Canny Irish investors take a punt on India

[gonk]

Did anyone see the piece under this headline in today's Irish Times (26/04/2007)? The genius quoted below is hoping for a 620% return on his investment in seven years - and he's an accountant by profession. I hope it keeps fine for him! There are many adjectives I could think of to describe this, but "canny" isn't one of them . . .

******************

"There's nothing to buy for €25,000 in Ireland and not the same level of growth," says accountant Daire Turner, who has put a deposit on one of the Mumbai apartments. "I was at a wealth management conference last month where India and China were mentioned as places with growth potential. I know I'm taking a punt, but €25,000 would buy you a car in Ireland and that will depreciate. My €25,000 apartment could be worth €180,000 in 2015 - that's good growth in any language."

 

[auto320]

"There's nothing to buy for €25,000 in Ireland and not the same level of growth," says accountant Daire Turner, who has put a deposit on one of the Mumbai apartments. "I was at a wealth management conference last month where India and China were mentioned as places with growth potential. I know I'm taking a punt, but €25,000 would buy you a car in Ireland and that will depreciate. My €25,000 apartment could be worth €180,000 in 2015 - that's good growth in any language."

Glad this guy isn't my accountant! Obviously he hasn't checked the price of property in India, nor the earning power of the potental buyers.

 

[priscilla]

he probably means ; 25,000 euro as a 20% deposit on an apartment costing 120,000 euro.

 

[gonk]

he probably means ; 25,000 euro as a 20% deposit on an apartment costing 120,000 euro.

Doesn't seem so to me - he says "My €25,000 apartment could be worth €180,000 in 2015" - nothing at all about a deposit or what percentage of the purchase price such a deposit might be.

 

[Firefly]

Doesn't seem so to me - he says "My €25,000 apartment could be worth €180,000 in 2015" - nothing at all about a deposit or what percentage of the purchase price such a deposit might be.

I'll be an aweful long commute for him too

 

[Amarin]

If he had said the same 8 years ago about China ye probably would have laughed at him aswell.

Nothing wrong with a 25K punt on the Indian market with a 8 year timeframe. Can't see how many of ye may think this is crazy when i know dozens of people who have paid over 300K for a one bed flat in Dublin.

Keep things in perspective .

 

[TTV]

He should have a read of this article so...

Death knell sounding for India property boom?


[broken link removed]

 

[gonk]

If he had said the same 8 years ago about China ye probably would have laughed at him aswell.

Yes, I would. According to this site, which has an interest in promoting property investment, house prices in China rose 35% between 1997 and 2005.



Now of course, China's a huge country and within that average there's scope for prices in some areas to have risen much more. But, still, 620% over seven years in Mumbai? I won't say it couldn't happen, but I wouldn't hold my breath. Increases at that rate would make the Irish property price boom seem positively restrained.

Tell you what, if AAM is still going in seven years, I'll come back and post the actual percentage increase in the price of housing in Mumbai over the period. If it's 620% or anything near it I'll gladly eat my words . . .

 

[room305]

Nothing wrong with a 25K punt on the Indian market with a 8 year timeframe. Can't see how many of ye may think this is crazy when i know dozens of people who have paid over 300K for a one bed flat in Dublin.

That's exactly what this guy is doing, gambling. No research just a completely irrelevant comparison with Irish prices and an assumption it must be a good buy if it is cheap compared to Dublin.

Dublin isn't some international property price benchmark to which all cities must eventually converge and should have no relevance to a decision to invest in the Indian property market.

I often wonder if some of these developments are hyped to facilitate the smooth exit of earlier invested "smart money".

 

[Amarin]

That's exactly what this guy is doing, gambling. No research just a completely irrelevant comparison with Irish prices and an assumption it must be a good buy if it is cheap compared to Dublin.

Dublin isn't some international property price benchmark to which all cities must eventually converge and should have no relevance to a decision to invest in the Indian property market.

I often wonder if some of these developments are hyped to facilitate the smooth exit of earlier invested "smart money".

To be fair he was only comparing the growth for a capital sum of 25K, rather than property on property.

Is it a gamble. Higher risk investing is sometimes seen as gambling but its a calculated risk. I'd rather take a punt on a well researched development in Mumbai ( pay local prices, yields etc...) than moan at others doing such things whilst i swap my money between northern rock to nationwide chasing paltry interest rates to try to match inflation.

 

[gonk]

I'd rather take a punt on a well researched development in Mumbai

This is how the guy described his research: "I was at a wealth management conference last month where India and China were mentioned as places with growth potential." This month, he's buying in Mumbai. Can't say it sounds like very thorough research to me.

 

[Amarin]

This is how the guy described his research: "I was at a wealth management conference last month where India and China were mentioned as places with growth potential." This month, he's buying in Mumbai. Can't say it sounds like very thorough research to me.

There is not enough information in the article to assume that he has done no research. Besides it all depends on how high that 25K is a percentage of his portoflio.

As an investment vehicle, 25K sounds about right to spread your portfolio to the Indian market. He may be doing some diversification and I can , for one, see the sense in that.

However, If 25k is your total capital expenditure then sure it would be an unwise move.

 

[Staples]

Sounds to me as if it's exactly that - a punt. And one that he can easily afford.

If it woks out, he's quids in. If not, I suspect he won't even miss the 25K.

However, I'm sure there were many reading the article for whom 25K represents the once-off accumulation of a household's SSIAs. To encourage them to "take a punt" with the entire wad is a bit irresponsible.

 

[Amarin]

Sounds to me as if it's exactly that - a punt. And one that he can easily afford.

If it woks out, he's quids in. If not, I suspect he won't even miss the 25K.

However, I'm sure there were many reading the article for whom 25K represents the once-off accumulation of a household's SSIAs. To encourage them to "take a punt" with the entire wad is a bit irresponsible.

I have not read the article so I can't comment on what the piece was suggestioning (?) but it should not detract from the merits and demerits of investment in India. Surely that is what this 'property investment' forum is about rather than dismissing ideas that may appear 'out of the box'.

 

[gonk]

I have not read the article so I can't comment on what the piece was suggestioning

I guess it was the overall thrust of the piece and not just the comments by the punter (I use that word advisedly!) quoted which shocked me.

The piece described how properties were available with rental guarantees, something which has been pointed out ad nauseam here on AAM is only feasible if it's built into the original purchase price. It said a property company has sold 280 apartments in Mumbai and Goa off-plans to Irish investors, so these people cannot have seen what they're buying, even if they could take the trouble and expense of going to India to check.

Basically the tone of the article was uncritical and unbalanced hype -"everyone else is doing it so why don't you". Even the article headline was self-contradictory - this is taking a punt (i.e., gambling), not investment. If that's what people want to do, fine, but it would be a lot less hassle and no greater risk in my view to simply take the money and stick it on your selection in the 2:30 at Punchestown.

As for the quoted investor's (sorry - punter's) hope for a 620% increase in his property's value in eight years, I can only describe this as delusional. I am not, as you put it, dismissing in principle the idea of investing in Indian property. But the Reuters report linked to by TTV above would not give me confidence: "The only difference of opinion among some of India's leading property professionals at the conference in Mumbai was how far property prices would drop, probably at some point in the next year -- 10 percent or 40 percent?"

Whose opinion would you rate higher: the local Indian property professionals, or an Irish accountant who first gave consideration to buying in India last month?

 

[icecool]

Did anyone see the piece under this headline in today's Irish Times (26/04/2007)? The genius quoted below is hoping for a 620% return on his investment in seven years - and he's an accountant by profession. I hope it keeps fine for him! There are many adjectives I could think of to describe this, but "canny" isn't one of them . . .

******************

"There's nothing to buy for €25,000 in Ireland and not the same level of growth," says accountant Daire Turner, who has put a deposit on one of the Mumbai apartments. "I was at a wealth management conference last month where India and China were mentioned as places with growth potential. I know I'm taking a punt, but €25,000 would buy you a car in Ireland and that will depreciate. My €25,000 apartment could be worth €180,000 in 2015 - that's good growth in any language."

He sounds like he knows what he is doing.... lol!!

 

[Staples]

I have not read the article so I can't comment on what the piece was suggestioning (?) but it should not detract from the merits and demerits of investment in India. Surely that is what this 'property investment' forum is about rather than dismissing ideas that may appear 'out of the box'.

In fairness, that's what the property supplements should be about - reasoned analysis about the merits and demerits of the various investment proposals that come to its attention. Regretably, most "features" contained in such supplements are nothing more than lazy rehashes of an advertiser's gloss.

The danger is that some newspaper readers can't see through this charade.

 

[Zulu]

Indian Property Market:
For an individual with a reasonable portfolio it may make sense to invest about 10%-30% in a higher risk market as India. It may not be suitable for a first time investor or anyone getting closer to retirement to invest in such a high risk location. The Indian property market has been performing very well, especially in certain locations due to the IT industry expansion etc. and property price increases in the 20% region is common. Having said this, I believe there are no mortgages available to foreign buyers so no hedge is available against local currency fluctuations,furthermore, if the property is rented out I do believe that investors may not repaptriate the rental gains.

 

[icecool]

Indian Property Market:
For an individual with a reasonable portfolio it may make sense to invest about 10%-30% in a higher risk market as India. It may not be suitable for a first time investor or anyone getting closer to retirement to invest in such a high risk location. The Indian property market has been performing very well, especially in certain locations due to the IT industry expansion etc. and property price increases in the 20% region is common. Having said this, I believe there are no mortgages available to foreign buyers so no hedge is available against local currency fluctuations,furthermore, if the property is rented out I do believe that investors may not repaptriate the rental gains.

I wouldn't disagree with that. A first time overseas investor would be niave to get involved in india at this stage. Yes it is risky, but thats not why, primariliy is because there is no local mortgage finance thus meaning their investment cannot be geared

 

[Zulu]

I wouldn't disagree with that. A first time overseas investor would be niave to get involved in india at this stage. Yes it is risky, but thats not why, primariliy is because there is no local mortgage finance thus meaning their investment cannot be geared

You are correct- gearing is what makes property investment stand out above other investment products. It is certainly not recommended for a first time buyer to invest in India.

(however, this depends on their current portfolio and there are exceptions to the rule).

What I mean by an portfolio client- it is someone that has a reasonable self-sustaining portfolio that may be spread over different currencies and consists of a commercial and residential mix- not a first time buyer- it certainly would make sense to invest in a high growth market.