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 punerebuyer
    From a well knows financial analysis firm ..

    --
    The number of advertisements and messages from builders offering to book apartments at a fraction of the cost has multiplied in the past few months. Eager to cash in on the rise in real estate prices, builders are trying their best to lock in buyers before a correction sets in. Profit hungry banks have done their bit in encouraging the builders' ploy. They are willing to fund 90-95% of a project with negligible contribution from the buyer.
    This was on expected lines & it is now good to see that RBI has capped the lending amount to 80% max. The FREE EMI schemes are usually started when builders either run out of cash or there simply aren't enough buyers for the project, hence such schemes. Remember that Mont Vert scheme, RENT TODAY, BUY TOMORROW??:D It too fell flat on the face.

    The real impact will be seen after the festive season as this is the peak time when buyer buy property & later it is more or less a normal market.
    This was on expected lines & it is now good to see that RBI has capped the lending amount to 80% max. The FREE EMI schemes are usually started when builders either run out of cash or there simply aren't enough buyers for the project, hence such schemes. Remember that Mont Vert scheme, RENT TODAY, BUY TOMORROW??:D It too fell flat on the face.

    The real impact will be seen after the festive season as this is the peak time when buyer buy property & later it is more or less a normal market.
    This was on expected lines & it is now good to see that RBI has capped the lending amount to 80% max. The FREE EMI schemes are usually started when builders either run out of cash or there simply aren't enough buyers for the project, hence such schemes. Remember that Mont Vert scheme, RENT TODAY, BUY TOMORROW??:D It too fell flat on the face.

    The real impact will be seen after the festive season as this is the peak time when buyer buy property & later it is more or less a normal market.
    This was on expected lines & it is now good to see that RBI has capped the lending amount to 80% max. The FREE EMI schemes are usually started when builders either run out of cash or there simply aren't enough buyers for the project, hence such schemes. Remember that Mont Vert scheme, RENT TODAY, BUY TOMORROW??:D It too fell flat on the face.

    The real impact will be seen after the festive season as this is the peak time when buyer buy property & later it is more or less a normal market.
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  • Diwali Greetings

    Diwali Greetings to all IREF members & viewers :)
    Attachments:
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  • Secrets Exposed

    Some RE facts which I have got from reliable sources:-

    1.) Lavasa's to-be investors/buyers have pulled out investments worth crores of rupees post the scam coming up all across. Buyers were caught by surprise when this scam came to light (really dumb buyers I must say:o). Lavasa has now threatened few media houses of filing defamation suit against them:D.....(man, jiski ijjat nahi, usko kya lutenge??:D),

    2.) Amanora is finding it hard to sell Aspire Towers 1-10, despite advertising it all across. Hoardings have been put up even in cities/towns like Nagar!!!!:D They also participate in RE exhibis in Mumbai & abroad as well,

    3.) Sun Grandeur by Mittal builders till date has only 1 (one) agreement done, while builder claims 80% project has been sold out:bab (34):,

    4.) Nanded City is again stuck, & old investors are finding hard to recover their money if they cancel,

    5.) Several builders in Pune have now started asking for cash...earlier they were OK with complete cheque payment, but now they prefer cash as well. There are 2 reasons for this:-

    >> Many projects are under Income Tax 80IB benefit where builder is exempt from income tax if area of flat is less 1500 sq ft & completion date is before Mar 11. As many builders are unable to complete the project under this scheme before Mar 11, they will loose IT benefit, so demanding cash &

    >> Investors who have put cash in the builders' project see no value currently & are demanding the money back from the builder. So, to pay these investors back, builders require cash which they don't have plenty as of now.

    Now what you all make of this?? Believe in this or believe in 'FEW FLATS LEFT' story of RE bulls & builders.
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  • Originally Posted by realacres
    Some RE facts which I have got from reliable sources:-

    1.) Lavasa's to-be investors/buyers have pulled out investments worth crores of rupees post the scam coming up all across. Buyers were caught by surprise when this scam came to light (really dumb buyers I must say:o). Lavasa has now threatened few media houses of filing defamation suit against them:D.....(man, jiski ijjat nahi, usko kya lutenge??:D),

    2.) Amanora is finding it hard to sell Aspire Towers 1-10, despite advertising it all across. Hoardings have been put up even in cities/towns like Nagar!!!!:D They also participate in RE exhibis in Mumbai & abroad as well,

    3.) Sun Grandeur by Mittal builders till date has only 1 (one) agreement done, while builder claims 80% project has been sold out:bab (34):,

    4.) Nanded City is again stuck, & old investors are finding hard to recover their money if they cancel,

    5.) Several builders in Pune have now started asking for cash...earlier they were OK with complete cheque payment, but now they prefer cash as well. There are 2 reasons for this:-

    >> Many projects are under Income Tax 80IB benefit where builder is exempt from income tax if area of flat is less 1500 sq ft & completion date is before Mar 11. As many builders are unable to complete the project under this scheme before Mar 11, they will loose IT benefit, so demanding cash &

    >> Investors who have put cash in the builders' project see no value currently & are demanding the money back from the builder. So, to pay these investors back, builders require cash which they don't have plenty as of now.

    Now what you all make of this?? Believe in this or believe in 'FEW FLATS LEFT' story of RE bulls & builders.


    Really good information. Strong RE Bulls should think about this fact.
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  • Originally Posted by realacres
    Some RE facts which I have got from reliable sources:-
    >> Investors who have put cash in the builders' project see no value currently & are demanding the money back from the builder. So, to pay these investors back, builders require cash which they don't have plenty as of now.


    My personal experience: Builder took 6 months to find a buyer for garden-facing (not top-floor) flat to pay me back in Jan 2010.
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  • Originally Posted by realacres
    Some RE facts which I have got from reliable sources:-

    ....

    Now what you all make of this?? Believe in this or believe in 'FEW FLATS LEFT' story of RE bulls & builders.


    realacres how r u interpreting these exposed secrets with respect to real estate price correction? i think rates will continue to hover at this level for minimum around 6 months or may be more until number of defaulters become notably significant, who overleveraged themselves in home loans
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  • Originally Posted by puser
    realacres how r u interpreting these exposed secrets with respect to real estate price correction? i think rates will continue to hover at this level for minimum around 6 months or may be more until number of defaulters become notably significant, who overleveraged themselves in home loans

    The post here was just to inform members that how these price hikes are artificial & more of mental games than actual. Now imagine if just 1 flat is sold in reality, from where do you expect the builder to fund the project?? Will investors be interested in putting in money where sales are not happening? Already builders have started feeling the pressure of cash flows which had increased to some extent post correction in 2009. If you see, in past 3 months, hardly any movement has taken place in terms of sale. If this continues, the builders will have no other option but to cut prices or abandon the project. Bottom-line is sales are not happening the way it is being shown to the buyers.

    *PS:- Some of my friends had gone to sales office at site just few days before Diwali & they were surprised to see that they were the only ones in several cases.
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  • Originally Posted by realacres
    If you see, in past 3 months, hardly any movement has taken place in terms of sale. If this continues, the builders will have no other option but to cut prices or abandon the project. Bottom-line is sales are not happening the way it is being shown to the buyers.

    *PS:- Some of my friends had gone to sales office at site just few days before Diwali & they were surprised to see that they were the only ones in several cases.


    Real, you r sharing nice information. But the statement "no movement in past 3 month" is going on since last 2 years. It hold true for last year.

    But Now I can see many buyers r jumping in and investors r also back in market.
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  • Well, the data doesnt prove that. The NHB also has the price movement data.

    For me, the best place to buy is Bangalore currently as per NHB data, the prices have gone down from 100 to 60...

    In Pune, it has increased from 100 to 133, 10% a year...but for me..Bangalore & Pune are on the same boat...
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  • Originally Posted by kothrud_pune
    Real, you r sharing nice information. But the statement "no movement in past 3 month" is going on since last 2 years. It hold true for last year.

    But Now I can see many buyers r jumping in and investors r also back in market.

    No movement is by the virtue of ratio of availability:actual sales. If you compare last 2 yrs with situation 4 yrs ago, the sales have indeed slowed a lot & in past 3 months sales are very, very low when compared to late 09.

    As far as investors are concerned, I am not seeing investors back for the simple reason appreciation is nill now. Infact, only day before yesterday I came to know that A wing of 52 Green Woods by Achalre, behind Pashankar auto has majority Mumbai investors & aren't able to find buyers, hence till then they have put flats on rent & scouting for buyers & their investment is fetching negative returns. You can confirm this from any resident of 52 Green Woods.

    Btw, have you bought a flat at Sun Satellite?? Please don't avoid same questions again & again.
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  • Originally Posted by realacres
    No movement is by the virtue of ratio of availability:actual sales. If you compare last 2 yrs with situation 4 yrs ago, the sales have indeed slowed a lot & in past 3 months sales are very, very low when compared to late 09.

    As far as investors are concerned, I am not seeing investors back for the simple reason appreciation is nill now. Infact, only day before yesterday I came to know that A wing of 52 Green Woods by Achalre, behind Pashankar auto has majority Mumbai investors & aren't able to find buyers, hence till then they have put flats on rent & scouting for buyers & their investment is fetching negative returns. You can confirm this from any resident of 52 Green Woods.

    Btw, have you bought a flat at Sun Satellite?? Please don't avoid same questions again & again.

    Agree ...it is slowed down a lot...last year there were no bookings...no investors in market.....but now u only giving examples of investor flat....

    Check this forum itself no discussion about investment last year...but now people r discussing about investment ...renting ideas....
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  • Originally Posted by realacres

    Btw, have you bought a flat at Sun Satellite?? Please don't avoid same questions again & again.


    Will that make any difference? I can say anything here..
    --I have purchased
    --My brother has purchase
    --My friend has purchased

    .what difference will it make on this forum. So
    stick to the topic instead of unneccessary question
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  • /*
    Well, the data doesnt prove that. The NHB also has the price movement data.

    For me, the best place to buy is Bangalore currently as per NHB data, the prices have gone down from 100 to 60...

    In Pune, it has increased from 100 to 133, 10% a year...but for me..Bangalore & Pune are on the same boat... */

    pcpune, this is not a correct way of investment :), thr r always 2 types of stocks in market...both r fundamentally strong but stock A has already moved 30% in 1 yr and stock B is declined 10%....still I will buy stock A and would avoid stock B :), isn't it? boss Banglore is not the place whr 1 sud invest...I still believe dat if u can afford a home in Pune then u sud invest/self use.

    We were talking abt Ahmedabad investment but I was totally socked in my recent trip...most of the flats has price 1cr+...u can chk with ur sources...though total area is on higher side but boss 1 cr+ :( (atleast 70% flats i checked has dat price tag).
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  • Jigar, that is just that you went at probably inappropriate places.. If you do just a bit more research, properties in A'bad are way below pune rates.
    I am not advocating to invest in A'bad, I think RE is overpriced there too.
    But they are still not as high as pune. you can certainly get a 3bhk in less than 30L. And the floor plans there are way more spacious.

    A friend of friend bought a 3bhk, check his floor plan. This is not even a premium flat. It is way below the rate required in pune to buy a 2bhk.

    http://sphotos.ak.fbcdn.net/hphotos-ak-snc4/hs921.snc4/73473_10150312711020713_530800712_15556741_1993590_n.jpg

    Master bed is 155+ sqft, and smallest bedroom is 135+sqft. Look the store room and dry balcony with kitchen, and waiting-area in living room.




    Originally Posted by jigarshah

    We were talking abt Ahmedabad investment but I was totally socked in my recent trip...most of the flats has price 1cr+...u can chk with ur sources...though total area is on higher side but boss 1 cr+ :( (atleast 70% flats i checked has dat price tag).
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  • Aditi - thanks for info.

    Well, I have checked total 10 projects, 7 projects in satelite, 2 in vastrapur and 1 in naranpura. I have recentally sold my 3 bhk flat (15 yrs old) (nr. judges bunglow) and was planning to invest in Ahm only. In Ahmedabad one sud be very alert abt the area u choose...I found one 3 bhk premium scheme nr. Juhapura (33 lacs all inc) but will never buy/invest thr due to communal factor...even I wud avoid chandlodia (new C.G. Road) whr 3 bhk is arnd 30-40.

    1 cr+ area (apartment) - Naranpura, Navargpura, C.G.Road, Parimal Garden road, satelite, Jodhpur, S.G. Highway.

    you will easily find 15-40 yrs old resale flat in range of 25-75 lacs here. (above mentioned area).
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