Why do I find so many attractive targets to write about?
Just found an article on Rediff.com saying ‘Six reasons why property prices WILL NOT FALL in your city’.
Let us look at it reason by reason?
“Property prices across the country are unlikely to see significant price corrections of more than 10 per cent in the coming few years.”
YOU NEED GUTS TO MAKE SUCH A COMMENT…RAW GUTS.(my comment!)
Reasons given in the article:
1. Because it is a cash haven for BLACK MONEY:
come on Indians know that now you pay 30% Income tax and 10% short term capital gains tax. Long Term cap gains is 0% – much easier to convert and invest wherever you wish. Even in cities like Mumbai, only some locations can you do a 70:30 (Cheque: Cash) transaction. Much, much easier to do small transactions in gold.
2. Investors are willing to pay the high interest rates:
Complete nonsense. Seen a deal where a builder borrowed Rs. 200 million @ 28% p.a. for 2 years. This builder would have happily given a 35% discount on his rack rate – but needed a big committment from the buyer. As it was not forthcoming, it got converted to a secured loan at 28%.
3. Inflation:
I did not understand this as a reason, pardon me.
4. Wages have gone up, thanks to NREGA – so labor is not available….
I think the author means that because of inflation and non availability of labor prices cannot come down. Funny, prices of existing housing stock will fall – because the builder may be going out of business!!
5. Contrary to popular belief only a few builders are leveraged:
Do not have enough audited figures to dispute this, but take a look at the balance sheets of listed companies – there is surely some leverage, and further loans are JUST NOT AVAILABLE for builders…
6. You are likely to get about 18% p.a. return:
Did this working over the last 25, 30, 35 years…did not find any location where property prices doubled in 4 years…feedback welcome. And I am not even talking about interest cost, borrowing costs, term insurance, maintenance, ….etc.
the bold print is in the article – the normal print is my view. Sorry rediff, find it difficult to agree…
Now I know a bunch of people who have LOST money in real estate transactions – bad builder, bad timing, …many reasons and in many locations too! Pune, Chennai, Bengaluru, Mumbai, Navi Mumbai…..will do specific stories…not sure when!!
Source:Subramoney.com