Hi Folks,

Do you think that investment in Pune Real Estate in good areas ( Kothrud, Baner, Aundh) or upcoming areas( Rahatani, Ravet, Undri) will give returns better than investment in shares? (say more than 15% CAGR- compound annual growth rate)

In simple words if I invest 25L on 1st Jan 2010 then will I get around 1 Cr. by 1st Jan 2021?

Thanks

Matrixneo
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  • CAGR funda...

    matrin...
    first of all RE cannot and infact need not be compared with nifty when it comes to investment...the basic fact is 25% CAGR over a period of 5 years continuously will triple your money....with similar CAGR one can predict the sen 50000 by 2020 with the GDP estimates remaining same...so instead i on my personal account would like to advise you to go for SIP of about 25K per month (25L will cost you 25k emi over 20 yrs) for next 20 years and the investment will run into some crores,,,of course with regular disclaimers that "Past performance is indicative and is no guarentee that similar results be replicated"....
    Choose your bet...
    I am planning to go the SIP way bcoz you will never get a bigger "mandi" and bring the kothrud rates to 25L...samrajya asks 75L...so maybe one will require about 60% reduction in existing rates...
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  • Ravet and Undri
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  • pimple Saudagar.
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  • RE is secure compared to equities, unless you are a long term investor in equities with loads of patience.

    I think if you get a good deal in RE, then go for it rather then equities. Anyways both go up mostly at the same time, they are kindof interdependent, a symbiosis kind of relationship.

    If RE does well, then loads of different companies also do well who supply stuff for RE. I think RE/Infra is the biggest driver of economies.

    But still RE is less risky then equities, and there are lots of other factors too which will need a long discussion.
    CommentQuote
  • Originally Posted by matrixneo
    Hi Folks,

    Do you think that investment in Pune RE in good areas ( Kothrud, Baner, Aundh) or upcoming areas( Rahatani, Ravet, Undri) will give returns better than investment in shares? (say more than 15% CAGR- compound annual growth rate)

    In simple words if I invest 25L on 1st Jan 2010 then will I get around 1 Cr. by 1st Jan 2021?

    Thanks

    Matrixneo


    Here are the data if one of the leading diversified MF:
    Magnum Contra-G

    As on 11 Dec 2009 Fund Category
    Year to Date 86.93 80.76
    1-Month 3.55 2.75
    3-Month 8.44 9.49
    1-Year 93.55 87.31
    3-Year 14.59 9.68
    5-Year 32.39 23.21
    Return Since Launch 28.57 -

    Source : ]http://new.valueresearchonline.com/funds/newsnapshot.asp?schemecode=633

    See CAGR for more than 5 yrs is 28%...so in other MF also we can take 20% CAGR as normal & 20% CAGR will make your 25 lacs to 1.5 Cr...I dont think that a 2 BHK u buy now will fetch you even 1 Cr even if u buy in good area as well...

    So, equity investment beats all other asset classes hands down...Now choice is urs:)

    See CAGR for more than 5 yrs is 28%...so in other MF also we can take 20% CAGR as normal & 20% CAGR will make your 25 lacs to 1.5 Cr...I dont think that a 2 BHK u buy now will fetch you even 1 Cr even if u buy in good area as well...

    So, equity investment beats all other asset classes hands down...Now choice is urs:)
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  • Guys please remember Land appreciates and construction depreciates, so if you are thnking
    of buying a flat for investment, forget it. Buying flat today for giving out on rent is like doing
    social service towards your beloved tenants.

    Look for some land, which might give you good returns long term.

    In general Pune RE is inflated and current prices are not good for investment.
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  • I agree with you But

    I agree with You .Yes Land appreciates and construction depreciates . But It matters at what price you are buying the land.
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  • Really surprised to read "Pune RE is inflated".

    Have you ever seem on this site only, most discussions are for Pune RE only. That shows the demand. Atleast 50% conversion ratio from discussions to becoming buyers.

    And pune is growing like anything, i think most guys who says Pune RE ins inflated right now also, are the guys who couldn't buy at the right time and now want a big downtrend to happen.

    Which i assure will never happen. Look at the amount of people we add every year to this country. Its mind boggling dude. And places like Pune, will be the best cities in India. Look at the number of IT companies, VolksWagen has come up with a huge plant for world supply.
    I dont think Pune prices are inflated, if you cant buy something that doesn't mean prices are inflated.

    In India atleast in the coming years RE prices will increase in the long term. Equity, yes equities can give much more return, if you invested 20 lakhs in few shares by 8th March, 2009, you wud have a crorepati by now. But there are lot of ifs n buts in equity. You need to study well and pick the right stuff. Its lot more unpredictable.

    Anyways both are good(RE+Equity). Divide you money between the two. You will be a happy man. Dont put everythin into the same basket. :)
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  • Stock has always beated RE in the long term.

    It is true in USA for the last 120 years and true in India in the last 20 years.

    Thats only sen returns, without market timing. With good timing, Stock returns are far superior.

    But if you have to take a loan to invest, it is stupid to invest in Stock. RE is a great leveraged investment, especially if you plan to live in it. Even otherwise.

    Without leverage, if you have say 50L lying around, even Bank FD returns will beat RE returns over 10 years.

    YOu will get 40,000 a month, even 50,000 a month if rates harden. Keep your capital and blow the money. Live for today.

    Invest in property if you have saturated your senses or have children (assuming you already own your retirement flat and have another 50L lying around.

    It is a truism that by selling one house, you can buy another liveable house anywhere else in the world.

    Another truism - if you child can study, sell your flat to pay for it. If he cant study, give him the flat to live in it.

    Srinidhi, a flat gives more pleasure than a plot. Flat is like a consumption of your money today, plot is an investment which will bear fruit when you are too old to enjoy your money.
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  • Originally Posted by Venkytalks
    Stock has always beated RE in the long term.

    It is true in USA for the last 120 years and true in India in the last 20 years.

    Thats only sen returns, without market timing. With good timing, Stock returns are far superior.

    But if you have to take a loan to invest, it is stupid to invest in Stock. RE is a great leveraged investment, especially if you plan to live in it. Even otherwise.

    Without leverage, if you have say 50L lying around, even Bank FD returns will beat RE returns over 10 years.

    YOu will get 40,000 a month, even 50,000 a month if rates harden. Keep your capital and blow the money. Live for today.

    Invest in property if you have saturated your senses or have children (assuming you already own your retirement flat and have another 50L lying around.

    It is a truism that by selling one house, you can buy another liveable house anywhere else in the world.

    Another truism - if you child can study, sell your flat to pay for it. If he cant study, give him the flat to live in it.

    Srinidhi, a flat gives more pleasure than a plot. Flat is like a consumption of your money today, plot is an investment which will bear fruit when you are too old to enjoy your money.

    USA for the last 120 years and true in India in the last 20 years.

    Thats only sen returns, without market timing. With good timing, Stock returns are far superior.

    But if you have to take a loan to invest, it is stupid to invest in Stock. RE is a great leveraged investment, especially if you plan to live in it. Even otherwise.

    Without leverage, if you have say 50L lying around, even Bank FD returns will beat RE returns over 10 years.
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  • Time period too short ...

    Originally Posted by ash7979
    Here are the data if one of the leading diversified MF:
    Magnum Contra-G

    As on 11 Dec 2009 Fund Category
    Year to Date 86.93 80.76
    1-Month 3.55 2.75
    3-Month 8.44 9.49
    1-Year 93.55 87.31
    3-Year 14.59 9.68
    5-Year 32.39 23.21
    Return Since Launch 28.57 -

    Source : ]http://new.valueresearchonline.com/funds/newsnapshot.asp?schemecode=633

    See CAGR for more than 5 yrs is 28%...so in other MF also we can take 20% CAGR as normal & 20% CAGR will make your 25 lacs to 1.5 Cr...I dont think that a 2 BHK u buy now will fetch you even 1 Cr even if u buy in good area as well...

    So, equity investment beats all other asset classes hands down...Now choice is urs:)

    Folks,

    All of you guys are being too optimistic! And that is because your time period for calculation is too short and to much extrapolation is depended upon to get unearthly CAGRs.

    Example: Suppose I bought a stock at Rs.75 in March and see it at Rs.350 today, thats a return of 367% in 10 months which is 440% annually. If I go around extrapolating it for 10 years ... you get the idea!;)

    In general I agree (and I have given proof earlier about this) that stocks give significantly higher returns over any other asset.

    Of course to those who mention risks in stocks, generally, if you pick the blue chips the risks are almost negligible. And I can give you many, many risks in RE (litigation, multiple sale of same property, local goons threatening in outlying areas, etc) besides other negative factors in today's times like illiquidity, no market mechanism to determine fair price, etc.

    The long term return on equities is in the 15%-20% CAGR range and in some periods can even go upto 25%. Anyone making over 25% on a sustained basis on the entire portfolio (not just one star performer) in the long term is an award-winning stock portfolio manager!

    cheers

    Folks,

    All of you guys are being too optimistic! And that is because your time period for calculation is too short and to much extrapolation is depended upon to get unearthly CAGRs.

    Example: Suppose I bought a stock at Rs.75 in March and see it at Rs.350 today, thats a return of 367% in 10 months which is 440% annually. If I go around extrapolating it for 10 years ... you get the idea!;)

    In general I agree (and I have given proof earlier about this) that stocks give significantly higher returns over any other asset.

    Of course to those who mention risks in stocks, generally, if you pick the blue chips the risks are almost negligible. And I can give you many, many risks in RE (litigation, multiple sale of same property, local goons threatening in outlying areas, etc) besides other negative factors in today's times like illiquidity, no market mechanism to determine fair price, etc.

    The long term return on equities is in the 15%-20% CAGR range and in some periods can even go upto 25%. Anyone making over 25% on a sustained basis on the entire portfolio (not just one star performer) in the long term is an award-winning stock portfolio manager!

    cheers

    Folks,

    All of you guys are being too optimistic! And that is because your time period for calculation is too short and to much extrapolation is depended upon to get unearthly CAGRs.

    Example: Suppose I bought a stock at Rs.75 in March and see it at Rs.350 today, thats a return of 367% in 10 months which is 440% annually. If I go around extrapolating it for 10 years ... you get the idea!;)

    In general I agree (and I have given proof earlier about this) that stocks give significantly higher returns over any other asset.

    Of course to those who mention risks in stocks, generally, if you pick the blue chips the risks are almost negligible. And I can give you many, many risks in RE (litigation, multiple sale of same property, local goons threatening in outlying areas, etc) besides other negative factors in today's times like illiquidity, no market mechanism to determine fair price, etc.

    The long term return on equities is in the 15%-20% CAGR range and in some periods can even go upto 25%. Anyone making over 25% on a sustained basis on the entire portfolio (not just one star performer) in the long term is an award-winning stock portfolio manager!

    cheers

    Folks,

    All of you guys are being too optimistic! And that is because your time period for calculation is too short and to much extrapolation is depended upon to get unearthly CAGRs.

    Example: Suppose I bought a stock at Rs.75 in March and see it at Rs.350 today, thats a return of 367% in 10 months which is 440% annually. If I go around extrapolating it for 10 years ... you get the idea!;)

    In general I agree (and I have given proof earlier about this) that stocks give significantly higher returns over any other asset.

    Of course to those who mention risks in stocks, generally, if you pick the blue chips the risks are almost negligible. And I can give you many, many risks in RE (litigation, multiple sale of same property, local goons threatening in outlying areas, etc) besides other negative factors in today's times like illiquidity, no market mechanism to determine fair price, etc.

    The long term return on equities is in the 15%-20% CAGR range and in some periods can even go upto 25%. Anyone making over 25% on a sustained basis on the entire portfolio (not just one star performer) in the long term is an award-winning stock portfolio manager!

    cheers
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  • Equity is better than flat in Pune

    Pune RE Vs Equity:-

      Flat may or may not be there after 10-20 years as many constructions are hopeless. So, the flat has to be there is the prime criteria,
      Land appreciates:- Right, my bet would always be land & not flat for such type of investments; the only drawback is that you can rent a flat but not a plot. The drawback though remains that your flat is secured, while there are land sharks. Hence, you also need to protect your land as well, like your baby. Add to it various contacts required in Govt. for DP roads, environment clearances, SEZs, state notifications etc. Your land value may go up or down based on this.
      You can sell stocks,bonds etc. with a simple click of a mouse, however, you need to find a buyer to sell your flat.
      10-15 years is long time mike. Who knows that Nashik may give better yields than Pune in that case i.e. Pune may not be investor friendly after 10-15 years. Did you see investors in Pune before 2004? Just like Mumbai based investors bought in Pune, I feel that now Mumbai + Pune investors may look at cities like Nashik.
      In equity though make sure you don't invest in overnight companies to fetch high returns.
      I would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:DI would rather buy flat where current EMI:Rent ratio is low unlike Pune coz appreciation may be more here than in cities like Pune.

      Btw, how come no one discussed about putting money in builders' FD?:D
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  • a person buys house with 15% investment say 6 lacs for a 40 lac house and takes loan for bal 85%. follwoing are exp from booking till the possesstion- lets assume after 2 years.

    Price 40 lacs

    Stamp duty and regn - 2.75 lacs

    Loan fees etc - 25 K

    Interest paid for loan amount - Rs. 2 lacs approx. - there are options to minize this and hence it can be lower too.

    his own contribution is Rs. 6 lacs. total investment is 11 lacs.

    and loan amount is 34 lacs.

    After 2 years lets assume the price is up by 25% - i.e 50 lacs.

    He sells and gets 50 lacs less 34 lacs = 16 lacs.

    returns = Rs. 16 lacs - 11 lacs = 5 lacs.

    He has invested only his cont., interest and other expenses. so return = 5 / 11 = 45%
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  • Originally Posted by ndegaonkar
    a person buys house with 15% investment say 6 lacs for a 40 lac house and takes loan for bal 85%. follwoing are exp from booking till the possesstion- lets assume after 2 years.

    This is for end users, investors work differently & have more capacity to make large downpayment. However, lets consider it true for this calculation.

    and loan amount is 34 lacs.

    returns = Rs. 16 lacs - 11 lacs = 5 lacs.
    He has invested only his cont., interest and other expenses. so return = 5 / 11 = 45%

    Interest will reduce his profits coz in early years, interest constitues more share of EMIs & principal amount is less. So, he pays interest more than EMIs. Add to it the 30% short term capital gains tax which will make the investor make loss, let alone no-loss, no-profit:D.

    After 2 years lets assume the price is up by 25% - i.e 50 lacs.

    25%/annum? If this the case, everyone will put money in RE & banks will have no money at all to lend to the builders as there will be no deposits with the banks:D. What's more, at such appreciation, will one be able to find a buyer for the flat?
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  • Originally Posted by ndegaonkar
    a person buys house with 15% investment say 6 lacs for a 40 lac house and takes loan for bal 85%. follwoing are exp from booking till the possesstion- lets assume after 2 years.

    Price 40 lacs

    Stamp duty and regn - 2.75 lacs

    Loan fees etc - 25 K

    Interest paid for loan amount - Rs. 2 lacs approx. - there are options to minize this and hence it can be lower too.

    his own contribution is Rs. 6 lacs. total investment is 11 lacs.

    and loan amount is 34 lacs.



    Interest of 2L in 2 yrs for a loan of 34L, is this possible, what option are you talking about?
    Interest would typically be ~4L /yr


    Originally Posted by ndegaonkar


    After 2 years lets assume the price is up by 25% - i.e 50 lacs.



    Considering the inflated prices in Pune right now, I strongly doubt this appreciation.
    I wont be surprised to see a price tag of 30L or less on the same flat after 2 yrs.


    Originally Posted by ndegaonkar


    He sells and gets 50 lacs less 34 lacs = 16 lacs.

    returns = Rs. 16 lacs - 11 lacs = 5 lacs.

    He has invested only his cont., interest and other expenses. so return = 5 / 11 = 45%


    The price of holding a 50L flat for 2 yrs is approx 13L
    see calculations here. These calculations dont consider the inflation rate for 2 yrs.
    http://www.indianrealestateforum.com/pune/t-re-is-again-bullish-7386/page2.html post #17
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