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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  • Originally Posted by kirankatkar
    CRISIL rating is credit risk rating.
    A better rating for a Project means "Chances of completing project is higher in terms financial strength"

    It means they have money backing there dues...So will get bankrupt.

    But at end,
    Builder can still miss completion time on other grounds.
    Construction quality is not assessed by CRISIL. They generally look at asset and liabilities and it's potential. Even if building falls down within year, you cannot hold CRISIL responsible for giving wrong rating.


    True.

    The Credit risk rating is for financial health of the organisation.

    It doesn't certify the quality of product / services offered by organisation.
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  • Originally Posted by HemantDesh
    True.

    The Credit risk rating is for financial health of the organisation.

    It doesn't certify the quality of product / services offered by organisation.

    In this case, Magarpatta, Lavasa, Amanora & Nanded City will get 7 Stars, coz financial backing of Pawar & Co.:D.
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  • Originally Posted by Sharpj
    Mumbai made the distinction of being the filthies place in India.

    No doubt. One may be living in 1 Cr flat but covers nose when walking past a open garbage-pit.

    Today an expert on financial channel said that RE sales in Mumbai are down for past few months and inventory rising.
    With higher interest rates, he expects 20-30% correction. Will this impact Pune RE?
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  • I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.
    Gain:-

    8500 per month rent,Annual 102000
    45K annual tax saving
    and property price rise 1100*1200=1320000

    Investment:-
    750000 from self source
    22lac loan
    So EMI 19K and interest on investment 7k per month.(self source)
    property Tax and society charge 1k per month

    So total 27K I am investing and gaining
    12500 per month as rent and tax saving.

    Effectively I am paying 14.5K per month and I got return of 13.2Lac in 1 year itself.
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  • This is paper gain man, 3500 psft at Kharadi is a joke, its the 'wish rate' of builders, doesn't mean people are buying at that rate.. Even magarpatta city is 3250 and they r feeling hit to sell their phase4 flats...
    Try to sell your flat at 3500 and you will realize the reality.


    Originally Posted by vinayaktan
    I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.
    ..............

    Effectively I am paying 14.5K per month and I got return of 13.2Lac in 1 year itself.
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  • Originally Posted by vinayaktan
    I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.
    Gain:-

    8500 per month rent,Annual 102000
    45K annual tax saving
    and property price rise 1100*1200=1320000

    Investment:-
    750000 from self source
    22lac loan
    So EMI 19K and interest on investment 7k per month.(self source)
    property Tax and society charge 1k per month

    So total 27K I am investing and gaining
    12500 per month as rent and tax saving.

    Effectively I am paying 14.5K per month and I got return of 13.2Lac in 1 year itself.



    Do you mean in your apartment rate is 3500/- ? I don't think there is this much appreciation. You may have timed it it right but 3500/- may be just marval's rate. Also you need to consider aggreemnet value ( approx 1.5 laks) and NOC charges (25000/-) as loss.
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  • Originally Posted by hitmady
    No doubt. One may be living in 1 Cr flat but covers nose when walking past a open garbage-pit.

    Today an expert on financial channel said that RE sales in Mumbai are down for past few months and inventory rising.
    With higher interest rates, he expects 20-30% correction. Will this impact Pune RE?

    Correct & at Pioneer area, Jurong, Singapore, you get a 3BR condo for INR 85-90L. Think whether Singapore is more VFM or Mumbai. The quality of life in Singapore beats Mumbai hands down.
    Originally Posted by vinayaktan
    I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.

    This is paper gain. Try selling it for 3500 & see how many buyers you get. This is no more than an illusion. Real gain is when you will sell this at 3500 TODAY.
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  • But who generates more money, who attracts more people everyday, which is more busy in terms of day-today transaction? Where more money flows across? I believe Mumbai beats Singapore hands down if we get these statistics. Mumbai is dirty (but why? Raj has answered it :D) but because of it is not going to be cheap :o
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  • Originally Posted by puser
    But who generates more money, who attracts more people everyday, which is more busy in terms of day-today transaction? Where more money flows across? I believe Mumbai beats Singapore hands down if we get these statistics. Mumbai is dirty (but why? Raj has answered it :D) but because of it is not going to be cheap :o

    Singapore is the commercial hub which connects Asia to ASEAN/Ocenia, Mumbai is limited only to South Asia.

    Coming to the migration, which tye of migration takes place in Mumbai? Is it the professionals like seen in Singapore migration or UP-Biharis who pollute the city in most cases?

    As far as busiest is concerned, man look at the population of Mumbai & it's infra/sq km & then find the difference. How many stadiums does Mumbai have? Have many squash courts, tennis courts, shooting range?? Singapore has some of the best stadias in the world, that too public (Govt). Road digging work is done in 24Hrs & along-with the digging, a road roller comes so that the road is made ASAP. You don't even realize the next day that the road was dug. The metro station is air-conditioned, even water bottles are not allowed in metro train as it may spill...spot cleanliness everywhere & the reason for this is simple:-

    Strict enforcement of law & treating the city as our home.

    Man, the bottom line is that Singapore has better quality of life compared to any city in India, what's more, Indians are are the helm of political establishment, one of the biggest fund raisers for the political parties & over 15% of population is Indians:), so you don't feel alienated as well. Btw, there is Mini India area in Singapore, if you go there you feel you are in clean India, all hotels, shops etc. are owned by Indians & you get some of the best Indian cuisine as well but damn expensive (got single idli for INR 50, so 2 idlis cost INR 100 & note that this is one of the cheapest dishes here).

    Hey, where is VK, he stays here & may throw some light on this as well. VK, please put some pics as well.
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  • What is the message?

    Originally Posted by vinayaktan
    I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.
    Gain:-

    8500 per month rent,Annual 102000
    45K annual tax saving
    and property price rise 1100*1200=1320000

    Investment:-
    750000 from self source
    22lac loan
    So EMI 19K and interest on investment 7k per month.(self source)
    property Tax and society charge 1k per month

    So total 27K I am investing and gaining
    12500 per month as rent and tax saving.

    Effectively I am paying 14.5K per month and I got return of 13.2Lac in 1 year itself.


    what is message here dude? Just buy flats and make a living? why to work?
    Did you resign from your work alreay? You are good now to buy 2 flats with the profit of 13L now. So we all do the same and we can be a country full of couch potato's.

    No crime, no schools, no police, no stock market around because every one has easy money. Good times ahead!

    Is this what you meant here?
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  • Originally Posted by puser
    But who generates more money, who attracts more people everyday, which is more busy in terms of day-today transaction? Where more money flows across? I believe Mumbai beats Singapore hands down if we get these statistics. Mumbai is dirty (but why? Raj has answered it :D) but because of it is not going to be cheap :o



    Don't know the actual stats, but can very very very safely say that Singapore generates more money and more busy in terms of day to day transactions for sure

    Singapore is a whole country, Mumbai is just a city
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  • little india, Singapore

    RA, Man you are wrong.Little India which is part of S'pore is same like India( in terms of dirtiness)mostly during weekends its more dirty.Even no one bothers and clean it until week starts.May be coz of Bangladeshis workers.
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  • Originally Posted by vinayaktan
    I don't think buying a house is a bad decision.
    I took a apartment at rate of 2300 in kharadi and now its 3500 in 10 months.


    Vinay,

    Seems like its the brokers who told you that your apt is now at 3500psft. Dude, you really need a wake up call.

    Just try selling your flat at 3500 and see how many buyers you get! Once you get one and have made the sale, come back and we will do the same calculations once again.
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  • I always see some sort of typecast on North Indians when it comes to cleanliness.. I am hurt that we the so called educated middle class get swayed by politicians like Raj Thackeray. The problem is not certain people but it is poverty..
    I have seen some maharastrian dalit colonies that are so filthy and dirty.. and it is not because they are dalits.. but because they are really poor.. not enough toilets.. no water.. living in unhygienic slums.. next to overflowing gutters..
    That is the reality friends of our India.. the dark underbelly.. and unfortunately we get swayed by politicians and start believing what they say.. and forget the real issue..

    I am not anti Raj or pro Pawar.. They do play their politics and their dirty games.. There are plenty of fellow idiots who go about bashing vegetable vendors, and milkmen under their influence..

    We are the supposedly educated middle class should pause and take all this for what it is .. "Politics"
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  • Originally Posted by Sharpj
    I always see some sort of typecast on North Indians when it comes to cleanliness.. I am hurt that we the so called educated middle class get swayed by politicians like Raj Thackeray. The problem is not certain people but it is poverty..
    I have seen some maharastrian dalit colonies that are so filthy and dirty.. and it is not because they are dalits.. but because they are really poor.. not enough toilets.. no water.. living in unhygienic slums.. next to overflowing gutters..
    That is the reality friends of our India.. the dark underbelly.. and unfortunately we get swayed by politicians and start believing what they say.. and forget the real issue..

    I am not anti Raj or pro Pawar.. They do play their politics and their dirty games.. There are plenty of fellow idiots who go about bashing vegetable vendors, and milkmen under their influence..

    We are the supposedly educated middle class should pause and take all this for what it is .. "Politics"


    Bang on target :)

    Divide and Rule - (in 1800s people in Power were)Englishman did During Kings times....
    Divide and Rule - (in 1970s people in Power were)politico did with Caste ....
    Divide and Rule - (in 1990s people in Power were)politico did with Religion....
    Divide and Rule - (in 2000s people in Power were)politico did with State Bias .....

    lots and lots of example ........




    and that will keep on happening .......
    until unless there is Rebellion .. a uprising ...... then it will subside for some years and again will start ..:bab (35): with some new dividing mechanism ...
    why only in India ???




    by the way came across a interesting chart ....

    The chart below shows that compared to the real estate bubble in Japan during the late 1980s and the current bubble in China, the US housing bubble looks like a tiny speed bump. The US has 20% to 30% more downside to go. For those looking for a housing recovery, I'd like to point out that Japan's housing market has fallen for 20 years with no recovery.
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