at current price ,it is difficult to buy a decent house. so target an upcoming area with a gestation period of 5-10 years and invest in a house. there are a lot of such projects which are coming up everywhere . meanwhile stay in a rented house. when you finally get the property- 5-10 years from now- it's market price will astound you, no matter what has happened in those years.check a piece of property which is now very expensive yet 5-6 years ago its cost would have been just a fraction . this will always be the case. ask your grandpa or somebody of his age.
blaming govt ,builders(most people who bought house from them are happy)and others will take you nowhere.do you think that those who cant give you even bijli pani sadak etc will build cheap house for you?
I always keep on reading your articles posted on rediff business, and I really appreciate the reality facts that you have shown on buying or renting a house, Even I find that owning a own house is much cheaper that renting since we have created an asset for us which can generate financial returns in our critical financial situtions in future and as investing in real estate or housing the chances of loses are very less
One point that will skew the above argument completely will be revenue expenditure Vs Capex. When you repay your home loan, you are paying back a part of the principle, which could be thought of as capex.
Renting leaves you without an asset and is entirely revenue expenditure.
Secondly, what is the person lives for 30 more years? and when you are 75 there is another finance minister like the current one (probably his son!) and inflation rises to 8%!
RE:Revenue Exp Vs Capex
by Vikas Singh on May 11, 2007 12:49 AM Permalink
Over past 3 years, I bought a land and a flat on loan with buy price of 9.66L and 21L resp. Today the cost is 28L and 32L resp. Collectively for both purchase, the investment from my side is around 10L till date. So in these three year, 10L gave me back 30L pure cash. So better buy a house than paying more than 10K as rent. its a waste any time.
RE:Revenue Exp Vs Capex
by Sonu Kumar on May 11, 2007 05:22 PM Permalink
But Vikas now it appears that there will be no drastic hike in property rates in the next 1,2 years. What is your idea
I would appreciate the author for giving a very good insight on the issue which any working professional would think of... i would rather suggest my friends who are contributing to the discussion: dont criticize! its just an example you assume and calculate according to you...he gave us insights to think about the issue and how to go about it , if one needs to. regards, Rajesh Panigrahi
I would like to take the authors attention to couple of things.
First of all the author assumes that a 25 lac worth property yields a monthly rent of Rs.13.5k. In my opinion its a too aggressive assumption given the current levels of Real estate prices.
Secondly, the author has completely ignored the concept of present value. Remember Re.1 received today is more valuable than Rs.2 received 20 years latter.
The perfect approach lies in valuing a real estate using prudent with the realisable rent as the returns from the property. If the real estate price is above the value of the property so determined then better rent a home and if the prices is less than the value then buy it.
RE:Questionable Assumptions and has ignore the Present Value
by Arun Kumar on May 08, 2007 12:37 PM Permalink
Your point on the 'realisable rent' and the questioning the assumption (will 25 lakhs worth home, can help realise a rent of 13,500) make good sense to me.
And of importance is the Present/Future value of money which should have been taken into account. Probably the author did not want to complicate things much by talking about PV/FV. An excel sheet comprising all calc including the PV/FV would be welcome for the readers to experiment.
Taking a loan to purchase a house is one thing which you can only delay but cannot be put away for ever. There can be times as they were last quarter when staying on rent would have made more sense but with property prices not rising at the same rate as they rose last year and interest rate unlikely to go any higher. Probably it makes more sense to go in for a home now. http://PowerMyLoan.com
RE:Question is not if, it is when
by abey zachariah on May 12, 2007 04:39 PM Permalink
It does not make sense to me at least in acity like Bangalore. Makes sense to invest in equities instead.
By the way try not to advertise your site like this......I think it is in bad taste.
How many of us show the correct amount for HRA in our IT declaration? Also does the govt have the resources to check on every rent receipt submitted to employers? My case, I stay with my parents and also take the HRA which is part of my salary. End of the year, I submitted rent receipts for a property in a neighbourin town( 80km from where I stay) belonging to my relatives. Since these relatives are NRIs, they dont file any return and dont show any income in India, as they have no interaction with banks or financial institutions and had built the house from their own funds. How the hell can Chidambaram and his entire department track this? or will they even bother. Renting might also be a good option, currently since the IT department does not track anything.. eg; you have a HRA of 10,000 Rs. You rent a 2 BHK for 7500 and end of the year you submit rent receipts and your spouse who is also working submits rent receipts ( printed from the company printer!!) for the same property!!! what happens, you pocket the difference and the govt is no wiser
RE:regarding IT
by sheela babu on May 04, 2007 10:43 AM Permalink
why dont you keep ur mouth shut ,bloody every one knows it , dont think that u r only the smartest person,why are making government to take any step, already we are paying lot of tax,my kind request is dont do these kind of nonsense again.....
RE:regarding IT
by oldruff on May 08, 2007 03:13 PM Permalink
Sheela Babu, If you are so afraid, do pay up diligently instead of asking Krishna to shut up , who has made a very valid point. It is because of ppl like you the country is in such a state, shame on you Sheela .. Babu
RE:regarding IT
by sheela babu on May 04, 2007 10:42 AM Permalink
why dont you keep ur mouth shut ,bloody every one knows it , dont think that u r only the smartest person,why are making government to take any step, already we are paying lot of tax,my kind request is dont do these kind of nonsense again.....
my previous writer has the right view of appreciation in the real estate value after 20 years which may go as high as four times of the original cost but it is depending on the location of the property,if it is in a growing location you are in a very comfortable position but if the growth is less or negative ,you may not in a comfortable position. from sanjay
