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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  • As Pu LA deshpande said 'If you want to be a mumbaikar you have to born in mumbai' (This is because rates are very high). If you have parent's house or company ready to give house in proper mumbai (dadar , andheri , south mumbai) then mumbai is good place to work. You can't get own house near workplace. climate is too bad , hot and humid. For this reason I love pune even though i born in Thane and spend almost 25 yrs in thane-mumbai.
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  • hey Goa is a better place than Mumbai....Let's discuss...

    It seems Veteran members donot have any topic to debate so spending unneccessary time on useless topic.....
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  • Yes I agree with kothrud_pune...
    I'm amazed to see all veteran and senior folks just have all possible negative views for real estate in Pune..

    I found they are so enthu to prove their point by any way possible. Most of the times, the guys opposing them, vanishes away as..
    That does not mean the guy is wrong, but most of the times the guy looses his patience.

    Now, a days senior folks talking on 2 things:

    1. Comparison with RE in some of the developed countries: Guys, I respect your knowledge, but how can you compare those developed countries with India?.. I mean if you count, there are lot of economical difference between us and those countries...

    2. I see now senior folks are not talking much on prizes going down, but they found new fad.. The prizes may increase as per "inflation", and hence you can buy it anytime... great!!!!!!!!!!!!!!!!!!!.. Guys did you calculate the effect, even if prizes of RE goes up according "inflation".. You guys are talking of minimizing risk, Which investment will give you returns according to "inflation" ??

    Its not buying vegetables or grocery..
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  • Originally Posted by tpshere


    1. Comparison with RE in some of the developed countries: Guys, I respect your knowledge, but how can you compare those developed countries with India?.. I mean if you count, there are lot of economical difference between us and those countries...

    Its not buying vegetables or grocery..


    on this point, i would rather agree with the senior members. You are saying that we should not compare Pune with developed countries because of economical difference. I agree to this but how come that justify the Pune RE prices which are same (or more) than developed countries?

    The simple point is, developed countries have very high living standards hence their real estate prices are also high. How can one justify the same prices but with poor infrastructure and living standard in Pune? And remember, an average common man (who can afford a house in US) earns a lot more than what an average common man earns in India and still they have a 30 year loan minimum to justify the prices. In India, the loan duration is 20 years and average income much less and still sky rocketing prices... something just doesnt make sense... :bab (34):
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  • Originally Posted by punerebuyer
    on this point, i would rather agree with the senior members. You are saying that we should not compare Pune with developed countries because of economical difference. I agree to this but how come that justify the Pune RE prices which are same (or more) than developed countries?



    The simple point is, developed countries have very high living standards hence their real estate prices are also high. How can one justify the same prices but with poor infrastructure and living standard in Pune? And remember, an average common man (who can afford a house in US) earns a lot more than what an average common man earns in India and still they have a 30 year loan minimum to justify the prices. In India, the loan duration is 20 years and average income much less and still sky rocketing prices... something just doesnt make sense...




    hmm.. yes, I understand this point.. But, if you compare with growing developing countries, you can find similar trend..
    Why do you pay same prize for Honda Civic in India and US? That is why common man is happy with Maruti Zen.. (Common man in US will not be even happy with Civic)..
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  • Originally Posted by tpshere

    hmm.. yes, I understand this point.. But, if you compare with growing developing countries, you can find similar trend..
    Why do you pay same prize for Honda Civic in India and US? That is why common man is happy with Maruti Zen.. (Common man in US will not be even happy with Civic)..


    i didnt understand you... you are saying the same thing what we are saying.. people see that in India Civic is costly and hence go for cheaper car because a cheaper option is available for buyers and sellers too... imagine what if for some reasons, govt decides that the minimum standard car is Civic and above... how many will buy a car then? obviously car sales will decline... no one will spend life long saving for buying a car even if it is for emotional reasons... :D

    Same thing is happening in pune RE. People cannot afford hence sales are declining but builders and politicos have big holding power hence they can keep the prices afloat artifically.
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  • Originally Posted by kothrud_pune
    :) Started with Motto ...Hate builder....currently Hate Pune...

    First & foremost, this thread was not created for hating builders. This was meant to expose the ill-practices of builders & ways to avoid it. Now if a builder is crook 24*7, then automatically it becomes hate builder type of thing. But you need to know that some projects have been appreciated as well.

    I also fail to understand why typical Puneris get angry if something is said good for someone else?? I have mentioned earlier as well that Pune has taught me a lot & I owe a lot to the city. But man, if one says Accord is better than Wagon-R, there is no need for Wagon-R fellow to get angry.

    *PS:- I said I love Mumbaities, does it mean that I hate Puneties??
    This is the bad part here:- Say good things only about you & never for others:o.

    Originally Posted by rsatitkar
    What energy levels man?

    Why do you see energy as local trains only. In Pune, you call up someone for service maybe electrician, plumber etc. They will say 'will be there in 2 hrs' & will not come the whole day.

    In Pune, so many shops are closed between 1-5 pm (these require a nap in afternoon:D). Hardly see such things in Mumbai . How many areas in Pune offer food after 1 pm? This is called as energy levels. Also, the let's do it attitude is far stronger in Mumbai.

    Anyways, lets get back to RE. Seems people don't like some issues discussed on lighter note outside RE.
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  • Originally Posted by tpshere
    Yes I agree with kothrud_pune...
    I'm amazed to see all veteran and senior folks just have all possible negative views for real estate in Pune..

    And what should be our views then?? Buy in junk projects with 90% loan, 25 yrs loan duration with 80% income in EMIs?? Is this positive?? Don't we share info about projects, if one has decided to buy, don't we support him for future dealings post purchase or simply say, as you have bought, get lost?? Infact, we don't say this, nor would we, nor should we do this. Haven't members here said to shift to other areas like from Wakad to PS, or did they say, don't buy anywhere??? See Maggi here. Bought one in Viva Hallmark & gives updates. Did he run away or anyone abused him?? Same goes with harishkulks (not active these days, seems gone to China again). He bought in Park Street but doesn't recommend to buy under-cons in Pride Group. Please learn something from these guys.

    I found they are so enthu to prove their point by any way possible. Most of the times, the guys opposing them, vanishes away as..
    That does not mean the guy is wrong, but most of the times the guy looses his patience.

    Look, everyone is free to air their views here. I make a point, you counter-attack, this is the essence of the free form. But what can we do if our queries are unanswered?? Why not face hard hitting Qs? At the end of the day, patience is the name of the game, especially in RE.

    Now, a days senior folks talking on 2 things:

    1. Comparison with RE in some of the developed countries: Guys, I respect your knowledge, but how can you compare those developed countries with India?.. I mean if you count, there are lot of economical difference between us and those countries...

    Won't comment as PRB has answered wisely.

    2. I see now senior folks are not talking much on prizes going down, but they found new fad.. The prizes may increase as per "inflation", and hence you can buy it anytime... great!!!!!!!!!!!!!!!!!!!.. Guys did you calculate the effect, even if prizes of RE goes up according "inflation".. You guys are talking of minimizing risk, Which investment will give you returns according to "inflation" ??

    We still maintain that even inflation adjusted price is high of now. How many times you need to see the difference between EMI & rent?? We still maintain that RE rates will have to dip irrespective of inflation.
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  • Originally Posted by tpshere
    hmm.. yes, I understand this point.. But, if you compare with growing developing countries, you can find similar trend..
    Why do you pay same prize for Honda Civic in India and US? That is why common man is happy with Maruti Zen.. (Common man in US will not be even happy with Civic)..

    Honda Civic specs are the same be it US or India (except ground clearance & suspension to suit Indian roads). Though the production costs here are bit less, the taxes on cars is high in India, hence high price. All cars above 4m in length & engine more than 1.2L for petrol & 1.4L for diesel is taxed heavily while smaller ones not. Have taxes at par & even Wagon-R would have been about 5.5 L!! Issue is Zen is priced at the price of Civic here in case of RE.

    Btw, Sobha developers stated today that 40%+ of their buyers are from IT sector!!
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  • Originally Posted by realacres
    Honda Civic specs are the same be it US or India (except ground clearance & suspension to suit Indian roads).


    NOPE...there are many differences.. not only with the engine specs but there are a lot more to add to :)
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  • Originally Posted by tpshere

    2. I see now senior folks are not talking much on prizes going down, but they found new fad.. The prizes may increase as per "inflation", and hence you can buy it anytime... great!!!!!!!!!!!!!!!!!!!.. Guys did you calculate the effect, even if prizes of RE goes up according "inflation"..



    Not to target you, but I have lately seen many people using word "prize" instead of "price".

    Guys huge difference, google it.
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  • Originally Posted by tpshere
    Yes I agree with kothrud_pune...
    I'm amazed to see all veteran and senior folks just have all possible negative views for real estate in Pune..


    Again not to target you, but why people always put all seniors(?) in same bucket and curse?

    Dude, who is a senior member? any donkey who has 500 posts can be called senior.. LOL:D:D:D

    I am not any senior or belong to any group called "senior" Trust me there is no such group. Every one just expresses his/her opinion on this public forum.

    No one is here to form groups and write together or make friend or enemies.

    Only min. expectation(from public forum) I have is people to write polite and respectfully and write what you believe in your heart.(honest)
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  • Originally Posted by tpshere
    Why do you pay same prize for Honda Civic in India and US? That is why common man is happy with Maruti Zen.. (Common man in US will not be even happy with Civic)..



    I can only dream of price of Honda civic/accord/CRV/camry etc.. where same as in USA. Thanks to our high import duty. After all tax money is very less to feed these guthkha Netas.
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  • From NOIDA forum - thought some here might like to read.

    #

    Actually recessions are predictable - they come every 4 years in industry and every 7-8 years in RE.

    Question is different

    1. - how bad will the recession be?
    2. -What kind of recession?

    It is possible for each country to be in a different kind of recession. Looking at current data, it seems to me

    1. USA: Standard heavy recession will continue with unemployment for prolonged period till 2020 with no big upmove in stocks or RE

    2. UK: Shallow recession has ended and 2011 will see pick up in economy and RE. Both will peak in 2014

    3. Germany: Same as UK. only stronger

    4. France: Same as USA

    5. Spain and Italy: Worse than USA, but same pattern as USA

    6. Japan: Stagnation will continue till 2020.

    7. China: Will continue spectacular growth

    8. India: Will see standard business and RE cycles with exagerated stock and RE price movements, recap of USA from 1945 onwards

    Obviously, investing strategy for each country has to be different.

    In India, I expect best returns from stock market but with exagerated see saw. RE should be a smoother and safer bet.

    I expect stagnation in Gurgaon with problems expected for leveraged and overinvested people whenever the stock market collapses - which I expect in Feb 2011. Same for Mumbai. But from 2014, prices will jump for Gurgaon and Mumbai

    I expect two situations for NOIDA.

    1. Currently under construction projects will go thru. But price for RE will be capped and will not give fantastic returns at all - I expect price stagnation / keeping pace with inflation with muted returns till 2014. People should expect good returns in NOIDA from 2014 onwards, but not as much as Gurgaon.

    2. If there is a heavy recession in 2012 (expected in a 4 year cycle after 2008), many of the yet to be constructed projects will face severe delays or abandonment. People with bookings in such projects will miss out on the good returns expected from 2014 onwards.

    I would therefore urge people to book only in projects where there is some assurance for construction, lest they miss out on the expected returns from 2014.

    As for ATS, one can always hold for rental returns and keep quiet. One can sell for 2.5 crores in 2017 or so when the next RE bull phase reaches its peak.

    Munish, best capital appreciation in RE is always in luxury category and not in affordable category. Advantage of affordable (and NOIDA in general) is that downside is limited. Unfortunately upside is also limited. Lluxury prices move maximum in bull phase but crash too much in recession, preventing exit effectively - except with huge loss).

    NOIDA flat will find ready seller/buyer regardless of market timing. Gurgaon luxury flat will find seller/buyer only in good times (which is right now!).

    NOIDA is a conservative investment and one should expect returns in line with inflation. Since it is currently some 14% (CPI) I expect some 40% return from your booking by completion in 2012-2013 which corresponds to Zohaibs prediction of around 4200 psf.
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  • Originally Posted by realacres
    But man, if one says Accord is better than Wagon-R, there is no need for Wagon-R fellow to get angry.



    Man I know you like cars. But this time this example does not suit here :)
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