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RE is again bullish

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RE is again bullish

Last updated: April 23 2012
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  • #11

    #11

    Re : RE is again bullish

    Originally posted by shirishtiwari01 View Post
    We all know that there was a dip in market starting Jan-Feb 09, reaching to its peak around May-June 09 and starting increasing again from July-Aug 09. So prices were never stagnated. They are showing a upward trend as of today. Do u mean there will be a second dip?
    Dude,
    Think of any investor who bought 2BHK for 50L in early 2008. If the price of same(end of 2009) is still 50L it means stagnation.
    Its like he paid interest on that amount for no reason.

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    • #12

      #12

      Re : RE is again bullish

      Ok I understand what u mean but it is a virtual loss which is not realized until he sells the property.
      In reality it does not mean anything. Hold on to you property, the bulls have started there run. Future is bright.

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      • #13

        #13

        Re : RE is again bullish

        Originally posted by tsongt View Post
        have we started seeing increments in salaries in IT sector? If not how can we believe RE is bullish? Its more of sceptical betting in RE thats happening rather than actual demand.
        Off course IT salaries are increasing. Dont u read the papers

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        • #14

          #14

          Re : RE is again bullish

          Originally posted by shirishtiwari01 View Post
          Ok I understand what u mean but it is a virtual loss which is not realized until he sells the property.
          In reality it does not mean anything. Hold on to you property, the bulls have started there run. Future is bright.
          Its not virtual loss. Its actual. Loss of Interest on your loan amount.
          If the investor had bought the property today, he would have earned interest on that money(down payment) for last 1.5 year.
          So net loss: Loss of Interest(on down payment) if kept in bank FD + interest paid for the loan amount.
          I strongly doubt if future of RE is bright in India. Very few people can afford. Who will you sell your investment tomorrow? People cannot pay the asking price.

          Comment

          • #15

            #15

            Re : RE is again bullish

            Originally posted by veeemkay View Post
            The rates have increased and now today RBI raised the SLR by 1% trying to curtail Liquidity. Going forward Inflation would probably be a concern and hence RBI might increase interest rates as well. Hence EMI might be higher than what you see now.

            My Comment: I am not buying under these circumstances.

            VK
            Do, you know what is SLR & what was it earlier rate & what is now???

            and you have pass ur judgment as well...Govt trying to curtail Liquidity

            I think all economist of India only write here on this forum only

            Why dont you join some good Financial Institution, then u will able to earn enough, so that u dont have to bother abt RE prices....

            This is going too far now...ha ha ha
            Last edited by ash7979; October 27 2009, 10:28 PM.
            Cheers,
            -Ashish

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            • #16

              #16

              Re : RE is again bullish

              Originally posted by lazybone007 View Post
              Off course IT salaries are increasing. Dont u read the papers
              which papers? TOI ?

              If the salaries increase a bit to adjust to inflation i will be more than happy.

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              • #17

                #17

                Re : RE is again bullish

                Let me see if I can explain ...

                Originally posted by RAJESHP View Post
                Its not virtual loss. Its actual. Loss of Interest on your loan amount.
                If the investor had bought the property today, he would have earned interest on that money(down payment) for last 1.5 year.
                So net loss: Loss of Interest(on down payment) if kept in bank FD + interest paid for the loan amount.
                I strongly doubt if future of RE is bright in India. Very few people can afford. Who will you sell your investment tomorrow? People cannot pay the asking price.

                There are 2 issues here ...

                1. If you put 10 lakhs as down payment, then, even if price stagnated for 2 years, you probably lost around 20% of that 10 lakhs (2 lakhs) in terms of interest calculated at 10% pa which you would have otherwie got if you invested that 10 lakhs. So, this is a real loss, not notional.

                2. Then comes the more dangerous interest on highly leveraged loan! Imagine you borrowed 40 lakhs more at a home loan interest of around 10% average across this period. Each year, you paid an interest of 4 lakhs (not declining balance but year-end balance for simplification sake), which means, over the last 2 years you are out of pocket 8 lakhs which does NOT add to the value of the house. This 8 lakhs is simply transfering from your salary account to the bank's pocket.

                This get eve more serious when you have deducted 30% income tax on salary before paying the interest amount (I'm being simplistic again for illustrations sake). Pre-tax, you have a hit of Rs.11.40 lakhs from your salary for the privilege of holding a stagnating home. For this home to start showing value above your gross purchase price, it must increase at least by this (11.40 + 2.00) lakhs before it breaks even!!! which is a 27% increase in home value needed to see breakeven! You home, in 2 years need to sell for 63.5 lakhs to break even for you!!!

                If prices stagnate for say 4 years (not unreasonable in my view), the loss of interest on 10 lakhs will be 4 lakhs, interest paid (pre-tax) will be in the range of 20 lakhs and your home must appreciate at least by this amount (24 lakhs, which is 50% higher than your purchase price!!!).

                How long do you think your home will take to show a positive gain under these conditions? Its like starting a race with a negative handicap, while also running against a faster opponent. Your best position is at the beginning when the gap is the least. Then as each minute passes, your opponent pulls away further and further from you. The gap between your home's value and the money you put into it goes up higher and higher against you, till some day an inflexion point is reached and the gap starts turning down as your annual interest declines and annual growth rate overtakes it. That could well be 10-15 years from your point of purchase!

                So, stagnation also means loss or decline in value!!!

                cheers
                Last edited by wiseman; October 28 2009, 12:01 AM.

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                • #18

                  #18

                  Re : RE is again bullish

                  Originally posted by wiseman View Post
                  So, stagnation also means loss or decline in value!!!
                  cheers
                  I agree with the explanation. On an avg a person think less on how to invest the money than the effort he puts into the work to earn that money.

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                  • #19

                    #19

                    Re : RE is again bullish

                    Originally posted by wiseman View Post
                    For this home to start showing value above your gross purchase price, it must increase at least by this (11.40 + 2.00) lakhs before it breaks even!!! which is a 27% increase in home value needed to see breakeven! You home, in 2 years need to sell for 63.5 lakhs to break even for you!!!
                    Also need to consider Inflation. A actual worth of 50L after 2 yrs is less by the rate of inflation for 2 yrs.
                    Originally posted by kirunOnly View Post
                    On an avg a person think less on how to invest the money than the effort he puts into the work to earn that money.
                    Completely agree with Kirun on this.

                    Comment

                    • #20

                      #20

                      Re : RE is again bullish

                      Originally posted by ash7979 View Post
                      Do, you know what is SLR & what was it earlier rate & what is now???

                      and you have pass ur judgment as well...Govt trying to curtail Liquidity

                      I think all economist of India only write here on this forum only

                      Why dont you join some good Financial Institution, then u will able to earn enough, so that u dont have to bother abt RE prices....

                      This is going too far now...ha ha ha
                      ha ha ha.. Thanks for calling me back after i had gone too far.

                      Can you please explain what is SLR? and what is the effect of it moving from 24% to 25% and what other hints did RBI give about the future?

                      Please give RBI direction and not ICICI Banks direction.

                      VK
                      Last edited by veeemkay; October 28 2009, 11:15 AM.

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