Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Originally Posted by wiseman
    This kind of analysis is done for RE Vs Gold in US market.

    I just have 2 points to make.

    1. DDA flats have consistently gone up in relation to Gold. Therefore DDA flats are heading towards bubble territory and gold is relatively out of bubble zone wrt DDA.

    2. If you take 1980 or 1985 (or somewhere in between) as he BASE of the super boom of last 25 years - after the 1970s stagflation - RE has boomed from a base of 1985 all the way upto 2005. Since then relative to gold RE is climbing down and is close to Gold ratio of 1985.

    Therefore what we can surmise from this is, RE boomed all the way from 1985 to 2005 and is swinging down back to 1985 ratio. Main reason for this is the increasingly easy-money policies of Govt.

    On the other hand, Gold declined all the way from 1985 to 2005 relative to RE and is now racing up to catch the 1985 ratio again.

    How much further gold will rise against RE? Will it beat the 1985 ratio and become a better 25-year performer wrt RE? When will the run end?

    We are definitely looking at gold heading into bubble territory. But is it actually in a bubble? Extraordinary circumstances may suggest that gold may go to extraoedinary levels even against RE.

    cheers


    I agree - DDA flats are definitely in bubble territory wrt to both gold and wrt US house prices. Current 14000 psf prices are not sustainable and in any case, this is asking price, there are no deals at this price.

    Reason: People prefer to buy a Sohna Road flat for 6000 psf and get a 2500 sf flat with all amenities rather than a run down pathetic 1000 sf DDA flat.

    I was about to do this for US which has much better and longer and easily accessed data. If people have already done it, then maybe you can post the results here? Also, can anyone analyse Bombay prices also - which also has better data than a govt controlled DDA flat allotment.

    I also agree - Gold has been out of favour for 2 decades while RE has been in favour . Hence perhaps these price distortions. Which has also affected our psyche of how we perceive these assets - people have an inflated opinion of RE value. Also, If we go back before 1960 and analyse - we might find that the mean price is actually less than 1gm psf and all the rest is actually distortion. Ideally it is better to interpolate 100 year US data (since US has been urbanised for long times) and try to figure out ideal RE Price in India with all its govt derived distortions.

    Regardless of what these data mean, one thing is for sure - there is extra-ordinary stresses and imbalances in the monetary and economic system in India as well as the world. Normal ways of thinking and analysis of such an unstable system are bound to fail in unpredictable ways.

    Only hindsight will know the reality. Until then we are all groping in the dark.Nothing is what it seems.

    Safety first should be the only motto.
    CommentQuote
  • Reposted from the "Right" thread to the "Wrong" thread because wrong is right!!!

    Currency depreciation.

    Right now, Indian Rupee is temporarily strong. So you are calculating 1Crore = 200,000 dollars. But if our currency depreciated to 90Rs to the dollar, 1Cr = 100,000 dollars.

    Since whatever you have said above is absolutely true, something has to give way and that something is our currency.

    So expecting 60Rs to the dollar within the next one year would not be wrong. Only reason it hasnt happened is because US rates are abnormally low.

    The moment US rates start tightening (and it has to happen at some time in the next few years), our currency will depreciate like crazy.

    Let us assume a few approximate prices and see (dont remember exact prices)

    Year / USD/Rupee /Median US house price / DDA flat 2BHK price in Rs /(dollar) / Ratio US house: Indian house

    1982 /? 12 /50,000$ /1,00,000 Rs (=8000$) /6.25

    1987 /? 18 /75,000$ /8,00,000 Rs (=40,000$)/ 1.85

    1992 /30 /100,000$ /16,00,000 Rs (=50,000$) /2.0

    1997 /35 /150,000$ /25,00,000 Rs (=70,000$)/ 2.0

    2002 /45 /200,000$ /35,00,000 Rs (=70,000$)/ 2.85

    2007 /45 /250,000$ /80,00,000 Rs (=175,000$) /1.42

    2011 /45 /225,000$ /125,00,000 Rs (=275,000$)/ 0.81

    So historically US homes have costed around twice the price of a DDA flat. 1982 I dont remember the US exchange rate (strangely, could not find a good web site going back that far - anyone can post a good link????) , but US median housing price readily available - I have rounded off for easy analysis. For India, I went with DDA flat whose market price I know.

    Currently, US homes are cheaper than in India. For reversion to mean, this ratio, currently 0.8 has to go back to about 2.

    So one of three things has to happen

    1. US homes have to appreciate by 100% (double). Seems impossible, but with inflation stoking by printing currency, ultimately it will happen

    2. India prices have to fall 50% (RE bull theory proved wrong guys believe this).

    3. USD has to appreciate 100% (i.e double to 90 per dollar).

    It can happen in any ratio. Over the long term, probably, 30% of each of these will happen i.e US prices will rise 30%, Indian prices will fall 30% and USD will appreciate 30% i.e Rupee depreciation of 30%.

    Question is which will come first? I as a RE bull theory proven right person, believe the order will be: Fall in Indian prices by 30% (happening right now), Rupee depreciation by 30% (expect to happen in next one year) and then US house appreciation by 30% (probably take 5 years and more)

    OR - Rupee can show run away depreciation. I remember 1991 when there was flight of capital. We had to devalue and shift to semi float. From 18Rs to dollar price went to 30 Rs to dollar if I remember right.

    If there is flight of capital, same thing can happen again. All of our forex reserve is hot money from FII who want to chase our volatile stock markets.

    We cannot allow them to put money in our gilt bonds - because with US rate at 0% and Indian rate at 8.4% or so, that is an arbitrage which will either bankrupt us or shift our rates to about 4% which would stoke the wildest inflation we have ever seen and collapse our monetary system.

    Our only option is to allow them to take their money and go and face a massive depreciation of Rupee - which will cause a bad recession and also stoke oil price inflation.

    The truth will lie somewhere in between -30/30/30 I wrote above is the safest prediction possible
    CommentQuote
  • Venky, Excellent analysis in your last couple of posts. Thanks for sharing this all..I hope your predictions prove true...
    CommentQuote
  • Prices are Up

    Guys,
    I feel sorry the ppl who waited from last one year to buy their flat.
    Looking at the past data itself, I am seeing the appreciation of price by atleast 700-800 psqft. In wakad, last April, ready possession was available for 2700 psqft and now it is 3800 psqft. Even if price correct and go to 3200 psqft, it would be still a loss for the one who waited.
    In PS, the price hike is more due to monoploy of few builders.
    Take any area, any project, the prices went up and even if it comes down, they won't fall below the 2010 rates.
    CommentQuote
  • DLF Plans to Sell Stakes in Pune, Noida IT Parks

    DLF which may get bankrupt if loans not repaid in very less time, is selling off it's non-core assets. Hinjewadi IT park is one to go from DLF. Check the link below:-

    Article Window
    CommentQuote
  • Originally Posted by kirunOnly
    Guys,
    I feel sorry the ppl who waited from last one year to buy their flat.
    Looking at the past data itself, I am seeing the appreciation of price by atleast 700-800 psqft. In wakad, last April, ready possession was available for 2700 psqft and now it is 3800 psqft. Even if price correct and go to 3200 psqft, it would be still a loss for the one who waited.
    In PS, the price hike is more due to monoploy of few builders.
    Take any area, any project, the prices went up and even if it comes down, they won't fall below the 2010 rates.

    Price went up but now if you see the market, the prices are coming down. Also, there is no reason for you to think that prices won't fall below 2010 rates.

    In 2009, 2 factors led to sales:-

    1.) Reduction in prices &
    2.) TEASER RATES

    SBI has said that since it stopped TEASER RATES, the home loan has dipped by atleast 30% compared to last fiscal.

    This clearly indicates that banks were major factor in sustaining the rates as they had given loans to builder which indirectly were recovered from buyers.

    You simply now see the plight of home loan borrowers who took TEASER RATES in 2009 & very soon, the real rates will kick in which are over 27% more than 2009 teaser rates.

    The increase in NPAs of banks in RE sector only proves this point further.

    No liquidity to buyers nor to builders is going to make situation worse by the end of this year for RE.

    West being in doldrums will only hit this hard. I expect the inflation to be in double digits soon :(, thanks to useless policis of Central Govt.
    CommentQuote
  • RBI Tightens Rules for Banks Lending to Realty

    Very good post Venky & wisey.

    Here is one more news to show RE loans are indeed getting as BAD LOANS. I now strongly feel that several builders are going to go bankrupt in coming days. This I am saying not only one the news report but even from my own sources in RE.

    Besides stake sale in projects, lands are also being sold by the builders at less than market rates. More land will mean more pressure on RE as well.

    Article Window
    CommentQuote
  • Originally Posted by Venkytalks
    Reposted from the "Right" thread to the "Wrong" thread because wrong is right!!!

    Currency depreciation.

    Right now, Indian Rupee is temporarily strong. So you are calculating 1Crore = 200,000 dollars. But if our currency depreciated to 90Rs to the dollar, 1Cr = 100,000 dollars.

    Since whatever you have said above is absolutely true, something has to give way and that something is our currency.

    So expecting 60Rs to the dollar within the next one year would not be wrong. Only reason it hasnt happened is because US rates are abnormally low.

    The moment US rates start tightening (and it has to happen at some time in the next few years), our currency will depreciate like crazy.

    Let us assume a few approximate prices and see (dont remember exact prices)

    Year / USD/Rupee /Median US house price / DDA flat 2BHK price in Rs /(dollar) / Ratio US house: Indian house

    1982 /? 12 /50,000$ /1,00,000 Rs (=8000$) /6.25

    1987 /? 18 /75,000$ /8,00,000 Rs (=40,000$)/ 1.85

    1992 /30 /100,000$ /16,00,000 Rs (=50,000$) /2.0

    1997 /35 /150,000$ /25,00,000 Rs (=70,000$)/ 2.0

    2002 /45 /200,000$ /35,00,000 Rs (=70,000$)/ 2.85

    2007 /45 /250,000$ /80,00,000 Rs (=175,000$) /1.42

    2011 /45 /225,000$ /125,00,000 Rs (=275,000$)/ 0.81

    So historically US homes have costed around twice the price of a DDA flat. 1982 I dont remember the US exchange rate (strangely, could not find a good web site going back that far - anyone can post a good link????) , but US median housing price readily available - I have rounded off for easy analysis. For India, I went with DDA flat whose market price I know.

    Currently, US homes are cheaper than in India. For reversion to mean, this ratio, currently 0.8 has to go back to about 2.

    So one of three things has to happen

    1. US homes have to appreciate by 100% (double). Seems impossible, but with inflation stoking by printing currency, ultimately it will happen

    2. India prices have to fall 50% (RE bull theory proved wrong guys believe this).

    3. USD has to appreciate 100% (i.e double to 90 per dollar).

    It can happen in any ratio. Over the long term, probably, 30% of each of these will happen i.e US prices will rise 30%, Indian prices will fall 30% and USD will appreciate 30% i.e Rupee depreciation of 30%.

    Question is which will come first? I as a RE bull theory proven right person, believe the order will be: Fall in Indian prices by 30% (happening right now), Rupee depreciation by 30% (expect to happen in next one year) and then US house appreciation by 30% (probably take 5 years and more)

    OR - Rupee can show run away depreciation. I remember 1991 when there was flight of capital. We had to devalue and shift to semi float. From 18Rs to dollar price went to 30 Rs to dollar if I remember right.

    If there is flight of capital, same thing can happen again. All of our forex reserve is hot money from FII who want to chase our volatile stock markets.

    We cannot allow them to put money in our gilt bonds - because with US rate at 0% and Indian rate at 8.4% or so, that is an arbitrage which will either bankrupt us or shift our rates to about 4% which would stoke the wildest inflation we have ever seen and collapse our monetary system.

    Our only option is to allow them to take their money and go and face a massive depreciation of Rupee - which will cause a bad recession and also stoke oil price inflation.

    The truth will lie somewhere in between -30/30/30 I wrote above is the safest prediction possible



    Your comparison is totally incorrect.

    You have taken the relatively top city's prime location and comparing with the average price of US.

    Why not compare Newyork to Delhi.

    A typical US home in this price is furnished a lot.
    It has land .... so maybe you have to compare a small row-house to a similar city's row-house. Those cities wages ratio should be at least at 1/3 to 1/4. Historically RE also held that wage ratio.
    but now wage ratio is nowhere in picture....

    AND RE has only 1 factor - Location, Location & Location.
    Gold is too versatile and limited stock in world to be compared to RE.

    While RE's valuation can be created by improving the LOCATION(Not in India).

    Make Roads, Infra and there you are ....
    For that lesson see China.

    And RE can be devaluated ... make Slum nearby....
    Stop water supply ... many ways .. this you cannot do to gold .....

    If city become inhabitable your RE is lost forever ...... like Chernobyl for next 20,000 yrs ...
    while Gold you can again get back ....
    CommentQuote
  • Originally Posted by Venkytalks
    Reposted from the "Right" thread to the "Wrong" thread because wrong is right!!!

    Currency depreciation.

    Right now, Indian Rupee is temporarily strong. So you are calculating 1Crore = 200,000 dollars. But if our currency depreciated to 90Rs to the dollar, 1Cr = 100,000 dollars.

    Since whatever you have said above is absolutely true, something has to give way and that something is our currency.

    So expecting 60Rs to the dollar within the next one year would not be wrong. Only reason it hasnt happened is because US rates are abnormally low.

    The moment US rates start tightening (and it has to happen at some time in the next few years), our currency will depreciate like crazy.

    Let us assume a few approximate prices and see (dont remember exact prices)

    Year / USD/Rupee /Median US house price / DDA flat 2BHK price in Rs /(dollar) / Ratio US house: Indian house

    1982 /? 12 /50,000$ /1,00,000 Rs (=8000$) /6.25

    1987 /? 18 /75,000$ /8,00,000 Rs (=40,000$)/ 1.85

    1992 /30 /100,000$ /16,00,000 Rs (=50,000$) /2.0

    1997 /35 /150,000$ /25,00,000 Rs (=70,000$)/ 2.0

    2002 /45 /200,000$ /35,00,000 Rs (=70,000$)/ 2.85

    2007 /45 /250,000$ /80,00,000 Rs (=175,000$) /1.42

    2011 /45 /225,000$ /125,00,000 Rs (=275,000$)/ 0.81

    So historically US homes have costed around twice the price of a DDA flat. 1982 I dont remember the US exchange rate (strangely, could not find a good web site going back that far - anyone can post a good link????) , but US median housing price readily available - I have rounded off for easy analysis. For India, I went with DDA flat whose market price I know.

    Currently, US homes are cheaper than in India. For reversion to mean, this ratio, currently 0.8 has to go back to about 2.

    So one of three things has to happen

    1. US homes have to appreciate by 100% (double). Seems impossible, but with inflation stoking by printing currency, ultimately it will happen

    2. India prices have to fall 50% (RE bull theory proved wrong guys believe this).

    3. USD has to appreciate 100% (i.e double to 90 per dollar).

    It can happen in any ratio. Over the long term, probably, 30% of each of these will happen i.e US prices will rise 30%, Indian prices will fall 30% and USD will appreciate 30% i.e Rupee depreciation of 30%.

    Question is which will come first? I as a RE bull theory proven right person, believe the order will be: Fall in Indian prices by 30% (happening right now), Rupee depreciation by 30% (expect to happen in next one year) and then US house appreciation by 30% (probably take 5 years and more)

    OR - Rupee can show run away depreciation. I remember 1991 when there was flight of capital. We had to devalue and shift to semi float. From 18Rs to dollar price went to 30 Rs to dollar if I remember right.

    If there is flight of capital, same thing can happen again. All of our forex reserve is hot money from FII who want to chase our volatile stock markets.

    We cannot allow them to put money in our gilt bonds - because with US rate at 0% and Indian rate at 8.4% or so, that is an arbitrage which will either bankrupt us or shift our rates to about 4% which would stoke the wildest inflation we have ever seen and collapse our monetary system.

    Our only option is to allow them to take their money and go and face a massive depreciation of Rupee - which will cause a bad recession and also stoke oil price inflation.

    The truth will lie somewhere in between -30/30/30 I wrote above is the safest prediction possible


    I beg to differ

    I think RE may have a short term blip (even that I am not convinced about to pay heed to as trying to time the market is dangerous game) but long term it would give good returns.

    I think Re will go up against the USD and not down.

    US homes will appreciate once they find a bottom. With so much money slushing in US money markets it will enventually its way to RE inflation.
    CommentQuote
  • Originally Posted by frugality
    Your comparison is totally incorrect.

    You have taken the relatively top city's prime location and comparing with the average price of US.

    Why not compare Newyork to Delhi.

    A typical US home in this price is furnished a lot.
    It has land .... so maybe you have to compare a small row-house to a similar city's row-house. Those cities wages ratio should be at least at 1/3 to 1/4. Historically RE also held that wage ratio.
    but now wage ratio is nowhere in picture....

    AND RE has only 1 factor - Location, Location & Location.
    Gold is too versatile and limited stock in world to be compared to RE.

    While RE's valuation can be created by improving the LOCATION(Not in India).

    Make Roads, Infra and there you are ....
    For that lesson see China.

    And RE can be devaluated ... make Slum nearby....
    Stop water supply ... many ways .. this you cannot do to gold .....

    If city become inhabitable your RE is lost forever ...... like Chernobyl for next 20,000 yrs ...
    while Gold you can again get back ....


    I did what was easy.

    Do you have New York prices? Do you have historical Bombay prices? I dont. I cannot compare data I dont have.

    If you have the data, go ahead and compare over the years. I would be interested to see your results.

    I dont even have pre 1980s data for Delhi. Nor is it available on the net.

    Even historical USD Rupee exchange rates are difficult to find. I had to guess from my memory that it was 12 Ruppes to the dollar when I was a kid - which year I have no recollection.


    Stoxx, even I said US prices will rise to cover 30% of the imbalance. I put the time frame for this at 5 years in my post.

    As for RE continuing to hold value - I agree on the long term - any real asset will keep some value when currencies are debasing with the global epidemic of currency printing.

    That is why I made some RE investments after abhorring the sector (as being only fit for madmen and criminals) for 8 long years.
    CommentQuote
  • My per rant (from NOIDA forum)

    Assume you are in 30% tax slab, salaried middle class person

    Out of 100Rs earning, you pay 30Rs to govt. straight.

    Rest 70 Rs you spend.

    But India has very high consumption tax varying from 20-30%

    if you include import duty, central excise, state VAT, Octroi, service tax. etc - everything is ad-valorum - i.e. if cost of something is 10Rs., import duty is 20%, makes the cost 12 Rs, then central excise is say 12% of Rs. 12 and not of Rs. 10 and so on for each and every tax.

    So 30% of remaining 70Rs which you spend also goes to govt. (Petrol price is 30 Rs cost and 30Rs tax, so this kind of wild taxation raises average taxation as a component of tax on final price and evens out against the lower 10% service tax. for some of your consumption)

    So 30% of Rs 70 becomes Rs. 50. For every 50Rs worth of spending you have to do in India, you have to earn 100Rs and give 50 Rs to govt - which wastes this money in the wildest corruption imaginable.

    Even in RE, you have VAT on steel, cement, service tax, VAT on the finished product, registration cost, stamp duty.

    Now on top of all this, if you also have to pay bribes to the govt officials - that means for every 50Rs. you spend, tax by govt and its corrupt minions is adding some 60-70R over and above it. You have to earn some 120Rs to spend 50Rs.

    On top of that, you have inefficiency of govt services. So instead of spending on decent things, you have to spend on invertors because power is inefficient, power back up because power cuts extend more than 4 hours, water purification because of poor quality water, buying water because there is no water, cars because there is no public transport, wireless modems because the MTNL broadband breaks down every few days.

    SO out of every 50Rs. you want to spend, some 20Rs is wasted in duplicating things which the govt is supposed to provide to you in rturn for the taxes you are paying.

    So middle class works hard to earn 120 Rs but gets to spend only 20Rs on itself because govt forces you to waste 100Rs.

    The rich cheat and dont pay taxes.

    The poor pay no income tax, but every time they pay more for aaloo or onions, govt is pocketing 1Rs in the form of diesel tax.

    Every time they spend 10Rs on a soap, govt is pocketing 3-4 Rs (Corporate tax, tax on raw materials, ad valorum central excise, state excise VAT, octroi). Cost of making soap is only 1Rs. Company earns 1Rs in profit. Wholesaler makes 1Rs. retailer makes 1Rs. Advertising is some 1Rs. Govt makes 5Rs - because it taxes the wholesaler, the retailer, the advertiser and the manufacturer.

    If you are middle class, you also pay your income tax. In India it is better to be poor or be corrupt and cheat on taxes.

    You and I have to bear this price.

    Honest people are horribly discriminated against. And yet, India is shining only because of its educated middle class.

    Poor are unproductive. Make only 500dollars per annum.

    Rich are corrupt - they live like parasites with their crony capitalism.

    Middle class is making 5000 dollars of productivity. But it gets ony 500 dollars per annum to spend on itself - just like poor people - because the rest 4500 dollars is stolen by the govt and corrupt people.

    Leave this country. Or tolerate the injustice.

    We are like this only.
    CommentQuote
  • Originally Posted by Venkytalks
    My per rant (from NOIDA forum)

    Assume you are in 30% tax slab, salaried middle class person

    Out of 100Rs earning, you pay 30Rs to govt. straight.

    Rest 70 Rs you spend.

    But India has very high consumption tax varying from 20-30%

    if you include import duty, central excise, state VAT, Octroi, service tax. etc - everything is ad-valorum - i.e. if cost of something is 10Rs., import duty is 20%, makes the cost 12 Rs, then central excise is say 12% of Rs. 12 and not of Rs. 10 and so on for each and every tax.

    So 30% of remaining 70Rs which you spend also goes to govt. (Petrol price is 30 Rs cost and 30Rs tax, so this kind of wild taxation raises average taxation as a component of tax on final price and evens out against the lower 10% service tax. for some of your consumption)

    So 30% of Rs 70 becomes Rs. 50. For every 50Rs worth of spending you have to do in India, you have to earn 100Rs and give 50 Rs to govt - which wastes this money in the wildest corruption imaginable.

    Even in RE, you have VAT on steel, cement, service tax, VAT on the finished product, registration cost, stamp duty.

    Now on top of all this, if you also have to pay bribes to the govt officials - that means for every 50Rs. you spend, tax by govt and its corrupt minions is adding some 60-70R over and above it. You have to earn some 120Rs to spend 50Rs.

    On top of that, you have inefficiency of govt services. So instead of spending on decent things, you have to spend on invertors because power is inefficient, power back up because power cuts extend more than 4 hours, water purification because of poor quality water, buying water because there is no water, cars because there is no public transport, wireless modems because the MTNL broadband breaks down every few days.

    SO out of every 50Rs. you want to spend, some 20Rs is wasted in duplicating things which the govt is supposed to provide to you in rturn for the taxes you are paying.

    So middle class works hard to earn 120 Rs but gets to spend only 20Rs on itself because govt forces you to waste 100Rs.

    The rich cheat and dont pay taxes.

    The poor pay no income tax, but every time they pay more for aaloo or onions, govt is pocketing 1Rs in the form of diesel tax.

    Every time they spend 10Rs on a soap, govt is pocketing 3-4 Rs (Corporate tax, tax on raw materials, ad valorum central excise, state excise VAT, octroi). Cost of making soap is only 1Rs. Company earns 1Rs in profit. Wholesaler makes 1Rs. retailer makes 1Rs. Advertising is some 1Rs. Govt makes 5Rs - because it taxes the wholesaler, the retailer, the advertiser and the manufacturer.

    If you are middle class, you also pay your income tax. In India it is better to be poor or be corrupt and cheat on taxes.

    You and I have to bear this price.

    Honest people are horribly discriminated against. And yet, India is shining only because of its educated middle class.

    Poor are unproductive. Make only 500dollars per annum.

    Rich are corrupt - they live like parasites with their crony capitalism.

    Middle class is making 5000 dollars of productivity. But it gets ony 500 dollars per annum to spend on itself - just like poor people - because the rest 4500 dollars is stolen by the govt and corrupt people.

    Leave this country. Or tolerate the injustice.

    We are like this only.


    Absolutely true... there are even more points of injustice...

    the bloody caste reservation...starting from +2 admissions, open general categories are cornered in dark hell.(believing their forefathers’ souls will come and help, why country should help these fair skin bast***!!!
    !..)..
    then this reservation trails comes all along till you die.....in college, in jobs, in promotions.....and furthermore the congies and their gandhis are going to have reservations in private sector also (remember how murthy aur azim ki fat gayi thi yeah baat sun ke kuch sal pahele??...Open general should fear more then them....)

    I am already planning to leave mera bharat mahan.....surely, fellow citizens would be more then happy to give me a send off....(ek to kam hua!!!!) ....

    I dont want my children to be raised in such a chaotic hell.....its bitter truth about my own country....

    now there may be some patriotic attacks on me....who cares!!!
    :D
    CommentQuote
  • Raj in the world 99.9% people (incl me and you) look at their own self requirements and have vision and plans of their own life. rest are into serious patriotism, politics, NGOs and corruption.

    So you will not be attacked till you are living your dreams. Your nationality doesn't matters. Enjoy and all the best.



    Originally Posted by rajtjrll
    Absolutely true... there are even more points of injustice...

    the bloody caste reservation...starting from +2 admissions, open general categories are cornered in dark hell.(believing their forefathers’ souls will come and help, why country should help these fair skin bast***!!!
    !..)..
    then this reservation trails comes all along till you die.....in college, in jobs, in promotions.....and furthermore the congies and their gandhis are going to have reservations in private sector also (remember how murthy aur azim ki fat gayi thi yeah baat sun ke kuch sal pahele??...Open general should fear more then them....)

    I am already planning to leave mera bharat mahan.....surely, fellow citizens would be more then happy to give me a send off....(ek to kam hua!!!!) ....

    I dont want my children to be raised in such a chaotic hell.....its bitter truth about my own country....

    now there may be some patriotic attacks on me....who cares!!!
    :D
    CommentQuote
  • Save tax

    Venky,

    I agree to what you say as LOOT by the Govt. & even I am angry with the same. The basic junk thing is octroi, all states have abolished octroi except Maharashtra. Anyways, here are some methods to save tax:-

    > If possible, fill fuel from pumps outside PMC/PCMC limits, you save atleast INR 1.2/l,

    > Buy cell-fones from Mumbai which are bought from Gujarat. Gujarat has 4% VAT as against 12.5% of Maharashtra. There is a difference of INR 4,500-5,000/- between the price of Black_berry BOLD 9780 in Mah & Guj & even more in case of ifone,

    > If need to buy things like expensive laptops, SLR cams etc., go to Dubai in December. The 10k ticket price is covered in cam & whatever you save when you buy laptop, fone etc. is profit :). I know a chap who bought a laptop for INR 37k which was available in India for INR 56.8k!!

    > Whenever possible, pay in cash & avoid taking bill if you know shop-keeper well. You save VAT of 5-12.5%,

    > Buy diesel vehicles rather than petrol ones,

    > If possible, start some business, it can be catering, shop etc. Put your salary in this business (show it as loan) & then show business went in loss even when if made profit. Claim tax benefits on this.

    There are many more but can't put all on forum.
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  • Property prices begin to dip, shows index

    It's official now, property prices are dipping according to latest Residex released by the National Housing Bank.

    Here is the link:-

    Property prices begin to dip, shows index - The Times of India
    CommentQuote