[Jaguar]

Originally Posted by Axe77

To use the cash flow metric as an alternate, personally, at 45 yo, I would want to keep my overall borrowing / capital outflow commitment (like for a house), at any point WELL UNDER one year’s gross income.

Trying to understand. Do you mean to say, if one is earning say 50 lakhs, the house should cost < 50l or the borrowed amount should be < 50l?

[Turbanator]

^^
One Year's salary/earnings will be too low for any meaningful purchase for most of people. Maybe not everyone but the majority. So I will go with something like 7-10 Year earnings as Mr Narayan has mentioned. This will also depend on the age at which you are investing. Say at 50, if I am earning 4 lac a month, I may not be eligible for a loan for 3,5 Cr in the first place, but someone who is 40 will qualify. The basic idea is that if you are out of a job/ work for any reason, you should be able to repay your EMI for a while.

Given today's hike and another expected shortly, be very careful with purchase. Real estate prices are very high in most parts of India and globally but are taking a hit in some markets. Like in GTA ( Toronto region), prices are dropping by a few % every week after hitting some highs early this year.

[Jaguar]

Originally Posted by Turbanator

^^
One Year's salary/earnings will be too low for any meaningful purchase for most of people. Maybe not everyone but the majority.

That's what I also thought and therefore wanted to clarify with the OP

[sunilch]

Originally Posted by Turbanator

^^
One Year's salary/earnings will be too low for any meaningful purchase for most of people. Maybe not everyone but the majority. So I will go with something like 7-10 Year earnings as Mr Narayan has mentioned. This will also depend on the age at which you are investing. Say at 50, if I am earning 4 lac a month, I may not be eligible for a loan for 3,5 Cr in the first place, but someone who is 40 will qualify. The basic idea is that if you are out of a job/ work for any reason, you should be able to repay your EMI for a while.

Given today's hike and another expected shortly, be very careful with purchase. Real estate prices are very high in most parts of India and globally but are taking a hit in some markets. Like in GTA ( Toronto region), prices are dropping by a few % every week after hitting some highs early this year.

Originally Posted by Jaguar

That's what I also thought and therefore wanted to clarify with the OP

It should be based on your monthly take-away and the EMI portion should go down with age. While you will be eligible for a lesser amount, if the EMI is still 50% of your monthly takeaway, that too is a flag to notice. At young age, you can pay 50% as EMI, at 40 years it should be less than 50% (say 33%) and at 50 it should be 20% or less. This is simply to be able to absorb the shocks, if any.

This is not related to your purchase cost - that could be still high if you have other assets/use that you will adjust to buy a newer one. So if you have 50L in FDs, you can borrow more and go beyond 20% in EMI. Or if you have other properties fully paid, you can buy a new one at 2-4cr by selling the older ones first. EMI is what needs to be in control.

[AZT]

Originally Posted by Gaur

Need some advice about the future prospects of Goregaon East as an investment destination considering I.T parks in nearby area and upcoming Goregaon-Mulund link road.

Basic advice would be to obviously invest only in ready or almost ready properties. I have seen IT and offshore process companies moving to Thane / Airoli now. Not sure what the outlook for Goregaon is but don't base your decision on just current scenario there.

[pk1972]

Originally Posted by ValarMorghulis

Explored a few properties this weekend.
1. Sobha Manhattan Towers in Attibele have mad prices even though construction is scheduled to be completed in 2025/26 & it's kinda out of Bangalore.

2. Sobha Sentosa near Varthur lake gets you a 1BHK for the price of a 2BHK in 1. above

Mind==blown

Mind blowing indeed it is the Bangalore RE market. I was in the market end of 2019 - the price per sq.ft was around 6k-7k then are now quoting 10-11k in & around Bellandur with further revisions every second month. It does look like a big cartel of builders, RE agents and channel partners and really not sure where this will end. I do need an bigger house but just completely stumped by the quotes I get from builders !

Should I wait for some more time for prices to stagnate because of inflation and rate increase?

[Axe77]

Originally Posted by Axe77

These matters are very subjective of course and there’s no absolute right or wrong, so I’m just sharing how I would see this from my lens, for whatever its worth.

To use the cash flow metric as an alternate, personally, at 45 yo, I would want to keep my overall borrowing / capital outflow commitment (like for a house), at any point WELL UNDER one year’s gross income.

Originally Posted by Jaguar

Trying to understand. Do you mean to say, if one is earning say 50 lakhs, the house should cost < 50l or the borrowed amount should be < 50l?

Hey. Good question.

A few points:
1. That last bit was not an advisory - it was MY personal view point only for reference. Maybe it is indeed conservative but it was also specific to people well in their 40s where the EMI outlook is only for 15 years or so (till age 60). If you’re much younger (also if you’re double income) then of course that would be much much higher - maybe 5 - 7 years of projected income.
2. The post needs to be read in entirety for fuller context and not that statement alone in isolation.
3. You could say maybe that the purchase could be 2 - 3 years of annual income (instead of one year) but I’d not venture much beyond that for people well over 40. At 30, you have the benefit of a longer tenure loan therefore making the purchase cheaper via prepayments in due course.
4. Interest rates are only going to go upwards from here on. We’ve already just seen a 50 bps hike this week (which was in line with expectations). Anyone taking a monthly cash flow approach (as one should) with a shorter (12-15 years) tenure should be mindful of this aspect as it could result in increased EMI amounts on the purchase. I’d in any case be wary of aggressive real estate purchases in this market, given my outlook on RE as an investment bucket, likely interest rate graph etc, and the fact that we are in turbulent times where some are talking of possible recessions, there is political uncertainty and what not. Like I said elsewhere in my post, I’d also want to keep 12 - 18 months of liquidity for completely unforeseen events (they could be external impacting your income or internal like health which impact earnings, not inconceivable when you’re in nodding distance of 50).

Disclaimer: I am fundamentally conservative when it comes to any capex purchase and borrowings in particular so please factor that mindset when reading into my views on this.

[ValarMorghulis]

Originally Posted by pk1972

...
Should I wait for some more time for prices to stagnate because of inflation and rate increase?

From personal experience I can confidently state that I've never witnessed prices fall for RE in Bangalore when it comes to reputed builders (Sobha, Prestige, Salarpuria, Brigrade, Purvanakara). I've seen prices stay level for a couple of quarters during pandemic but that's it. Even then the builders, if at all, reduced only floor rise amounts.

If you have to buy a house, the best time is yesterday. Prices will never fall, not in tier-1 cities for good builders, in India at least.

[highwaypatrol]

Hello guys, I am planning to buy one apartment of Casagrand builders here in Hennur, Bangalore (Casagrand Boulevard project). They are quoting a price of Rs.6700 for a 2 BHK apartment excluding registration. Is it a good deal? How is the reputation of Casagrand builders? I heard they are very big in TN, and started off late in RE market Bangalore only in the last few years.

Suggestions from well informed RE experts are most welcome and it will help finalise my decision at the earliest.

Thanks..

[shyampsunder]

Originally Posted by ValarMorghulis

If you have to buy a house, the best time is yesterday. Prices will never fall, not in tier-1 cities for good builders, in India at least.

Many many examples of significant price corrections in tier-1 cities. The most famous in India is Hyderabad. Many famous properties in OMR Chennai are struggling as well.

Also you must keep in mind that RE ownership for most Indians is a highly leveraged play backed with home loans. Any price rise less than the cost of capital (Interest) - notional rental yield eats into the owners equity very fast. It's not directly visible but it's the truth.

Till now we didn't have a proper RE price index and we had to do with anecdotes from people around us. Thankfully the RBI RE price index has come out and it is clear that for most cities RE investments haven't broken even in the last few years.

[SgtRepeat]

Originally Posted by shyampsunder

Many many examples of significant price corrections in tier-1 cities. The most famous in India is Hyderabad.

Having observed the real estate market in Hyderabad for the last 25 years, the price has always gone up and never down.

In places like Kondapur and Gachibowli, land rates per sq yard were around ₹30,000 in 2016 and now cost upwards of ₹1,00,000. Apartment prices vary between ₹6000 to ₹12,000 per sq feet depending on the area you're looking at and its proximity to the main road.

Real estate prices may remain stagnant for a few months at best, but will not go down in Hyderabad.

[JediKnight]

Originally Posted by SgtRepeat

Real estate prices may remain stagnant for a few months at best, but will not go down in Hyderabad.

Remain stagnant for a few months will change to a few years going forward which is actually a loss. As cities expand they experience rapid increase in price as Hyderabad has experienced in the past. But this cannot keep on going to infinity. Already Hyderabad prices are similar to Bangalore prices, a city with much higher GDP. With US economy slowing and interest rates rising a slump in real estate including Hyderabad cannot be ruled out.

[Turbanator]

Since 2003 or 2004, we have seen real estate prices increase. There was a brief period around 2014 when these got reduced, but most have forgotten. Now in recent times, after 2020, prices across the world have increased, unlike past. People have gained easy money from stocks, low-interest rates and whatnot. But this cannot continue forever.

8% is current Home loan interest and is expected to rise even further. In most places, full cheque payment is now a norm. As a result, people have been taking loans like there is no tomorrow.

A close friend had a house in Brampton, which he bought in 2016 for 600K. This went up to 1,5 in Jan/ Feb. He had paid around 200K as down in 2016, and maybe some few thousands might have gone all these years to the principal as amortisation is usually 20-25 Years here. In January, his property got valued at 1,5, so he got another mortgage on his existing house for 800K and paid 20% down on Two properties In the last two months, property prices in GTA corrected by 20-30%. As his closing for the new home gets near, he is having trouble getting a mortgage due to the revised value of his properties. I won’t be surprised if he bleeds even more. Though he comes from a wealthy family and will come out of this due to inherited wealth, this can get tricky for people who have taken loans on inflated values of their assets.

RE investment for growth is good and acceptable in the long term but may not work for someone trying to make quick money. In India, we still have low rentals as compared to new home prices. A colleague rented a flat at 50K, the same flat costs 2 Cr currently. It may work for the owner as he may have paid Rs 1 Cr or even less a few years before, but if someone has to buy today or rent, the choice is clear.

Homeownership has its pride but living under stress is not suggested. Until basic salaries increase, investing in RE will be very risky.

[SgtRepeat]

Originally Posted by JediKnight

Remain stagnant for a few months will change to a few years going forward which is actually a loss. Already Hyderabad prices are similar to Bangalore prices, a city with much higher GDP.

The price stagnation is a worst case scenario that hasn't happened in Hyderabad. Even during the peak of the pandemics, prices were not stagnant.

While prices here are similar to Bangalore right now, it might overshoot it soon as well. Unlike Bangalore which is saturated (no offense meant), Hyderabad is still growing and IT investment is increasing here.

The only deterrent for real estate investments right now is the rising interest rates and a fear of an incoming slump in the US economy leading to companies slowing down hiring. This would affect prices everywhere and not just Hyderabad.

[Sebring]

Are you saying Bangalore isn't growing and IT companies are not investing in Bangalore? Or are you implying the real estate sector is saturated? Plz clarify

Originally Posted by SgtRepeat

Unlike Bangalore which is saturated (no offense meant), Hyderabad is still growing and IT investment is increasing here.