Hyderabad Real Estate : Corruption, Investments and My Strategy

Housing / Real Estate are the most expensive in Hyderabad. With 1 sq. yard .. equivalent of 9 sq. ft going for an average of 20,000 in most live-able areas and upto 50,000 in the posh areas, it has become a challenge to find a suitable living space in Hyderabad. Commercial / Main road / prime plots if not kabza'd or taken over by crooks/politicians will fetch you 100,000 per sq yd on main roads of Jubilee and Banjara hills.

Corruption is very rampant in real estate transactions in the best areas of the city. There are some plots being sold with multiple registrations and some being put under litigation by the original owners / pattadar's of the nawab time. Now a days, it has become compulsory to have every member of the seller/original owners family sign on the sale deed to avoid any issues in the future. Settlement mafia's are rampant, they some how get the common people with good land into trouble and settle for 10-20% of the value etc..

On real estate investments in apts and houses, its important to realize that the days of 100-300% returns are gone if you invest today, and even the 50-100% returns are very rare. The large returns are available to the folks who are plugged in to the political/industrial families and can acquire land before projects are announced or for companies like infosys [ who is evolving to be the biggest land grabber in India today ].

Coming back to the housing thing, the house I currently rent would cost me around 3 to 4 crores to buy ( 30 to 40 Million rupees).. and the possibility of this area moving up 100% in 1 year is very unlikely.. [ who knows.. I have been wrong many times..;-) ]

My thought wrt buying in my favourite area is different.. Correct me if I am wrong.. I some how am not too big on house ownership after living through it in the US. Too much of dead capital .. Atleast we had home equity loans to draw upon in the US. Now, I pay 30,000 pm / ~Rs 10/sqft all inclusive.. [ No extra charge for maintenance, repairs, servant quarter, solar heater, 24 hr muncipal water .. and just have to let my landlord know to get things fixed when they are broken etc. ]. Yes, 30K are running out of your account pm, but I would hear a giant sucking sound if I had to pay the bank @ 11% on a loan of 24 Mil Rs...

Here is my understanding about deductability of interest in India.. The max deduction you can have on housing interest is 1.5Lac/annum so going to a max of 15 Lac loan@10% will get you the best benefit for the early years. A nice article here. . .... So, what good does it do paying 4 Lacs of interest on a 40 Lac Loan ?. I certainly agree that appreciation is there, but do you think its worth buying an apt in the current market at Rs.5000/sqft ?

Some of you asked me what I am doing with the money if I have not bought a house.. I still have a sizeable amount left in the USD, dont want to touch it unless I am sure I can consistently beat the ~15% I am able to generate Year over Year. Of the money I have in hand, some risk capital has gone into speculative land deals [ Jai Telangana ;-) ], invested in some mid level housing where the values are more affordable and can fetch some good rental income and thirdly sticking to the true and tried 15% compounding with some of the investments. With the small amount left, I am trying to leverage it as a down payment to leverage a govt subsidized investment in a family business/ industrial unit.

Hope this strategy will pay off in the long run and I am not too worried about the future since Uncle Sam and Social Security are supposed to take care of me and my family ;-).. Yeah Right !!!

All feedback regarding this article is welcome...