Why property (residential) investment does not make sense at all...

I am on a mission to spread financial revolution and help retail investors become HNI (having at least $1 Mio when they turn 60+). This is also serving the nation and society by building nations and individual wealth.

Being a Wealth Manager I travel and meet clients on daily basis. According to my business associates residential property market in Singapore is in doldrums while most of UAE residential properties have halved in last 7 to 8 years. And in India prices have not gone up since 2013-2014 and there is a big chance for property market to correct further. One of my billionaire Gurus has very confidently shared with us that Mumbai will become cheaper in times to come.

While majority of us will view demonization as the culprit. But that's not the full truth. It was bound to happen since market was well dominated by politically heavy weight land mafia; currently there are 80,000 plus developers in India and hardly a few 💯 are really genuine when it comes to delivering the project on time, commitment to quality and ethical practices. Government was also losing on revenue, earning shame on international diaspora and losing investment from FIIs.

Lots of these developers will just perish or reset or consolidate in coming 5 years due to RERA and GST {reforms by Modi Government}.

UAE and Singapore are also going through a massive infrastructure development and every other area is becoming posh. This essentially makes every area very pricy but due to super connectivity and mode of conveyance {maximum 45 min from one place to another} is making every place consolidating hence cheaper. My house rent in Dubai has slashed by 20% by this July 2019 and I expect more correction by next fiscal.

If we look at developed world data for last decade like London, Newyork or Japan residential properties have not grown more than inflation. Inflation in these countries are hardly any hence residential properties won't be able to grow in high single digits in time to come even for emerging market like India and dollar pegged Middle East.

To add further fuel ⛽ to this all Governments are working on infrastructure on 24*7. Honble Prime Minister Narendra Modi has just announced 100 lacs crore (100 trillion rupees) in infrastructure alone in India. UAE is already known to create world class infrastructure. Every time I come back to city post my vacation or long travel I found that a new road or toll or under pass is created. When Metro project was started a lot of people had doubt about its success. Today it's becoming life line of the city.

Mumbai's new Centre of hub is BKC and not Nariman point. The way city is growing it will certainly require two Airports by 2030 like Newyork, Dubai, California and various big cities in the world. And with water, rail, road, hyper-loop, metro rail distances won't matter within the city. And that's true for all metro cities in India.

World average rental is 3% post tax which is equivalent of inflation in these countries or little higher and India's inflation is all time low and expected to remain lower for next decade or so if it is going to be a developed country from here.

Also millennials are unsure of where they will settle down in times to come, they are more global than local. Coming to developers, they keep all margins for himself while selling living little room for end users to make any upside. With new law (RERA) investors will be away from Real estate which essentially will make it a very lackluster commodity to keep invested.

One must use an excel calculation or seek proper paid financial advise before investing in the property to make money. I strongly reject the idea of even siphoning taxation while buying property in cash (majority of NRI investors do it due to lack of knowledge and scarcity of financial advisors). I also condemn the mortgage arrangements for investing in property to make money. On every property we invest we tend to pay 1.6 to 2.5 times of the original amount borrowed. No wonder why HDFC is India's biggest home financing company by market cap (bigger than SBI and ICICI Bank in market cap). Retail investors must get financially educated to take wiser decision rather than sticking to (hear say) dekha dekhi decisions.

One most important aspects of property investment is illiquidity. Many of my clients are unable to sell their properties for last 1 year in Gurugram, Mumbai and Dubai. There are hardly buyers at right price. Gold, FD and mutual funds are better when it comes to liquidity.

Partial withdrawal: When you are in need of money in your business and would like to use some cash out of your real estate asset. It's so difficult to convince a banker to give you a property overdraft for the amount you need. All bankers are interested only in giving you loans to make long term wealth creation for their stakeholders at your cost. In fact every loaned customer is perfect example of a stock which is delivering 20% cagr return for the bank and housing companies on yearly basis. No wonder why a well managed bank and housing finance companies are a very good long term investment.

In the end liquidity of your assets are the most important in today's times of jobs, critical illnesses and business uncertainty (due to disruptions). One must have to make them financially educated to make double digit investment and at the same time maintain the liquidity too.
For Any Financial Advice Email at Bijal.shah@nexusadvice.com
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