Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Lifts in buildings come under state govt scanner

    A informative news from IE:-

    Builder Atul Goel criticised the government’s plan to hold builders responsible for lift mishaps. “Builders outsource lift job. The equipment, the installation and the maintenance are looked after by manufacturers and they should be held responsible.”

    >> This means that builder will use crap equipment & then blame on the contractor. So, use crap material, increase profits & then if anything goes wrong, blame it on someone else.

    Read the news here:-

    http://www.expressindia.com/latest-news/lifts-in-buildings-come-under-state-govt-scanner/608690/
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  • Civic body parking norms draw flak from builders

    See, the builders are taking big sums for parking area, yet they say that parking space should not be increased in residential projects. Maybe this is because they will loose their money on open car park (free for them), & they will have to invest more in covered parking as well.

    http://www.expressindia.com/latest-news/civic-body-parking-norms-draw-flak-from-builders/608686/
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  • Originally Posted by realacres
    A informative news from IE:-

    Builder Atul Goel criticised the government’s plan to hold builders responsible for lift mishaps. “Builders outsource lift job. The equipment, the installation and the maintenance are looked after by manufacturers and they should be held responsible.”

    >> This means that builder will use crap equipment & then blame on the contractor. So, use crap material, increase profits & then if anything goes wrong, blame it on someone else.


    How convenient is builders life in our country!
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  • Originally Posted by RAJESHP
    How convenient is builders life in our country!


    Life of rich, powerful and political people have always been convenient in India....
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  • Originally Posted by realacres
    First, many areas in Mumbai came up after drop in prices as high as 55%. In pune that dip hasn't yet happened & the rise which took place was artificial one. This can be seen even by the posts put up by members here who say that builders are ready to negotiate, change in their stand just about 2 months ago.

    Next, I don't think anyone will sell house used for self use & buy in Pune RE just because it is cheap. It is like saying Puneties will sell their houses & shift to Nashik. Personally, I would not have shifted from Mumbai to Pune if I had been a resident of Mumbai (already seen Mumbai people getting bored in Pune after about a month stay). Man, despite all the drawbacks, Mumbai has life & in no way can it beat any other city in India. You get all the things, good or bad, legal or illegal in Mumbai on your fingertips at good rates:).



    You mean to say that mumbaikars have no reasons to be poor punekars. And the reasons you have cited are from your personal wishes and likings. It would be better if you could give more sound objective numbers. e.g in my office group out of 16 persons who are renting 4 of the owners are from Mumbai, 1 from bangalore and 2 from US. Even my sampling based investigations should give a more scientific support to 'Mumbaikars are keenly interested in Pune properties' than your just pooh poohing the idea based on your lifestyle based arguments. I personally feel Pune has higher RE prices than Bangalore/Noida/Hyderabad due to land holding patterns (this causes extra 500psf to overall price) and propensity of mumbaikars to invest in pune (this leads to atleast 250psf to overall pricing).
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  • Originally Posted by mindguru
    You mean to say that mumbaikars have no reasons to be poor punekars. And the reasons you have cited are from your personal wishes and likings. It would be better if you could give more sound objective numbers. e.g in my office group out of 16 persons who are renting 4 of the owners are from Mumbai, 1 from bangalore and 2 from US. Even my sampling based investigations should give a more scientific support to 'Mumbaikars are keenly interested in Pune properties' than your just pooh poohing the idea based on your lifestyle based arguments. I personally feel Pune has higher RE prices than Bangalore/Noida/Hyderabad due to land holding patterns (this causes extra 500psf to overall price) and propensity of mumbaikars to invest in pune (this leads to atleast 250psf to overall pricing).

    Anyone can become poor Punekars by buying RE here at illogical prices, & everyone is free to do so. The eg. which you gave was of your office & this may not be true as it is due to COMPULSION rather than volunteer. How many Mumbaities voluntarily want to settle in Pune giving away their plush homes in Mumbai? This is the question. People for work go & work in poor African countries as well but this doesn't mean that Indians like Africa more!!

    Next, those Mumbaikars who invested Pune were INVESTORS who planned to sell out once they get good profits (According to their benchmark). I have not seen a single Mumbaite who has invested in Pune & himself stays in Pune as well. The only Mumbaities I know who stay in Pune are retired people/pensioners. Those who came from Mumbai & settled down in Pune (those whom I know) came here for job (IT) & even today, they spend weekends in Mumbai.


    As far as reasons for high Pune RE vis a vis it's counterparts is concerned, I accept what you said. But the most important aspect is Pune isn't a STATE CAPITAL like B'lore, H'bad, Chennai, Kol'ta, yet commands high price, nor is it a Satellite city of Mumbai. The real probs are:-

      DP plan still not santioned even after decades &
      PBAP & heavy politicisation of RE,
      Absence of planning bodies like DDA, BDA etc. If PMRDA is formed, many probs would automatically vanish.
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  • Originally Posted by realacres


      Absence of planning bodies like DDA, BDA etc. If PMRDA is formed, many probs would automatically vanish.





      surat urban development authority
      lucknow development authority
      ujjain development authority
      agra development authority
      bhubaneswar development authority
      Bhopal development authority
      cuttack development authority
      ghaziabad development authority
      greater noida development authority
      haridwar development authority
      indore development authority
      jodhpur development authority
      mohali development authority
      mysore development authority
      naya raipur development authority


      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)

      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)

      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)

      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)

      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)

      and the list goes on .....

      So Pune standing is so poor .....
      or Governance is so old ...... :)
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  • http://www.indianexpress.com/news/hyderabad-riots-fuelled-by-realtors-factfinding-tea

    I know its deviation from the topic..but found this piece of information is eye opener...see at what disgusting level these builders are palying with mango man...

    And again as usual...its from IE (they call it India Explaind!!!)...Not from some TOIlet paper.

    http://www.indianexpress.com/news/hyderabad-riots-fuelled-by-realtors-factfinding-team/609537/

    A fact-finding team comprising members of five city-based organisations has concluded that the March riots in Hyderabad began as a tiff between two communities but were turned into a full-scale riot by the real estate mafia to grab prime real estate. Attacks on religious places, houses and shops were pre-planned in order to scare residents away so their properties could be taken over, the committee said.


    The team found that religious places were attacked and demolished by the real estate mafia between March 23 and 27.


    “What started off as a tiff between the two communities over celebration of festivals was turned into a full-scale riot by real estate mafia. For the first time in the history of Hyderabad a number of religious places have been attacked and demolished and the real estate mafia is behind this. There is evidence that the mobs who carried out these attacks did not belong to Hyderabad, their language and appearance was also different. Even the stones that were used to pelt at religious places and houses were brought from outside,” Lateef Mohammed Khan, Secretary of Civil Liberties Monitoring Committee (CLMC), says.
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  • Originally Posted by mindguru
    I personally feel Pune has higher RE prices than Bangalore/Noida/Hyderabad due to land holding patterns (this causes extra 500psf to overall price) and propensity of mumbaikars to invest in pune (this leads to atleast 250psf to overall pricing).


    Right. But there is one more major point: "Lack of transparency & competition amongst builder/developers".
    What explains: "In spite of large inventories, Pune builders are still holding on to price?"

    A friend of mine(from Mumbai) told me that 2 yrs back he had booked flat in OxygenValley,Manjri(Hadapsar) at 2500 psf with club-house charges of 50K. A month back he came to know that builder was selling below 2000 psf, club-house free.
    Since builder is not ready to give same deal, he is canceling the agreement as taking possession means making loss.

    Moral of the story is: "What goes up too-quickly without any rationale must come down".
    The fact is that these days even owners do not get higher rents and flats are lying vacant for months
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  • Oxygen valley is at 2000 sq ft? Can anyoone confirm the latest rate?

    EDIT: Oh, Manjiri, I thought Wagholi!
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  • Originally Posted by ani_meher
    Oxygen valley is at 2000 sq ft? Can anyoone confirm the latest rate?

    EDIT: Oh, Manjiri, I thought Wagholi!


    THree months back I visited Oxygen Valley Manjari and after 3-4 meetings and stretching a lot, builder offered for 2200 psf.

    However I didn't purchased it. The scheme is a mess. There is no open space left arounf in the scheme. Club house walls are touching society buildings. The temple in one corner as per plan is actually raised on first floor to make way for parking. Children's play area is not more than 40 X 40 ft. Staircases do not have ventilation and lights even in daytime.
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  • Realtors scurry for loans and they're having to pay for it

    With liquidity tight, firms resort to high-cost borrowing, accept tough conditions to raise funds.

    •Two Mumbai-based property developers, one listed, and the other unlisted, borrowed at nearly 30 per cent a month from banks and financial institutions

    •Another Mumbai developer has taken a three-year loan from a private bank, pledging its entire building, with the condition that it would sell the asset to the bank at half the market price if it fails to pay

    •A listed real estate developer in the Malad area of Mumbai is selling apartments at half the price, with a catch that buyers have to pay up up to 90 per cent of the apartment price at one go. Normally, home buyers pay 20 per cent of an apartment price as booking amount and the rest in instalments

    •Developers are signing steep cash 'waterfall' options with private equity funds, wherein the latter gets the first right on cash flows from a project

    http://www.business-standard.com/india/news/realtors-scurry-for-loanstheyre-having-to-pay-for-it/392084/

    >> All this indicates in how deep mess the builders are in reality.
    CommentQuote
  • Originally Posted by realacres
    With liquidity tight, firms resort to high-cost borrowing, accept tough conditions to raise funds.

    •Two Mumbai-based property developers, one listed, and the other unlisted, borrowed at nearly 30 per cent a month from banks and financial institutions

    •Another Mumbai developer has taken a three-year loan from a private bank, pledging its entire building, with the condition that it would sell the asset to the bank at half the market price if it fails to pay

    •A listed real estate developer in the Malad area of Mumbai is selling apartments at half the price, with a catch that buyers have to pay up up to 90 per cent of the apartment price at one go. Normally, home buyers pay 20 per cent of an apartment price as booking amount and the rest in instalments

    •Developers are signing steep cash 'waterfall' options with private equity funds, wherein the latter gets the first right on cash flows from a project

    http://www.business-standard.com/india/news/realtors-scurry-for-loanstheyre-having-to-pay-for-it/392084/

    >> All this indicates in how deep mess the builders are in reality.



    It May sound bad - but this information kinda makes me feel good :D:D
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  • There is more bad news coming which would surely make all of us feel good.
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  • me too :).
    Not because of the nature of things going, but becuase our belief is vindicated.

    Originally Posted by Madhurg
    It May sound bad - but this information kinda makes me feel good :D:D
    CommentQuote