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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  • New Year, new, higher EMI: Banks hike rates

    The country’s second largest lender also increased its floating reference rate (FRR) by 25 bps for consumer loans (including home loans) to 14 per cent.

    Read more here:-

    New Year, new, higher EMI: Banks hike rates up to 50 bps
    CommentQuote
  • Still a lot more of interest hike has to come in - expecting 2% repo rate hike by RBI in 2011.

    This would mean more and more stronger hands would be able to dictate the markets which would translate into "hum to etne mai he bechne wale hai - aapko lena hai to lo nahi to kahi aur dekho".

    We are in a bull markets and with shifting populations from rural to urban areas the prices of land/house/accommodation is bound to go northward only. :)

    Those who missed you will miss out again. They missed in 1994, 2001, 2004 bought only in 2007 then missed again in 2009 ;)

    Aisa he hota hai bhai logo - as they say Bulls make Money Bears make money pigs (read retails) gets slaughtered - always

    Rohit
    CommentQuote
  • Originally Posted by rohit_warren
    Still a lot more of interest hike has to come in - expecting 2% repo rate hike by RBI in 2011.

    This would mean more and more stronger hands would be able to dictate the markets which would translate into "hum to etne mai he bechne wale hai - aapko lena hai to lo nahi to kahi aur dekho".

    Man, even builders won't be able to borrow easily, nor did I understand this logic coz when interest rates go upwards, so does EMIs making housing unaffordable. To whom builders will sell if interest rates are over 13% ?? Interest rates are inversely proportional to RE prices & history has proven this.

    We are in a bull markets and with shifting populations from rural to urban areas the prices of land/house/accommodation is bound to go northward only.

    Wrong, it also depends upon the incomes of these people who migrate. Had this not been the case, rates in Mumbai would have been more than Monte Carlo.

    Those who missed you will miss out again. They missed in 1994, 2001, 2004 bought only in 2007 then missed again in 2009

    And what about crash in 1998?? As far as 2009 is concerned, had these so called reduced rates would have been sufficient, all projects launched before 2009 would have been completed sold out. As this is not the case, it isn't wise to say that 2009 rates dipped considerably to revive RE market especially in Pune. The correction was good & buyers bought outside Pune in metros & cities like Bangalore, H'bad & NCR.

    Aisa he hota hai bhai logo - as they say Bulls make Money Bears make money pigs (read retails) gets slaughtered - always

    If this is the case, why have the NPAs in RE gone up YoY??
    CommentQuote
  • 'Hike in RR rates will not affect property prices'

    The state government has hiked the rates by 18 to 20% from January 1
    Jan 02, 2011,Sun
    Abhay Khairnar
    Source:- 3dsyndication

    Experts from the housing sector feel that the rise in ready reckoner (RR) rates would not affect the property buyers much in the city, as the market prices are already higher than government valuation.
    Experts in the real estate sector said the hike in rates would help the government to get more revenue as in some transactions, buyers and sellers show sale deeds of a minimum amount to save stamp duty. The government has increased the RR rates by 18-20% in city from Saturday.
    Every year, the government reviews the RR rates and implements the revised rate on January1. The RR rates are used for valuation of a property to calculate minimum registration charges and stamp duty to be paid while registering the sale deed.
    Advocate Sumedh Katariya told DNA that a customer will have to pay 6% (5% stamp duty and 1% registration fee) while registering the sale deed.
    "While registering the property, every transaction should be either according to the RR rates or higher. It is being observed that transactions are happening at rates more than the RR rates in the city,'' he said.
    Sachin Shingav, president, Association of Real Estates Agents (AREA) said it is an exaggeration that the property prices in city are going to be dearer by 18-20%.
    "The hike is only in RR rates but the market price is much higher than ready reckoner rates. Hence, it won't have any affect on the property price,'' he said.

    * PS:- This means builders will now be forced to take less cash which in turn is good for buyers especially those who don't have B-money. Btw, the RR rates in Model Colony are highest in Pune, more than Koregaon Park or Boat Club road.

    ---------

    Anyways, for keeping the moment light, here is an SMS I received:-

    Message from Sri Sri Ravishankar in Goa:-

    Having a wife is part of living.

    But having girlfriend alongwith wife is "Art Of Living":D.
    CommentQuote
  • in short chose between eating food with onions vs living luxurious apartment with luxurious water tankers :bab (45):
    CommentQuote
  • Originally Posted by realacres
    The state government has hiked the rates by 18 to 20% from January 1
    Jan 02, 2011,Sun
    Abhay Khairnar
    Source:- 3dsyndication

    Experts from the housing sector feel that the rise in ready reckoner (RR) rates would not affect the property buyers much in the city, as the market prices are already higher than government valuation.
    Experts in the real estate sector said the hike in rates would help the government to get more revenue as in some transactions, buyers and sellers show sale deeds of a minimum amount to save stamp duty. The government has increased the RR rates by 18-20% in city from Saturday.
    Every year, the government reviews the RR rates and implements the revised rate on January1. The RR rates are used for valuation of a property to calculate minimum registration charges and stamp duty to be paid while registering the sale deed.
    Advocate Sumedh Katariya told DNA that a customer will have to pay 6% (5% stamp duty and 1% registration fee) while registering the sale deed.
    "While registering the property, every transaction should be either according to the RR rates or higher. It is being observed that transactions are happening at rates more than the RR rates in the city,'' he said.
    Sachin Shingav, president, Association of Real Estates Agents (AREA) said it is an exaggeration that the property prices in city are going to be dearer by 18-20%.
    "The hike is only in RR rates but the market price is much higher than ready reckoner rates. Hence, it won't have any affect on the property price,'' he said.

    * PS:- This means builders will now be forced to take less cash which in turn is good for buyers especially those who don't have B-money. Btw, the RR rates in Model Colony are highest in Pune, more than Koregaon Park or Boat Club road.

    ---------

    Anyways, for keeping the moment light, here is an SMS I received:-

    Message from Sri Sri Ravishankar in Goa:-

    Having a wife is part of living.

    But having girlfriend alongwith wife is "Art Of Living":D.


    Will this not cause property tax hike ?

    "Art of Living" - Can find lot of these in Marigold , kalyaninagar :D:D
    CommentQuote
  • Originally Posted by realacres
    The state government has hiked the rates by 18 to 20% from January 1
    Jan 02, 2011,Sun
    Abhay Khairnar
    Source:- 3dsyndication


    * PS:- This means builders will now be forced to take less cash which in turn is good for buyers especially those who don't have B-money. Btw, the RR rates in Model Colony are highest in Pune, more than Koregaon Park or Boat Club road.



    +1.

    Other impact: It will have def. impact on small-mid type of investors. They were taking advantage of lower RR.

    I just got the news dat RR in Model Colony is 7500 psq....:). I can easily guess dat why RR is high in Model Colony...:bab (59):
    CommentQuote
  • Originally Posted by suryawork
    Will this not cause property tax hike ?

    "Art of Living" - Can find lot of these in Marigold , kalyaninagar :D:D

    Property tax is going to be hiked this year in any case as it is revised after every 10 years. So, this is bad news for those whose completion will come in mid 2011 or later.

    Marigold?? Are you sure man.....if so, Manoja, neo007, ani_meher & several others would like to rent a flat here:D. No wonder why Marigold has BPOs & IT cos.

    I just got the news dat RR in Model Colony is 7500 psq..... I can easily guess dat why RR is high in Model Colony...

    Oh, you mean because of the word 'Model':D. Expect some model annexes in Pune RE now. New projects will come up in super-model areas!!!:D
    CommentQuote
  • A lookback at year 2010, has been very good for India overall

    VOA | India's Economy Rebounds in 2010 | Asia | English


    Deals worth $10 billion were sealed during U.S. President Barack Obama's visit. During the French President's visit, deals worth about $13 billion were announced, while the Chinese Premier secured deals totaling $20 billion. A $30 billion deal for fighter aircraft was the highlight of the Russian President's visit. All countries set ambitious new targets for increasing trade with India amid forecasts that the high rate of growth will continue.
    CommentQuote
  • 8/10 home buyers are unhappy with their purchase: Survey

    A real mind opening news:-

    Press Trust Of India / Mumbai January 3, 2011, 0:05 IST

    Only a poor two out of 10 home buyers, both first-time as well as second-time, feel satisfied with the homes they buy as a whopping 80 per cent are dissatisfied with their purchase, says a survey .

    The study conducted by Track2Realty, an information platform for the realty sector based in New Delhi, says still larger portion (92 per cent) of the respondents are highly dissatisfied with the private developers and would prefer government housing.

    The survey was conducted among nearly 2,000 middle and upper middle-class buyers.

    What is more interesting is that in the absence of any effective regulatory mechanism in the realty sector, 74 per cent of these people would not mind investing in shares of the same realty developer they are dissatisfied with, says the survey.

    Again, as many as 70 per cent of these home-buyers repent investing their life savings in the real estate they bought even though 65 per cent of them saw their real estate price appreciate.

    Out of these 80 per cent dissatisfied buyers 31 per cent have already filed or are preparing to file cases in consumer courts against their developers, and 43 per cent of those who have moved the courts or are preparing to do so have refused out-of-court settlements with the developers.

    Again, 87 per cent those polled with double income are already looking for a better home.

    The main grouse against the developers include poor construction quality (92 per cent), poor facility management provided by the developers (69 per cent), with 67 per cent sulking over hidden costs.

    Other complaints include delayed possession, and short-changing on the floor area and carpet area among other issues.

    Within the dissatisfied lot, 62 per cent are first-time buyers while 38 per cent are second-time buyers. On a scale of 1,000, the customer satisfaction is a dismal 212.

    The survey-covering 28 private sector developers was conducted in 10 cities — Delhi, Mumbai, Kolkata, Bangalore, Ahmedabad, Jaipur, Patna, Kanpur, Allahabad and Indore — between December 1 and 25 by Track2Realty.

    A significant number of the respondents (1,672, 34 per cent females and 66 per cent males) were buyers of mid segment houses and majority were first-time buyers (62 per cent) who shifted to the new house either from parental homes or rented accommodation.

    Link is here:-

    8/10 home buyers are unhappy with their purchase: Survey
    CommentQuote
  • Originally Posted by realacres
    A real mind opening news:-

    Press Trust Of India / Mumbai January 3, 2011, 0:05 IST

    Only a poor two out of 10 home buyers, both first-time as well as second-time, feel satisfied with the homes they buy as a whopping 80 per cent are dissatisfied with their purchase, says a survey .

    The study conducted by Track2Realty, an information platform for the realty sector based in New Delhi, says still larger portion (92 per cent) of the respondents are highly dissatisfied with the private developers and would prefer government housing.

    The survey was conducted among nearly 2,000 middle and upper middle-class buyers.

    What is more interesting is that in the absence of any effective regulatory mechanism in the realty sector, 74 per cent of these people would not mind investing in shares of the same realty developer they are dissatisfied with, says the survey.

    Again, as many as 70 per cent of these home-buyers repent investing their life savings in the real estate they bought even though 65 per cent of them saw their real estate price appreciate.

    Out of these 80 per cent dissatisfied buyers 31 per cent have already filed or are preparing to file cases in consumer courts against their developers, and 43 per cent of those who have moved the courts or are preparing to do so have refused out-of-court settlements with the developers.

    Again, 87 per cent those polled with double income are already looking for a better home.

    The main grouse against the developers include poor construction quality (92 per cent), poor facility management provided by the developers (69 per cent), with 67 per cent sulking over hidden costs.

    Other complaints include delayed possession, and short-changing on the floor area and carpet area among other issues.

    Within the dissatisfied lot, 62 per cent are first-time buyers while 38 per cent are second-time buyers. On a scale of 1,000, the customer satisfaction is a dismal 212.

    The survey-covering 28 private sector developers was conducted in 10 cities — Delhi, Mumbai, Kolkata, Bangalore, Ahmedabad, Jaipur, Patna, Kanpur, Allahabad and Indore — between December 1 and 25 by Track2Realty.

    A significant number of the respondents (1,672, 34 per cent females and 66 per cent males) were buyers of mid segment houses and majority were first-time buyers (62 per cent) who shifted to the new house either from parental homes or rented accommodation.

    Link is here:-

    8/10 home buyers are unhappy with their purchase: Survey



    Yeah, I read it y'day in ToI or DNA.
    This news has proved dat RE buyers are not thinking properly before purchasing the property. (also nullify the claim dat only IT wale nahi sochte :bab (59):).

    There minds are like Girls, you will never understand what's cooking thr


    BTW: gng outside (weekend's) with GF/Wife?? here is the tip:
    'We always hold hands. If I let go, she shops.' :D
    CommentQuote
  • Originally Posted by realacres

    The survey-covering 28 private sector developers was conducted in 10 cities — Delhi, Mumbai, Kolkata, Bangalore, Ahmedabad, Jaipur, Patna, Kanpur, Allahabad and Indore — between December 1 and 25 by Track2Realty.


    Interestingly, Pune having very high rates, is not included in this survey.

    Originally Posted by jigarshah

    This news has proved dat RE buyers are not thinking properly before purchasing the property. (also nullify the claim dat only IT wale nahi sochte ).


    Right. Apart from Delhi, Mumbai & Bangalore, there are hardly any IT companies in the other cities surveyed.
    CommentQuote
  • Originally Posted by realacres
    A real mind opening news:-


    The survey-covering 28 private sector developers was conducted in 10 cities — Delhi, Mumbai, Kolkata, Bangalore, Ahmedabad, Jaipur, Patna, Kanpur, Allahabad and Indore — between December 1 and 25 by Track2Realty.

    A significant number of the respondents (1,672, 34 per cent females and 66 per cent males) were buyers of mid segment houses and majority were first-time buyers (62 per cent) who shifted to the new house either from parental homes or rented accommodation.

    Link is here:-

    8/10 home buyers are unhappy with their purchase: Survey


    Pure Puneites....... We are the one facing the most inflated prices and still we are not even considered for the survey......that percentage of dissatisied customers would have increased a lot if puneites were included in the survey :bab (34):
    CommentQuote
  • Originally Posted by realacres
    Again, as many as 70 per cent of these home-buyers repent investing their life savings in the real estate they bought even though 65 per cent of them saw their real estate price appreciate.

    This also shows that end users are not bothered about appreciation of price on paper which is one of the selling points of the builder even to end users.

    Originally Posted by kingmanish
    Pure Puneites....... We are the one facing the most inflated prices and still we are not even considered for the survey......that percentage of dissatisied customers would have increased a lot if puneites were included in the survey :bab (34):

    +1.
    CommentQuote
  • Toothless Credai fails to redress complaint

    Jan 02, 2011,Sun

    Ritu Goyal Harish
    Source:- 3dsyndication

    The Pune chapter of the Confederation of Real Estate Developers Association of India (Credai-Pune) has reimbursed the complaint processing fee of Rs2,000 collected from an aggrieved flat purchaser instead of looking into his complaint against a builder, who is a Credai member.
    Baban L Gaikwad, a resident of Legend Prestige Co-operative Housing Society, Hadapsar, had complained to Credai on September 13, 2010 seeking redressal of the grievances of his society against builder Pankaj Shah, a member of Credai.

    Gaikwad paid Rs2,000 towards 'processing fee' as demanded by the Credai.
    His complaint was forwarded to the grievance cell of Credai and one month later he was called for a meeting with Credai officials.
    After a detailed meeting and discussion with Credai committee members on October 25, 2010, the organisation representing a group of prominent city builders went silent for more than a month.

    "I did not hear anything from them about their proposed action or action plan or even comments after the meeting. We had heard about Credai (formerly Promoters and Builders Association of Pune) from a very senior member, who is a renowned builder from Pune, and so we wrote to them. Our problems are very serious but so far no action has been taken by them," said Gaikwad.
    When asked by DNA, Credai's vice-president (public relations) Rohit Gera revealed that the committee was in the process of addressing the consumer's complaint, but since it was a very complex issue, it would require a much wider level solution including a site visit and interaction with the other residents of the building.

    "Also, the customer has filed cases in numerous courts and the matter is subjudice. Credai does not entertain such cases but in this case, the builder is also willing to co-operate and sort the matter out. We are trying to resolve the issue and find a solution that works for all."
    He said the solution will take time and that Credai cannot commit to a time frame.

    However, on December 18, Gaikwad received a letter from Credai stating that the organisation will not be able to redress his complaint since he has approached the consumer court and the matter was subjudice. A cheque dated October 16, 2010 of Rs2,000 was also enclosed with the letter.
    "It is pertinent to note that the object of setting up of the grievance cell by the association is to redress the complaints of the customers amicably and the role is restricted to act as a mediator, which shall have no legal force," wrote DK Abhyankar, director general of Credai's grievance cell in his email.
    Unhappy with the response from the city builders' lobby, Gaikwad told DNA, "I expected Credai to at least verify the gravity and genuineness of our problems by sending experts to the site, force the builder to resolve at least those issues certified by the said expert, to cancel the builder's membership if he is faulty on Credai's scale and to force the builder to carry out Conveyance Deed, which is overdue and any way mandatory by law itself."
    But none of it happened and Credai simply closed the case. He said it was clear that Credai did not want to go in depth "and punish their own family member for pleasing a single flat owner." :bab (45):

    In an email to DNA, Abhyankar admitted that this was the lone case where a refund was made by the organisation for the matter being subjudice, which was revealed to them during the personal hearing on October 25. Yet the organisation took 45 days to dispose of the complaint as untenable.
    Gaikwad said that Credai-Pune's action raises serious questions on the credibility of this all-India organisation that claims to work towards the protection of buyers' interests while addressing issues relating to the builder/developer community.
    CommentQuote