Friday, August 14, 2009

Six reasons why real estate is a good investment

Times of India, Bangalore trumpetting the cause of the builders. The article is right next to an advertisement from Credai - Karnataka (The builders lobby) which is touting a property mela on the 15th and 16th of August at the Lalit Ashok Hotel. Can someone from Bangalore visit and give us a real report of the ground situation. I'm tired of these soft marketing articles from the Times of India. They are as one-sided as a the coin from Sholay.

This is a good time for investors to buy property as part of a portfolio, says Kavita Sriram
Leading a life of luxury on borrowed money may not always be the right thing to do. How prudent would it be to make an exception on home loans? Should you buy your dream house or invest in some piece of land? Is it time to invest in real estate?

Stability
Real estate is less volatile than stocks. While real estate may be less liquid, and you may have to wait indefinitely before a buyer agrees to purchase your property for the price you seek, the prices are not as volatile as the stock markets. The transition towards a correction or boom takes place gradually, giving ample time for investors to read the transition and safeguard their positions.

Price correction
The economic slowdown had an impact on this sector. The rates have come down over the past few months. Wouldn't it make a lot more sense to invest in real estate when a price correction is taking place rather than in a heated market?
People with a large disposable income can explore investing in real estate for diversification of their assets. Lowering home loan interest rates and lower property prices makes it an opportunity hard to resist.

Good in recession
Some investments are considered safe in times of recession like precious metals and foreign currencies. In this list of investments that are popular during times of financial uncertainty, real estate can be included. Focus on achieving positive monthly cash flows rather than immediate appreciation. Cash flow refers to the amount of cash coming in relative to the amount going out.

Hedge against inflation
Real estate and gold are considered a hedge against forces of inflation. Inflation has led to the rupee value depreciating and property prices travelling upwards. Property investments are typically held over a long term.

Tax benefits
Home loan borrowers are eligible for tax deductions on their interest and principal repayments subject to a certain limit. Further, you can use the rental income from the property to make a portion of the EMI repayments.

Good returns in long term
Investments in property has always proved to be stable and yielded good returns over the long term. With lesser risk and probability of higher returns, this is a much favoured investment option.
Stimulus packages announced by the government are expected to show good results and bolster the economy. Cement, a key construction material, has indicated a growth of 12 percent in May. This is enough indicator of vigorous economic activity.
Borrow as little as possible and consider investing in property.

27 comments:

Anonymous said...

Actually we should re-christen the times of india to the Jokes of India!

And JOI would be such a better brand compared to TOI, since their jokes always bring joy to so many people around the globe ;)

Kavita is such a liar and a pretender. All her points sound very familiar!!

I am convinced this Kavita is no one other than BB!! Ha Ha Ha Ha Ha Ha...BB trying to pull a fast one by reaching out to a wider audience. Fool! very soon the whole country would be rolling on the floor, laughing their asses off at BB!!!

Anil said...

Guys, frankly I'm not surprised. This is whats we can expect from this Toilet Paper of India (TOI) and its sponsored supplements - Property Times in all major cities. Actually I have very attractive TAG line for them - "100% Ads, 0% news". Do anyone remember that Property times in Pune was taken back and what was the reason? Its not that there were no readers , no news, its simply their builder friends turned away for some time. And when they say market can be hyped further, they again started..

As Annon @11:31 mentioned, lets enjoy the joke of the Day and thank them for providing these jokes regularly. laugh with me Ha..Ha..Ha..

Again, take it easy, its well know that how Times group is involved in sponsored journalism. The truth is, this is their desperate attempt to clear the inventory and unload huge land banks they sitting on..

Anyways, if anyone is from Pune and interested to join Housing self help ..here is something you can check
http://dreamhomeinpune.blogspot.com/

Anonymous said...

"Real estate .... a hedge against forces of inflation"..

what a crap...!!!

Anonymous said...

The BFSI (Banking, Financial Services and Insurance) sector which was one of the major factors for fuelling the IT growth is in jeopardy. The US housing and credit card bubble is halfway through and these morons of TOI group are screaming the gullible home buyers to take risky bets. This is the height of immorality!!!


Toxic Loans Topping 5% May Push 150 Banks to Point of No Return


By Ari Levy

Aug. 14 (Bloomberg) -- More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.

shailesh said...

All my reading and study on Real Estate has taught me few basic principles. These are,

1. Real Estate Bubble and Bust are not new. They happened through out history and will happen again.

2. The so called analysts and media will always be last to find anything that is of importance. No one predicted the biggest bust in US housing. Rather than following what they preach, follow what they do. Most so called preachers do not follow their own advice.

3. Real estate bust are not crash. They deflate. Also they more from outside to inside, for e.g. Tier 2 to Tier 1 cities or far off suburbs to city centers. The bust has always taken minimum 5 years, so any talk to bull run coming back is foolish.

4. During bull run, all kind of senseless logic are created and believed. For e.g. There is no land to build upon !!! Just look at the satellite map of India and your city. You will see what I am talking about.

5. The key factor in RE going up will be Employment. Unless there is driver to increase jobs or income, all the other talk is non-sense. Look at the chart below. I wish we had something like this for India going back long duration. With IT spending coming down in US, number of IT jobs are going come down significantly. Also many companies are now realizing the savings from offshore are not as great as promised. Unless domestic consumption in India start increasing in decent percentage terms, there does not seem to be any big driver.

Real House price and Unemployment Rate Link

6. Top locations change. At one point in time, areas in Mumbai such as Bhindi Bazaar were considered top. Today they are filthy and no one wants to live there. So don't feel bad if you can't buy in so called top area today.

shailesh said...

Real Estate JOKES

Anonymous said...

Good Jokes Shailesh!

I didn't know there were so many jokes on BB :))

I was howling and rolling on the floor..thinking how many people have met BB...

shailesh said...

Mumbai may get special status under CRZ Act

"We are considering to give a special status to Mumbai under CRZ Act to resolve issues regarding development and redevelopment of the city," Union Environment Minister Jairam Ramesh said today.

"The economic capital of the country has peculiar problems and requirements and therefore changes have to be made in the CRZ Act to provide the city a special status," he said.

The special status envisages housing and right to employment for economically weaker sections, especially the fisherfolks, Ramesh said. The housing projects along the coasts will be undertaken by the state government with state funding and not by the private builders, he said.

Now state wants to be the builder. I think they tried that in Navi Mumbai, how did that turn out!!

shailesh said...

Demand for affordable housing pegged at 2 million by 2011

Anonymous said...

very good blog on Indian News Papers report false real estate prices

http://fraudsofindia.blogspot.com/2009/03/do-indian-newspapers-report-false-real.html

Anonymous said...

One more interesting blog link on the media/news scams -

http://fraudsofindia.blogspot.com/2009/04/indian-media-scam-private-treaties.html

The shit will hit the fan, soon :))

Anonymous said...

People in India are living in their own little world. As soon as SRK came out of the hole, he was strip searched in US.

Anonymous said...

The Indian banks have the mammoth NPA ( Non performing assets) i.e. the loans for commercial real estate sector on their balance sheets. With the economy slowing down, downsizing in IT, reduction in the monthly salaries by 20 to 90%. ( 90% ??? no this is not a typo..if you are in the virtual pool . then please don’t come to the office...we will inform you once the opportunity is available…..till then take 10% of salary...meanwhile if you are self-respected then quit the company..), the malls/shopping centers etc are finding it difficult to attract the new and retain the existing customers.

The banks are just hedging against the future losses by hoarding the cash, rolling over the short term debt (protecting the unscrupulous listed real estate companies) . This is one of the reasons why the home loan rates for existing debt owners have not come down inspite of the central bank,RBI reducing the CRR and Repo rates considerably since Sept 2008. This will not long last.

Genuine home buyers please don’t fall into the trap of teaser home loan rates of 8-9%. Until the prices come down by 60-70%, don’t buy the houses. Otherwise you are just going to loose your hard earned money to the crooks i.e. bankers.

Just check what is recently happening in USA.

Colonial BancGroup shut down by federal officials

Colonial BancGroup shut down by federal officials

16 Aug 2009, 0225 hrs IST, AGENCIES

WASHINGTON: Real estate lender Colonial BancGroup Inc. has been shut down by federal officials in the biggest US bank failure this year.

The 77 bank failures nationwide this year compare with 25 last year and three in 2007

As the economy has soured — with unemployment rising, home prices tumbling and loan defaults soaring — bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

AK said...

Geraa tho bhi taang oopar!!!

God knows who is laughing, is it BB or us? It looks like right now BB is laughing, lets hope thing change.

Amit

AK said...

We will keep joking and guys like BB will keep poking :-)

Amit

shailesh said...

Real estate lawyers hard hit by economic crisis

shailesh said...

Find investors to complete Hill County project, Maytas tells members

Maytas Properties, which is facing an uphill task of raising finances for completing its Hill County project, has now turned to the home owners. It is asking its customers to use their good offices to find investors for the project. Most people who have purchased properties at Hill County are software professionals, NRIs and entrepreneurs and would have been exposed to venture capitalists and other funding bodies — is the premise on which it is working to get additional support.

Anonymous said...

Instead of reading and posting on this blog it is better we go and buy some RE. We have lost the battle for the time being, lets accept this fact.

Shailesh lets accept it we are fighting a loosing battel.There is no point being obsessed with BB.

Anonymous said...

Tempest to be turned into Hurricane

Commercial Real Estate Bubble About to Burst


Commercial Real Estate Catastrophe

Anonymous said...

Commercial Real Estate Crash
July 15, 2009 11:00 AM

"Commercial real estate is the next shoe to drop."

James Helsel, Treasurer of the U.S. National Association of Realtors


~ commercial real estate prices have already fallen from their 2007 peak valuation by a greater figure than that which has crippled the U.S. residential housing market .

~ The Federal Reserve is also in a state of high anxiety, for the same reasons. By June of this year, there were already 5,315 commercial properties in default, a figure that is more than double the number of commercial real estate defaults in all of 2008.

~ Many loans initiated when the prices of commercial properties were at their peak will be coming due over the next 3 years, including $400 billion by the end of 2009 , and nearly $2 trillion by 2012. With unemployment skyrocketing, real disposable income shrinking and nearly 7% of income now being saved by the chastened American consumer, it is a foregone conclusion that a greater proportion of these loans will become non-performing.

~ In the final analysis, a very large number of small to medium sized banks in trouble can pose just as great a systemic risk to the global financial system as was the case with a small number of banking giants.

Anonymous said...

Hi All

In the Last few posts we got to know about Bindas Bhai's profession. He seems to be a rich person with heavy interests in real estate. As confessed by him he seems to be a developer or may be a broker. I don't know if this forum is only for middle class people, but I have a gut feel that most people here are those who have a dream to get a 2-BHK in their city.


People like BB who have manisfested interest in high RE prices will keep posting false / misguiding content on this forum. This forum should give the real picture of real estate in India and should not be allowed to become platform for brokers/ developers manipulating middle class people by their agenda.

I seriously feel that BB is not spending so much time here on this blog just to educate and help us people. He has a malicious agenda to be here.

I strongly feel that he should be blocked from this forum. Let the real analysts be on this forum.

marvin said...

Good thing there's FHA home loan program that can assist them to avoid foreclosures because there are lots of people who are on the verge of losing their own homes because of the current economic crisis.

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New Delhi Real Estate said...

very informative blog. If anyone want invest in real estate then read this blog. I hope it will be very useful to you.

Sherwoods said...

One of the Biggest asset of all times is Real estate where in you could see no loss whatsoever not like stock markets. These days people are investing in real estate for diversification of their assets. Lowering home loan interest rates and lower property prices makes it an opportunity hard to resist.

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