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?

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  • And we punekar elected this leader. He has embarrassed the Pune city. Our heads bow down in shame. We are equally responsible for this.
  • In another case of fraud, the State Govt. gave Hiranandani 230 acres of land to build houses for poor people, in LIG & MIG. What the builder did? Built premium residences running from several lakhs to few crores. Who lost in this? The State govt. as the land was thrown to the builder & not sold at market rates. Who won? The builder & the politicos. And this same govt shamelessly asks us to pay tax honestly? For what? Filling up their pockets?
    Originally Posted by mahesh pune
    Is it of onlt 9 crore. Their one flat must be costing 9 crore. So why such cheating. It must be in blood of builders.

    Our heads bow in shame? Man, why Pune, even being an Indian makes me feel shameful in many cases.....Bofors case, Sikh riots, Bhopal gas tragedy...still going on. Last week CBI (Congress Branch Of Intimidation) (CBI is a tail wagging dog of Congress) said that they will file review petition for Bhopal gas tragedy. 26 yrs gone, how many more do they require?? Man, look at Israel, a country smaller than Delhi yet it dictates the policy of US. This is called as nation. When I met Israeli's, they simply said that if they had the economic & military might of India, Pakistan wouldn't have even existed by now. Man, Mossad (Israeli secret service) rocks!!:). Hats off to this agency. The biggest problem with India is Delhi is full of eunuchs. As long as these are there, even a 'machar' (remember that dialog, ek machar aadmi ko... bana deta hai:D) will keep bothering us.
    Originally Posted by HemantDesh
    And we punekar elected this leader. He has embarrassed the Pune city. Our heads bow down in shame. We are equally responsible for this.
  • The events off late have made me feel that India is headed towards self destruction.

    My Granny used to say they were happier in undivided India.. under the British. I used to get very confused as a child then.

    Now it comes to my mind and I wonder what has changed!!!!
    Earlier we were told that we were looted by British and now we are being looted by Indians. (Real would say Italians :bab (59):). So the decision we made was we want to be looted by our own people and not by other.

    Its the same like earlier there used to be Zamindars and Munims who are now called / replaced by Builders and Bankers.

  • Even my mom says the same thing, that his father used to say British raj was much better for us Indians - very less corruption,quality work, everything was in order, now by by setting India free, we have given it to be run by a bunch of idoits,and they will surely eat all the money they can until they live.
  • Originally Posted by pcpune
    Even my mom says the same thing, that his father used to say British raj was much better for us Indians - very less corruption,quality work, everything was in order, now by by setting India free, we have given it to be run by a bunch of idoits,and they will surely eat all the money they can until they live.


    Even i have heard the same line.
  • kalmadi was always useless...i have been in pune for 15 yrs and the city has gone bad under him..but unfortunately we ppl vote for very different including..

    what i dont understand i we have failed so miserably under him as ioc president but even then we persist with him..its not like raja or pawar who is with allies..this guy is he shud have been replaced..even aiyar and gill was against him..y dont gandhis just get rid if him..i remember chidambaram coming to pune and telling infra here is really poor..

    pargat singh is fighting an hockey election agst and 80+ lady who he will lose to..r v such an idiotic country to understand who is better choice..i expect better from govt than this..they have failed in sports..even more than in inflation
  • CWG lawn bowl turf overpriced nearly 6 times

    More corruption in CWG..
  • Guys,

    I generally do not reply on threads which have swayed out of topic. But this one has transcended many topics over the months and while reading the latest posts I really couldn't stop myself.

    Please don't promote the idea that external rule was better. During our grandfather's generation, India had only 30 Cr people.

    Management of 30Cr people and management of 100Cr people is a totally different ballgame. For those who are developers, you will understand the following.

    When a website had only 10 visitors, its fast. When it suddenly gets 20,000 users, it simply breaks down, unless there are some massive infrastructural improvements along the way.

    Same is the case of our country. By the time our parents were born and became 20 years of age, the population had suddenly shot up to 90 Cr. With us coming into existence its 100+Cr.

    Where our country has underperformed, is scaling up! Corruption, degradation of cultural values, degradation of environment are all tell tale signs of any country which is leaving poverty behind and moving to prosperity. Any country going through this is bound to see same issues.

    China has the same problems. Massive level of Govt corruption, degradation of environment and loss of cultural traditional values.

    The loss of values brings in a problem of land grab. I have 80 yrs to live. Whether it takes me a hook or a crook, I have to be a crorepati. Then, for that, if I need to pay a couple of govt officials, hire a couple of goons to spread fear, whatever. I will do it. This is called as land grab. Success at any cost!

    When people take an election day as a holiday, what can you expect?
  • Originally Posted by harshalx

    When people take an election day as a holiday, what can you expect?

    i have heard this question many times now.

    Let me add one of my questions to this one.
    Can someone tell me which political party is non currupt?


    Editing to add: Above is not meant to be a sarcastic question. I really intend to ask this question and know which party is non-corrupt.
  • There is one party, who is not corrupt. Have you heard name WUERYGKDHFLD.

    Never heard, right ? there is no party.
  • Originally Posted by kirankatkar
    There is one party, who is not corrupt. Have you heard name WUERYGKDHFLD.

    Never heard, right ? there is no party.

    Then start one :-)
  • Has anyone joined PPI (Professionals Party of India) ?
    I am receiving their Emails but never attended any event.
    Let us know your opinion, how the PPI leadership is ?

    Originally Posted by puser
    Then start one :-)
  • I have downloaded the PPI form. One of these days I am going to submit it and become a member.
  • Ppi

    Originally Posted by harshalx
    I have downloaded the PPI form. One of these days I am going to submit it and become a member.

    Good work, appreciate it:). For those who want further info, please visit:-
  • Crisil launches project-specific real estate ratings

    Some good news for buyers; Builders now to be rated. Read more:-