Sunday, December 12, 2010

Of bricks, mortar and land

"You need to buy a flat soon. Before the prices go up!" One of my colleagues was advising another over lunch. There was another colleague sharing the table, who recently moved back from the United States and lost a boatload of money in the real estate bust there. He was quiet for a few seconds and then advised exactly the opposite, "Don't buy, even if your life depends on it!". He was usually quiet over lunch. While we would talk about politics and sports, he would simply enjoy the Daal or the Sambar, as if this was the last year India was going to have  the monsoons. But today, with real estate as the discussion item, it seemed that we had touched a raw nerve somewhere. And a floodgate of information was suddenly opened.

"You should know that real estate in India is in a massive bubble. Don't you know that in a big city, your rent is a fourth of the EMI you would pay to buy the same place? That is simply ridiculous. Plus, all the black money generated from tax evasion and  bribery in India is invested in real estate and that is what has pushed the prices up. Wait till the crash comes, the bubble is about to burst."

It took me a few seconds to digest all the information. The Sambar was so hot that half of my brain cells were engaged in making sense of the fire in my tongue. "How do you know so much about this?", I asked.

"Well, as you know, I lost a lot of money in American real estate when the market crashed. One learns a lot from past mistakes. Plus, there is this blog called India's housing bubble. It is tracking the bubble for a while, and I have learned a lot from it."

I was intrigued. "So, what is your advice to mere mortals like me?"

" I have decided to wait for the bubble to burst. But, my advise to you is that don't buy a flat in a big city, even if you live and work there. Just keep renting. You are better off buying land in a smaller town in India. You will get a much better deal. "

"You mean some place like Jhumri-Talaiya?" 

 If you grow up in North India, it is your God given right to invoke Jhumri-Talaiya, every time someone talks about a random town. It is like the Desi version of Timbuktoo.

A few weeks later, this colleague of mine called me. "Well, since you suggested the name to me, I should give you first-dibs. You see, I found this ten acre piece of land in Jhumri-Talaiya at a fabulous price. I have entered into a partnership with a developer friend of mine and we are going to make flats. If you are interested, I will give you a very good deal".

"But, what about the real estate bubble you told me about? You said there is a blog post on it that people frequently visit."

"I don't think there is a bubble any more. Plus, that web site hasn't seen much traffic lately. Although I don't think you can double your money in a year any more, two years sound more like it. So, let me know. We can even arrange a loan for you through a major MNC bank."

I am headed to Jhumri-Talaiya next month. I understand that the last fifty kilometers have to be negotiated on a bullock cart, and there is no electricity or water at the site my colleague is developing. But, just wait till the wealthy NRIs hear about the project. We will all be rich.

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