tag:blogger.com,1999:blog-7004453.post4867825598552384313..comments2023-09-02T19:53:06.144+05:30Comments on Understanding and applying value investing principles: Real estate – current reality and some thoughtsRohit Chauhanhttp://www.blogger.com/profile/00356455735241398199noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-7004453.post-73702324075928215222008-12-29T08:42:00.000+05:302008-12-29T08:42:00.000+05:30Thanks Prashant,You're right about that:-) i.e. th...Thanks Prashant,<BR/><BR/>You're right about that:-) i.e. the reasons listed by you.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-17444064797487967662008-12-22T16:50:00.000+05:302008-12-22T16:50:00.000+05:30Hi Vikas,Sorry for late reply.I think you would no...Hi Vikas,<BR/><BR/>Sorry for late reply.<BR/><BR/>I think you would not be interested in this property for the following reasons:<BR/><BR/>1. It is not from reputed builder.<BR/>2. It is located in Meerut (UP)<BR/>3. You will not get MNC renting it.<BR/><BR/>This property came to me through my father but I decided to let it go.<BR/><BR/>Apparently property price has gone down to 28 lacs. Actual rental is 25,000 / month with 5% yearly increment for 3 years.<BR/><BR/>Rohit,<BR/><BR/>Main reason for my interest in commercial properties (primarily office space) is more appreciation of commercial properties than residential in the past plus higher rental yield. <BR/><BR/>Thanks<BR/>PrashantAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-81820409965621968702008-12-21T08:18:00.000+05:302008-12-21T08:18:00.000+05:30hi karthiknothing new actually. satyam is known fo...hi karthik<BR/>nothing new actually. satyam is known for poor governance. what is new that the market gave a good wacking to the promoters and they were not able to get away with their games. main reason was due to the presence of foriegn investors and the co. being listed in US<BR/>MNCs, and other indian companies continue to behave equally badly. however indian investors including the big ones never assert their rights.<BR/><BR/>In india it is easier to steal 100 crs via stock market than 100 Rs.<BR/><BR/>i dont know why people are still buying the stock. i would personally never touch such a company.<BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-22503594942619534032008-12-19T11:29:00.000+05:302008-12-19T11:29:00.000+05:30Hi Rohit, Just getting off track for a bit.. Wante...Hi Rohit, Just getting off track for a bit.. Wanted ur view on Satyam drama... <BR/><BR/>Even after the promotors showed that they cannot be trusted the script went up again yesterday.. How can people buy this script after all this?..How do they know that promotors wont try this stunt again?karthikhttps://www.blogger.com/profile/06869050750982435094noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-5833175819703053162008-12-18T03:54:00.000+05:302008-12-18T03:54:00.000+05:30Rohit,I was told by my contact about 1 lac limit, ...Rohit,<BR/><BR/>I was told by my contact about 1 lac limit, not exactly sure of this but there's one for sure.<BR/><BR/>It relates to the shares/money that hasn't hit DEMAT yet.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-75621954430689954212008-12-18T03:47:00.000+05:302008-12-18T03:47:00.000+05:30Hi Rohit,I've lot of experience in Residential are...Hi Rohit,<BR/><BR/>I've lot of experience in Residential arena and some exposure to commercial. I can write on my learnings if you like.<BR/><BR/>Yes, you 're right that the brokers act as an intermediary only But there can be lot of issues in my experience. For example:<BR/>Whatever the trade you execute, it takes some time to settle/reflect in your DEMAT a/c. In my case: Many stocks that I had already paid for were still sitting in Broker's pool, they never made it to DEMAT<BR/><BR/>You can find all sort of issues with the Top brokerages such as ICICI direct, HDFC, Motilal, sharekhan etc. in Mouthshut, e.g.:<BR/><BR/>www.mouthshut.com/product-reviews/IciciDirect.com-925042891.html - 341k - <BR/><BR/>I totally believe in such issues as I'm going through the same. though many might never come across any.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-23347584296502753672008-12-18T01:24:00.000+05:302008-12-18T01:24:00.000+05:30Hi vicyou seem to have a experience/ knowledge of ...Hi vic<BR/>you seem to have a experience/ knowledge of real estate / commercial property management ..do you mind making a write up ..would like to share with other readers on this blog ..i think it will help everyone<BR/><BR/>also i thought brokers - such as icici direct only act an intermediary ..the stock is held by nsdl ..is your understanding different ..can you clarify what you mean by assets covered upto 1 lac only ?<BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-26943710468654473752008-12-18T00:08:00.000+05:302008-12-18T00:08:00.000+05:30Rohit,There are two types of commercial properties...Rohit,<BR/><BR/>There are two types of commercial properties:<BR/>1) Office Space<BR/>2) Retail store in a mall<BR/>I would prefer investing in Grade A Office space which is usually rented to MNCs..not corrupt.<BR/><BR/>If you take up a space in new mall or building, the management is minimal. I have bought OFfice space which is under construction so don't have any rental experience in the same category.<BR/>But I have/had residential apts in Gurgaon, Noida and Pune which I have been renting for last 3-4 years..that too primarily from the US. <BR/>First of all, I buy a property in Modern India spots which obviously attract good crowd. These ppl have least interest in acquiring your apt. So it is not all that difficult but appears to be.<BR/><BR/>For example, learning to invest (Not trade) in stocks is not difficult or extremely time consuming but most of the ppl find it so. Same thing goes with property acquisition/ongoing mgmt.<BR/><BR/>There will always be work involved regardless of what type of investment it is. For example, my broker went belly up which was never expected. I just found out that the assets are only covered upto 1 lac by NSE. Luckily, I had invested less than one lac, I could have easily invested much more.<BR/>During my research in hunt for a new brokerage, I found out all kind of issues with top brokerage firms in India. I'm just speaking of the middle man here, not even the companies that I would invest in. Such basic issues don't exist in the US.<BR/>But this won't stop me from investing. Just keep on learning the lessons..more you learn..better one becomes.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-47590892633990783102008-12-17T20:49:00.000+05:302008-12-17T20:49:00.000+05:30hi vic / prashantwhat kind property do you conside...hi vic / prashant<BR/>what kind property do you consider as commerical property - shops , industrial plots etc ?<BR/><BR/>also if i am not mistaken, commercial property management requires more time and involvement ..any views on that ?<BR/><BR/>what kind of legal and procerdural safeguards do you have for commercial property? <BR/><BR/>although not discussed openely , residential property especially in places such as mumbai have high risk if you rent it out. tenancy laws are so bad and anti owner that if the tenant refuses to vacate , the owners is in trouble<BR/><BR/>what has been your experience on this count with commerical property ?<BR/><BR/>i personally think equity is more transparent and convenient for me ..with a job and other time constraints i would not have the time and energy to manage a commerical property. but those who can , it can be a good source of income<BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-53739884221566796292008-12-17T20:07:00.000+05:302008-12-17T20:07:00.000+05:30Prahshant,I forgot to mention: the proposal you ta...Prahshant,<BR/><BR/>I forgot to mention: the proposal you talked about sounds an attractive one. If you don't mind, can you share the details?<BR/>Keep in mind that the commercial leases are usually 3-5 years plus annual increase. <BR/>So If one does his homework and buys it at an attractive location @ cheap price, can work out good. Same thing goes with selecting a tenant which can weather the storm.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-41673743245850363402008-12-17T20:02:00.000+05:302008-12-17T20:02:00.000+05:30Hi Prashant,I agree with you that equity investmen...Hi Prashant,<BR/><BR/>I agree with you that equity investment is better.<BR/><BR/>But for large portfolios i.e. Over 1 Cr, it is good to have 20-25% in a good commercial..just to own different asset class. You can reduce the tax bite by deducting some expenses.<BR/><BR/>The financial markets are not very transparent and developed in India. Also majority of ppl still tend to invest more in RE.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-48593823192695656792008-12-17T11:43:00.000+05:302008-12-17T11:43:00.000+05:30Hi Rohit,Good post!Like Vikas mentioned, rentals f...Hi Rohit,<BR/><BR/>Good post!<BR/><BR/>Like Vikas mentioned, rentals from commercial properties are much higher than residential.<BR/><BR/>I am getting one proposal of commercial property - price 30 lacs, current rental 30,000 / month. This way yield is 12%. However after tax it will be 8% only. Not sure about rentals in future - most likely going down. <BR/><BR/>I still feel investment in equity is much better - in term of liquidity, tax, etc.<BR/><BR/>Thanks<BR/>PrashantAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-79439022320399062112008-12-17T03:07:00.000+05:302008-12-17T03:07:00.000+05:30hi vikasthats make it three of us ( you me and the...hi vikas<BR/>thats make it three of us ( you me and the hot blooded evil twin) i am a rajput too :) <BR/><BR/>2005 i had more time and less work :)<BR/><BR/>also back then i used to write about current events. i have stopped doing that since then. hopefully one of these days i should be able to consolidate some my posts in an ebook<BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-56640156073071318442008-12-17T02:44:00.000+05:302008-12-17T02:44:00.000+05:30Hi Rohit,I agree with your comments. I was also sh...Hi Rohit,<BR/><BR/>I agree with your comments. <BR/><BR/>I was also shocked when I first saw a post from Rana few months back. I thought somebody was imitating me as it is not usual to spot Rana(s). My guess is Some Hot Blooded Rajput..:-)<BR/><BR/>On a different note, I'm almost done with reading your 2005 posts (quiet a few you had that year). It is part of my daily activity, like it very much.<BR/><BR/>Thanks,<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-73485481367551539412008-12-16T22:13:00.000+05:302008-12-16T22:13:00.000+05:30hi vikasyes you are right ..i am speaking in terms...hi vikas<BR/>yes you are right ..i am speaking in terms of residential property.<BR/>if the numbers you mention are representative, then the gap in yields is still fairly high.<BR/>some part of the higher yields can be explained by the higher cylicality of the rentals as commerical property is more influenced by business cycle, but still the difference is quite high.<BR/>i agree it is a decent addition to the portfolio ..the negative is see is the amount of money needed to invest and i assume it also requires more skill to invest in commercial property than residential.<BR/><BR/>btw - vic ..do you have an evil twin by the name rana:) ? this dude keeps flaming me and seems to dislike what i have to say .. ..just joking <BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-8987602000098315882008-12-16T21:50:00.000+05:302008-12-16T21:50:00.000+05:30Rohit,Your analysis seem to focus on residential a...Rohit,<BR/><BR/>Your analysis seem to focus on residential apts. <BR/>I invested heavily in RE during last 3-5 years. In my experience, most of the folks buying the apts, don't really go into rental/yield aspect much. The big chunk of the returns are expected from appreciation..which is all speculation.<BR/>But for commercial properties, rentals are much higher. For example, a good A grade office space can yield 8-9% and retail 11-12% which can come under pressure at times..but stay stable for the most part. Plus you can add some appreciation. So I think this is a decent asset in one's portfolio.<BR/><BR/>VikasVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-14288004993607039432008-12-16T19:54:00.000+05:302008-12-16T19:54:00.000+05:30Hi prashantthat is precisely my point. rentals and...Hi prashant<BR/>that is precisely my point. rentals and property values have become disconnected in a lot of places.<BR/>we can argue that the yields should 2% (as it is in most places), but rental yields across markets and across various times show that yields below 2% are low and investors demand more.<BR/>either the rentals rise , which may happen in india or the property values drop or both<BR/><BR/>regards<BR/>rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-80339948859831958412008-12-16T11:55:00.000+05:302008-12-16T11:55:00.000+05:30Rohit,There has always been a mismatch between the...Rohit,<BR/><BR/>There has always been a mismatch between the rentals and the "assessed" value of a property in India. As an example, I can supposedly sell my apartment in Chennai for around 35 lakhs (price my next door apartment was sold a week back). However, maximum rent I can get (or the offers that I get) is in the region of only Rs 6000 to 7000. <BR/><BR/>Real estate as an "investment" worked as long as the bubble was still growing and there were people to buy the property off you at a much higher price than what you paid for it. However, it does not work if you planned to hold on to the property and tried to rely on rental income.Prasanthhttps://www.blogger.com/profile/15361097905671284394noreply@blogger.com