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Reality prices to crash...

Last updated: May 25 2009
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  • #31

    #31

    Re : Reality prices to crash...

    Everyone's situation is different. You need to decide whats best for you. My suggestions to people would be deleverage and keep some cash at hand (enough for get by for a tleast 6 months). Don't be stuck in debt up till your eyeballs (specially in these times) and don't gamble with your own or other's money.

    I have taken my own advice and have no debt (house, car and other investments are paid off) and have sufficient cash reserves (for rainy day). My other cash positions will be invested when I see realistic prices (doesn't matter if it is RE or other investments).

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    • #32

      #32

      Re : Reality prices to crash...

      Originally posted by nick_alan_76 View Post
      On a side note regarding the reasons why NRIs will not invest more in 2009/2010, Say an NRI remitted $60K for buying a property in India back in Oct 2007 at Rs. 39/$. Now imagine he want to pull back that money, he will be pulling out at Rs. 51/$. That's a loss of Rs. 12/$ and total Rs. 7.2 Lakh for his initial investment. Imagine that he had taken a second mortgage on his house to invest in India and the picture gets dirtier. With so much rupee fluctuation, do you think anyone in his/her right mind invest at this time ?
      It is really interesting and sad to know that people have taken second mortgages to invest in India.

      Any most of the wiseman predictions are coming true, now we have to be prepared for oncoming inflation threat because of stimulus packages all around the world.

      Not sure when to expect this.

      Comment

      • #33

        #33

        Re : Reality prices to crash...

        Originally posted by sehgal View Post
        you are right nick...reality prices are bound downwards. Can you suggest what may be done if one is highly invested in house/commercial property. should one sell few?What then to do with cash?
        Dear friend,

        This is not the time to sell RE unless one is in very urgent need of money for some specific purpose like higher studies abroad/marriage etc. Better to hold on till the downstrend is off and signs of recovery are visible. Whatever has come down now will go up after some time including the IT sector and that will be the time to sell RE at good rates/value.

        ks2071746

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        • #34

          #34

          Re : Reality prices to crash...

          Originally posted by ks2071746 View Post
          Dear friend,

          This is not the time to sell RE unless one is in very urgent need of money for some specific purpose like higher studies abroad/marriage etc. Better to hold on till the downstrend is off and signs of recovery are visible. Whatever has come down now will go up after some time including the IT sector and that will be the time to sell RE at good rates/value.

          ks2071746

          Dear friend

          Next few years in RE will be non performing years. i.e., prices will be either stagnant or getting downwards.
          This means no appreciation during this period. Suppose the selling price of a particular plot is Rs. 10L.

          If it lies idle for the next 3 or 4 years, you will lose 4 or 4.5 Lakhs rupees

          which you could have got through interest rate.

          If you sell this particular plot, after 3 or 4 years you will have around 14 or 15 lakhs in cash.

          So, It is not adviseable to retain the non performing land for long period

          thanks

          chataara

          Comment

          • #35

            #35

            Re : Reality prices to crash...

            Originally posted by chataara View Post
            Dear friend

            Next few years in RE will be non performing years. i.e., prices will be either stagnant or getting downwards.
            This means no appreciation during this period. Suppose the selling price of a particular plot is Rs. 10L.

            If it lies idle for the next 3 or 4 years, you will lose 4 or 4.5 Lakhs rupees

            which you could have got through interest rate.

            If you sell this particular plot, after 3 or 4 years you will have around 14 or 15 lakhs in cash.

            So, It is not adviseable to retain the non performing land for long period

            thanks

            chataara
            Dear friend,

            One need not have to rush sell now. If you see in a longer perspective, say 5+ years, the property would have given more return than the normal bank interest. Of course, if one in debt, they may have to sell some or all proiperties to avoid getting bankrupt.

            ks2071746
            Last edited February 28 2009, 04:38 PM. Reason: add on

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            • #36

              #36

              Re : Reality prices to crash...

              What would you say to a 10 to 15 year recovery ...

              Originally posted by ks2071746 View Post
              Dear friend,

              One need not have to rush sell now. If you see in a longer perspective, say 5+ years, the property would have given more return than the normal bank interest.

              ks2071746
              ks,

              I would like to disagree.

              - First, in the case of Sehgal, by "investment in too many properties" does he mean based on cash or based on Debt. Agree with Alan that if it is debt, then Sehgal is in serious trouble.

              - Like Alan, I too have wound down my debt position to ZERO over the last 2 years having seen this approaching from around late 2006. In addition, I focused out of the export market (US mainly) and took these 2 years to build an India-focused and low-cost, high-margin business that specifically thrives on downturn (our product cuts cost of operations by 50% - 80% for customers besides sharply increasing accuracy).

              - As Chataara has said, would you like to be the early one out? And lose 20%? Or would you like to wait for the turnaround over next 10 years? And see your real returns coming only 15 years or so later - if you still survived?!

              Remember, focusing on the 15% - 20% loss today would mean missing the much bigger loss - not to exclude the position of being asset rich and cash poor (in a declining asset value scenario) - of seeing your property going down to surprisingly bad levels and staying there for a long time.

              If Sehgal is overloaded with debt, there is a real chance of him being bankrupted by this decline the way he is loaded.

              Beware!!!

              cheers

              Comment

              • #37

                #37

                Re : Reality prices to crash...

                if TSUNAMI couldnt kill RE on ECR,slowdown cannot kill RE in Chennai.

                Originally posted by wiseman View Post
                ks,

                I would like to disagree.


                Beware!!!

                cheers
                WM as you adapted to the downturn by looking at other avenues,the indian economy has diverse strenghts and is resilient too.I for one think that we are not in the same boat as US and UK.
                I still see many people making money (lots of em) i do not know the Numbers or the % of IT or the salaried crowd buying RE.but i know by personal exposure the big deals are done by self employed people.till date not much of a dent in their earnings (if any).and many businesses are managed by one person or famil(managmt)they have surplus which they do not invest in expanding their own business as they cannot manage on their own and do not want to risk delegation or diversification. these people still invest in RE,
                these people are happy to buy RE and rent it out. they do not calculate the CAGR or the R/E etc and are blissfully unaware or care about the impending 'doom' predicted by wiseman & co.
                there are lots of ifs & buts in both our views, i am neither pessimistic or overtly optimistic ,
                you remember the TSUNAMI and people telling nobody will ever buy land on the ECR ..... one year and the Tsunami was forgotten and people started
                buying on ecr and it was not left out of the boom.
                if a catastrophe like tsunami couldnt kill RE on ECR then i dont think a slow down can in Chennai.

                Comment

                • #38

                  #38

                  Re : Reality prices to crash...

                  be careful what you wish for ...

                  Originally posted by abk View Post
                  WM as you adapted to the downturn by looking at other avenues,the indian economy has diverse strenghts and is resilient too.I for one think that we are not in the same boat as US and UK.
                  I still see many people making money (lots of em) i do not know the Numbers or the % of IT or the salaried crowd buying RE.but i know by personal exposure the big deals are done by self employed people.till date not much of a dent in their earnings (if any).and many businesses are managed by one person or famil(managmt)they have surplus which they do not invest in expanding their own business as they cannot manage on their own and do not want to risk delegation or diversification. these people still invest in RE,
                  these people are happy to buy RE and rent it out. they do not calculate the CAGR or the R/E etc and are blissfully unaware or care about the impending 'doom' predicted by wiseman & co.
                  there are lots of ifs & buts in both our views, i am neither pessimistic or overtly optimistic ,
                  you remember the TSUNAMI and people telling nobody will ever buy land on the ECR ..... one year and the Tsunami was forgotten and people started
                  buying on ecr and it was not left out of the boom.
                  if a catastrophe like tsunami couldnt kill RE on ECR then i dont think a slow down can in Chennai.

                  abk,

                  I'm not surprised to see denial een at this late stage. Please consider the facts in front of you ...

                  over 80% of the World's economies had just concluded Jan 2009 with an Industrial Production drop between 10% and 20% (Japan, which dropped 20% dwarfs Indias IP as it is THE manufacturing powerhouse in the world as well as the 2nd biggest economy in the world).

                  We are talking about economic collapse in so many countries that are considerably bigger than us, you cannot even start fathoming the severity of this financial tsunami.

                  Right now, I would liken our condition to the hours before the real Tsunami struck. When the output of much of your export markets decline 50% - and this happened back in the '30s - you will realise that the total exports from India - which was targeted at $200 billion for 2009 and is now revised to $170 billion already by the Govt (remember this is a 15% reduction even before the storm has struck) will have declined by as much as 50%.

                  Do you realise the impact of a 50% drop in exports alone - which is 10% drop in total GDP? Even assuming a 1.5 times impact on the broader economy (most analysts use 2 or 3 times multiplier) you will see a 15% drop in GDP. We will be in deep depression. This end seems to be very realistic given the global economic situation, unless you want us to believe that somehow we will be exporting all our good and services to Martians.

                  You seem to be all too eager to invite this final stage into India. The consequences of a 10% - 15% drop in our GDP will beggar this country and take us all the way back to early 1990s in economic terms. Do you really want to imagine the consequences of millions of jobless people both in the IT/ITES and other sectors? Your property will be worth 1/5th of what it is now and even then be considered high given economic conditions then.

                  cheers

                  Comment

                  • #39

                    #39

                    Re : Reality prices to crash...

                    Hats off Wiseman,

                    I think the link below contains yet another prediction you made.

                    http://businessstandard.com/india/ne.../13/19/350315/

                    According to a Credit Suisse report, developers such as DLF, Parsvnath and Orbit have over 20 per cent of their revenues booked since financial year 2006-07 as outstanding from customers and some of these transactions could be cancelled leading to write offs.

                    Comment

                    • #40

                      #40

                      Re : Reality prices to crash...

                      Up up and away

                      Wiseman. Very well put. First we had Irrational Exuberance (in words of Alan Greenspan) and now denial to accept the reality.

                      Here is to people who think the real estate properties WILL ALWAYS come back, this is what happened in Japan in 1989 (which was the largest exporter that time with HUGE trade surplus... UNLIKE INDIA which still has public debt ~59% of GDP).

                      Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over 100 million yen ($1 million US dollars) per square meter ($93,000 per square foot). Prices were only marginally less in other large business districts of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak. Tens of trillions of dollars worth were wiped out with the combined collapse of the Tokyo stock and real estate markets. Only in 2007 had property prices begun to rise; however, they began to fall in late 2008 due to the financial crisis.
                      Source: http://en.wikipedia.org/wiki/Japanes...t_price_bubble
                      KS & ABK: Do you still feel the real estate price bounce back is only a matter of time? How long are you willing to wait?

                      That is why I tell everyone that you need to do your own study. Don't base your investment strategies on what someone else says. He/She may have vested interests. I learnt the hard way in 2001 tech bubble burst that your don't trust anyone else but your brain. Don't ask me or anyone what you should do. Remember, Internet discussion forums or financial advisers are not a replacement for your own research.

                      My posts keep getting bigger so I will try and keep them short now onwards.
                      Last edited March 1 2009, 09:33 PM.

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