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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  • NCL gives up 2.2-acre plot: value Rs22 crore

    The following is yet another article using which one can clearly understand that even Govt land can't be taken for granted. So, if a builder tries to sell a project based on open govt land in front of the project etc. never believe that. One can't guarantee for how long the plot shall remain vacant. Always buy based on the assumption that some building will come up on adjoining plot.:bab (35):

    PUNE
    Dinesh Thite
    Nov 15, 2010,Mon

    In a surprising development, the director of the National Chemical Laboratory (NCL) here has requested the state government to delete the reservation of a 2.2-acre plot of prime land meant for public and semi-public purpose. The state government has accepted the request.
    The state urban development department issued an order recently in this regard, which says the land (survey no 19A/2B) of 2.2 acres in Pashan, shown as existing public/ semi-public zone of NCL is deleted as shown in the plan.

    Former assistant director of town planning, Ramchandra Gohad, told DNA that once the public or semi-public zone of the land is deleted, it becomes residential. Now, the private owner would be able to develop the plot. It is estimated that the market price of the land is in the region of Rs22 crore. The two pieces of land bearing (survey numbers 19A/2B and 18 part) of 2.2 acres were designated for public/ semi-public zone for NCL, according to the development plan of 1987 of the Pune Municipal Corporation (PMC).
    The order says land owner Prakash N Baldota and the NCL director requested the government to delete the land reservation under provisions of the Maharashtra Regional and Town Planning Act, 1966. Accordingly, the state government has made the change.

    The NCL director was not available for a comment on the issue. The NCL's public relations officer, PK Ingale, asked this correspondent to call up on Monday, saying he needed to study the documents.
    Established in 1950 in Pashan area near the University of Pune, the NCL is a premier public interdisciplinary research institute.

    Source:- 3dsyndication
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  • Originally Posted by realacres
    The following is yet another article using which one can clearly understand that even Govt land can't be taken for granted. So, if a builder tries to sell a project based on open govt land in front of the project etc. never believe that. One can't guarantee for how long the plot shall remain vacant. Always buy based on the assumption that some building will come up on adjoining plot.:bab (35):

    PUNE
    Dinesh Thite
    Nov 15, 2010,Mon

    In a surprising development, the director of the National Chemical Laboratory (NCL) here has requested the state government to delete the reservation of a 2.2-acre plot of prime land meant for public and semi-public purpose. The state government has accepted the request.
    The state urban development department issued an order recently in this regard, which says the land (survey no 19A/2B) of 2.2 acres in Pashan, shown as existing public/ semi-public zone of NCL is deleted as shown in the plan.

    Former assistant director of town planning, Ramchandra Gohad, told DNA that once the public or semi-public zone of the land is deleted, it becomes residential. Now, the private owner would be able to develop the plot. It is estimated that the market price of the land is in the region of Rs22 crore. The two pieces of land bearing (survey numbers 19A/2B and 18 part) of 2.2 acres were designated for public/ semi-public zone for NCL, according to the development plan of 1987 of the Pune Municipal Corporation (PMC).
    The order says land owner Prakash N Baldota and the NCL director requested the government to delete the land reservation under provisions of the Maharashtra Regional and Town Planning Act, 1966. Accordingly, the state government has made the change.

    The NCL director was not available for a comment on the issue. The NCL's public relations officer, PK Ingale, asked this correspondent to call up on Monday, saying he needed to study the documents.
    Established in 1950 in Pashan area near the University of Pune, the NCL is a premier public interdisciplinary research institute.

    Source:- 3dsyndication


    Does this also means, just like Mumbai, Pune govt officials have also been ordered to vacate land for builders? i think if a piece of land is reserved for public use, 'public' need to have some say in these transfers...

    tomorrow, they might make 'Sarasbag' as a residential land... :D
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  • Unitech slips a lot on deliveries, debt up 11.6% or `700 cr

    Another story of a major builder whose debt is rising. Same is the case with several others as well. This just portrays the real picture of RE. The nos. clearly show that not all is well with RE sector.

    Had to deliver 23 msft, does a third of that up to Sept

    Pooja Sarkar
    Mumbai
    Nov 15, 2010,Mon
    Source:- 3dsyndication

    Unitech Ltd, the second-largest realtor by market capitalisation, is way off its delivery target, according to the company's operational update for the September quarter released on Saturday.
    Net profit for the quarter fell 2% to `173.8 crore from `177.9 crore in the same period last year.
    While Unitech had a target to deliver 23.1 million square feet (msft) up to the September quarter, it has managed to hand over only a third of that, or 8.6 msft. These are projects launched before March 2009.
    R Nagraju, chief financial officer, Unitech, said most of the deliveries are in the final stage. "Structural work is currently being done and we will begin handing over all these projects in the next 4-5 quarters. For one or two projects that are more than 50 storeys tall, it will take more time."
    Meanwhile, Unitech's debt has also risen 11.6% in the quarter to `6,700 crore from `6,000 crore.
    Analysts find this is a cause for worry.
    "The reason for the increase in debt is not clear. It could be because of land purchases," one analyst with a foreign brokerage, who did not wish to be named, said.
    Unitech made repayments of less than `1,000 crore by the end of this fiscal, Nagraju told DNA Money on Saturday.
    The company has again started land acquisition in Gurgaon, Nagraju said.
    "We have started buying land in strategic locations which are adjoining our present sites in Gurgaon. We will be investing `150 crore plus on a quarterly basis for this. But we will do it only to the extent where we do not overleverage," he said.
    The company is buying more land in Gurgaon because premium housing is finding buyers right now, said another analyst.
    "So the concept of affordable housing has taken a backseat. But the question on margins still remains as land prices have also shot up so we do not foresee much profit from these moves," the analyst, who, too, works with a foreign brokerage, said.
    Unitech also sold 2.58 msft in Gurgaon in the September quarter, while sales in the rest of the cities have been pretty slow.
    "In Chennai and other places, there is potential and we have done better than our peers but the volumes that we do in the National Capital Region cannot be compared," Nagaraju said.
    Interestingly, Unitech's sundry debtors — or those who owe the company money — have risen by 28% in the quarter.
    Nagaraju said this is because property prices haven't risen in the Greater Noida region. "In certain pockets we are facing a cash problem as post downturn, prices have not moved up here but we hope to receive the receivables soon," he said.
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  • Builder lobby wary of change in Maha leadership



    Ashok Chavan , ousted over a land scam, is leaving behind a wistful lot of builders in his wake. Real estate analysts estimate that the revenue of an average builder close to doubled because of a series of relaxations related to Floor Space Index (FSI) approved by Chavan.

    The builders' biggest fear is that the incentive FSI given in lieu of public parking, a scheme that had Chavan's stamp of approval, will be scrapped. This scheme, conceived three years ago, gives up to 50 per cent FSI to developers for creating public parking. Builders made a beeline for this scheme and pocketed about 87 lakh sq ft against 27,000 parking spaces. Over 80 per cent of these are in South and Central Mumbai - mainly on mill lands - where the rates are anywhere between Rs 20,000-60,000 per sq feet.

    Town planners say the new CM has a challenging task on his hands. Chandrashekhar Prabhu, town planning expert, said, "It will be prudent to roll back parking FSI in some places where it is doing more harm than good such as Lower Parel."

    Advocate Y P Singh alleges that many of the parking proposals were cleared "with lightening speed" just before the Vidhan Sabha elections last year.

    He also alleges that Chavan extended his tacit support to the BMC when it allegedly turned lax and started allowing builders to construct fourfeet ornamental projections such as flower beds and sundecks in each apartment. Developers are exploiting this provision to increase the super built-up area or loading by about 70 per cent. "The BMC had restricted these after rampant violations a few years ago. After 2009, they got emboldened because of the CM's support," said Singh.

    An analyst, requesting anonymity, said these two moves put together almost doubled the area a builder could sell. "Earlier, on a plot of 1,000 sq feet in the suburbs, a developer could build 2,000 sq feet and could stretch it to 3000 sq feet by including 40 per cent loading. Now, on the same 1,000 sq ft plot, he can build more than 5,100 sq feet," the analyst said. An architect, who did not wish to be named, confessed he worked out a saleable area of 2,50,000 sq feet for a leading city builder on a 50,000 sq feet plot thanks to these incentives.

    Another big sop for builders during Chavan's time came in the form of relaxed FSI norms for Information Technology (IT) Parks. Five years ago, the government had allowed such parks double FSI - 2.66 in the island city and 2 in the suburbs. In July this year, the Urban Development Department, headed by Chavan, included banks and non-banking financial institutions in the 80 per cent of the parks earlier for IT/ITES activities. This relaxation paved the way for over 15 million sq feet of non IT commercial real estate space, analysts say.

    Mumbai Mirror asked Sunil Mantri, President of Maharashtra Chamber of Housing Industry (MCHI) - the city's strongest builder lobby , if Chavan's departure was going to cause problems. "There may be a couple of issues, the parking FSI, for instance. Even if there is disagreement, I am sure the basic agenda will continue to be the creation of affordable housing. We are not worried and will make a presentation before the new CM shortly."
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  • "We are not worried and will make a presentation before the new CM shortly."

    In other words, new paycheck will be presented. Hope the new Chavan will live up to the expectations of aam janta, and teach a few lessons to the builders. But is it too much to expect from anyone coming from congress?

    Man this govenrment has looted the public so much :( All major scams, same names everywhere, and what's the big punishment? Madamji will ask him to resign, that's it. He can happily go on enjoying the wealth created in 1-3 years, that his past 7 generations couldn't build, and his next 7 generations won't have to work.

    Are things this bad even in UP/MP/Bihar?
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  • Originally Posted by ani_meher
    "We are not worried and will make a presentation before the new CM shortly."

    In other words, new paycheck will be presented. Hope the new Chavan will live up to the expectations of aam janta, and teach a few lessons to the builders. But is it too much to expect from anyone coming from congress?


    Also DADA is there to pull his legs....New CM has recently admitted ....there r many restriction when single party donot have majority...
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  • lets hope that new chief minister ensures welfare of public and not bunch of builders

    btw nice article from sakal, greedy builder bhagao, maharashtra bacaho
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  • Originally Posted by ani_meher

    Man this govenrment has looted the public so much :( All major scams, same names everywhere, and what's the big punishment? Madamji will ask him to resign, that's it. He can happily go on enjoying the wealth created in 1-3 years, that his past 7 generations couldn't build, and his next 7 generations won't have to work.

    Are things this bad even in UP/MP/Bihar?


    Or madamaji may promote them to centre as 'heavy business minister'.
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  • Unitech could be facing huge unxpected problems ...

    Originally Posted by realacres
    Another story of a major builder whose debt is rising. Same is the case with several others as well. This just portrays the real picture of RE. The nos. clearly show that not all is well with RE sector.
    Folks, In 2008, I thought Unitech was a gone-case with the enormous debt load they had. Then they played the 2G Scam and bought Telecom licence by paying their "respects" to A.Raja. As a result they sold the licence for a 6000 Crores profit to Telenor, which is stuck now in India with a humongous loss running over 10000 Crores. I had mentioned this around a year back when this happened. Now that the Scam has broken out and will start consuming victims, Telenor is washing off its hands saying any action will be borne by Unitech promoters because they only came in later. I suspect that, if this goes into a withdrawal of licences due to criminal acts of omission, commission, supression of facts, etc, then Telenor could then take Unitech owners to court to recover their 6000 Crores. IF this happens, RIP UNITECH! cheers
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  • This swan telecom is one of the strangest cuckoo in the whole 2G
    http://www.livemint.com/2008/02/06235301/In-race-for-spectrum-Swan-Tel.html

    Do u know which is this Baramati based group that is so strong..
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  • There is a talk going on of revoking all the lisences of the firms. If that happens, at least all this crap would come to a good halt.
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  • After aadarsh society scam of mumbai, cnn ibn has some evidence of k'taka cm's involvement in banglore land scam. and fall of building in delhi has already started debate of builder, mafia, beaurocrat and politician nexus in real estate...:bab (45):
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  • With you on that ...

    Originally Posted by harshalx
    There is a talk going on of revoking all the lisences of the firms. If that happens, at least all this crap would come to a good halt.



    I too firmly believe that not only should licences be revoked, but also Raja should get a long jail term with no bail.

    The Licence money should be confiscated. People who misrepresented should also get jail terms.

    The only problem is that, once Govt gets so-called corrrect price, 2 negative things will happen ...

    1. The Licence Fees will be squandered away like the 3G money by Govt
    2. 2G costs will skyrocket - say goodbye to 1p/m calls

    Which one would you like?

    cheers
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  • No tree, just buildings

    Originally Posted by harshalx
    Another interesting article in Sakal.

    http://72.78.249.107/esakal/20101116/5389103658647036432.htm


    Yep not just humans, but even the dogs are affected by this builders, cutting all the trees and building flats.:D:D:D
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