Greed – A Gateway to Hell

Overview:

Since Christmas vacation is fast approaching, I thought of taking my kid for a short trip. Since time was a constraint, I thought of a nearby destination. Hunting for places online, I came across Lavasa, which is a small holiday destination near Pune. This reminded me that Anand, a friend of mine, who kept investment there for a weekend destination home. I thought of checking with him if he could help us with our stay. On enquiring, I got to know that he has sleepless nights after investing in Lavasa.

Anand’s financial planning went wrong and his investment in real estate is now nothing, but a junk. I did hear about Lavasa Debacle but little did I know that my own friends could fall a prey to such scams. What mistakes did Anand make?

Investing in an extravagant weekend home:

Around 4-5 years back, Lavasa was considered as heaven for Mumbai. Whenever they wanted a short break from their busy lives, Lavasa was their default destination.

This boom attracted investment and a couple of people raked up the idea of investing here for a weekend home. To be very frank, even I was carried away by the sway, and the lure of a weekend getaway home in between the mountains forced me to have a look at the place. This was about 4 years back that I first visited Lavasa, and by that time a few of my friends had already invested there.

The very site of beautiful houses trunked between the mountains could trap anyone to invest here. Lavasa was certainly breathtaking!! A flat there, about 4-5 years back coasted approximately Rs 25 lakhs. However, I was sure that I had no money for such luxury. “All that happens, happens, for good,” this is because the central government claims that the promoters have violated the Environment (Protection) Act.

I had read about all this in the newspaper, but listening to Anand, I could relate to all those people who have invested here. He said that there were no construction activities going on in Lavasa currently and now it’s nothing but a ghost’s town.

Facts:

Doomed by investing in Lavasa: This is just one of the story of people who bought a house in Lavasa with hard earned money.

“I am writing to you to express my sadness and all the hopes I was having on this investment (more than 80 lakhs) is beginning to fade which is leading to depression.

We were promised 5 years ago about the “Learn, Work, Play” theme with the promising self-sustainable economy in Lavasa where an opportunity for everyone. After waiting for more than 4 years without any returns, the property is now ready, but there is no hope yet to generate revenue as the city hasn’t been functional yet and no permanent residents to create self-sustainable economy (i.e there is no demand for rental). With no rental option, I will not only do not get any returns on the property but also bleed 10,000 Rs. every month on maintenance charges. You may aware that I am a middle-class family person, took loans from banks for the payment of the property. Adding additional burden will make me bankrupt.

Is it wise to invest in such luxury?

In India, if you own one apartment, it holds a good amount of place in your portfolio – in the financial term, this is called allocation. Your portfolio will suddenly be dazed by the property. Investing in a weekend home will slope it more!

A number of middle-class investors who draw a good salary often land in such traps. Having invested in one home, a middle-class person must think twice before investing in the second one especially if it’s a weekend home. Understand that putting all your eggs in one single basket can land you into problems. Even a big investor would think twice before investing in a second home. This is because the basics of financial planning remain same for all, irrespective of your bank balance.

Consider the following points:

  • Maintaining a weekend home will cost you a good amount of money. Instead, one can spend the same amount on vacations each year.
  • Ask yourself whether you will practically be able to spend each weekend at your luxury apartment.
  • Weekend homes are away from city limits which practically makes commuting difficult.

The takeaway is pretty simple – Overlook weekend homes and take your eagle eyes at your asset allocation before you even think of buying a second home. A middle-class man should rather think of investing in some other option rather on a luxury like weekend home.

Updated: December 22, 2016 — 1:07 pm

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