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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  • Great chart frugality.
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  • Originally Posted by realacres
    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.


    Realacres, that area is called as Little India. That area is worst area in Singapore in terms of clealiness. You will see all kinds of litters and waste on the road here. Its is all about attitude and social responsibility. Many people working/ living there are from 10-20 yrs in Singapore. But they yet to acquire those habit completely.:bab (2):
    But you get nice South Indian food in this area.:)
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  • Originally Posted by frugality
    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.


    Frugality, nice message as always we expect from you.

    More interesting is Japan housing market recession. The peak was in 1990 and the down slide which yet to recover. Can we attribute this to rise of China? And many business/ mfg moved to China from Japan ?
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  • Originally Posted by realacres

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

    Tumne boolaya aur hum chale aaye...!!!!!! About pics let me check.

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

    This is true but i have no idea about the transactios and the turnover.

    Originally Posted by realacres

    As far as busiest is concerned, man look at the population of Mumbai & it's infra/sq km & then find the difference.
    Strict enforcement of law & treating the city as our home.

    Some Stats... In terms of Area in Sq Km.. Singapore and Mumbai both are close o 600 sq Km. Population of Singapore is 4-5 million while mumbai is.. 15-20 million.. not sure what the unofficial numbers are.
    What you say "Strict enforcement of law" is one thing that is awesome in Singapore. Example last year in the area where i stay there were 3-4 dengue cases reported in buildings around mine. There were government health officials visiting every house and checking if there is stagnant water anywhere and if there isa possibiity of mosquito breeding. I was being told to use mosquito repellant in case i go out in the evenings for a Jog in the nearby Park. They did not wait for the situation to get out of control like it is now in Mumbai.
    I think we have to work on those lines in the future if we dream of converting a Mumai to a Shanghai or Singapore.

    Originally Posted by realacres

    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).

    Originally Posted by kiran parmar
    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.

    Originally Posted by HemantDesh
    Realacres, that area is called as Little India. That area is worst area in Singapore in terms of clealiness. You will see all kinds of litters and waste on the road here. Its is all about attitude and social responsibility. Many people working / living there are from 10-20 yrs in Singapore. But they yet to acquire those habit completely.:bab (2):
    But you get nice South Indian food in this area.:)

    Yes i agree with Kiran and Hemant here. Compared to quite a few places in India.. little India is clean and compare to Singapore little India is dirty.
    About immigration, there are both types educated and labourers. Local are uncomfortable with foreign labourers from Bangladesh / Malaysia and India. The infrastructure over here is under stress and the locals are uncomfortable with more foreigners coming to Singapore. The Roads during peak hours are Jammed, the Metro is over crowded and the Busses are Full.

    Overall, I would love it if Mumbai an become a Singapore. BUt i believe it has a long way to go.

    VK
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  • Nice chart frugal.
    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..

    North Indians if you see are dirty in totality. Take a simple case of 2 big religious places:-

    Varanasi & Madurai. Varanasi is full of spits of paan on road:o, junk smell in crowded areas, most of the small restaurants have zero hygiene.....then check out Madurai, clean streets, no spitting on roads (very few consume things like paan & gutkha is almost non-existent), many people take bath twice a day, the front of the entrance door is always clean with Rangoli:),....now doesn't Madurai have poor people? Man, cleanliness is mostly in blood. Ever seen Narendra Modi, Karunanidhi, Yedurappa spitting the way Lallu Yadav & co. from UP-Bihar does??

    Man, don't take this personally, but in terms of overall population, cleanliness is more in West, North East & South India compared to North.
    Btw, visit some constro site & the laborers who spit on walls will be from North India.

    As far as total cleanliness is concerned, it is the population to be blamed. The laundry fellow nearby has family in UP & he has 11 kids :o, the person who sells flowers nearby has 5 kids ......now what wonders me is why produce so much when you can't maintain them??
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  • All Indians are dirty compared to chinese (East Asians), Blacks and Whites.

    I live in Delhi and can state with confidence that UP and Bihari people are the dirtiest of a dirty lot.

    There is no corner of India which seems clean when you visit - even the beatutiful streams of HP have potty everywhere when you go near.

    Only clean place is Corbett park - because if you try to do potty there, tiger/crocodile will eat you.

    Still, people of the Corbett village and the guards will dirty the place.

    We are like this only
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  • See I still think it is a cycle of illiteracy and poverty that is the reason this.. and not any particular community.. Maybe there have been certain people who have been in this cycle for longer.. like the Biharis.. or the blacks in africa.. that the problem is genetic now..
    Pan and ghutkas are biggest banes and should be banned
    Have you seen Howrah railway station in Calcutta.. It is extreme in filth..
    But the point I am making is fringe politicians use this for their own purpose..
    be it Raj or the AH Lalu or Abu Azmi..
    Raj is trying to be project himself to become the leader...
    Sena is trying to go one up on Raj...
    BJP is at the sidelines seeing which one will emerge stronger..
    NCP and Congress is letting Raj grow to split the opposition..
    Samajwadi and JDU wants to use this for mileage back home...

    Have you been to Uttarkhand.. or Uttarachal whatever it is called.. It is quite beautiful.. however dirty ganga is.. It has been a part of UP..

    The poor migrant laborer is always dirty .. whichever part of India he comes from..
    One of my gujju friends recently was traveling by public transport in UK and he sat next to an white teenager who remarked.. "Man you Indians stink.. what do you eat" .. Of course she was the fringe element in the society.. but people are always scared of outsiders and politicians play on this fear...
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  • Lets get back to Real Estate now.

    As someone said, if one doesn't buy now - he or she will have to buy house more 2 km away from city center :-((
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  • Originally Posted by puser
    Lets get back to Real Estate now.

    As someone said, if one doesn't buy now - he or she will have to buy house more 2 km away from city center :-((

    Lets do one thing:- Wait for 5 yrs & buy in Mumbai:D.
    C'mon man, these are builders' tricks, sad to see forum members here falling to these tricks.

    If all the affordabilty is 2km away from city, then who will buy in city? Again, will you buy 40L flat at Bhugaon or rent a 60L flat for 13k at Aundh/Baner?? How long will builders keep selling their flats?

    Man, the case of Mumbai/Delhi is different where there is demand for central areas from HNIs & land space is small, so came the outskirts. However, outskirts came when internally no land was available. Also, satellite cities like Navi Mumbai, Gurgaon came up where it is just another city. What's the case of Pune? Acres of land is lying vacant at Balewadi, Wakad, opp side of Sus road.....& people are taking about Bhuagon & Mulshi??:bab (22):

    Man, do some aerial survey to see how huge traces of land is available.....or simply use satellite pics to see the land lying vacant. Builders move outside so that they get land for under 100/sq ft & sell the flat for 2900/sq ft......see how you are being conned. For me, I would buy in PCMC for 2600/sq ft rather than going to places like Bhugaon.

    Go out of Pune is just a scary thought put in buyers mind by the builders so that they purchase in areas like Wakad & Kharadi. Before giving in to builders word, find out the absorption rate & then take a call.
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  • Originally Posted by puser
    Lets get back to Real Estate now.

    As someone said, if one doesn't buy now - he or she will have to buy house more 2 km away from city center :-((


    Not yet, wait, here are some pics from Singapore, I got in FW email. A swimming pool on 55th floor of a resort.
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  • Originally Posted by Sharpj

    Have you seen Howrah railway station in Calcutta.. It is extreme in filth..


    I agree with Venky here, we Indians are like this only, its not north or south.

    Why go so far, just visit Pune station, 5 and 6th platform. Stand there for 1 hr and I will buy you food and beer:D
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  • Originally Posted by puser
    Lets get back to Real Estate now.

    As someone said, if one doesn't buy now - he or she will have to buy house more 2 km away from city center :-((



    Time will tell, Trust your rationale and not builder sales people. If you know your salary and people around you and feel prices are unaffordable, they will correct. Its not just you and I are poor, its every body having similar salary.

    One should trust himself more than the builder sales people and their tall claims.
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  • Originally Posted by realacres
    Lets do one thing:- Wait for 5 yrs & buy in Mumbai:D.


    Good Idea.:D:D

    Originally Posted by realacres

    Builders move outside so that they get land for under 100/sq ft & sell the flat for 2900/sq ft......see how you are being conned. For me, I would buy in PCMC for 2600/sq ft rather than going to places like Bhugaon.

    Go out of Pune is just a scary thought put in buyers mind by the builders so that they purchase in areas like Wakad & Kharadi. Before giving in to builders word, find out the absorption rate & then take a call.


    I believe, one of the reason why builders do this(launch project in remote location with high cost) is to justify the prices for inner locations. People start feeling that Pan card club Baner/Wakad/PS are center of city, and no more remote.

    People also start believing that If prices in Kharadi and Bugaon, Ambegaon are so high then Baner/Wakad/PS at current prices is such a good offer.

    Also you see all the tall claims of sold out on launch day come from these remote locations Ambegaon/Kharadi/Talegaon etc. People like Jitu selling good stuff in good locality comparatively struggle to sell.

    Now who do you want to trust?

    Some day this will end, till then enjoy other things in life.:bab (35):
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  • Rajesh

    People are buying it anyway, I know people who have bought 50L, 60L flats; and don't think they're bragging

    I feel I am just underpaid or may be we are forming new society where buying house is limited to onsite frequenters, NRIs, big shots, businessmen etc:D

    Pune has disadvantage that its close to Mumbai, and Mumbai folks find Pune cheap even at 5K per sqft rate :). I am shocked to learn 5500 psft rate in Baner

    BTW is that waterfall, a man is swimming and u cant see other end of pool
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  • Amazing pictures, RajeshP
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