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 realacres


    Venky,

    I came to know from people in Delhi that areas like CP, Raisina still have debris lying around...& in some areas the digging work hasn't even started, let alone lifting of debris. Do you think the work (infra) will be completed before CWG??

    .


    The whole place is full of debris. But Delhi has been like this for the last 10 years with metro construction all over the place.

    Maybe they will call out the army :)

    Otherwise my suspicion is that if one more adverse event happens - stadium roof falls, Dengue epidemic, terror blast, some kind of major corruption event getting exposed more than whats already happened - they might cancel the CWG in Delhi and hold it in Sydney or London.

    Like Mani Shankar, I almost hope this happens so that we improve ourselves and tackle our corruption and civil engineering.

    But then I realise - we will not improve ourselves - it is not in our nature - so it is best if the CWG is a success.

    I am a permanent pessimist and bear - I expect the worst. But it is in our country's interest if CWG is a success
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  • Real,

    Unlike Pune, Nashik had poor connectivity with Mumbai..

    Nashik also has the Nashik road railway station which is quite far from the city..

    The expressway between Mumbai and Nashik is almost done..
    Do you think Nashik will also go the Pune way with investors driving up the price to crazy levels...

    It is just about creating a shortage of land and buying land at expensive prices (from politicians) and making and selling apartments.. Maybe it will happen.. who knows..

    Originally Posted by realacres
    I have simple question to you:-

    Nashik is more cheaper than Pune, so if Pune RE prices becomes unaffordable, will you but at Nashik??:bab (39):

    Man, the fact is this type of thinking is done by investors & not end users. As said before, had I been in Bangalore, I would have been doing interior works by now, so does that mean that I buy in Bangalore?? No, especially when it is for self use.

    The bottom line is RE is out for investors....even those who jumped last year are now complaining...think about end users then. Had there been good sales why would builders put up 2+ yr old projects at exhibis held recently at VITS, Balewadi?? Think..
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  • sending cbi to gujarat has nothing to do with implementation of policies etc..i dont know why u r adding two different subjects..

    selectively ignoring more heinious crimes like genocide/cold blooded murders..and only condoning corruption..wudnt make india a great nation..

    lets collectively denounce everything bad..be it murders or corruption.without patronizing any party..else parties will keep polarising and ppl will keep voting for all wrong reasons..which they do now


    Originally Posted by realacres
    And here in Pune, PMC & PMPML are deciding whether to buy buses with doors on left hand side or right hand side for past 1 year:o.

    This is the thing which is Gujarat far ahead than rest....quick decision & proper implementation....& junk Italian Congress doesn't like that & hence sends it's dog (read CBI) to Gujarat .

    Venky,

    I came to know from people in Delhi that areas like CP, Raisina still have debris lying around...& in some areas the digging work hasn't even started, let alone lifting of debris. Do you think the work (infra) will be completed before CWG??

    * CWG = Congress Wealth Games Man, Kallu has made crores, infact he can now even put Sharad Pawar to shame....however, he doesn't know how to eat quietly like Pawar & Co.:D:bab (45): Btw, alongwith Mani Shankar Aiyar, I will be the most happy person if these CWG fails :) & hope these games turn out to be a big failure.
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  • Originally Posted by veeemkay
    Here is one question to the seniors, knowledgable ppl on this forum and basically everyone.

    Some members have pointed this out and i do believe there is a connection. The property rates in Mumbai are out of reach of many. Including some who have decent salaries. A lot of these guys see PUNE as an option. As long as property rates in Mumbai are touching 80 lacs to 1cr in even average suburbs. Pune property will have boyant demand. I find this a very important link. What do the others think?

    VK


    I think mostly investors from Mumbai bought in Pune during boom time. Now Investing is not a option any more, so not many Mumbai buyers in Pune.

    This is my personal opinion, I don't have any data and no one else would have this data.
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  • Originally Posted by Venkytalks


    Basically, India and China are having the same buy for the child syndrome - people have money and they buy a flat for their small children and keep it locked for future use - if any.

    QUOTE]

    Agreed with you . Businessmen in mumbai have lot of money.They invest corores in stock market and invest surplus in RE considering it as safe investment. I don't think they really bothered abt returns on this. - people have money and they buy a flat for their small children and keep it locked for future use - if any.

    QUOTE]

    Agreed with you . Businessmen in mumbai have lot of money.They invest corores in stock market and invest surplus in RE considering it as safe investment. I don't think they really bothered abt returns on this.
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  • Pls dont politicize the issue. We support them because of their progressive policies/work done, which every other government has failed to deliver.
    No one supports innocent killings. Whoever you vote, either you vote the killers of 1984 or killers of 2002.
    Coming to CBI, who doesnt know how they are used for political gains. If this had been an genuine agency, Quatrochi, Tytlor and Advani, all would have been in jails. Its certainly Congress Burrow of Investigations.
    Encounters happen everywhere. 99% of them are fake. If CBI has to seriously probe, why not in mumbai where there r many cops who have encountered more than 100 criminals each ??

    Originally Posted by kazihamed

    selectively ignoring more heinious crimes like genocide/cold blooded murders..
    CommentQuote
  • Originally Posted by Sharpj
    Real,

    Unlike Pune, Nashik had poor connectivity with Mumbai..

    Nashik also has the Nashik road railway station which is quite far from the city..

    The expressway between Mumbai and Nashik is almost done..
    Do you think Nashik will also go the Pune way with investors driving up the price to crazy levels...

    It is just about creating a shortage of land and buying land at expensive prices (from politicians) and making and selling apartments.. Maybe it will happen.. who knows..

    The Mumbai investors came in as they saw the boom happenning in IT & hence most of their investment was in & around Hinjewadi & Vimannagar. Man, how many Mumbai investors you see in Pimpri-Chinchawad?? If there is a growth potential in Nashik in short term (5 yrs), they will go to Nashik. Pune has now saturated as even the ITGs (investors main bakras) are finding it difficult to buy at hyped rates. Also, Mumbai investors invest in Mumbai RE as well, so it's a double whammy for them now. Ofcourse, those who have bought in cash will be worried but not affected on paper.

    Let's see, but investors flat are simply piling up & this I can say as some flats which I saw last year are still up for sale.
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  • Originally Posted by kazihamed
    sending cbi to gujarat has nothing to do with implementation of policies etc..i dont know why u r adding two different subjects..

    selectively ignoring more heinious crimes like genocide/cold blooded murders..and only condoning corruption..wudnt make india a great nation..

    lets collectively denounce everything bad..be it murders or corruption.without patronizing any party..else parties will keep polarising and ppl will keep voting for all wrong reasons..which they do now

    Agree with aditi. Man, UP has done more than 200 encounters, Gujarat just 17. Then why target Gujarat?? Even in Maharashtra the encounters are more than Gujarat. Now Mamta Banerjee has said that the central govt killed innocent people under the name of Maoists in W.Bengal. Now will CBI take action against Home Minister Chidu??

    And the issue is not about justice...look at Soharabuddin's facts:- I won't go in details, read this:-

    http://kanchangupta.blogspot.com/2010/07/criminal-history-of-sohrabbuddin.html

    He had direct connections with ISI, Dawood, did arms dealing of AK-56s, grenades etc. Even the woman who was shot dead by Gujarat ATS has now been confirmed by none other than FBI & David Headley, the handler of these chaps, as member of LeT, yet Congress earlier stated that she was innocent & called for Modi's resignation.

    Until & unless Congress gives up minority appeasement, the security condition is risky. In NDA times, large no. of Bangus were kicked out, COngress uses them as vote banks by giving fake ration cards. I know this well as I have myself thrashed atleast 4 fake voters when I was in politics.

    Man, Modi rocks, hate him or love him....Modi remains the best CM India has ever got till date:).
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  • Originally Posted by realacres
    Agree with aditi. Man, UP has done more than 200 encounters, Gujarat just 17. Then why target Gujarat?? Even in Maharashtra the encounters are more than Gujarat. Now Mamta Banerjee has said that the central govt killed innocent people under the name of Maoists in W.Bengal. Now will CBI take action against Home Minister Chidu??

    And the issue is not about justice...look at Soharabuddin's facts:- I won't go in details, read this:-

    http://kanchangupta.blogspot.com/2010/07/criminal-history-of-sohrabbuddin.html

    He had direct connections with ISI, Dawood, did arms dealing of AK-56s, grenades etc. Even the woman who was shot dead by Gujarat ATS has now been confirmed by none other than FBI & David Headley, the handler of these chaps, as member of LeT, yet Congress earlier stated that she was innocent & called for Modi's resignation.

    Until & unless Congress gives up minority appeasement, the security condition is risky. In NDA times, large no. of Bangus were kicked out, COngress uses them as vote banks by giving fake ration cards. I know this well as I have myself thrashed atleast 4 fake voters when I was in politics.

    Man, Modi rocks, hate him or love him....Modi remains the best CM India has ever got till date:).

    And he has best PM prospects.
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  • He can become CM of Gujarat but cant become PM(look at Bihar for example - he is politically untouchable). He has retrogressive social image; plus those who love him for his development go on trek, family vacation, some party or their names go missing or have no names in voter's list; other who love him for reasons 'other than development' love the symbol of party and will put stamp on it regardless who stand,they get orders from Reshim Baug.

    However if Modi makes a good house in the reach of common man and brings upon strict implementation of real estate laws in favor of real estate end-user buyers; end the corrupt practices and demolish the builder lobby, in short make it easier for Indian (not Bangu wangu) to buy good house within all income ranges and ensures that he would do all he can to prevent what happened in 2002; I will be very appeased and would vote for him. But he wont do it as well:o and Congress/NCP wont let him do it even if he want:bab (45):
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  • Originally Posted by puser
    He can become CM of Gujarat but cant become PM(look at Bihar for example - he is politically untouchable). He has retrogressive social image; plus those who love him for his development go on trek, family vacation, some party or their names go missing or have no names in voter's list; other who love him for reasons 'other than development' love the symbol of party and will put stamp on it regardless who stand,they get orders from Reshim Baug.

    However if Modi makes a good house in the reach of common man and brings upon strict implementation of real estate laws in favor of real estate end-user buyers; end the corrupt practices and demolish the builder lobby, in short make it easier for Indian (not Bangu wangu) to buy good house within all income ranges and ensures that he would do all he can to prevent what happened in 2002; I will be very appeased and would vote for him. But he wont do it as well:o and Congress/NCP wont let him do it even if he want:bab (45):


    OK. I am only talking about prospect from development point of view. The reality is dependent on what majority of people ( who votes), development or corruption?
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  • Originally Posted by HemantDesh
    OK. I am only talking about prospect from development point of view. The reality is dependent on what majority of people ( who votes), development or corruption?


    In 60 yr history of voting; we have got again and again corruption guys :D. So does it mean majority want corruption?

    Majority of voters happen to be in slums or in poor areas where they vote for money or some interest.
    Other voters vote for personal indirect gains - he is my cousin so voting for him, she is of my caste so voting for him, he defends my religion so i shall go for him or I fund his party he will help me etc.
    Rest of educated lot are actual minority in India and none wanna appease that minority:bab (45):
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  • Originally Posted by realacres


    I know this well as I have myself thrashed atleast 4 fake voters when I was in politics.

    .


    Real, you are a politician????!!!!!
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  • Originally Posted by HemantDesh
    OK. I am only talking about prospect from development point of view. The reality is dependent on what majority of people ( who votes), development or corruption?

    Just as land reform act was a vote bank act. This act had no end to its circle of tribunal- high court events for the 20 yrs or more, for a piece of land till might is wright decided its outcome till then the low end politicians made a handsome buck. Land reforms has run its course and the ruling party has no new tricks up its sleeves to hold on to vote bank hence the regional parties have come up due to petty regional issues are taken up by them for vote banks. In RE the corruption for politicians has moved from the land reforms based to the developer based who are supported by their dons

    CAN
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  • Here's how we can make a difference....

    Ask what’s our cause, not what’s mine - Chetan Bhagat

    So, we are in 2010. Remember the presentations, plans, articles, studies and forecasts from a couple of decades ago — many of them had titles like Vision 2010, India Superpower by 2010, Marching Towards 2010, etc. This is one of those years by when things needed to have been done. But no, we are nowhere near some of those forecasts that were made. Conveniently, those forecasts have been shifted to another nice, elegantly rounded year like 2020, or in case of a few over-eager forecasters, to 2050.

    In fact, by 2050, we are supposed to be richer than Western countries, a wonder created by Excel spreadsheets and research houses that are the equivalents of sensational TV channels. Such forecasts assume current growth rates to perpetuity, ignore the low-base effect, and do not consider the fact that most of the economic growth is having minimal impact on the majority of Indian people. It also ignores the fact that we don’t have the basics of almost any developed economy right — an effective legal system; fiscal prudence; disincentives for corruption; intellectual property rights; less government interference in business; incentives for capital flows and an education system that is designed to reward talent. No, these things are too boring and cumbersome to figure out when all you have to do is drag those Excel cells until India overtakes the West. If it can happen in my spreadsheet, it will happen in real life.

    Get real, we are in 2010, and we are still a long way from being a developed country. We have nearly 20% food inflation; almost all government offices are corrupt; the legal system is designed to drag things out and our politicians care little about changing this as the people don’t vote on these factors. There are a significant number of educated, and if one may say, enlightened people who want performance and nothing else. Yet, most people in India still vote on caste, traditions, personalities or dynasty. But we already know all that, you will say. Can’t you be less morbid, at least in the New Year? It’s a new decade, after all.

    I am not being morbid. I am telling you what it will take in this decade to change all this. I am telling you the real set of numbers to focus on. The number of votes it will take so that this set of enlightened people, sprinkled across the country, and hence, not a votebank yet, begins to matter.

    Using heavy approximations for simplicity, India has around 600 million voters, a staggering number (all data from Election Commission website). Half the people do not vote, thereby reducing the actual vote count to 300 million. However, if you see the difference between the winner in each constituency versus the next guy (that is, the difference between the winning candidate’s votes and that of the runner up), and add these up for the 530 odd constituencies, the difference is only 40 million votes. That is, these 40 million votes decide the winners of all seats. In fact, if half of these 40 million people switched their vote for the second guy, that person could have won in all constituencies. And half of 40 million is only 20 million — the number of votes that decides who will be in power at the top.

    This 20 million is a far more manageable number to deal with. It is roughly the readership of this newspaper. It is also just over three percent of all registered voters, the population of two big metros, the theatrical viewership of a Bollywood blockbuster and a little more than the current penetration of networking sites. It’s not an impossible target, if that is the number of enlightened people we need.

    However, there are some assumptions in this. For one, the enlightened people have to be united and tightly knit. We may all care for our country, but we could be pulling in different directions. In most colleges across the country, the youth is engaged in community activities. However, they all have their own local issues. A group of students is working for more trees in Bangalore; another set in Delhi wants to clean up pollution; an NGO in Chhattisgarh wants better primary education... No doubt, these are fantastic causes, and the hard work done must be commended. However, this does not use our collective power — one that can swing the outcome of a national election.

    That needs a common agenda in line with the founding principles of a modern progressive nation. The rest will follow. Once we are seen as a tight votebank, and a swing one at that, politicians will have no choice but to listen to us. It is great to be spread out as little sparks around the country, but if we can come together as a fireball, it is even better.

    The Internet, college festivals, inter-NGO networks are all opportunities to bring these sparks together. Slowly, this change is happening anyway. But we must hasten it — don’t ask what’s my cause, ask what’s our cause. There are many well-intentioned people but they are just not stitched together into a votebank that matters yet.
    And if we can make 2010 a year in which we decide to do that, build that 20 million votebank, then by 2020 those spreadsheets will finally begin to make sense.

    Please think about it!
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