23rd December 2017
I got talking with an Indian from Hyderabad who currently lives in Texas, and has an executive job for a big energy company; a Sri Lankan who lives in Canada; and a NRI from London; whilst abroad.
The topic inevitably turns to property at some point in the conversation, as it’s in the blood and psyche of the Indian. As the saying goes, you can take the Indian out of India but you cannot take the Indian out of him. They all had a passion for investing in property.
The Hyderabadi was particularly astute. He purchased property for 15 years in Hyderabad, when they were only Rs 25 Lakhs each. His goal was to buy one a year, which he did for 15 years. Now each property is worth Rs 3 Crores. This means he has a substantial amount of assets in India, well into the millions and a solid base. Now if he wants to sell up and purchase in the US, where he resides, it’s an easy move for him.
His strategy was simple, he never bought a property for more than Rs 50 Lakhs and he only purchased when the market was down. Bread and butter property, as they say. Stuff that cannot really go any lower. His thinking was simple, he saw that property in India and China would rise to match with the western world, as the world was coming to a level playing field. This is certainly true; One only has to book a hotel in Mumbai or Delhi to see the prices, and they will not bargain either. Prices are on par with London, if not higher.
He said the fool will buy a property for Rs 1 Crore and the wise man will rent from him at Rs 25,000 pm. The logic being, there is a limit to the growth of the Rs 1 Crore property, and the yield of only 3%. Whereas, if you purchase low the potential for growth is far higher.
At the time, the property price entry level was low relative to income, now there is a wide margin of difference in the multiples.
Clearly, he has done very well implementing these simple principles to his investment.
The NRI from London has done well too. She bought a property in Delhi for Rs 50 Lakhs, the property has grown to Rs 1 Crore in a few years. She was disappointed with the rental returns which were low, to be expected in India. However, with solid growth you can afford to be a little relaxed about the rental income side of investment.
The Sri Lankan chose to invest in his new home, which is Canada, where he runs a business and invests in a moderate way along with some money lending on the side.
When I said that’s all great, but you should always grow your flowers where you can water them, it resonated with all of them. The Sri Lankan nodded his head furiously, saying that many people came to him to invest overseas, but he figured if everyone is coming to Canada to invest why should he go elsewhere?
The NRI from London agreed, and felt there is a lack of control, and it’s easy to put money in but hard to get it out again. The Hyderabadi, well his watering pipe reaches all the way from Texas to Hyderabad, as he has family and connections over there which means he can get things done over the phone and laptop.