Part- 1
It seems to me that we all fall prey
to the myth of the "pot of Gold" with respect to property
investments. This is largely fueled by selfish greed of individuals - Buyers, Sellers
and the intermediaries. The triangular forces exert forces against each
other as and when they can. The Seller wants the maximum returns for his
investment, the seller wants to capitalize on his being a “genuine buyer” –as we
call them in broking parlance, and of course the ubiquitous broker who tries
desperately to make “the deal”.
Consider this, if you have bought a
property in the last decade, most of you would have made
some money. Some of you would have made a lot of money, and some of you would
have made some money and some of you would have just about broken even if not
lost some money.
So, to the bright guys who made
money, let me ask you a question. Who would you give the credit for making that
money for you? Let me guess – You? After
all, you made the call; you took the right decision at the right time for the
right property, right location, right builder and right market conditions –
Right?
Wrong! If you made money then it was
largely due to “Lady Luck” smiling on you, and, to the economy
which provided the investment cycle for entry and exit. It was also in part, due to
laggards who delayed buying their piece of earth and then got “sucked” into
buying from you.
Real Estate, as an asset class is
highly unpredictable due to layers of misinformation and malpractices generated
and transmitted by the machinery of vested interests. Let’s look at some of
them,
Media: The newspapers and portals do
a roaring business out of real estate – ever wondered why your newspaper looked
more like a property classified or advertorial (paid advertising with the
write-up being done by or on behalf of the advertiser for a fee)? They make
significant money from this. Some of the established newspapers actually acquire
a stake in Builder companies in return for selling ad space, Paid write-ups,
interviews and focused articles on real estate and the developers (who of course
are asked to pay for all this).
Politicians – Bureaucracy- Land
Aggregators nexus: Need land and willing to pay for it. Well as long as you can
afford to pay for the same, land is available for any land use. If the Town
planning official is honest and not obliging, then changes are made and then, “Voila!
– you can get the land”. Or else,
approvals are delayed. In which case the projects get delayed and your
estimates of profits (Pot of Gold) vaporize.
Lenders : Lenders often practice
entrapment to get business. They introduce teaser rates (even our nationalized banks
are guilty of this) and the floating rates then keep floating upwards.
Brokers: Brokers sell what they have. If you have not identified a professional broking firm, you have taken the risk of being a victim of mis-selling. So some of you would have lost money or not made enough since you took bad advice.
Friends & relatives: In my view, an ill-informed friend should be best avoided for determining the feasibility or evaluation of these big investment decisions - buying a property. This is really one category that you should consult only after seeking professional advice from people who work in the real estate for a living and someone you trust.
In the last decade, a lot of us were lucky that the
math worked for us. For some it didn’t. They got trapped in projects that were
delayed, had lenders who kept raising the interest rates and kept them high
even when the economic cycles reversed and charged huge pre-payments when you sold
your property and pocketed enough money or walled in to the frustration - to
quit the property.
-To be continued…
