situation where current revenues are okay but future outlook of revenues growth and profitability improvement is hazy.

    Thats what I meant.

    cheers
    IF you notice, the US long term rates are now 2.4 after touching 3.

    Lowering long term yields is the BEST indicator to a future recession.

    We just have to wait for it.

    Originally posted by wiseman View Post
    We had this discussion at many points in the history of IREF. Once Baruch (I think) even posted a link to a nice site which permitted viewers to enter various numbers and do a Rent Vs Buy comparison.

    I have also done some spreadsheets which try to figure out the breakeven point where renting and buying will be equivalent.

    The whole thing hinges on the renter putting away the EMI amount (less rent) into savings meticulously every month. This generally does not happen and therefore the comparisons are skewed leading to the belief that rent means giving away the money and EMI means investing it in a home!

    I believe there are 3 major causes for this propagation of thinking wrt RE.

    - From a long time ago (when other avenues for investing were few) we were brainwashed from young age that "as soon as possible" we should buy a house. This was generally passed along with little analysis of what it entailed financially by people generally financially illiterate

    - People on rent do not enforce the discipline of saving (as though they were on EMI) and therefore ending up when opportunity came with little money to buy a home. This further propagated the belief that EMI meant investing and rent meant splurging

    - Govt skewing RE with subsidies and tax brreaks which led to excessive and sustained increase in RE prices where a lot of money could be squeezed out of people over long periods of time (milking, its called) and keep the cattle corralled by ensuring that the EMI yolk forced them to put head down and toil in "jobs" endlessly

    Will it change? I don't think so for the large mass of people.

    cheers
    I have always contended that the reason for youngsters to buy flat on EMI is a very good thing - nopt because it makes financial sense - but because it forces them to part with a big chunk of their income.

    Otherwise they lack discipline to save. Even I lack it - I recently reduced PF contribution thinking I will save more in Equity - but I have not been as systematic - and end up saving less than when I just cut the salary into PF.

    Originally posted by wiseman View Post
    I've been harping about automation being the BIG ONE for some time now. I noticed that long ago and used to cite hot.mail (can you imagine? "hot-mail" was blocked as a badword?! ) as the example (how much it was throwing out System Admins doing localised Mail Server Administration with a few 100 people handling 100s of millions of MAil Accounts!

    It will be hard and I can think of the once-mighty Mainframe SysAdm guys who were making money in large quantities going the Horse-n-Buggy way as an example.

    The process is underway and people in the IT business (also other businesses who are getting automated away rapidly) need to start looking beyond their noses and start taking action to avoid getting runover. I've been taking mine for a long time now.

    "Job Security" is starting to look like an Oxymoron now!

    cheers
    Around 90% of current Indian jobs are redundant - with greater efficiency we can eliminate so many jobs.

    Productivity per worker will go up and he will earn better salary.

    What will happen to the 90% who lose their job?

    Its happening in USA also. People get 100,000 a month job - or get 20,000 a month flipping burgers - or end up unemployed.

    Originally posted by vlokras1 View Post
    I was just looking at past couple of pages..Just thinking are all the 'Honorary Moderators' Bears since the thread started in 2009 or any Bull moderator is there at all in the forum? :P ..Everyone is so flustered about job & economy..those who are so scared of upcoming scarcity in jobs or lesser onsite oppurtunities or % decrease in revenue of an XYZ company or country, should stay on rent only..as who knows what will happen to their jobs!..I am not a bear or a bull..was a bull till 6 months ago..but am optimistic this a normal lull in RE sector which will continue or might continue increasing (not like 09-13) if the economy improves..
    Well we are free for our assumptions and understanding, but why are we making money? Just to put it in FD, equities, gold?? Owning a home on loan does not mean we stop investing in FD and other instruments.
    On the Assest Liability part, when you pay rent, you are paying your landlord’s loan or adding equity to his or her bank account. However, when you have a home loan, you increase your degree of ownership in your home with every payment
    I was a bull in 2009 and called RE the investment of the decade. I myself bought.

    I am a bear now - nobody can be bullish for ever. And RE HAS ALREADY BEEN the investment of the decade, giving better returns than Stock bonds and even gold.

    But now it is over. Stocks are the investment for the remainder of the decade.

    Originally posted by kaatesha View Post
    I agree with wieseman. One should look to buy a house without leverage. Even if you want to take a big loan, your net worth should be such that you will be able to pay off from your own equity and still left with a lot. For ex, if you are looking to buy a 2 cr house, your net woth should be 6 to 8 crores. You should treat housing as an expense and it should not create a dent on your balance sheet.
    An alternate approach is that take a small loan just to cover the IT exemption limit. ( I think its 2 lakh per year now). Other good thing about this is that, bank also will do some legal verification on the property.
    Leverage is good for youngsters - it forces a saving which otherwise gets frittered away on mobiles, clothes and parties.
    Venky (Please read watch a or before posting)

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      @Wiseman - 'The process is underway and people in the IT business (also other businesses who are getting automated away rapidly)"

      Banking and education are next (IMHO). In banking (and medicine), huge regulatory compliance make it harder for a small lean startup to disrupt. But it will happen. Financial institutions will see their cushy margins wither away.

      Education is already being disrupted. Coursera, Udacity, Khan Academy .... Early days, but simply a question of time till they refine their model. I think the real kicker will come if firms start hiring people with certificates from them. For folks working in IT, most of what you learn in an Engg course is redundant anyways. 4 years mostly wasted. It will be interesting if the world transitions to a learn as you go model. Take a few courses, get a job. And take some more when the job or a career shift demands it.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by Sj2013 View Post
        I got following numbers from Igrmaharashtra.gov.in. for Haveli no. 4


        DocNo DName RDate
        Year 2014
        5000 36--Leave and Licenses31/05/2014

        Year 2013
        5000 36--Leave and Licenses10/06/2013

        Which states that. 5000th registration happened on 31st May 2014 where se it took 10 more days in 2013


        Tell me which Haveli number has more registrations "till mid-last year" than today, we will confirm
        Man, what I said in my above post :-

        Mid of last last year & past 6 months of this year. But you took different period.
        And for proof, the simple thing would be to sit for a day in any registrar office you wish & see how many sale deeds are happenings.
        If you are happy, you are successful.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by Sj2013 View Post
          EMI for home contributes to build an asset which is your home
          Rent for home never contribute to build any type of asset it is pure expenditure
          EMI - Rent = +X.
          This X invested & later used for higher downpayment will cut down price of so called asset.
          And man, 'Asset' is for investors, for end users, its a 'Liability'. Note the difference between the two. Man, sometimes even in such lacklustre RE market, the RE bulls give logic that how buying an aircraft is cost effective than purchasing a ticket for travel.
          Heck, when you buy airline ticket, the money is wasted coz you don't even own the seatbelt, let alone the seat & aircraft.



          The real owner is the one who do the registration, pays the stamp duty, pays property tax, buys insurance, etc on the property.
          Don't pay EMIs for 3-4 months & you will come to know who the owner is.
          Either you rent house or you rent money.
          If you are happy, you are successful.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by ThodiSiZamin View Post
            but when you rent, you can keep your downpayment in financial instruments and earn at least 9% every year. the amount of money you will have at the end of 15 years will definitely be more than the captial gains in RE net of all transcation costs.

            Owning a home mean renting money from the bank and Renting means renting an apartment.
            +1. Infact, I operate 2 accounts. One is like the piggy bank account where I put some money & forget about it. This account is liked to my RD account.

            Sansei,
            Not all are drift spenders. There are lot of so called kanjoos friends whom I have & you won't believe that despite fantastic earnings, their spending pattern is like one we had in college.
            Even today, for all my advance trips, I book ticket well in advance & save thousands on single trip. My credit card offers 2.5% cash back even on fuel, so I use CC a lot for fuel.

            Man, whether to spend heavily on useless stuff or not depends upon the power of your mind. No power on earth can propel a person to spend unwisely if he has control over his mind.
            If you are happy, you are successful.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by Sj2013 View Post
              Are you assuming fixed rent for the entire life time?

              Every rent agreement is for 11 month only. And now a days we have to do registration for rent agreement without fail. This cost registration only renter has to bear and that too every 11 months.
              3 years agreement is also there. Please do check that out.
              Btw, place where I stay is long term investor & he said to me that I can stay as long as I want. It has already been 4 yrs now.

              Rest of the things have been aptly put by southsea.
              If you are happy, you are successful.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by realacres View Post
                +1. Infact, I operate 2 accounts. One is like the piggy bank account where I put some money & forget about it. This account is liked to my RD account.

                Sansei,
                Not all are drift spenders. There are lot of so called kanjoos friends whom I have & you won't believe that despite fantastic earnings, their spending pattern is like one we had in college.
                Even today, for all my advance trips, I book ticket well in advance & save thousands on single trip. My credit card offers 2.5% cash back even on fuel, so I use CC a lot for fuel.

                Man, whether to spend heavily on useless stuff or not depends upon the power of your mind. No power on earth can propel a person to spend unwisely if he has control over his mind.

                On a lighter note , which cc you use that provide 2.5% cash back ????

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by realacres View Post
                  3 years agreement is also there. Please do check that out.
                  Btw, place where I stay is long term investor & he said to me that I can stay as long as I want. It has already been 4 yrs now.

                  Rest of the things have been aptly put by southsea.
                  Owners doing this type of multi-year rent agreement are at huge risk of loosing their home.

                  The current practice is renew agreement ever 11 months.

                  If this is possible at all I would lease for 3,4 or 10 years and give it on sub-lease!!!

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by RAJARORA83 View Post
                    On a lighter note , which cc you use that provide 2.5% cash back ????
                    Sorry, its not 2.5% but 5%.
                    Cash back is not just for fuel but also for phone & utility bills (like electricity), each gives 5% cash back. The credit card is StanChart (Standard Chartered) Titanium credit card. This is amongst their top of the line credit cards. There are also good offers on airlines, lounge access & hotel bookings with some preferential forex charges when you use it abroad & make payment in non-INR currency. Apart from this, I would also recommend you to have a look at Visa Signature/Infinite range of cards.
                    If you are happy, you are successful.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by vlokras1 View Post
                      @vaibhav123 - 2009-2013 the world economy was in shatters...recession in US Europe Japan started in 2008 and continues till today(improving though in some places), wars in Iraq afghanistan was on, Kon-gress and NCP rule in Maharashtra, even after all these issues the RE market surpassed expectations..I am not saying it will continue that astronomical rowth but even if there is a slump it will be smaller drop or stagnant growth compared to the 100% or 200% rise in property prices..But it will pick up again as more and more ppl come to work in metros..and Pune has all the factors for growth, MFG industry showing signs of revival (it will take couple of quarters), IT not growing strongly but growing gradually, Education hub, Investors from Mumbai who could afford buying homes @15000-20000 psqft find Pune cheap and continue investing..And how much ever the government ries, black money is infested in India, and RE is the only option other than elections where the maximum black money is invested..
                      "I dont want to hear total bullish noises" - Well what I meant to say was not a single bullish noise is a Honorary Moderator or a veteran member..they just come and go in this forum..they research a lot, take inputs and leave the forum..they don't waste time here..on the other hand the Bears never leave this forum :P
                      If you see the first few pages of this thread, you will understand that whatever be the scenario outside, its just impossible to predict the RE scenario in India..especailly in Pune coz its one of the few cities in India where RE is still somewhat bullish alongwith Mumbai and Bangalore..North India will see a definite drop according to me..especially places like Gurgaon and Noida..
                      Well, RE cannot be predicted according to you, but you can predict the bullishness in pune and Bangalore re market. Howzzat ?
                      And not all veterans or mods are bears 2 Years back this forum had 1000 bulks for every bear. Now the figures are more or less balanced, but what does it prove then ?

                      Comment

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