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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  • CommentQuote
  • Originally Posted by kingmanish
    Ha Ha Ha....
    Wow Really Makes Sense....

    After all unless we are investors all we need is accomodation.
    Then why not stay in a cheaper apartment ( Rent )
    If you are getting a car for EMI of 8 k per month and same for 3k on rent then why not rent.

    Even if the car is yours after 7 years who will you need that then or not.
    May be car is outdaded by then and all u want is to sell it :)

    So be the case with rentals and EMI

    Really funny:D. Don't know how you compare car with rent & flat, who will add the fuel costs. If I use my own car, I need atleast 8-10k/month as fuel charges. If I take it on rent, I will be paying a hell lot than this as price/km in self car is less compared to cab.

    Btw, if you can provide me rented car for 3k/month, I will order atleast 5 & I am serious.

    * PS:- Don't send Tata Nano.
    CommentQuote
  • Even SBI is involved in this ?:bab (36): Banker to ALL Indians? SBI is supposedly most trusted bank in India, and where to put FD if not in FD:bab (59):. As ASH used to say iss hamaam me sabhi nangey hai:bab (45):
    CommentQuote
  • Originally Posted by REmania
    :o


    In matter of years, rentals zoom to EMI levels and still u own nothing.


    I dont think thats going to happen, because ...rentals are closely linked to monthly salaries...

    If the average salary in Pune is 30K pm net....one can only afford 10-12k of rent...

    So, what you are aiming at is 50-70k net salary -- AVERAGE --- to pay rentals in the range of 20-35K....well...good optimism.!!!!!!!!!!!
    CommentQuote
  • Originally Posted by realacres
    Really funny:D. Don't know how you compare car with rent & flat, who will add the fuel costs. If I use my own car, I need atleast 8-10k/month as fuel charges. If I take it on rent, I will be paying a hell lot than this as price/km in self car is less compared to cab.

    Btw, if you can provide me rented car for 3k/month, I will order atleast 5 & I am serious.

    * PS:- Don't send Tata Nano.


    No man ... Don't be to optimistic.
    I won't be sending Tata Nano.

    May be some old Maruti 800 or premier padmini :D
    CommentQuote
  • BE CAREFUL WHILE PURCHASING BUNGALOW PLOT

    It seems there is a new breed of conmen who call themselves 'land developers'. One of my friends in Pune, who wants to purchase a plot and build an independent house, came across an ad by ShreeVinayaka Developers. He visited their office in Undri, and later visited their site at Autadewadi, which is about 3 kms from Undri chowk. Plots are available in sizes from 2000 sq ft onwards. he was given the usual sales talk of 'proposed civic amenities' coming up in the area, and was also told that he would get a 7 / 12 extract in his name, besides the Index II. So far so good.
    But when he consulted a lawyer, the following facts came to light:
    1] The entire site is farmland. Unless it is granted RESIDENTIAL NA by the District Collector, it cannot be bought & sold for residential purposes.
    2] The law prohibits breaking down farmland into parcels of less than 10 gunthas ie app 10,000 sq ft.
    3] If one purchases farmland, one has to present proof of being a farmer himself, or someone in the family being a farmer.
    So selling farmland as 'bungalow plots' is totally illegal. And yet this seems to be happening rampantly in the fringe areas of Pune. My friend was told that the developer had a 'setting' with the grampanchayat office, and the 7 / 12 extract for the plot he would purchase would bear his name. To prove the point, the salesman showed him several such extracts pertaining to recently sold plots.
    My friend also checked out plots offered by Ranjeet Developers, as also various 'developers' on Sinhagarh Road and found much the same thing.
    Now, this is another scam waiting to erupt. So-called developers are buying up productive farmland cheap, promoting it as 'bungalow colony', bribing local officials to fudge documents --- and breaking a dozen laws in the process. The end-loser, as usual, is the buyer. The sale-deed can be cancelled , and any construction can be razed by the PMC.
    So be very careful while going for a bungalow plot. In my opinion, this matter should be brought to the notice of the media. Believe me, its a huge scam., and any construction can be razed by the PMC.
    So be very careful while going for a bungalow plot. In my opinion, this matter should be brought to the notice of the media. Believe me, its a huge scam., and any construction can be razed by the PMC.
    So be very careful while going for a bungalow plot. In my opinion, this matter should be brought to the notice of the media. Believe me, its a huge scam., and any construction can be razed by the PMC.
    So be very careful while going for a bungalow plot. In my opinion, this matter should be brought to the notice of the media. Believe me, its a huge scam., and any construction can be razed by the PMC.
    So be very careful while going for a bungalow plot. In my opinion, this matter should be brought to the notice of the media. Believe me, its a huge scam.
    CommentQuote
  • Read 2-3 days earlier in TOI (let)..which mentions the wife of our deputy CM and Pune's guardian minister, sending application to state govt. for converting 20 acres (or 200 don't remember) of farmland on her name into residential zone (NA). The reason given was "all other land next to ours is in R zone..so we want to convert ours too"

    Man..I think the developer your friend is talking with, will eventually do what he is claiming.. anyone can do anything..sirf chahiye to POWER. :D
    CommentQuote
  • Originally Posted by Neo007
    Read 2-3 days earlier in TOI (let)..which mentions the wife of our deputy CM and Pune's guardian minister, sending application to state govt. for converting 20 acres (or 200 don't remember) of farmland on her name into residential zone (NA). The reason given was "all other land next to ours is in R zone..so we want to convert ours too"

    Man..I think the developer your friend is talking with, will eventually do what he is claiming.. anyone can do anything..sirf chahiye to POWER. :D


    But he is not promising to convert the land to RES NA. He is selling it as it is, and the 7/12 extracts also record it as farmland. The whole thing is illegal.
    CommentQuote
  • Originally Posted by realacres
    I differ on this for few reasons:-

    1.) Politcos put money where it can multiply, not just to hide. If returns are not their in RE, they will pull out, infact I have personally seen some politicos exiting RE from Mumbai RE,

    2.) Had politicos been so powerful, why did lavasa get stuck?? Can it raise money from IPO? What was the need for Lavasa to raise money through IPO that too for just INR 2000 Cr when Pawar has much more than this?

    3.) RBI doesn't act under Govt. This Pranab Mukherjee had asked RBI to go slow on home loans interest rates, teaser rates etc. but did RBI listen?? Do you know what situation will it be if SBI needs bail outs?

    4.) Teaser rates are gone, SBI has hiked FD rates by upto 150 bps or 1.5% day before yesterday. This means they will lend at higher rate + expect hike in home loan rates from SBI in coming weeks as well,

    5.) Congress is into RE, infact Sonia Maino Gandhi has significant stake in Indiabulls RE. Yet, banks are not ready to give loans to one of its project at Panvel. Hope you got the point.

    6.) Last but not the least, there is limited capacity for buyers as their incomes are finite. Add to it if prices in areas like Balewadi hit 1Cr+, will it find buyers even by putting ads like "Slice Of Koregaon Park" or "Rise Above the Rest"?

    7.) Recent scams like in housing shake the confidence of investors in RE, making liquidity even tight for builders. Just see the articles posted in this regard. Infact, in Pune, members have already pointed out to court notices put up in front of builder like Kumar Builders.

    8.) I have received 2 invitations from banks to participate in their auction for sale of row houses, flats in past week in Pune. These are people who have defaulted & banks are auctioning their properties. One property is in Wanowrie. So, does these news comes in media???

    All in all properties have a ceiling. Price over this, & it goes for toss, had it not been the case, there wouldn't have been so many RE exhibis showcasing same projects again & again.:D


    Sonia Maino Gandhi has significant stake in Indiabulls RE.

    This is master stroke by realAcres..Real could you please let me know how do you know that Sonia mano gandhi has stack in Indiabulls??? have you seen Sonia mano's name in shareholding pattern of Indiabulls...

    This is really Rubbish..People of level of Sonia gandhi dont play such small games,like having stake in such a small company like indiaBulls (Even A raja & other smaller politician own much bigger companies then IndiaBulls)....

    This seems that either you know everything, what happening in india or just speculate too much to prove your point...


    Had politicos been so powerful, why did lavasa get stuck?? Can it raise money from IPO? What was the need for Lavasa to raise money through IPO that too for just INR 2000 Cr when Pawar has much more than this?

    Sometime you says politicians are so powerful (Specially Power of pawar) that they can amend any plan (even Pawar has diverted water revered for Pune to Lavas) & then sometime says that why lavasa get stuck (you also know why it get stuck...political tussle between Congress & NCP)...And if some company is coming for IPO doesn't always mean they need money..IPOs are also done for PR or marketing of the companies (so that more peoples in other part of India/world know their companies)...For example Infosys never need money when they did GDR in US market,but it was just a PR activity, so that they can put in their brochure that they are listed on US stock exchange...there are many examples in India as well (I can give you if you need one)....

    So, I think one has to limit himself to the matter they know better than commenting on each & every thing in World:bab (35):
    CommentQuote
  • Originally Posted by pcpune
    I dont think thats going to happen, because ...rentals are closely linked to monthly salaries...

    If the average salary in Pune is 30K pm net....one can only afford 10-12k of rent...

    So, what you are aiming at is 50-70k net salary -- AVERAGE --- to pay rentals in the range of 20-35K....well...good optimism.!!!!!!!!!!!


    It also works in reverse.

    As inflation pushes up cost of living, including rent, companies are forced to fork out higher and higher salaries to retain talent.

    When IT was hot in 2000-2007, salaries were higher in IT. In 2000-2003, people avoided IT because of the bad vibes of dot com bust. But by 2004/5, inflation made manufacturing salaries insufficient. Especially RE price inflation, when each techie had 3 flats compared to manufacturing's one . Lots of people from engineering background working as managers/sales/CRM/HR shifted to the IT sector from 2004-2007, which gave better salaries than manufacturing. There was a massive haemorrhage of talent.

    Manufacturing companies were forced to raise salaries from 2004/7 to match IT levels and had to go above and beyond IT levels.

    When IT slowed down, lots of people shifted back to manufacturing for bettter salary and steady jobs. IT is now forced to raise salaries to retain talent.

    People dont shift jobs on whims. Inflation, cost of fees, rental, etc also drives shift to higher salary.

    If Rupee depreciates in a 3-5 year period, you can anticipate much increase in inflation and salaries.
    CommentQuote
  • You missed cost advantage point which gave rise to outsourcing to third world countries like India in first place.

    Originally Posted by Venkytalks
    It also works in reverse.

    As inflation pushes up cost of living, including rent, companies are forced to fork out higher and higher salaries to retain talent.

    When IT was hot in 2000-2007, salaries were higher in IT. In 2000-2003, people avoided IT because of the bad vibes of dot com bust. But by 2004/5, inflation made manufacturing salaries insufficient. Especially RE price inflation, when each techie had 3 flats compared to manufacturing's one . Lots of people from engineering background working as managers/sales/CRM/HR shifted to the IT sector from 2004-2007, which gave better salaries than manufacturing. There was a massive haemorrhage of talent.

    Manufacturing companies were forced to raise salaries from 2004/7 to match IT levels and had to go above and beyond IT levels.

    When IT slowed down, lots of people shifted back to manufacturing for bettter salary and steady jobs. IT is now forced to raise salaries to retain talent.

    People dont shift jobs on whims. Inflation, cost of fees, rental, etc also drives shift to higher salary.

    If Rupee depreciates in a 3-5 year period, you can anticipate much increase in inflation and salaries.
    CommentQuote
  • Facts remain facts

    Originally Posted by ash7979

    This is master stroke by realAcres..Real could you please let me know how do you know that Sonia mano gandhi has stack in Indiabulls??? have you seen Sonia mano's name in shareholding pattern of Indiabulls...

    This is really Rubbish..People of level of Sonia gandhi dont play such small games,like having stake in such a small company like indiaBulls (Even A raja & other smaller politician own much bigger companies then IndiaBulls)....

    This seems that either you know everything, what happening in india or just speculate too much to prove your point...

    Well, I don't speculate to prove my point, now, Pawar & Co. made more in Sugar scam than Lavasa, even the current food scam in UP & northern states is pegged in several thousand crores where food for poor was diverted to open market through backdoor.

    Coming to Sonia Maino Gandhi, she has stakes in Indiabulls RE alongwith LN Mittal of ArcelorMittal who is also one of richest person in the world & richest in UK. Now do you mean to say why LNM is not having stakes in Indiabulls??? Man, even Sharad Pawars' name is not there anywhere in RE projects, be it Lavasa, Amanora, Magarpatta, Nanded City, Ackruti.......bobada pawar doesn't own a car, nor does Sonia Maino Gandhi, infact she doesn't own a house either. Now, if this is the case declared with EC, how will she make share-holding public?? Politicos always spread out their ill-gotten wealth in different firms, some are even based in Mauritius. So, if you don't know this, don't call this rubbish just because it doesn't work according to your logic. Btw, Bollywood movies have lot of underworld & politicos money as well, so do you see producer's name as Chota Rajan or D Company?:D. Don't be naive man.

    Sometime you says politicians are so powerful (Specially Power of pawar) that they can amend any plan (even Pawar has diverted water revered for Pune to Lavas) & then sometime says that why lavasa get stuck (you also know why it get stuck...political tussle between Congress & NCP)...And if some company is coming for IPO doesn't always mean they need money..IPOs are also done for PR or marketing of the companies (so that more peoples in other part of India/world know their companies)...For example Infosys never need money when they did GDR in US market,but it was just a PR activity, so that they can put in their brochure that they are listed on US stock exchange...there are many examples in India as well (I can give you if you need one)....
    Politicians are powerful as long as opposition or alliance partners shut their mouth, else one dacoit become rival of another & does more harm than police:D. As far as IPO of Lavasa is concerned, it has 2 things to do so:-

    1.) One can't construct 100% project without any white money, so they need to show they got money from XYZ official channels,

    2.) Pawar & Co. have already invested a lot in RE, & their crores of rupees in the land near Chakan where they have purchased hundreds of acres of land based on PROPOSED AIRPORT, is now stuck. Add to it that Nanded City & Amanora didn't fare the way MP City did. In Mumbai, Ackruti has probs where Pawar has his money parked in. It is now being told that Pawar & Co. are making investments in liquor manufacturing from wheat & focusing back on sugar. They are also creating firms for making bio-fuels to be added in petrol as petroleum ministry has given it's go ahead for the same.

    So, I think one has to limit himself to the matter they know better than commenting on each & every thing in World

    As said before, I come across people from all walks of life, hence get more info especially insider info directly from them & I comment only when the source is authenticated. Now if you keep demanding proof that show Sonia's stake in Indiabulls or stuff like that, then note that even Pawar doesn't has his name anywhere either which makes him very innocent & harmless:D.

    Btw, did you get the possession of your flat at Vanshaj Kiona, Balewadi?? How is the current experience with the builder & project??
    As said before, I come across people from all walks of life, hence get more info especially insider info directly from them & I comment only when the source is authenticated. Now if you keep demanding proof that show Sonia's stake in Indiabulls or stuff like that, then note that even Pawar doesn't has his name anywhere either which makes him very innocent & harmless:D.

    Btw, did you get the possession of your flat at Vanshaj Kiona, Balewadi?? How is the current experience with the builder & project??
    As said before, I come across people from all walks of life, hence get more info especially insider info directly from them & I comment only when the source is authenticated. Now if you keep demanding proof that show Sonia's stake in Indiabulls or stuff like that, then note that even Pawar doesn't has his name anywhere either which makes him very innocent & harmless:D.

    Btw, did you get the possession of your flat at Vanshaj Kiona, Balewadi?? How is the current experience with the builder & project??
    As said before, I come across people from all walks of life, hence get more info especially insider info directly from them & I comment only when the source is authenticated. Now if you keep demanding proof that show Sonia's stake in Indiabulls or stuff like that, then note that even Pawar doesn't has his name anywhere either which makes him very innocent & harmless:D.

    Btw, did you get the possession of your flat at Vanshaj Kiona, Balewadi?? How is the current experience with the builder & project??
    CommentQuote
  • Originally Posted by Venkytalks
    It also works in reverse.

    As inflation pushes up cost of living, including rent, companies are forced to fork out higher and higher salaries to retain talent.


    Rent is not just inflation. Its demand/supply as well. We had worst inflation in last 3 yrs and rent remain constant in last 3 yrs.

    I see rentals coming down in future, because of oversupply already.
    CommentQuote
  • The built-up trap

    A good article again from IE where it shows how builders fake the areas which makes buyers shell out more money for area which are non-existent. Read for more:-

    http://www.indianexpress.com/news/the-builtup-trap/720338/0
    CommentQuote
  • Venky are you sure of this ? i come from core IT and so do most of my friends. Core IT and manufacturing and complete different beasts. You cant switch just like that between the 2. In late 90s and early 2000, lots of ppl between age 30 and 40, who were smart and stuck with less pays shifted to IT, but never went back.

    Can you give some domain specific examples or products ? will be helpful !


    Originally Posted by Venkytalks
    It also works in reverse.

    When IT slowed down, lots of people shifted back to manufacturing for bettter salary and steady jobs. IT is now forced to raise salaries to retain talent.

    People dont shift jobs on whims. Inflation, cost of fees, rental, etc also drives shift to higher salary.

    If Rupee depreciates in a 3-5 year period, you can anticipate much increase in inflation and salaries.
    CommentQuote