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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

    interesting this post is no more sticky

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by puser View Post
      interesting this post is no more sticky
      https://www.indianrealestateforum.co...ml#post1496264
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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by wiseman View Post

        Elliott Wave guys say 2016. But who cares about +/- 1 year or so!

        A good deal is a good deal!!!

        But when prices fall and keep falling, wait for momentum to come to zero and prices to stagnate for 6 months or so. Given the viciousness of the global crisis this time, it could be longer.

        Buy when volumes as well as price seem to have hit absolute, unbelievable rock bottom, buy with full confidence. Accumulate cash meanwhile.

        Imagine! even 6 months ago, people continued to be bullish with talk of price rising even now while the tsunami of unsold stock kept climbing. Sure sign of impending disaster.

        All the time it was quite clear that this was a Bull Trap developing (for those who have seen Bull Traps in other markets it was clear). Prices keep on rising going well into bubble territory. Economy keeps on sliding with every other economy accompanying. Volumes keeps on sliding, implying thin participation. Financial distress of builders keep on growing.

        With ALL this evidence for as long as 2 years or more, people were jumping into this whirlpool, chasing a runaway situation to somehow catch it before its too late.

        Now we have to track how much prices will slide in terms of years. For example ...
        15% COMPOUNDED

        PRICE
        2005 40,00,000 (Purchase price)
        2006 46,00,000
        2007 53,00,000
        2008 61,00,000
        2009 70,00,000
        2010 80,50,000
        2011 92,50,000
        2012 1,06,50,000
        2013 1,22,00,000
        2014 1,04,00,000 (15% down - 2012 level) --- 85,00,000 (2010) (adjusted for interest paid + tax saving)
        2015 92,00,000 (25% down - 2011 level) --- 75,00,000 (2009) (adjusted for interest paid + tax saving)
        2016 79,50,000 (35% down - 2010 level) --- 65,00,000 (2008) (adjusted for interest paid + tax saving)
        2017 61,00,000 (50% down - 2008 level) --- 50,00,000 (2007) (adjusted for interest paid + tax saving)
        God Forbid!
        2017 49,00,000 (60% down - 2006 level) --- 41,50,000 (2005) (adjusted for interest paid + tax saving)

        The price adjusted on the right is accounting for interest paid on EMI (35L loan 9% for 15 years) and includes 30% tax saved on 150k added back notionally to principal paid.

        Lack of liquidity as well as age could further depress prices from these levels, leading to levels even earlier. In addition, since in the first 5 years or so, large bulk of EMI would have been interest outgo, a large part of the initial purchase price would still be unpaid.

        Meanwhile, the person who has not bought from 2005 would have accumulated cash from then on, added interest to it and have a big kitty as well as huge choice in a distressed market. If the saver started with the same 5L in 2005, adding the same amount as EMI (3.9L) each year, earning 7.5% (after tax interest) on principal, in 2016 he would have accumulated nearly 75L. From the table above we can see that, with 25% decline in prices, after adjusting remaining principal, the price of the same house is about the same 75L!!!

        These are rough calculations but one gets the picture, I hope!

        This is the classic Bull Trap of a runaway market which eventually follows the logic of "everything that goes up must come down eventually" and "higher they rise without fundamental strength, harder and longer they fall". By now, is there anyone who thinks builder prices are justified by any kind of fundamentals?

        As I had mentioned back in late 2009, the rising stock market and all-round feel-good was the BEST time for builders to have reduced prices and inventory. In their arrogance (and stupidity), they did the exact opposite, raising prices significantly. And investors and occupiers ran after this chimera with the "lets buy before its too late" refrain. What happens when you get money-mad, I suppose!

        cheers
        The prices have been keeping stead in 2015 and 2016 at least in Pune RE. 40L 2005 (Luxurious 3 to 4 BHK in Pune) like new flat in good location will not be below 1.25 cr in current market. If you find such deal please let me know.

        The post tried to make 2013 as some kind of peak and projected 15% plus fall in price in subsequent years . 2016 79.5L, 2016 60L - LOL . Mungerilal kahan ho tum.
        Last edited by compuwalah; September 23 2016, 03:25 PM.

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        • Sj2013
          Sj2013 commented
          Editing a comment
          calculation does not have adjustments towards saving in rentals. when you purchased a flat then you are not paying any rent

      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by compuwalah View Post

        The prices have been keeping stead in 2015 and 2016 at least in Pune RE. 40L 2005 (Luxurious 3 to 4 BHK in Pune) like new flat in good location will not be below 1.25 cr in current market. If you find such deal please let me know.

        The post tried to make 2013 as some kind of peak and projected 15% plus fall in price in subsequent years . 2016 79.5L, 2016 60L - LOL . Mungerilal kahan ho tum.
        There are many posts on this forum (including official Govt numbers) that put 2013/14 as the peak and plenty of examples of 15-30% drop in prices.

        Pune is not a normal example since much of Pune (as I understand from posts on this forum) is parking for black money of politicians and thus normal market fluctuations do not work (until they suddenly do).

        But keeping all that aside, the world is on its trajectory to the worst every crash in its modern history (and if you didn't know this, either you are not reading up or are in denial). So the calculation trajectory is broadly on track and I doubt there are many people as eagerly going out and buying as they were in 2013.

        I hope you are not guaranteeing price rise to infinity to buyers today into the next 5-10 years - or your money back. If you are, there is something you know that most well-known economists, bankers and financial experts do not.

        Patience and you will have your RE crash when the global Bond, Stock and Commodity markets crash on a Financial System freeze up. Thats almost guaranteed. Right now people are in doubt what Gold will do, though I'm not.

        cheers
        Last edited by wiseman; September 23 2016, 09:15 PM.

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        • drstoneheart
          drstoneheart commented
          Editing a comment
          Dear Wiseman, will it be hyperinflation or deflation that will hit us?Just ur thoughts .regards.

      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        My favorite thread is back after long time

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Many of the arguments of first post are still valid. Home buyers are facing so many issues even after paying such high prices. Luckily the backbone of this black money economy is starting to crack. At least in NCR region, buyers are becoming more aware and getting justice. Hope it happens in Pune as well.
          Personally I have decided to defer my home buy for indefinite time. Have bought land in my hometown, have invested in Equity funds and looking to invest in start-ups.

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Was reading this article http://economictimes.indiatimes.com/...w/54687904.cms as how automation is going to affect job of around 69% of work force in India. This gonna have impact on property prices ?
            Last edited by fermion; October 6 2016, 08:13 AM.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by Deepak Singh View Post

              MANOJa, times have changed a lot since you were last in Pune. If you see Pune now, you wont be able to recognize it. As of today, traffic in Delhi is much more manageable than Pune.
              Very true!! I travel everyday from South Pune to East Pune! Mark my words - no other Metro city is as chaotic as Pune! Lets not even talk about places like Hinjewadi etc.
              The charm of old Pune is long gone. Especially due to unplanned growth of the city. Emergence of IT and auto industry brought many migrants to Pune, with that grew the builder lobby and that gave birth to newly rich political class which would give shelter to shady elements. So Pune is not as safe as it used to be. Recently many incidents of robbery on roads like Karve Road at night. I still remember traveling from Viman Nagar to Sinhagad road at odd times like 3 am in the morning but never had second thoughts about safety etc. Not the case anymore.

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