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Real estate prices in US and India

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Yamaka

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Is it true real estate prices in many US cities are lower than /equal to what we have in our top cities in India?If that is so,are we overpaying a lot in India or US market is dead cheap now?

Hello Fire:

Yes.. we had a Real Estate Bubble in the US; it got pricked starting 2007 and still the housing market is losing value...

There is a Rule of Thumb to know whether cities in India have over-valued real estate or not:

1. Find out the NET income generated by this property if rented or leased for a year (from the gross cashflow, deduct any repair or maintenance cost to get the NET income). Say Rs.1000000 is the NET income for a year.

2. Multiply this with a factor of 15 to 25.. this is called the p/e ratio. If the market value of this particular property is Rs. 15 millions, then it is called Fairly Valued; if it is Rs. 25 million or more, then it is called a Bubble - a Speculative Bubble. Anything in between will be according to your view of the market.. you may say a bit over-valued or highly over-valued etc.

Many cities in India and China have Speculative Bubble - sooner or later, this Bubble will be burst, and the latest owner will be the biggest loser in this.

This happened in Japan in 1990s onwards, and it happened in the US recently... it will happen one day in India and China... it depends when the FDIs and FIIs pull their money out of the country... if they get a better deal elsewhere, they will leave India and China...

Be careful with your retirement savings... follow a Portfolio Investment Strategy...

Good luck.
 
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