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Builders & Real Estate Bulls Theory Proved Wrong
June 26 2009 , 11:59 AM   #11
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this all sounds good what I would say it is theroy.

becuase I will take one case, where my good friend was paying 5K rent in 2004 for 2BHK and then bought a house for 10L for 9K EMI.

Now his house is worth of 30L even after RE crash and paying 10K EMI...in this case, buying a house decision is wiser than pay the rent.

Today it all depends on where you invest due to globalisation, development is happening at most of the location, you donot find place as same as it was looking 10 years back. but it was the case 20 years back, So it cannot be generalised. one of my friend bought a house in Dec-2007 in 25L and sold in 35L after a year before shifting to Pune. he didnot pay the rent for year and also gained 10L on top of it. What will you call this case ?
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June 26 2009 , 12:14 PM   #12
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very well said realacres.

People should not get carried away by emotions where their hard-earned money (present as well as future money is concerned). Let the trends and the market forces play out over the next 5-7 years to get to the real fair value of real estate!
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June 27 2009 , 01:55 PM   #13
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calculator buy vs rent.

hi all,

just to make things simpler for you, i am attaching an excel calculator ( i was in the same dilemma , and found useful stuff on the net , god bless the person who has made it) which will let you know whether buying or renting is a better option.

as you might see this depends based on various parameters which you have to key in, & based on your inputs calculator lets you know which is the best option.


disclaimer: cannot claim on the authenticity or accuracy of this calculator hence pls use at your own will. I will not be liable in anyway for any inaccurate result.
Attached Files
File Type: zip Buy-Or-Rent-Zero-Values.xls.zip (44.1 KB, 1120 views)
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June 28 2009 , 11:54 AM   #14
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manna143,
About your friend, where is he living now? Did he buy a new house? If not, then he has understood the futility of ownership. If he has, then he obviously paid for his new house at peak rates of 2008. I.e. net loss, even in your supposedly good case scenario.
The thing is, it takes a loooong time to recover from RE slumps. As a medium term investor, I would steer clear even at rock-bottom prices, because I wouldn't be able to recover my capital + interest for as much as upto a decade.
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June 28 2009 , 03:43 PM   #15
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Quote:
Originally Posted by manna143
this all sounds good what I would say it is theroy.

becuase I will take one case, where my good friend was paying 5K rent in 2004 for 2BHK and then bought a house for 10L for 9K EMI.

Now his house is worth of 30L even after RE crash and paying 10K EMI...in this case, buying a house decision is wiser than pay the rent.
Get us some figs.

1.) What is the rent which your house will fetch right now? It makes sense to buy a 10L house than to pay INR 5000/month as rent even today, right now.
Formula is above:- Value of house max.= 200x; x=rent/month.

2.) What you did was in 2004. This made sense as it is accommodated in the above formula nor there existed any RE bubble at that time.

3.) If you want to purchase your own house again, will you buy it at INR 30L or pay rent?

Please don't get confused between PURCHASE IN 2004 Vs RENT IN 2009.

Quote:
Today it all depends on where you invest due to globalisation, development is happening at most of the location, you donot find place as same as it was looking 10 years back. but it was the case 20 years back, So it cannot be generalised. one of my friend bought a house in Dec-2007 in 25L and sold in 35L after a year before shifting to Pune. he didnot pay the rent for year and also gained 10L on top of it. What will you call this case ?
Fact remains that this happened before RE bubble burst in the country & economy showed signs of illness. Would he have been able to sell it today at INR 35L is the question?
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June 29 2009 , 12:42 AM   #16
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Quote:
Originally Posted by realacres
I am not asking anyone to stay on rent for life. I just want to say that Rent Today & Purchase Tomorrow at affordable/logical price.

I agree to you fully with that but i would like to add

" dont try to time the market"

e.g. 20 years down the line properties in NCR were available at a price of 10-20L are currently at 2-3Crs. so if you are looking for a home for self or for long term perspective a home bought today at 3K or 3.5K per sq ft will not matter 20years down the line when it would be probably 40K 45K per sq ft. ... well this will hold true for every big city in india atleast for next 30-40years
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June 29 2009 , 02:38 PM   #17
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Quote:
Originally Posted by amit_arya
I agree to you fully with that but i would like to add

" dont try to time the market"

e.g. 20 years down the line properties in NCR were available at a price of 10-20L are currently at 2-3Crs. so if you are looking for a home for self or for long term perspective a home bought today at 3K or 3.5K per sq ft will not matter 20years down the line when it would be probably 40K 45K per sq ft. ... well this will hold true for every big city in india atleast for next 30-40years
Please read point 1.
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June 29 2009 , 07:10 PM   #18
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wowow.... very interesting

Quote:
Originally Posted by amit_arya
I agree to you fully with that but i would like to add

" dont try to time the market"

e.g. 20 years down the line properties in NCR were available at a price of 10-20L are currently at 2-3Crs. so if you are looking for a home for self or for long term perspective a home bought today at 3K or 3.5K per sq ft will not matter 20years down the line when it would be probably 40K 45K per sq ft. ... well this will hold true for every big city in india atleast for next 30-40years
Your numbers make me do some math.
according to you, prices in India after 20 yrs will be 40K 45K per sq ft.
that means a 2 BHK with 1000 Sq feet will cost 4 Cr. EMI would be around 3.5L per month.
so what would be the salary of average Indian? min 7 L per month? That's almost double the average salary of people in USA!!

If i have done my math right then wowo.... Its Interesting... So finally American people will apply for work visa to India for better salaries.
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June 29 2009 , 07:23 PM   #19
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Exactly the same argument used by others

Quote:
Originally Posted by RAJESHP
Your numbers make me do some math.
according to you, prices in India after 20 yrs will be 40K 45K per sq ft.
that means a 2 BHK with 1000 Sq feet will cost 4 Cr. EMI would be around 3.5L per month.
so what would be the salary of average Indian? min 7 L per month? That's almost double the average salary of people in USA!!

If i have done my math right then wowo.... Its Interesting... So finally American people will apply for work visa to India for better salaries.


You got it wrong RajeshP!

If you noticed this is the same disingenuous argument put forth by Nats for people to buy property now as it would give a 24% CAGR over the next many years.

Therefore a half-ground property worth 1 Cr today (or roughly 8k per SFt) would become 5.90L per SFt 20 years later with the plot costing 70Cr.

To buy it at the same 90% loan, your EMI would be around 70L per month. So your salary before tax must be at least 1.30Cr per month.

Why the average American joe! Even the President of America would be applying for a job here!!!

cheers
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June 29 2009 , 07:31 PM   #20
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RajeshP & wiseman,

Hahahaha.Very good one.. Well said.

How about settling in Monte Carlo at this price after 20 years, if RE bulls are to be believed?
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