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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  • I always believe prices of premium locations(in T2 cities, T1 cities are obvious) will never come down whether it is in Pune, Ahd, Noida, Jaipur, Bangalore, Hyd, Kolkata Ghzbd etc.

    I also know for sure in all the above cities u will always get flats in 15-20Lacs as well in not so good locations obviously.

    I am not ready to believe that flats are not avl in Pune at ~15 Lacs, man they are avl in Mumbai and even Delhi.......:bab (22):

    Yes plz dont DREAM of a flat in south mumbai or south delhi price of virar or najafgarh :D
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  • Originally Posted by jigarshah
    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).

    In Ahmd, even i had seen many premium apts, however these are very lavish - mostly row houses or bunglows and 4000-7000 sq feet ON CARPET , but believe me , its way better to invest 700 sq feet for 45 lacs in Pune.

    Even if I add up conservatively, the prices in Ahmedabad are HALF of what they are in Pune.

    I agree that in Ahmd, one has to very careful about the "Location" of the property.

    But then I believe, LOCATION is the basis of any RE purchase other than anything else.

    If I get something around 10-15 lacs(900-1100 sq feet in CARPET) in North/West in Ahmedabad, I would certainly invest.
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  • Originally Posted by pcpune

    If I get something around 10-15 lacs(900-1100 sq feet in CARPET) in North/West in Ahmedabad, I would certainly invest.


    Is Ahemadabad really so cheap? Do not know much about Ahemadabad. But Pcpune's figure show that he is expecting 900-1100 psf (built up) in Ahemadabad. This rate one would not get even in Talegaon or Shirval near (?) Seen rates nearing 2000 in cities like Kolhapur. How can one expect rates lower than that in a city which is almost a metropoly, & 7th largest city in India? Are salaries in Ahemadabad so low? Is construction cost in Ahemabdabad 200 psf? or land comes free in Ahemadabad?

    Not advocating prices in Pune at all. But pcpune's expectations are too optimistic. Expecting 2003-2004 prices with 2010-2011 salary :-)
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  • Originally Posted by rsatitkar
    Is Ahemadabad really so cheap? Do not know much about Ahemadabad. But Pcpune's figure show that he is expecting 900-1100 psf (built up) in Ahemadabad. This rate one would not get even in Talegaon or Shirval near (?) Seen rates nearing 2000 in cities like Kolhapur. How can one expect rates lower than that in a city which is almost a metropoly, & 7th largest city in India? Are salaries in Ahemadabad so low? Is construction cost in Ahemabdabad 200 psf? or land comes free in Ahemadabad?

    Not advocating prices in Pune at all. But pcpune's expectations are too optimistic. Expecting 2003-2004 prices with 2010-2011 salary :-)


    Rsatiskar,

    I have already been to Ahmedabad many times, and now the prices are around 15-20 lacs for 900-1100 sq feet CARPET with free parking, and NOT built up. In 2009, I would have surely got this price, and hence I am just waiting for that 10-20% correction in Ahmedabad.

    Hence, compared to Pune they are nearly 50% or even 70% less. But, I think you should visit Bangalore & Hyderabad once, they are selling decent 2 BHKs for 18-22 lacs very well within city limits.

    Its just that Pune is SO OVER PRICED, that we cannot look whats cheap. Just visit the NHB housing site, and you can view the trends in prices.

    In my company, about 20-30% people are leaving jobs BCOS of high cost of living/poor infrastructure and HIGH APT costs in Pune.They are really sick and tired of the politics & the rickshawallas here as well.
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  • Originally Posted by pcpune
    Rsatiskar,

    I have already been to Ahmedabad many times, and now the prices are around 15-20 lacs for 900-1100 sq feet CARPET with free parking, and NOT built up. In 2009, I would have surely got this price, and hence I am just waiting for that 10-20% correction in Ahmedabad.

    Hence, compared to Pune they are nearly 50% or even 70% less. But, I think you should visit Bangalore & Hyderabad once, they are selling decent 2 BHKs for 18-22 lacs very well within city limits.

    Its just that Pune is SO OVER PRICED, that we cannot look whats cheap. Just visit the NHB housing site, and you can view the trends in prices.


    Did not know that. I am wondering how can there be such a huge difference. Becasue salary levels in Ahemadabad should definietly be close to Pune. When pune prices were ~1000 psf in 2003-2004 & salaries were lower than today's date, Pune seen a sudden boom, surge whatever you call in property prices.

    I am wondering if property prices are so low as compared to salaries, why there is no surge seen in property prices? Demand to supply ratio does not seem to be working here.

    Agreed that from 2004 onwards Pune builders created a cartel to inorganically increase the prices, but too an extent that surge in prices was fueled by real deamand (becasue of the affordability of people).
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  • Originally Posted by pcpune
    Rsatiskar,

    I have already been to Ahmedabad many times, and now the prices are around 15-20 lacs for 900-1100 sq feet CARPET with free parking, and NOT built up. In 2009, I would have surely got this price, and hence I am just waiting for that 10-20% correction in Ahmedabad.

    Hence, compared to Pune they are nearly 50% or even 70% less. But, I think you should visit Bangalore & Hyderabad once, they are selling decent 2 BHKs for 18-22 lacs very well within city limits.

    Its just that Pune is SO OVER PRICED, that we cannot look whats cheap. Just visit the NHB housing site, and you can view the trends in prices.


    One of friend booked a 3 BHK 1600 sft 38 lacks in hyd. Those tower have one flat per floor.
    See the difference between Pune and Hyd. Even Hyd have much more and very good companies compare to Pune.
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  • Originally Posted by pcpune

    In my company, about 20-30% people are leaving jobs BCOS of high cost of living/poor infrastructure and HIGH APT costs in Pune.They are really sick and tired of the politics & the rickshawallas here as well.



    Good that will lessen loand on current poor infrastructure and it will start looking better.

    Wondering why Ahemadabad is not attracting many IT companies. Prices are so cheap, infra is good. Why do they still stick to Pune insptie of exhorbitant prices & poor infra?

    There can be few one off examples but as a trend still Ahemadabad is not seen as an IT city.
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  • Originally Posted by kothrud_pune
    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....

    Well what about Sun Grandeur, Amanora, Nanded City.......these are directly from builders. Sun Grandeur is from your beloved builder, yet just 1 agreement done. What does this indicate? One need not believe about few flats left theory anymore, even in case of investors.

    Check this forum itself no discussion about investment last year...but now people r discussing about investment ...renting ideas....

    Agreed but how much RE investment in Pune is there? Most of it revolves around other cities like Bangalore & A'bad.
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  • Sharing of info becomes simpler

    Originally Posted by kothrud_pune
    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

    Makes a hell lot of difference. Here is why:-

    1.) If you have bought, you will be more bullish, not because of actual ground realities but because you have bought one,
    2.) If brother has purchased, issue maybe same as above,
    3.) If friend has purchased, doesn't matter much.

    However, based on the strong support you gave to builder, I think the options are either 1.) or 2.)

    Also, if you have bought a flat here, one can discuss all Sun's project in depth as the buyer has a lot more info than rest especially with the dealings at the site.

    Eg. Harish, Maggi keep us updated about respective projects & areas (like Aks does for PS). This helps buyers to take more precise view of the entire scenario. In short, more info can be exchanged if real purchase, if any is revealed, nothing personal.

    Hope you got the point.:)
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  • Difference of blood makes the change

    Originally Posted by rsatitkar
    Did not know that. I am wondering how can there be such a huge difference. Becasue salary levels in Ahemadabad should definietly be close to Pune. When pune prices were ~1000 psf in 2003-2004 & salaries were lower than today's date, Pune seen a sudden boom, surge whatever you call in property prices.

    I am wondering if property prices are so low as compared to salaries, why there is no surge seen in property prices? Demand to supply ratio does not seem to be working here.

    Agreed that from 2004 onwards Pune builders created a cartel to inorganically increase the prices, but too an extent that surge in prices was fueled by real deamand (becasue of the affordability of people).

    Man, the reason for A'bad being more VFM is because of Gujju blood....money runs in their blood & the buyer like to see VFM before they buy. It is not like ITGs where you throw money on junk builders just because you have it. Problem in Pune is here money is money, for Gujjus, Marwaris & Vaishyas, money is Lakshmi & this makes all the difference. Add to it strong family values, the kids stay with their parents even if they are earning crores, so no new additional houses for self use, though many gujjus have 2nd house in Mumbai.

    Coming to A'bad, I don't know why people here are just comparing rates/sq ft with Pune & A'bad...look at the biggest difference man:- Pawar & Modi:). This is an added advantage of A'bad, not to forget electricity 24*7 & water + excellent road infra & low fuel prices as well :). You know the petrol pump owners in Maharashtra on Mumbai-Surat road are frustrated coz truckers fill their tank full before entering Mah & refill after entering Gujarat. VAT too is less & the best part:- There is no octroi in Gujarat :). The Black-berry Bold was cheaper by good 5.5k in Gujarat. Saris, damn cheap when compared to what one gets at Laxmi road + better variety as well. So, one saves more making him/her automatically rich.

    I pray IT never comes to Gujarat & to make it rot, I am happy with the manufacturing sector alongwith diamond trade & textile + petroleum. Btw, Gujarat recorded highest agri growth in the country, thanks to irrigation dept which made water & power available for farmers here :).

    *PS:- Ajit Pawar is now Dy.CM of Maharashtra:bab (45): Maharashtra is now Ram Bharose!!
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  • Originally Posted by realacres

    *PS:- Ajit Pawar is now Dy.CM of Maharashtra:bab (45): Maharashtra is now Ram Bharose!!


    it may be better for Pune as now he would try "focus" :bab (34): on other cities in Maharashtra...
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  • Originally Posted by realacres

    However, based on the strong support you gave to builder, I think the options are either 1.) or 2.)

    Also, if you have bought a flat here, one can discuss all Sun's project in depth as the buyer has a lot more info than rest especially with the dealings at the site.

    Eg. Harish, Maggi keep us updated about respective projects & areas (like Aks does for PS). This helps buyers to take more precise view of the entire scenario. In short, more info can be exchanged if real purchase, if any is revealed, nothing personal.

    Hope you got the point.:)


    I have already said ...I can discuss about Satellite and Empire as I know these 2...and already sharing all info about that...
    I am not interested in any other scheme.....and don't see any need to findout more about them....
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  • Originally Posted by realacres
    Well what about Sun Grandeur, Amanora, Nanded City.......these are directly from builders. Sun Grandeur is from your beloved builder, yet just 1 agreement done. What does this indicate? One need not believe about few flats left theory anymore, even in case of investors.


    Agreed but how much RE investment in Pune is there? Most of it revolves around other cities like Bangalore & A'bad.


    That's exactly the problem......most of the seniors r highlighting the -ve facts on RE...
    No one should believe few flats left theory...but at the same time every one should agree that few flat r already sold....so Buyers/Investor's r back in market....

    Your theory is proved wrong till date.....so it's time to change name of this thread now...same as that of Diwali thread....

    (I 'll be happy if prices came down as I can purchase another flat.)
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  • Need a balanced & realistic view

    Originally Posted by kothrud_pune
    That's exactly the problem......most of the seniors r highlighting the -ve facts on RE...
    No one should believe few flats left theory...but at the same time every one should agree that few flat r already sold....so Buyers/Investor's r back in market....

    Your theory is proved wrong till date.....so it's time to change name of this thread now...same as that of Diwali thread....

    (I 'll be happy if prices came down as I can purchase another flat.)


    I have seen people on exterimities (Bulls & Bears) on this thread. But what we need a balanced & realistic view.

    Following points will explain what I mean by a balanced view:

    1. Pune RE has not seen deep decline in prices but at the same time % increase in prices since Early 2008 onwards is not great (20-30% which means CAGR 8-10%)
    2. There is not so strong support for RE prices at current levels , hence prices increasing further to yeild profits on investments seems very difficult.
    3. To support the prices market needs genuine buyers & not just investors. In today's date investor pool in any apartment is ~50% or more. If all of them start selling their apartments there will be substantial supply in the market. This will be in addition to new apartments from builders. This will naturally keep a check on prices.
    4. At the same time however bad Pune infra may be, one thing holds true is Pune has ample jobs still getting created in IT, mfg, education & allied fields. Hence there is always a good pool of genuine buyers. Bears pls do not give one off examples of insutries moving out of Pune. I am talking about overall picture of job market in Pune & which is still good.
    5. Salaries of people have gone up by 50% or more as compared to 200-4-2005 salaries. So surely we can not expect those prices (1000-1500 psf) now.
    6. All in all as urrent prices are bloated and they can not grow further much. There is no striong support to these prices because of the affordability of genuine buyers is diminishing.
    7. Investors though can hold for couple of years they can not hold endlessly.
    8. At the same time when prices start coming down genuine buyers waiting for opportunity will start getting in (once there is a correction ~15-20%). Here market will start getting a support. Prices may continue to go down further but for that also there is a limit which can be max 30-35% in my opinion.
    9. So in today's date if one want to investin Pune RE, I would say it's not good time. Investing in RE by taking a loan in completely illogical in current situation. If one wants to buy for self use, then also market is bloated & it' advisabel to wait for a year or so. Prices are not going to go high further. Chances of them correcting by 10-15% in nearest future are good. Hence better to wait.
    10. These are my views, which I think are balanced:) People can differ:)
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  • Originally Posted by kothrud_pune
    That's exactly the problem......most of the seniors r highlighting the -ve facts on RE...
    No one should believe few flats left theory...but at the same time every one should agree that few flat r already sold....so Buyers/Investor's r back in market....

    Your theory is proved wrong till date.....so it's time to change name of this thread now...same as that of Diwali thread....

    (I 'll be happy if prices came down as I can purchase another flat.)


    Right. Only projecting -ve facts & that 'no flats are selling' is only to prove a theory mentioned here. The reality is different.
    Real, you might know few friends of yours who saw empty offices of builders, no rush etc. but I have few friends who have recently booked & are in process of booking flats in Megapolis, Nanded-City etc. whose possesion dates are in 2012-13 (I am not suggesting that their decision is right or wrong). So it cannot be concluded that there are no buyers in RE market now.
    Yes, everyone would like to have the rates reduced but that is not the reality, atleast as of now. :bab (38):
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