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?

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  • I DONT agree to put culprits into the jail, as if All politicians go to jail then who is going to run the country???
  • Originally Posted by ashishpune
    I DONT agree to put culprits into the jail, as if All politicians go to jail then who is going to run the country???

    we have many more gundas and mafias, no shortage, everyone should get chance.
  • Originally Posted by ashishpune
    I DONT agree to put culprits into the jail, as if All politicians go to jail then who is going to run the country???

    I guess you missed an 'i' in the spelling. It should be:

    ...who is going to ruin the country???
  • Originally Posted by kothrud_pune
    Also DADA is there to pull his legs....New CM has recently admitted ....there r many restriction when single party donot have majority...

    Just another lame excuse of Congress. Isn't BJP having alliance with SAD in Punjab, with JD(U) in Bihar & still performing better than Congress run states? The fact is there is no capable leader in Maharashtra unit of Congress
    (as rightly said by some, even the current CM has been imported from Delhi:D) or NCP to take the state forward. It is more like choosing better amongst the worst.:bab (45):

    Coming to Congress again, Sonia Maino Nehru (also called as Sonia Gandhi) has significant stake in Indiabulls Realty alongwith steel tycoon LN Mittal, the Chairman of ArcelorMittal. Bhupinder Singh Hooda of Congress in Harayana is a pet of KP Singh of DLF. Ask anyone how state govt cleared so many sanctions in such a short time for DLF. It is no wonder why most of the new areas have been developed by DLF in Gurgaon.:bab (34):

    In 1995 when BJP-SS came to power, the RE prices in Mumbai fell by 30-35% & when Congress-NCP returned in 1999, the RE prices again went upwards. Any guesses why? :bab (35):
  • Originally Posted by wiseman
    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?


    Well, 1p/m will be there as those who introduced this:- Tata Docomo have also got 3G spectrum. Now note that cos paid high price for 3G spectrum not for only 3G but the bandwidth is now so big that they won't require any additional spectrum. Cos like Uninor, Videocon, Swan etc. will now be even in bigger mess as they won't be even able to sell their 2G spectrum to existing players like Vodafone, Airtel, Idea etc. as all have sufficient 3G spectrum to accommodate voice as well. They have just made dead investment & cos especially like Uninor will be the biggest hit.

    *PS:- Mukesh Ambani lead RIL had interest in telecom (they have already bought pan-India license through backdoor channels for Wi-Max) & was considering buying out Videocon Tele as well as D2H. Seems some said no point in fighting with Anil everywhere:D.
  • I like your inner info on the politics circle, realacres, really :)
  • Originally Posted by ashishpune
    I DONT agree to put culprits into the jail, as if All politicians go to jail then who is going to run the country???

    Well, do you think Govt runs the country at first place?? Do you think if Parliament is bombed & all 545 MPs die, will you die next day? C'mon man, it is the corporations which run the countries & Govt is just a puppet. Seen cabinet ministers doing Jee Huzoor in front of corporate big shots . A MLA had touched a feet of infrastructure cos Chairman.

    Btw, if junk MoS for Home like Bagwe can lift chappals of Rahul, they will even lick the sole of the fund-raisers:D.

    Btw, politicos used to line-up like beggars in front of Maker Chambers 4 (MC4), South Mumbai for tickets.

    * MC4 was RIL HQ during the time of Dhirubhai Ambani.:)
  • High property prices hit resale of old flats

    See how the viscous cycle of high prices hit sellers well:-

    Mumbai, November 13, 2010
    Source:- HT

    The steep property rates in the new constructions seem to have played an adverse effect on the resale of flats in the city. The reason: Owners of these used flats, who usually upgrade themselves to new constructions, are finding it difficult to find new properties suiting their budgets owning to exorbitant rates quoted by the builders. This has forced many to defer sale of their existing properties.

    Ram Prasad Padhi, CEO of Mumbai Propertys, a leading real estate brokerage firm, rues the absence of sellers. “We have a huge database of buyers but flat owners are postponing their sales in a big way,” said Padhi.

    He added that recently a flat owner at IC Colony in Borivli had refunded a token money on the pretext that there was not a single property in the vicinity where he could shift which suited his budget.

    The resale flats market occupies 50% of the sales in the realty sector. In normal course, flat owners tend to sell off the premises and shift to bigger ones in new constructions. However, the recent unprecedented hike in new constructions has dampened their mood.

    “Flat owners are adopting a wait-and-watch policy as they expect these rates to come down,” said Harendra Pandya, vice-president, Estate Agents Association of India, an apex body of real estate agents.

    Builders say they should not be blamed for the scenario. “The overheads have increased in the last two years and we price according to market conditions,” said Shailesh Sanghvi, director of Sanghvi Builders.

    But experts say this disturbs the entire market. “Homebuyers are left in lurch while the government loses revenue,” said Pankaj Kapoor, CEO of Liasas Foras, a real estate research firm.
  • Builders say they should not be blamed for the scenario. “The overheads have increased in the last two years and we price according to market conditions,” said Shailesh Sanghvi, director of Sanghvi Builders.

    What market conditions drove these rates making people to sit on fence?
  • Sub prime presentation

    This explains in extremely simple terms what happened.Just move the slides one by and one in a sequence and you get the picture

    :bab (4):
  • 4 yrs on, a bridge to nowhere

    This is what happens if you believe in DP stuff of the builders. Another kick for those who bought based on DP bridge & DP road connecting PN to Baner. See the image below.

    PMC fails to acquire land for approach to Baner-Pimple Nilakh bypass over Mula river

    Archana Dahiwal
    Source:- 3dsyndication

    Despite being completed about four years ago, the Pimple Nilakh-Baner Bridge over the Mula river is yet to be opened to the public, because there is no connecting road at one end.
    The project was undertaken jointly by the Pune Municipal Corporation (PMC) and the Pimpri Chinchwad Municipal Corporation (PCMC). About Rs5.25 crore was spent to build the 160-metre-long, 20-metre-wide bridge.
    "The construction of the overbridge was completed on September 20, 2007. But the bridge could not be opened to the public because the PMC failed to acquire the land at one end of the bridge," claimed PCMC officials.
    According to officials the acquisition of the land was imperative for the construction of a road connecting the overbridge. Once inaugurated, the overbridge would link Pimple Nilakh, Kalewadi, Rahatni, Jagtap Dairy and Baner-Balewadi routes.

    A demand by the residents to open the overbridge for public has been long-pending. The PCMC engineering department co-ordinator, Dilip Kudale, told DNA, "As it was a joint venture by both the municipal corporations, the PCMC had completed its work on time. It was the failure of the PMC, which has not followed the deadline for the project."

    In a Right to Information (RTI) inquiry on the status of the overbridge by BJP activist Vishwas Gandhile in 2008, it was revealed that the PMC had failed to acquire the land for developing a road near the project.
    Under the RTI Act, 2005, he was informed that the PMC had sent a proposal for land acquisition to the district collectorate office on June 8, 2006. "If the PMC still neglects the land acquisition for the road development, it would complicate matters. Encroachments have already started taking place near the project," PCMC officials claimed.

    The Pimple Nilakh-Baner overbridge proposal was sanctioned during the tenure of former PCMC commissioner Anil Diggikar in 2003. Local activists made efforts to ensure that the overbridge was opened before the Commonwealth Youth Games in 2008, but in vain.
    There are nearly 2,000 commuters from various parts of the city like Baner, Pashan, Pune and Aundh who come to the Pimpri-Chinchwad area for work every day. They could save a lot of time if the bridge was opened to traffic.
  • Dear Members,

    Greetings on Guru Nanak Jayanti :).
  • The Power Tapes

    Man, not directly related to RE but is indeed interesting. It shows how corporates lobby to mend their rules according to their interests:). Here are some fone tapes done by people having access to strings which you will find useful. Most of country's leading politicos & top corporate honchos & media chaps are heard. Listen & have some fun.:bab (59):

    Is India indeed a democracy?:D:D
  • India is a demon-cratic Rupia-blic
  • Confusopoly

    This was supposed to criticize business but it is very well suitable for builder lobby...

    Another genius cartoon from my favorite Scott Adams!