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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

    Logic is possible if all parameters are equal. Here the end users is using all white money, whereas the builder is using black money to speculate and raise prices. Assuming the buyer had never paid tax on his income for 10 years he would have a substantial portion of money which could then provide for the down payment. What does the builder do ? Most of his income is tax free. He has 30% of tax savings every year. Add it up for 10 years and you will see how buyer can never keep up with quoted prices by the builder.

    Similarly person working in the Gulf/Singapore with a lifestyle at the purchasing power parity of one working in India in 10 years will have a bigger savings balance thanks to lower taxes. The only way out is to either join the builders club or go to a lower tax country
    Last edited by rameshyahoo; October 5 2010, 10:58 AM.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Formula man

      Originally posted by rsatitkar View Post
      Well I will write in precise points:

      2. At the same time I belive there was an opportunity in 2009 where prices came down by 15-20%, here I differ with most of the senior members. Agreed that may not be the only opportunity but, yes it was an opportunity.
      I disagree for the simple reason that not all prices dipped the way they should. If a 10L flat is quoted for 70L & then given for 50L, is it a good buy?? Compare the price with bottom price adjusted via inflation & not hyped prices. No point in saying that flat at Kharadi which costed 60L was available for 50L in 2009 for the simple reason that even 40L is not worth here, let alone 50L.
      3. Renting forever (or even 5+ year ) is not an option. You may call my thinking poor, old fashioned or whatever you wish. But this what I think. I differ a lot with senior members on this point.
      Personal opinion, so won't oppose. However, seen people saying on rent for 6-7 yrs & make 60%+ downpayment. Man, note that RE prices is Pune are again hyped up & real gain in RE will be far lesser than your income growth. So, in any case, you won't loose anything today if you don't buy now. Anyways, I agree with wiseman here, real ownership is only when you are free of EMIs.

      4. Now comes buying at logical & affordable price. Yes we are advising people to buy at a price which is both logical & affordable. Affordable is still a quantifiable term which can be directly linked to buyer's income / savings. But how about logical price? When to call that price is at logical level, unfortunately it's very difficult to determine this & hence so far no one has given a quantified answer for a what a logical price would be?
      So simple man, rent/month x 200 or lets say even 300 max. Hence, if rent is 10k, the flat cost should be max to max 30L. Check out rents at Samrajya & see for yourself.
      If you are happy, you are successful.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Internal Adjustments

        Originally posted by rameshyahoo View Post
        Logic is possible if all parameters are equal. Here the end users is using all white money, whereas the builder is using black money to speculate and raise prices. Assuming the buyer had never paid tax on his income for 10 years he would have a substantial portion of money which could then provide for the down payment. What does the builder do ? Most of his income is tax free. He has 30% of tax savings every year. Add it up for 10 years and you will see how buyer can never keep up with quoted prices by the builder.

        Similarly person working in the Gulf/Singapore with a lifestyle at the purchasing power parity of one working in India in 10 years will have a bigger savings balance thanks to lower taxes. The only way out is to either join the builders club or go to a lower tax country
        Agreed. But note that even B-money is there to earn more money, it is not like just because it is B-money, it can go down the drain & no-one cares. Money is money, it has no colors!! So, even if builders use B-money, it is of no use until & unless buyers pump in white money to buy flats .

        As far as builders are concerned, the tax benefit was under income tax 80IB, & this has already been discontinued. It was valid only for projects sanctioned till 2007 & should complete by Mar 2011 (Earlier date was Mar 2010), with flat areas less than 1500 sq ft. I think builders made hay for few years till 2007 but good part was builders were encouraged for demanding more of white money so even buyers especially salaried class benefited as well. Now, if builders drastically show less income, the IT dept will get hold of them. So, in one way, those who made merry in these times but now want to show less income will be for toss.

        * PS:- The real purpose of giving the tax benefit of the Govt was to make housing affordable. So, they removed taxes thinking that builders will pass on this 30% (or atleast 15-20%) benefit to buyers which they did not. Anyways, the politicos got their cut as well from the builders.
        If you are happy, you are successful.

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by realacres View Post
          I disagree for the simple reason that not all prices dipped the way they should. If a 10L flat is quoted for 70L & then given for 50L, is it a good buy?? Compare the price with bottom price adjusted via inflation & not hyped prices. No point in saying that flat at Kharadi which costed 60L was available for 50L in 2009 for the simple reason that even 40L is not worth here, let alone 50L.

          Personal opinion, so won't oppose. However, seen people saying on rent for 6-7 yrs & make 60%+ downpayment. Man, note that RE prices is Pune are again hyped up & real gain in RE will be far lesser than your income growth. So, in any case, you won't loose anything today if you don't buy now. Anyways, I agree with wiseman here, real ownership is only when you are free of EMIs.


          So simple man, rent/month x 200 or lets say even 300 max. Hence, if rent is 10k, the flat cost should be max to max 30L. Check out rents at Samrajya & see for yourself.
          Fine formula is there. So to which clearlly means that prices will have to crash more than 50%, so that they will be logical as per this formula. What is the likehood of that? I am not denying possibility of that happening but chances are very remote to be honest. Yes prices can sure dip but them going down by 60% is something very unlikely.

          Agreed that in today's date supply is much more than demand & still prices are high, hence there are chances for a correction. But at the same time I think market has some support becasue of peoples current salary levels (not just IT, Banks, Cent Govt etc). Hence even though rates start falling down there will be some support it will not be a free fall (unless something like sub-prime happens in India. Touchwood).

          Also agreed that Pune infra is pathetic as compared to many other cities & this makes Pune property rates look even more hyped. But that does not mean that rates in other cities are logical. They are hyped too. May be established infra make them look better than Pune.

          Also though I completely agree than Pune infra needs a big leap & buying with no or poor infra should be avoided. But only thing is if there is a correction in RE it has to be countrywide, rates correcting only in Pune becuase of poor infra is not likely.
          Last edited by rsatitkar; October 5 2010, 01:17 PM.

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Gujarat sees 52% fall in home loan size

            "The average home loan amount in Gujarat has fallen. During January-June 2010, the average size of home loan amount has witnessed a fall of about 52% when compared to that in the same period in 2009.
            Bankers and developers say this fall can be attributed to two factors: increasing demand for affordable houses, which decreases the amount of loan; and the factor of cash component that has been introduced by some developers.
            As per State Level Bankers’ Committee (SLBC) quarterly reports, in the first six months of 2009, home loans worth Rs2,004 crore were disbursed to 16,436 accounts in Gujarat. During this period, the average housing loan per account stood at around Rs12.19 lakh.
            But during January-June 2010, home loans worth Rs1,886 crore were disbursed to 32,887 accounts. This brought down the average loan amount to Rs5.73 lakh per house, thereby making a fall of 52%."


            Link: http://www.dnaindia.com/india/report...n-size_1447804

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Aditi, I was actually looking for a property in Ahmedabad to invest...do you know something in the range of 10-12 lacs for a 2 BHK (about 1000 sq feet)?

              Checked new CG road but still it is around 15-20 lacs, and plush bunglows are costlier.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by realacres View Post
                I disagree for the simple reason that not all prices dipped the way they should. If a 10L flat is quoted for 70L & then given for 50L, is it a good buy?? Compare the price with bottom price adjusted via inflation & not hyped prices. No point in saying that flat at Kharadi which costed 60L was available for 50L in 2009 for the simple reason that even 40L is not worth here, let alone 50L.
                +1. The propagandists (aka Builder lobby) will always claim that the 2009 dip was one small opportunity, now that that also is gone, it's going to be up and upward journey for RE prices in Pune.

                Only time shall tell ...

                Currently, if 5K for Pune outskirts, how much for Aundh/Baner now?

                BTW, the so called posh areas were under the cloud-bursts yesterday.
                Wall collapses, knee-high water-clogged roads and houses, etc....

                And such areas command 1 Cr.+ for 2-Bhks…in the name of amenities, infra, etc.

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by rsatitkar View Post
                  Fine formula is there. So to which clearlly means that prices will have to crash more than 50%, so that they will be logical as per this formula. What is the likehood of that? I am not denying possibility of that happening but chances are very remote to be honest. Yes prices can sure dip but them going down by 60% is something very unlikely.

                  Agreed that in today's date supply is much more than demand & still prices are high, hence there are chances for a correction. But at the same time I think market has some support becasue of peoples current salary levels (not just IT, Banks, Cent Govt etc). Hence even though rates start falling down there will be some support it will not be a free fall (unless something like sub-prime happens in India. Touchwood).
                  If something can go 4x in 3 to 4 years it can as well come down by that rate.
                  To say that 50% or 60% fall is unlikely is another way of enticing fear
                  amongst buyers to buy.

                  It may or may not go down, but as a buyer I don't care.
                  I would buy only when I can afford, otherwise I'll look somewhere else.

                  After all Pune is not the only so called civilized world!

                  Also, why Builders always are back after how much people earn?
                  Why can't they sell their product on actual costs and some decent profit margins?

                  Why they expect people to become EMI slaves for 15 to 20 years just to server their greed?

                  Aren't there other non-RE things to cater for with increase in the salary?

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    This is actually little lower budget for West Ahmedabad. Recently a friend bought a 2bhk(1000+sqft) in 22-23L near motera stadium (under construction)
                    But in 10-12, you can check out East part, specially the ones near SP ring road. Naroda, nava naroda / Nicole/Odhav/Isanpur etc. All are lower middle class areas. yI have not much idea about the areas nearby the place where GIFT city is coming up, but that will be quite good in future.


                    Originally posted by pcpune View Post
                    Aditi, I was actually looking for a property in Ahmedabad to invest...do you know something in the range of 10-12 lacs for a 2 BHK (about 1000 sq feet)?

                    Checked new CG road but still it is around 15-20 lacs, and plush bunglows are costlier.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Well, that area is still the north west and people are quoting like 20K-25K sq yard in these areas. Actually, if any good scheme (with a good developer ) is coming up in the East as well, I dont really mind as it is still around 5-7 kms from City Centre.

                      Lets see when I travel again to Ahmedabad, but GIHED had a property show on October 1,2 and 3.

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