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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

    I feel like a loser here.

    1. Didn't buy a home even after 9 yrs of IT experience.
    2. Bought 2 junk pieces in b/w Bajaj Avenger(felt like god when bought) and Honda Jazz (wasted 7 lakhs in the name of security, safety and comfort). But I love to ride my junk 2-wheeler and feel safe with family in 4-wheeler junk in this mad traffic.
    3. Don't like a flat within budget and the ones I like are well beyond my budget, but thankfully affordable on rent.
    4.Damn! I hardly like any city to live (spoiled by a 6 month stay in chandigarh in 2005). Waiting for smart cities to be built.
    5. Thankfully invested in ppf and epf to full extent. Have some endowment policies also from LIC.
    6. Some one advised me to buy term-insurance and mediclaim even if employer provides one and I DID. Wish he would have advised to book a flat.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      By the way, I moved to Ahmedabad 6 months back from Pune. Here its a known fact that RE is dull since last 2 yrs at least. Even my carpenter is suggesting, don't buy now wait for 1 more yr, prices will drop more.
      I befriended the consultant who placed me here. He bought a bunglow for 52 Lacs. Quoted price was 72 Lacs.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Arey sab personally lene lage....everybody's needs and situation is different. Buy what's of most utility to you.

        Also, its not like people cant buy a smart phone due to financial reasons so stop that stupid argument

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by realacres View Post
          Car came after home -- but earlier & not now. People have now realized that its a folly buying over-priced RE & then traveling on scooter & kids, if any hanging here & there. I have seen people who own flat but travel 3-4 on activa.
          Again, when we say car, it doesn't mean one should buy car of 15L+. It is better to spend even on good hatchback & stay in rented house. Whats the use of buying flat if one skids & falls off from scooter ?? In developed countries, house is never a priority, quality of life is. And its always better to have good quality life than owning a flat & leading a life like BPL family. Again, this doesn't mean one shouldn't buy house but surely not at the cost of other things in life.
          I was talking about 'earlier'.
          If one skids - the argument can be reversed - what's the use of owning a car (no matter what - a hatch or 15L+) and getting thrown out of house by landlord (with or without notice) and what's the use of shifting every 11 months and disturbing family and especially kids and their friend circle every 11 months. If you have elders staying with you then - what's the use of expecting them to adjust in new surrounding every 11 months?

          Again, car is a depreciating asset (though I own it and happy to have it) will you be handing over it to next generation? What'll they get out of a 10-20 years old car?

          I agree with you on quality of life - but, do you call it a quality of life which pays EMIs for car (most of the guys buying cars on loan, I did this mistake when I joined job had loan limit with no liabilities, so I paid interest on a depreciating asset - such a fool I was and there are lot many like me) and paying rent for home? I'll prefer to stay in own house and roam on bicycle if I cannot afford a scooter after paying EMIs of home but with own home I'll ensure stability to my family - kids and parents. With own home, they can make/convert it the way they want and after all this there comes an element of satisfaction of achieving something in life (even car gives that satisfaction but home is home).

          In developed countries, the concept of family itself is in question and forget about inheritance and so on.. usually people don't stay with parents so they don't have to consider that angle in owning a house (see data of US and UK and you'll find that most of the Asians and in that too most of Indians have good families and not their natives).
          Again, in developed countries, the thinking is - earn to live and spend for oneself and get loans if you can and spend that too on fun, holidays, hobbies and so on - remember why US faced the dangerous recession?

          In India, we have the best economy - we call it savings economy - everyone tries to save for future and for next generations. There's nothing wrong in that, you'll get the feeling from Indian parents that whatever I could not get, I'll try to give to my kids - this feeling lacks in developed countries and they have their own different issues. So don't compare with them.

          I'll still say that owning a car (especially on loan) prior owning a house (anywhere, does not need to own at the place/city you work) is not a good idea - it's pure idiotness.
          I went through it and I know how and when it pains - as I was paying EMI on car, I had low eligibility left for home loan - where is quality of life when you need to adjust in 1 room lesser to own a car?

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by Tangent View Post
            i bough a flat for 26L which now sells for 70L so now you decide who is a fool
            interesting...

            what would be more interesting is you ACTUALLY buying one more similar flat (may be next to yours) at 70L TODAY and selling it for 2 cr+ in 2018-19. Believe me it is quite possible. Not joking.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              On inventory piling up and there are no sales - these are because of current inflated prices - I completely agree and if you check my earlier posts I always mentioned to piling inventory in cities including Pune.

              But my view is straight as always - if you are a builder and you are developing a project with the support of finance from bank or investors (Investors I don't mean someone who buys one flat from builder and want to sell it for profit, I mean big investors who lend money for profit sharing or for interest earning) will you sell it at loss just to repay your debits?
              Yes, you'll adjust prices little bit so that sells realize and you get money but will you sell it for loss - same question.

              If you predicted that by selling at 6k psqft (current rate of wakad if you look at market from developers perspective - includes all builder charges) will you slash prices to 3k psqft just to repay your debits?

              Answer is NO - you cannot book loss if you are a real businessman. Yes, you can reduce the profit - I'll explain how -
              If as a developer you have 40 flats to sell at 6k psqft and each flat is 1000 sqft that means you are aiming to sell each at 60L approx.
              How this 6k or 60L came? Did you dream this price? NO.. You did some market research and found out about paying ability of 'mass' (arguable but true), You found out about the current rates at which others are selling and you did your maths on profit calculation keeping in mind the raising cost of construction. Don't forget the interest on borrowed capital.

              So, as a developer, you came to conclusion that you'll start selling at 5.5k - you'll sell 10 flats at this price and then next 20 you'll sell at 6k and then last 10 you'll sell at 6.5k to average out your costs considering 100% profit.

              No developer makes 100% profit - even they initially plan for it. Inflation, raising cost of construction materials and labor and so on eats from this 100% even if you considered them earlier. If sales get delayed then further interest on borrowed capitals eats from this 100%.

              So at the end you end up in making approx 60-70% profit if everything went well and some new comers make even lesser than 50%.
              Any project approximately takes 3 years to complete - so divide this 60% average by 3 years - 20%. If you are not getting at least 20% profit a year - why to do business?

              Now will someone please tell me that if a developer can discount prices by 50%? forget about 50%, can a developer discount prices by 30-40%? NO - and if one does then I'll say he's a fool or he decided to move out of this business.

              Yes, when sales don't happen you see discounts but you should be realistic about the figures. You'll never get a flat selling at 70L today for 30-40L tomorrow or next year or anytime prior and after that.

              When someone says prices are stagnant for a year - yes they are but then that's coming out from that 100% planned profit - when this planned profit goes below 70-80%, developers will not have any choice than to raise the prices.

              Be realistic guys - you can hope for a discount of 4-5L or say max 10L on 70L but not more than that and for getting 10L (approx 15%) discount you'll need to find a developer who is in urgent need of money so that he gets food that day at home.

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              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by pune_friend View Post
                interesting...

                what would be more interesting is you ACTUALLY buying one more similar flat (may be next to yours) at 70L TODAY and selling it for 2 cr+ in 2018-19. Believe me it is quite possible. Not joking.
                I recently bought one for 72L (inclusive all) - 2BHK in wakad.
                I booked 1 for 18L in Rahatani in 2009 which I can sell today for at least 33L (current market is approx 36L - I am considering lower than market just in case I need urgent buyer).

                No FD is doubling the amount in 4-5 years - and remember - the interest rates are increased now - last year or so they were at max 7.5-8% approx. Many guys broke old FDs and created new to gain on interest part.

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Now will someone please tell me that if a developer can discount prices by 50%? forget about 50%, can a developer discount prices by 30-40%? NO - and if one does then I'll say he's a fool or he decided to move out of this business.

                  Prices for high end homes in Delhi have fallen 20-30% over the last year. Why should Pune be an exception? Between 1995 and 1998, prices in Mumbai fell around 40%, so there is historical precedence too.
                  BTW, I am not saying prices are going to fall in Pune, just that current and historical evidence goes against your argument.

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by RP Pune View Post
                    Free tax is 10%

                    Include parking it's 14%

                    but I am not saying your call is wrong as the above freebeis are on today's price and RA only knows who's offering them
                    What is this 10% tax about ? Also why are you counting parking at 4 % ? Its about 2% only.

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                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally Posted by Tangent
                      i bough a flat for 26L which now sells for 70L so now you decide who is a fool

                      Last decade gave returns almost in everything you put your money in(you'll be astonished that returns in stocks and gold were many times higher than in RE and PPF used to give 11-12% tax free interest) - so people started thinking this will go on forever . This plainly is not true .

                      RE , stocks , gold all are assets and profit depends on the buying price , cost of holding in terms of money , time , effort and selling price .

                      You need to own a roof on your head but buy anything at any price ??? Lot of people are buying apts on leased land , no society , no conveyance , legal issues , under construction - pains to see educated people behave blindly and getting duped . My experience is most of the less educated lot is smarter in making financial decisions and do not get trapped in recurring costs .

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