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Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

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Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

Last updated: August 7 2009
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  • #11

    #11

    Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

    Dear friend,

    I did not want to go into the higher salary hikes of top managers whether they deserve or not. It is a fact that at the working levels, the increases were not much and now it is decrease even. In the recent wage hike approved by the Govt. for PSUs, at the Sr. Level, say in the level of Addl. General Manager ( gr. 7 ) the basic pay was Rs. 25700 PM prior to wage hike where as it was Rs. 26,500 for a General Manager ( gr. 8 ) and to become a General Manager after becoming AGM, one will have to wait for minimum of 4 and a maximum of 8 years. See the difference between grades at Sr. levels, hardly Rs. 800 per month? Even in the revised scales,. the difference is small only.
    Some people open their mouth wide when the pay hike news came that the PSU chaps are going to get increase of 60% etc. where as the increase comes once in 10 year period unlike the private sector hikes which are very high every year, of course hire and fire exist here as against job security at the PSUs.

    Believe me, the lower/ below mid level people at Infosys are keeping quiet now due to IT downtrend. There is wide spread discomfort as also fear prevalent now. Once the IT industry trend reverses to uptrend, many will go to smaller or medium or bigger companies at higher salaries. Infosysians at lower and middle levels are the people who will await their chance to prosper better elsewhere on the revival of the IT industry.

    ks2071746
    Last edited by ks2071746; May 9 2009, 02:40 PM. Reason: add on

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    • #12

      #12

      Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

      KS,

      You are talking about fathers. grandfathers generation. During 1970s, 1980s government job meant prestige, working in a government job got the same respect like working in Infosys today.

      Have you watched this Sarath Kumar movie "Arasu", in that movie after Vadivelu gets a "Government Job" suddenly the attention and actions he makes.

      That was the Nehruvian social ist era when the biggest employer was Government.

      Now since 1990s, after the economic reforms, we are in a open era where private capital is encouraged and private entrepreneurs are not punished if they have excess capital. This is true democracy.

      I can't understand how you took that increment of Rs.800 in 4 years to explain. Nobody in today's generation has patience to work in a government job for Rs.800 increment in 4 years LOL.

      Now coming back to Infosys,

      Employees of IT leaders like Infosys have taken high increments of 15-20% p.a during the last 4-5 years. When new employees join big companies like Infosys, they directly get 30-50% hike. Currently there is a recession in western economies and that is understandable. When the recovery happens in another 1-2 years like yourself agree, who is in the best position to benefit? India based big IT companies like Infosys
      • MNCs like IBM, Accenture are subjected to tough draconian corporate laws in USA which under Obama is a communist country already
      • Smaller, midsized IT companies do not have the volume when there will be a sudden spike in demand after slowdown for 1-2 years.
      • Big Indian IT companies like Infosys which have volumes and headquartered in capitalist India are best positioned to handle a sudden spike in demand after the slowdown ends.
      Last edited by contra; May 9 2009, 06:23 PM. Reason: grammer

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      • #13

        #13

        Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

        Originally posted by coolmouli View Post
        Instead of government forcing the state owned banks to reduce home loan interest rates they should have forced builders to reduce the rates or atleast leave the interest rates to the banks. Inflated artificial real estate prices not going to help any economy and that too with poor infrastructure...

        Becasue of the boom for last years People borrowed money from banks and gave it to builders. Now salaried people's disposable income has come down affecting every business and the economy.

        Daily wages labourers, bank home loan agents should know the pain more than any one who bought the house and cannot pay EMI.

        Builders should reduce prices by 40% and go back to 2004 levels and people should start buying houses with in their salary limit atleast for this daily wage workers and to keep the economy moving....
        I also wish the same and hope the government would take such steps.But, it seems unlikely.

        The financial instituitions and the government thrives by leveraging appreciating assets like RE for economic growth.

        Ever since the 1990 economic reforms and opening of the markets, Its been a deliberate attempt by the government to encourage people to invest all their wealth within a regulated system and extending cheaper loans to various industries and fuel its development.This ensures uniform distribution of wealth and growth to an extent.On the downside, The Banks and Corporates have become more powerful and influential in deciding the countries economy.

        There are very few avenues available today to hold wealth outside the system now, some being Cash(including black money) and Real Estate.

        Allowing IT exemption for housing loan EMI payments is also such an effort to bring the money invested in RE by the salaried class into the system.

        We are all so content having evaded tax whilst putting the hard earned money into a system which is purely capitalist in nature.The profits are distributed only among their investors and not across all strata of people in the country.

        If one chooses not to participate in the system, either as an investor or credit availer, they tend to lose out on the opportunity to grow along with the economy.

        How many of us expect the government do something directly for us?How many of us opt for government job?how many of us want government to allocate a home for us?how many of us get treated at a government hospital?how many of our kids study at government schools?

        We have other alternatives like high paying private jobs,Home loans to buy our dream house, medical insurance to cover expenses at the best private hospital with better healthcare facilities,educational loan without collateral available for studies in best colleges/university.we have life insurance/pension/child plans to support future expenses and retirement.

        The government today is expected to play only a facilitating role, not a provider.

        India has seen more development due to this systematic infusion of capital and availability of easy credit in the past 25 years than anytime in its 60+ years of independance.

        Lets hope that the latest economic slowdown makes the government to take some populist measures and sociallistic reforms to address this imbalance and focus on development of domestic production and consumption like agriculture,power,natural resources,metals,commodities etc.
        Last edited by nabishek; May 10 2009, 01:41 PM.

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        • #14

          #14

          Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

          Silly Q

          Ear...please think before u make the comment!!!!...............BANK , Builders and Govt need to come on a single platfrom to think of the Property at evryones reach!!!

          Comment

          • #15

            #15

            Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

            Originally posted by nabishek View Post
            I also wish the same and hope the government would take such steps.But, it seems unlikely.

            The financial instituitions and the government thrives by leveraging appreciating assets like RE for economic growth.

            Ever since the 1990 economic reforms and opening of the markets, Its been a deliberate attempt by the government to encourage people to invest all their wealth within a regulated system and extending cheaper loans to various industries and fuel its development.This ensures uniform distribution of wealth and growth to an extent.On the downside, The Banks and Corporates have become more powerful and influential in deciding the countries economy.

            There are very few avenues available today to hold wealth outside the system now, some being Cash(including black money) and Real Estate.

            Allowing IT exemption for housing loan EMI payments is also such an effort to bring the money invested in RE by the salaried class into the system.

            We are all so content having evaded tax whilst putting the hard earned money into a system which is purely capitalist in nature.The profits are distributed only among their investors and not across all strata of people in the country.

            If one chooses not to participate in the system, either as an investor or credit availer, they tend to lose out on the opportunity to grow along with the economy.

            How many of us expect the government do something directly for us?How many of us opt for government job?how many of us want government to allocate a home for us?how many of us get treated at a government hospital?how many of our kids study at government schools?

            We have other alternatives like high paying private jobs,Home loans to buy our dream house, medical insurance to cover expenses at the best private hospital with better healthcare facilities,educational loan without collateral available for studies in best colleges/university.we have life insurance/pension/child plans to support future expenses and retirement.

            The government today is expected to play only a facilitating role, not a provider.

            India has seen more development due to this systematic infusion of capital and availability of easy credit in the past 25 years than anytime in its 60+ years of independance.

            Lets hope that the latest economic slowdown makes the government to take some populist measures and sociallistic reforms to address this imbalance and focus on development of domestic production and consumption like agriculture,power,natural resources,metals,commodities etc.
            Even though India has one of the highest saving ratio in the world we are still dependent largely on external capital for growth as most of the investments in India goes in to illiquid RE and gold.

            What is the value addition if money(both black and white) is invested in RE and remain locked for 30-40 years(I am not talking about house bought for personal use).Mostly politicians and middleman gain as they know the knack of tweaking rules and extract maximum profit.Is land in shortage in India?No.we have lot of land but not land fit for living i.e residential land.For converting non-residential land into residential land one needs to get 64 signatures.This redtape is causing the shortage of land and politicians and middleman will not allow this to change so easily.

            See what happened to gold.In 1970s price of gold was around 850 dollar per ounce.Now also the price is around the same level.Why?US under Nixon abolished the gold standard which was existing before 1970s so that price of gold does not increase drastically.So single piece of legislation can change the game dramatically.Price of gold had increased in rupee terms as government allowed rupee to devalue against dollar which is not good for India in long term.

            Same thing can happen for RE also.If any good government in future abolishes the redtape, more land can be made available for development which will make land affordable for new buyers .Investing in RE now is like investing in ponzi scheme or getting trapped in Greater Fool Theory i.e false belief that they would always be able to sell their assets to “bigger fools” at a higher price.
            Last edited by BigBear; May 11 2009, 07:41 AM.

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            • #16

              #16

              Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

              Originally posted by Natarajg007 View Post
              How about your salary being reduced back to 2004 levels?
              Are you implying that the salaries have grown at the same rate as the RE prices? Coming from you, that's an ignorant statement. You are smarter than that, Natz.

              From 2004 to 2007, RE has grown 300 to 400% (if not more). How people do you know who are making 4 times in 2007 compared to what they were making just 3 years back?

              Don't get desperate

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              • #17

                #17

                Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

                Originally posted by SHYAMSUNDAR PAHARI View Post
                Ear...please think before u make the comment!!!!...............BANK , Builders and Govt need to come on a single platfrom to think of the Property at evryones reach!!!
                Friend, You are missing the sarcasm and pertinence of the question.People think they are above the government in having evaded tax and feel confident that they can manage their investment themselves, and become richer and richer.They miss out that they are becoming richer only through this system provided by the government and not outside it.

                Government is the only body that can and would give subsidies keeping the larger interest of the people in mind, Not the Banks and Builders.

                Are you expecting the government to liaise between the different bankers and builders for reduction of prices in existing projects?No way.

                Government cannot dictate or direct how banks should be run or how much profit a builder should book.They can at best take efforts to regulate it and try to keep away speculators and prevent malpractices.

                Government can come up with future township projects as public/private partnerships schemes where the government would provide land and the private players build on it.It would be a development,build,finance,operate and transfer model(DBFOT).

                Classic example of BOT are the toll roads by NHAI.Though you end up paying heavy fees each time you make use of the roads.Its beautiful,connectivity is great,it makes travelling pleasurable, transport of goods faster and generates huge revenues.

                Thats the way to go forward.
                Last edited by nabishek; May 11 2009, 02:35 PM.

                Comment

                • #18

                  #18

                  Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

                  Originally posted by BigBear View Post
                  Even though India has one of the highest saving ratio in the world we are still dependent largely on external capital for growth as most of the investments in India goes in to illiquid RE and gold.

                  What is the value addition if money(both black and white) is invested in RE and remain locked for 30-40 years(I am not talking about house bought for personal use).Mostly politicians and middleman gain as they know the knack of tweaking rules and extract maximum profit.Is land in shortage in India?No.we have lot of land but not land fit for living i.e residential land.For converting non-residential land into residential land one needs to get 64 signatures.This redtape is causing the shortage of land and politicians and middleman will not allow this to change so easily.

                  See what happened to gold.In 1970s price of gold was around 850 dollar per ounce.Now also the price is around the same level.Why?US under Nixon abolished the gold standard which was existing before 1970s so that price of gold does not increase drastically.So single piece of legislation can change the game dramatically.Price of gold had increased in rupee terms as government allowed rupee to devalue against dollar which is not good for India in long term.

                  Same thing can happen for RE also.If any good government in future abolishes the redtape, more land can be made available for development which will make land affordable for new buyers .Investing in RE now is like investing in ponzi scheme or getting trapped in Greater Fool Theory i.e false belief that they would always be able to sell their assets to “bigger fools” at a higher price.
                  I agree with most of your points here.

                  But,I feel the fact that we dont have lots of land thats liveable and the politicians have vested interest to keep it that way makes it a good investment for long term.With the speed our government works, It takes atleast 10 years for a place to become liveable with all infrastructure from the time the initial layout is formed.

                  I feel when one buys a non-litigated liveable property using cash, at the right price without over leveraging their capacity.They are safe.The risk of the investment is only devaluation and not erosion.

                  Unlike stocks where you can lose your money completely.Assets like RE,gold are something that provides balance and prevents wealth from getting eroded completely.They provide hedge against inflation and troubled times.

                  While I try to assess risk of various portfolios,I find open ended mutual funds with large corporate investor participation pose higher risk than RE.The overdependance on "professional fund manger(s)" makes them more vulnerable to ponzi like scams despite being regulated by SEBI.Just my 2 cents.

                  Comment

                  • #19

                    #19

                    Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

                    Originally posted by panther View Post
                    Are you implying that the salaries have grown at the same rate as the RE prices? Coming from you, that's an ignorant statement. You are smarter than that, Natz.

                    From 2004 to 2007, RE has grown 300 to 400% (if not more). How people do you know who are making 4 times in 2007 compared to what they were making just 3 years back?

                    Don't get desperate
                    I am yet to come across one who has not made more than 3 times his salary in IT or Financial fields between 2004 and 2007. Infact all the examples I have, have made 4.5 times on the average.
                    PS. I aint a HR broker...Sethugm will ask that next! LOL!

                    PS2. Incidentally if anyone is not making 3 times more between 2004 and 2007 then they should be hopeless or must have retired like me! LOL!

                    Comment

                    • #20

                      #20

                      Re : Are Cheaper Home Loans Beneficial Against the Inflated RE Prices?

                      Originally posted by Natarajg007 View Post
                      I am yet to come across one who has not made more than 3 times his salary in IT or Financial fields between 2004 and 2007. Infact all the examples I have, have made 4.5 times on the average.
                      PS. I aint a HR broker...Sethugm will ask that next! LOL!

                      PS2. Incidentally if anyone is not making 3 times more between 2004 and 2007 then they should be hopeless or must have retired like me! LOL!
                      Dear friend,

                      Regarding PS2, it looks, as you did not make 3 times of salary in 2007 over that of 2004, you chose to retire and now you should be making much more than the 3 times every 3 year period?

                      What do people like me, PSU employees, who never made more than a few hundreds by way of increment each year during all these years do, except to await the retirement to come ?

                      ks2071746
                      Last edited by ks2071746; May 12 2009, 09:57 AM. Reason: add

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