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Old 9th June 2010, 14:27   #151
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Originally Posted by pramodkumar View Post
The experts in the market say that there is another recession to hit us in the next 6 months
News to me; I haven't heard about this. Probably time to start a new thread on this in Shifting Gears

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i would like to stay put until then and look for great bargains that time
Very true & very right, provided the above speculation is true

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Property seems like a good investment but a loan will put you in a rat race, where all your decissions in future would be based on your job and income security.
Very very true & to make matters worse, if the job is lost, so does the peace of mind.
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Old 9th June 2010, 14:28   #152
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Originally Posted by pramodkumar View Post
The experts in the market say that there is another recession to hit us in the next 6 months, i would like to stay put until then and look for great bargains that time, here in kerala what used to be a 2 lac rupee property 5 years ago is close to 2 crore now, i would say the appriciation here is definity 100 times. Property seems like a good investment but a loan will put you in a rat race, where all your decissions in future would be based on your job and income security.
Pramod
I happened to talk with by senior boss (He's around 45) during lunch last day, and he was saying that in Kerala, people in their mid 40s are the majority. Since a good percentage of them are already settled, the number of people looking out to buy a property has become less during recent years. This, coupled with the recession explains why property prices are not skyrocketing in the last couple of years.

It will so, given a gap pf another 5 to 6 years, as per him. Kerala has a net negative rate of migration now (number of people going out and settling elsewhere are more than number of people migrating in) Population is also very much controlled (unless all young married couples decide to have 10 kids ) and it is not on a rise.

So of you are looking forward to making big money by buying some land and selling it in few years, it may not turn out as good as you expect. But if you are looking to buy some land to build your own house, its a good time now.

Last edited by clevermax : 9th June 2010 at 14:32.
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Old 9th June 2010, 14:33   #153
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Originally Posted by vishnurp99 View Post
I am really confused regarding whether i should invest in property now. The property prices seems to have appreciated by 100% in the last 5 years. I can raise around 25 lakhs without any liability courtesy parents/some savings etc. I can go ahead and get a loan of another 40 lakhs for which EMI could come to around 20K. I feel that this EMI is a safe EMI for me.
Please let us know which bank is this.

My EMI is around 15k for a 16 Lac loan for 20 yrs tenure.

By that approximation 40 L would fetch an EMI of nearly 35-37 k.
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Old 9th June 2010, 14:41   #154
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Please let us know which bank is this.

My EMI is around 15k for a 16 Lac loan for 20 yrs tenure.

By that approximation 40 L would fetch an EMI of nearly 35-37 k.
Yes, EMI would be in 35k range. I am looking for a loan of 35l and I am getting quotes of 29-30k EMI for 20 year loan (Interest in the range of 8-9%)
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Old 9th June 2010, 14:46   #155
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This is how i calculated my EMI.

When i was looking for car loan the ICICI had offered me an EMI of 2061/lac(9% interest) for a period of 5 years. For getting the EMI for 20 years/lac i thought i just had to divide it by 4(home loans are cheaper than car loans too). This would come to 520 Rs/lac or 520*40=20800

What i did wrong is I didn't consider the interest for those 15 years :(. So ended with a lesser EMI than what i would actually have to pay for the amount in question. I am going to find out the EMI that i will have to pay for 40 lakhs right now.

Even if the EMI is wrong, I am more worried about the concept of buying a land on Loan. I am planning to buy it in kerala and atleast near where my parents stay the asking rate is around 10 lacs/cent (10 lacs is conservative. There are small plots of 1 cent etc which is going for 25 lakhs etc ). I want to make sure we will not run into a US kind of situation where the real estate actually depriciates instead of appreciating.

Sorry for posting the wrong EMI.

Last edited by vishnurp99 : 9th June 2010 at 15:00. Reason: Needed to add more information.
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Old 9th June 2010, 14:47   #156
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@Vishnu - All of them here're are right on the loan amount & EMI. Here's something that I tried to prove you & failed
Loan amount - 40 Lakhs
Tenure - 300 months (25 years)
Interest rate - 8% (which is ridiculous)
and this is what I obtained

Name:  l1.JPG
Views: 634
Size:  42.2 KB

Source - ApnaLoan EMI Calculator: Car Personal & Home Loan EMI Calculator
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Old 9th June 2010, 15:21   #157
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^^ Yes, you end up paying more interest than principal amount. A loan for 20 years is nothing other than a burden for the common working man.
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Old 9th June 2010, 15:29   #158
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@Clevermax - see the total amount that is being paid over the years & that is what is blowing the brains out. 40 Lakhs versus 92 Lakhs in 25 years. What I learned from this thread is to put 50% or more upfront & borrow as less as possible & close it as soon as possible.

A friend of mine took a housing loan for 19Lakhs, pays about 23K for about 15 years & ends up paying around 42 Lakhs & that was my eye opener.
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Old 9th June 2010, 15:59   #159
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Originally Posted by aargee View Post
A friend of mine took a housing loan for 19Lakhs, pays about 23K for about 15 years & ends up paying around 42 Lakhs & that was my eye opener.
Will the property be worth 42 lakhs in 15 years?

Or to rephrase

What would be the worth of the property 15 years from now?

That I guess is more inportant to know.

Last edited by Spitfire : 9th June 2010 at 16:00.
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Old 9th June 2010, 16:35   #160
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Originally Posted by Spitfire View Post
Will the property be worth 42 lakhs in 15 years?
Or to rephrase
What would be the worth of the property 15 years from now?
That I guess is more inportant to know.
Its a loss if the property is just worth 42 lakhs after 25 years!
Even if it is worth 42 lakhs or more, its at a later stage of your life, you are probably old by then, and the most difficult part - if that was bought as an investiment or not - will be the difficulty in parting with anything whose value appreciates as time moves on. You might want to wait until it becomes 75 lakhs or may be 1 crore and in that process, time will move on and in many cases, the person who bought it won't be able to finally enjoy it.

I wouldn't take a loan and pay the EMIs for the next 15 ot 20 years of my life. Even if I have to, I'll try to close it asap, and yes, will try to get maximum funds ready before buying anythig rather than relying on the loan fully.

I guess this discussion is going off-topic

Last edited by clevermax : 9th June 2010 at 16:38.
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Old 9th June 2010, 17:22   #161
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Originally Posted by clevermax View Post
Its a loss if the property is just worth 42 lakhs after 25 years!
Even if it is worth 42 lakhs or more, its at a later stage of your life, you are probably old by then, and the most difficult part - if that was bought as an investiment or not - will be the difficulty in parting with anything whose value appreciates as time moves on. You might want to wait until it becomes 75 lakhs or may be 1 crore and in that process, time will move on and in many cases, the person who bought it won't be able to finally enjoy it.

I wouldn't take a loan and pay the EMIs for the next 15 ot 20 years of my life. Even if I have to, I'll try to close it asap, and yes, will try to get maximum funds ready before buying anythig rather than relying on the loan fully.

I guess this discussion is going off-topic
Though off topic the point is great, the question is how much will this investment return to you?

Pramod
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Old 9th June 2010, 17:58   #162
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In the intend of clarifying the off topic...
My friend borrowed the money only to build the house in their ancestral property (own land) & he was able to only pay 6 Lakhs upfront. The value of the property is about 50 Lakhs today. He built two houses & earns about 16K as rent from both the houses. So I think what he did was a wise decision. Had he not owned the land, then, he would've borrowed more & that's what I call as disaster.
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Old 9th June 2010, 18:37   #163
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So in the context of this thread, what % of up-front payment for a house would be considered safe? 50%?
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Old 9th June 2010, 19:04   #164
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Originally Posted by clevermax View Post
I happened to talk with by senior boss (He's around 45) during lunch last day, and he was saying that in Kerala, people in their mid 40s are the majority. Since a good percentage of them are already settled, the number of people looking out to buy a property has become less during recent years. This, coupled with the recession explains why property prices are not skyrocketing in the last couple of years.

It will so, given a gap pf another 5 to 6 years, as per him. Kerala has a net negative rate of migration now (number of people going out and settling elsewhere are more than number of people migrating in) Population is also very much controlled (unless all young married couples decide to have 10 kids ) and it is not on a rise.

So of you are looking forward to making big money by buying some land and selling it in few years, it may not turn out as good as you expect. But if you are looking to buy some land to build your own house, its a good time now.
Kerala had this social situation for long time. The land prices are going up in Kerala not because of localites buying them. It is because of the interest shown by non-resident Keralites. And this number is only increasing. Most of the Mallus has a dream of going back to Kerala, at some point of their life. So this fuels the desire to buy property there. And of late the development activities and large projects such as ports and roads are making it a wiser option to invest in land. So basically the negative growth rate will only help in increasing land prices as more and more NRKs will invest in land. In my home town the population has been stagnant for over a decade now. But the land prices have gone up at least by 10 times. After all, what else is worth investing in Kerala?

I will give another example. We bought some land in rural Palakkad at about Rs 5000 per acre about 15 years ago. Now the same land is being sold at 20 lacs per acre. No other investment would have fetched me that kind of return, even in cities like Bangalore.

Coming back to the OT, I am living on the edge, big time. 80% of my salaries are paid to EMIs. And I dont think any bank seriously check this aspect when they sanction new loans.

Last edited by vasoo : 9th June 2010 at 19:08.
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Old 9th June 2010, 19:20   #165
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Quote:
Originally Posted by clevermax View Post
Its a loss if the property is just worth 42 lakhs after 25 years!
Even if it is worth 42 lakhs or more, its at a later stage of your life, you are probably old by then, and the most difficult part - if that was bought as an investiment or not - will be the difficulty in parting with anything whose value appreciates as time moves on. You might want to wait until it becomes 75 lakhs or may be 1 crore and in that process, time will move on and in many cases, the person who bought it won't be able to finally enjoy it.

I wouldn't take a loan and pay the EMIs for the next 15 ot 20 years of my life. Even if I have to, I'll try to close it asap, and yes, will try to get maximum funds ready before buying anythig rather than relying on the loan fully.

I guess this discussion is going off-topic
No, this is totally on topic. You clearly explained the point of investing but not utilizing one's investment. I have no intentions to accumulate wealth, and then die. I want to enjoy it too.

This is why in later part of life americans take equity out of their house so there is really no assets left when they die.

Another concept in india (as explained and understood in west) is "asset rich, cash poor". It is not unusual to see somebody owning a shop in say chandni chowk worth crores, but living a very low cost life. They probably do not earn as much as they could thru interest, but what keeps them locked there is the "asset" factor. Living life frugally doesn't matter much to them.
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