To Mr.T (re; Chennai RE)

by Kris Sat Aug 18, 2012 11:30 am

You may want to look at Ashaya Properties on GST road. Next to Ford and about three miles from Mahindra city. They throw in a lot including the registration. Apartments run about $150K including registration. Workmanship is good. Apts are about 1900 sq ft, rent potential is 25K to 30K rupees and so you do have to take into consideration the negative cash flow. Some of the other projects are even more lopsided than this. I didn't have much of a choice due to cap gains issues, but the appreciation potential looks good on this.

by nevada Sat Aug 18, 2012 12:07 pm

If you don't mind me asking, are you funding the purchase by taking a loan or by selling an existing property and using the proceeds? I have never invested in apartments in India, just curious about how people do it.

by Kris Sat Aug 18, 2012 12:24 pm

nevada wrote:If you don't mind me asking, are you funding the purchase by taking a loan or by selling an existing property and using the proceeds? I have never invested in apartments in India, just curious about how people do it.

>>>>In the past, I have done that. It is a pain the a** in terms of documentation and the interest rates are nothing to write home about. I am still thinking about the plan of action this time around. The term is more restrictive as well with a great deal of attention paid to retirement age, usually assumed to be 60, I think. The way the prices have gone up in many of the metros, a sizeable negative rental cash flow is pretty much a given. Still there are deals around, if you can be patient with your investment. Study the locality's potential for growth carefully and take into consideration the dollar/rupee relationship.

by Kris Sat Aug 18, 2012 12:30 pm

Kris wrote:You may want to look at Ashaya Properties on GST road. Next to Ford and about three miles from Mahindra city. They throw in a lot including the registration. Apartments run about $150K including registration. Workmanship is good. Apts are about 1900 sq ft, rent potential is 25K to 30K rupees and so you do have to take into consideration the negative cash flow. Some of the other projects are even more lopsided than this. I didn't have much of a choice due to cap gains issues, but the appreciation potential looks good on this.

>>>I meant Akshaya

by truthbetold Sat Aug 18, 2012 12:32 pm

Kris
i am sure you did your homework. Here are some tools used in apt purchase in usa.
On negative side apt needs maintenance set at one to two months rent. Taxes 2 % or 3 to 4 months of rent. On pos side you get rent usually 1% of capital depreciation write off. Appreciation of property is only 5to 6% in most places. Appreciation in india is much higher but forex rate is working against you atleast in short term. There are more reasons than mere number crunching in a purchase but i likr to have numbers on my side.

by Kris Sat Aug 18, 2012 12:42 pm

truthbetold wrote:Kris
i am sure you did your homework. Here are some tools used in apt purchase in usa.
On negative side apt needs maintenance set at one to two months rent. Taxes 2 % or 3 to 4 months of rent. On pos side you get rent usually 1% of capital depreciation write off. Appreciation of property is only 5to 6% in most places. Appreciation in india is much higher but forex rate is working against you atleast in short term. There are more reasons than mere number crunching in a purchase but i likr to have numbers on my side.

>>>In general the viability on these investments has narrowed considerably over the past 5 or 6 years, with skyrocketing prices. It was almost a shock when I started to working out the numbers. The idea now is to find those deals which are in those areas that will expereince growth in the next decade. Besides the currency aspect, you have more restrictive lending happening in India, at least compared to the last time I looked at this/

by truthbetold Sat Aug 18, 2012 1:21 pm

Interest rates are high too. You need anywhere from 15 to 30% value appreciation to overcome all other issues. That is property value doubling in 3 to 6 years. An interesting thing pointed out to me in india is that you are better off holding building than cash because of continued 10% inflation. Building materials retain value while money could lose value.
Goodluck with the purchace.

by Kris Sat Aug 18, 2012 1:30 pm

truthbetold wrote:Interest rates are high too. You need anywhere from 15 to 30% value appreciation to overcome all other issues. That is property value doubling in 3 to 6 years. An interesting thing pointed out to me in india is that you are better off holding building than cash because of continued 10% inflation. Building materials retain value while money could lose value.
Goodluck with the purchace.

>>>Thanks. With those numbers, I am anticipating a break even (and I am also tweaking my liquid assets in India). The Cap Gains rule requires investment in like property, so I had to earmark that gain for RE. Of course, if the rupee/$ pendulum swings back, that would be a bonus too. Thankfully, India allows cost-indexation, so that helps on the cap gain front in terms of indian taxes.

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