Announcement

Collapse
No announcement yet.

Builders & Real Estate Bulls Theory Proved Wrong

Collapse
X
Collapse

Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
12768 | Posts
  • Time
  • Show
Clear All
new posts

  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Originally posted by ajaya21 View Post
    Here is the issue with this approach.... you get 9% interest (in good high interest days like now a days) on your FD. You pay around 4% of the value of the flat in rent and some on income tax. that leaves you with only 3-4% profit in your hand. Infation is 6-7% so value of your money saving is dwindling on every passing day. I will elaborate with numbers..

    eg say you now have 1 CR to invest in flat. But you decided to put into FD rather than buying flat. You got 9 Lac interest in an year (this is the best scenario). Now you are renting a house worth 1 Cr. So you end up paying around Rs. 30000 to 35000 rent per month. ie whopping 4lacs in an year. So your actual profit is 9Lacs - 4 Lacs = 5 lacs. Govt wants there share from your income so they take 20%. That leaves your 4 Lacs profit on 1 CR savings!!! You know, infation never stops!!! 6% infation will reduce value of your 1 CR by 6 Lacs every year. so you saved 4 Lacs and deflation is 6 Lacs... so in all you lost 2 Lacs at the end of the day!!!!

    And as years go by citys get denser and denser with lesser plot to build houses. that makes reality prices go up!!!

    Only solution to this problem is having more and more cities on our country. Realty prices would come down only when our villages become inhabitable places and development spread across the villages. Until then dont expect pricess to come down.

    Short term glitches would come after every 5-6 years. Take advantage of those and buy your home!!!!

    I am not saying this is right time to buy!!!! Realty prediction will never be accurate.. its like predicting stock market!! But all indications now are showing correction is awaited. Dont buy now... it is worth to wait for 3-4 months!! its risk but may worth taking..

    Mumbai Real Estate Sector can witness Oversupply in 2012-13: Jones Lang LaSalle

    Pune should be no different... We all should unite and dont buy... most of the prices are artificially inflated!!! Logical increase in price should be 10% in an year and not 50% in an year as has been happening since last 3-4 years since 2008 slowdown!!!!!
    Your calculation is correct.

    But everyone doesnt have 1Cr. So they take bank loan. In that case, the calculation falls apart.

    Still, I am now coming around to "invest what you have" and "rent what you need" viewpoint.

    Invest in RE yes, but not necessarily your primary residence - just make it a small RE investment, a portion of your portfolio.

    In the meantime, rent what you need. Chose a place close to work when unmarried, close to school when married - or close to spouse workplace, relocate where you wish, whichever city you wish, rent near a club, a park for your children, a gym, near parents, near friends, in a place with lift if parents are old, near a hospital when necessary - rent according to your need.

    Buying a flat 30 Km from work and everything else is just not sensible - either as investment nor as expenditure.

    Rents in India at 2% of capital value in metros is really cheap
    Venky (Please read watch a or before posting)

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by Venkytalks View Post
      Your calculation is correct.



      Rents in India at 2% of capital value in metros is really cheap

      Keep renting till annual rent value goes above 3.5% of property value ,then would be a time to buy.
      Mass production of anything only brings the prices down or keeps them stagnant so do not fall for this every week increasing prices fallacy.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by Venkytalks View Post
        Your calculation is correct.

        But everyone doesnt have 1Cr. So they take bank loan. In that case, the calculation falls apart.
        Good point! Inflation may actually be desirable to a person who takes a bank loan because it can reduce the underlying value of his EMI payments. A 40,000 EMI today would be worth 30,000 in 5 years at an inflation rate of 6%.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by Venkytalks View Post
          Your calculation is correct.

          But everyone doesnt have 1Cr. So they take bank loan. In that case, the calculation falls apart.

          Still, I am now coming around to "invest what you have" and "rent what you need" viewpoint.

          Invest in RE yes, but not necessarily your primary residence - just make it a small RE investment, a portion of your portfolio.

          In the meantime, rent what you need. Chose a place close to work when unmarried, close to school when married - or close to spouse workplace, relocate where you wish, whichever city you wish, rent near a club, a park for your children, a gym, near parents, near friends, in a place with lift if parents are old, near a hospital when necessary - rent according to your need.

          Buying a flat 30 Km from work and everything else is just not sensible - either as investment nor as expenditure.

          Rents in India at 2% of capital value in metros is really cheap

          yes.. I agree with your right strategy. and yes i agree if you do not have money to buy a house dont take loan.. no matter how enticing it may seem.... go for rented property.... Interest on loan will always be higher than the rent so why pay higher interest.

          I think its combination of three factors

          1) How much you have to put into property
          2) How much loan would you take and interest that would occure
          3) How much rent you need to pay in case you are not buying your property

          Everyone should do such calculation before comming to a decision. Like manufacturing theory "Make or Buy", here its "Rent or Buy".

          Having said that... in my opinion, this is absolutely not the right time to buy. Builder lobby is just trying wither our this slack in market by showing brave face and not reducing the prices. They are slowly losing all options as now even banks have stopped paying them more money without prudent justifications. And in few days, we would see them blinking!!! Until then just wait and watch. I still think 10-15% correction is long due. But some gullible buyers are still buying houses, when that also stops due to unaffordability, correction is invetible. See what happens when correction is avoided for too long.

          China's Ghost Cities and Malls - YouTube

          have fun... this is latest news on China.. Hope people open their eyes!!!! In case of china, govt is doing this but in India builders are moving that way. Builders have no support in contrast with govt.. So builder community, if you are reading this.. wake up!!!!!

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by ajaya21 View Post
            yes.. I agree with your right strategy. and yes i agree if you do not have money to buy a house dont take loan.. no matter how enticing it may seem.... go for rented property.... Interest on loan will always be higher than the rent so why pay higher interest.

            I think its combination of three factors

            1) How much you have to put into property
            2) How much loan would you take and interest that would occure
            3) How much rent you need to pay in case you are not buying your property

            Everyone should do such calculation before comming to a decision. Like manufacturing theory "Make or Buy", here its "Rent or Buy".

            Having said that... in my opinion, this is absolutely not the right time to buy. Builder lobby is just trying wither our this slack in market by showing brave face and not reducing the prices. They are slowly losing all options as now even banks have stopped paying them more money without prudent justifications. And in few days, we would see them blinking!!! Until then just wait and watch. I still think 10-15% correction is long due. But some gullible buyers are still buying houses, when that also stops due to unaffordability, correction is invetible. See what happens when correction is avoided for too long.

            China's Ghost Cities and Malls - YouTube

            have fun... this is latest news on China.. Hope people open their eyes!!!! In case of china, govt is doing this but in India builders are moving that way. Builders have no support in contrast with govt.. So builder community, if you are reading this.. wake up!!!!!
            Completely agree with this , I would never want to buy at these inflated price even if it means "that i miss the bus" but the problem in India is not all think that way and the obsession of Indian the society with owning a home and the social pressure, all these actually result in some buyers always being there. Add to that the moment the builder reduces the price by say even 5% more than half of the people from this very forum will be buying or booking the house, even if it is still not any VFM, the general attitude we follow if I can afford at this 5% discount I will buy, hell with infrastructure and basic amenities I do not want to be left out

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by Venkytalks View Post
              In the meantime, rent what you need. Chose a place close to work when unmarried, close to school when married - or close to spouse workplace, relocate where you wish, whichever city you wish, rent near a club, a park for your children, a gym, near parents, near friends, in a place with lift if parents are old, near a hospital when necessary - rent according to your need.
              Perfect. And as builders finally deliver a building/scheme/a foor in different parts of city, high chances that large % of delivered flats are going to be investment and hence available for renting. So flats available to rent should keep increasing.

              With Areas close to offices slowly have flats delivered, some (especially bachelors) will decide to rent there. Hope they do not give large amount of rent as there will be tons of such options available.

              And that will mean flats in developed areas will become available for renting to others (married couples/with parents). This implies it will not be possible to keep pushing the rent up in either areas

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by medhapp View Post
                Completely agree with this , I would never want to buy at these inflated price even if it means "that i miss the bus" but the problem in India is not all think that way and the obsession of Indian the society with owning a home and the social pressure, all these actually result in some buyers always being there. Add to that the moment the builder reduces the price by say even 5% more than half of the people from this very forum will be buying or booking the house, even if it is still not any VFM, the general attitude we follow if I can afford at this 5% discount I will buy, hell with infrastructure and basic amenities I do not want to be left out
                Yes societal pressure does play major part in helping builder to inflate prices!!! But if you see, its now question of affordibility. At the current prices 90% of the indian population cannot afford to buy. 10% who can afford have already invested enough in the market and made profit at some places. I am sure those 10% of the prudent guys who afford to buy, now see this market slacking out and wont invest any more. Most of the flats being sold in last 1 year are to PE firms. And guess what those firms are now out there selling their investment fearing majot breakdown!!! Stock market has given its verdict on realty stock!!!! Banks are not paying builders without proper plan and justifications. RBI is maintatining highest interest rate...

                I think builders are getting cornered from all angles... its just question fo time!!! Eraly they reaslise they cannot sustsian these prices better for them!!!

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  I posted this on the ' stock advice' thread in this forum --

                  Activist Post: Cashless Society: India Implements First Biometric ID Program for all of its 1.2 Billion Residents

                  This is off-topic, but necessary to spread awareness. I also found the comments interesting.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    If government makes a law that owner of the house will be made to pay a hefty fine if house is unoccupied for more than 180 days. And house lying vacant for more than 3 years should be confiscated by the government and auctioned. That would bring the real estate priced down by 25% in one single day - the day the law is passed. But the bureaucratic and politicians are the one who are hoarding houses.

                    I am really surprised after seeing with my own eyes that many cooperative societies and private builder apartments that were offered possession more than 10 years back are lying unoccupied. The owner is not even interested in rent. This is criminal.

                    I live in dwarka where prices are high but 30% houses are unoccupied. The society in which I live from the last five years - the floor on which i live has four units out of which three are unoccupied. No one ever came to even open these three houses. I live alone on the floor

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Duration of property being used is important

                      Originally posted by ajaya21 View Post
                      yes.. I agree with your right strategy. and yes i agree if you do not have money to buy a house dont take loan.. no matter how enticing it may seem.... go for rented property.... Interest on loan will always be higher than the rent so why pay higher interest.
                      +100000000000000000000000000000000000000000
                      And not to forget that taking loan also means RENTING MONEY.
                      So, either you rent a house or rent money, at the end of the day, one remains a tenant, maybe of bank in case of purchase, that's all.

                      Btw, hope you all must have seen ad of Ultra tech cement of EMI proof houses. If not, link is here:-

                      afaqs!> Advertising> Creative Showcase

                      I think its combination of three factors

                      1) How much you have to put into property
                      2) How much loan would you take and interest that would occure
                      3) How much rent you need to pay in case you are not buying your property

                      Everyone should do such calculation before comming to a decision. Like manufacturing theory "Make or Buy", here its "Rent or Buy".
                      Agree completely & this should form the crux of calculation while making such major decisions.

                      Also one needs to add the duration for which s/he is going to use the property.

                      Eg. A friend of mine in gym, much elder than me & married with 1 kid informed me last week that he is leaving the gym. Asked why, he informed that he has been transfered to Hyderabad & will be there for atleast 5 years. Said he will be going by Jan end, while his wife & kid will come in April after the school exams get over so that admission can be done in school from mid 2012 onwards in new academic year.

                      Now, this is a chap who purchased a flat in early 2010, to be precise in Feb 2010 & now is in fix whether to sell it or rent it. Don't want to rent as he has done good furniture & doesn't know how tenant will use it; nor does he want to sell as his wife is opposing it (why are all wife same ?) but he on other hand says that in such case, he will be paying EMI of this flat + rent in Hyderabad, which will be too heavy on his pocket.

                      And this is not a stand-alone case, I have already mentioned cases about my neighbors where they left for abroad for stay of over 5-7 yrs within 1-2 years of flat purchase.

                      I find it really stupid & equally funny when people buy houses when they are not even sure of their stay in the city & 90%+ of such buyers belong to IT/allied services, don't know why.
                      If you are happy, you are successful.

                      Comment

                      Tags: None
                      Have any questions or thoughts about this?
                      Working...
                      X