Skewed rental market….
Subra we may be a great marketing and distribution company, but we are no patch on the steel, cement and finance companies. This was said by one of the World’s great FMCG company….this is so true.
Let us see how the real estate market works AGAINST the renter and FOR the owner:
1. ‘You cannot rent your house to bachelors, unmarried girls and college students’: not sure whether it is legal, ethical or moral, but this is a condition in many, many building societies.
2. There will be a 10% Non Occupancy Charges if you give your house on rent. So if everybody else is paying Rs. 1000 per month as a society charge, you will end up paying Rs. 1100/-. Logic? well none.
3. The funny story in Mumbai is the Government said ‘you can hire your house to visitors (like a hotel) and charge on a weekly, daily or a monthly basis’. Which means you could buy a house and use it like a guest house, right? Well the builders lobby made sure that you can do this ONLY AND ONLY IF all the people in the building agree to do this! It completely killed the opportunity.
So Mumbai has many, many flats bought and kept EMPTY (young boys and girls are the biggest market)….so this forces parents to buy a flat for their kids!
And if you buy a house for say Rs. 1 crore – it contains land appreciation (call it interest?), cement, steel and of course the INTEREST paid by the builder.
Now if you buy a house for Rs. 1 crore, you end up paying an EMI of Rs. 100,000 per month for 20 years…so you will end up paying 100,000 x 12x 20 = Rs. 2.4 crores.
What is the Rs. 1.4 crores called? (over and above what YOU thought is cost) – it is called INTEREST!
Who gets it? Your banker!! call him SBI, Hdfc, Icici, …….LOL…
Milind N
Many thx for the Training .WOW.So many of our readers are today not part of HUGE EMIS Generation and enjoying their financial freedom by not over leveraging ……Renting making us richer …thx to subra…Now can you see sir ,why a POST CLARIFICATION from your side is not required and it pinch our regular readers.MANY THX
asmi
nice satire in todays ET page 20 ‘why iam bidding my job goodbye’ Go through for a light moment.
prabe
So were does this lead…the same old classic debate of rent or buy?
Dr Mohammed Ali Khan
It seems like the rental market works against BOTH the owner & renter. If there are so many conditions attached to renting out to someone, it severely shrinks the customer pool, hence, the rent realization will also be less. It looks like real estate ultimately benefits only the banks, government & builders.
subra
builders? Heck no. Cement, and steel manufacturers. You buy cement and steel and do not USE IT (house kept locked). In the total cost of a house, INTEREST is the biggest component!
So the Home Loan companies!!! Sbi has a book of Rs. 100,000 crore – Hdfc must be having a similar book…..LOL!!
Rs. 12,000 crore of SBI’s topline….:-)
param
“AGAINST the renter and FOR the owner:
1. ‘You cannot rent your house to bachelors, unmarried girls and college students’:”
i think this one works against the owner (the one who intends to rent to bachelors, etc. at expectedly higher rentals…
Praveen
Can’t we sell a house (not apartment) which cost 1cr now for 5cr after 20 years???? So although we pay a total of 2.4 crs still it’s a lot better atleast a cushion with inflation
P.S: I am not taking the issue of investing the same amount in an asset which give more return from this
pravin
“You cannot rent your house to bachelors, unmarried girls and college students’”.
this is illegal.the tenant alone can decide who to rent out his premises to.societies,chairmen and secretary deciding to ban such bachelors are simply using intimidation.the writ of the general body cannot oveeride ownership.
most people put up with it to buy “peace”,plus there is always a ready stream of ‘family’ renters available thanks to high prices.
i and my wife (having experienced bachelor day renting) never fail remind arrogant building neighbors that the same fate will befall their children when they grow up and travel to some other place in search of a job.
Milind N
Today Economic Times Page 9 personal Finance page …join and advocate what any Subras Associate learned years back…Renting a clear choice over Buying …. A story of 2 Real couples who are finding it extremly difficult to lead a normal life as they finished everything they have in Buying a House .Please read Original article .Another financial expert in it Sadagopan says”If you stay on rent ,then you will be paying only a fraction of the amount and you will save a lot.”….nothing new to a die hard fan and learner from our SUBRAMONEY ! Thank u Sir
santosh
Mr Subra is just misguiding whole generation. No one can gurantee return in any market, may be equity or real estate, Our market are immature, look at USA, people have their 401K vanishing when market falls.
SO dont listem to Subramoney or anyone else, decide for yourself.
Shiva
@santosh – Come on…. Grow Up. Be a Man. Don’t be a kid. Did subra sir ask you to rent and not to buy? This blog is purely his personal rant man. The fact that he is still keeping your comment here (even though he could have easily rejected it) shows how genuine he is.
Milind N
For People Who feel that Subra is misguiding….DO NOT visit page .SIMPLE ! Subra never told anyone whether that person should Buy or RENT .As An Expert he just shared his views,In An Exoberant prices situation in Metroes ,where salaries are still not matching to meet an Emis of 50000 pm ( A small 700 sq feet flat cost 70 lacs minimum and with 20 percent Down payment ,it Translates to 50000 emi pm ,where salaries even at Asst mgr level may not touch 60000) Renting Makes ECONOMIC SENSE ! If for 30 percent of take home which Most of the EXperts with CFP TAG suggest in Papers,Magazines,TV Showes for acquiring an Asset like House ( which means 18000 for a person with net 60000 pm in hand),if we get 1 BHK or 2 BHK House as owner ,we can take it without Worry.Are such flats available in Mumbai ,Delhi ,Gurgaon,Bengaleru ,PUNE ? Think before you criticize…A Blog which is for making Economic Sense ,will write what Makes Economic Sense…not what we are forced to believe by people who are not experts in Finance .
santosh
50000 emi is nothing nowadays, look around man. Probably you should be exposed to little high strata of society, even local General Merchant in Delhi makes more than 60000 per month.
Man salaries are pretty good in Metros, and you dont need crore people with salries in 1L+, just enough to absorb the new supply.
Indian Thoughts
I also agree with Shiva and Milind N above.
This is a personal blog. Person who writes here will write his own opinion/experience. If someone doesn’t like it, please MOVE ON. There are umpteen blogs that you might like, it’s not a NEWS channel that one ought to agree with everything!!!
shinu
@ Santhosh
Whoever does has the ability to read a blog should do use his brains too to reach his decision and not blindly follow anybody.
I hear to my father, mother, brother, wife, teacher or from leaders, bloggers, thinkers…. but ACT according to my logical conclusion and take up the responsibility. There are things which i may disagree with all of them but there are very many agreements in thinking between all the people i love or follow. It’s my choice to see the value in each persons view points, take/bring them into your view or just agree to disagree.
Subra sirs views have been influenced by the location he is in and may not match yours or my city or place of recidance, which do have a very great influance on the topics he discuss. So its just for you to choose to have a view and whether to follow. Personally i felt a big majority of thoughts / processes which can be followed like the thousands following and just Njoy.
Milind N
Buying vs Renting will always bring a forceful reactions both way…..A Bouncer or wide Ball…sensible thing to do ? As sunil Gavaskar told Sehwag…LEAVE THE BALL…LET PEOPLE WIN ARGUMENT….lets not forget that only when buyers win arguments,renters have paradise .God Bless
santosh
Its not about Subra.
Just think of it, how can every one be winner in a market. Just 2% of people are winner in stock market. Subra might be lucky tohave great broker, but most of people end up losing money.
Also dont talk of MFs, you know whats happening with Fiedlity & wht happened with UTI. You have to on top of your investment whether real estate or Equity. But in downturn, you cant sleep on ur equity, but can do so in your house.
I will close this by saying, India is different. Stock market is rigged up, you cant believe balance sheets. Relinace wells are spurting up water & sand, Satyam is history, PWC auditors are bungling their own books.
I buy a property in any part of India, I can see it, feel it, know its value. Also, dont invest in under construction property.
Sanjay
Hi Santosh,
Your second comment delivers your message in a lot better way. Your earlier comment is just sounding like “Subra bashing”.
So my advice is give opinionated comment. Go against opinions, don’t go against a person.
About your second comment :
I buy a property in any part of India, I can see it, feel it, “know its value”.
knowing value of an asset is difficult business. Especially in non transparent markets like real estate. Everybody in US real estate sector was thinking that he knows its value.
In any market, you need buyer and seller. If buyers are missing then how do you “know its value”. You might be knowing “quotes” but not “price”. Price is discovered when transactions happen. In Equity market, price is discovered every day. In real estate market, investors hold on to their “quote” anchors (and live in a sort of make believe world, which gets called bubble after a decade).
Sanjay
One broad level observation: Indians have seen financial prosperity in last decade. They will see financial uncertainty in this decade.