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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  • Soon Amanora flats will be available in 1/4 the the Price

    Originally Posted by puser
    Day dreaming leads you nowhere



    I second that :)


    I second that :)


    I second that :)


    I second that :)


    I second that :)
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  • Have you heard about conflict of interest ?
    Srinivasan, a member of BCCI and owner of chennai team was given a special permission by board. While LKM went 'benami' using relatives.

    Pawar, thru city corp, though didnt get pune team, He would have lots of other benami interest.(like sadanand's ownership in MGM)
    Legally, any stake by BCCI members in any team would create conflict of interest.


    Originally Posted by razer
    16% is a minority stake. And it's a legit stake in a company that decided to bid for IPL. How is that wrong in anyway? I really don't see anything wrong with it at all.
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  • Originally Posted by aditi sharma
    Have you heard about conflict of interest ?


    Sure I have. :)

    But I still think in this particular instance the reasoning isn't very solid, at least not enough to nail him.
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  • Contradictions

    Nice link Frugal:).



    Here are 2 contradictory statements:-

      When it was pointed out that despite the “board resolution”, the bid was in the name of City Corp, Sule said it was for Deshpande to explain. “After all, I am a minority stakeholder,” she added.
      Asked about the Pawar family connection with City Corp, Deshpande said he was not sure if they had any shares. “They are not involved. I am the managing director. There is no control,” he said.
      Now what do you make of this?

      Again, report said "If City Corp had won the bid it would have been executed by a "different consortium, comprising Akruti (a Mumbai construction firm), Maharashtra Cricket Association, etc," he said. So far, no state cricket association has bid for a team."

      >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.."

      >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.."

      >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.."

      >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.."

      >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.
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  • Originally Posted by realacres
    >> This means Pawar has stakes in Ackruti as well. M^2, beware, you are looking at Pawar's project at Katraj-Kodhwa:D:o.


    These ppl have so much black money that we cannot determine where they have spread their roots..

    And after all the earlier Pawar's project (Magarpatta) is not a bad deal at all ;)

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  • Originally Posted by m_square
    These ppl have so much black money that we cannot determine where they have spread their roots..

    Pawar must be shipped to Pakistan, he will make that country bankrupt within a day:D. Btw, Pawar should start coaching classes:-

    How to take kickbacks & make B-money without being noticed:D.
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  • Powar (alias Power) have stakes in almost 99% of projects in Maharashtra directly - indirectly if links are inquired with herculean efforts.

    Meanwhile it is curious to see deafening silence of almost all political parties against Powar.
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  • Originally Posted by puser
    Powar (alias Power) have stakes in almost 99% of projects in Maharashtra directly - indirectly if links are inquired with herculean efforts.

    Meanwhile it is curious to see deafening silence of almost all political parties against Powar.


    Well, Congress cannot help unless "we" keep vote out pawar from the elections. Also, I happen to read almost 2-3 articles in Loksatta - one about a Pimpri-Chinchwad land sold to some builder for 50 crores when its actual price was 150 crores by PMC.

    Also, the Midori towers issue is being published daily with updates...

    Definately, could not find these articles in Sakal.
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  • Originally Posted by pcpune
    Well, Congress cannot help unless "we" keep vote out pawar from the elections. Also, I happen to read almost 2-3 articles in Loksatta - one about a Pimpri-Chinchwad land sold to some builder for 50 crores when its actual price was 150 crores by PMC.

    Also, the Midori towers issue is being published daily with updates...

    Definately, could not find these articles in Sakal.


    What is circulation of Lok Satta among voters "who vote for nothing but character of a candidate and party"

    Meanwhile, Congress if given a chance would do all (secretly) to eliminate NCP from scene but it is also engaged in same things.

    In short, pot is telling kettle black - is case with political parties
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  • There is a basic difference between NCP & other parties:-

    Other parties say:- Thoda tu kha, thoda main khata.
    NCP says:- Tujhe laath marunga aur sab main khaunga.

    SS, MNS has big stakes in Mumbai RE, but the way in which they operate is far different than NCP. The mouth & stomach of NCP is infinitely big, this Pawar chap will even put an ad 'For Sale:- India'. Brokers Welcome:o.

    This is not the case with Cong, BJP, SS, MNS. The best thing would be BJP-Cong coming together & wiping out NCP. It is good for state, country & mostly even for themselves & I am damn sure that some back-door deal must have already started in this regard.

    * Cong would have kicked out Pawar after sugar & dal scandal, but they couldn't as they would have lost Mah. If Cong had full majority in Mah or they had been in opposition with BJP-SS combine in power, Pawar would have been kicked left & right at the centre or rather he would not have been even offered a berth either. The good part though:-

    Pawars' dream of becoming PM will remain a dream forever. Amen:).

    * Ajit Pawar is also the Mr.10%. If amount is say INR 20-25 Cr, you need to meet Ajit, if amount is in few hundred+ crores, then you need to meet Sharad Pawar:bab (34):. Based on the nature of work, the commissions are fixed. This may be in form of money or shareholding.
    Btw, I have also heard that Pawar has stakes in Praj Industries.
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  • Originally Posted by realacres

    * Ajit Pawar is also the Mr.10%. If amount is say INR 20-25 Cr, you need to meet Ajit, if amount is in few hundred+ crores, then you need to meet Sharad Pawar:bab (34):. Based on the nature of work, the commissions are fixed. This may be in form of money or shareholding.
    Btw, I have also heard that Pawar has stakes in Praj Industries.



    The Pawars (Powers) have stake in almost every big project/company in Maharashtra. Be it Bajaj Auto, Telco, Mahindra, Lavasa, Amanora, MPCity or any other project.
    NCP has a marathi slogan 'Jaau tithe khaau'. :bab (59):
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  • Originally Posted by realacres
    Ajit Pawar is also the Mr.10%. If amount is say INR 20-25 Cr, you need to meet Ajit, if amount is in few hundred+ crores, then you need to meet Sharad Pawar:bab (34):. Based on the nature of work, the commissions are fixed. This may be in form of money or shareholding.
    Btw, I have also heard that Pawar has stakes in Praj Industries.


    And where does Madam - TV/News spokes person fit in?:bab (59):
    BTW, I dont like Sula wines:D
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  • Originally Posted by realacres
    There is a basic difference between NCP & other parties:-

    Other parties say:- Thoda tu kha, thoda main khata.
    NCP says:- Tujhe laath marunga aur sab main khaunga.
    …..
    This is not the case with Cong, BJP, SS, MNS. The best thing would be BJP-Cong coming together & wiping out NCP. It is good for state, country & mostly even for themselves & I am damn sure that some back-door deal must have already started in this regard.

    I would differ on BJP. It pains to see how BJP state unit has turned into family business of Mr Munde. He has made sure even his dog also get MLA or MP post.

    I hate current rule of congi-ncp, but even SS-BJP did no good for state when they were in power in late 90’s. Best will be Congess in power and responsible opposition which makes noises on common man’s issue.

    In modern democracies politicians always prefer to opt for appeasement policies without long term vision, this does not happen just in India. In last 70 years Japan have been ruled by 42 PM's, and Itlay 50 ish PM's

    In my opinion our current political set up is hopeless.
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  • Right now, even in the center BJP is weak opponent. They are unable raise the concern that’s why Cong got the second term.
    We have to bear the NCP-Cong in Maha and Center.
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