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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Dalal Street or Samudra Mahal?

Posted by Muthu on January 26, 2015

Happy Republic Day.

Samudra Mahal in Mumbai is one of the most expensive properties in the country.

The Economic Times report that

“In one of the most expensive apartment transactions in India, Nandan Nilekani, Infosys co-founder, has paid about Rs.1.29 lakh per square feet, or Rs.22.5 crore, for a sea facing apartment in the marquee Samudra Mahal building at Worli in South Mumbai.

The deal for the 1,750 square feet three-bedroom property is the second most expensive transaction ever on a per-sq-ft basis for a residential apartment in the country. “

The cost of one square foot in Samudra Mahal was Rs.700 in 1970. At Rs.1,29,000 now, the value has multiplied by 184 times in 45 years. This works out to an annualised return of 12.29%.

In Dalal Street, Mumbai a sq.feet was Rs.100 in 1980. After 35 years, it sells at Rs.29,000 per sq.ft. Money multiplied by 290 times in 35 years. This works out to an annualized return of 17.58%.

Samudra Mahal can be bought and owned only by cream or elite of the society who are worth at least tens of crores, mostly hundreds of crores.

The 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 property in Dalal Street is a metaphor for Sensex. A sq.feet is one unit. If dividend yield is also included (assuming 2%+ CAGR), Sensex would have delivered around 20% annualized returns over last 35 years, significantly higher than the most expensive prime property in the country.

Good mutual funds and many stocks have delivered returns far superior to Sensex itself.

Power of equity is least understood in this country.

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 the real estate.

Give at least the same importance to equity as you give to real estate.

You don’t mind holding real estate for 20 or 30 years. Please do the same for equity ignoring bull and bear markets, notional profits and losses.

Many of you have been investing for last couple of years. Stay the course for at least another 15 to 20 years completely ignoring market fluctuations. You would be amazed at the fortune created for your retirement or to pass on to your children.

All the best.

8 Responses to “Dalal Street or Samudra Mahal?”

  1. amit singh said

    Keep inspiring…

  2. without any expectations,U r doing a very good job……..God bless u always…….Whenever market went down,I read ur articles on 2011s to rise my confident level……….Now Im confident………Please keep it up………..Plz continue ur articles frm different point of view like this article………..

  3. kk said

    very well described.. nice comparison.

  4. Do not forget the source of Mr. Nilekani’s income . Last quarter, he sold a FEW of his Infosys Shares!

  5. ratnakumar72 said

    very inspiring articles…HATS OF TO YOU…

  6. Kumar said

    Think in 70’s we can buy 1sqft of LAND for 700, now Nilekani bought 1sqft of a floor in APARTMENT now!!!!. Correct me if I am wrong

  7. R. Ramachandran said

    Sorry….but of disagreement. Real estate is bound to increase over a decade irrespective of common man’s expertise. Many equities have drown down to nuts due to the whatsoever reasons behind it. Common man will agree with this.

  8. Dear Muthu, you are one great source of inspiration for me , thank you for being such a great support through your blogs and tweets

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