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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  • An alternative eminently sensible vision for China

    http://www.fool.com/investing/international/2010/08/11/has-chinas-market-bottomed.aspx

    A very balanced and thought provoking insight into how China's future might unfold.

    Essentially he feels - now they have built their cities, their modern housing and now they will start to consume their 4000$ per capital incomes.

    And China will become rich and prosperous. So a good place to invest.

    While India rots in its own unique hell hole
    CommentQuote
  • Originally Posted by Venkytalks
    Real, you are a politician????!!!!!

    Yep, was active till early 2007 & I have already said that I am ex-scorpio chap:o. But man, I learnt a lot from this especially the art of manipulation, pushing the blame by making it a political issue & how the cops, media, goons remain on payrolls of politicos. I must say that I learnt some of the most crucial things in life which I wouldn't have otherwise by being in politics, the best of all:- backstabbing. Ofcourse, I was not part of mother party but the youth wing.

    Originally Posted by puser
    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):

    Here are 2 things:-

    >> There are development authorities in place to ensure that the DP is there even outside the city limits for bare min of 10km. This is already done in Ahmedabad, Surat, etc. So, you can buy your own land & build on it & if you decide to buy from a builder, you already know what may come up in nearing plots as they are already demarcated. The city planning in Gujarat is much better than that seen in any other state. Look at BRT in A'bad or the roads here, you will seldom find a dead end...all roads connect to some road or other.

    >> The people here very much value their money, infact money runs in their blood, hence even some of the best areas in A'bad are under 2500/sq ft...& these are better than areas like Aundh or Kalyaninagar, not to forget water supply & 24*7 electricity. So, as everyone seeks value, the builders there can't hike the rates like they do in Pune. In short, the Gujjus treat wealth as Laxmi rather than money....note the difference.

    Coming to voting, Puser, the issue is not we are in minority, rather we are in majority...problem is we are in minority when it comes to voting. I travel on NH4 bypass regularly & on election days, the road is full with cars with luggage heading towards Mahabaleshwar. Here is where we go for toss, else we can become the biggest vote bank. As this is not the case, Arun Bhatia looses to Kallu:o.

    Btw, 'can', nice to see you back after ages!!:)
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  • A decade back there was this fool theory about INDIA shining and by 2010 it would be great power.
    Indians have fooled themselves by leveraging, hoping they would get world class facilities like in USA, Japan etc.
    Had been to Japan's towns/villages. Even villages there have better infra than Mumbai.
    Read about Mumbai-infra:
    http://www.bloomberg.com/news/2010-08-12/millionaires-get-neighborly-with-slum-dwellers-in-space-challenged-mumbai.html
    “Mumbai’s infrastructure is at the bottom of the list among international global cities, somewhere between Yangon and Kabul,” said Bertaud, a international property consultant.

    If this is Mumbai's infra-rating then where does Pune stands in infra, Kabul?
    Today's DNA ad on Celestial City in Ravet, made me laugh :D
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  • Indian IT industry

    Originally Posted by Venkytalks
    http://www.fool.com/investing/international/2010/08/11/has-chinas-market-bottomed.aspx

    A very balanced and thought provoking insight into how China's future might unfold.

    Essentially he feels - now they have built their cities, their modern housing and now they will start to consume their 4000$ per capital incomes.

    And China will become rich and prosperous. So a good place to invest.

    While India rots in its own unique hell hole



    well

    -US visa fee raise is specific to Indian IT companies.

    -UK super bug named on New Delhi..

    -China's IT Challenge

    In a move that could upset the Indian outsourcing industry's robust growth so far, China has announced operating tax exemption for its outsourcing businesses till 2013. The exemption, which will benefit Chinese companies in 21 cities, is in line with China's aggressive campaign to emerge as the top outsourcing destination in Asia.

    http://timesofindia.indiatimes.com/home/opinion/edit-page/Chinas-IT-Challenge/articleshow/6301403.cms

    This is when there is no recession in World ... what will happen later :bab (45):

    if 'IT outsourced jobs' are halved by US by some new law what will happen it Indian IT youths ?

    Or US jobless IT professionals are given option to work in India ?


    And EVM tampered ???
    http://timesofindia.indiatimes.com/city/hyderabad/Demo-on-EVM-tampering/articleshow/6284330.cms
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  • Statistics Dont Lie (Well almost)

    Though I am not an active participant in the self slaughtering business, I do take interest in the RE development/trends in Pune.

    To all those who are living in fear of short supply or ever increasing RE prices,
    just go to Magic Bricks and look at whats the supply situation.

    Some interesting statistics I observed today.

    Appt for rent 5000+ PM = 49366
    Appt for sale by Individuals under 40 lacs = 14022
    Appt for sale by ALL = 36561

    Now I don't want to analyse this any further for the sheer lack of analytical skills. But its still a good Indicator of the current supply situation.
    CommentQuote
  • Originally Posted by hitmady
    Read about Mumbai-infra:
    http://www.bloomberg.com/news/2010-08-12/millionaires-get-neighborly-with-slum-dwellers-in-space-challenged-mumbai.html
    “Mumbai’s infrastructure is at the bottom of the list among international global cities, somewhere between Yangon and Kabul,” said Bertaud, a international property consultant.

    If this is Mumbai's infra-rating then where does Pune stands in infra, Kabul?

    Don't know whether it is Kabul or Timbaktoo, but for sure the rates are more than much better cities providing better infra. Some of Pune's area have rates more than Adelaide, Aus.
    Today's DNA ad on Celestial City in Ravet, made me laugh :D

    Lol:D, same here man. Btw, that model looks familiar...seen her somewhere else as well. Man, if these are models for Ravet, we may then see Heidi Klum & Kate Moss for projects in Aundh & Kalyaninagar:D. Btw, here is the ad of celistial city, ravet. Look at their TAG-LINE & see the fun.
    Attachments:
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  • Originally Posted by realacres
    Don't know whether it is Kabul or Timbaktoo, but for sure the rates are more than much better cities providing better infra. Some of Pune's area have rates more than Adelaide, Aus.

    Lol:D, same here man. Btw, that model looks familiar...seen her somewhere else as well. Man, if these are models for Ravet, we may then see Heidi Klum & Kate Moss for projects in Aundh & Kalyaninagar:D. Btw, here is the ad of celistial city, ravet. Look at their TAG-LINE & see the fun.


    LoL ha ha ha. And where is this beautiful lake? Inside the society?
    CommentQuote
  • This month's outlook money features following article about homebuying.

    10 Nasty Traps To Avoid
    http://money.outlookindia.com/article.aspx?266517

    Some extracts...

    “Last few flats left, book now”
    This is a common sales pitch you will come across. Here, the real estate agent is trying to play with your psyche. It’s well known that buying a house is arduous and, many a time, you just want to close the deal. The developer/agent is trying to target this particular vulnerability. If you take him at his word, you might end up making a mess of the budget you had allocated for your home purchase.
    Course of action. When the real estate agent gets pushy and makes such statements, look for a few things to find out if he is telling you the truth. First, see how busy he is. The number of prospective homebuyers that have come to meet him is usually a good indicator. Second, see the progress on the construction site. A project that is witnessing demand and has people lining up will also have some progress on the ground. Check the adjoining sites and see the pace of activity at those locations. If there is hardly any work going on, looking at another project and another location would not be a bad idea.
    You can also consult online groups for feedback on the project you are interested in. Says Vineet K. Singh, business head at realty portal 99acres.com: “Nowadays, online groups are getting popular. Members put in their experiences for unknown online friends freely, without much hesitation.”
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  • 10 Nasty Traps To Avoid

    “Book now. Prices are expected to go up very soon”
    This is another attempt at taking control of the buyer’s psyche. If you buy the spiel, you will end up booking the unit in haste. Obviously, the chances of your making a mess of the budget rise, not to mention the potential loss you will incur if the price of the unit falls in future.
    Course of action. As a first step, check the movement of capital values in the location over the last one year. If capital values in the locality have appreciated at a higher rate than other areas of the city, find out the reason. There are chances that you would not find a solid reason for the rapid increase. In that case, it makes sense to give the property a miss. The rapid increase in prices in a certain locality without a substantial reason is an indication of speculators being very active. Says Samarjit Singh, managing director at Agni Group, a property broking company: “Try to book a unit while the project is in its early stage to avoid such issues. Go for flats directly available from developers.”
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  • 10 Nasty Traps To Avoid

    “project will be located a km (or so) away from the proposed metro station/airport”
    Recently, this has been a common sales gimmick, especially in the National Capital Region (NCR). Once an infrastructure project is announced in a particular location, capital values in the locality go up. In Bengaluru, for instance, capital values had shot up as soon as the plan for the new international airport at Devanhalli was announced. In cases like this, the developer is trying to sell you the location rather than the house. Historically, there have been significant delays when it comes to the completion of infrastructure projects in India. To give you an idea, the recently commissioned Bandra-Worli Sea Link was completed with a delay of five years. If you book a unit in the hope that an infrastructure project will come up nearby, you may end up in a location devoid of any social infrastructure. Plus, if you book such a unit for investment purposes, you would need to hold on to it for a long time before there is any meaningful increase in capital values. The worst part, however, is that the developer will charge a premium for the unit based on future capital appreciation, which depends on the materialisation of the infrastructure project.
    Course of action. Even before you visit the location, check the project’s status on the website of the authority concerned. Check the scheduled completion date and the authority’s track record in meeting deadlines. After these preliminary checks, visit the site to see how far the house is from the project’s proposed location. Look for signboards or any construction work happening there.
    If you are satisfied with the house, take a look at the infrastructure available and don’t bother much about what’s proposed.
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  • And the article says the same thing what this forum is saying last 1 year...

    Says Pankaj Kapoor, founder and chief executive officer (CEO), Liases Foras, a real estate research firm: “Sales have virtually reached a real low in the last few months. In Pune, sales are down 50 per cent compared to the last quarter, while in Mumbai they are down 25-35 per cent. The same is the scenario in Chennai, Bangalore and other cities.” Clearly, real estate developers are under a lot of pressure stemming from unsold inventory and slumping sales, which have led to very low liquidity. With their backs to the wall, the only recourse for developers is getting rid of the unsold inventory. The recent marketing frenzy is aimed at just that and, needless to say, deals often smell fishy, if not outright dishonest.
    The modus operandi of the whole exercise is simple yet effective: make the offer sound unbelievably good and instil a false sense of urgency in the mind of the consumer. More often than not, the human psyche falls prey to this set-up of temptation and fabrication.
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  • Originally Posted by home123
    This month's outlook money features following article about homebuying.

    10 Nasty Traps To Avoid
    http://money.outlookindia.com/article.aspx?266517

    Some extracts...

    Excellent link home123:). Liked that.

    Btw, here is one more fraud committed by Kallu in Balewadi games, CYG, 2008. Almost INR 25 Cr are siphon_ed off. And the constro was so pathetic that badminton hall is leaking, flooring has been damaged....read on from IE:-

    http://www.expressindia.com/latest-news/balewadi-badminton-complex-roof-opens-up-in-rain-wooden-flooring-damaged/659579/
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  • The number of registrations seemed to have really gone down in Pune.

    I got 3 calls from different builders in last couple of days whose site I had visited in last couple of months. They said it’s the best time to buy and are ready for some negotiations, when earlier all of them were saying that there is no scope for negotiations and the rates would only go up.

    With the interest rates going northwards, the sales would hamper even more. Looks like it’s going to be a buyers market soon….:-)
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  • Yeh, even I got the same news and confirmation from a guy who works in PMC, its down to like 500-1000 houses registrations per month from 2000-3000 earlier - in Jan-Mar period....

    Well, its important now that banks keep the interest rates high, developers will need to blink...however - lets ask for transparency in deals rather than the price - as this is what has affected all of us much more....
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  • Yet the bull story lives on -- in TOI

    The outlook for the realty industry in Pune looks bright, with the city's builders getting gung ho about their projects. CREDAI, Pune launched the first of its property exhibition series on 6-8th August at the VITS Hotel, Balewadi displaying over 200 projects offering 1 BHK to 5BHK penthouses.
    Anuj Bhandari, exhibition committee chairman, CREDAI said, "We feel that the stock of good quality housing is low compared to the demand. People are now more confident of the economy and demand has returned to the realty industry. CREDAI Pune recently did a survey that showed the average ticket size was Rs 3025 per sq. feet. But supply is not able to keep pace with demand."
    The exhibition was inaugurated at the hands of the Mayor, Mohansingh Rajpal. Commenting on the exhibition the Mayor said, "A new generation of builders is building for the new generation of citizens. This younger generation of builders is doing a lot of good for the city. Pune needs increasingly young people participating in the development of the city. We need builders to take a more pro-active role in developing facilities for recycling of water, Rain Water Harvesting, sewage treatment as this will help reduce the load on PMC. In return the PMC offers a 10% reduction in property tax that will make a project more attractive to buyers."
    A move that Shantilala Kataria, vice-president CREDAI, Pune says had been initiated about five years back. "Even before the Government came out with sops for green initiatives, Pune's builders took it upon themselves to develop such projects. But now more and more members are seeing the benefits of eco housing to their customers and the city."
    Kataria said, "This is on account of shortfall of land availability. CREDAI, Pune has made a representation to the Urban Development secretary, T.C. Benjamin to make more land available by applying the same parameters of redevelopment for wadas and old city areas as they have done in Mumbai. Also the DP has not been approved leading to a lock-up of greater amount of developable land."
    Mayor Rajpal stated to the CREDAI members that the DP would be passed before October 15th this year. "I can assure you that the DP will be passed before Diwali. Whatever is required for the betterment for the city, I am ready to do." The Mayor asked CREDAI members to look at ways in which tourism could increase in the city and assist the PMC to develop projects such as cleaning up the river, development of a world class exhibition centre, museums and malls.
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