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 savvy_v
    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

    Politics & RE go hand in hand. Imagine a situation without Bobada Pawar, the RE situation & state situation would have been so better than today.

    Anyways, to keep some serious issues off, some light 'brake' is required ;).
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  • Darode-Jog updates 1

    Darode-Jog recently launched a new project in Dhayari, Sinhagad rd called as Oakwood County for pre-launch rate of 3500/sq ft (man, this rate at Dhayari!!). When bookings didn't happen, in a week the rate became 3000/sq ft :D. Imagine what must those who booked in pre-launch must be thinking!! Now, not only this project getting probs due to lack of buyers, but even the older one, Crossover County has several issues because of which new buyers aren't coming in. Will post in detail about this soon.

    In some other RE news, Builder to pay Rs 20-lakh fine for delay in handing over flats:-

    Builder to pay Rs 20-lakh fine for delay in handing over flats
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  • Home buyer feels cheated by Goel Ganga Group

    Another eg. of how Goel Ganga dupes its buyers, as always .

    Price of apartment raised by almost 20% in six months
    Source:- 3dsyndication
    Ritu Goyal Harish
    Feb 28, 2011,Mon

    After booking a two-bedroom apartment of their choice in a project by city builder, Goel Ganga Group, a serving army officer, Major Harshinder Thakur, and his wife Preetika were shocked to know that the price of the apartment had been raised by almost 20% in six months.

    The couple had booked the apartment measuring 915 square feet for Rs2,700 per square foot (PSF) by paying a token amount of Rs1 lakh in June last year in Ganga Sparsh, in Undri. But the developer hiked the PSF to Rs3,200 by January this year.

    The couple was left with two choices: accept the new PSF price or take back the booking amount and cancel the booking.
    "Accepting either of the two options is unfair to us. We zeroed down the project keeping several aspects in mind, including the reputation of the builder. Six months later, he can't tell us either to pay more or cancel the booking because we won't get another apartment for the same price in the same area. If we had known that the apartment would be beyond our budget we would have gone to another builder and not lost out on time," argued Preetika.

    The managing director of the Goel Ganga Group, Atul Goel said, "I can understand the couple's predicament. But I am helpless as the project got delayed due to certain revision of plans that we had to apply for after the town planning department changed its by-laws. Our sanctioned plans had to be put up for revision, which took almost a year."
    Goel said the group is willing to return the booking amount with interest and have also offered them the apartment at Rs3,000 PSF, even though the present selling price is Rs3,500 PSF. "I don't want to jeopardise our relationship with our customers," he added.

    The builder's explanations did not cut ice with the couple, who claimed that they have already incurred a cumulative loss of about Rs50,000 as a result of the delay. "We don't want to accept this type of behavior since it is principally not right. We can accept his new quoted price, but we fear it would set a bad precedent and would be unethical," reiterated Preetika.
    According to city based eminent consumer activist, Sudhakar Velankar, the builder is bound by the price he quoted initially. "Under the Contract Act he is bound by the paper work he issued to the buyer wherein a price of Rs2,700 PSF is quoted specifically and for which he took the booking amount," he said.

    According to Velankar, if the builder doubted that the project was not feasible in the price quoted in June 2010, he should have issued a supplementary contract highlighting probable price escalation.
    While the stand-off between the parties continues, the Thakurs have written to the Pune chapter of the Confederation of Real Estate Developers' Associations of India on February 1, 2011, seeking their intervention, but are yet to receive any response.

    >> Man, see how crap even PBAP/CREDAI Pune is.
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  • Originally Posted by realacres
    Another eg. of how Goel Ganga dupes its buyers, as always .


    People should at least do a character check of builder. The father of Atul shot another builder in one Kalayni Nagar’s land deal. Then, just not to get arrested he used to pay 1Lakh daily. If one will do through background check you may find some more cases from UP.
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  • This is a new low by builders! Usually an 'escalation clause' is there in agreement, that the customer has to pay for any escalation in prices arising out of unforeseen events. But straightaway asking for market prices is too much. Did the builder return people money when market crashed in 07-08?
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  • FM announces Indian Fannie Mae

    He also increased the value of houses eligible for availing such subsidy by Rs 5 lakh to Rs 25 lakh.

    To further stimulate growth in housing sector, I am liberalising the existing scheme of interest subvention of one per cent on housing loans by extending it to housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh from the present limit of Rs 10 lakh and Rs 20 lakh respectively, he said.

    The government also enhanced the existing housing loan limit to Rs 25 lakh from Rs 20 lakh under priority sector lending on account of increase in prices of residential properties in urban areas, he added.

    On the development of homes for poor, Mukherjee said, Credit enablement of economically weaker sections (EWS) and LIG (low income group) households is a serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana.

    This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.


    This was from FM and here is from USA

    Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing


    Do you guys see some similarity :D I cannot stop laughing - We are heading towards the same fate that of US in 2035 :D

    I m lovin it

    Rohit
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  • Originally Posted by rohit_warren
    FM announces Indian Fannie Mae

    He also increased the value of houses eligible for availing such subsidy by Rs 5 lakh to Rs 25 lakh.

    To further stimulate growth in housing sector, I am liberalising the existing scheme of interest subvention of one per cent on housing loans by extending it to housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh from the present limit of Rs 10 lakh and Rs 20 lakh respectively, he said.

    The government also enhanced the existing housing loan limit to Rs 25 lakh from Rs 20 lakh under priority sector lending on account of increase in prices of residential properties in urban areas, he added.

    On the development of homes for poor, Mukherjee said, Credit enablement of economically weaker sections (EWS) and LIG (low income group) households is a serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana.

    This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.


    This was from FM and here is from USA

    Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing


    Do you guys see some similarity :D I cannot stop laughing - We are heading towards the same fate that of US in 2035 :D

    I m lovin it

    Rohit


    Interesting parallel, Rohit. Duh. My husband & myself visited India in Nov, intending to buy a townhouse or apartment. We checked out several options in Chandigad, Noida & talked to friends in Bangalore & Pune. In the end, we decided against buying property in India. Huge mismatch between rates & quality of living. Way, way overpriced.

    Now that the banksters dont have sheep to fleece in US & Europe, they've swooped down on markets like India.

    In another news, china has implemented policy that prohibits its citizens from owning more than one property. Indian govt will never have guts to do smthg like that to bring prices to realistic levels. Jahan sarkar bepari, vaha praja bhikari !
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  • Banks want higher promoter equity in real estate projects

    While the developer normally has 25-30% of equity contribution in a project, banks typically fund 40% of the value

    “Banks now have to doubly make sure slightly higher equity contribution in the projects. One may like to have 30-60% (of promoter equity in the project). We would like to be very sure about the credentials of the people,” said R.K. Bakshi, executive director of Bank of Baroda.”:bab (35)::bab (35)::bab (35)::bab (35):

    Banks want higher promoter equity in real estate projects - Home - livemint.com
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  • Group buying

    Hi,
    I was going through various threads on this forum and was surprised to learn that given such a large group of serious buyers who visit the forum regularly why isn't there some serious group buying initiative being planned here.. to my knowledge group buying can get you really sweet deals...just came across this link..

    “GrOffr wants to offer real group-buying deals” - Moneylife Personal Finance site and magazine

    I am not very aware of the forum rules regarding a third party website.. but doesn't anyone think this could be a serious tool in the hands of the buyers in the current interest rate/real estate cycle ?

    ~ would love to see this initiative picking up on this forum but would want some moderator to confirm if this is going against the rules..

    ~ A serious buyer who has been priced out in this unforgiving city.. :(
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  • Originally Posted by punerebuyer
    off topic but thought of sharing...

    HC notice to Rahul Gandhi on missing girl - Rediff.com India News


    I am shocked...but not surprised !
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  • Originally Posted by punerebuyer
    off topic but thought of sharing...

    HC notice to Rahul Gandhi on missing girl - Rediff.com India News


    This is not the first time.

    Our Mr. Future Primne minister has been indulging in more such cases.
    But the word is never out.....neither media nor the victims....

    everybody is silenced by these KGB agents traitor family.
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  • Originally Posted by SanjanaSingh
    Interesting parallel, Rohit. Duh. My husband & myself visited India in Nov, intending to buy a townhouse or apartment. We checked out several options in Chandigad, Noida & talked to friends in Bangalore & Pune. In the end, we decided against buying property in India. Huge mismatch between rates & quality of living. Way, way overpriced.

    This is precisely what we say here:-

    Pay for first class & travel by economy class or maybe even tier-2 by train :D.

    Rather than spending lacs on builder, one must go abroad, see how things are there & then take a final call. Not to forget that in several countries, there are stringent norms for developers in terms of quality, delivery etc. & where customer can sue them for damages. Here in India, the buyer pays through his nose & acts like a beggar in front of builder as if builder is doing some favor by giving the flat.
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  • Originally Posted by punerebuyer
    off topic but thought of sharing...

    HC notice to Rahul Gandhi on missing girl - Rediff.com India News

    This anti-national Raul alias Rahul is notorious for this. It is just that some go on his face & think he is a baby :bab (45):. He has committed several sins when abroad. It is this junk media who are paid by anti-India forces who hide such things. If Rahul does this, nothing will take place in media easily, but if a BJP MP is found seated in a car without seat-belts, media will make big issue of it as if one has committed a big crime by driving without seat-belts on . Infact, it was Aaj Tak once who were running like dogs behind non-Congress politicos car to see whether seat belt was being used or not in Delhi. But unknowingly, they found Delhi CM, Shiela Dixit on front seat without seat belts on :D.

    Btw, Rahul broke his leg this week :D & doctor has advised rest for atleast 3 weeks. Man, better to see his chair to be broken coz it is in the greater interest of the country.

    Earlier it were the British, now Italians & Spanish . If you see Rahuls' friend circle, majority of them will be foreigners. These chaps also bag deals in India under some 'jaali' name & our tax payers money is sipho_ned off to foreign shores .
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  • Originally Posted by khbarilal
    While the developer normally has 25-30% of equity contribution in a project, banks typically fund 40% of the value

    “Banks now have to doubly make sure slightly higher equity contribution in the projects. One may like to have 30-60% (of promoter equity in the project). We would like to be very sure about the credentials of the people,” said R.K. Bakshi, executive director of Bank of Baroda.”:bab (35)::bab (35)::bab (35)::bab (35):

    Banks want higher promoter equity in real estate projects - Home - livemint.com

    Good link :). The liquidity crunch has now made several builders to float FD schemes with interest of 15-18%!! Some builders are even taking unsecured loans to the tune of 40% interest rate so as to not get themselves labeled as NPAs post 31st Mar 11.
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