Tuesday, May 05, 2009

Kiyosaki and Mahindra World City

Here is a good article I found on yahoo on buying value investments. Its a perfect article to illustrate why Chennai represents good value over Mumbai to live and make a career without take undue risk with housing investments. If Tata and Mahindra can find value, so can the middle class individual.

The other day a friend of mine approached me excitedly, saying, "I found the house of my dreams. It's in foreclosure and the bank will sell it to me for a great price."
"How good is the price?" I asked.
"Just before the real estate market crashed, the seller was asking $780,000 for the property. Today, I can buy it from the bank for $215,000. What do you think?" she asked.
"How would I know?" I replied. "All you've given me is the price."
"Yes!" she squealed. "Now my husband and I can afford it."
"Only cheap people buy on price," I replied. "Just because something is cheap doesn't mean it's worth the cost."
I then explained to her one of my most basic money principles: I buy value. I will pay more for value. If I don't like the price, I simply pass. If the seller wants to sell, he will come back with a better price. I let him tell me what he will accept. I know some people love to haggle; personally, I don't. If a person wants to sell, they will sell. If I feel what I am buying is of value, I'll pay the price. Value rather than price has made me rich.
Here is the Mahindra presentation on MWC. Land near this area is between 350-700 Rs for plots. In the next five years, one can easily expect this area to boom. the neighboring area of Singerperumail Coil is booming with houses, and so is Marmalai Nagar.

Chennai Facts Chennai Facts api_user_11797_saravana_blr

32 comments:

Bharat said...

Wonder what happened to Maha Mumbai and the Pune area.

I totally agree with you Vik, Mumbai has gone to the dogs, its over congested, its over polluted, its extremely expensive and just plain unlivable.

People in Mumbai are building pigeonholes and calling them houses..Which then people like BB try to pump and dump on the middle class.

Anonymous said...

Vik,

How do you define value, and how do you equate it with price?

I think value -- just like beauty -- is fickle, relative, and depends on one's state of mind. For example, if I am lost in a desert and am thirsty, I will pay anything (whatever I have on me at that time) for a bottle of water. The moment I am rescued, the "value" of that bottled water, for me, would go back to $1.

My point is that value-based decisions could also be emotional, just as in the case of your friend -- she got emotional with that huge drop in the price.

Having said that, I understand what you are trying to say -- each buyer has to find something, apart from the price, attractive in the property. For example, I wouldn't mind paying a small percentage of the price higher than the market price for, let's say, a house that right next to my work place. As I see "value" in not having to spend three hours on commute everyday -- the time that I could spend with my family.

As you can imagine, when more and more people start seeing value in the same thing, the demand goes up and so does the price. I am not saying that people should buy pigeon holes in Mumbai when they have much better alternatives elsewhere in the country. It may be just a matter of these Mumbaites finding "value" in continuing to live in the city where they grew up and have their entire family.

Just a thought.

Vik said...

What I call value is the land on GST close to MWC. MWC is selling apts for 2500+, outside you can get land between 350-700. Whenever the area develops, maybe in the next 3-5 years, land prices will approach apt prices, whatever is that number. I don't think you get such value in many places in Bangalore, forget Mumbai or Delhi. I know it is very hard to move from the area you have grown up in, but frankly for me as a career the tech industry is in Bangalore, Pune or Chennai. Mumbai doens't cut it for me even if real estate was cheaper then Chennai I wouldn't move there. The value which I see is career satisfaction versus cost of living. I think for many Chennai might be the only choice as many companies setup shop or continue moving people to Chennai to take advanage of the lower cost. I know TCS is doing that and from insiders at seniors level I know they will fill up the OMR campus.

admin said...
This comment has been removed by the author.
Shriniwas K said...

WTF Chennai has no water! You cant just survive on nariyal paani

Shriniwas K said...

Not to mention Chennai has the most intolerant business culture /lifestyle, You wont survive if you dont know Tamil. Even Software companies hold meeting in Tamil and the colleges have all the Tamil pride syndrome.

Tamil Nadu wanted to secede to form its own nation. Now its shamelessly wooing others to come to Chennai while for 60 years Tamils have been bashing Delhi wallahs and Bombay wallahs. This is the most ridiculous brochure ever. Once you move to Chennai all you can do is spend money to buy water from tanker even for your most basic needs, and forget about any other language other than Tamil...The only reason it attracted so much investment is because Tamil Nadu politicians have been dominating the national scene since PV Narasimha Rao's time...

Anonymous said...

My due respect to tamilians.

Chennai is great, no water problem, great work culture, superb night life, pleasant weather. Karunanidhi a visionalry without eyes. People across the world will have to learn tamil to work there, superb public transport. Richshaw guys are the best in India.

Now you will have cheap labour because of tamil influx from Srilanka

Keep up the good work Vik. R u working for Mahindra group?

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Vik said...

Shriniwas, Its time for you to visit the new Chennai. There is the obvious language problem but I know several non tamilans who have moved to Chennai since they found better jobs there. Your mileage will vary. Besides the water problem exists in bangalore and Pune too. Water is directly related to the monsoon and last few years have been good.

Vik said...

I don't work for anybody in the real estate industry. I'm putting my point of view. Just as you think there will be a 50% rise in obscenely priced property, I think the GST outskirts presents value at 350 rs per sq ft. If you still havn't been to Chennai, its time to do so. If you are a language bigot, you can stay in Mumbai and wrestle with the Maharashtraian politicians like Raj T and Abu Azmi.

Anonymous said...

What sets the rich apart from others?
Suresh SadagopanTuesday, May 5, 2009 3:20 IST Email

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Mumbai: What does a great car on the road make you think? Envy at the guy behind the wheel and the disparaging thought that it must have been bought with ill-gotten wealth? Or, that it's great, but is far beyond me? Or, perhaps, I will drive a beauty like that one of these days.

If you are thinking like the last guy, you are bound to come into money --- the cribbers be damned. Indeed, only such guys are like to work towards it --- they think like the rich and will be rich. The focus of others is elsewhere and they are bound to pound the pavements for the rest of their lives, without ever courting success. So, what sets the rich apart?

Rich do not get there by short cuts

Get-rich-quick schemes do not make anyone rich. Many are tempted by the "amazing returns" some of these schemes promise. But if the scheme and the returns were indeed true, probably the risks associated would be very high. Many do not understand this basic tenet and wander into the territory that angels would fear to tread. Many pyramid schemes, doubling money in double quick time, extremely high interest for deposits, property investments at much below market prices etc, all belong here.

Rich are careful but not fearful. They also know that if it is too good to be true, it probably is. They do not need the shortcuts for they have a knack of smelling opportunities and cashing in.

Risk taking ability
Risk & reward are interrelated. When one looks at cashing in on any opportunity, there is always some risk associated with it. Weighing the risks and assessing potential returns is a process that needs to be done while evaluating any opportunity. Risk is not bad. If there is no risk, there would be no rewards too. Taking calculated risks is important. That is what the rich do all the time. Buying good stocks or property at a time like this would be a calculated risk. There is a risk of erosion of value, in the short term. But there is a great opportunity of getting excellent returns in the medium to long-term.
Guts to go against conventional wisdom

Rich do things their own way. They consider the options and may end up choosing a path that may defy conventional wisdom. In that sense, they might be pioneers in their own right. They evaluate the options using the knowledge base they have, check against the touchstone of their experience, consult advisors whose wisdom and counsel they value and finally come to a decision, taking into account their feel & intuition on the matter. Unconventional thinking may work well for them as they evaluate things differently and come to different conclusions.

They may be the ones who want to completely change the upholstery and the furniture now, taking advantage of discounts in this downturn - makes sense to them as it had to be done anyway and it's better at half the cost, wouldn't it? They may be the ones taking their families on long holidays now, buying cars, buying homes… Others have bottled up and are conserving cash.

Playing smart
I had read an anecdote on an Argentine billionaire who wanted to get into oil business. There were several established players and he was a rank outsider. He did his homework first. He was aware of a huge beef surplus in Argentina. He then knew about a shipyard in UK that was on the verge of closure. He went there and struck a deal for a supertanker against a delivery of beef from Argentina, which they gladly agreed. He then went to the third country (oil producer) and told them that he'll buy their oil if they engaged his supertanker to ship it to Argentina. And he was in business. Playing smart is how the billionaires got there.

Sprats to catch a whale
Rich understand that they may not know everything. They do not go by hearsay --- they have the right people to do everything. They engage bright minds to work for them --- be it running their companies, managing their money, taking care of their properties or advising them on business. They spend money to amplify their chances of success. They do that as they know that their wealth pile will be smaller if they tried to do everything on their own. Throwing a sprat in return for a whale is something they do all the time.

Rich make their money sweat
Ironically, the rich understand the value of money more than anyone else. They evaluate thoroughly before they commit. They spend on things, which need to be done, or which will help them leverage. For instance, they commit to invest money on a holiday timeshare, where one gets a weeks holiday in a resort for the next couple of decades. They are saving money here in the long-term, though they are paying upfront.

Their money management otherwise is top drawer too. They don't allow money to vegetate in savings bank accounts. On the contrary, they manage their money in such a way that they make it run that bit harder - by having overdraft facility (so that they can invest their surpluses ), investing in debt funds, diverting to short-term deposits, etc. The savvy among them may write options using their underlying investment. They may raise money with their long-term stock holdings, their properties, etc to fund money needs. In short, they have quiver full of ideas to shoot with.

Rich don't crib
They make things happen. They change their environment with a single mindedness of purpose. Our software industry is truly the poster boy of business. Though their invincibility has come under a cloud of late, the captains of this industry have steered the industry from nothing to international stature --- all with little help from the government. People with the rich mindset make things happen. Sometimes they complain too --- the bad roads and lack of accommodation in Bangalore were sore points the IT industry captains complained about. But then, they learnt to live with monumental apathy of the government. Infosys built hotel rooms; many companies invested in state-of-the-art video conferencing facilities and built campuses in other locations. The rich always find a way.

You find rich and poor in every country. Both exist amidst the same system, same opportunities and problems. It's just the difference in their mindsets that sets them apart. Their background, lack of opportunities, lack of capital, education --- do not matter for the rich. The poor complain about these all day, though.

The writer is a certified financial planner who runs Ladder 7 Financial Advisories and can be reached at ladder7@gmail.com.

Anonymous said...

Vik,

This is exactly what i had mentioned yesterday.

MFs completely missed April rally

http://www.dnaindia.com/report.asp?newsid=1253328

Sad news for bears like this will start emerging


Home loan demand is on the rise, say banks

http://www.dnaindia.com/report.asp?newsid=1253327

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Vik said...

BB if buyers are getting deals and discounts, what is the harm in buying. I got an ICICI bank advt in the mail for 10,500 for Dadar (w) apt. This used to be 18,000 last year. This price is down 40% and think it has another 25% to drop. It is not possible to get a 70L loan today even if you earn 20L. Remember the interest component which you pay over a 15 year loan is more then the principal. So for 70L principal you will end up paying 70L as interest. If you were in the US you end up paying 25L as interest since the interest rates are lower. You cannot compare Indian loans to US loans as the magic of compounding interest will make you a pauper.

GK said...

Shriniwas,
If you think this is a "ridiculous brochure" they go and blame anand mahindra. Probably some employee from this bombay-wala company only prepared this.

Anonymous said...

Yes look for values and buy that is exactly what i am also saying instead of waiting to time the market especially for a city like Mumbai.

Hiranndani is still quoting 18k for Powai pls. dont buy these kind of properties but Unitech at Dadar is something you can look at provided you are ok to wait if the project gets delayed. BTW Unitech has increased the price to 15k. Pls. keep waiting for another 25% reduction.

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Anonymous said...

Sorry I made a mistake it is 14k not 15k

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Anonymous said...

Economic Rebound to Start Toward 2009-End for India: IMF
New Delhi | May 05, 2009

http://news.outlookindia.com/item.aspx?659444

US Economy to 'Turn Up' Later in '09: Bernanke
Washington | May 05, 2009
http://news.outlookindia.com/item.aspx?659447

shailesh said...

Why the time is not ripe to buy a home

That the property market has undergone a significant correction is well known. That real estate experts are now talking about prices bottoming out is well known too.

But, contrary to conventional wisdom, experts are of the view that this may not be the right time to invest in residential property. And, their advice is for both first and second-time home buyers.

Consider this: A report from PropEquity, a firm that maintains data on real estate, said that in the first quarter of the current financial year, the Mumbai market saw an average correction of 42.84 per cent compared to the corresponding quarter last year.

Anonymous said...

Shailesh,

I think you are not from Mumbai. This wonderful city has hardly seen any correction barring few projects here and there. Few cash strapped big builders like Niram, HDIL and Unitech have slashed their prices. Again having said that if you sit with money and negotiate hard with investor and some small needy builders you can get a descent deal.

This report you are taking about could be for New Mumbai and Thane

I still maintain that pls. buy RE only for actual use. As an investment i will bet on equity at this stage.

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Anonymous said...

Chennai is no better than Mumbai, in fact as filthier and as congested. Having lived in chennai for a decade and still living there, I would like to point out some basic facts about the city.

1. Hygiene: Call it culture or habit, most chennai people like to answer the call of nature in open space. No one here finds it offensive or unhygenic. Guess, people are used to it

2. Heat: No wonder that most people from chennai have blacker than black skin colours .

3. Water problem

4. corruption


These are few things, I have noticed

If you think that you can get used to the above, come and settle in chennai

vanakkam

Anonymous said...

People planning to shift to Chennai should visit the place during/after the heavy rains and see the pathetic conditions of the sewage system there . Water gets logged for days. In Chennai its either water everywhere or absolutely no water.
Weather and Water are the main areas of concern.Also there are power cuts.

Things that are +ve according to me are - The governance is good. Transportation infrastructure is getting better by the day. Cost of leaving is cheap.
Vik,
Being from Mumbai and into IT. No good options for exists for IT there .Currently settled in Pune but always evaluating a better place to settle in.

-RK

Pandu said...

Bindas Bhai is a troll. I'd refrain commenting on his comments.

@Bindas Bhai,

Guru, kayko idhar aake logoko chidatha hai. tereko kaam danda nahi hai kya. Chal, shiv sena mey barti ho ja. kaali pili, pukatko gharib logoko upar kayko chadte ho

Anonymous said...

I would request you not to take Bindas Bhais comment lightly. He is more or less accurate on what he is commenting for last one year ( at least till date).

He has been repeatedly telling the forum that Mumbai will hardly see correction in Residential but Commercial will correct. I think what he has said is true. He was the odd one out and all against him but he had strong conviction about Mumbai and that’s what he spoke about.

He also spoke about the stock market going up two months back and that happened.

I think we should not discount him instead encourage him. Vik this forum must be healthy and I have seen you mentioning about him positively in your comments. I think he is a marwari and only a marwari can have this kind of business sense.

Pls. don’t jump on me for supporting him, this is purely my observation.

I also remember he clearly mentioned almost 8 months back that outskirts of Mumbai will correct and that has happened.

On 4th this month he mentioned about DII, MF and retail investor how they will react. We have to wait and watch if that will come true or not.

I feel he is in touch with the Market and not books like most of us, be it stock or property so pls. do not ignore or discount him

My humble request to the forum is to also encourage contra view. Neither the stock nor the property market will move as per the views posted on this blog. Vik please encourage Contra view, this is will very helpful for this blog

Kulkarni

Vik said...

I'm sorry you guys are missing the big picture about Chennai. But to each his own. Besides even today if someone feels that the bubble will grow bigger be my guest. I'm not in the business of convincing anyone. I have my views which I express. People talk about Sri Lankans tamils populating Chennai but forget that Bangladeshi's have taken over certain parts of Mumbai. They see the open squatting in Chennai but fail to see that the sea view in many prime locations is enhanced by folks squatting on the sea-side.
The bottom line I see is affordability for business. Did Tata setup a 25,000 facility in Mumbai ? NO
Did Mahindra do the same in Mumbai ? NO

They cannot, as the price of land is too high. They face the same problems like we do, only on a bigger scale.

Pune has seen a boom in new business near Hinjewadi since Mumbai has priced itself out.

It a a decline of a great city and very unfortunate to see that. However most people don't have a choice. they are forced to live in sub-standard conditions. The quy squatting on the street is not doing it out of happiness. Its majboori. The politicians have ensured that upon the common Indian.

Now it is our job to be careful about the money we earn. In US you can claim bankruptcy and start your life all over again. In India, you will be looked down upon and most folks will not touch you.

To each his own. I'm stil waiting for some Chennai proponents to weigh in on this piece.

Vishaal said...

BB : what you think about rate of 7.2k for 1 building of Acropolis in Chembur Mumbai, is it good rate or further corrections in that area are possible. Rents have been falling drastically around there.

Cool Head said...

@Bindas Bhai
Whom are you trying to fool? Have you checked the prices for Bandra properties last year and now? Have they not corrected? Or do you consider Bandra not part of Bombay?
If so, let's take an example from south Bombay (the creme-de-la-creme market.Ask about the Lodha project on Malabar Hill. Ask your friends in RE what was the asking price last year and what price Lodhas are offering.
If you have contrarian views, fine. Howvever don't call my posts crap, as you have done earlier.

Anonymous said...

Please think........
The joy and happiness of Living in a certain place takes precedence over every consideration while choosing a place to settle in for life or a considerable part of it. This is my belief and is sure most of you share it. Each individual though may have his own definition which depends on – Family, Career, Extended family and Social avenues - in short a 360 view towards life. For first time buyers what should matter most is meeting these criteria to go ahead with a decision.

Having said that though in this case you can have emotion as the overriding factor, as heart easily scores over mind when we start talking of personal choices. To avoid this pitfall do a thorough assessment of your choice based on all the parameters of the VFM (Value for Money) criteria and then take the plunge.

Is this the right time (mean as of today). Well, those who don’t have an immediate need or who haven’t done the above exercise may wait but others shouldn’t and investors in RE should completely avoid now. Rather for those who are looking for a personal dwelling I think this is the best time, here’s the Why and How

Why
Uncertainty, Fear, Gluttony and Wishful thinking drives any risk-driven investments. Economics used broadly as a term for everything else forms the background to this playing field of emotions. It is the fear of the UNKNOWN that leads to unimaginable bottoms. Once anything that is unknown comes to the fore and there is nothing significant left to unfold everyone and everything gets back to NORMAL. It looks like we are in that phase. This is truer about Equity markets than RE as it’s definitely more knitted to employment and GDP. But even then we are behind the unknown, irrespective of the means employed by the entire world, especially US. This will lead to excessive inflation etc, etc and all that crap but does it really matter to us so much in our decision to buy a house. We are not IMF economists here, leave that to the theorists. We are simple salary earning professionals or businessmen and all others who are looking to balance happiness and risk. We can keep talking about it as a past-time but execution is the key.

How
Once you have made up your mind and finalized on a property – apartment, plot, bungalow, anything you like and decided what YOU think is a fair price make an offer. Your own offer irrespective of what the counterparty’s expectations are and am sure you will be able to close the deal at your price or a 5 – 10 % premium (considering your quote will be much lower than current market rates). This is more applicable for cities like Bangalore, Chennai, NCR and Pune than to Mumbai in the current market. I think there is still a room for correction in Mumbai after which you can apply the same principles.

I will like to talk about the Chennai – Mumbai debate and some of my thoughts on Bangalore, Hyderabad, Pune in my next contribution

Thanks,

NT

Anonymous said...

I think Raheja will give at 7K. Personally i do not foresee any further correction. It was 8600 sometime and now the asking is 7K.

Chembur is a great bet for the future.

1) Just matter of six months the Flyover will be ready connecting West of Kurla to Chembur. Commuting to Western Suburb will be a dream. Airport and BKC will be like going to Sion Hospital from Diamond garden.

2) They are building a six lane highway behind Shivaji statue which will take around 20 mins to reach VT.

3) As you know monorail project is already on.

4) The numerous flyover from Sion to Byculla will be a dream driving to VT, from Byculla there is already a flyover to VT.

5) Last but not the least even Metro phase 2 can come in coming years.

Pls. buy , 7k is good value. Invest for your actual use and with a long term view. Frankly you can look at Chembur even for investment at this price for Raheja.

All the best my friend.

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Anonymous said...

Cool Head,

Thanks you are right.

I still maintain that areas which have seen three times the price vis viz 2000 will hardly seen major correction but areas which have multiplied more than three times will correct accordingly.

Kindly read my earlier post.

Eg: In 2000 Chembur Diamond garden was at 3500 and Dadar Shivaji park was 4500. During peak Chembur reached max 12k whereas Dadar shot up between 18 to 25k. Now you can expect dadar to come at more realistic level of 12 to 14k and Chembur between 9 and 10k.

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai

Anonymous said...

Is Raheja Really offering 7 K??? Fully constructed??? Is this on Super built up or carpet??

Anonymous said...

yes, but only in 1 building which is behind, this is on super buildup, however the maintaince is these buildings is 6-7 rs. per sq ft ! a major deterrant to any genuine buyers imo.

Anonymous said...

Raheja Acropolis (Deonar) Phase I still quoting at 11,000 bulider is giving at 10,000 when you sit with cash. My request is not to buy this property till the builder offers at 6k. Hold on builder will bring Pahse II property (Deonar) at 5k shortly and Pahse I at 6k. Pls. do not buy builder is holding huge inventory in Pahse I.

Property tax is pinching Raheja now and is bound to lower the rate.

Cheers!! Vik, vulture (HB) and Observer you are proved right and I personally feel now that we will see major correction by June 09 in lot of pockets.

Bindas Bhai

Anonymous said...

Dear Vishaal,

Last one month things have changed and that is the reason I have changed my views.

Although bullish initially for some time i also thought that the prices will come down but now i think it wont.

If the economy worsens further anything can happen but there is good chance that the worst is over and things will look bright from now.

It is purely your call whether to buy or not.

This market is for actual user and with atleast three years horizon.

Minumum 50% increase for Mumbai in three years.

Dont time, Dont time, Dont time.


Bindas Bhai