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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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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.