Property as an Investment.
There is a seven floored Shobha on the way to my wife's office. The apartments are ready to occupy and there are very few occupants. It has been this way from at least a year. I have been seeing at least 5 to-let boards on completed/old commercial complexes from the last six months in the vicinity of my house. Close to 50% of the new stores, shops that had come up in the last 6 months have closed. Sweet vendors, cloth stores, stationary shop etc. One of them told me that the business was not good and he could not afford the rent.
The Business in general has not been good. But how then, have the real-estate prices been holding up?
Black money. Most of real-estate business runs on black money, the kind of money that did not expect returns anyway. It (black money) was parked under beds and pillow covers it is now standing as a building. And the real-estate Mafia, it appears to me, is holding the real-estate prices, artificially.
The impression that most of us get when go our scouting for a property purchase is that Property prices have almost doubled / quadrupled in the last few years. However, if you notice this chart from makan.com it has a different story to tell. from July 2012 to July 2013 property prices in Bangalore have appreciated by a mere 5.17%
I the real estate boom is so deep in our minds that I hear many people talking about buying a property as an investment. Many go to the extent of taking a huge loan to get a new property. If you have done just that or planning on buying a property on loan as an investment, then, here is a sheet that can help you decide what kind of returns to expect when you sell this property.
An average property would have to appreciate at about 10% every year to make up for the interest you pay and Interest you would have gained from your cash. In the last one year, Delhi, Bangalore and Mumbai real estate prices have appreciated by less than 10%. On the other hand Property prices in Chennai, Kolkata and Hyderabad have increased by 18-20.The Business in general has not been good. But how then, have the real-estate prices been holding up?
Black money. Most of real-estate business runs on black money, the kind of money that did not expect returns anyway. It (black money) was parked under beds and pillow covers it is now standing as a building. And the real-estate Mafia, it appears to me, is holding the real-estate prices, artificially.
The impression that most of us get when go our scouting for a property purchase is that Property prices have almost doubled / quadrupled in the last few years. However, if you notice this chart from makan.com it has a different story to tell. from July 2012 to July 2013 property prices in Bangalore have appreciated by a mere 5.17%
I the real estate boom is so deep in our minds that I hear many people talking about buying a property as an investment. Many go to the extent of taking a huge loan to get a new property. If you have done just that or planning on buying a property on loan as an investment, then, here is a sheet that can help you decide what kind of returns to expect when you sell this property.
No doubt that property prices in the long run will increase. Land is a limited resource and human population (the demand) is constantly raising. However, what we see today is plenty of towering residential and commercial constructions, a wild torrent of real estate ads in paper, on radio and on hoardings, To-let boards on new and empty commercial buildings. All these, to me, suggests that there is more supply than demand.
So, will the prices come down? Should you invest now, later? I don't know.
Are paying more the free market price? I certainly think so.
Here is an interesting Economist chart that will tell you about history of housing prices and rents in different countries.
http://www.economist.com/blogs/dailychart/2011/11/global-house-prices
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