Caveat Emptor. I do not understand interest rates. To be more precise, do not understand interest rates at all.
Many people in the floating rate model of interest for housing may not know that they are already paying north of 14.5% p.a. interest on their loans. Ouch. It hurts.
For new buyers of big houses at big EMIs there is a real threat of a 5% REAL INTEREST RATE – a stunningly high figure to fund ANY ASSET PURCHASE, leave alone a NON EARNING asset like real estate.
So if you have a housing loan, get rid of it. At 14.5% p.a. the hurdle rate is too high for keeping your SIP on and your EMI payments on. If you have 2-3 year horizon, I daresay you may be better off paying off the loan. Having said that the Great Humiliator that the market is, it may stun all of us.
However, I think the following broad price ranges will work.
at Price Earning < 15 Buy or accumulate
at P E > 25 sell, sell and sell rapidly. 🙂
Sorry this is not some magic wand, that it will also make money for you….
However w.r.t interest rates I think in India the following table my work
0-8% p.a. : take a home loan and buy in an upcoming location
8-10%p.a. : take a loan depending on the amount needed
10-12%: pay the loan instalments
north of 12 or 13%: repay part of the loan instead of investing – even in pf.
caveat emptor….once again..
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