r2i forum

I assume
In India
1. Real estate appreciation of 15%.
2. Inflation 5-7%.
3. Re appreciation of 1-2%
4. GDP growth avg 7.5%, earnings growth 10-12% ----> equities app 12-14(200 basis pts + for FII inflows).
(all % per year for next 20 years).
For US
1. Real estate falling by 15% from current value by 2015. After 2015 real estate will appreciate by 3-4% for next 15 years or so.
2. Inflation 1-2%(if China, Japan etc start selling treasuries things will get very bad but not considering that but highly possible and extremely scary for LIA's)
3. GDP growth 2-4%, equities appreciation of 5-7%.
(all % per year for next 20 years).

If you do the math you will realize that by 2020 or so real estate in DEL, MUM,BLR, CHN, HYD etc will be even more than in NYC, SF etc.

So unless someone is Doctor etc ( I mean very rich) r2i is ruled out. LIA will be the only viable option.

It is unbelievable how the tide can turn so dramatically in just 20-30 years.

What do you think about the effects of dollar devaluation? Effects of energy price rise, upcoming in future?

Lot of things are going to happen simultaneously. Dollar devaluation, fairly high appreciation of chinese labor costs and also Indian labor costs. The world will be dramatically different in 20 yrs.

Significant productivity gains are also on the cards in BRICs ( or to be more exact extended BRICs, the point is what will be the composition of extended BRIC s in 20 yrs?).

Europe excluding Germany ( even Germany in 20 yrs with demographic issues may not be in great shape) is almost sure to be in very deep trouble.

The possibility of stagflation in US is very high.

Things are going to be ugly. A lot will depend upon how US handles Chinese ascendence and vice-versa.

No major change is power has gone smoothly in human history.

As far as India goes it will be a true paradox. Lot of wealth will be there but the metros will be almost unlivable. And mostly lifestyle diseases will wreck havoc.

It is a true dilemma should one LIA with all the basic amenities and reasonable comfortable life thanks to low population and abundant resource but not good jobs and most probably a directionless youth or LII with significant material wealth but significantly poor quality of life.

Oil is going to skyrocket. Most probably we will hit peak oil on or before 2015. Middle east probably will be the best place in the time frame of 2015-2030 (then alternative energy sources will hopefully kick in).

OP
I think you probably have some points correct and some point incorrect.

Real estate in india will not appreciate 15% each year. Infact thanks to recession the prices have stabilized for now. There will flattening out of teh growth in real estate.

As the rupee starts appreciating we will see the salary growth levels in india drop down. Currently the whole foundation of the growth is based on low cost strategy and once that vanishes the growth will also flatten out a bit.

I think your assumptions about the US are correct. In general it seems that the finance/Banking/Mortgage sector which was a major driver of growth in US will lag now with the house values being stagnent. With the huge budget deficit Dollar will certainly weaken and at some point taxes will also need to be increased.

I agree with you that it will be difficult to R2i after some years. In general it will be diffcult for experienced R2i guys( more than 35 years of age) to get good job offers as the people over here in IT sector get more experienced. The best bet currently is to get a internal company transfer but those opportunities will also shrink as the indian offices will slow down the growth in future and also because of development of skillset in people from local offices. Currently in my office it is very diffcult for a outside R2ier to get the job since the salary budget for the open position is usually not very high.

Lastly I disagree with your opinion of poor quality of life in India. I certainly find living in INdia better than US where you live out in your own BOX(house,car , office) . In India you get a much richer social/Family interaction which leads to a happier life.

anyway my 2 cents

bearcat

>>>Real estate in india will not appreciate 15% each year. Infact thanks to recession the prices have stabilized for now. There will flattening out of teh growth in real estate.

Agree. I saw some apartments in BLR selling for 90L in 2007 and now in 2010 same or similar unit is quoted for 85L. For the last 3 years RE growth is zero. The situation was same with plots/villas. Rates are stuck in 3500-4000 psf for the past 3 years. I feel the affordability versus income has reached a balance state. Any appreciation has to come with increase in salaries. With inflation at 12% people will not have spare cash for RE. All the money is directed towards onion and tomatoes.

>>As the rupee starts appreciating we will see the salary growth levels in india drop down. Currently the whole foundation of the growth is based on low cost strategy and once that vanishes the growth will also flatten out a bit.

Right - IT boom and the accompanied RE boom was once in a lifetime opportunity like the dot com or RE bubble in US. People who were at the right place made money. Rest are left running after the train and hoping they can hitch a ride next time.

I see worse problem in EU with bankruptcy in Greece, Ireland, Portugal and other countries. Japan is stuck in a no growth mode for a long time. India is running double digit inflation with high exposure to oil price swings. Just two weeks back GoI increased the petrol prices. Unless you have a sackfull of dollars and a steady stream of Rupee income life is going to be worse here than in US.

If you have hot skill sets you should be able to earn and save well in US. Right strategy will be to work in America till retirement and then r2i to avoid the high cost post-retirement life in States. This is just a financial point of view. Did not take into account friends, family, kids, love for cricket and rajma chawal.

Old-Spice2;358609>>>Real estate in india will not appreciate 15% each year. Infact thanks to recession the prices have stabilized for now. There will flattening out of teh growth in real estate.

Agree. I saw some apartments in BLR selling for 90L in 2007 and now in 2010 same or similar unit is quoted for 85L. For the last 3 years RE growth is zero. The situation was same with plots/villas. Rates are stuck in 3500-4000 psf for the past 3 years. I feel the affordability versus income has reached a balance state. Any appreciation has to come with increase in salaries. With inflation at 12% people will not have spare cash for RE. All the money is directed towards onion and tomatoes.

What about the population increase? More people will be looking for more flats in metros, in the next 10-20 years. Won't that cause real estate price to grow? Or do you think that has already been priced in today?

sid_earth;358614What about the population increase? More people will be looking for more flats in metros, in the next 10-20 years. Won't that cause real estate price to grow? Or do you think that has already been priced in today?

In Pune, going rate in good societies on the outskirts is Rs 3500. Which is only slightly more than double of the rates in 2005. This does look cheap when I look back at the RE euphoria in 2007. However, when I look at the rents, house prices do look excessive. I was looking at a house priced at 1.6 crores (should be negotiable) and the tenant was paying Rs 40,000 for this house (out of that 7,000 went towards maintenance...not sure about the taxes). So ratio of RE Prices Vs Rental shows that the support is very low for RE prices.

mn_op;358625In Pune, going rate in good societies on the outskirts is Rs 3500. Which is only slightly more than double of the rates in 2005. This does look cheap when I look back at the RE euphoria in 2007. However, when I look at the rents, house prices do look excessive. I was looking at a house priced at 1.6 crores (should be negotiable) and the tenant was paying Rs 40,000 for this house (out of that 7,000 went towards maintenance...not sure about the taxes). So ratio of RE Prices Vs Rental shows that the support is very low for RE prices.

Which pune outskirts you talkin?

Mumbai is a different beast altogether I guess. Prices are on rise all the time...

mn_op;358625In Pune, going rate in good societies on the outskirts is Rs 3500. Which is only slightly more than double of the rates in 2005. This does look cheap when I look back at the RE euphoria in 2007. However, when I look at the rents, house prices do look excessive. I was looking at a house priced at 1.6 crores (should be negotiable) and the tenant was paying Rs 40,000 for this house (out of that 7,000 went towards maintenance...not sure about the taxes). So ratio of RE Prices Vs Rental shows that the support is very low for RE prices.

If you think about it, in order to accommodate demands from growing population, what's outskirts of a metro today, will be well inside the city in next 10 years. So by law of location-location-location, price will increase for this current outskirts area. However, there will be new outskirts in development, where low prices could still be found. Also, once inside the city, prices more or less get stabilized, but they will always be about double the price of what's available in outskirts.

Very interesting topic!

I think we don't need to wait till 2020-5, it will happen prior to that.

Cost of living is growing exponentially in India. While it is still possible to lead a cheap life in India, the R2Iers won't be able to do that. When someone wants most comfort as in westeren world, life will be quite expensive.

The salary structure will rich its plateau.

Actually I find it quite misleading when people say European/American lifestyle is not available in India. It is available in India, but unlike its western counterparts, you get lots of problems in India as freebies (e.g. pollution, traffic jam etc.)

Another issue with R2Iers that in India, again unlike western world, standard of living varies greatly between villages (also small towns) and big metropolis. In developed countries, you can live in a small town quite far away from big city and can still get all amenities and commute easily due to good road network. But when in India, you have to have live in a big town for a good quality of life.

[Quote]In general it will be diffcult for experienced R2i guys( more than 35 years of age) to get good job offers [/Quote]

I beg to differ on this bit. My experience is that it is more lucrative for aged IT pros to R2I than junior pros. Because the salary difference between India & US/UK is more prominent in junior grades than senior levels. While an American developer may earn 5 times than an equivalent Indian counterpart, an American VP may be earning only twice of Indian VP in similar role.

A large part of India's economy [especially IT] is dependent on western world. Indian IT is still predominantly service based. So, if European/American economy falls, it will affect Indian economy and thus it will also bring down real estate boom in India.