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Archive for the ‘guide’ Category

Real estate buying decision

Posted by karthikjcecs on September 20, 2014

Recently I was running around to buy a property in Bengaluru. With lot of options around and price range, it was very difficult to make an informed decision.

These days, nobody will spend on real estate without capital gains in mind. When it comes to capital gains, it is important to make decisions based on the best investment option from a financial perspective. Due to the lack of knowledge on the finance, we tend to just guess or take risk. Majority of the crowd I know ( including me) has no clue on how to compare two or more investment options from perspective of profitability

To fill in this gap, I registered to a course on “Fundamentals of Finance” from Guatam Kaul in coursera, which helped me tremendously to analysis options I have from a financial perspective.

There are number of factors that matters to make a final decision to invest on real estate, Like –

  1. Ready to occupy/under construction
  2. Payment schedule
  3. Possession date
  4. Reputation on builder to stick on to schedule
  5. Interest rate
  6. Rent anticipated ( In case of investment )
  7. Tax saving etc.,

etc.,

How do we factor in all of these parameters and make an informed decisions among the numerous options around?

Certain decision has to be made before coming to the financial comparison. Like – City, Area to invest, Builder segment, Budget, Size

Once these are done, look for options around and collect the information given above. There is a financial model called NPV ( Net present Value ) using which you can actually find out the financially better option

Here is the excel for the calculation and with few of the options I had considered ( Data in it is an year old )

https://drive.google.com/file/d/0B4N200WmhdivLWRjWTJvdzJZQnM/edit?usp=sharing ( Download and use, just viewing in the pop up does not clearly shows information )

Feel free to download and use it to your benefit as you wish. If you find out any flaws in the excel, please leave a comment.

About the excel:

It has 5 properties compared with different features –

  • Mantri under costruction pay out pre-emi ( Builder will payout interest part till the completion of the project ) which is accounted in the calculation
  • Mantri ready to occupy  which will start earning rent from day 1
  • Other under construction with varied hand off time

The last column ( NPV ) provides you the information of  “What is the current value of the investment, if the property is sold after n number of years”. For example, if NPV in 5th row is 10 Lakhs – It mean, after 5 years if you sell, you will become as much financially capable if you were have 10 Lakhs today.

In order to achieve the provided NPV, you should sell your property at a price of “Capital Value” + “Capital on Interiors” on that year. That looks like a big number but considering inflation/real estate capital growth, it is quite achievable. This number looks big number, but the current value of the investment is much lesser considering inflation and the interest you have paid.

While making the decision, look for the highest NPV over the horizon of investment with in your budget

Analysing the data:

Surprisingly, some of the properties are not having a positive NPV for years together. These should not be purchased if the purpose is investment. For example, Sobha city is having negative NPV. The payment structure is not considered here, that can mostly be ignored as you would pay 90% pretty quickly.

Some other option has a positive NPV right from the first year.

About my decision:

I decided for Mantri ( 1305 ) based on the positive NPV right from year 1. Other option could have been Mantri (1740) but the capital is high for me to afford. The Pre-emi payout in the whole investment calculation is making a big difference.

Closing note:

Your feedbacks are very much welcome, please leave comments on your thoughts and if you find anything wrong the calculations. If you are in need of any special kind of requirement while comparing the options, please leave a comment, so that I can help you to customise the calculations to meet your requirement.

Disclaimer:

I am not marketing for any builder here. This is just my personal thinking around real estate investment decision. I also not responsible for any damage caused using the information provided.

Posted in Finance, guide, purchase, Real estate | 2 Comments »

Java Interfaces versus Abstract Class

Posted by karthikjcecs on January 14, 2009

I had not understood clearly why exactly interfaces are required while I was in college. Put it in different way, I had not seen real applications of interfaces. Now I know the applications of interfaces and I want to help newbies of  java  to better understand.

The first thing that comes to mind when you hear about interfaces is that why cannot it be done as an “abstract class”(As by definition interfaces are set of abstract methods).  Usually new comers to java will be having background of C++ and would have better understood about abstract classes. Let me explain you where and how the interfaces fits in by considering a real world scenario.

Consider you are designing a “Car” object. So what is the hirerchacy of “Car” object? Okay, at top level is “Vehicle”, then it is a “Four Wheeler” as shown below

Vehicle

|

Four Wheeler

|

Car

Note: Do not get confused about what methods will be there in these Classes or what field will be present or how these objects are used. Keep in mind while designing objects the real world entities should be mapped to objects.

Now, a company manufactures a car, say Benz. So Benz car inherts from the “Car” Class,

Car

|

Benz Car

Suppose Benz car gives a feature of “Auto Drive”. Think a bit how can you model this feature using just inheritance ? Our aim is to show Benz Car has got “Auto Drive” feature to external world. One way to do it is make Benz Car to inhert from both “Car” Class and “Auto Drive” Class (Considering we create a class for “Auto Drive”) . This we cannot do as Java does not support multiple inheritance.  Suppose multipule inheritance is supported in Java, would you desing in this way? Think about it, is it good idea to have “Auto Drive” as a class? A class should be mapped to real world entity, “Auto Drive” cannot be an entity but its a feature that any “Car” can provide. Interfaces are applied to model the statement in italics. Define “Auto Drive” as an interface but not as a Class, whoever wishes to provide “Auto Drive” feature would implement this interface i.e., tommorrow “Ford Car” offers “Auto Drive” will implement this interface. Interfaces helps us in having strict hierarchy which in turn leads to better modelling. Now go ahead and read definitions of interfaces and start using it. There are still more applications of interfaces like defining specifications, I do not go in deep and confuse at the first shot.

I hope this entry is easily understandable, if not, post comments. I am happy to clarify but not happy if you leave the page without understanding

Posted in guide, Object-Oriented programming, Technical | 3 Comments »