A new beginning

[asliarun]

I have only invested in prime location in Delhi only and I think I have got better returns compared to the people who have invested in stocks(all the people I know who have invested in stocks have lost their money and that too by a huge percentage). I have got comparable returns to the people who have invested in Delhi suburbs(but my investment was risk free).

I don't mean to comment about your investment strategy or the decisions you made. However, I would like to point out a few things that I felt about real estate investment in India:

- The key challenge in RE investment in India is that it is incredibly hard to buy land that has a clear title and even harder to keep the property safe from other vultures wanting to do illegal "kabza". This is why RE has rapidly become the domain of people with power - i.e. MPs, MLAs, Corporators, big businessmen, and people with "connections"

- Lack of data - there are no computerized records of either "comparitivies" (i.e. reliable data on how much similar parcels of land or aptts got sold in various neighborhoods nearby or with similar profiles) or of history. At least with the stock market, you have reliable data of a stock's historical price movement

- In India, RE investment is like investing in gold - you are basically counting on a resource's scarcity and potential demand. In other words, the logic is "we have a billion people and only so much land, hence property prices will keep rising infinitely".

While this may be true to some extent in the short term, IMHO, true sustainable growth can only happen when "value is added" to the input raw material. Companies do this in a well understood way - most either add value through manufacturing, or through services. Investors constantly demand that companies should keep adding value which in turns creates growth. Investors also hold a copany's management accountable for said growth (or lack of it), among many other things.

However, RE is a finite resource. Value can still be added, but it has to be in the form of improved infrastructure. Unfortunately, this is where things go to the dogs. Not only is infrastructure in big cities horrible, it is becoming worse. On top of it, you as a real estate investor, has zero control or zero influence on this infrastructure growth/neglect. Worse still, the people responsible (bureaucrats and politicians) are not only not accountable to you in any way, most are thoroughly corrupt and crooked as well.

Imagine if a company asked you to invest in it, and then told you to go F yourself, and on top of it, you know that the CEO and board of directors are siphoning off huge portions of the company revenue to line their pockets, and you couldn't do anything about it. That's basically the state of RE in India.

The only value that is being added in Indian RE is the big population migration from rural to urban agglomerations, and the growth in jobs in cities. While these are good solid reasons to invest in RE in India, the key question to ask is if current RE prices already have this factored in, and how much longer this can sustain itself with corrupt and inept governance.

 

[vinay]

Ajay,

It is not true by any standard that only banks and hedge funds profit from stocks and related markets. Take the case of yourself Ajay, you have also made a lot of profits in stocks and wiping out your losses similarly many of the individuals make money, especially who are full time into this. Furthermore you are again probably set to make big profits that is why you have invested in Suzlon.

I am sure this is just a factory of myth that mutual funds are the biggest losing game while the fact is that people have made money as long as they have invested sensibly and followed the risk management. I have discussed with you the benefits of mutual funds many a times on this forum and even in private but often you are quite and not coming forth for a full friendly debate.

For most of the things we are dependent on some one or the other so please be assured that there is nothing like a faceless stranger. I have a different take that i would invest money even through a stone if it can generate profits therefore i feel at full ease to invest via faceless stranger as he has a track record and we have the opportunity to reduce our investment through the so called stranger if he is not performing in line to the market and so on.

If someone feels that he can make more profits by investing directly in the stocks then it is indeed very good so in order to prove the point to himself he should invest equal amounts in stocks and mutual funds via adviser to prove on a average for 3 years that investing directly is more beneficial.

V.

Neeraj
Your post offers sensible and realistic advise for potential investors. Everybody seems to have made money from real estate but only big banks and hedge funds seem to be profiting from stock, commodity and currency markets.

I know that Vinay has a different take on it but personally I feel that Mutual Funds are the biggest losing game out there. At least with stocks you have the satisfaction of having lost your money yourself. But in a mutual fund your money is being lost by a faceless stranger