Announcement

Collapse
No announcement yet.

Real Return on RE is ZERO!!!!!!!!!

Collapse
X
Collapse

Real Return on RE is ZERO!!!!!!!!!

Last updated: July 2 2010
37 | Posts
  • Time
  • Show
Clear All
new posts
  • #11

    #11

    Re : Real Return on RE is ZERO!!!!!!!!!

    Originally posted by pcpune View Post
    House prices and rents have been closely linked throughout history, with both increasing at the rate of inflation
    Our smart investors in Pune do not understand this. For them rent bears no relationship with price of a house.

    They feel happy with 10% discount the builder offers and they buy.
    The more and more this bubble stretches, bigger will it burst and give us more attractive prices to cherry pick tomorrow. Just keep patience.

    Its time for "The other things in life, than home buying"

    Comment

    • #12

      #12

      Re : Real Return on RE is ZERO!!!!!!!!!

      Good returns were past things when prices were much cheaper. Currently the rates are v high and if one is taking home loan for 20 years and suppose he takes full term to repay, then after 20 years either the flat will not be in that condition to be sold out or one will get little margin of profit due to heavy interest he has paid for the last 20 years..

      If you are planning to stay then purchase else better stay away...Plan to buy wherever you wanna settle...

      Comment

      • #13

        #13

        Re : Real Return on RE is ZERO!!!!!!!!!

        Rent:Price ratio, even discussed in the article under a different name, is very much out of the normal range in Pune. In Mumbai, I am so surprised to see the rents are so damn high for even bakwaas apartments, and though the prices are high for buying, still the rent:price ratio is 1:300 or better, but I haven't seen even 1:400 ratio. But in Pune, specially in the underconstruction projects, the future rent:price ratio is skewed to even 1:500 or worse. How the hell people are making money??? Throwing up all the savings of life in unnecessary, unthought decision! The houses that are on rent are available so cheap as compared to price, it would take a really desperate or really stupid person to completely forgo the expected yield funda, and go with the so called 'heart decision'!

        I wish some builder adopts me now! Its a en time for builders, and worst time for end users, with no guarantee of the preservation of capital, no descent buy in good price, no government support to fulfil one of the most basic needs (roti-kapda-makaan, hell some of the builders are actually politicians!)

        I would say buy in Mumbai and rent in Pune! Atleast the returns would be good, though the initial investment may cost you your kidney!

        Comment

        • #14

          #14

          Re : Real Return on RE is ZERO!!!!!!!!!

          Originally posted by ferozkarim View Post
          hmm interesting post,
          would be great to put actual purchase figures from our personal purchases versus rates of inflation in that period, India specific & see what actual real returns are.

          For e.g.
          I bought a flat 1075/- psf in 2004, today, asking price is 4200/-.
          Can I get a work around on real returns please !!
          Well, if you calculate your returns on "asking price", there is always going to be a premium. The average "buying" rate in the area may be even 3500 or 3000. Anyways, in 6 years, your CAGR is about 40%.

          Inflation+interest rate+depreciation
          (IID) adjusted, you CAGR is cool 24%, way above the 0% mark...

          Hence, your property price has and will come down to about 2200-2500 in 2014-2015 to meet the long term average...

          Considering what you want to believe - to conitnue the rise at same level for the next five years at 24% IID adjusted - the price will become DOUBLE IN 3-3.5 YEARS...., and 4 times in 5-6 years absolutely improbable I would say...

          My take - SELL, if you CAN....

          Comment

          • #15

            #15

            Re : Real Return on RE is ZERO!!!!!!!!!

            In general I agree that stocks will give better return then house. However stock is risk and reward game, mutual fund sounds better for average people. However in this forum most of the members we have are brilliant hence we are talking about very intelligent people here.

            My personal opinion is with my IQ, I am finding it very difficult to make money in stock (I am not talking about mutual fund route and long term investment, we understand that 10-15% can be made by mutual fund route), timing the market is very difficult, selecting a stock is very difficult.


            My opinion of real estate is as investment and not for a place where you will stay, as there is no logic that can be applied to a house where you stay, it is your personal comfort and choice, it is not an investment. One can buy a 1 BHK to stay and even a mansion.

            If we kept our eyes and ears open in last 6-7 years there were huge opportunity to make money in real estate even for average IQ people. Brilliant ones made tones……………………………Though we will not see that kind of appreciation in next 4-5 years but even today I find making money easier in real estate.


            If we talk about Pune…………….We know what is happening in which area, not very difficult to find out growth potential of areas, that too after you have stayed for 10-15 years and have seen face of areas changing. From the look of it you will know the next area that is going to be developed. Some research will also give you idea about builders who are trying to get into real estate (rate of new builder apartments are cheaper than established ones). If you find out financial muscle of the builder and stability most of your job is done.

            I will give an example (I share personal experiences and will do it again, few will like it and there will be others who will not agree, but it is ok). Only yesterday one of my friend booked a house in area between Balewadi to Pashankar auto as he thinks that this area will definitely grow.

            From my personal experience so far I am convinced that this area will see a great face life due to following reasons:
            1. Close to Hinjewadi . After Wakad getting crowded this area seems to be natural choice
            2. Close to Baner and Pashan link road so you have all the shops in 1-2 km even today
            3. There is a river that separates Hinjewadi and this area……………Blue Ridge is to the other side of the river and Kumar(KUL) is starting a township to Baner/Sus side of the river
            4. There are 7-8 schemes already started in the area
            5. On the Pune Bangalore Highway
            6. Balewadi stadim is near by which has great infrastructure for kids
            7. Very good locations with hills on almost 3 sides
            8. I have other points but wrote few just for example……and yes personally water does not scare me too much as I stay in heart of Baner and we ran on Tankers for 9 years before full fledge PMC water was available

            If we find builders in area like this and are innovative in our approach, if we are the first ones and select best flat with great Vastu and view in that society, resale value will be very high. There are builders who are still loading 25% and charging 50% for terrace/balcony. Remember if you book in a society that is starting you do not start paying immediately (well I know there are members in this forum who believe that we shd buy only in a completed society, they are right in their way).

            With what I mentioned I firmly believe that money can be made. As mentioned my friend booked a house at a kind of pre launch which is supposed to be 300 rupees less then the launching price, he just paid 2 lac for booking amount (per sq feet price 400-500 rs less then what guys like Rohan asking in that area) and in next 6 months will probably pay another 20%. So from today till 6-8 months he would have paid 9 lac rupees……….and if he is able to sell at rs 400 per sq feet more after 6-8 months he would have made 450000. Well this way he invested 9 lac and will make 50% on it in 6-8 months……………….I do not mind even if it becomes 30% and not 50.

            Different perspective but still thought of sharing. I will update what happens after 2,4 and 6 months for the same property.

            Somehow based on what I see, prices are not coming own drastically. If you are innovative in buying and have bought cheaper then market then no need to worry.But detailed research must be exercised before taking a decision.

            Cheers,
            Birendra.

            Comment

            • #16

              #16

              Re : Real Return on RE is ZERO!!!!!!!!!

              Originally posted by birendra View Post
              With what I mentioned I firmly believe that money can be made. As mentioned my friend booked a house at a kind of pre launch which is supposed to be 300 rupees less then the launching price, he just paid 2 lac for booking amount (per sq feet price 400-500 rs less then what guys like Rohan asking in that area) and in next 6 months will probably pay another 20%. So from today till 6-8 months he would have paid 9 lac rupees……….and if he is able to sell at rs 400 per sq feet more after 6-8 months he would have made 450000. Well this way he invested 9 lac and will make 50% on it in 6-8 months……………….I do not mind even if it becomes 30% and not 50
              Money can be made in RE, no doubt. However, in this case you mentioned above, I differ. The reason:- Rohan has it's own name & the project has progressed. Hence, we need to see the cost of interest + rents which will be incurred for the time till this project reaches the stage where Rohan stands today. Also, resales with better name fetch more price. Eg. Paranjape Schemes on Baner-Pashan link rd command more price than Mont Vert, despite the fact that both maybe ready poss with similar specs & amenities.

              I would rather than putting money in pre-launch offers, would invest in the builder if I find the outlook to be very positive. No khich-khich of selling flats, finding buyers etc. Invest in builder & take your cut, as simple as that.
              If you are happy, you are successful.

              Comment

              • #17

                #17

                Re : Real Return on RE is ZERO!!!!!!!!!

                Birendra,

                Good post. The problem is - selling under-construction and under loan property is not very easy.Also, the assumption that in 6-8 months the prices will rise by so and so feet sqfeet can really back fire.

                I agree that it is the intelligent people who make money in pure stocks...but for dummies --Mutual Funds definately gives a average 15% returns over any period...

                It is an old saying - "ek dusre ko topi" pehnane mein, the last purchaser always suffers...3000 becomes 3200 becomes 3400 becomes 3800...how do you know --you are not the last ?

                About development in new areas - I feel Pune has over-streched itself and about 50% flats are lying empty inside city to be RENTED...

                This is akin to a Bubble build up by the developers/agents as they want to offload a lot of inventory into the market without people actually living in them..

                When the bubble would burst, all of us - the consumer will suffer the most..as OVERSUPPLY is already visible by many "ready possession" properties still available in the market...

                If you are so intent on playing satta on 2 LACS -

                Buy 8 Niftys (20 lac amount - margin 10%), hold it for 6 months...if it appreciates by 300 points (only 5%).... the profit is cool 1.2 lacs...., similar to what you would get in RE...

                Comment

                • #18

                  #18

                  Re : Real Return on RE is ZERO!!!!!!!!!

                  You have just found a go-ld mine. Congratulations!!

                  Put 9 lacs and get 50% profit in 6-8 months.
                  If you want more profit, take some loan of 9 lacs and book 2 flats, 9 lacs of profit in 6-8 months.
                  If you are a working couple, invest 9 each and take loan of 9L each and book 4 flats. Cool 18lacs profit in 6-8 months.


                  Originally posted by birendra View Post
                  and in next 6 months will probably pay another 20%. So from today till 6-8 months he would have paid 9 lac rupees……….and if he is able to sell at rs 400 per sq feet more after 6-8 months he would have made 450000. Well this way he invested 9 lac and will make 50% on it in 6-8 months……………….I do not mind even if it becomes 30% and not 50.


                  Cheers,
                  Birendra.

                  Comment

                  • #19

                    #19

                    Re : Real Return on RE is ZERO!!!!!!!!!

                    If you have cash and have power to sustain then certainly you can go for that. It’s not good for the first time buyer with loan.

                    Comment

                    • #20

                      #20

                      Re : Real Return on RE is ZERO!!!!!!!!!

                      Originally posted by birendra View Post
                      In general I agree that stocks will give better return then house. However stock is risk and reward game, mutual fund sounds better for average people. However in this forum most of the members we have are brilliant hence we are talking about very intelligent people here.

                      My personal opinion is with my IQ, I am finding it very difficult to make money in stock (I am not talking about mutual fund route and long term investment, we understand that 10-15% can be made by mutual fund route), timing the market is very difficult, selecting a stock is very difficult.


                      My opinion of real estate is as investment and not for a place where you will stay, as there is no logic that can be applied to a house where you stay, it is your personal comfort and choice, it is not an investment. One can buy a 1 BHK to stay and even a mansion.

                      If we kept our eyes and ears open in last 6-7 years there were huge opportunity to make money in real estate even for average IQ people. Brilliant ones made tones……………………………Though we will not see that kind of appreciation in next 4-5 years but even today I find making money easier in real estate.


                      If we talk about Pune…………….We know what is happening in which area, not very difficult to find out growth potential of areas, that too after you have stayed for 10-15 years and have seen face of areas changing. From the look of it you will know the next area that is going to be developed. Some research will also give you idea about builders who are trying to get into real estate (rate of new builder apartments are cheaper than established ones). If you find out financial muscle of the builder and stability most of your job is done.

                      I will give an example (I share personal experiences and will do it again, few will like it and there will be others who will not agree, but it is ok). Only yesterday one of my friend booked a house in area between Balewadi to Pashankar auto as he thinks that this area will definitely grow.

                      From my personal experience so far I am convinced that this area will see a great face life due to following reasons:
                      1. Close to Hinjewadi . After Wakad getting crowded this area seems to be natural choice
                      2. Close to Baner and Pashan link road so you have all the shops in 1-2 km even today
                      3. There is a river that separates Hinjewadi and this area……………Blue Ridge is to the other side of the river and Kumar(KUL) is starting a township to Baner/Sus side of the river
                      4. There are 7-8 schemes already started in the area
                      5. On the Pune Bangalore Highway
                      6. Balewadi stadim is near by which has great infrastructure for kids
                      7. Very good locations with hills on almost 3 sides
                      8. I have other points but wrote few just for example……and yes personally water does not scare me too much as I stay in heart of Baner and we ran on Tankers for 9 years before full fledge PMC water was available

                      If we find builders in area like this and are innovative in our approach, if we are the first ones and select best flat with great Vastu and view in that society, resale value will be very high. There are builders who are still loading 25% and charging 50% for terrace/balcony. Remember if you book in a society that is starting you do not start paying immediately (well I know there are members in this forum who believe that we shd buy only in a completed society, they are right in their way).

                      With what I mentioned I firmly believe that money can be made. As mentioned my friend booked a house at a kind of pre launch which is supposed to be 300 rupees less then the launching price, he just paid 2 lac for booking amount (per sq feet price 400-500 rs less then what guys like Rohan asking in that area) and in next 6 months will probably pay another 20%. So from today till 6-8 months he would have paid 9 lac rupees……….and if he is able to sell at rs 400 per sq feet more after 6-8 months he would have made 450000. Well this way he invested 9 lac and will make 50% on it in 6-8 months……………….I do not mind even if it becomes 30% and not 50.

                      Different perspective but still thought of sharing. I will update what happens after 2,4 and 6 months for the same property.

                      Somehow based on what I see, prices are not coming own drastically. If you are innovative in buying and have bought cheaper then market then no need to worry.But detailed research must be exercised before taking a decision.

                      Cheers,
                      Birendra.
                      Birendra,

                      Can you promise us to come back on this thread when your friend successfully sells this flat at a Rs 400 psft appreciation?

                      Here in the forum we do a lot of technical analysis and conclude that we should stay away from RE. Starting with you, lets make a real life case study and find out whether any money can be made in RE with the prices at these levels.

                      What say?

                      Comment

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