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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

    haha nice logic.

    I think then the list of lucky guys should start at least 200-300 years back in case of RE .. isn't it?

    Now here's another example of luck - my dad was in state govt service with poor salary and salaries being held for 8-10 months was usual scenario.. no assurity of fix periodic income. He avoided buying plot in this small village where his job was but his friends who had risk appetite and money bought and constructed bungalows. Then finally, because of some close friends, he got a plot but at the price 10 times more than what his friends paid 4-5 years back. Yes you heard right - even more than 10 times, his friend got 3k sqft plot for 3.5k and my father got 2.5k sqft plot for 40k after 4-5 years. of course my dad bought late so we had to move 2-3 colonies more outside the community.
    This was prio 35 years or so.. he constructed bungalow which is now central and most well planned area in entire town.
    Current cost (yes in this down time) of the bungalow should be no less than 60L but let's count 50L only.
    Now see the magic - 40k to 40L (again counting to the lowest of lowest in thoughts) in 35 years means 250% + returns per year?
    Investment 40k, returns 40L so gross profit 3960000 in 35 years i.e. 113142 Rs per year (simple division by no. of years) which means 280% +++ returns per year on investment.

    NOTE:- I haven't counted cost of construction, neither I am counting cost of bungalow today - counted price of land only.
    Town hasn't grown much and had population approx 60k in 2001 census and has 70k in 2011 census. Neither a district place nor a tehsil place, in remote parts of maharashtra with very low rainfall. Town is not adjacent to any national highway. No MIDC at least in 50 KM.
    Trading is main business of community there after farming.
    Last edited by illusionist13; February 4 2016, 03:48 PM. Reason: text format

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by suryawork View Post
      https://www.indianrealestateforum.co...p-1430417.html

      Extracted from here :

      I work in IT services and my job is fully secured by my employer.

      Regret to misunderstand what the above amusing statement meant - is this some kind of employment insurance you possess ?
      Read it again - I mentioned "fully secured" not permanent - I also added there and in previous post that it's secured through my performance - you should perform well to keep your job secured. Please re-read my posts to avoid any such confusions.

      Well everyone must have some kinda insurance and assurance from some other sources which I am also trying to build.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by Carefree View Post
        when you go and play in a C-A-S-I-N-O, The House ( ) will allow you to win beginning games so that you can be convinced about the fairness of the game...later as you start playing more and more ....you will start losing more...same with all investment class....only people who come in the beginning make some money...people who come later to play will lose money...

        you seemed to have played it in early stages and have made some money ...this does not mean that everytime you play, you will win the game ...or everyone who play or play every time will win...

        you just turned out to be lucky few ( those from 1995 to 2010) who made some money...

        finally The house (C-A-S-I-N-O) wins....


        Interestingly woven tale. BTW who is owning the and who has time in the world to make you first win and then lose and then keep track of it ? You should see movie 'Bolt'.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by REinvest View Post
          haha nice logic.

          I think then the list of lucky guys should start at least 200-300 years back in case of RE .. isn't it?

          Now here's another example of luck - my dad was in state govt service with poor salary and salaries being held for 8-10 months was usual scenario.. no assurity of fix periodic income. He avoided buying plot in this small village where his job was but his friends who had risk appetite and money bought and constructed bungalows. Then finally, because of some close friends, he got a plot but at the price 10 times more than what his friends paid 4-5 years back. Yes you heard right - even more than 10 times, his friend got 3k sqft plot for 3.5k and my father got 2.5k sqft plot for 40k after 4-5 years. of course my dad bought late so we had to move 2-3 colonies more outside the community.
          This was prio 35 years or so.. he constructed bungalow which is now central and most well planned area in entire town.
          Current cost (yes in this down time) of the bungalow should be no less than 60L but let's count 50L only.
          Now see the magic - 40k to 40L (again counting to the lowest of lowest in thoughts) in 35 years means 250% + returns per year?
          Investment 40k, returns 40L so gross profit 3960000 in 35 years i.e. 113142 Rs per year (simple division by no. of years) which means 280% +++ returns per year on investment.

          NOTE:- I haven't counted cost of construction, neither I am counting cost of bungalow today - counted price of land only.
          Town hasn't grown much and had population approx 60k in 2001 census and has 70k in 2011 census. Neither a district place nor a tehsil place, in remote parts of maharashtra with very low rainfall. Town is not adjacent to any national highway. No MIDC at least in 50 KM.
          Trading is main business of community there after farming.
          what i was trying to say is that the major portion of RE ( and all other asset classes) appreciation happened during 1995 to 2010 period because of central bankers incessant money printing ....now that everyone has come to know that this money printing is not going to work anymore the music will come to standstill...

          following are the telltale signs:
          commodity prices have fallen to historical lows
          gold remained constant
          oil prices fallen to there lows of last 12 years....

          all showing that the money printing has not helped and ponzi scheme will come to an end...
          now i do not know when it will finally come to end....it may be slow process....

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by REinvest View Post
            I agree with you but still 10 hours a days seems stretched work life, my office asks for 40 hours a week which I don't think more than 50% would have ever achieved in any week

            My experience -

            2008
            Never took loan and had same feelings like you but then I saw lot of guys buying and rates are going up.. here I fell in the trap - got home loan no more than 40% of my salary to go in EMI.. listening to so called veterans.. Then I was offered a car loan at lower interest than home loan and that too fixed rate - I grabbed the opportunity, kept my little savings in FD and FD interest used to pay for car loan interest (yep, I got it that cheap and hence I bought a car without necessity another wrong decision).

            2009
            Now with two EMIs I felt that I cannot save much and hardly I can spend what I was spending in all those years of no EMI. This made me look for something else, I talked to my employer (HR) and they refused any hike in salary so I switched at approx 40-42% hike.

            2010
            I was in top performers so got a very good raise - approx 18-20% and was happy with it..

            2011
            Paid off my remaining car loan in one stroke to get some other loan and started looking for bigger property. This year hike was only 8% at my level. Didn't like available options.

            2012
            Realized that RE prices went too high in all these years and I need more savings to buy another property so again switched the job - this time only 1 EMI was there - home loan (as car load was already settled down) so I took 30% raise on current and joined where I am today..

            2013
            Waited for stability in this new organization, got 12% hike which is very good at this level and bonus too (apart from CTC) and then I took decision to buy another property.. which I booked under construction in late 2013 with home loan of 75%

            2014
            Mid year, Got possession and rented it out.. 2 EMIs continued, tax benefits are continued.. Hike this year 7% - you know every company wanted to save..

            2015
            Again sector saw good progress and future so for hike of 10%.. paid some extra to first home loan (2L - though seems small but it made big difference) - adding both EMIs is approx 60% of my take home salary now (yep, second one is very costly).

            2016
            Planning to save more so that I can buy something else.. tax benefits will continue, rent pays maintenance of both properties and I can save some of it..


            If you count, my salary hiked multi-fold with 2 switches and 2 home loans.. I am able to do lot of stuff with remaining 40% of my take home..
            meanwhile got married in 2012, wife earns a bit which covers her expense and no extra burden on me, I get gifts from her on all occassions which is added benefit (of getting married not of home loan ) which made me save more as I haven't bought any jeans or shirt or any type of clothing with my money in 2015

            Now I am planning to go for joint ownership with wife for another property so that she could also save on tax, savings are on for down payment.

            Conclusion of long post -
            Total amount earned and invested 6L (first property) + 29L (second property) and rest I am earning and paying to bank and writing posts here from some time taken out in office.. wealth created as per today's market value - at least 1.5 CR.. hopefully will close both home loans in coming 5-6 years..


            Great post REinvest;. Hats off to your planning and progress. Usually people refrain from posting such items as people have been mauled by bears (refer to my analysis over how you will be treated for posting any success stories) in past. Compared to you I should say overall I have been much conservative in my approach on RE buys and investments.
            Last edited by illusionist13; February 4 2016, 04:18 PM. Reason: tagged user

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by REinvest View Post
              haha nice logic.

              I think then the list of lucky guys should start at least 200-300 years back in case of RE .. isn't it?

              Now here's another example of luck - my dad was in state govt service with poor salary and salaries being held for 8-10 months was usual scenario.. no assurity of fix periodic income. He avoided buying plot in this small village where his job was but his friends who had risk appetite and money bought and constructed bungalows. Then finally, because of some close friends, he got a plot but at the price 10 times more than what his friends paid 4-5 years back. Yes you heard right - even more than 10 times, his friend got 3k sqft plot for 3.5k and my father got 2.5k sqft plot for 40k after 4-5 years. of course my dad bought late so we had to move 2-3 colonies more outside the community.
              This was prio 35 years or so.. he constructed bungalow which is now central and most well planned area in entire town.
              Current cost (yes in this down time) of the bungalow should be no less than 60L but let's count 50L only.
              Now see the magic - 40k to 40L (again counting to the lowest of lowest in thoughts) in 35 years means 250% + returns per year?
              Investment 40k, returns 40L so gross profit 3960000 in 35 years i.e. 113142 Rs per year (simple division by no. of years) which means 280% +++ returns per year on investment.

              NOTE:- I haven't counted cost of construction, neither I am counting cost of bungalow today - counted price of land only.
              Town hasn't grown much and had population approx 60k in 2001 census and has 70k in 2011 census. Neither a district place nor a tehsil place, in remote parts of maharashtra with very low rainfall. Town is not adjacent to any national highway. No MIDC at least in 50 KM.
              Trading is main business of community there after farming.
              Wrong...here is the profit percentage for 40k to 40L in 35 years :

              FV(14%,35,0,40000,1) = 3924007

              So profit is abt 14% per year not 280% per year . See the diff. in actual vs your assumptions .

              You are in supervisory position but do not know that your job does not depend only on your performance but also the company performance .

              Hats off to your genius , Sir !!!

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by Carefree View Post
                what i was trying to say is that the major portion of RE ( and all other asset classes) appreciation happened during 1995 to 2010 period because of central bankers incessant money printing ....now that everyone has come to know that this money printing is not going to work anymore the music will come to standstill...

                following are the telltale signs:
                commodity prices have fallen to historical lows
                gold remained constant
                oil prices fallen to there lows of last 12 years....

                all showing that the money printing has not helped and ponzi scheme will come to an end...
                now i do not know when it will finally come to end....it may be slow process....
                The you are not aware of the world my friend.
                I gave you example of 35 years back which is way prior to 1995 - my dad's friend bought bigger plot for 3.5k and my dad bought smaller plot for 40k after 5 years.. this was in 80s.. may be 82-83-84 period.

                Commodity prices are not all time low and definitely not at historic levels - check out daal prices and you'll understand - wheat, rice are not at historically low prices if you meant commodity market but if you meant shares and stocks then it's all hopeless sentiment driven decisions in India.. has nothing to do with RE rise or fall.

                Gold prices are actually stable only for last week or two.. otherwise they were falling continuously but you didn't see much fall in terms of rupees as US dollar became stronger day by day to nullify the difference.

                Oil prices - again - where's the difference in India and on your life with global oil price reduction? That's a move by govt which I already explained as per my understanding. So global oil prices reduced but not in India - you pay what you used to pay so how will that affect your RE? Or how will it make RE fall? Other way round, instead of investment in oil markets or bonds, people will move to RE and other sectors soon.

                Money printing? now from where's this coming? Do you seriously think that a country can produce as much as it wants in times of need? Then why not print money and pay back all our dues?

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by Carefree View Post
                  what i was trying to say is that the major portion of RE ( and all other asset classes) appreciation happened during 1995 to 2010 period because of central bankers incessant money printing ....now that everyone has come to know that this money printing is not going to work anymore the music will come to standstill...

                  following are the telltale signs:
                  commodity prices have fallen to historical lows
                  gold remained constant
                  oil prices fallen to there lows of last 12 years....

                  all showing that the money printing has not helped and ponzi scheme will come to an end...
                  now i do not know when it will finally come to end....it may be slow process....

                  I rather see it as a stage set for next stage of growth. During era of high oil price and rising gold prices, people predicted that since there is no faith in global economy people are buying gold at high prices. But when gold fell no one says this is sign that people have now faith in global economy (people make observation fit to confirm to their own belief ) . No one said - see such high commodity prices (non food) means economy and inflation will go increasing. Still people kept on predicting doomsday is just around the corner. Just see the thread "will world end in 2012 " and you can have at least few days of entertainment.


                  Countries like India should buy large quantity of oil and store it wherever possible (even in old abandoned mines) and/or invest big way oil futures locking current low price of $28/barrel. Oil producing countries fearful that oil may fall to 15$ will at least sell futures at this price at least to lock in current price. Oil ministry current must be sitting on big cash as difference between sustained low price of oil and petrol pump rates must be ensuring this. I think this will result in sizable cash surplus with Govt. But given lot of money need to be provided for infra projects, we should be able to manage in less loan or go more aggressive on Infra projects.
                  Last edited by compuwalah; February 4 2016, 04:33 PM.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by compuwalah View Post
                    Interestingly woven tale. BTW who is owning the and who has time in the world to make you first win and then lose and then keep track of it ? You should see movie 'Bolt'.
                    the c-s-i-n-o i was referring to are the big financial institutions like banks, private equity firms , investment banks, wealth management firms, politicians....they have vested interest in running this show...

                    now coming to RE, even i was half hearted about this RE appreciation...i was not sure if this RE appreciation trend will sustain or not....sometime even i thought that this will keep on growing....but i have been interacting with RE brokers in my home town and in bangalore....and they are pretty much sure that it will not grow exponential like it happened before....they reckon it may remain stagnant for at least 2 to 3 years or grow 5 % per year at max ....now that is a big statement to come from people for whom RE is the bread and butter....it is not only one or two ....but multiple people agree on the same....the only thing that seems to sustaining the stagnation of RE is the black money....if not for this black money RE would have fallen...

                    as said before for each person the circumstances vary...so we cannot generalize with statement like RE is good or bad....for a person with black money it is a perfect place to park his money....profit or loss doesnot bother him....but people from salaried class need to be extra careful while dealing with RE....just because some people made money from RE does not mean that everyone will make money from it in future.....

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by compuwalah View Post
                      Ok. One in action now .


                      As per your around 2011 analysis , doomsday was around 2013 and best time to buy RE was 2014.
                      New doomsday date is _____ ?
                      The target would have been reached and by now we would have been well on way to recovery if normal course of markets were allowed. Negative impact would have been limited.

                      I did not bank on powers that be bailing things out and delaying the inevitable.

                      The problem with bailing out is that the eventual fall will have added energy with all that pent-up debt to be destroyed. It will only make things worse.

                      So, one does not get prizes for the exact date target accuracy.

                      One gets benefited by doing the right thing and coming out ahead. Nothing is lost by staying on rent and accumulating cash for the eventual crash when the real bargains will be available.

                      I'm still betting that, when the big one comes, almost everyone, including me, will be surprised by the depth of fall. That would be the opportune time to deploy all the cash saved.

                      Nothing has changed. OTOH, things may only have got worse. Ask all the people who, today are much more worried about their jobs/careers than they were back in 2013!!!

                      Now the corrected doomsday date is the day one has realized that their property is 50% down and their loan is underwater. And worse, they are also not employable as job scene would have deteriorated.

                      We just have to wait.

                      cheers
                      Last edited by wiseman; February 4 2016, 04:32 PM.

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