On sector 78 NOIDA flat booking

Hi buzz.

Since you are saying you want to buy for own use, the only thing which should influence your decision should be - what can you afford? Are you financially able to make this EXPENDITURE?

For own living, a flat is an expenditure, not an investment. It has to be close to your work place, have decent schools and shops, have good traffic and a decent neighborhood.

I dont know your personal background, but Sector 78 etc are not so well located and essentially belong in the "affordable" category. They dont have the best of everything.

Secondly, poorer quality builders are more frequently found in the "affordable" category. These builders are more likely to cheat, to go slow, deliver substandard construction and also for total abandonment of the project.

Since you are planning to make the biggerst expenditure of your life, going slow is a virtue. Your best option and also for everyone in the 78 and surrounding projects, is to wait for 1-2 years and see which one is nearing completion and quality looks good. Buy in a resale, before registration, but shop around with brokers for 1-2 years to get the hang of the way things work, so that you buy the best possible flat for yourself.

Making a booking in a "prelaunch" etc kind of situation is for RE investors and should not be the modus operandi for an end user. This is for high risk high reward kind of investors and not for people stretching themselves on loan to buy a home for themselves.

MM and SBajaj and others may have made multiple bookings, but none of them are for own use - they are for resale to people like you. They take the risks so that people like you can buy without risk - but they make a profit in the bargain while you pay for safety. They take the risk that job market might collapse and prices of flats dont rise. They take the risk that the builder defaults or gives substandard product. They take the risk that they may not be able to sell the flat for various reasons. Why should you take this risk needlessly? You are making an expenditure and it should be risk free.

Trying to do both together is not advisable, unless you can afford to do so - i.e you have a big salary and dont mind living on rent for prolonged periods and can afford to pay both rent and EMI - in which case, sector 78 is anyway not for you. Killing 2 birds with one stone means you stick to the best builders like 3C or logix etc for new bookings and have enough financial muscle to last rhough extended staying periods. It is unfortunate that a lot of people mix their investment and expenditure.

Just like insurance - it is an expenditure and mixing investment with expenditure is silly. And yet almost every insurance policy is sold as investment - and every flat is sold as investment - which actually affects one's judgement and proper selection.

So yes, I would definitely urge you to only buy nearly constructed flats, before registration and after due diligence. New bookings are risky and not worth it.

Yes, there is some loss of choice in taking over a booking, but not much - almost all projects have investors booking the best and choice flats only, because they know they can get a better price for it. So you will get your choice, provided you pay a few lakhs extra - which is worth it.

Negotiation and timing are the key things - and if you plan to live in a flat for 10-20-30 years, spending a lot of time and effort in selecting the best is well worth it.

Vikky, your idea - buy plot, target flat, sell plot and buy flat is excellent. Lots of people I know have been doing that

Arihant, your concept of buying a flat as insurance is also a good idea. While term insurance is a necessity for many, for those who can afford, flat is a good partial replacement for insurance. While insurance premium is a dead loss expenditure, you can turn a "insurance like" purchase of a flat into a good investment.

For this, I assume you currently rent a flat close to work but want to buy close to where relatives live.

That makes it basically an early retirement flat purchase.

You can exercise options of early retirement, shifting your job near where you want to live, getting an easier job there and finishing substantial part of repayment early in your life.

There are some caveats.

1. If you are younger than 30 and have no children, it is better to wait. Expenditures tend to bloat with Children - and salaries tend to rise a lot between 30 and 40.

2. If you are 35-40 or so, its the right time. Your ultimate peak salary is probably close to where you already are and family/children's requirements will be clear

3. If you buy too early, you might under buy - instead of a 3-4BHK which is ideal for final settling, you buy a 2BHK which you will later have to sell for the better house. Also, you will tend to buy with poorer quality builders because of cost effect - and these dont last 20-50 years (usual post retirement period which you should budget for)

4.A retirement house is actually the first purchase you should target before making other arrangements for children's education and marriage.

Location: Close to your relatives

Builder: if its your retirement home, you should buy a ready built flat. Since you are buying this as "insurance", you want to transfer an asset and not a risk. The risk is already there (untimely death). You should buy on a loan a property close to relatives and take out a loan insurance in case of death.

Buying a booking means you actually transfer a liability and not an asset. You multiply your risk. You are adding to risk of death, builder default risk, EMI risk, "living on rent while all your money is locked up in under construction flat" risk - thats not what you want to do.

A good compromise would be an almost finished flat. Then you can "risk it" that you will live for 1 or 2 years and get possesion.

Unfortunately, you wont get anything for your 25L without heavy compromise.

Is that 25L already with you or is that your loan amount? And how old are you? And how many children do you have - boys or girls or what? What kind of job are you in? How safe, what field? How much is your current rent and what percentage of salary is going out on rent? Where are you currently located?

There are so many unknown factors. Without taking all that into account, one cannot say anything

[QUOTE=pravinchaudhary;126900]Hi Venky,

Sector 78 is very far from NE, leave alone crossings. After 3 years, people will access 78 thru Dadri road. An operational (not proposed) SEZ is very close by. [/QUOTE]

I have visited 78 and the SEZ. I know where the place is.

What people are not seeing is

1. Sez will provide very low salary employment. People planning to live in 78 are actually higher income people currently working in NOIDA.

2. There are only 3 roads in future which will go from main NOIDA to 78.

3. The currently existing road is too small to handle traffic from main NOIDA to NE and 78 - and also all the developments in 120/1 etc as well. There is likely to be a lot of Crossings to NE, Crossings to NOIDA and Crossings to 78/SEZ traffic which will make commuting difficult from this side.

4. Dadri road is also very congested and cannot handle so much traffic. If GN expressway is tolled, a lot of traffic will shift to Dadri road - which currently take the longer GN expressway route because it is such a smooth drive

5. Commuting from 78 to main NOIDA and the expressway, where newer IT jobs will come up, will be tiring and hectic. There are only going to be 3 routes for going from 78 to main NOIDA/expressway and all 3 will be congested.

6. FNG is meant for truck traffic and it will be unpleasant to drive with trucks. It will not lead to where people buying flats in 78 will want to go for work.

If a place is disadvantageously located, only the people who have no choice - i.e. those with less money - are going to buy. That makes 78 a lower income/affordable section housing area. No matter how many wide sector roads get built in 78, the main link to NOIDA and through that to Delhi is going to remain just 3 bottle necked and congested roads.

Those thinking otherwise are making a mistake. Buying a premium flat here makes sense if you work in SEZ or nearby and not for main NOIDA. And if you will be happy for your children to take up SEZ jobs - again that indicates lower middle class only

Try driving in NOIDA between 10 and 11AM and you will know what I am talking about. Office will not change its timing to suit the traffic congestion. Vice versa actually.

In GN also, the best projects might now shift to the expressway and Yamuna eway and the adjoining GN areas on other side of FNG might turn into poorer quality/disadvantaged locations

On plot price movements in Gurgaon and NOIDA

I dont think Gurgaon and NOIDA plot prices will match Delhi prices in 10 years.

Plots in GGN and Noida are mostly in the hands of investors and are not being built upon. This trend will continue for at least 15 years.

Delhi plots are already built and in most cases re-built as builder floor. Prices upwards of 3L plus psy - GGN and Noida max 1-1.5L psy in best areas.

As GGN and NOIDA appreciates, Delhi will also appreciate in line to maintain difference.

After 15 years I expect DLF rates to be same or similar to South Delhi, after good amount of end user construction. Maybe will take even 20 years.

10 years is too small a time frame for this to happen.

People with plotted house in GGN are not happy - security is poor and water electricity and road woes.

People are selling kothis and moving to posh apartments - putting a cap on the plot price.

For plots in GGN and NOIDA, HUDA/NDA plots will not have as much value as Jaypee/Vatika etc who have integrated township plans. Only those plots will command premium because they are part of township and problems will be properly solved.

More and more people are going to abandon the Kothi style of living for apartments in Delhi as the advantages become clear over the next few years.

Building own Kothi in own plot is anachronistic and will die down. It came up in 60s and persists till now in Suburban USA because land was very cheap and abundant in USA and promised a good life.

In India, apartment life will be found to be better than kothi (kothi is not exactly a villa though called villa - our so called villa is very different from the Western concept of villa which has ample garden space >4-5 times built up space).

Still, plots in GGN and NOIDA will appreciate better than flat - so worth investment

On price and recession prediction for 2012

Actually recessions are predictable - they come every 4 years in industry and every 7-8 years in RE.

Question is different

1. - how bad will the recession be?
2. -What kind of recession?

It is possible for each country to be in a different kind of recession. Looking at current data, it seems to me

1. USA: Standard heavy recession will continue with unemployment for prolonged period till 2020 with no big upmove in stocks or RE

2. UK: Shallow recession has ended and 2011 will see pick up in economy and RE. Both will peak in 2014

3. Germany: Same as UK. only stronger

4. France: Same as USA

5. Spain and Italy: Worse than USA, but same pattern as USA

6. Japan: Stagnation will continue till 2020.

7. China: Will continue spectacular growth

8. India: Will see standard business and RE cycles with exagerated stock and RE price movements, recap of USA from 1945 onwards

Obviously, investing strategy for each country has to be different.

In India, I expect best returns from stock market but with exagerated see saw. RE should be a smoother and safer bet.

I expect stagnation in Gurgaon with problems expected for leveraged and overinvested people whenever the stock market collapses - which I expect in Feb 2011. Same for Mumbai. But from 2014, prices will jump for Gurgaon and Mumbai

I expect two situations for NOIDA.

1. Currently under construction projects will go thru. But price for RE will be capped and will not give fantastic returns at all - I expect price stagnation / keeping pace with inflation with muted returns till 2014. People should expect good returns in NOIDA from 2014 onwards, but not as much as Gurgaon.

2. If there is a heavy recession in 2012 (expected in a 4 year cycle after 2008), many of the yet to be constructed projects will face severe delays or abandonment. People with bookings in such projects will miss out on the good returns expected from 2014 onwards.

I would therefore urge people to book only in projects where there is some assurance for construction, lest they miss out on the expected returns from 2014.

As for ATS, one can always hold for rental returns and keep quiet. One can sell for 2.5 crores in 2017 or so when the next RE bull phase reaches its peak.

Munish, best capital appreciation in RE is always in luxury category and not in affordable category. Advantage of affordable (and NOIDA in general) is that downside is limited. Unfortunately upside is also limited. Lluxury prices move maximum in bull phase but crash too much in recession, preventing exit effectively - except with huge loss).

NOIDA flat will find ready seller/buyer regardless of market timing. Gurgaon luxury flat will find seller/buyer only in good times (which is right now!).

NOIDA is a conservative investment and one should expect returns in line with inflation. Since it is currently some 14% (CPI) I expect some 40% return from your booking by completion in 2012-2013 which corresponds to Zohaibs prediction of around 4200 psf.

Later:
Hi all.

This was actually a post in NOIDA forum, in response to recession discussion, but wanted your valuable opinions as well from Gurgaon.

And I think you all have made valid points.

Sachin, this was individual perception only. I am pessimistic by nature, but my prediction for India was USA from 1945 to 2010 i.e. 65 years of superlative growth with recessions superimposed. Dow went from 300 to 14000.

Thats being optimistic only. There will be ups and downs but overall growth will be up. So I am nor predicting doomsday, but pointing out the reality of industrial growth and contraction being normal every 4 years.

Durbious, very good points. Gurgaon has definitely matured and may not see much downside. I think people now have holding power and the leveraged investors, flippers and heavy loan RE companies have learnt a lesson - and wont repeat.

But I expect static prices +/- 10% till 2014 when it will take off for a next bull run.

YOu are right, Gurgaon is much safer feeling than NOIDA, without doubt. We go to Gurgaon malls all the time and come home late. NOIDA is too scary after dark.

NOIDA will not see price fall, instead people will lose their bookings in case of major problems. Prices are so low, it cannot possibly fall further. And regardless of big or small recessions, some of the dodgy bookings will default on delivery and a lot of lower middle class people who have booked in NOIDA will lose their money to the builders.

RBBR, actually I am bullish on RE because of inflation effect. I dont think we have seen the last of inflation.

How to SIP in Real Estate

[QUOTE=puser;114570]keep writing in indian real estate forum [/QUOTE]

Hi all. Good discussion here. A few quick points.

1. A CLP is the closest you can get to SIP in RE. You lock in todays price, then keep paying slowly - but with inflation depreciated currency. So after 3 years, your 1L payment is actually 86,ooo because inflation devalued your money by 14% (rough example)

2. It is not necessary to invest in RE directly. You can also invest in stock proxies for RE, while waiting for right location price and downpayment accumulation. SIP into a basket of say DLF (Delhi), HDIL/HCC (Bombay), Leelaventures (Maharashtra), Royal Orchid (Bangalore) and Kajaria ceramics will capture whatever growth RE will give you. ICICIDirect also gives you a stock SIP option nowadays (you can place orders for market purchase at aftermarket times, since you may not be able to do it while working - whereas previously they only allowed limit orders at off market times

3.Taking a loan at floating rate does not beat inflation. If you are buying to beat inflation, stick to fixed rate of interest loan - currently some 2-3% higher than floating

Feelings on Indian economy

Hi Wiseman.

My fear is the same as yours - people cant afford these food prices. Hell even I cant afford these food prices. Restaurant prices for food is skyrocketing and we are cutting back on eating out - even cheaper restaurants are becoming unaffordable. And our home dlivery of pizzas is also dwindling - as it costs some 700 Rs for the whole family to eat in - and 1000 plus to eat out.

A friend of mine living in Delhi and earning 25000 per month is unable to make ends meet and is thinking of shifting his family to Kerala. And this after his mother pays for his two children's education.

Life is becoming tougher and tougher. Something has to give and things have to become more unpleasant.

Re: gold, it is obviously a response to the fed threat (supposedly couched in terms of inducement) of quantitative easing. Gold in dollar terms will rise as long as the fed prints money.

But it is a high risk speculation. Bond yields are only imperfectly under the fed control. Bonds are currently in a bubble. When the bubble bursts, Gold will fall flat to the ground.

So buy dollar gold only if you are sure of being nible footed and exit well before the bursting of this bubble. It is definitely a good trade but a bad investment.

Rupee gold if you notice has stood still because of receprocal relation between gold-dollar and Rupee-dollar relationship. Local ETF will make money if Rupee depreciates. Not otherwise. The way the fed is behaving, dollar is likely to be weak for at least 6 months, before sufficient economic data comes in for the fed to take a stance one way or another.

Rupee-gold is likely to stay static, even with Rupee appreciation. I am suspending further purchases of gold ETF until there is clarity. I think one can get the same or even less prices between now and march.

With this much dollar weakness, I am also suspending further stock sales, unless the sensex seems super bubbly. This much liquidity has to flow somewhere and better to ride the bubble than to stay out. In any case, I have sold some 10% of stock and finished 80% of stock portfolio rebalancing.

As for RE, I anticipate exactly what you propose - abandoned projects, shortages of flats, unfinished and delayed flats, people's money stuck, poor movement.

Re: inflation, India's dollar Rupee exchange rate in 2000 was around 45. Today it is still 45. USA has seen some 3% inflation (not precise data). India probably some 10% inflation over 10 years (again not precise data). With this difference, Rupee should have been 70 or 80 to the dollar.

Even last year, USA had zero inflation. India had 15% inflation. Rupee appreciated 5% recently, so actual Rupee appreciation keeping inflation in mond is some 20%. In just a few months or days.

Every country is in a race to depreciate and we are achieving 20% appreciation? This is quite crazy and unsustainable. Obviously something has to give.

What that something is I dont know. But some catastrophic calamity is looming. Better be prepared for whatever it is.

My bet is either a sudden catastrophic market fall triggered by some butterfly fluttering, or flight of capital because of the failure of quantitative easing and bursting of the US bond bubble. That will start a chain reaction which can cause

1. Rupee depreciating to some ridiculously low figure like 100 to the dollar
2. Balance of payment crisis
3. Super spike in commodity prices - imagine our oil import, copper import and machinery import bill suddenly doubling. Gold in Rupees will also double
4. Hyper inflation - how can India sustain a doubling of oil prices?
5. Corporate crisis as repayment of dollar loans by Indian companies becomes unsustainable. Watch out for Reliance - planning on a dollar loan of 1 billion dollars
6. Stagflation for a few years.

Things are bad and I get a feeling of impending doom even as I ride the euphoria of the current bubble.

However, I get this "doom" feeling for India but do not really see problems in USA.

Actually I feel that quantitative easing will be successful - the end of which is always marked by a rise of interest rates as the bond bubble deflates. Which spells doom for India. So at the end of the day. USA will get away with it while crucifying us.

I think Ben Bernanke is excellent at his job. He is using the right tool at the right time to achieve the US self interest.

Alan Greenspan was terrible at his job - he overstimulated USA after the locally contained dot com bubble - when real economy did not need it - and created the RE super bubble of 2007.

YV Reddy was excellent at his job. He correctly identified the RE bubble and took appropriate corrective action which was largely responsible for containing the crisis in India.

Subarao appears clueless. He seems to be under some govt pressure - why I dont know. His juniors are not getting extention, there is talk of setting up a finance ministry super-regulator over and above RBI, there is talk of divesting govt bond auctions away from RBI and then we have this unsterilised injection of liquidity into the Indian market.

While I dislike conspiracy theories (they are always wrong) I am unable to account for this much policy drift - it is totally dismaying and has to end badly - unless there is some vested interest which is responsible for this chaotic central banking.

Still at the end of the day, I must conclude on only extra-ordinary ineptitude on the part of RBI in recent days - and the current RBI governor is probably the worst we have ever seen.

Yes, I know, why would quantitative easing stop? I dont know, but sooner or later it has to.

But it is good for 6 months at least I feel. So for next 6 months, what you are saying seems likely.

All I can say is repeat my 1 and a half year old dictum of 30% stocks, 30% bonds, 30% RE and 5-10% gold ad nauseum.

Cant think of any other way to ride out these uncertain times and unpredictable global imbalances.

Munish, if you are so severely underweight equity, put your money in a liquid fund and do STP into a good fund of your choice - say 30,000 every month for 2 years - say DSP top 100, HDFC top 200, Franklin blue chip etc.

You should never be out of any of the 4 asset classes, only shift around 10-30% by changing the weight.

Returns come from the right asset allocation and not right instrument selection within an asset class

Stock Market view

I am fairly pessimistic on future prospects. Time to keep booking profits and ploughing into liquid funds - I am practicing what I am preaching.

If you were 60/40 in favour of stocks, time to rebalance to 50/50. I am still 60/40 (down from 70/30).

I am pessimistic on FMCG, Auto, Banking and NBFC/Housing finance.

Pharma and infrastructure should hold up better. Also dividend yield funds. I am buying in these sectors.

Re: US quantitative easing, it will reverse with a bang when long term yields fall to ridiculous levels (currently ~ 2.5% and falling) - and people start dumping US bonds (currently in a bubble). There will be a sudden and drastic rise in US yields, dollar index will rise, g-old will fall, rupee will fall, rupee g=old will rise or stay same (depends on just how much dollar g-old will fall)

FII money will stay for a while, and then withdraw to safer US yields of around 4%. Depending on extent of outflow, Rupee depreciation will be drastic.

I expect 55 to the dollar within 1 year.

On Rich becoming richer and poor becoming poorer in India

Wealth is not gold. Wealth is not Rupees.

Wealth is human effort - working hard to make each other's life better.

Indians are poor because they are illiterate and unable to be productive. They have a useless parasite govt. Much effort is wasted makings things over and over again because they were not done right the first time

Americans, Japanese, Europeans etc are wealthy because they are highly capable and are highly productive - and because, unlike Indians they understand what wealth means.

In a free market, anything that has value and is tradable is wealth. But it is not finite - as many of you said in the previous thread, which prompted my response. It is infinite, limited only by the capacity of humans to generate it. Many things which do not have value but are tradable (like art etc) are also wealth. (Note, that also requires human effort.) Name one item which is wealth but does not require human effort. Resources are finite. Wealth is infinite, limited only by human effort. Wealth includes a society with law and order, cleanliness, decent human values, entertainment, politeness, just rewards for human endeavour and other similar intangibles, which are not tradable except in a barter system. Nevertheless, these are a part of our wealth and contribute to out well being. In a dysfunctional society like India, there is no amount of money which can buy it for you. We are poor because we dont have these.

Gold doesnt come out of the ground without human effort. There is a cost to extraction of gold which is currently some 4-500 dollars. The price over and above that for gold is just a nominal tradable premium. If by using your brains, you figure out a cheaper way to take gold out of the ground, you have made yourself wealthier using the same resources. This use of brains is human effort.

In the past, India was the wealthiest nation in the world per capita, because God had bestowed the maximum of all resources on India. Human effort was hardly necessary to be wealthy.
All other nations became wealthier than us by their human effort - by working hard, being more inventive, fighting harder than us, being more productive. We, being already blessed, continued in our laziness and have become one of the poorest countries in the world. Because of lack of human effort.

Without labour, there is no produce. India is a good example of labour without produce. We build bridges which fall down, we make roads which wash away. These are examples of capital destruction i.e. waste of human effort. Because it does not generate wealth.


Whole of society is co-operative effort. Obviously individual effort is needed and self interest is also needed. You wont be very wealthy living in a forest alone. You may not even sleep well, given the dangers. Here, wretched examples of laziness exist. India, Sri Lanka, some African and South American countries come to mind. People despite their self interest being against it, live in laziness. These countries are not wealthy - despite the abundance of resources - because human effort is lacking.

Essentially, efficient allocation of capital is better achieved through market economics than through govt fiat. India is poor because it allocates too much capital through govt. Soviet Russia collapsed for the same reason. That is why China is trying hard to embrace market economics and so far has exeeded the original capitalist countries in its abilities

Capitalism has worked out exceptionally well for last 400 years.

Markets by nature are made up of traders who try to maximise their gain. There are some markets which are zero sum (like stock derivatives) and some markets which are not sero sum (like stock markets, commodity markets, land, commercial or residential real estate). In zero sum markets, for every winner, there has to be a loser. Other markets everyone wins, except when greed gets ahead of fundamentals and "efficiency" decreases.

Re. Quantitative easing, the govt of USA projects itself as a buyer of its own debt. It creates a bond bubble, which is currently on, as bond prices are bid higher and higher in a game of passing the parcel - safe in the knowledge that US govt will be finally left holding the parcel.
The US fed is making an educated gamble that this will stoke economic activity and inflation - at which time, the US bonds can be dumped, deflating the bubble with yields rising again to match inflation levels.

All current indicators point towards this gambit succeeding