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 abc111 View Post
    Some of my friend told that even Kerala market is dead for past 3 years.
    add jaipur to this list.

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by abeerbagul View Post
      I actually am staying on rent, waiting for the price : rent ratio to turn favorable. In Dahanukar Colony, Kothrud, current prices for a 1 BHK are 40L, rent is 10k per month.

      EMI for a 40L flat would be 32k per month. So I need to invest the extra 22k per month which I am saving by staying on rent. This saving adds up while waiting for either rents to go up or prices to go down.

      Case 1: Rents go up, price remains constant. So a 1 bhk flat rent becomes 20k per month, price 40L. Now the rent : price ratio becomes 1 : 200, which is decent enough for buying.

      Case 2: Prices crash, which I dont think will happen in Dahanukar colony, Kothrud.

      In case 1, if it takes 5 years for rent to reach 20k, then I am saving on an average 17k per month. Investing this at 15% p.a. will give me 16L, and the 8L downpayment which I already have will become 16L in 5 years.

      So waiting on rent gives me a downpayment of 32L, and need to take a home loan of 8L only, at the end of 5 years.

      The other pain in a rented flat is only that you need to shift periodically. I think this is more of an urban myth. If you have a decent landlord, and you are a decent tenant, every landlord will prefer to keep on extending the tenure with you rather than find a new tenant every 3 years.

      In rental properties, a known devil (tenant) is always better than an unknown one. Nowadays, with leave and licence agreement, a tenant never gets a right on the property.
      So where exactly are u investing that you are going to get 16% returns every yr for 5 yrs and dont you think if return in stock market are going to be so high then wont it affect real estate prices and so case 1 is not possible?

      I mean where are u going to have a situation that rates in kothrud stagnate whereas the broader economy doubles after 5 yrs in nominal terms. unless you are betting on a Hyderabad like situation with Pune cause I dont think IT jobs are going to go so down that we have a Jaipur or a Kerala like situation.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        I didn't find "reason for 250:1 ratio" in the entire post, as the title had suggested

        Originally posted by abeerbagul View Post
        I believe real estate is always cyclical. If there is a boom today, there will be a bust tomorrow. It might be in inflation adjusted terms, not absolute terms.

        So a 50L flat might not go down to 30L, but it might remain at 50L for 5 years, in which case inflation is eroding its value.

        Bubble is when price : rent ratio starts going above 1 : 300, bust is when price : rent ratio starts going below 1 : 200.

        E.g. If a flat is worth 50L and rent for the same is 30k per month, it is a definite buy scenario. Because rents will keep increasing 10% per year.
        If a flat is worth 50L and rent is 12k, it is a definite rent scenario.

        The grey zone is in between, i.e. a 50L flat gets 18k rent.

        I would prefer to wait till the cycle swings over into bust, when people suddenly discover that real estate is flat for a couple of years. In such cases, usually external environment is blamed such as political unstability (e.g. Telangana in Hyderabad). In such cases people ignore that rental demand is strong and rents are high.

        At this time, banks have very stringent finance requirements and cash is king. If you have more than 50% downpayment, then you can get big size flats 3 bhk or 4 bhk at very low prices.

        Demand for small flats is always constant, but demand for big flats and penthouses is very volatile.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by fatichar
          What if we apply the DCF (Discounted Cash Flow) model to RE?

          In simple words, DCF states that

          intrinsic value of an asset is equal to the sum of all future income expected from the asset. The future income has to be expressed in today's currency.

          Let us take a plain vanila example - a 2 BHK 1000 sqft flat in Kharadi.

          Since we are talking about "all future", we have to make several assumptions.

          1. Life of building is 100 years.

          3. After 100 years, the building will be demolished free of cost. The owner will retain the land share. The pricing of the land share is complex - will look at it later.
          It is good to have healthy discussion with you man, but above 2 points made me .

          Man, seeing current constro in Pune, I will be happy even if it lasts 25 years & what's the user of ownership of flat after 100 years, when owner himself is defaulted .

          Seems kids will say, " Yeh Hamara Pushtaini Flat Hain (aur DP road abhi baaki hain) " .
          If you are happy, you are successful.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by realacres View Post
            It is good to have healthy discussion with you man, but above 2 points made me .

            Man, seeing current constro in Pune, I will be happy even if it lasts 25 years & what's the user of ownership of flat after 100 years, when owner himself is defaulted .

            Seems kids will say, " Yeh Hamara Pushtaini Flat Hain (aur DP road abhi baaki hain) " .


            It pains me to see that people who are devoid of even basic knowledge of economics and finance like realacres have been made senior mods and they keep joking and making fun of every argument which cannot see with there way of looking things.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Builders to Cut Prices

              CREDAI has asked its members to cut prices & reduce inventory overhang (in reality reduce debt). This was conveyed by CREDAI to all it's members.

              Now here is the inside story :-

              As you all know, members of CREDAI are bound to obey the diktat of CREDAI. Several builders across the country complained that they no longer can hold the inventory & facing severe liquidity crunch. When the voices of such builders grew louder, CREDAI had no option but let loose. Expect individual correction in prices very soon & as seen, Mumbai has already started witnessing fall in RE prices.

              Apart from this, NDTV reported this week how builders have taken money from buyers in launch & pre-launch stage and builders are not constructing anything. The buyers are being threatened that incase they cancel the booking, few lacs will be deducted. The situation is severe in Bangalore & Delhi-NCR. A long list was put up for the same.

              In reality, builders are taking money from buyers even in Pune & using it to pay off debts rather than to complete the project. Hence, it is now best to buy ready possession flats to be on safer side & having 60% investors in market, makes things even more easier for buyers, what one needs is some ground-work.

              Apart from this, BoB or Bank Of Baroda has stated that it will not give loan to builder or buyer (home loan) for entire area of Greater Noida due to legal issues & poor track records of the builder. Bankers say that similar policy will come up across the country where loans in future will not be sanctioned for projects having some or the other issues, which is now on rise even in cities like Pune.

              And last but not the least, just speak with your banker, you will be shocked to see the fall in home loans. My bankers informed that in their branch, not a single home loan was taken in this month & overall the fall is over 80% !!
              If you are happy, you are successful.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by realacres View Post
                Seems kids will say, " Yeh Hamara Pushtaini Flat Hain (aur DP road abhi baaki hain) " .
                Change that "Hain" to "Tha". So it will read "Yeh Hamara Pushtaini Flat Tha"....

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by mymarji View Post
                  Change that "Hain" to "Tha". So it will read "Yeh Hamara Pushtaini Flat Tha"....
                  In some cases, it may even need to be changed to

                  " Yeh Hamara Pushtaini Flat Tha. DP road abhi baaki hain.
                  Aur zameen ki ownership builder ke par-pote ke pas hai

                  Is mitti se tilak karo yeh mitti hai hamare par-dada ke flat ki"

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Newspaper being used to spread opposite story !

                    Originally posted by realacres View Post
                    CREDAI has asked its members to cut prices & reduce inventory overhang (in reality reduce debt). This was conveyed by CREDAI to all it's members.

                    Now here is the inside story :-

                    As you all know, members of CREDAI are bound to obey the diktat of CREDAI. Several builders across the country complained that they no longer can hold the inventory & facing severe liquidity crunch. When the voices of such builders grew louder, CREDAI had no option but let loose. Expect individual correction in prices very soon & as seen, Mumbai has already started witnessing fall in RE prices.

                    Apart from this, NDTV reported this week how builders have taken money from buyers in launch & pre-launch stage and builders are not constructing anything. The buyers are being threatened that incase they cancel the booking, few lacs will be deducted. The situation is severe in Bangalore & Delhi-NCR. A long list was put up for the same.
                    !!
                    Today's Sakaal has a news like item suggesting real estate to have great time going forward due to anticipated reduction in interest rates etc. etc. etc.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by pune_friend View Post
                      In some cases, it may even need to be changed to

                      " Yeh Hamara Pushtaini Flat Tha. DP road abhi baaki hain.
                      Aur zameen ki ownership builder ke par-pote ke pas hai

                      Is mitti se tilak karo yeh mitti hai hamare par-dada ke flat ki"
                      Similar situation for people deciding not to buy and stay on rent forever..

                      "YEH HAMAREY MAKAAN MALIK KEY POTEY ka pushtaani flat hain..hum yahaan pein rent par rehtey the aur rent bharney key alaava piggy bank mein paisey daaltey the..piggy bank toh nahi raha par tum zaroor aur ek piggy bank kholna..NDTV neh bola tha keh rates kam ho jayenge..NDTV bhi zaroor dekhna..

                      Comment

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