December 26, 2015
Time: 10 am
Real Estate Woes:
I decided to give my vies on different sectors over a period of time. First I gave my view on Real Estate stocks. I have already written two time about real estate woes.
I wish to add few more points. This is relevant after the huge rainfall in Chennai andits suburbs.
In 2004, I just inquired the plot prices in Valasaravakkam, Chennai, I was told that a plot of 2400 sq.ft cost about Rs 4 to 5 lakhs.
In 2008, just 4 years later, people bought plots in Mudichur for Rs 50 lakh per ground. That was the phenomenal rise in the prices.
The rise in prices will continue as long as the rise is equivalent to inflation plus or minus 2 to 3%. But in the above mentioned period the inflation was up by just 25 to 30% and the rise in the plot prices were anywhere between 1000% and 2000%.
That is the exact reason why the prices stopped rising after 2008. Now the people are realising that the price paid too high as they realise now that all these areas are low lying and water stagnation is a big problem in case of heavy rain.
Can you imagine the following case?
I bought an apartment in Singapore which is a developed country at half the price of same size apartment at Valechery. The rental value of my Singapore apartment is 5 times the rental value of Valechery.
So when the valuation is so high, how much it can go higher?
We should remember what happened to people who bought DLF at Rs 1200 in 2008 at such a high valuation.
Another disturbing factor is the govt. policy. WHen people make goods, they pay VAT, when people offer service, they pay Service Tax. But only for Real estate transaction, we pay VAT, Sevice Tax and Registration charges. What is the logic behind this? Earlier, apartment buyers were not paying VAT or Srvice Tax and that is why they were paying Registration charges.
Do you know that I paid only 1% as registration charges for my Singapore apartment and that is it. No VAT, No Service Tax, No Infrastructure Development fee, etc.
Now what will be the status when GST introduced. Those who buy Cars will pay only 18% GST but those who buy apartments ill pay 18% GST and 9% Registration Charges.
So if you pay 18% GST and 9% Registration charges in addition to Infrastructure Development fee, you end up paying about 25% to 30% to Govt. This is in addition to EB charges and Sewage Charges.
So apartment buyers should be exempted from paying GST. Otherwise our real estate will be like Japanese real estate in 1990s. Prices in Japan did not go up for more than 10 years. They coined a word "Los Decade" to reflect this truth.
We are already into 7th year of real estate stagnation in most places and three more years is not a big deal in realty.
Time: 10 am
Real Estate Woes:
I decided to give my vies on different sectors over a period of time. First I gave my view on Real Estate stocks. I have already written two time about real estate woes.
I wish to add few more points. This is relevant after the huge rainfall in Chennai andits suburbs.
In 2004, I just inquired the plot prices in Valasaravakkam, Chennai, I was told that a plot of 2400 sq.ft cost about Rs 4 to 5 lakhs.
In 2008, just 4 years later, people bought plots in Mudichur for Rs 50 lakh per ground. That was the phenomenal rise in the prices.
The rise in prices will continue as long as the rise is equivalent to inflation plus or minus 2 to 3%. But in the above mentioned period the inflation was up by just 25 to 30% and the rise in the plot prices were anywhere between 1000% and 2000%.
That is the exact reason why the prices stopped rising after 2008. Now the people are realising that the price paid too high as they realise now that all these areas are low lying and water stagnation is a big problem in case of heavy rain.
Can you imagine the following case?
I bought an apartment in Singapore which is a developed country at half the price of same size apartment at Valechery. The rental value of my Singapore apartment is 5 times the rental value of Valechery.
So when the valuation is so high, how much it can go higher?
We should remember what happened to people who bought DLF at Rs 1200 in 2008 at such a high valuation.
Another disturbing factor is the govt. policy. WHen people make goods, they pay VAT, when people offer service, they pay Service Tax. But only for Real estate transaction, we pay VAT, Sevice Tax and Registration charges. What is the logic behind this? Earlier, apartment buyers were not paying VAT or Srvice Tax and that is why they were paying Registration charges.
Do you know that I paid only 1% as registration charges for my Singapore apartment and that is it. No VAT, No Service Tax, No Infrastructure Development fee, etc.
Now what will be the status when GST introduced. Those who buy Cars will pay only 18% GST but those who buy apartments ill pay 18% GST and 9% Registration Charges.
So if you pay 18% GST and 9% Registration charges in addition to Infrastructure Development fee, you end up paying about 25% to 30% to Govt. This is in addition to EB charges and Sewage Charges.
So apartment buyers should be exempted from paying GST. Otherwise our real estate will be like Japanese real estate in 1990s. Prices in Japan did not go up for more than 10 years. They coined a word "Los Decade" to reflect this truth.
We are already into 7th year of real estate stagnation in most places and three more years is not a big deal in realty.
Comments
Post a Comment