Real Estate Downturn Affected R2I Plans

puneri_punter · Post by **puneri_punter** » Mon Dec 03, 2007 8:35 am

Is anyone other there whose R2I plans were affected (Cancelled or postponed) due to the downturn in the US Real estate market?

I had always assumed that a heft chunk of my R2I money ($100k approx.) would come from the sale of my house.

Though I don't have a fixed R2I date, I have certainly retrogressed in my march towards the traget money needed for R2I.

obiwankanobi · Post by **obiwankanobi** » Mon Dec 03, 2007 5:34 pm

From the heading I implied that the upturn in Indian markets affected your R2I.

How much difference in %age would have that really have been to affect your R2I decision. The Indian side of things should have somewhat affected.

OB1

puneri_punter · Post by **puneri_punter** » Mon Dec 03, 2007 11:07 pm

Actually it is a double Whammy. Fall in US Real Estate and Rise in Indian Real Estate.

For arguments sake, let us assume I need $300K for R2I out of which $100K would come from sale of my house. I had planned to invest that $100K in a house in India.

Now in the US that $100K is reduced to say $65K. At the same time it is now going to cost me $125K in India to buy the house that I had originally wanted to buy for $100K.

So now overnight I have a $60K short fall. Don't you think this is enough to have an impact on your r2i plans?

ChennaiNanban · Post by **ChennaiNanban** » Mon Dec 03, 2007 11:51 pm

I went thru the same phase during my home sale in US .
Only good thing for me was.. I made the purchase in India little earlier.
Regardless the hit in US was taken by me as I need to sell my home.
Coming to your equation, the $60k is like 20 lakhs approx. You have to decide if you want to make up that number by staying here or doing it in India.
It is more like x+1 syndrome to me. We have to draw the line at some point.
I drew the line based on time even with a shortfall of numbers.

Good luck.

puneri_punter;62266Actually it is a double Whammy. Fall in US Real Estate and Rise in Indian Real Estate.

For arguments sake, let us assume I need $300K for R2I out of which $100K would come from sale of my house. I had planned to invest that $100K in a house in India.

Now in the US that $100K is reduced to say $65K. At the same time it is now going to cost me $125K in India to buy the house that I had originally wanted to buy for $100K.

So now overnight I have a $60K short fall. Don't you think this is enough to have an impact on your r2i plans?

rasi · Post by **rasi** » Mon Dec 03, 2007 11:55 pm

Not a double whammy but a triple whammy ( fall of the mighty US dollar)... :emangry: :emangry:

talkative · Post by **talkative** » Tue Dec 04, 2007 12:13 am

I personally suspect the triple whammy will be short lived - given so much of the boom in India has tight association with US, it's conceivable that a slowdown in US would lead to downward price pressure on Indian real estate. There may be a lag which I suspect we're seeing now, but eventually it may catch up.

Also, a weaker dollar would mean fewer people in US find India real estate as affordable, which too may put downward pressure on prices, especially in major cities where so many NRIs buy apartments / land on grounds of some very-distant r2i plans which may not pan out.

Old-Spice2 · Post by **Old-Spice2** » Tue Dec 04, 2007 12:30 am

>>>I personally suspect the triple whammy will be short lived - given so much of the boom in India has tight association with US, it's conceivable that a slowdown in US would lead to downward price pressure on Indian real estate.

I used to think Rs will always depreciate against USD. With new liberalisation policies and privatisation in India, I am not so sure. Rs appreciation may reverse but steep fall in RE price is doubtful.

There is hardly any development in rural areas. People are migrating in large numbers to metros in search of jobs. Most of the economic activities are centered around metros. Quality of life and service availability plunges as you move to smaller towns.

RE, Gold and FD are the main avenues for investments by resident Indians. People tend to keep their apartments locked instead of foreclosure and distress sale like US. I personally know one family that has one SF and one apartment locked for the past 5 years. Remember people are frugal and have saving mentality in India. Home equity loan and huge credit card balance are not common.

PC is talking about 9% GDP growth rate for the next 20 years.

>>There may be a lag which I suspect we're seeing now, but eventually it may catch up.

As KRV mentioned in another thread how S Korea is unaffordable for many Koreans LIA, it may happen with us. We can not make decisions based on past events. Already people in India are hesitating to go to Gulf and other overseas destination. This was unthinkable 10 years back.

Mash_Babu · Post by **Mash_Babu** » Tue Dec 04, 2007 12:59 am

i said this before but i am saying it again...

Indian real estate is a different animal.
with so much population mainly living in 4 metros and surrounding suburbs i dont see RE dropping like here in US.
I worst case it might slow down but wont drop.

desihometown · Post by **desihometown** » Wed Dec 05, 2007 3:47 am

Mash_Babu;62324i said this before but i am saying it again...

Indian real estate is a different animal.
with so much population mainly living in 4 metros and surrounding suburbs i dont see RE dropping like here in US.
I worst case it might slow down but wont drop.[/quote]

Dude, thats just your speculation. Japan is even more land locked than
the total real estate in India cities. Do you know the brutual real estate
crash in Japan in the early 90s ? The Japan real estate bubble was one of the most spectacular in history. At the peak, one square foot of downtownTokyo land was worth over 1 million dollars. The bubble burst in the early 1990s, about three years after the stock market crashed and still hasn't recovered. Commercial property was the hardest hit with some buildings losing over 80% of value. On average Japanese commercial property is down over 60% from the peak and residential is down over 40%. Extraordinarily low interest rates and massive money creation was not enough to save Japanese real estate

There is no concept of real estate will always go up. Yes. Over 50 - 100 years it might, but there can be brutal periods of 15-20 years where it
can keep crashing or be stagnant. When affordability does not keep pace
with real estate prices, a correction/crash will happen.

Please dont speculate that india real estate will never go down. It flies in the face of basic economics.

r2i_100 · Post by **r2i_100** » Wed Dec 05, 2007 6:21 am

Mash_Babu;62324i said this before but i am saying it again...

Indian real estate is a different animal.
with so much population mainly living in 4 metros and surrounding suburbs i dont see RE dropping like here in US.
I worst case it might slow down but wont drop.[/quote]

Read following link, Indian RE is reaching 'unaffordable range'.

You may be mistaken that Indian RE will not drop, thumb rule is if the property price is 5 times of average salary, a downturn is likely.
Bangalore average salary is 6-8 lakhs => Any RE > than 40lakh is venerauble...

http://economictimes.indiatimes.com/Indias_hot_property_mkt_likely_to_cool_soon_Kamath/articleshow/2595410.cms