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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  • Regulator far from Realty

    Another news from IR:-

    For 70-year old Delhi-based businessman Dharam Paul, investing in three residential flats for his three daughters in an upcoming project in Gurgaon marked the beginning of a long dispute with the developer. While the developer seemed to get his way each time, Paul says that the least the developer could avoid was the continuous delay in delivery of the keys.

    “With barely any notice period, the developer started asking for much higher monthly instalments than what was agreed three years ago when the sale agreement was signed. For the first three years, there was no construction activity, and then out of the blue I received the letter from the developer asking to shell out higher instalments,” says Paul.

    A few months later, Paul noticed that the developer has hiked the transfer charges – amount paid to the developer for transferring the title of the flat in someone else’s name -- by more than 100 per cent. “Even though I managed to deposit the said amount in time, the developer asked for some additional formalities which delayed the entire process. I had to shell out Rs 4 lakh as a result, instead of Rs 40,000 earlier,” says Paul. Later, he re-read the sales deed and found no mention of hiking of transfer charges. “I feel cheated and blackmailed,” he says.

    Read for more:-

    http://www.indianexpress.com/news/regulator-far-from-realty/617954/0
    CommentQuote
  • Originally Posted by realacres
    Another news from IR:-

    For 70-year old Delhi-based businessman Dharam Paul, investing in three residential flats for his three daughters in an upcoming project in Gurgaon marked the beginning of a long dispute with the developer. While the developer seemed to get his way each time, Paul says that the least the developer could avoid was the continuous delay in delivery of the keys.

    “With barely any notice period, the developer started asking for much higher monthly instalments than what was agreed three years ago when the sale agreement was signed. For the first three years, there was no construction activity, and then out of the blue I received the letter from the developer asking to shell out higher instalments,” says Paul.

    A few months later, Paul noticed that the developer has hiked the transfer charges – amount paid to the developer for transferring the title of the flat in someone else’s name -- by more than 100 per cent. “Even though I managed to deposit the said amount in time, the developer asked for some additional formalities which delayed the entire process. I had to shell out Rs 4 lakh as a result, instead of Rs 40,000 earlier,” says Paul. Later, he re-read the sales deed and found no mention of hiking of transfer charges. “I feel cheated and blackmailed,” he says.

    Read for more:-

    http://www.indianexpress.com/news/regulator-far-from-realty/617954/0



    http://www.indianexpress.com/news/after-express-report-cm-scraps-handover-of-prized-mumbai-flats/617695/

    It keeps doing a lot ....
    once ther paper is after someone ... :)

    Like Mining Issue of Reddy's .....

    Now after MH mininsters :o
    Why Govt is giving Flats to Ministers ... each may be having Several of them ....?
    CommentQuote
  • Real estate issues face uphill task

    At a time when confidence is yet to fully return to the market, experts feel this rate-sensitive sector will see only subdued response from investors. This could come as a blow to the companies, which plan to raise Rs 12,000 crore in the coming months.

    Many analysts view the sector with scepticism due to factors like land valuations, project delays and politics.

    “The sentiment has not improved for the sector,” said Amit Goenka, national director, capital transactions, Knight Frank. “Most of these companies are looking for anchor investors, but there is hardly any appetite. The valuations are high. Some of the companies planning to tap the markets are eyeing a multiple of 85-90 times, which is quite high. There is also a huge debt overhang. Clearly, there is no value left for investors.”
    Market experts say the current volatility in the secondary market has made most investors risk-averse and this impacts sectors that suffer from inherent risks.

    Read for more here:-

    http://www.business-standard.com/india/news/real-estate-issues-face-uphill-task/394544/
    CommentQuote
  • Hello Jitu,

    I would like to know how many sanctions are required before starting the project & which are the major ones. It would be helpful for us to know what builders go through before launching the project.
    CommentQuote
  • charge on real estate developers to give road connectivity to new properties

    heard this news that the government has decided to impose a charge on real estate developers to give road connectivity to new properties.

    "The Road Transport and Highways Ministry, which is responsible for building roads, has held a series of meeting with real estate developers and officials from other ministries and has decided to recover Rs 250 per square meter of road that is built to connect the property."


    http://in.biz.yahoo.com/100513/50/bavl8b.html
    CommentQuote
  • http://indiatoday.intoday.in/site/Story/96281/Business/One+lakh+sq+ft+office+space+vacant+in+Nariman+Point.html


    http://www.businessweek.com/news/2010-05-06/ubs-jpmorgan-quit-india-s-manhattan-as-buildings-rot-update2-.html

    Nariman Point is from 500 psf rental to .... 200 ...

    See how big companies cut cost .... they have left the iconic Nariman Point address to settle for less....

    Hope they not to leave Mumbai ..
    CommentQuote
  • Originally Posted by ziblu
    heard this news that the government has decided to impose a charge on real estate developers to give road connectivity to new properties.

    "The Road Transport and Highways Ministry, which is responsible for building roads, has held a series of meeting with real estate developers and officials from other ministries and has decided to recover Rs 250 per square meter of road that is built to connect the property."


    http://in.biz.yahoo.com/100513/50/bavl8b.html

    Personally, I welcome this move. This will have 2 benefits:-

      Builder will buy land at a place which is feasible for the road to be constructed in terms of cost, distance & land acquisition &
      The builders won't be able to say that it is now the responsibility of govt to build roads & not us. Hence, for buyers, it is good move as they can now verify whether the builder has paid such amount to the govt or not based on which the buyer can take the call to buy or not to buy.
      I think, that the govt should also impose tax/levy for water pipelines. This will make the govt earn money as well eliminate the tanker mafia as well. The buyer has to pay either for pipeline or tanker, but in long run, it is better to pay for water pipeline rather than tanker.

      Originally Posted by frugality
      http://indiatoday.intoday.in/site/Story/96281/Business/One+lakh+sq+ft+office+space+vacant+in+Nariman+Point.html


      http://www.businessweek.com/news/2010-05-06/ubs-jpmorgan-quit-india-s-manhattan-as-buildings-rot-update2-.html

      Nariman Point is from 500 psf rental to .... 200 ...

      See how big companies cut cost .... they have left the iconic Nariman Point address to settle for less....

      Hope they not to leave Mumbai ..

      Yep, man. Reliance was the first one to shift out from South Mumbai to Nerul. The fact is companies think from head about money, but many buyers think from heart. Atleast they should know that commercial markets shows the economic fundamentals & not the residential ones.

      Even in Pune, large commercial spaces are lying vacant at prime locations/CBDs. When buyers start thinking like companies, see how builders are brought to knees.
      Yep, man. Reliance was the first one to shift out from South Mumbai to Nerul. The fact is companies think from head about money, but many buyers think from heart. Atleast they should know that commercial markets shows the economic fundamentals & not the residential ones.

      Even in Pune, large commercial spaces are lying vacant at prime locations/CBDs. When buyers start thinking like companies, see how builders are brought to knees.
      Yep, man. Reliance was the first one to shift out from South Mumbai to Nerul. The fact is companies think from head about money, but many buyers think from heart. Atleast they should know that commercial markets shows the economic fundamentals & not the residential ones.

      Even in Pune, large commercial spaces are lying vacant at prime locations/CBDs. When buyers start thinking like companies, see how builders are brought to knees.
      Yep, man. Reliance was the first one to shift out from South Mumbai to Nerul. The fact is companies think from head about money, but many buyers think from heart. Atleast they should know that commercial markets shows the economic fundamentals & not the residential ones.

      Even in Pune, large commercial spaces are lying vacant at prime locations/CBDs. When buyers start thinking like companies, see how builders are brought to knees.
      Yep, man. Reliance was the first one to shift out from South Mumbai to Nerul. The fact is companies think from head about money, but many buyers think from heart. Atleast they should know that commercial markets shows the economic fundamentals & not the residential ones.

      Even in Pune, large commercial spaces are lying vacant at prime locations/CBDs. When buyers start thinking like companies, see how builders are brought to knees.
    CommentQuote
  • Just some economic facts


      China has raised suspicion about Greece & overall EU economic revival,
      SBI profit has dipped 32%,
      DLF profit fell by 61%,
      Spain & Portugal may soon declare bankruptcy,
      US may again be hit as many cos have billions invested in these EU countries,
      India's inflation remains high & bankers have said that RBI will increase the interest rates soon,
      The tax code 2011 has been modified & what the people earning above 10L were thinking will be hit as they will now be taxed 30%. So, less savings, no further rise in purchase power due to this move by the fin min.
    CommentQuote
  • Originally Posted by realacres
    Hello Jitu,

    I would like to know how many sanctions are required before starting the project & which are the major ones. It would be helpful for us to know what builders go through before launching the project.

    Dear realacres,
    As per my understanding if title is clear and NA charges has been paid then builder needs to submit layout of the project which shows current & proposed buildings showing the amenity space. Once layout is sanctioned he proceeds for building permission which is received as Commencement Certificate. Once CC is obtained the builder can start the work and complete till 1st slab whereby he needs to carry out plinth checking for verifying duct sizes, front margin etc. Once plinth checking is done the work progress and finally the builders applies for Occupany Certificate by sumitting all relevant NOCs.
    The above procedure gives a brief idea of the sanctioning process and may involve any relevant sanctions as per the case.
    CommentQuote
  • Originally Posted by Jitu_Sir
    Dear realacres,
    As per my understanding if title is clear and NA charges has been paid then builder needs to submit layout of the project which shows current & proposed buildings showing the amenity space. Once layout is sanctioned he proceeds for building permission which is received as Commencement Certificate. Once CC is obtained the builder can start the work and complete till 1st slab whereby he needs to carry out plinth checking for verifying duct sizes, front margin etc. Once plinth checking is done the work progress and finally the builders applies for Occupany Certificate by sumitting all relevant NOCs.
    The above procedure gives a brief idea of the sanctioning process and may involve any relevant sanctions as per the case.

    Thanks Jitu for this info:). So is this all, or you require permission from environment dept as well? What about road & water? Doesn't the PMC look into this aspect?
    CommentQuote
  • Over supply hits city hospitality industry

    Friends,

    The following one reads how many hotels are being canceled in Pune, including major ones like Leela, Oberoi, Marriot etc. All in all, 1500-2000 rooms have been canceled.

    According to confirmed reports available with the PHA and EAAP, some of the leading projects which have been called off include Leela's at Vishrantwadi, Oberoi on Nagar Road, Marriot on Airport Road , Lemon Tree near Pune Railway Station, Park Hotel at Wakdewadi and Coronot at Kalyani Nagar. Besides, several projects like Hilton at Vimannagar and those planned near Inox and Talegaon have either been indefinitely delayed or are being redesigned as residential properties.

    Read it here:-

    http://news.indiainfo.com/c-83-143717-1243842.html
    CommentQuote
  • Originally Posted by realacres
    Thanks Jitu for this info:). So is this all, or you require permission from environment dept as well? What about road & water? Doesn't the PMC look into this aspect?

    Dear realacres,
    I think there is no permissions required from environment dept though 1 NOC is required from garden department while getting completion. Space for roads is to be shown in layout while verified while building permission. As regards water permission then it is obtained only after completion.
    CommentQuote
  • Pune retail growth affected, projects delayed

    Nilanjana Ghosh Choudhury
    May 16, 2010,Sun
    Source:- 3dsyndication

    The boom in the economy post the economic slowdown is yet to show its effects on the retail sector with Pune registering over 6 million square ft of over supply in commercial space.

    As per an estimation done by leading real estate consultant Knight Frank, over the next few years, plans for construction of organised retail space will be delayed due to high vacancies in already constructed projects resulting in projects being delayed by over three years across the city. Projects which were scheduled to be operational in 2009-10, will now only commence by 2012-13.

    "Retail and IT space combined Pune currently has an over supply of over 10 million square feet with SEZ alone having nearly 2.5 million square ft of vacant space. Moreover, several projects have also been called off,'' said president of National Realtors Association Ravi Verma. According to the Knight Frank 'India Organised Retail Market diagnosis and outlook in the last one-and-a-half-year, out of the total retail space in 2008-09, the construction of 1.25 million sq ft has been called off and only 1.5 million sq ft has become operational. Some of the malls whose construction has got delayed during this period include Inorbit Mall, R Mall, Down Town and Esplanade. Also two of the main mall projects in south Pune, 44 Sinew Hills by Kumar Builders and Kakade City Mall by Kakade Group both at Karvenagar have been called off.

    The level of vacancy is the highest in central Pune (areas like Deccan, FC Road, JM Road, Senapati Bapat Road) with 37%, followed by north (Pimple Saudagar and Wakad) with 22% and east (Kalyaninagar, Hadapsar, Airport Road, Vimannagar, Ahmednagar Road and Koregaon Park) with 15% vacancy levels. South (Karvenagar, Kothrud ) and west (Baner and Aundh ) have 5 and 4% vacancy levels at present.

    "Though the demand for residential space has picked up in the last few months, the same did not happen with retail. Falling demand coupled with builders being ready to negotiate prices at any given time is resulting in this crisis. Moreover, the problem is now going to be augmented more with additional capacity being added over the next few years,'' added Verma.
    ----
    This is similar to what is being seen in other cities like Mumbai. Btw, commercial spaces tell the real story of financial condition rather than residential:bab (34):.
    CommentQuote
  • Read this today in a newsletter i receive...

    Chinese banks have had a brilliant run so far. The nation of aggressive savers has been pouring more than a third of its GDP into banks. This has made some of them the largest globally in terms of balance sheet size. The government's mandate to lend aggressively has also helped these banks grow at a scorching pace when their global peers, including some in India, were cutting down exposure to risky businesses. However, analysts in the dragon economy see red from here on. The banks' heavy exposure to real estate could wreck havoc to their asset quality. One that could transpire from home loans to personal loans, as seen in the US. About 30% correction in housing prices is all that will take the Chinese banks to acknowledge that so far they were supporting a bubble. We will not be surprised if China too follows the 'Too Big To Fail' mantra.
    CommentQuote
  • Originally Posted by punerebuyer
    Read this ................



    yet just for a thought when will the China mkt expected to declare its bankcrupcy......:bab (6): a duration in precise......
    CommentQuote