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....
Read more
Reply
12597 Replies
Sort by :Filter by :
  • Another Discount offer

    This one from a reputed builder
    Attachments:
    CommentQuote
  • Originally Posted by rohit_warren
    I would rather call it consolidation after steep rise ; looks like some weak hands getting out.

    Rohit


    any idea what is there ongoing rate and before discount??
    CommentQuote
  • Originally Posted by realacres
    Vilas Javdekar Eco Home is offering INR 500/sq ft discount without any floor rise for their projects in Wakad.

    This clearly shows RE prices are falling.


    Thanks for the update man!

    Soon rest will follow ..
    CommentQuote
  • Realty companies' financial woes to mount

    15 Jan, 2011, 11.05AM IST, Kailash Babar,ET Bureau

    MUMBAI: The woes of realty developers may not ease anytime soon as pressure to repay debt and redemption of quasi-equity instruments continue to be a major task for them.

    Repayment of structured quasi-equity instruments totalling Rs 3,000 crore held by foreign investors is due in the next couple of months and this is expected to stress already cash-strapped developers.

    Redemption of these instruments is likely to coincide with developers’ loans that were rescheduled by banks two years ago and are now expected to come up for repayment around March.

    As external commercial borrowings are not allowed in the realty sector, some cash-strapped developers had placed non-convertible debentures with non-banking finance companies, listed these debentures and then offered these to foreign investors.

    At least four developers, three from Mumbai and one from Bangalore, had raised over Rs 1,000 crore almost a year ago through this route. These funds raised by some realtors through quasi-equity instruments around three years ago went to supporting their ongoing projects and land acquisitions.

    However, most of these foreign investors may not be interested in converting these instruments into equity and hold stake in these realty projects, given the weakening demand for residential units and possibility of a fall in prices, analysts said.

    “Builders will find it difficult to repay overseas investors since few local banks are willing to take large exposures. With the stock market entering a bearish phase, the prospects of IPOs are also dim,” said a senior official of a realty fund.

    In a few cases, the matter may boil into legal disputes. “However, many of the structured papers are not enforceable debt and foreign investors may be left with little recourse,” he said.

    Consensus on a fall in realty prices hereon is getting stronger as almost all the market participants, including consultants who undertake sales of these projects on behalf of the developer for a fee, have also estimated at least 15% correction.

    Mumbai, the country’s financial capital that led the appreciation in realty prices in the past 12 months, is now expected to lead the correction in property prices owing to buyers’ resistance to higher prices, rising interest rates, tightening of credit, and an excess supply scenario.

    An indication of this has already come through falling numbers of registrations at stamp duty and registration offices across Mumbai. After gaining nearly 40% in the past one year, residential property prices in Mumbai have already surpassed their last peak witnessed in 2007 and scenarios are almost similar across major locations such as the National Capital Region , Bangalore and Hyderabad.

    Interest rates that have started moving higher are impacting affordability and delaying decision making and all of this is not allowing the demand to get converted into sales since the past two quarters.

    Realty companies' financial woes to mount - The Economic Times
    CommentQuote
  • Discount ka Dhamaka !!!

    One of the reputed builder is offering 50,000 off in Aundh annex since Dec.
    Though it’s a minuscule, but discount dhamaka already started.

    :bab (41):
    CommentQuote
  • Banks ask Mumbai builders to return Rs 6,000 cr

    Owed 6,000 crore, banks cut off funds to Mumbai builders - The Times of India

    Is this an indicator of things to come?
    CommentQuote
  • Originally Posted by realacres
    Vilas Javdekar Eco Home is offering INR 500/sq ft discount without any floor rise for their projects in Wakad.

    This clearly shows RE prices are falling.

    I checked with them...builder is quoting 3690psf
    however through group booking i.e. HBC, you can book for 3195....good for someone interested in this project...get in touch with HBC...
    CommentQuote
  • Originally Posted by gandalf
    I checked with them...builder is quoting 3690psf
    however through group booking i.e. HBC, you can book for 3195....good for someone interested in this project...get in touch with HBC...


    How to get in touch with HBC?
    CommentQuote
  • CommentQuote
  • Originally Posted by am_pune


    Hey Khabari, it will be gud, if you can tell us the builder's name.

    +1

    Many times builders compromise the price but tell buyers that "I am doing this only for you so please dont disclose this to anyone else" and the gullible buyers honor the word even if knowing what builders really are...

    Buyers should publicize such deals as much as possible so other buyers also come to know about it and ask for discounts, that way the word spreads and builder community gets pressurized...

    IREF is a good place to do this but one can always do this via friends and families too...

    +1

    Many times builders compromise the price but tell buyers that "I am doing this only for you so please dont disclose this to anyone else" and the gullible buyers honor the word even if knowing what builders really are...

    Buyers should publicize such deals as much as possible so other buyers also come to know about it and ask for discounts, that way the word spreads and builder community gets pressurized...

    IREF is a good place to do this but one can always do this via friends and families too...

    +1

    Many times builders compromise the price but tell buyers that "I am doing this only for you so please dont disclose this to anyone else" and the gullible buyers honor the word even if knowing what builders really are...

    Buyers should publicize such deals as much as possible so other buyers also come to know about it and ask for discounts, that way the word spreads and builder community gets pressurized...

    IREF is a good place to do this but one can always do this via friends and families too...

    +1

    Many times builders compromise the price but tell buyers that "I am doing this only for you so please dont disclose this to anyone else" and the gullible buyers honor the word even if knowing what builders really are...

    Buyers should publicize such deals as much as possible so other buyers also come to know about it and ask for discounts, that way the word spreads and builder community gets pressurized...

    IREF is a good place to do this but one can always do this via friends and families too...
    CommentQuote
  • Wikileaks is going to release 2000 names of people having accounts in Swiss Bank. Some are politicians....it will be fun if Indians name fig there as well :).
    CommentQuote
  • Originally Posted by realacres
    Wikileaks is going to release 2000 names of people having accounts in Swiss Bank. Some are politicians....it will be fun if Indians name fig there as well :).


    If they realy come up with prominent Indian names...this will increase political uncertainty...will affect the stock market...also RE market.
    CommentQuote
  • They even have info of one ex-PM.
    Twitter

    "Swiss bank account details of a former Prime Minister of India included in the details handed over to WikiLeaks today "

    Originally Posted by am_pune


    1+
    what i don't understand is why wikileaks made annoucement of leaking the names. rather than directly annoucing it to public. are they waiting for someone, who should approach them with money, for not disclosing his name.
    CommentQuote
  • The Indian Govt has already recieved over 1000 names who have money stashed up abroad. Even Supreme Court has asked the central govt to publish the names, but Congress led UPA isn't. It is the BJP & its MP & senior lawyer Ram Jethmalani who is fighting against these corrupt chaps. This has put Congress on backfoot as not adhering to Supreme Court (SC) will spell more trouble & one can easily guess why Congress-NCP is opposed to releasing the names:bab (34):. Now Congress says don't politicise the issue:bab (45):. Man, speaking for the country means politicizing the issue?? These rotten-heads should be kicked out to Italy & morons like Rahul Gandhi should be sent to Spain to his GF...hey his GF was Spanish, don't know current one. Btw, Rahul made a PRIVATE visit to London last week...hmmm:bab (59):.
    CommentQuote
  • Definitely

    Originally Posted by lazybone007
    Banks ask Mumbai builders to return Rs 6,000 cr

    Owed 6,000 crore, banks cut off funds to Mumbai builders - The Times of India

    Is this an indicator of things to come?



    Lazy,

    Back in Oct/Nov 2009, when the Stimulus-driven economy was making the markets rise, I was stating that this was the last opportunity for builders to cut prices and move inventory. This was because it was quite obvious that, once stimulus ended worldwide, there would be a worse recession simply because India and other economies could not get their growth story going again without stimulus (largely because of too much debt on their heads) and this debt would HAVE to be reduced for the bull period to start again.

    According to me all along, 2011 would be the start of the next recession/depression and 2012 would likely be the worst part.

    Well, at that time I was accused of being too pessimistic and bearish, etc, etc. But now its starting to return again and this time the builders have nowhere to go as they approach their perfect storm of too much inventory built on too much debt with too high prices and buyers starting to hold back and wait. With banks now unlikely to rollover debt and other sources of funds like IPOs PEs, etc drying up due the the increased risk perception of RE at its high levels of debt and high prices, the sh** will hit the fan very quickly going forward.

    Enjoy and profit.

    cheers
    CommentQuote