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Investing in Land

Investing in land is good or bad?

Today people start buying land / plots not for using it, but for investing.

Earlier, farmers buy land to expand and increase their Agriculture productivity. Industrialist buy land to construct factories to increase their production and profit. Individuals buy land to live, they build houses and start living there.

But Nowadays, people buy land to Invest, not for agriculture, industry, and living. We buy land in the belief that somebody will buy from us in a higher price sooner or later, like shares, mutual funds.

Here is a true incident of buying a land and its impact, which I witnessed.

Person A bought a plot at Sriperumpudur for Rs.7000, twenty years back. He sold it to person B for one lakh after 10 years.

Person B sold his plot for Rs.3 lakhs to person C, 3 years back.

Person C sold his plot for Rs.8 lakhs to person D, a year back.

Person D bought the plot in the hope that, he will be able to sell it for more than Rs.8 lakhs. When he tries to sell his plot, there are no buyers. Nobody is interested to ‘Invest’ 10 to 12 lakhs.

I am not sure, either people are not interested or not able to invest or a plot at Sriperumpudur is not worthy of 10 – 12 lakhs.

The piece of land involved is a plot sizing 2100 sqft – nearly one ground. There are small and big returns in short and long term for A to C. They did not do anything in the plot they purchased. They did not produce anything from the land. But they got profit for their ‘investment’ by natural and sudden growth of inflation rate in those year.

But, person D seems to be in big trouble. He may get a profit in the far future. But as of now, his money is buried in the land he bought. He can not produce anything from the plot he bought. He can not live there, because the plot he purchased is far away from city and lacking in basic amenities to live.

A,B, and C seems to have profit, but our country is the looser. The amount of money buried in the land now is bigger than the profit earned by them.

If Rs.8 lakhs is spent in a normal way, like buying cloths, going to movie, tourism, food and etc – the money would be rotated with countless people. If it is invested in any industries, it will increase production. If it is invested in mutual funds or shares, there may be risk, but it will increase the production or profit of some industry either directly or indirectly.

Now, Rs.8 lakhs is buried. It may sprout out or not. Person D has to wait till the normal Price Index get increased. He has to pray for higher and faster Inflation rate to get a profit in the future. It may take a decade or more.

Eight lakhs belong to our country has become nothing as on date. Investing in land/realty/plot may seem to be profitable in the long run. But it is a loss as of now. We lost the purchasing power of Rs.8 lakhs now.

If the 8 lakhs is the hard earned – life time savings of person D, he may or may not be able to save such amount again in his life.

I realized these things after buying a land in my native place, not for producing anything from it, not for living there, but for Investing. I have buried Rs.1 lakh, it may sprout out or not. But to get the purchasing power of one lakh, I have to wait another couple of years.

Investing in anything other than production or personal use is a loss to ourself and country. We loose the purchasing power for a while. In other words, investing in anything which has no ‘easy liquidity’, is a loss as of now.

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Insure Flats near ECR OMR

Have you insured your flats near ECR, OMR against Tsunami, Flood?

Nowadays, flood is common in sea shore areas. During monsoon and cyclone, our city is inundated – its is a common scene.

So, Insurance to home seems to be mandatory especially in sea shore.

Home Insurance can be the building cost required to rebuild the house again, not the land value. Which means, sum of insured will be building cost required at the time of re-construction.

Second, insure your things inside the home, like TV, Fridge, etc and other than Laptop and hand held devices. When flood strikes, it may wash out the homes. The things inside the home may be scattered around 10 to 15 miles away from the home.

Any part of the world does not seem to be exempted from natural calamities. Seashores seems to be vulnerable for natural calamities.

If you are living near OMR or ECR, you may be prone to both earthquake and sea level rise. If you are away from sea shore like GST, Oragadam, you are prone to earthquake and flood during monsoon. Not a monsoon passed without a flood in the last decade.

ICICILOMBARD, TATAAIGHOMEINSURANCE, ROYALSUNDARAM and other insurance companies offer Home Insurance. Like, life insurance, mediclaim insurance, home insurance seems to be mandatory.

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Low Budget Flats in Chennai

Low Budget Flats in Chennai is a reality or hypothesis or fact? Definitely, it is an expectation from many middle class or moderate income people.

But low budget flats in Chennai corporation limit is not possible as on date due to the land prices. Price of flat is decided by the prices of plot where it is constructed. Square feet price of land directly affects the price of flat(SQ.FT).

Flats Less than 30 lakhs is not possible within Chennai corporation limit.

There are low budget flats available at the outskirts of Chennai. They are psychologically brought into the boundary of Chennai. But practically they are NOT Chennai.

If you are aware of about the boundary of Chennai corporation limit, you will be shocked to know that the low budget flats are sold actually in other districts, which are sharing the border with Chennai district. They are called Integrated Townships or satellite towns revolving around Chennai.

Low budget flats are available in the Integrated townships sprouting around the border of Chennai, not inside Chennai corporation limit.

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Buying House in Chennai

Who can buy a house in Chennai?

Buying a house in Chennai is beyond the scope of middle income group people without housing loans. No two bed room flats or a house around 1200 SQFT is available for less than 25 lakhs. This is regarding apartment. Independent house can not be bought by middle class people even with bank loan.

Moreover, the NRIs from chennai has more opportunity(money) to buy a house in chennai with bank loan than Middle class people living and working in Chennai.

If you look around your known circle, the software professionals working/worked in abroad booked apartments more than non-software professionals.

The land value of within the city is beyond the life time income for middle class chennai population.

ECR or OMR areas are for NRIs and proprietors who employed and providing provisions to middle class people.

Well, where can the chennai middle class people ‘settle down’ in their own house?

About 30 to 40 kilo meter away from chennai city(sub urban bushes), chennai’s middle class population can buy a house. In Urappakkam, Kooduvancherry, by all the GST road from chennai to trichy has little scope for chennai middle income group to buy their house.

Chennai is growing. You can buy a old house or around Chengulpet and say you have owned a ‘house in chennai’. Chennai will swallow the areas till Chengulpet, Kanchipuram, and Pondicherray. Chennai is extending in all the direction (except in the east) by swallowing the near by villages, municipal towns etc.

Kunrathur was a separate entity from chennai, is now part of Chennai.

The Chennai city is expanding like universe.

In spite of all the financial hurdles, is it worth buying a house in Chennai? You have to pay the house loan EMI for the rest your life if you are a middle income man.

Is it worthy of buying a house in chennai? Along with the price, the quality or quantity should increase. Is it happening in rocketing realty price hike? If you have already bought a house in chennai, you may read it why you may dispose it.

The chennai city is growing in size and population.

Is the water reserve proportionally increased? Is water distributed equally to all citizens of Chennai? Are the road quality and road capacity to handle exploding traffic get increased? Are the police stations and police men are increased proportionately with increasing population and land. Is the public transport enhanced to meet out the commuting of ever exploding Chennai?

Are Government Hospitals, schools, colleges increased along with physical area and population? Are there enough public toilets and parks? Does Chennai have a drainage system with the capacity to dispose sewage from its dwellers?

If ‘NO’ is the answer for all the above questions, this city is growing unevenly. No proportionate growth in all the aspects. It seems to be both crowded and congested. A concrete jungle than a well planned and organised city.

If you are living in Chennai with your family, you may need to travel from 4 to 5 hours per to day to shuttle between your house and office. You find it difficult to reserve travel ticket to go to your native place. You find it difficult to go to a movie without reservation in weekends.

You vacate your house in raining season because your house is inundated.

You find it difficult to park your two wheeler or four wheeler in your house premise or your house may not have premise. You have to park your vehicle in street.

You have to wait in a ‘Q’ for everything and anything in public places.

Your family women have to carefully walk in the street to avoid men like barbarians who are intoxicated by alcohol.

You children are trained to be professional corporate slave if they study in English medium private schools. After finishing college, they are only eligible to be a corporate slave than a free man.

Just think whether you are going to buy a house in Chennai which is a man made concrete jungle or in a human habitable city. Chennai seems to be Concrete Jungle growing aggressively than a city worthy of living. For middle class man it is a city for working than living.

Chennai or any metro city is a cluster of loosely coupled industrial units than a City.

Soon the people living outside of Chennai will shuttle to their offices from 40 to 50 km away from chennai. Finish their work and go home in the late night or midnight.

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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.

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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.

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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.