Re : Mathematics on Pricing of Land

[ks2071746]

First of all i would like to say thank you for Mr.Natraj for his vast knowledge in the real estate sector and his way of explaining mathematically the cost calculation of a flat. Actually seeing your calculation i though how much hard earned money these builders make by making fool of MIG people. My opinion to this thread what ever be the market condition(recession etc) these guys wont let the price come down bcoz they have made a big profits in the past and they would survive even in the worst market condition.

Dear karthickj,

This is what exactly is happening in the RE arena at Chennai. Only peanut reductions are being offered. Prices like Rs. 1975/sq.ft. for flats are offered at far away places, even 30 KM away. Whereas, near the city, the prices have not been reduced much. The Builders and Promoters have tasted high and unrealistic profits in the past and they would like to hold on for further periods. They may delay the existing ongoing projects, delay the start of the announced projects etc. but continue to book the flats and collect the interest free advances.

ks2071746

[Natarajg007]

Am not writting stories Nats . I dont have any other intension other than to see RE prices to fumble to the realistic levels. Probably you might own some 750 sqft land (your worth) and striving hard to sell it at unrealistic price .

I had to narrate the stock story(fact) of my colleague because he was planning to construct a house in a land he owns . Now he does not even have 5/10 Lacs to start the construction . And he is more bothered to go for house loans as there is a possibility the project will be off-shored.

If things in stock market goes wrong for another 6-12 months , he may plan to sell the land he owns. Result ...one more plot on sale ....We tend to hear more such availabilities and will drive the price to plummet ... He may do it early on a distress sale ...

You may not have an oppurtunity to know the happenings around the world ...Nortel.. Nadra...RBS . More such 'Halt of Business' to follow .Kindly do atleast 1 hour study/preparation before you comment like "Chennai RE is not IT/ITES dependant and isolated from global slowdown(now its meltdown)" .

BTW , Whats your quote on your 750 SQFT vadapalani land ===> 3 C now ?

Pls understand this is not 'Kalakkappovathu Yaaru' (A Comedy Show in Vijay TV presided by senior actor Pandiarajan - whose comedy with bunch of fools bidding in crores for a worthless thing) and you are repeatedly trying to impress Mr Pandiarajan .

Sethu, YOu are the one fit for Kalakkapovathu type of programs, not me. You are talking about Nortel, have you been to Nortel labs in Montreal. I have seen that too. There are bunch of jokers like you from India specifically TN. ONe guy by the name Manikka Thiagarajan knew how to execute 100 test cases. Full stop. AFter 5 years in the company. I had learnt to execute and had executed those cases after a 4 months stay in BNR. I was in WIpro then. ANd I am talking about hi fi Sonet OC technology. So you must have been a urchin crying on the road at that time in 1990s or maybe you were studying in some silly COrporation school then. And Manikka like fellows who will if asked which college u studied in will reply Madras Univ, never telling the specific college.
Nortel made the mistake of holding such leftovers like Manikka T. WIpros Saskens and the rest milked Nortels and the rest. TOday those Wise idiots are in dire straits not because of poor technology (their Sonet and OC tech are superb!). They are in trouble because of mismanagement and letting folks like you and Manikka to be employed.
Now CHennai realestate will fall if idiots listen to your peanut brained fundas. ANd you couldnt hide your real want.YOu want RE to fall because you want to enter at the pits and you want your daydream to be a reality. Ofcourse you can go back and quote today's CNBC tell you bout 8% fall in RE stocks today. Does th at mean that land price fell 8% today!
FOols like you can write a lot of nonsense. NObody can make a bigger mess than teh Manikka Thiagarajans of the world. However there are yet many sane folks who wont sell out to a self centric clown like you who states "I dont have any other intension other than to see RE prices to fumble to the realistic levels."
SO your intention though not noble will end up being a pipe dream. ENjoy Sethugm!

[Natarajg007]

the flat prices have increased alongwith land prices too.so the MIG who sold land to these builders made lots of money too.the flat prices are not going down much bcoz the land prices there (held by MIG) is not going down a lot.see any builder prices his flats according to the market value of land there(cons cost is constant for all locations). and if builder X had bougth at a higher price and quoting a higher price then if land is cheaper there builder Y will buy and quote a lesser price.every one wants to book profit at the earliest.
the point is if land prices fall the flat prices will too.

Actually you may be wrong. Flat prices are dictated by builders who are strong hands. Land prices are dictated by individuals and are mostly sold when there is a necessity. They are weak hands. SO the truth is builders are making a fortune. Infact my advice to many on this board is go and buy land from a owner along with a couple of your friends and then build a flat for yourself.

[Natarajg007]

Dear karthickj,

This is what exactly is happening in the RE arena at Chennai. Only peanut reductions are being offered. Prices like Rs. 1975/sq.ft. for flats are offered at far away places, even 30 KM away. Whereas, near the city, the prices have not been reduced much. The Builders and Promoters have tasted high and unrealistic profits in the past and they would like to hold on for further periods. They may delay the existing ongoing projects, delay the start of the announced projects etc. but continue to book the flats and collect the interest free advances.

ks2071746

Well KS. Your fundas are clean but you saying high and unrealistic profits of builders is not right. THey have made those profits happen realistically at the foolishness of the land owners and now I see the same hands playing market to fall (Wiseman, Sethugm et. al.) since they want to buy at cheap prices. Honestly salaries have gone up 5.5 times in good cases and atleast 4times in average cases between 2003 and 2009, so realestate going up that many times is more than justified.
Just that the fools who were getting 2000 in 2003 and are now paid 10000 in 2008 want prices to fall to 2003 levels assuming they have become great and others have gone mad. That explains the rantings of Sethugm and the bear cartel.
The truth is unless there are huge job cuts resulting in downward growth of salary to say 2003 levels, there is NO WAY realestate will fall to those old levels. In other words if in 2003 one earnt 20K and could dream of a one bedroom flat in some distant part of the city, ONE CAN ONLY DREAM OF THE SAME ONE BEDROOM FLAT TODAY even though the salary might have gone up to 1L, the person's NET INTRINSIC WORTH HAS HARDLY GONE UP. THat is the story.

[Natarajg007]

It is unfortunate that many on this board are consciously missing out an opportunity to enter RE when they can. I wont bother about traders and speculators. Those who need a place to live should enter when it is feasible. I bought the property I live in in 1996, when the boom was going bust. I dont repent it one day. It has not fallen anytime. The benefit was that I could get the best property for the lowest price.

[gone_mad]

was just curious abt Manikka and googled him...
His linkedin profile shows this:

Current
Leader, UMTS SW Development at Alcatel-Lucent
Education
Carleton University

Sethu, YOu are the one fit for Kalakkapovathu type of programs, not me. You are talking about Nortel, have you been to Nortel labs in Montreal. I have seen that too. There are bunch of jokers like you from India specifically TN. ONe guy by the name Manikka Thiagarajan knew how to execute 100 test cases. Full stop. AFter 5 years in the company. I had learnt to execute and had executed those cases after a 4 months stay in BNR. I was in WIpro then. ANd I am talking about hi fi Sonet OC technology. So you must have been a urchin crying on the road at that time in 1990s or maybe you were studying in some silly COrporation school then. And Manikka like fellows who will if asked which college u studied in will reply Madras Univ, never telling the specific college.
Nortel made the mistake of holding such leftovers like Manikka T. WIpros Saskens and the rest milked Nortels and the rest. TOday those Wise idiots are in dire straits not because of poor technology (their Sonet and OC tech are superb!). They are in trouble because of mismanagement and letting folks like you and Manikka to be employed.
Now CHennai realestate will fall if idiots listen to your peanut brained fundas. ANd you couldnt hide your real want.YOu want RE to fall because you want to enter at the pits and you want your daydream to be a reality. Ofcourse you can go back and quote today's CNBC tell you bout 8% fall in RE stocks today. Does th at mean that land price fell 8% today!
FOols like you can write a lot of nonsense. NObody can make a bigger mess than teh Manikka Thiagarajans of the world. However there are yet many sane folks who wont sell out to a self centric clown like you who states "I dont have any other intension other than to see RE prices to fumble to the realistic levels."
SO your intention though not noble will end up being a pipe dream. ENjoy Sethugm!

[gone_mad]

Actually you may be wrong. Flat prices are dictated by builders who are strong hands. Land prices are dictated by individuals and are mostly sold when there is a necessity. They are weak hands. SO the truth is builders are making a fortune. Infact my advice to many on this board is go and buy land from a owner along with a couple of your friends and then build a flat for yourself.

woh woh my thoughts! am willing/going to do the same.

[Natarajg007]

was just curious abt Manikka and googled him...
His linkedin profile shows this:

Current
Leader, UMTS SW Development at Alcatel-Lucent
Education
Carleton University

Nope Manikka studied in some Queens univ or so in Canada, Ottawa. He is not even a Carlton product. ANd in TN he studied in Madras Univ, but that is generic. It can mean Guindy in which case it is respectable or in some goddamn college. That he wont say as I suspect he studied in some hut called a college in good old 1988-90s when the concept of these colleges first came in to being!

[Natarajg007]

Many folks in this forum with a bearish view are talking about American collapse in RE and that the same will happen in INdia. Might sound logical at first site but let us read our lessons from scratch in a mathematical view.
Given below are the price of a specific land in 2003end in Chennai and its price in 2008 end. Similarly I have given the salary of a BRoking professional in this same period and also that of a SW engineer in CTS.
2003 2008 Ratio
Land price for 1 ground 25L 150L 6
Broking professional salary p.a. 2L 11L 5.5
CTS engineer salary p.a. 1.8L 9L 5

These are data I have from a land for which I had offers, from a friend in Broking industry and a CTS employed relative. So these are not cooked up.

Now let us assume that the wants of the bears are satisfied. LEt us assume PRice of land will crash let us say by 70% much to the pleasure of our biggest bears. It also means salary will crash by 70% or even more ON THE AVERAGE. Now unless salary crashes prices wont fall for sure since demand will exist by those whose jobs are yet there.

So let me argue as a bear (I find it ludicrous though!). So the CTS engineer will get 2.7L and broking guy 4.5L and land will cost 45L. So let us assume you are owner of the land. Should you sell it now. The bears on this forum say YES. Suppose the bear call does happen then you can take out 150L and look rich after the crash. However if I did not sell out the property I owned! THen I WILL BE RELATIVELY AT THE SAME PURCHASE LEVEL as I was before since the buyer namely the CTS engg or the Broking employee will afford to buy only at that DIMINISHED PURCHASING POWER. So I wont be getting poor!
Most land owners are retired or have not more than one piece of land.
Suppose the bears are wrong and price went up say to 300L. Now you will be left only with 150L. Your CTS engg will get 18L and the Broking guy 30L assuming everything moves up together and ASSUMING AS OUR FUNNY BEARS FEEL THAT PRICES MOVED UP ONLY BECAUSE OF NEW AGE JOBS!
So where will you retired guy get that 150L more?
In effect if you are short of cash, sell your property. Do I need to tell u that, you know it. If not why will you play a game with the bears. So if u dont need money now and u did not sell out and indeed 70% drop in salaries happened and in RE, then everything ought to get cheaper too. So you will have a 70% deflation, (I cant imagine that...even Japan does not have it!). So in that case your pension may not diminish (govt walas) and bank interest might dip but unless it becomes -ve like Japan you can spend it out and then sell your property.
In net all I am saying is RE is your FAMILY JEWEL. It is not a trading item. One famous bear on this board wants to sell out a 100 yr old property. Now ask him if in the 100 years were there no reasons to sell out? Or will the end of the world happen only in the next 10 years.
HOnestly those who own WORTHWHILE lands should just hold on and if it had a house enjoy the rent.
Now the other question is about Flat purchases. Now if indeed the bears are right you will be trapped. However dont you think that you never realised the rise in 2003 to 2009, so how sure are you to say it will fall for the next decade. Did the Wise bears tell you to buy in 2003?
All I can tell flat buyers is if you have the potential to buy with or without loan and if you have the repayment capacity with loan and U NEED THE FLAT (necessary condition) then please do buy it whether it is bull or bear market. IF you dont need it and are buying flats you are always stupid whether bull or bear market. In the best cases I know of Chennai returns probably 5% return on investment. So buy a flat ONLY TO LIVE IN IT.
And then why should I buy land. NOw one reason is to build a house so the argument is same as for a flat except that you dont own a BUILDER CONNED UDS, but the entire land share. ALso you can operate on the land to your taste. HOwever if you are an investor in Land then you are a speculator as anybody else. THe only advice I can tell u is from the past. Land prices have not crashed 70% in 1996 when there was a crash, even until 2002, not in the small falls in earlier eras. Land WHICH IS LIVEABLE is always useful. So it will go up giving higher returns than any other normal investment types including Nifty or Gold or anything else. I dont want to talk about specific stock since u may not know to identify it and if u did you dont need to read this anyway!
Land does not give linear returns, it is kinky, but past experience of data I have on lands purchased in 1960, 1967,1979,1988 and 1996 have shown that uniformly they have given about CAGR of 20% to 30%. However I am not talking about some agricultural land in TIndivanam. I am talking about a Mylapore or a T Nagar in 1960s, a THiruvanmiyur or a Saligramam in the 70s-80s and a GST road or a ECR in the 90s. These were liveable when purchased and have developed fantastically over the years. So if u buy land say in Velachery today it has to go up without fail based on past, in URapakkam most likely but in Madurantakam or Sriperumbudur maybe. In Tindivanam or in Vayalur u r speculating and u will have to wait for 20 years minimum for that CAGR based on my past studies.
In summary if the sky falls on my head like the Gauls say, then I cannot do anything with or without bears. However if I dont believe in imaginary comics and depend on past facts in a SCIENTIFIC EDUCATED VIEW then buying LAND TODAY is an ASSET, FLAT is a good investment to LIVE and a house is a good combination of both and to sell your LAND OR HOUSE is SPECULATION and most likely will be FOOLISHNESS unless u r a trader in the housing market in which case you dont need to ask me.
Hope the above summarizes all one needs to know about RE. Specific queries can be answered but this one summary tells it all. I AINT FOOLISH TO ASK A FOOLISH AMERICAN NRI TO TELL ME WHAT THE FUTURE HOLDS FOR ME, FOR HE HIMSELF LEFT THIS SHORE ASSUMING HE KNEW THE SOLUTION AND IS STUCK IN A NEW LAND WITHOUT FRIENDS AND WITHOUT JOB BUT YET WILL LIKE TO TELL ME THAT MUD HAS NOT LITTERED HIS MOUSTACHE.
Is there more to say?

[Natarajg007]

With the budget passed today, there will be no stimulus more for anything in India for next 4 months. Lots of weak hands will be squeezed to sell out their RE for pennies and then all of a sudden come August or October, the same squeezed RE will be quoted for fancy figures.
Even Wiseman who has as agreed by Panther a set of dup ids to support his views is going to sell out his land for a song. He will then will be paying tax hopefully (rather hopelessly) and then see that he cant buy 50% of that same land for the remaining money and will write next year telling us a fresh story!
Please realize one thing. Dubai jobs are gone and Indians are returning true. Global downturn - true. REcession true. Realestate falling - partially true. What is missed is, funny rises in the outskirts are in trouble, silly builders are in trouble, but valuable land is yet pricey and you are getting lesser and lesser of them.
Please go and find a genuinely buyable piece of land in Adayar, Mylapore, TNagar for reasonable price (will say 12K psft) and then u really got a good deal.
Incidentally in Bangalore where prices are supposedly falling, in the outskirts of Sanjay Nagar where an acquaintance has a flat at 25L for 1000plus sqft, he states current rate is 30L. Things aint really falling, just stabilising.
Ofcourse the silly broker who sold land in Sriperumbudur some 10km from Rajiv gandhi memorial for 1000psft will now give u the same for 200psft or even for free!
Take care if u have land. Dont end up as Idiot man. IT is better to have a simpler name than to call urself Wiseman and be a Foolishman in reality!