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 :
  • Regulator for real estate ?

    Tatas seek a regulator for real estate sector

    However, as this is been pushed by a real estate company, don't whether it will be beneficial to the buyer ( as builders may borrow money at low interest but will they pass the saving to buyers?)

    excerpt from the above link:
    "The company also wanted the Centre to grant industry status to realty sector and make loans available at softer rates to provide impetus to residential and commercial projects in the country."

    Also wasn't there already a regulator for telecom when the 2G scam was cooking? :bab (38):
    http://www.dnaindia.com/india/report_a-raja-used-2g-money-to-become-concrete-king_1512009
    CommentQuote
  • Originally Posted by nitesh321
    Totally agree. And these politicians boast so confidently that they have resigned or the guilty members of their party have resigned as if by resigning, their crime gets wiped off :D

    Fact is the opposition (which includes rivals in own party) wants to expose the politicos so that they get kicked out of their chair (coz this is the only thing they do magach-maari for :D).

    Man, no one wants punishment to guilty, once the seat is vacated & new replacement done, rest are happy. Again tomorrow if that chap in chair gets in wrong books, he too will be made a bakra & kicked out.

    Issue is chair is one while aspirants are many. So, this type of kick-boxing will go on.....

    * PS:- Pune MP Kallu can soon be arrested. Now as his political career is finished, who will benefit? Mohan Joshi of Cong & Ajit yeda of NCP!! Pune citizens won't benefit coz one thief is being replaced with another but it is just that some new thief got a chance now.
    CommentQuote
  • Originally Posted by vinodv
    Tatas seek a regulator for real estate sector

    However, as this is been pushed by a real estate company, don't whether it will be beneficial to the buyer ( as builders may borrow money at low interest but will they pass the saving to buyers?)

    excerpt from the above link:
    "The company also wanted the Centre to grant industry status to realty sector and make loans available at softer rates to provide impetus to residential and commercial projects in the country."

    Also wasn't there already a regulator for telecom when the 2G scam was cooking? :bab (38):
    A Raja used 2G money to become concrete king - India - DNA

    RE regulator may not be able to get rid off all issues of RE, however, once this is implemented, the extent to which buyers can become bakras can be greatly reduced. Also, the builders will be required to launch projects only after sanctions, NOCs etc. while there will be more rights with the buyers as one sided agreements won't take place then.

    Though RE regulator or for that matter any regulator can't sort out all the issues, atleast the damage borne by users/buyers can be reduced & builders can be blacklisted leading to which no banks will give home loans for his projects. These are good things here, lets see what happens once it is put on table.
    CommentQuote
  • Originally Posted by realacres
    RE regulator may not be able to get rid off all issues of RE, however, once this is implemented, the extent to which buyers can become bakras can be greatly reduced. Also, the builders will be required to launch projects only after sanctions, NOCs etc. while there will be more rights with the buyers as one sided agreements won't take place then.

    Though RE regulator or for that matter any regulator can't sort out all the issues, atleast the damage borne by users/buyers can be reduced & builders can be blacklisted leading to which no banks will give home loans for his projects. These are good things here, lets see what happens once it is put on table.


    Thanks for your detailed explanation. We buyers would be more than happy if this gets implemented and followed the way it should be.
    CommentQuote
  • Originally Posted by vinodv
    Tatas seek a regulator for real estate sector

    However, as this is been pushed by a real estate company, don't whether it will be beneficial to the buyer ( as builders may borrow money at low interest but will they pass the saving to buyers?)

    excerpt from the above link:
    "The company also wanted the Centre to grant industry status to realty sector and make loans available at softer rates to provide impetus to residential and commercial projects in the country."

    Also wasn't there already a regulator for telecom when the 2G scam was cooking? :bab (38):
    A Raja used 2G money to become concrete king - India - DNA


    Dear, what you are saying is true but have you consider/checked the benefits? (TRAI rules and regulation)

    Benefit:
    charges: I used to pay 18 rs outgng and 9 rs incmg charges in 2002. and now??
    portability is aval.

    Cable charges: I used to pay 400-500 rs in 2006 (not even digital signal) and now paying max 333 rs (digital signal). Lots of options for DTH operator.

    ---list is long sir.

    Also wasn't there already a regulator for telecom when the 2G scam was cooking?
    ---when PMO interfere then u can't do anything, thr side is very clear in this scam. They have informed/advised the PMO.

    Thanks,
    Jigar
    CommentQuote
  • Originally Posted by jigarshah
    Dear, what you are saying is true but have you consider/checked the benefits? (TRAI rules and regulation)

    Benefit:
    charges: I used to pay 18 rs outgng and 9 rs incmg charges in 2002. and now??
    portability is aval.

    Cable charges: I used to pay 400-500 rs in 2006 (not even digital signal) and now paying max 333 rs (digital signal). Lots of options for DTH operator.

    ---list is long sir.

    Also wasn't there already a regulator for telecom when the 2G scam was cooking?
    ---when PMO interfere then u can't do anything, thr side is very clear in this scam. They have informed/advised the PMO.

    Thanks,
    Jigar

    Very well explained. It seems all is not gloomy and there is still hope.
    Will be waiting for the time when Buyers can reap the benefits of this scheme.
    Meanwhile feeling relly sorry for the guys who put their money behind DB Realty in Pune.
    CM orders Balwa
    CommentQuote
  • Kallu is spilling the bin now....

    Hope he s something about Sonia and whoever involved.

    Kalmadi attacks Sheila, says she should be summoned by CBI




    Kalmadi attacks Sheila, says she should be summoned by CBI - The Times of India
    CommentQuote
  • Tata has no business talking, he has been exposed now - for talking to Radia - for which he now wants "right to privacy" - and wants silence on his paying bribes to Raja.

    The telecom scam was not the govt. license tax loss - that would have finally come from commonman's pocket only, not from company, and would have made m-obile telep-hony expensive.

    Telecom scam is Raja taking bribes - for which he and the bribe givers must be first exposed and then sent to Jail.

    Including Tata - who is responsible for making India a banana republic (banana republic banana)
    CommentQuote
  • Originally Posted by ajoshi565


    Sir Winston Churchill... His argument against granting India freedom.
    "Power will go to the hands of rascals ,rogues, freebooters; all Indian leaders will be of low caliber & men of straw. They will have sweet tongues & silly hearts. They will fight amongst themselves for power & India will be lost in political squabbles. A day would come when even air & water would be taxed in India."



    Prophetic Words which have unfortunately come true!!!

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.
    CommentQuote
  • +1. Agree with Kaushik. Freedom is a right, it can not be equated with any other need or luxury. Live Free or Die Hard.


    Originally Posted by kaushik.v
    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.
    CommentQuote
  • Have any one read "Freedom is not Free"
    CommentQuote
  • Originally Posted by kaushik.v
    The above is a myth not a fact. Its used by both indians (sic) and non indians (mostly britishers) to show that we are not doing well after independence and british rule was better. Even with so much of scams, corruption etc I will say its better than britishers ruling us.At least we are free now and if we want to create a scam we can and britishers are not the only right holders to do all scams and looting of our country.

    Ofcourse there is no debate between freedom and British Raj. But what W. Churchill predicted is true in terms of greed, power madness etc etc. is proven true so far starting with Nehru

    hard to digest that Kallu is still roaming free.
    CommentQuote
  • Originally Posted by rambarve3
    Kallu is spilling the bin now....

    Hope he s something about Sonia and whoever involved.

    Kalmadi attacks Sheila, says she should be summoned by CBI

    After Sheila, it is the turn of Ajay Makan, but he will become bakra once Sheila becomes bakri. Sheila as & when tried by CBI will be detrimental for the Congress as she is the one who single handedly won Delhi state elections in a row. Sheila gone means good news for BJP, especially Vijay Kumar Malhotra who may become next CM of Delhi if BJP comes to power.

    Btw, imagine a scene.......

    Sheila & Kallu dancing on the tunes of the song Sheila Ki.... with CBI dogs dancing around as extras :D.
    CommentQuote
  • Originally Posted by realacres
    After Sheila, it is the turn of Ajay Makan, but he will become bakra once Sheila becomes bakri. Sheila as & when tried by CBI will be detrimental for the Congress as she is the one who single handedly won Delhi state elections in a row. Sheila gone means good news for BJP, especially Vijay Kumar Malhotra who may become next CM of Delhi if BJP comes to power.

    Btw, imagine a scene.......

    Sheila & Kallu dancing on the tunes of the song Sheila Ki.... with CBI dogs dancing around as extras :D.


    REALACRES...
    I just cant stop laughing....the way u imagined teh scene.
    Imagine the scene when really this happens on stage.....just so funny....
    But realacre the post is Builders & RE Bulls Theory Proved Wrong how the sheila/makhan came in between,,.....?
    savvy_v
    CommentQuote
  • Most expensive real estate markets in 2009 | Global Property Guide

    Look at the rental yields.. India figures at the middle on 2009 prices.. and if you consider the prices of 2010.. I am sure it would have slipped a lot more..
    CommentQuote