Global recession – Land Money Maya

Global recession is clouding the whole world. I discuss the land – money myth, which is the main reason for Global recession.

Everybody says, United States goes down, all the major banks closed down, etc. What happened to the money and where is it gone?

Last year my friend purchased a land(tiny bit of land) 100km away from Chennai. He got a loan from XYZ bank for 2 lakhs. Paid the bill to the land and started paying the EMI.

He also ‘advised’ me to get a loan and purchase a land along with him. Fortunately, I was lazy enough to produce the documents for loan processings. Moreover, I am not interested in ‘loan’ amd ‘EMI’.

Soon, he was in dear need of money, trying to sell his land. Nobody was there to purchase it. He approached the brokers and conveyed as ready to reduce the price. His 2 lakhs become 1.5 lakh. Later it become 1 lakh. He kept reducing the selling price.

Suddenly, he realize that his 2 lakh becomes 0(zero). Nobody was there to buy it. But he still paying the EMI to XYZ bank but with hate. Soon, he may stop paying the EMI and ask the bank to take over his land. If he stopped the EMI, the bank’s 2 lakhs and the huge return will be equal to the price of the land – 0 (zero).

The 2 lakh money value of the bank become 0. Like that many 2 lakh or 2 crore will become 0.

The same might be happened in United States. People borrowed loan from banks and invested in land and houses. Billions and Millions have been invested(buried) in realestate. Now the Billions and millions become zero value.

You purchased a land/house for 25 lakhs with a belief that It will grow up to 1 crore in the near future. But suddenly, you realize that your land value kept being reduced rather than growing. It become 10 lakhs. But you have to pay the EMI for 25 lakhs, not for the current value of your 25 lakhs.

It may be little confusing.

Even though your 25 lakh become 10 lakh, you have to pay the EMI/loan for 25 lakh. You try to sell your land at whatever price you get. But nobody purchase it since people expect it to get reduced to few hundreds. Finally, you stop paying the EMI/Loan and bank will take over your land/house. When they try to resell it it, they may get 10 or 5 lakh or not able to sell it. So the bank’s 25 lakh become nothing.

The same is applicable to shares and mutual funds.

Like water evaporates money invested for big return evaporates.

Billions of Billions dollar evaporated. It is like I have bundles and bundles of cash in my locker. Take all and burn the money bundles into ashes. Now I am broke.

Like that, banks invested/burn the billions of billions of cash into land through massive payout to individuals as loan. Now the money becomes sand and concretes without any monetary value.

Money saved will be spent. Money invested will be evaporated. Money spent will be floating in cycle. Saving or investment is a stagnation, no use to anybody. Let the money float.

If we do not have fear of future, we will not save. If we do not greed for future, we will not invest. It is the fear of future and greed bring the global recession.

Chennai House Rent Boom

Chennai house rent and sale price is hiked from 50% to 100% in the last 10 years. (2004 to 2014) Especially in south madras (Chennai).

India holding the largest middle class population in the world. But its metro cities seem to be not suitable for middle class dwelling. Cost of living in metro cities especially like IT hubs like Bangalore, Hyderabad, and Chennai are going beyond the purchasing power of middle class people. Chennai is slowly pushing the middle class people to out skirts of Chennai. You may be eliminated from Chennai anytime.

In western countries, particularly in American metros, more than 50% of the earning should go towards house rent. Now Chennai is racing with American cities in hiking house rent. Ultimately and as usual middle class people is going to suffer like any thing. They have to seek house in out of Chennai. Either low class or high class alone is going to live in Chennai.

Why this hike? Is there any way things will revert back to normal? After discussing with friends, Real Estate brokers, House owners, and investment consultants I like to figure out few issues.

First I would like to discuss about Housing Loans. Housing loans are thriving to professional especially to IT and medical professionals. Huge loan amount with 40% to 60% of the salary as to EMI for two decades is one of the reasons for hike in house selling price and house rent. If you purchase a house and paying EMI as 60% out of your salary then you will definitely increase your rent to meet out your EMI. EMI is an ‘indirect tax’ you pay to financial institution. Many people avail housing loan because; EMI is tax detectable source (TDS). When Government change EMI paid for housing loan like it is not a Tax Detectable Source (TDS), then house price and rent will be increased further.

Next is IT Boom and outsourcing success. Western and European money (currency) coming to India through software outsourcing. Most of the companies sky scrapping salary to its employees. They have more purchasing power than others. Because of this sectors House rent and price are increased. Moreover, 70% of IT employees are youngsters and not married. They do not have big family commitments. They form a group of 4 to 5, occupy a house and share the rent. Their monthly total income of the group will reach 2 to 3 lakhs(INR). For them rent is not a big issue. Since they are going to share rent, which is not an issue what ever it may be. This group’s paying power is more than a single man earning family. Single man earning family can not afford or what group of bachelors can afford. House owners are increasing the rent because of this high earning cum low committed group of bachelors. These bachelors will suffer by the house rent when they raise their independent family.

These IT boom and housing loan are main reasons for sky scrapping house rent. Soon Chennai may be a city of high earning youngsters (bachelors).

What about single man or couple earning families, especially those who are working in other than IT and medical sectors.

Government is not interfering into Rental boom like in English medium schools and college fee boom. Many house owners are not giving proper bill or receipt for the rent. At least Government should enforce the house owners to pay proper tax for the sky scrapping rental they demand.

Western currency especially American dollar coming to India through IT out sourcing is ultimately and indirectly going to financial institutions both Government and Private, and House owners of Indian metros and Real Estate industry. They will be prospering in the next decades more than other sector people.

Is there any way to bring back to normal or middle class comfort or at least stop it where it is now? Government should introduce a Rent ceiling act to regulate rent. It should collect the tax against the rent originally received.

If nothing happening to stop the sky scrapping rentals, then middle class will suffer like anything. Man kills another man. Civilization kills another civilization. Religion kills another religion. Caste kills another caste. Race kills another race. Now class kills another class: High class will kill middle class. There will be no class barrier after getting rid of other classes and keeping only one alive.

If you belong to middle class or middle income group, you may be eliminated from Chennai or Indian metro cities any time. Even the sky scrapping software salary is smaller than sky scrapping rentals.

Men from India leave their families in their villages or rural head quarters and go to Gulf countries and East Asian countries for earnings. Like that, Men have to come to Chennai or metro cities for earnings without their families.

I am a victim of Real Estate boom happened in Chennai

I am a victim of real restate boom happened between 2003 to 2010. I determined not to go for loan to buy a home. My determination got broken when real estate boom was in peek in 2010.

I was obsessed when relatives bought home. I decided to buy a home through loan. The obsession to buy a house in 2010 was beyond resistance.

I got a pre-approved home loan from Axis bank. I saw various advertisement related flats. Visited various flats nearly 40 to 50 kms from my current home. For my budget flats were available at such distance only.

My budget was 20 lakhs.

I managed to find a flat 30 kms away from my current home – saligramam. A flat 30 kms away which met my budget.

With loan and pledging jewels for down payment, I purchased flat in 2011. There were few flats and shops in that area in 2011. Now there are countless flats and shops in 2019.

After purchasing the flat, I shifted to that flat. My wife and kids were not able to live there. Within one month, we shifted back to Saligramam. I had to pay the Housing loan EMI and rent. I paid both emi and rent for 7 years.

For the society, I purchased a home. Actually I purchased a home loan, not home. I need to close the loan in order to own the home. Till then home is pledged with Axis bank.

In 2018, I pre-closed my loan by luck. I got good severance package from my employer. I closed my loan with severance package i received.

Now, I want to sell my home. Becauae, I never going to live im my home, because we comfortably settled in Saligramam. We dont have the amenities of Saligramam in West Tambaram.

There is no buyers now. I reduced the price to same price as how much i bought. Interest and principle i paid in seven years are loss to me. Market price has not grown upto realise interest paid towards home loan. I supposed to sell my flat for 28 lakhs to cover the interest paid, but i have quoted 20 lakhs to broker – actual price i bought the flat.

There were many unsold new flats in West Tambaram, so buyers has not shown interest in my flat though i reduced price to damn cheap.

I am not in urge to sell my flat, I am waiting patiently.

Good thing is I spent 20 lakhs to buy the flat. If i had gone for 40 lakhs or more then my situation would be miserable now. I would not be able to close my loan with severance package if i loan amount goes beyond 25 lakhs.

Right now, I am without any debt, I own a home for name sake – pride factor only, not living in own house, living in a rented home. My emi, interest, principal I paid towards my home loan is a loss to me, which will come around 8 lakhs.

Due to real estate boom, I lost eight lakhs, and I own a hard to sell asset, had tension to pay the EMIs without failing single due.