No Dream Too Big!

Understanding the Rise & Rise of Real Estate Prices in India - Part III

Industry experts say that with India Inc expanding into the country's major metros, the upward trend of rentals will be witnessed primarily in and around existing and upcoming business districts, due to huge demand from top and middle level executives with transferable jobs. With sale values going sky high and home loan interest rates being revised upwards, many potential home buyers have currently put off plans to buy, preferring rental housing for now.
The builders' bid for the land to match the reserve price of the land is decided by the development authority. If the land is expensive, it will have a cascading effect on the price of the houses as well. The government recently hiked the Cash Reserve Ratio (CRR), leading to the increase in the cost of the house. The rising construction cost and land prices will ultimately be passed on to the end user. Therefore, we are not able to fulfill the requirement of low cost housing in the country. The real estate sector gives service tax at two stages.
When the builder builds a house, he pays service tax on the bills of architects and those involved in the construction. Now he has to take service tax from those who buy his flats. The builder is treated as a contractor if the customer is buying a house during the period of construction. Besides service tax, the industry pays two types of tax -- VAT and stamp duty -- levied by the state government. So the industry has to bear the load of three types of taxes. Stamp duty rates are inconsistent and exorbitant across the states.
The government should treat housing as a priority sector. Housing is a need and not an industry. A policy will have to be framed integrating suppliers, consumers and municipalities. A big chunk of housing is lying locked. The problem must be addressed at the policy level. This can solve the problem partly. As far as incentives are concerned, adequate incentives are available on home loan.
Rental housing should be promoted. Tax incentives are given and rent control act be made uniform. The landlord will be encouraged to give his house on rent, if he is sure he will get it back after two years. The house owner should get a rebate on the rental income.

I’m for Sale, But at My Price!

Understanding the Rise & Rise of Real Estate Prices In India - Part II

If home prices have risen disproportionately with increases in personal income and interest rates, then there is a cause of worry. Moreover, when expectations of rapid price appreciation appear to be a major factor behind the strong housing market, the results are discomforting. The volatility in the price has to be driven by changing fundamentals rather than personal agenda of a handful of investors. Weaker fundamentals and non-transparent policies cause price declines in those countries with inelastic supply like India.
But basic fundamentals like inflation and nominal interest rates on the one hand, and housing prices on the other have a far reaching and seep impact on the prices if the market is driven by fundamentals. This link suggests that long periods of elevated inflation followed by a sharp deceleration of price growth may, in the shorter term, breed misalignments between house prices and longer-term determinants of residential real estate values.

Situations like this might call for greater caution on the part of monetary authorities. The feedback from property prices to credit growth is strongest in countries with a greater prevalence of variable rate mortgages and more market-based property valuation practices for loan accounting. In these countries the risk of a build-up of mutually reinforcing imbalances in the real estate market and the financial sector is more pronounced, indicating that authorities should closely monitor developments in property values

Dreams: At What Price ?

Understanding the Rise & Rise of Real Estate Prices In India - Part I

High prices are keeping buyers out of the market, making it harder for firms to attract workers in pricey markets and breeding high consumer debt and speculative buying. Potential buyers see warning signs of a speculative market but worry they run a bigger risk if they wait and prices jump still higher. But it also has economic pitfalls.

If the reason the price is high today is only because investors believe that the selling price will be high tomorrow—when “fundamental” factors do not seem to justify such a price—then a bubble exists. The price per unit of the existing stock is determined in the demand side of the model, making the difference between the actual home price and the estimated price of particular interest in assessing the existence of a bubble. A positive difference would imply that current prices are higher than what the fundamentals can support over the long run, thus suggesting a bubble.

Few fundamental factors that influence the demand for housing over longer horizons include growth in household disposable income, gradual shifts in demographics (such as the relative size of older and younger generations), permanent features of the tax system that might encourage home ownership as opposed to other forms of wealth accumulation, and the average level of interest rates (possibly related to the long-run behaviour of inflation). The availability and cost of land, the cost of construction and investments in the improvement of the quality of the existing housing stock are longer-term determinants of housing supply.

Another factor affecting the liquidity of the housing market is the specific transaction cost framework such as the level of VAT, stamp and registration duties and inheritance taxes. Finally, the uncertainty about future prospects that follows periods of heightened volatility in housing prices tends to lead to a more cautious response of housing construction to shifts in demand because of the inherent irreversibility of this type of investment.

You've got a suicide note !

“It appears I am destined for something; I will live.” - Robert Clive

In a recent alarming study, The Economics of Suicide, researchers have tried t unravel as to why trying to kill yourself may be a smart business decision. Here’s an excerpt from Slate on the economics of suicide:

Marcotte’s study found that after people attempt suicide and fail, their incomes increase by an average of 20.6 percent compared to peers who seriously contemplate suicide but never make an attempt. In fact, the more serious the attempt, the larger the boost—”hard-suicide” attempts, in which luck is the only reason the attempts fail, are associated with a 36.3 percent increase in income. (The presence of non attempters as a control group suggests the suicide effort is the root cause of the boost.)

The economics of suicide were largely ignored in the ensuing decades. But last year Dave Marcotte, a professor of public policy at the University of Maryland, Baltimore County, pushed the field forward when he wondered what happens to people like Jones who attempt, but do not achieve, suicide.* There are about 20 attempts for every successful suicide. (Approximately 2.9 percent of the U.S. population has attempted suicide—1,760 attempts per day.). Previous studies had demonstrated that as personal incomes rise, the propensity for suicide falls (presumably, money does buy some happiness). Marcotte's insight was that individuals contemplating suicide do not just choose between life and death. Rather, they choose between three alternatives: life, death, and the gray area of unsuccessful suicide, which may be negative (expensive injury and permanent disability) or positive (a "cry for help" that elicits attention).

Why should suicide be an economic boon? Once you attempt suicide you suddenly have access to lots of resources—medical care, psychiatric attention, familial love and concern—that were previously expensive or unavailable. Doubters may ask why the depressed don't seek out resources earlier. But studies have demonstrated that psychological and familial resources become "cheaper" after a suicide attempt: It is difficult to find free medical care when you are sad, but once you try to kill yourself, it's forced on you. Read more.

But take a look at this with reference to India! You’ll be shocked! 1,00,248 farmers have committed suicide between 1993 and 2003. 195 farmers committed suicide after the PM’s two day-visit to Vidarbha. Ninety committed suicide in July and 105 in August, 2007. All these suicides were unfortunately successful and couldn’t quite fit in the report cited above. Even the unsuccessful ones have not brought in any ray of hope for hapless debt ridden producers of India.

Tehelka quotes

that the overwhelming cause of death is debt, sometimes less than Rs 10,000. While repayment of his(farmer) debt is impossible, he still requires money to feed his family, and prepare for the next sowing season. Blacklisted by the bank, or offered only a portion of his requirement, he must turn with leaden feet towards a private moneylender. Whoever this may be, he will possesses the ability to wring personal advantage from desperation — a first right on produce; a land sale deed, which may not be returned even after a debt is repaid.

Mainstream quotes,

that Most farmers’ suicides are desperation-driven due to heavy debt combined with inability to face usurious creditors, many of whom keep harassing his family members with insults and threats. He sees no way out of the debt-trap situation, because only a fresh, larger loan can pay off a previous one that has bloated due to unpaid interest, and he has already pledged his wife’s jewels, his land and even household utensils as security for previous loans. Money borrowed for social reasons usually leads to ruination, which is more rapid if a crop, the expected income from which is to service the loan, fails due to meteorological or technical causes. But excluding the social-cause loans, poor farmers’ survival-cause loans are on the order of several thousands to purchase seed or fertilisers and pesticides or draft or milch animals, or ten-twenty thousand to drill a borewell and buy a pump.

Mint adds

that amid concerns over suicides by debt-ridden farmers, RBI governor Y V Reddy has said the problem “goes beyond credit” and blamed the lack of risk mitigation mechanisms against natural calamities and other failures like pesticides for the crises. In India, Reddy says, there are not enough risk mitigating mechanisms either against natural calamities or against failures like seeds or pesticides or power supply by the government or water supply. “There are so many uncertainties, there are so many risks,” he said. Reddy says financial penetration doesn’t not mean just credit. “It is transactions and as people are moving in we have to see the whole penetration of the banking system.” Bank lending to agriculture is 18% but the RBI chief pointed out and that “in aggregate the rural areas give more deposits and take less money”.

So which ever way you look at it, whatever perspectives you may delve deep into, role of economics is a paradox of sorts when you talk about suicides. If you escape it(suicide), you’ll be well off, as the report points out. If you’re successful and that too in country like India, you’ll not just leave behind a family but also more economists working out the number game and politicians banking on their vote-numbers game. The eternal tussle between life and death will go on and who ever wins numbers will emerge. For the lucky ones numbers will be encouraging, for others numbers will just be a mere statistic left to languish in books, reports, news etc. leaving behind the trail of oblivious families in some forgotten village trying to make a living and remembering the dear ones who left.

At the "dead end" of the day numbers will resurrect from the ashes like some Egyptian mythic and shout silently.

Because numbers never die! People Do!

Project For Sale in Banagalore

Or Click : http://docs.google.com/Presentation?id=dn3qtbd_21dqrxvkg6

From Commercially‘Try’-able to Commercially Viable?

Commercial Real Estate Investments in '2008

Promises are the uniquely human way of ordering the future, making it predictable and reliable to the extent that this is humanly possible. - Hannah Arendt

The indications point that the Indian economy will moderate a bit in 2008, and the flow of capital into real estate will probably will remain focused on developing new properties. So we will continue to see the new commercial property development boom similar to what has already occurred in housing. And at the same time sustained increases in supply of such properties will decrease the profitability of commercial real estate within the next two years.

A report by DTZ suggests that

the NCR could have an surplus supply of 18% by early 2008, while Bangalore will witness an oversupply of 32%. Kolkata will have an surplus of 40% while Pune will see the maximum vacancy at 68%, followed by Chennai at 66%. Hyderabad too is expected to see 23% over supply by the first quarter of 2008. But the estimated oversupply is only in specific sub-markets of these cities.

The continued supply of new space for several years, could create enough new options to dishearten existing and new space markets by the way of increased vacancy rate and moderate rents in the mid term scenario. Consequently it’ll dampen the higher value appreciation that real estate has enjoyed in the past three years.

For tech savvy investors they’ll eye the higher initial yields from new Tier II/III city properties than rather than the existing ones. It is amply clear that the returns on a commercial property investment have a higher yield at 7 to 12% vis a vis a 5% rental yield in the residential sector, And if you were to chose amongst the best property investment options in today’s scenario, commercial real estate comes across an ideal choice.

Last two years have given a yield of 30% and 40% for any prudent investment in Real Estate. India's real estate industry has also gone from strength to strength. But now prospects for potential returns are moderating between 12% and 20% for next few years. Looming with uncertainties the Indian real estate market has only seen very negligible cut in interest rates while the land prices have gone galloping ahead with a gap which still lies unexplained.

For now, any short-term gains are out; and long-term scenarios still remain attractive riding on India's strong fundamentals. Optimism is the what the future indicators point to for Indian Real Estate in 2008. But Guarded Optimism is what it takes to succeed today as the market still needs to self regulate and organize.

Ms. Indian Economy needs the Sunscreen!

Can anybody remember when the times were not hard, and money not scarce? - Ralph Waldo Emerson. Surely the Sun is out and shining scorching bright but there is a need for precaution or a "sunscreen" to avoid the bad weather being predicted by the global economists.

The World Bank said the slowdown in the US, the world’s largest economy, is being partly offset by the resilience of developing countries, which have powered through four consecutive years of record expansion. After modest growth of 3.3 % in 2008, global output should expand by 3.6% in 2009 as the US economy rebounds, the report said. US economic growth is expected to have slowed to 2.2% in 2007, from 2.9%. The World Bank forecast a 1.9% expansion in 2008, then a rise to 2.3% in 2009.

In the recent tehelka study Will Wall Street’s Flu Make India Sneeze?

The effects of US recession on India are brought to light. “India has become more integrated with the US and the rest of the world, but we have also become more resilient and our growth engines are very strong,” says DK Joshi, principal economist at rating agency Crisil. He believes that India’s strong purchasing power, growing in tandem with rising income levels, could act as a counterfoil to the dip in demand in the US and parts of Europe. Economic Advisory Council (EAC) chairman C Rangarajan also suggests that Indian companies can offset the disadvantage of a US slowdown by focusing on productivity gains and the domestic markets.

Not all experts are sanguine about the Indian economy’s ability to ride out the storm without some serious damage. If the slowdown balloons into a full-scale recession, the adverse impact is obviously going to be more severe. Many economists believe that there could be pressure on capital inflows — despite the fact that Indian markets offer among the highest returns in the world.

DESPITE SOME optimism, others point out that though India may be relatively insulated, sentiment plays a strong role in market behaviour. Negative sentiment, therefore, could adversely impact domestic markets.

In a study released by Goldman Sachs, Can India ride out the US recession storm?, authors Tushar Poddar and Pranjul Bhandari make a case for cautious optimism: “We think that the economy has sufficient internal ballast so that it won’t be blown off course, but it will lose some momentum. In particular, we believe merchandise and software and other services export growth will halve in FY09 due to the global slowdown, with negative implications for employment growth. The structural growth story remains intact and opportunities to invest in one of the more dynamic economies will remain plentiful and, as a result, our equity strategists remain overweight on India.”

While most experts and industry-watchers are either doomsayers or holding out the hope that India will be somewhat battered but safe, , there is a small minority that actually believes that India and other emerging markets might well ride out the storm largely unscathed, much like a champion surfer. What is the possibility that a recession in the US could actually work to India’s advantage? Infosys mentor NR Narayana Murthy is optimistic: he feels that a recession will create opportunities for Indian corporations, including IT companies, emphasizing that a focus on better allocation of money means a greater opportunity for India. Guruswamy categorically feels that a recession in the US will see organisations such as banks cut jobs, which means more BPO operations in countries like India. Kamdar agrees with the possibility that in the long-term, a prolonged recession in the US may well wean Indian industry from its heavy dependence on US markets and capital and push the development of other markets and sources of capital within Asia and across the world. “This diversification could be a good thing for India’s economy,” she says.

Livemint reports that globalization has brought more competitors and more threats. For many companies, the threat of new competitors in low-cost environments is real. Profitability and cost efficiency has become vital, as has customer relationship quality. So, people look to different models. A model that has been vastly adopted by many businesses is outsourcing and offshoring. India clearly has, over a relatively short period of time, demonstrated itself as being the expert in that area.

However, the US recession could “lead to a decline in capital inflows and weaker exports particularly of services. This could affect the capital and current account and put pressure on the balance of payment surplus,” said the S&P report ‘Asia Pacific sovereigns brace themselves for headwinds from US’. The report further pointed out that “economies with a relatively small export sector and a large domestic market, such as India ..., are going to be much less vulnerable to a US recession-induced fall in export demand”.

The Year of The Band Wagon!

Blue skies smiling at me. Nothing but blue skies do I see. - Irving Berlin

Optimism is the what the future indicators point to for Indian Real Estate in 2008. But Guarded Optimism is what it takes to succeed today as the market still needs to self regulate and organize.

According to Economic Times predictions for Year 2008,

“The realty sector in the country is all set to enter into a new era in 2008 with a plethora of investment options lined up in the coming months. Investors may invariably be in a dilemma as to where to invest and what percentage should be earmarked for each category in the investment portfolio. It is one area where both yield and capital appreciation is assured for investors. What is more, today, one can use the asset acquired over the years to raise short term funds for a rainy day through multiple options like mortgage loan against immovable property , loans against rental income and reverse mortgage for senior citizens.

Those looking at residential property should remember there are three pertinent factors which are beyond investors’ control like increase in land cost, input cost and registration fee. They are moving up at regular intervals irrespective of the government in power and its policies to supplement the revenue for the exchequer . Though the return on investment may not be relatively lucrative in the short term, capital appreciation in the long-term will compensate the investors well.

For commercial property, developers themselves want to retain the premises and are keen on leasing. This is because they can realise substantial investments through rent discounting scheme offered by various banks. Leased commercial properties are sought-after and ideal for high net worth individuals. The yield varies from 10 percent and more, depending on the location, amenities offered, specification and proximity to landmark areas.

Investments in Tier II cities would be a viable proposition due to anticipated improvement in connectivity levels and infrastructure. Commercial property is currently exempt from the purview of payment of wealth tax and it is hoped that it would continue to remain so in the coming budget as well.

Rentals of office space in most of the markets of metropolis like NCR, Mumbai and Chennai went up by around 80%. CB Richard Ellis pointed out that amidst all the hype in the Indian real estate market, there are concerns now being raised about the viability of cost, amongst the MNC ranks, and all eyes are now intently looking at where rentals will move in 2008. The increased availability of office space in NCR and other metropolises will help bring down the prices in near future. The overheated markets of Mumbai and Gurgaon are in for a marginal rationalization in 2008.”

But come to think about it, there are lingering concerns about the credit markets for both residential and commercial real estate. Fact remains, that availability of finance remains crucial so does the policy. High interest rates and global liquidity crisis in all asset classes that is going to make financing much more difficult. Earlier anyone with his hear ticking could get a loan and could buy real estate, but now the loans have made even breathing that much more difficult. In addition to healthy fundamentals, commercial property valuations are well-supported by replacement costs. Because it still costs far more to build a building than it does to buy an existing one, not to mention the difficult approval process in most markets. The robust re-sale of existing supply is the key to the continued sustainability of the market. Also read Never Tell Me Odds! to know how speculators always have an important role in boasting the prices with their underwriting and long holding skills.

You're An Exception Mr. Seller!

One sticks to an opinion because he prides himself on having come to it on his own, and another because he has taken great pains to learn it and is proud to have grasped it: and so both do so out of vanity. - Friedrich Nietzsche

Ever hear of the hard seller. Maybe you have them just around you, owners who believe they’re an exception, the idea that their homes are growing in value while real estate prices all around are stable. These owners truly believe that somehow their property is unique and different, a home so wonderful that general sales trends and everything else is irrelevant. They are unwilling to see any relation to reality. These kind of whimsical prices seem to enhance throbbing egos and hulabaloo rather than result in deals.

While such owners, having once they are firm and sure in their minds what a property is worth, sometimes see any lower price proposal as a loss when that's not the case.

If the home has been on the market longer while local properties typically take less time to sell.

Then what is "fair market value" and how is this number determined? The term "fair market value" generally means the price at which a seller will freely sell and a buyer will freely buy. Legally speaking definition speaks, "Fair Market Value is the price for property which would be agreed upon between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances; it shall be the highest price estimated in terms of money which property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used."

But what really happens is that house that is overpriced by 10 percent of its actual market value is much less likely to sell within the first 30 days than one priced within 5 percent of its true value. Not only does an overpriced home takes longer to sell, it is also likely to sell for less than its actual value. More so because of the negative effect often associated with properties that have been on the market for a longer than average time.

But referring to Market values is important because if a property value is set too high it's likely to languish on the market. If the value is set too low then owners won't get full value. The same problems also impact buyers: If the property is over-valued you'll pay too much if you buy, if it's undervalued it will be quickly sold, perhaps before you get to it. Also read, How NOT to lose your sight in the Indian Real Estate Market.

How to Lose your Money in 30 Days!

When a person is born, he can embark on only one of three roads of life: if you go right, the wolves will eat you; if you go left, you’ll eat the wolves; if you go straight, you’ll eat yourself. - Anton Pavlovich Chekhov

Whatever said and done perhaps but one of the most important step in getting your property sold is entering the market with an offer that's priced right. Because over-priced property gets all the attention but for all the wrong reasons and loses out on the reasonable offers.

Invariably every seller looks for the highest price for his/her proposition. Usually a typical unreasonable seller starts at the highest price point possible, more than his own belief or reason. But the continued renegotiation of price can be a humbling experience.

But when numerous sellers are competing for fewer buyers -- adjusting price down may come bit too late and cost the seller less in gain. This can be avoided if the home is priced correctly from the start. Looking at properties that have sold in the last two months or so provide you a picture of what price range. And active properties in the market also give you an indication on where the market is headed. It may be a good idea to package the product accordingly. Read Sell It Fast! Sell it Right!

Even though home prices may have corrected a bit, real estate continues to be immensely expensive for most buyers, especially first-timers who lack cash flow. So it’s better that the property gets exposed to right and more number of qualified clients. And that happens with the right Value Proposition.

Arbitrary demands only result in arbitrary offers, which are least likely to materialize. And no one else would want to spend time promoting the whimsical offers, unless of course he is a big gambler himself. The key is to generate maximum response, the quicker you get those queries the better. More the queries, better are the odds of getting the best price at better terms. But then nothing is worth doing unless the consequences may be serious.

Sell It Fast! Sell it Right!

A weak man has doubts before a decision; a strong man has them afterwards. But in either case you have to know the value of your decision and where it will take you thereon. In a volatile Real Estate Market common sense always speaks too late. You might be thinking to jack up the price a little bit more while the market would already be offering you what’s the best. But you would let yourself be driven by either greed or fear, but not the common sense.

Here are few tips to Sell Your Property Fast and Furious provided you’ve decided to do so:

1. Fix It Up! Don’t just do a cosmetic surgery. Add value to your home by getting it renovated and fixing up the old nagging glitches. Just try to figure out how does your house look compared to the new construction around you. Try to add the experience into your home, which is difficult to forget, pleasant of course. It’s just like a walk through of a Sample Show Home. Anything less, is not anything at all.

2. Price it Right! It’s better not to lose your money with your adamant unflinching demand for a little more. You’ll lose an equal amount by delaying your sale by even two months. If your competitors are selling less and offering more then you better get your value propositions right. And Value is what the buyer sees and not what you force upon. Attract by showing the bait, and sell sensibly, and invest at lower prices for own purchase. But if you’re absolutely sure that you’re holding a Gold Mine in your hand than Don’t Listen to Anyone! Wait as long as you would want to.

3. Try to Push the Deal rather than Just a house. Avoid stringent price tags. Think of your home as a value proposition which needs a proper marketing.

4. Come to think of it, it's not only about the buyers, even some agents want to chip in a little more incentive for their efforts. Devise ways to offer incentives in form of commission or an extra share if the property is sold at a higher price. When people ask for time, it’s always for time to say no.

5. Package it with other incentives to the buyer. Like the ease of deal flow, transparency, personal disposition, walking that extra mile to give the buyer a comfort level he always look for.

To Buy or Too Shy !

“You see, most people never have to face the fact that at the right time, in the right place, they’re capable of anything.” - Roman Polanski

Over the last one year home sales have taken a plunge thanks to broad macro economic measure taken by RBI and a speculation driven unorganized market. Prices are more or less the same across some categories like apartments while dead investments like barren unproductive plots have taken a beating. Builders and sellers are offering concessions, and the most recent forecasts say the market is due for another correction.

But given the fact that it’s virtually impossible to pinpoint the ebb of the market, waiting for that the best price is as risky for buyers as it for sellers who are certain that market is about to peak. Logically speaking, it's only a right time for you to buy a home, normally, when owning is a cheaper and better option, than renting. More so when home ownership fits your financial portfolio, fulfills aspirations and offers personal/professional value. But is you only want a short term trade off than better wait, and understand the art of real estate investing.

There are other who say that in case you want to buy to live and if you don't take the plunge and home price appreciation carries on, you could be left out in the cold, with an opportunity lost. Especially if you are waiting for the perfect best deal, you could end up waiting for years on end, missing the bus while prices keep rising. Under such circumstances it’s always better to understand the nuances of Value Investing and the The Right Price Equation. Statistically, in the long run, real estate prices rise, by an almost of about 6 to 8 percent annually, getting your property to doubles every 10 years or so.

In short people buy real estate because it's an investment that provides shelter or security, tax benefits, loans, the appreciation and fosters the pleasure of and self actualization, with freedom to create, shape and develop, an option which you can not avail as a tenant. But whatever you do, know what you’re doing, because knowledge transcends these barriers of indecision and opens your eyes to seeing, creating and trading Value.

And when you can’t figure out what to do, it’s time for a nap.

Never Tell Me Odds!

A Peep Into Speculative Real Estate Buying.

“There are two great pleasures in gambling: that of winning and that of losing.” - Anonymous

Never tell me the odds, someone once said. For there are none. Not to be seen at least for now.

Ever thought of speculative buying in Real Estate? Well if so many have done it before, why not you? Especially in a highly unorganized market like ours, where burning your fingers is the only way to learn. And you always have to learn it the hard way. Seen the unbridled unrealistic spiraling unreasonable prices in Delhi? What’s there to think! Or there is nothing to think at all! Indian real estate is like that, after all. So get ready to burn your fingers if you’re entering the Indian Real Estate with opaque colored glasses on your eyes.

What is Speculation after all?? Is it investing in residential real estate for long term? Or is it buying a home where you don’t have any plans to live? It can also be a short term gain where you want to buy cheap, add a little value and sell it fast? So what really qualifies as a speculative trading and investment? Users today buy property because they're not sure that they would be able to afford it next month and speculators know that very well. Speculation happens when a certain sect of investors, unlike true investors take risks bigger than their appetite with an aim of trading or reselling the property at a profit in the minimum possible time period. They differ from the Investors who would want to stick along with a property for a longer duration of time.

Speculators always have an important role in boasting the prices with their underwriting and long holding skills. Invariably, it’s for everyone to see that prices are going higher by each passing day only because speculators think they'll always be able to trade for a profit, at any given point of time. But what happens in declining market is, retail or small time investors may not know when to get out and exit gracefully. It becomes difficult to know the peak and the best price to exit. Excessive speculative buying also generates and brings into pipeline the "hidden supply" that could come back to disturb the market and speculators have no option but to offload their units at the best possible rate, setting a chain reaction. As someone rightly described that a speculator is a man who, if he dies at the right time, has a rich widow. So if you are an aspiring speculator, get yourself a plan to exit before you enter.

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