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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  • Originally Posted by realacres
    Jan 02, 2011,Sun
    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.

    Isnt Credai run by builders themselves?? wonder how would they address complaints against themselves...looks useless org..
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  • Home loan rates to rise, says SBI

    Bloomberg / Mumbai January 5, 2011, 0:13 IST

    Shortage of cash may prompt move, says CFO.

    State Bank of India (SBI), the nation’s largest lender, may raise home loan rates further, Chief Financial Officer S S Ranjan has said. A shortage of cash in the banking system might lead to higher interest rates, he said.

    Read complete news here:-

    Home loan rates to rise, says SBI
    CommentQuote
  • Originally Posted by realacres
    Bloomberg / Mumbai January 5, 2011, 0:13 IST

    Shortage of cash may prompt move, says CFO.

    State Bank of India (SBI), the nation’s largest lender, may raise home loan rates further, Chief Financial Officer S S Ranjan has said. A shortage of cash in the banking system might lead to higher interest rates, he said.

    Read complete news here:-

    Home loan rates to rise, says SBI


    Hmmm.... sometimes i wonder why Banks are so desperate to lend to home owners....
    Does anyone here know if home loans come under the "Priority Sector lending".
    For those of you who dont know about Priority Sector Lending... it is basically that As per the Reserve Bank of India directives both private and public domestic banks need to invest 40% of their ANBC (adjusted net bank credit) in the priority sector. And i think Priority sector has agriculture Small scale Industries etc. Not sure if Home loans come under the same bracket.

    VK


    VK
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  • Investors selling flats at discounts

    RE prices are going to fall drastically, its official now & coming even from horse's mouth:bab (41):. :bab (34):

    Expecting realty rates to fall soon, individual investors have started selling their properties at discounted rates. Property brokers are being flooded with calls from investors offering rebates of 10 to 30% on their properties. “We have advised our investors to exit at the earliest and book maximum profits because prices will come down anytime,” said Ram Prasad Padhi, chief executive officer, mumbaiproperties.com, a brokerage firm.

    Padhi said investors have been advised to reinvest in property after markets come down.

    Investors have played a major role in the realty market in the last three years because they have cornered more than 50% of the properties booked during the period.

    Unlike end users, who pay in installments, investors book flats in the pre-launch stage by paying 50 to 100% of the cost thus providing capital to builders. Their aim is to resell the property and make profits.

    These days, investors are trying to sell their properties so that they can make profits while the rates are still high even if they sell at rates lower than the market price.

    In Bandra, investors who have booked flats in a project by a leading infrastructure group are quoting Rs18,000 a square foot when the prevailing rate is Rs23,000.

    Another leading builder in Oshiwara, who is quoting Rs12,000 a sq ft, has his investors selling at Rs8,600. Investors in Borivli are ready to sell for Rs7,500 a sq ft where the rates are above Rs8,500 while properties in Malad are being sold at Rs7,000 a sq ft when the prevailing rates are upwards of Rs8,500.


    “This indicates that prices are set to drop,” said Pankaj Kapoor, chief executive officer of real estate research group Liasas Foras. Anuj Puri, chairman and country head, Jones Lang LaSalle India, a real estate consultancy firm, said prices have now reached the peak.

    Builders agree that a correction in realty rates is expected. “Only projects in which prices are inflated will reduce rates. Investors will exit from these first,” said Abis Rizvi, director, Rizvi Builders.

    Sukhraj Nahar, director, Nahar Group, said investors are selling now because prices will reduce from March.

    See the link here:-

    Investors selling flats at discounts - Hindustan Times
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  • Originally Posted by realacres
    RE prices are going to fall drastically, its official now & coming even from horse's mouth:bab (41):. :bab (34):

    Investors in Borivli are ready to sell for Rs7,500 a sq ft where the rates are above Rs8,500.


    POLARIS Ltd. is selling flats (earlier rented to employees) for 7000 psf at Lokhandwala, Kandivali (E).
    Its hefty discount, since you pay NO extra charges for electricity meter/wiring etc :D
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  • Originally Posted by hitmady
    POLARIS Ltd. is selling flats (earlier rented to employees) for 7000 psf at Lokhandwala, Kandivali (E).
    Its hefty discount, since you pay NO extra charges for electricity meter/wiring etc :D

    Is it confirmed news? Any ready deal available ? and what is the min flat size ? Please post some details

    Rohit
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  • Originally Posted by rohit_warren
    Is it confirmed news? Any ready deal available ? and what is the min flat size ? Please post some details

    Rohit


    This is confirmed news. A colleague bought 1BHK (I guess 500-600 sqf) at 7K psf. Try to get in touch via POLARIS employee.
    CommentQuote
  • Huge Only Supply

    :bab (6):Pune city have the largest supply of real estate. This is just the glance of big township projects.

    Total Township Proposals = 34

    Pune West
    Blue Ridge Township acre=138, In progress
    Megapolis acre=150, capacity=5,800+ , In progress
    Vornado -VHTPL Not yet started
    Kolte Patil IVEN acre=421, Not yet started
    Tirth Builder acre=150,Not yet started
    HCC acre=500, Not yet started
    Kumar Builder Hinjewadi-Mahalunge Celbrum=125 + 120, capacity=4,000+,Not yet started
    Oxford propertis + Knowledge city Lavale acre=550,In progress

    East Pune
    MagarPatta acre=400, capacity=20,000,On completion way
    Amonara acre=470, capacity=16,000,In progress
    Kumar Builder Kharadi -Manjari acre=110, capacity=4,000+,Not yet started
    Goel Ganga Wagholi acre=100, Not yet started

    South Pune
    Nanded City acre=700,In progress

    In addition there are hundreds of mid size projects & lot of small size projects. In many cases builders are not revealing the complete size of project but keep coming up with phase1, 2 …etc . You may be aware of standard answers from Builders & agent that land is not available, but satellite view is full of empty land.

    Today, looking at the project locations, city will take decades to cross the limit. . The distance from Deccan to Baner border is around 9km, & Deccan to Hinjewadi is 19 km. It means around 10km radius supply will come in future. If some one will do simple geometric calculation, it tells us that when we consider Hinjewadi we are talking about more than doubling the city capacity. . The distance from Deccan to Baner border is around 9km, & Deccan to Hinjewadi is 19 km. It means around 10km radius supply will come in future. If some one will do simple geometric calculation, it tells us that when we consider Hinjewadi we are talking about more than doubling the city capacity. . The distance from Deccan to Baner border is around 9km, & Deccan to Hinjewadi is 19 km. It means around 10km radius supply will come in future. If some one will do simple geometric calculation, it tells us that when we consider Hinjewadi we are talking about more than doubling the city capacity.
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  • Govt. Bankruptcy & Real Estate Crash

    :bab (45):


    In 2008-09 recessions Indian govt. did a backdoor bailout for builders & as usual the news never came out as the central news in media. People attentions were diverted to US banks bailouts & some nonsense news. This time govt. themselves has spend so much that India is facing highest deficit & inflation. So there is no wonder Govt/RBI forced to tighten monetary policy & non performing loans.

    As US economy is improving there will be a reversal of foreign flows in future.
    In emerging markets, India is the costliest market.
    N11 countries are offering much higher returns than India.
    After so many scandals, foreign buyers are afraid of FDI. Private equities, which were the source of funding to RE are now demanding more returns to compensate for fraud risks.

    NOTE: The property registration data for 2010 is misleading, because majority of the booking happened in late 2009 & early 2010 in pre-launch & launch offers, for which the registration got executed in 2010, hence there was a surge in registration.

    A V Rajwade: India's deficit disorder
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  • Originally Posted by realacres
    Registrations for November are lowest in 2010; home loan off-take falling too
    Pooja Sarkar Mumbai
    Dec 27, 2010,Mon
    Source:- 3dsyndication

    Mumbai's wait-and-watch approach when it comes to buying residential property seems to be working. Property prices in the city are likely to stabilise and may even see a 10-15% drop as developers find it increasingly difficult to sell residential flats at the present 'unimaginable' rates.

    Sales of residential property in Mumbai continue to decline, with November witnessing the lowest number of transactions since June 2009. The trend is most visible in the premium segment, with prices beyond Rs7,500 per sq ft. The number of documents registered in the office of stamp duty registrars has also shown the steepest fall for 2010 at a mere 5,134 in November.
    Analysts suggest a price reduction is in the offing.


    Found a news exactly opposite to this:
    More property registrations bring cheer to builders in city

    More property registrations bring cheer to builders in city - Express India

    Real, you seem to have missed this one or may be I missed it in your posts. I wonder how registrations increased when we feel that flats are not selling. May be these figures are for first half of 2010.
    CommentQuote
  • Originally Posted by nitesh321
    Found a news exactly opposite to this:
    More property registrations bring cheer to builders in city

    More property registrations bring cheer to builders in city - Express India

    Real, you seem to have missed this one or may be I missed it in your posts. I wonder how registrations increased when we feel that flats are not selling. May be these figures are for first half of 2010.

    Gone through this link already & if you see Pune registrations is about the Pune division which would cover Pune, Kolhapur, Satara, Solapur and Sangli & not just Pune city.

    Add to it, the sales no. are for entire year compared to last FY, if you look QoQ basis, the sales have dipped by over 40% for which the link is already posted before.

    The RE is under pressure from the month of Aug-Sep till date & from Mar 11, situation will be even worse.
    CommentQuote
  • Originally Posted by khbarilal
    You may be aware of standard answers from Builders & agent that land is not available, but satellite view is full of empty land.

    Bang on target, infact while seeing plots, the agents were even ready to show me land parcels in excess of 3-4 acres & asked me whether I am interested in doing plotting!! So, land is very much there & as Pune has ample of land around it, it can spread towards Nagar rd, Mumbai side as well as PCMC side. Again, we haven't taken into consideration PCMC empty land. If one visits Chikhali rd, you can get several acres of land in one go.

    Today, looking at the project locations, city will take decades to cross the limit. . The distance from Deccan to Baner border is around 9km, & Deccan to Hinjewadi is 19 km. It means around 10km radius supply will come in future. If some one will do simple geometric calculation, it tells us that when we consider Hinjewadi we are talking about more than doubling the city capacity.
    Very good point :). When Balewadi/Bavdhan itself is vacant, why the need to go towards Wakad & Hinjewadi?? It is just that builders want to extract more & more profit by buying land at throw away prices.
    Very good point :). When Balewadi/Bavdhan itself is vacant, why the need to go towards Wakad & Hinjewadi?? It is just that builders want to extract more & more profit by buying land at throw away prices.
    Very good point :). When Balewadi/Bavdhan itself is vacant, why the need to go towards Wakad & Hinjewadi?? It is just that builders want to extract more & more profit by buying land at throw away prices.
    Very good point :). When Balewadi/Bavdhan itself is vacant, why the need to go towards Wakad & Hinjewadi?? It is just that builders want to extract more & more profit by buying land at throw away prices.
    CommentQuote
  • ICICI Sec foresees a 100 bps rate hike by RBI in CY11

    The one big fear that is sitting on the markets head is rising inflation numbers. With the January RBI policy review coming up, concerns are arising over how the central bank will react to rising inflationary pressures.

    ICICI Sec foresees a 100 bps rate hike by RBI in CY11 - CNBC-TV18 -
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  • Realty stock that collapsed 44% in 3 mths

    Just to show how RE stocks are getting hammered alongwith banking. In the chart given here (link), it shows Sunteck Realty sales as 16+ Cr & profits of 7+Cr, indeed very good profit margins. But man, this co. is more into residential projects where flats cost about 4-10+ Cr. So, does this mean that this :bab (35):builder sold 1-4 flats only in 1 year?? Or is there heavy component of cash?

    http://www.moneycontrol.com/news/buzzing-stocks/bearthe-day-realty-stock-that-collapsed-443-mths_511893.html

    Btw, IT (income tax:D) dept are busy today raiding the premises of Lodha Developers in Mumbai in over 40 places:bab (34):. Read the story in tomorrow's newspaper.
    CommentQuote
  • Originally Posted by realacres

    Btw, IT (income tax:D) dept are busy today raiding the premises of Lodha Developers in Mumbai in over 40 places:bab (34):. Read the story in tomorrow's newspaper.


    I-T raids Lodha Group for misreporting income - The Economic Times

    :bab (59): Jai Hoo Real Bhai
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