Tuesday, August 31, 2010

If you have to buy, buy from an investor

We've seen some excellent articles posted by fellow bloggers in the comments section along with some great arguments for the rise/fall in prices. I wish to thank everyone for that.

Here is my anecdotal evidence based on my interactions with brokers in Mumbai and other parts of the country.

Market has gone up rapidly in the past 7 months. They do not expect prices to rise much more beyond this. Investors are selling their properties however they are asking for almost 50% black. Some investors cannot exit with a high white component. Such properties are 20% lower the other all white deals sold by the builders. Like they say cash is king. In this case if you have cash you can negotiate any price. One of my friends put his house on the market. An offer was made within a day for 10% lower then the quoted price. For sellers the best thing is to decide the lowest price you are willing to take and then mark it up by 20%. People always like discounts so a 10% discount on a 120% marked price is better then a 5% on the 100% price. For buyers it makes sense to cut prices by atleast 20%. Give reasons like loan is not available for that amount. Funds are available but deployed elsewhere. This gives a sense of relief to the seller that even though you may not buy the flat, atleast you are capable of making funds available at some point in time and he is not dealing with a someone with an empty wallet.

Another person I met put his house on the market and got a quote right away, again at 10% below. This made me smart and I tried to do the same. I put my parents house and priced it 25% up and told this to the broker. The broker is like 'bahut jyaada quote kar rahe ho'. I know then that the rate I've quoted is what I should not be paying to buy the apartment from the broker.

In today's market in Mumbai it makes no sense to buy directly from the builder. The builder has already sold many properties to investors who keep rolling their money with him so the price is already higher then when the first flat got sold. In fact by buying the property you are decreasing the already reduced inventory and causing the price rise for the next buyer.
Secondly there are a plethora of taxes imposed by the government, BMC and other departments. This is true for all cities where I've looked. Pune, Chennai, Bangalore, Mumbai are all the same when it comes to government fees, all these fees are up some even by 40-50%.

There is Service tax due which can be almost be 3% of the total agreement value. There is VAT, impact fee, premium housing fee all which add to the underlying house price. The government sees this as a quick way to make money since they expect most of these prices to get passed down to the housing loans of the buyers


Its best for somebody else like the investor to pick up the taxes and you get what you pay for. The investor is happy to exit at the agreeable price so even though he makes money, he saves you money since the newer fees from the builders are much higher. Investors are also happy to negotiate a discount to the builder so your final price is also lower then what a builder will charge you.

In Chennai the first sale is registered at the UDS (undivided share of land) value, a fraction close to 10-15% of the full apartment value. If you buy an apartment from an investor before registration you can easily save the 9% registration cost of the full price plus you get an almost ready apartment if you buy an apartment nearing construction

Everywhere I've seen investor flats seem to be the best bet for any underlying house purchase.

66 comments:

Anonymous said...

What you are saying Vik is nothing new...Its been the way likethisfor past 20-30 years..unless youhave just started seeing properties in Mumbai for only 5 years.. But to add on towhatyou did not say..With 50% of investors in any property and 30% inventory levels, Banks hiking lending rates ..there is an imminent correctionwaiting to happen..so instaed of quoting 20% lower than asked price..its advisable to stay away...Its time the builders get their brains at thr right place and come to reality..andprice apartments much more in line with where genuine demand is...

Anonymous said...

they say its a seven year cycle of boom and bust.. but this one has been booming straight for 8 years now .. and i never got a chance to buy ... ive given up now .. prolly will rent for life :/

Vik said...

What I am saying is that even at current levels if someone is paying 20% below and closing the deal there is intrinsic demand at 20% lower price.

Liquidity is not getting sucked out. unfortunately unless the banks stop lending there will not be a dearth of buyers.

The government has added 20% cost to the price of the property plus stamp duty and registration. 25% of a new flat cost goes to the government and parking charges. I was never so high before. Add to that the super built up areas which in new buildings is upto 50%.

Its best to go with 5 year old building where one can get larger living space and the owner's cost is 1/3 today's price.

Loans are not going to stop so unless there is an economic shock things will continue to be the same.

If there is an economic shock, under construction buildings will be hit the most if black money is taken out of the system. This will be worse as all invested money will be stuck for a long time.

US buyers asked for lower prices and they got it along with a severe recession and lower standard of living.

In India it won't be much different if this happens

Anonymous said...

Accurate observation Vik,

I recently got sick and tired of waiting for the market to come to acceptable level and finally bought a 3 bhk in Andheri mumbai for 1.5.

As you rightly said the black component was way too high but it helped me negotiate a decent discount on the price.

The going rate was 12k-13k for the ground floor apartments and I managed to get the top floor (17th) for 10,250K psf.

Parking and society charges are a different story though.

India Property said...

I like the observation. Great stuff.

Desi Batman said...

Vik,

Builder and Investors having been partnering since long and is nothing new.

What is new is that they have made enough profits to hold on to properties for couple of years without going in red and therefore create artificial demand.

Great amount of growth has already happened in RE, now real question is can momentum of this growth be sustained?

To sustain RE growth, rate of earnings of the buyers should be at same or more momentum. Does really one think this saga is going to continue forever? Are people going to get increment y-o-y of 20%? May be sentiment today agrees to it, but thinking practically, is it possible. A guy earning 20L today will earn 35L after 3 years, if so how many.

Look at USA, middle class wages have been almost stagnant for almost 10 years but RE prices kept going up trend. What happened! Today prices are decreasing, interest rates are lower still people cannot AFFORD to buy, it is not that there is no demand. I bet demand is still same, but affordability is key word.

If you have been to Edison NJ, California, LA and observe. Few make 6 figures salary, some have to have 2 members in family working. Many who don't make that, do see their quality of life. It is posh slum in a way. RE prices and taxes are still way off the charts. Demand is heavy in those areas, but to keep up with prices, something else has to be given up - right - quality of life.

Rahul Bajaj said...

I sadly disagree with the observations on black money component. Unlike old days, now no one accepts cash, be it white or black. All payments are made by cheques. No one offers a discount even if you pay 75% in black. The cheques are drawn on different names, some non existent and are cashed immediately. Once the black cheques are cashed, the property registration process starts.

You can verify the above, from any small time real estate agent. If you get a discount, if the seller is in dire need of money at the earliest.

Anonymous said...

A new report says Vancouver’s real estate market could drop by 30 per cent. Aug. 31, 2010. (CTV)

By: Kerry Gold, ctvbc.ca

Date: Tuesday Aug. 31, 2010 5:08 PM PT

A new doomsday report warns Vancouver’s housing market could be hit by a burst bubble — and a drop in prices by as much as 30 per cent.

The threat of a giant, synchronized real estate bubble looms over all six of Canada’s major cities, says the report released by the Canadian Centre for Policy Alternatives.

But Vancouver homeowners are poised for the biggest hit to their investments.

“Vancouver would be worst hit, in dollar value, losing almost $200,000,” says a news release issued by the CCPA, which examined house price trends in six major markets over the last 30 years in a report called “Canada’s Housing Bubble: An Accident Waiting To Happen.”

Anonymous said...

builders are creating artificial scarcity. For example, if you go to sales office of hiranandani estate thane they will tell you they have only 2-3 flats available for sale in ready possession, however the fact is they have

132 UNSOLD 2bhk flats available ready for sales and delivery
32 UNSOLD 2bhk flats available ready for sales and delivery

but if you go to their sales office they will tell you only 3-4 flats are left and they are now selling them on 20% higher prices then what they was charging 2 months back.

Just go and ask brokers they will show you all those hidden flats but they are available for sale for premium prices to bribe company officials.

Anonymous said...

builders are creating artificial scarcity. For example, if you go to sales office of hiranandani estate thane they will tell you they have only 2-3 flats available for sale in ready possession, however the fact is they have

132 UNSOLD 2bhk flats available ready for sales and delivery
32 UNSOLD 3bhk flats available ready for sales and delivery

but if you go to their sales office they will tell you only 3-4 flats are left and they are now selling them on 20% higher prices then what they was charging 2 months back.

Just go and ask brokers they will show you all those hidden flats but they are available for sale for premium prices to bribe company officials.

and how do i know about all this? friend of mine who is also broker was having drink with some official in company and he spew out all this in drunken state!

Anonymous said...

also, if you go and look around on resale property you will find many property available bellow builder rate in hiranandani estate thane and if you give them cash you do get huge discounts! (atleast 5%)

Shetty

Anonymous said...

Rahul Bajaj :

Just pick any agent in Mumbai and tell him you can only pay 50% white. See what he says. Many builders want full white thats the reason to goto an investor who will cut the price for you in exchange o cash.
Sit with cash on the table and see how the game changes.

Desi Batman said...

Looking at RE news articles, blogs, forums, it seems most of the RE buyers want be investors and are buying RE as an prime investment.

Therefore investors are buying from investors and selling to investors. Looks like money is circulated within this syndicate. This drives up demand and real buyers are sucked into this.

Did someone every care to challenge builders for their pride of selling 95% of all flats! No, because there is no proof. There are no statistics. Everything is speculative and investor perspective.

Anonymous said...

okay, now we get it, vik is changing his tune; changed from "don't buy" to "if you want to buy, buy from investors", good progress!

Anonymous said...

vik is not telling you to buy, he is saying if you "have to buy" then buy it from investor and not from crook builders.

Rakesh

Desi Batman said...

So investors are not crook. That is news to me! In fact, they are main reason of such high RE prices.

If many of guys on this blogs remember olden days (may be valid even today), the black marketers selling movie tickets with high price because every ticket of show is sold out. Basically they were/are investors. I see no difference between those ticket black marketers add today's RE investors

In morden world, I remember when Wii games was released, it was sold the day it was in market, but sold for huge amount on ebay and other auction site. Similar events are still in practise even today.

So let's learn some tricks from this so called investors.

Anonymous said...

Right on Batman. Both are same faces of the same coin, builder and investor. Since housing is looked as an investment, it has ceased to be plain simple home.... and it seems this madness is not going to stop..unless people with money have some other alternative to investment. I wonder, why does India does not have a Las Vegas yet. Afterall, Indians are getting richer, are not they? LOL a business idea for free..casino..

kasbekar said...

@Anonymous 8:19

Appreciate if you could post the names of some builders who take only white money. I've been on the lookout for a place, but don't have black money.

Anonymous said...

Kasbekar,

Try Rustomjee builders, he is all white check deals kindda guy.

The caveat is that his rates will be more than everyone else in his area. Some consider this acceptable since quality of his constructions are far better than an average builder.

Hyderabad Real Estate said...

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Kasbekar said...

@Anonymous 10:32 PM

Thanks for the information abourt Rustomjee. As you said, his rates are astronomical. The going rate in malad near inorbit is rs 14,000/ per sq ft for super builtup. Besides this builder caters for parsis and christians. If you are not both, he doesn't even talk to you. The rate is beyond my wildest imagination. I am looking for something around 20-25 lakhs maximum

Desi Batman said...

Converting from white to black is easy but is financial stupidity.

To convert from white to black simply withdraw money as cash from your white account. Now have transaction without any paper work or any trace.

Converting black to white needs little work. Need to find someone who have leverage of absorbing taxes.

Builders/investors ask for big money in black because they save alot in taxes. e.g. 50 lacs black can save 30% (15 lacs) or more on profit taxes!

So now it seems like RE is churning more black money into market then before.... these money have go somewhere, best choice again RE.

Homeless said...

There are thousands of charitable organizations sprung up all over India whose main job is money laundering. If one requires foreign money, a large donation is made to a charitable trust and you get your money back in dubai or some offshore banking centre in Caribbean minus a small commission charged by the trustees. The turnover is in thousand of crores and people using this avenue are mostly real estate guys.

The rich using this avenue pay less taxes and the govt makes up the shortfall in revenue by taxing the poor. To sum it, rich indians get richer and poor get poorer. Manmohan singhs experiment with the economy has been the greatest disaster to hit India, the effect of which will be felt by the future generations
Poverty leads to crime and crime leads to destabilisation in which rich and poor equally suffer.

There is no significant increase in gnp/gdp/per capita income in spite of big talk by the bureaucrats about the 10% per annul growth.

Anonymous said...

This rich/poor divide; destabilization scares the hell out of me. Did not we read in our history books, kings/rich people were busy in enjoying life, making more money, and the common people were suffering with life's hardships and more taxes....and it all came to an end when the commoners got organized and took matter in their own hands. Are we waiting for an action replay?

Desi Batman said...

Rich and poor divide has been in existance since centuries. Real issue is divide between earnings and spending.

Spending for RE prices just like another commodity are supported by the buyers earnings.

Scenarios:
#1 - Earnings > Spending:
Growing, powerful economy. Purchasing power increases. India has been going through this because of lots of FDI.

#2 - Earnings = Spending:
Balanced economy. Possible?

#3 - Earnings < Spending:
Bubble. With RE prices totally disconnected from earnings. How can RE prices be sustained.

It will be interesting to see how all this will unfold in near future. Can 1 crore flat be sold for 2 crores without similar increase in earnings?

Desi Batman said...

93 million slumdwellers by next year

Ya keep rising RE prices and inflation, this will create more poor class people. These poor class people then always have need for RE and therefore increase in RE demand - that increases prices of RE further!

I love India.

Anonymous said...

I recall visiting a Subway way back in 2001 and I used to get a sandwich for 5$, I still get the same sandwich for 5$. If I compare this one with the price of masala dosa in Hyderabad in 2001 and 2010, I see it has increased in multiples. If we can accept that price of masala dosa, why is it so hard to digest the price rise in real estate?

shailesh said...

Need to build more homes in Rs. 15-20 lakh range: Deepak Parekh

The real estate business is back in full swing and seeing good demand the property developers have resumed their projects and have many in the pipeline.

But lessons learnt from the crisis haven't been implemented. Deepak Parekh, chairman of the country's largest housing finance company, HDFC, says that while the demand for residential property is insatiable, developers are not focused on affordable housing.

Real estate research firm, Ressex certifies that most developers in metros are focused on the luxury segment and this trend for instance, has seen the cost of homes built but not sold rise to an average of Rs. 2 crore in Greater Mumbai.

Overall the prices of residential property in Mumbai have doubled in a year's time and broadly demand has fallen sharply to half of what it was in the June quarter last year.

Deepak Parekh says developers need to relook at their strategy.

“There is a need to build more homes on Rs. 15 lakh to Rs. 20 lakh categories, else there is a danger,” Parekh said.

So while most developers announced various affordable housing projects in the immediate aftermath of the crisis, year and a half later, few such projects have been pursued. And the ground reality is that the gap between the demand for affordable housing and supply remains significant.

Desi Batman said...

Shailesh,

There are tons of affordable housing, they are called slums. People are buying RE by paying crores of Rs. so it is still affordable.

I feel there is still room to increase in RE before everything comes to halt and I may be wrong looking at Indian attitude 'Aisa hi hai' and 'Sab chalta hai'. Indians have always always adjusted and compromised. People have mindset that once prices go up in India they can never come down. So buy buy and buy it TODAY before there is further increase because today's price is affordable and future price unaffordable.

I love India.

Desi Batman said...


@ Anonymous 1:13 AM

If we can accept that price of masala dosa, why is it so hard to digest the price rise in real estate?


There is big difference. Masala dosa is not investment and not investor's choice but real estate is. Also you cannot create artificial scarcity of masala dosa but you can of real estate.

Houses were place for shelter, protection, stability for family. Now it is more for investments.

I love India.

Anonymous said...

Concern on India system of paid news
Regulator urged to clamp down on the media practice of providing advertising and news coverage to publicly listed companies, which could be used to influence share prices -
http://www.ft.com/cms/s/0/af741d4a-b77c-11df-8ef6-00144feabdc0.html

DhImAn said...

If we can accept that price of masala dosa, why is it so hard to digest the price rise in real estate?

I think it is because as a human race we can appreciate the arithmetic, but not the geometric. What I mean is that we can appreciate the impact of increasing the price of a flat from 1 crore to 1.25 crores in a year, but we don't care about the price of a masala dosa going from Rs 10 to Rs 12.50 in a year.

It is the same percentage change, but the sheer numerical impact of 25 lakhs awes us whereas Rs 2.50 does not.

Someone important once said that the greatest weakness of the human race is its inability to understand the exponential function. I cannot but agree.

Anonymous said...

Kasbekar

try allcheckdeals.com

Anonymous said...

Home loans @ 8.25% available at http://www.mymoneymantra.com/PL-home-purchase-loan.php

Anonymous said...

havent you guyz wondered that actually our purchasing power has decreased over the years. I feel tht i had greater purchasing power and better savings % 4 yEARS Back than right now. i am talking with a 20% YoY hike. i still feel the inflation has hit sky high. if this is the case for guyz like us i shudder to think how it shud be to the aam aadmi. one relatively sane dev is rentals have not risen astronomically. I visited my village recently and found that the villagers actually had a better quality of life than the slum dwellers in cities. to sum it in short, the cost of living has increased in such huge proportions in the city that the divide is staggering.

one possible outcome --> ANARCHY..

due to this spineless UPA gov and corruption spanning in every noook and corner its again going to be the poor and middle class who are going to be affected...

india shining... i dont toe that tagline... i foresee huge challengess...

Desi Batman said...

Funny video Germany vs. India

Nothing much has changed since independence. Only changes are:
- More technology and jobs in flow from other countries selling their product as importing law have been relaxed.
- More money chasing same product.
- More investors than buyers.
- More corruption than before. 'Aam Admi' term is used as brand name to entice people to make them feel as VIP.
- Today many people have so much money that they have no idea what to with it, what do they do - buy RE.

With all this what do we expect RE price to happen? decrease?

DhImAn said...

With all this what do we expect RE price to happen? decrease?

Of course.

The thing is this: You are calculating things based on a subliminal assumption that money does not change in value.

Let me explain. Take a simple equation like

Demand = f(price, constants)

Economists study such equations all the time. However, the term "price" on the right assumes that the value of money does not change.

What if money itself were changing in value? Then you could have the seeming contradiction that as price goes up (in a depreciating money), demand goes up as well.

This is because the equation transforms from a straightforward equation to a partial differential equation, something like:

d(demand)/dt = f(dp/dt, constants)

I use d but you should probably actually use del (for the partial differential equation).

So while the PDE makes sense, it may be unsolvable, or after solving it it may turn out that prices are actually falling if you normalize to a fixed value of money, such as the rupee value in 1960; or relative to a historical money such as gold.

Maybe you are not mathematically inclined, but this should be intuitively easy to grasp - if the value of money is falling faster than the rise in prices, then yes, prices can keep going up even when it seems absurd that they should.

This is why I harp on gold. It provides a fixed (or relatively most stable) point of reference.

To get back to your original question - yes, I expect prices to decrease. May not be "prices" in rupees, but prices in some stable frame of reference.

Anonymous said...

Dhiman,


You have a gift for the bombast. I like the way you have used maths and verbiage to convert a simple concept into something so complicated..I would like to challenge you to say the same thing but in a simple manner something which a person with zero exposure to maths or economics can understand and in 4-5 lines.

Anonymous said...

The government gave out some interesting numbers on Monday. The revenue secretary told a news conference that nearly 96 per cent of the 32.5 million who pay income tax reported a taxable income of under Rs 5 lakh (Rs 500,000); and only 2.2 per cent (i.e. 715,000 people) reported taxable income of over Rs 8 lakh (Rs 800,000).

Why is this interesting? Because when you match these with the income numbers put out by the National Council of Applied Economic Research (NCAER), on the basis of its household surveys, some numbers make sense while others don't.

For instance, NCAER projected for 2009-10 that some 32.3 million households would have annual incomes of over Rs 2 lakh (Rs 200,000) -- which is a reasonably good fit with the total number of people paying income tax (the threshold being taxable income of Rs 1.6 lakh

Now What is so rocket science for this idiots including FM to understand that property worth crores of rupees is sold overnight in Mumbai subrubs only... If so then such people will ne at least three times the reported nos...

What a shame for India

Anonymous said...

There is no point comparing the current patterns in US real estate markets (or for that matter real estate markets from any developed nations) to that of India. Currently, the # of people owning houses in India is extremely less as compared to other developed nations. The current state of Indian real estate market (& economy in general) could be compared to what US was in late 40s or 50s. That's when all the major Interstates were built in US. Considering the current infrastructure growth & urbanization trends in India, the real estate markets will growth for next 10 to 20 years. Of course, it will not grow at 25% p.a. but one can assume ~ 10 to 15% p.a. growth for next 10 to 20 yrs. There will be corrections in property prices but if one invests for a 10 year horizon, the investment will at least double

DhImAn said...

Anon @8:04 PM.

Apparently you did not read what I wrote. Your challenge has already been met and answered in the third to last paragraph of that post.

And "bombast"? Do you even know what the word means? It means "speech too pompous for an occasion" - tell me how is mathematics too pompous for economics?

Meanwhile, aside from ranting, you accomplished nothing. You did not say that my statement was wrong, much less disprove it in any way.

If at all, you implicitly agreed but were upset about the verbiage.

What is your problem? Forgot to take your medication today?

Anonymous said...

@anon 10.32

India is better comparable to US in 1880s or Victorian England.

US of the 1940s and 1950s was a very advanced country.

Anonymous said...

All the more reason property prices will go up

Desi Batman said...

DhImAn:

If I understand you correctly it is
Price vs. Value. Inflation keeps check of prices for value of the product. So it is not neccessary for value of RE to increase when there is increase in price and vice-versa. In that equation value decreases for increase in price when is no value added to the product.

But who cares for value. How many really do care for value of culture, value of respect, value of ethics, and atlast value of money. It is all going down, and ofcourse prices are going up. ;-)

I simply look at what I could buy 15 years ago for two rupees what my mom and dad bought 50 years ago for 1/25. And today same thing is bought for Rs. 10 or more.

So 1 crore is not really 1 crore, it is actually like 25 lacs or so.

Isn't economics great thing. People on the top can manipulate as they want to create a illusion of wealth.

I love this world, why? because this nonsense is all over world. Be part of this else you will miss the boat.

Anonymous said...

Hyper Inflation in India.
30% every year.

Anonymous said...

"So 1 crore is not really 1 crore, it is actually like 25 lacs or so.
"

Do I care for some theory that says todays 1 Crore was yesterdays 25 lakh? What is the use?

You still need Rs 1 crore to buy a decent flat at todays prices, dont you? And while many of us are wishing that the prices go down since like last 5 to 6 years, but they have not.

And now I am thinking they never will, if the prices drop like anything after 20 years, I do not care; by that time my productive work life would be over and I would be left with a big zero.

DhImAn said...

Batman, as usual, you got it. And I share your frustration, my friend.

I can even afford to buy a flat - say in the outskirts of Pune. The price there isn't much; perhaps 20-25 lakhs or so.

But the point is, I wouldn't dream of spending even that much money - first when a rental can be had for so cheap, and second when I have to educate my children etc. I mean, I can come up with a lot of creative ways to spend money, can't you?

OK, besides blowing it all on partying (which itself is a valid expense), I could save it for my kids, or I could start a business, etc etc - the opportunities are endless.

But dumping it in the one sector that everyone hypes? Nuh uh. Not my kind of way to make a loss. Already tried that in the dotcom bust in the US with great success. Was in the red for years.

I take hope in the fact that when everyone is rushing into a sector, I'm not, thereby being contrarian at least. Will it pay off? Who knows, my friend, who knows? It is all a gamble, whichever side you take.

As you yourself so aptly put it, people on the top have made it this way.

DhImAn said...

Do I care for some theory that says todays 1 Crore was yesterdays 25 lakh?

Yes, you absolutely do.

Plotted in real prices, the graph of real estate could tell you how much it has deviated from the mean; which could give you a realistic idea of what price to expect when the inevitable correction comes. Things do regress to the mean eventually. In fact that is the very definition of the mean.

While it is impossible to time the market to any degree of precision, being able to identify a dip in prices and buying the dip can make all the difference to your finances.

Cheer up - the fun thing is that markets correct when you least expect them to. So maybe they'll correct earlier than you expect.

Or maybe they won't. In that case, at least you'll have the joy of knowing that your kids aren't fighting amongst themselves over how to divide your property when you've kicked the bucket.

I mean, how can you not see the bright side of that?

Rajesh said...

Dear Stay away from property market, builders are now quoting discount up to 40% if purchaser buy's atleast 10000 Sqft and above.
However, realty in real sense is a dumb investment, unless one applies factors of production to it. Dear dont get depressed by living in rented property. what is the sense of buying a property of 1 crore, which can be easily rented around 25000/- rupees. On the top of it if you buy it on loan just imagine what is the quantum of money you shell throughout your life to repay loan, and the kind of pressure you live in all this good years. If you keep this mentality I am sure rate will soon come down to actual valuations and then you can enter with a view to use it. Real estate untill you use it for some purpose is waste of money. REMEMBER WE ARE NOT BORN HERE TO MAKE THESE CROOK BUILDERS RICH.

Anonymous said...

Dear Rajesh, Really A Good & Sensible Advice.

Arun said...

I've been watching the real estate scenario for the last 5 years. I moved into a flat in kalina 14 years back and it cost me about 6 lakhs. Not a fancy building. just 3 storey, flat area being 760 sq.ft built up. Just few days back, an agent of a builder approached our society and has made a offer to all the occupants and we have been having meetings almost everyday as regards to the acceptance.

Builder is planning to redevelop the land which our building stands. He has already managed to evit the slum dwellers /Tabelas surrounding it. The offer is like this.

1. Every flat owner is going to be allocated a flat with 130% of the present in the new project., project completion being with in 3 years of agreement by all . So, i would be entitled for 1000sq.ft. The building is going to be ultra modern etc. Once all agree, we will be provided with alternate homes in powai until completion of the project. Each is offered monetary compensation if they decide to opt for it. In my case i'm offered 1.7 cr cash.

80% of the occupants are likely to opt for cash. I'm still pondering what to do.

My point is that, mumbai real easte will not see a decline in prices for 2-3 decades to come. Therefore, make your plans today based on today's prices, or else you will miss the train.

Anonymous said...

1.7 crores will get you a 4 bed ready possession in kalina. I would maybe add another 50L and move to santacruz(w) for a 3 bed. From Kalina I would never move to powai unless I work there

samix said...

@Desi batman, the guys that are at the top can manipulate anything because we are living in the times of irredeemable paper currency backed by nothing.

The guys at the top can print and leverage as much as they like and screw us little people.

What we need is a gold standard where every rupee will be backed by a fixed vaule of gold.

If this is too much to ask then atleast we can have a currency that is backed by a amount gold which is floating depending upon the economic condition [freegold|http://fofo.blogspot.com]

If we have such a system, the moment the people at the top start to manipulate, all that we the people will have to do, is go and exchange the paper currency with gold and boom goes their manipulation.

DhImAn said...

Samix, forget what everyone else does - each person can help his own self by buying some physical gold periodically.

It is a win-win actually. Get your wife a bit of gold jewelry every month or two. This will result in both marital bliss and financial bliss. Or, win-win.

As Mogambo Guru says - "Whee, this investing stuff is easy!"

Desi Batman said...

For redevelopment RE I hear alot about builders offering crores of rupees to dwellers to vacat the flats. Add to that the cost of construction, add to that cost of inflation by the time construction is complete.

Now where do these RE developers get crores of rupees? Do financial institution simply hand them, what is their collateral? Or builders have inhiereted wealth from their forefathers?

Anonymous said...

I will opt for rent in current market, than buy unreal estate. Sonzeee~~~~~~~

Desi Batman said...

Flat buyers nervous about moving into floor-park buildings

Idiots. All BS. If BMC really cares they should go after sellers selling flat with marked up carpet area (super build up). Also many years ago flats used to have balcony, which was not really counted under carpet area, slowly this area was covered with iron grills and then concrete wall came up and then VOILA! into living area. BMC watching all this. So what is different this time? only a time shift and instead of balcony we have parking space.

Greed has already taken over, like it or not, believe it or not, these parking spaces will be one day converted to living area.

I love India.

Desi Batman said...

Do I care for some theory that says todays 1 Crore was yesterdays 25 lakh? What is the use?
- May be you shouldn't care for theory from me, I am no economist. But you should care about your money and your financial sense.
- You should buy a house if you feel it is worth the value and if you can afford it. Don't buy in because some lobby is holding you for a ransom, don't buy because of herd mentality, all you will do is add more fuel to this RE bubble and bury yourself into lifelong debt slave.

You still need Rs 1 crore to buy a decent flat at todays prices, dont you? And while many of us are wishing that the prices go down since like last 5 to 6 years, but they have not.
- Yes, please buy. Really I mean it. And please I am not wishing for the prices to go down, I am wishing that either earnings grow on the par of rise of prices or RE decrease on the par of earnings. They HAVE to be in sync.

And now I am thinking they never will, if the prices drop like anything after 20 years, I do not care; by that time my productive work life would be over and I would be left with a big zero.
- Really? what happened just a year ago when everyone was scared of their jobs. RE market growth went to a halt. India hasn't seen shit of growing pain. One hardly sees hire and fire in employment, not seen what happens if prices of commodities rises more than earnings. Taxi, auto, etc bandh is just a start. Bus fares will increase, prices of everything will be sky high. Will you not care even then? May be you will care when you will have to pay Rs 100 for a cup of tea, and then you would realize that your Rs 100 does not have same buying power of Rs 100 you thought of.

Desi Batman said...

No water cuts, but Mumbai left high and dry

Ya these south mumbai locations must cost aleast 5+ crores with 's' and have basic amenities like slum.

Sure investors are selling these south mumbai location as the hot location - the top of the line RE.

Please somebody buy RE in such posh location or you might be priced out.

I love Bombay.

Hemanshu Pandey said...

http://www.nhb.org.in/Residex/delhires.php

Check out the NHB Residex. Delhi, Kolkata are showing declines quarter on quarter.

Anonymous said...

Yesterdays slum dwellers are today's crorepatis. They like to live in a slum like environment. They feel at home. Early morning if you go for a walk arounf cuffe parade , you come accross some of them, urinating on the road side, spitting paan every where. Come 900 clock, they are in their chauffeur driven limousines, either on talking their mobiles or pretending to read newspapers.
Do they care if there is water scarcity in their buildins. No , they don't. They buy bottled water for drinking, bathing, washing their asses etc.

As some one mentioned, ours is incredible india

Anonymous said...

I am looking to purchase an investment property in Bangalore. I will only visit Bangalore once every couple of years. In short, this place will be rented out most of the time. Do you think this is the right time for me to make this purchase. I noticed that the prices in Bangalore are down. Any insight will he helpful

Desi Batman said...


@ Anonymous 1:47 PM

I am looking to purchase an investment property in Bangalore. I will only visit Bangalore once every couple of years. In short, this place will be rented out most of the time. Do you think this is the right time for me to make this purchase. I noticed that the prices in Bangalore are down. Any insight will he helpful


Rule of thumb is that you should have +ve cash flow (ha! as if you didn't already knew this.)
You have returns of atleast 15% to 20% for your risk and efforts to keep up with property maintenance or as such. I agree buying RE is beneficial in long term. Everymonth your rental flat is vacant, you are actually running in red.

If you are thinking that you are going to flip and make bucks - sure do it if you are riding bubble and getting heck of a RE deal.

Goodluck !

Desi Batman said...

@ Anonymous
Yesterdays slum dwellers are today's crorepatis.


So true. If someone was to be handed out crores just because he has RE that was acquired by non productive means it defeats purpose of intelligence, hard work and creativity.


They like to live in a slum like environment.

Yes, they do because they feel they are making money. I know someone who bought a house, and rented it and then moved back to chawl with his family - 6 people living in 20' x 30' room. They feel they are rich now. I ask, they can also save more money by living more sub standard life - may be rent that one too and move to jhopadpati.

I love India.

Bindas Bhai said...

Unlisted realtors borrow from HNIs at 16-18%
Tinesh Bhasin / Mumbai September 09, 2010, 0:06 IST

http://www.business-standard.com/india/news/unlisted-realtors-borrowhnis-at-16-18/407429/

Few signals before the fall.

All the best Guys

Bindas Bhai

rajni sharma said...

Hey this is really very nice post...
Nd one of your best post...Thanks
Flats in kolkata