Bollywood actor Rajesh Khanna fondly called as Ka Ka, bought a bungalow in iconic Carter Road in Mumbai for just Rs.3.5 lakhs in 1970’s. His heirs sold it recently for whooping Rs.85 crores. The property has multiplied by 2428 times or say has given an annualized return of 19.38% over 44 years.
Samudhra Mahal in Mumbai is another expensive property. A flat purchased in 1970 at Rs.700 per sq.ft was sold at sky high price of Rs.1,18,000 per sq.ft in 2013. Money multiplied by 168 times in 43 years. This again works out to an annualized return of 12.66%.
In 1963, Godrej’s paid Rs.1 lakh to buy their first house, a 2916 sq.feet apartment at Usha Kiran, Carmicheal road, in tony South Mumbai. In 2011 he sold it for a sum of Rs.25 crore. Money multiplied by 2500 times over 48 years or an annualized return of 17.70%.
In Dalal Street, Mumbai a sq.feet was Rs.100 in 1980. After 34 years, it sells at Rs.27,000 per sq.ft. Money has multiplied by 270 times in 33 years. This works out to an annualized return of 17.90%.
The first three properties can only be bought and owned by cream or elite of the society who are in worth at least tens of crores, mostly hundreds of crores.
The last property in Dalal street; your father could have bought with whatever money available at his disposal. You can buy it even now. Your son or daughter would be able to buy it even 20 years down the line.
The last property is called Sensex. A sq.feet is a metaphor for one unit. If dividend yielded is also included (assuming 2% CAGR), Sensex would have delivered 20% annualized returns over last 34 years, higher than the most expensive prime properties in the country.
Good mutual funds and many good stocks have delivered returns far superior to Sensex itself.
Power of stock market is least understood in this country (India).
If you can withstand notional loss (if you don’t book) in portfolio during bear markets, not worry about daily price movements, it is possible to make much better money than what can be made out of best of real estate.
So the lesson learnt here is to give at least the same importance to equity as you give it to the real estate.