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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  • NON AGRICULTURAL LAND

    Land can be called non agricultural land, if any activity in the nature of development is carried over on the land which makes land unfit for cultivation.

    Under section 44 of the Maharashtra Land Revenue Code 1966, before carrying out any development on the land, an eligible person has to apply to the collector for the permission to convert the use of agricultural land for any non-agricultural purpose, or to change the use of land from one non-agricultural purpose to another non-agricultural purpose.

    Form of application for permission to convert use of land- Every application for permission for the conversion of use of land from one purpose to another as provided in Section 44 is required to make in the form in Schedule I to the Collector.

    Document required to attached with the application form

    For obtaining N.A. Permission, applicant has to attach documents as mentioned below:

    Prescribed form duly filled in duplicate with court fee stamp of rupees 5/-
    Extract of V.F. 7/12 and its 4 zerox copies,
    Copies of the all the relevant mutation entries (V.F. 6) pertaining to land in question….one set,
    If record is not available in revenue office, a certificate from the Revenue Officer stating theirin that the same is not available with him. (Talathi or Tahasildar as the case may be),
    Extract of village form 8 A….one copy,
    Certified copies of the land map from the Taluka Inspector, Taluka Land Record Office,
    8 copies of site plan and 8 copies of *building plan (*if permission is asked for constructing building),
    If the land is not abutting to any classified road and right of way over the boundaries of other survey number/Gat number is acquired, then extract of the relevant V.F.7/12 and V.F. 6 ,
    If the land in question is abutting EW, NH or SH, copy of the NOC from Highway Authorities or other appropriate authority,
    NOC from concern Grampanchyat/Municipal councils,
    If the N.A. permission is already granted and application is to be made for change of use of land, then copy of the NA order and sanctioned plan is to be attached,
    If the land is attracting provisions of Bombay Tenancy and Agricultural Lands Act, 1948 then the Sale Permission received under section 43/63,
    No dues certificate from farmer’s co-op society,
    Certificate received from the Talathi stating therein that the land in the question is not under acquisition.
    Any other documents such as NOC and clearance certificate etc, if the land attracts provisions of some other laws
    If temporary permission is already granted for layout and application is made for final permission under the circumstances, then please attach the below documents:
    Copy of temporary NA order permission
    Plan prepared by survey department after subdivision of land in the plots, roads, open spaces and amenity places etc.
    8 copies of the Architect’s plan
    extract of V.F. 7/12 and its 4 zerox copies and
    Copy of the mutation entry (V.F. 6) related to the temporary NA permission.
    The Collector has to follow the procedure as mentioned below for granting permission to convert the use of agricultural land for any non-agricultural purpose or to change the use of land from one non-agricultural purpose to any other non-agricultural purpose:-


    Collector has to send a copy of one application form to the concerned Tahasildar for collecting detailed information of the land in question.
    If the area is within the jurisdiction of a Municipal Corporation or Municipal Council, the Collector consults them with reference to acquiring the building permission.
    When there is no Municipal Corporation or Municipal Council, the applicant has to submit a “No Objection Certificate” to the Collector, which is to be acquired from the Gram Panchayat of the village, for the change of use of land.
    If the land falls within the limit of any Regional Plan prepared under provisions of MRTP Act 1966, the Collector shall grant permission in confirmative to Development Control Regulations prepared by planning authorities and special planning authorities.
    In addition to the Development Control Regulations prepared by the planning authorities and special planning authorities (which are the instruments of regulating development), there are other laws, rules & regulations, policies as well which aid the development control efforts.
    There shall be no contravention of the provisions of any law, or any rules, regulations or orders made or issued under any law for the time being in force, by the State or Central Government or any local authority, statutory authority, Corporation controlled by the Central or State Government or any Government Company pertaining to management of Coastal Regulation Zone, or of the Ribbon Development Rules, Building Regulations, or rules or any provisions with regard to the benefited zones of irrigation project and also those pertaining to environment, public health, peace or safety. The collector is required to consult the authorities dealing with these subjects.

    These authorities may give clearance for development under some conditions; these conditions shall be binding on the applicant and such other conditions as the collector may, under the order of the State Government impose.

    List of some of the authorities .functioning important role In Development Control are given below.

    Town Planning Department:
    Health Department
    The Mumbai Village Panchayat Act, 1958
    Laws Related to Development Along Roads
    Mumbai Highways Act, 1955
    National Highway Act 1956
    Environment (Protection) Act, 1986
    Indian Forest Act, 1927
    Forest Conservation Act, 1980
    Maharashtra Acquisition of Private Forests Act, 1975
    Minor Mineral (Extraction) Act, 1955 and Explosives Act, 1984
    For more details of these authorities visit “The other Development Control Authorities”.

    Apart from the conditions imposed by these authorities, there are other basic conditions as well, which shall be binding on the applicant and also such other conditions as the collector may, under the order of the State Government impose. The basic conditions are as follows:

    The grant of permission shall be subject to the provisions of the Code and Rules made therein.
    The land shall not be used for a purpose other than that for which permission is granted;
    The applicant should commence the non-agricultural use within one year from the date of order, made by the Collector. Failure to do so, the permission granted shall be deemed to have lapsed, unless the Collector extends the said period from time to time.
    The applicant shall be liable to pay such altered assessment as may be determined with reference to the altered use under Section 110, or as the case may be, Section 114;
    If the permission is for building site, then in addition to the above,

    a) The applicant shall level and clear the land sufficiently to render it suitable for the non agricultural purpose for which the permission is granted;

    b) The applicant shall not use the land and the building erected thereon for any purpose other than the purpose for which the permission is granted. Under a circumstance, where the applicant wants to use the land for any other purpose, he will have to obtain the permission of the Collector under the provision of the code and the rules made therein.

    c) Applicant shall not divide the plot or subplot without prior permission of collector,

    Plan annex to the application is sanctioned under the conditions given below:

    1. Demarcation is to be done as per provisional sanctioned lay out and should get surveyed through Taluka Inspector, Land Record for obtaining final permission. Permission for building shall be granted only after the completion of this procedure.

    2. It is responsibility of the applicant to maintain the width of the road as per the sanctioned lay out. Also he shall construct a road along with drainage system, suitable for vehicular traffic

    3. Applicant shall attach the sanctioned layout plan while applying for building permission.

    d) Applicant shall plant trees on both sides of the road and it will be his responsibility to ensure the sustainability of this plantation.

    e) It mandatory for the applicant to provide road entry to the adjacent land’s proposed layout.

    f) If the provision for supply of drinking water system does not exist in the area, then it is the responsibility of the applicant to make the necessary arrangement.

    g) If the permission is given under ‘Gaothan Extension Scheme’, then the sale of plot is restricted to local people only.

    h) It is mandatory for the applicant to not impede the natural ways of water or he will have to provide alternate arrangements.

    i) Applicant shall not sell plot prior to obtain final permission.

    j) Applicant shall inform the Tahsildar in writing through the Talathi the date on which the change of user of land commenced, within thirty days from such date. If the applicant fails to inform the Tahsildar within the period specified above he shall be liable to pay in addition to the non-agricultural assessment such fine as the Collector may, subject to rules made in this behalf, direct but, not exceeding five hundred rupees.

    k) Applicant shall pay fee for survey within one month from the date of NA use. Also he shall fixed compound to outer boundary of the scheme.

    l) Applicant shall execute sanad in prescribed form within one month from the date of NA use.

    m) Applicant shall erect building within three years from the date of grant of sanad. If applicant fails erect building within stipulated period, the collector may extend the period in his discretion. Also he shall liable for fine.

    n) On event of violation of any terms or conditions imposed while granting permission, the permission shall be cancelled. Also applicant shall be liable for fine.

    o) The above terms and conditions are binding on both applicant and holder of the plot.

    Collector may refuse permission for conversion of land

    Depend upon location of the land collector may require to consult some of the authorities mentioned above. After receiving opinions from them if collector feels that N.A. permission asked for is in contradictory to the laws, rules, regulations and policies which aided the development control efforts, he may reject the application with stating the reasons in writing.

    Collector is required to inform his decision within the ninety days from the date of acknowledgement of the application, or from the date of receipt of the application-- if the application is not acknowledged, the permission applied for shall be deemed to have been granted, but subject to N.A. permission asked for is not in contradictory to the laws, rules, regulations and policies which aided the development control efforts.

    Date on which NA use started is required to inform the Tahasildar

    The person to whom permission is granted or deemed to have been granted under this section shall inform the Tahsildar in writing through the Talathi the date on which the change of user of land commenced, within thirty days from such date. The person has to pay N.A. taxes from the date on which NA use begins.

    If the person fails to inform the Tahsildar within the period specified above he shall be liable to pay in addition to the non-agricultural assessment such fine as the Collector may, subject to rules made in this behalf, direct but, not exceeding five hundred rupees.

    Grant of Sand-

    Where land is permitted to be used for non-agricultural purpose, a Sanad shall be granted to the holder thereof in the form in Schedule IV if the land is situated outside the jurisdiction of the Planning Authority, and in the form in Schedule V if the land is situated within the jurisdiction of the Planning Authority.

    Sanad is agreement between government and occupant. Conditions of sanad are binding on both the government and occupant. Sanad is prima facie evidence of title but not conclusive evidence.

    Penalties for unauthorised non-agricultural use-

    If any land is used for non agricultural purpose by occupant without obtaining permission, it is lawful for the collector to stop its unauthorised use, ask him to pay NA taxes and penalty.

    Fatichar,
    Access landsofmaharashtra.com for more info
    This gives the theory about conversion,but practical may involve something more.
    CommentQuote
  • Thanks a lot Vaibhav!
    CommentQuote
  • Originally Posted by RP Pune
    You are so being realacres II


    I don't know what to make of it.

    But personally I prefer data and facts rather than weasel words builders, brokers use like "developing".

    If you can point out the gaps in my logic or analytical abilities than that would help.
    CommentQuote
  • Originally Posted by realacres
    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....


    Thanks for sharing your in-depth knowledge and practical analysis with members here.I consider this as a must read post for any forum member before deciding to invest / buy in real estate

    Honestly , as of date i find nothing worth investment for gains in real estate.Bank Loans at 10 % interest compounded annually and to add to it inflation at around another 10% per annum compounded annually leave hardly anything for an investor even if a gud investment grows at 15% per annum ie price of property doubles in 5 years period.

    This means that as of now a good property fetches ( 15% for return on investment assunimng price doubles in two years -10% for inflation -10% for bank loan provision) ie a net minus 5 % of assured return on investment compounded annually leaving it worthless for investor except for the risks of investing in an unregulated market.

    I am personally averse to stock markets as based on my personal experience and observation around ; i understand that all reputed companies also manipulate their profit loss accounts and finally defraud the investor of his money by showing loss on papers; even as the companies might have actually made good profits on investors money.

    Reputed multinational companies conviniently manage to get their manipulated accounts certified by international auditors and the regulators watch the money of common citizens being stolen ; like a toothless tigerand a coraborator to the crime.

    I have invested in some super duper weath assured equities with international companies but it has resulted only in a super duper assuarance of fraud and loss of money.I personally know companies of international repute defrauding common investors of hard earned money to the extent that now parhaps most citizens are averse to investing in equity bonds.

    Definately , instead of investing in house if u can invest that money in your own business there is no comparison of returns to that of investing in Real Estate business.

    I am aware that if a person takes the money he has invested in house and instead starts his own business he shall earn much more monthly income from this business than his / her service.

    I also agree that taking a housing loan is like mortgaguing urself for whole life for nothing and better to live on rent instead.

    However , for persons working in offices what other better option can be advised by you through your expert advice keeping in view that experiences of investors in equity bonds has already forced them towards investing in real estate ? If not real estate , if not equity bonds then where to invest while working in office jobs????
    CommentQuote
  • >>> If not real estate , if not equity bonds then where to invest while working in office jobs????

    Gold is another option. It has its downsides.
    - you need to be sure of purity. when you buy from unknown sources, you cannot guarantee purity. when you buy from reputed makers, the making charges are very high. even coins have making charge, though less.
    - it is more volatile than RE (IMHO).
    - you can buy 24k pure certified from banks. but remember, they dont buy it back, you have only jewelers to sell to, and they will never give you the current market rate. selling physical gold is considered that the person is selling in emergency, and jewelers take advantage. another option is to buy from commodities exchange.
    - What if jewelers refuse to buy back gold? maybe they are not selling enough so no point buying and keeping stock.
    - personally, i never understood why it holds value. for me, it is just a yellow metal, which I buy just because it has value. in ancient times, it served the purpose of currency. These days, I dont think paper currency is backed by gold reserves of the central banks. countries just print money. Gold prices rise when countries print money. It can be used as a store of value against inflation, is all I see.

    - I personally do not put much of my savings into gold because you can sell to jewellers only (or find buyers on olx or quikr maybe). The traders/shop keepers go for gold because they have closer links with jewelers. A person like you or me are not part of the inner circle of traders and jewelers.
    CommentQuote
  • >>> Bank Loans at 10 % interest compounded annually and to add to it inflation at around another 10% per annum compounded annually leave hardly anything for an investor even if a gud investment grows at 15% per annum ie price of property doubles in 5 years period.

    I once posted earlier about real property investors :-)
    - They are part of builder's inner circles and they get rates lower than public launch rates.
    - Big shot Investors do not take loans to book flats.
    - Will you take a loan and invest in stocks/MFs that are delivering 15% returns. Your net rate of return is roughly 5% if you take loan at 10%. Inflation has already killed your returns. (and nobody gives you loans for investing in stock. Deta bhi ho to koi 10.5% par nahi dega).
    - Invest in RE only where you think rates will double in 3 years. If your horizon is 5 years, then dont take loan !!
    - There are no 10% myriad stamp duty and taxes when you buy gold. Here, do include these costs in the calculations for RE.

    One more
    - Real investors hardly ever visit these forums ;-)

    >> If not real estate , if not equity bonds then where to invest while working in office jobs????

    -In your skills.
    -In coming up with a brilliant idea and becoming an entrepreneur.

    This is the only way a salaried middle class guy in India can beat inflation and increase his real worth.

    caveats apply in the second one, you need political connections. you cannot be a middle class guy like edison, graham bell, ford, gates, carnegie, jobs, zuckerberg in India and grow because only because of your ideas or superior products/services alone. Note that the names above are not just silicon valley billionaires.

    PS. I myself am an end user looking for a flat.
    CommentQuote
  • I repeat

    Originally Posted by Sat234
    >>> If not real estate , if not equity bonds then where to invest while working in office jobs????

    Gold is another option. It has its downsides.
    - you need to be sure of purity. when you buy from unknown sources, you cannot guarantee purity. when you buy from reputed makers, the making charges are very high. even coins have making charge, though less.
    - it is more volatile than RE (IMHO).
    - you can buy 24k pure certified from banks. but remember, they dont buy it back, you have only jewelers to sell to, and they will never give you the current market rate. selling physical gold is considered that the person is selling in emergency, and jewelers take advantage. another option is to buy from commodities exchange.
    - What if jewelers refuse to buy back gold? maybe they are not selling enough so no point buying and keeping stock.
    - personally, i never understood why it holds value. for me, it is just a yellow metal, which I buy just because it has value. in ancient times, it served the purpose of currency. These days, I dont think paper currency is backed by gold reserves of the central banks. countries just print money. Gold prices rise when countries print money. It can be used as a store of value against inflation, is all I see.

    - I personally do not put much of my savings into gold because you can sell to jewellers only (or find buyers on olx or quikr maybe). The traders/shop keepers go for gold because they have closer links with jewelers. A person like you or me are not part of the inner circle of traders and jewelers.


    Btw, gold is Tier I asset among banks Internationally. Despite all the propaganda against gold, why do you think it is Tier I (highest category) asset for banks worldwide?

    There are many things going for gold.

    Small package, high value. Universal liquidity, can be split into tiny fragments and sold in small denominations. Universal asset to take loans. Lasts forever (more than 99% of all gold mined since the beginning of time for humans still exists). The list is long and favorable towards gold being a great asset to own.

    Unlike RE, which is accompanied by lots of bad baggage of RE like litigation, debt-based price levels, Govt siezure (for public good), no regulation, no buyer protection in case of litigation, rather severe illiquidity (with high illiquidity premium when economy is tight - example, sellers in recent times have to forego 25% of quoted price to get RE moving; something you won't see in gold as it is highly liquid at all times). Apart from that RE can be highly speculative and very low return generator except in small pockets like NCR and other few metros. So we really are talking only major metros for high RE growth - leaving out a huge portion of India where RE is a poor asset in terms of returns and liquidity.

    Btw, in the last 2-3 years gold has not gone below 25k and is mostly in the 28-32k range, which makes it a highly defensive asset given that stocks and RE can have rather large downward movement in price.

    Lastly, gold/silver have likely completed their consolidation phase and could be on the next leg up crossing previous highs towards $2000+. In today's rupee denomination that would place it So, going forward it could rise to the 44k-50k levels within next 2 years, giving it a potential for 20% CAGR over next 2 years.

    Anyone game for a little gold purchase? And stashing it away from the prying eyes of robbers of all colors? :D

    cheers
    CommentQuote
  • Originally Posted by wiseman
    Btw, gold is Tier I asset among banks Internationally. Despite all the propaganda against gold, why do you think it is Tier I (highest category) asset for banks worldwide?

    There are many things going for gold.

    Small package, high value. Universal liquidity, can be split into tiny fragments and sold in small denominations. Universal asset to take loans. Lasts forever (more than 99% of all gold mined since the beginning of time for humans still exists). The list is long and favorable towards gold being a great asset to own.

    Unlike RE, which is accompanied by lots of bad baggage of RE like litigation, debt-based price levels, Govt siezure (for public good), no regulation, no buyer protection in case of litigation, rather severe illiquidity (with high illiquidity premium when economy is tight - example, sellers in recent times have to forego 25% of quoted price to get RE moving; something you won't see in gold as it is highly liquid at all times). Apart from that RE can be highly speculative and very low return generator except in small pockets like NCR and other few metros. So we really are talking only major metros for high RE growth - leaving out a huge portion of India where RE is a poor asset in terms of returns and liquidity.

    Btw, in the last 2-3 years gold has not gone below 25k and is mostly in the 28-32k range, which makes it a highly defensive asset given that stocks and RE can have rather large downward movement in price.

    Lastly, gold/silver have likely completed their consolidation phase and could be on the next leg up crossing previous highs towards $2000+. In today's rupee denomination that would place it So, going forward it could rise to the 44k-50k levels within next 2 years, giving it a potential for 20% CAGR over next 2 years.

    Anyone game for a little gold purchase? And stashing it away from the prying eyes of robbers of all colors? :D

    cheers


    Hello wiseman,

    Good post. No doubt what you say holds true.
    From my perspective, I have some other points.

    I do mention to the asker that gold is another option for him. But I wanted him to be aware. However, one should not invest only in gold. Spread it over to RE and FD as well. I would not put all my money into gold.

    - Whom do I sell gold to? I can sell physical gold to jewelers only. Or maybe online on quikr or olx. I cannot even sell it back to the bank. Jewelers may probably underweigh your coin (I heard of an incident from a friend). Mostly not, but they will not pay you the market rates (a small difference between selling and buying rate which may be ignored).
    A jeweler may have stock in his shop that is not sold for a while, so he may refuse to buy gold from you.

    - Buying on a commodities exchange would still make sense because I will get market rates. I would choose an exchange which gives me option to get physical gold if I choose to. I am not aware if there is any.

    >>can be split into tiny fragments
    practically, i cannot do it myself. I have to go to a jeweler who may knock off a few milligrams. I cannot go to bank and tell them - take this 10g coin and give me two 5g coins.

    >> Small package, high value. Universal liquidity, can be split into tiny fragments and sold in small denominations.

    So are other metals.
    From what I understand, gold was used as currency, since it is rare and long lasting. So is platinum, more than 10 times rarer, but not 10 times the price of gold. Platinum vs gold is another matter. Coming back, gold as a rare metal with its qualities was a good unit of currency. Gold has value because everyone values gold. Maybe it is just tradition to look at it as money.

    May I not invest in a share of the cupertino based phone and laptop maker? It produces something that adds value. Or in an automobile manufacturer. It takes iron sheets and shafts and adds value to it. Wheat in a field has value because it satisfies someone's basic need (its price is not as high because it is in abundance compared to gold and/or some govt subsidy). Basically may I not invest in an idea that adds value. Something that solves someone's purpose (VCs do that).

    BTW, do you think platinum is a good investment :) . On second thoughts, I may buy a little to spread the risk.
    CommentQuote
  • There is psychological support basis in the minds of people towards gold.
    WE talk of giving gold during marriage as mandatory and not platinum.
    Demand for gold is ingrained and will stimulate demand always.
    CommentQuote
  • CombiBars for your convenience!

    Originally Posted by Sat234
    Hello wiseman,

    Good post. No doubt what you say holds true.
    From my perspective, I have some other points.

    I do mention to the asker that gold is another option for him. But I wanted him to be aware. However, one should not invest only in gold. Spread it over to RE and FD as well. I would not put all my money into gold.

    - Whom do I sell gold to? I can sell physical gold to jewelers only. Or maybe online on quikr or olx. I cannot even sell it back to the bank. Jewelers may probably underweigh your coin (I heard of an incident from a friend). Mostly not, but they will not pay you the market rates (a small difference between selling and buying rate which may be ignored).
    A jeweler may have stock in his shop that is not sold for a while, so he may refuse to buy gold from you.

    - Buying on a commodities exchange would still make sense because I will get market rates. I would choose an exchange which gives me option to get physical gold if I choose to. I am not aware if there is any.

    >>can be split into tiny fragments
    practically, i cannot do it myself. I have to go to a jeweler who may knock off a few milligrams. I cannot go to bank and tell them - take this 10g coin and give me two 5g coins.

    >> Small package, high value. Universal liquidity, can be split into tiny fragments and sold in small denominations.

    So are other metals.
    From what I understand, gold was used as currency, since it is rare and long lasting. So is platinum, more than 10 times rarer, but not 10 times the price of gold. Platinum vs gold is another matter. Coming back, gold as a rare metal with its qualities was a good unit of currency. Gold has value because everyone values gold. Maybe it is just tradition to look at it as money.

    May I not invest in a share of the cupertino based phone and laptop maker? It produces something that adds value. Or in an automobile manufacturer. It takes iron sheets and shafts and adds value to it. Wheat in a field has value because it satisfies someone's basic need (its price is not as high because it is in abundance compared to gold and/or some govt subsidy). Basically may I not invest in an idea that adds value. Something that solves someone's purpose (VCs do that).

    BTW, do you think platinum is a good investment :) . On second thoughts, I may buy a little to spread the risk.


    Lets compare similar situations ...

    You are asking me, what about liquidity when it comes to selling gold for some emergency. Here is the take ...

    We are comparing RE against gold as investment alternatives. So, my counter question ...

    - How many people sell their homes in case of emergency? :)

    As far as I know it is a small proportion of people who buy homes. So, lets give gold the same chance of being a long term asset (like RE for decades) rather than a speculative asset (like stocks).

    Coming to the phone+tablet maker, please see chart below and tell me it is as solid as gold! :)

    Then there is this nuisance of Banks selling gold coins/bars to you but not buying back. I'm telling you that they are only in it for the sake of being dallals (taking the cut - and a big one at that) and not in it as a gold merchant.

    There are alternatives. Buy certified swiss coins of 99.999 purity. Jewellers buy it from you no questions asked with low exit premium. Better still, convert to jewellery and you get more bang for the buck. Acquire a trusted jeweller over time (you do it with banks, grocers and istri-walla; so why not jewellers?)

    And finally for your convenience, here is the ultimate small denomonation gold bar - the Valcambi Combibar - check it out! :D

    Obviously you won't be buying more than 20% of wealth as gold/silver. But my posts are really targeted at the ridiculous posts selling me the mindless WEstern propaganda about how manufacturing too many "thing" adds value while gold is worthless.

    The world has an estimated 30%+ overcapacity of all things that are supposedly adding value. And this capacity is increasing while jobs are disappearing due to increasing automation and too much debt that is impoverishing people who do not buy these same "things" which leads to production stoppages and the vicious cycle goes on.

    Gold IS a store of value. So, forget about how it is not doing anything and therefore its worthless. By the same logic a pot holding water simply sits there holding water and since its not making Coke out of it, it is of no value?!!! :D

    How ridiculous!

    In any case, most likely gold is probably bottomed out and, given the various mega crises coming out of the woodwork (China, Crimea/PetroDollar, Europe deflation/recession, US recession etc, etc) there is a good chance gold is once again on the next leg up.

    Check out images.

    cheers
    Attachments:
    CommentQuote
  • Originally Posted by Sat234
    >>> Bank Loans at 10 % interest compounded annually and to add to it inflation at around another 10% per annum compounded annually leave hardly anything for an investor even if a gud investment grows at 15% per annum ie price of property doubles in 5 years period.

    I once posted earlier about real property investors :-)
    - They are part of builder's inner circles and they get rates lower than public launch rates.
    - Big shot Investors do not take loans to book flats.
    - Will you take a loan and invest in stocks/MFs that are delivering 15% returns. Your net rate of return is roughly minus 5% if you take loan at 10%. Inflation has already killed your returns. (and nobody gives you loans for investing in stock. Deta bhi ho to koi 10.5% par nahi dega).
    - Invest in RE only where you think rates will double in 3 years. If your horizon is 5 years, then dont take loan !!
    - There are no 10% myriad stamp duty and taxes when you buy gold. Here, do include these costs in the calculations for RE.

    One more
    - Real investors hardly ever visit these forums ;-)

    >> If not real estate , if not equity bonds then where to invest while working in office jobs????

    -In your skills.
    -In coming up with a brilliant idea and becoming an entrepreneur.

    This is the only way a salaried middle class guy in India can beat inflation and increase his real worth.

    caveats apply in the second one, you need political connections. you cannot be a middle class guy like edison, graham bell, ford, gates, carnegie, jobs, zuckerberg in India and grow because only because of your ideas or superior products/services alone. Note that the names above are not just silicon valley billionaires.

    PS. I myself am an end user looking for a flat.


    Hi Sat 234 ;

    Thanks for sharing your valuable insight.

    My ideas and understanding got affirmed with your advice and we are comming to the same core question that where is that coveted property which doubles its in price in 3 years to benefit a common investor ?I look forward towards experts and seniors to share their rich expertise and open the seas of their vast knowledge for a common mans dip also :)

    If you need a safer investment in this unregulated market then one needs to go for branded developers and investing with a safe brand to the best of my knowledge fetches at the best 15% p/a compounded annually ie property value doubles in 5 years time and not in three years as desired.

    You are right maybe one stands a better chance by investing in professional skills as otherwise as of now i did not come across anything worth investment value for a common man.You may get an inflation resistant parking space for your liquid cash but nothing with investment gains in it.

    I am not qualified to comment about complex financial gimmicks at national / international level but my instincts tell me there are big Capitalist houses / Looters all around who control and manipulate banks , financial institutions to their advantage and who are always bent upon robbing the common mans money be it in Gold / Real Estate / Equity ; even without breaking into their houses.

    I always suggest extreme caution with hard earned money of service class person and never to trust anyone especially the multinationals , private banks , and their hollow misleading claims that they are going to make you rich soon etc.
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  • Hi wiseman ;

    Gold has been a traditional means of investing since ages as it has proved to serve as an evergreen benchmark of inflation resistant price value.It is free from depreciation , taxes , maintenanace also.

    However , i am not sure about the effective investment gains value of Gold ie effective gain over and above inflation rate.It might serve as an inflation resistant savings but i am not sure if it provides the kind of effective gains ( over and above the inflation rate ) as in the case of doubling of property value in 3 years which an investor aims while investing in Real Estate.

    I understand that it is better to invest in Gold if your real estate investment is doubling in 5 years at 15% p/a comounded annulally But if your Real Estate investments are doubling in 3 years period then Real Estate might prove to be the better option as it grows around 30% p/a compounded annually ; which means effective gain of 20% at the given infaltion rate of 10%.I am not sure if Gold Can provide this magnitude of effective investment Gains as my perception is that Gold merely grows to the extent of adjusting in Inflation value and growth beyond that may not occur appreciably....i may be corrected if i am wrong here as it could improve my understanding to my better advantage.


    Originally Posted by wiseman
    Btw, gold is Tier I asset among banks Internationally. Despite all the propaganda against gold, why do you think it is Tier I (highest category) asset for banks worldwide?

    There are many things going for gold.

    Small package, high value. Universal liquidity, can be split into tiny fragments and sold in small denominations. Universal asset to take loans. Lasts forever (more than 99% of all gold mined since the beginning of time for humans still exists). The list is long and favorable towards gold being a great asset to own.

    Unlike RE, which is accompanied by lots of bad baggage of RE like litigation, debt-based price levels, Govt siezure (for public good), no regulation, no buyer protection in case of litigation, rather severe illiquidity (with high illiquidity premium when economy is tight - example, sellers in recent times have to forego 25% of quoted price to get RE moving; something you won't see in gold as it is highly liquid at all times). Apart from that RE can be highly speculative and very low return generator except in small pockets like NCR and other few metros. So we really are talking only major metros for high RE growth - leaving out a huge portion of India where RE is a poor asset in terms of returns and liquidity.

    Btw, in the last 2-3 years gold has not gone below 25k and is mostly in the 28-32k range, which makes it a highly defensive asset given that stocks and RE can have rather large downward movement in price.

    Lastly, gold/silver have likely completed their consolidation phase and could be on the next leg up crossing previous highs towards $2000+. In today's rupee denomination that would place it So, going forward it could rise to the 44k-50k levels within next 2 years, giving it a potential for 20% CAGR over next 2 years.

    Anyone game for a little gold purchase? And stashing it away from the prying eyes of robbers of all colors? :D

    cheers
    CommentQuote
  • The discussion here is not taking into consideration the concept behind making wealth. The concept is leading a quality life.Everything boils down to happiness and comfort.Wherever you invest what get for that ultimately is fiat money which is easily accepted by all. Better concentrate on keeping the wealth intact and hope for some increase in tune with inflation or a little more than that so that wealth doesn't get eroded.
    Why do we try to increase wealth ?
    So that we may buy something that we like and take care of medical emergencies.Also, that we may not be reduced to penury by inflation and struggle to make both ends meet.
    Hence some investment in all types is needed along with a comfortable home.
    Land or house is a drag if we want to sell in case of urgency.It had better be a home for end use and not for making money in the near future--unless we talk of mortgage which is not easy.
    Some selected stocks, a bit of gold would be the ideal situation now or for some years.
    FD is equally good for the time being.The rest of the money had better be spent in leading good life.
    I remember the witty remark made by some one long ago-----We lose health earning wealth and spend all the wealth to regain health. THAT IS THE FACT AND ALL OF US ARE DOING IT ONLY TO LOOK BACK AND RUE THE LOST TIME AND YOUTH. AND YOUTH.
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  • Originally Posted by fatichar
    What is the procedure for conversion of land to NA? How much does it cost? If individuals could get this done like the builders, prices would be much softer.

    Vaibhav123 has mentioned the details.
    What I know is one guy got his land converted from agri to NA residential at Shirval for 2L/acre. This is under the table amount. Official charges remains as they are. But man, this is nothing to what builders make. Amanora as one has pointed out bought land for mere 70/sq ft & look at what they are selling at post automatic NA due to Maharashtra Township Act.
    CommentQuote
  • Originally Posted by omshanti69
    However , for persons working in offices what other better option can be advised by you through your expert advice keeping in view that experiences of investors in equity bonds has already forced them towards investing in real estate ? If not real estate , if not equity bonds then where to invest while working in office jobs????

    One of my friend purchased 2 Indica Vista cabs & put them as pick & drop cab for MNC office via his friend who runs a cab fleet business. The company looks after maintenance, driver, fuel etc. & takes 25% of profit. Rest 75% is taken by my friend without any headache. In just over 2 years, the car becomes free. Whatever he earns through these cabs is enough to take care of his day to day expenses. :)

    As far as gold is concerned, no doubt it is good but problem with physical gold is even if one buys it as investment, it gets converted into jewellery. :D
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