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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  • i said gap between the prices and infrastructure. i just mentioned that because in the forum i had seen lot of posts which states the prices in pune are way to high.

    property prices are almost 5500 and more in ready to move projects almost 7 km away from IFFCO chowk landmark near most of the IT and other companies are located.

    - there is not effective commutation , so if u had ur own conveyance its more easier
    - power outages are quite frequent.

    but if u are looking at roads, malls etc they are better when compared to Pune. another hope is metro which has already improved connectivty with Delhi aoutnd new planned routes will improve

    Unfortunately pune is not seeing the effort in that area but i think 3000-3100 rate in pune is good enough
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  • Gurgaon is satellite city of Delhi, so it became instant hit with those who wanted to be close to Delhi but either the prices were high or infra wasn't planned properly.

    In case of Pune, it is not satellite city of Mumbai even though some builders try to show Pune as Mumbai annexe:D. Also, there are professional builders in NCR, while in Pune, currently most of RE market is dominated by NCP & its scorpio chaps:bab (45):.

    Pune is no doubt more safer & has closer to home atmosphere than NCR but the prices are too high vis a vis it's infra.

    * PS:- Gurgaon went up due to its proximity to Delhi & buyers are from all fields, while in case of Pune, prices went up mainly due to IT. So, all the RE hype was created around IT rather than infra & quality of life.
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  • BJP drops 2nd bombshell, links Sharad Pawar to Rs15,000 crore scam

    Published: Saturday, Apr 2, 2011, 0:23 IST

    A day after allegations of links between Union agriculture minister Sharad Pawar and 2G spectrum scam accused Shahid Balwa, leader of opposition in the state assembly Eknath Khadse rocked the house again on Thursday by revealing irregularities to the tune of Rs15,000 crore in land transfer to companies allegedly owned by the Pawar family and those controlled by Balwa. :bab (45):

    BJP leader Khadse said that land measuring 326 acres in Pimpri-Chinchwad in Pune was transferred to companies owned by Balwa, Pawar’s daughter Supriya Sule, her husband Sadanand Sule, Pune-based builder Atul Chordiya, his wife Varsha, and others. He alleged that the original compromise agreement between the revenue department and Mukund Bhavan Trust took place in 1990 for transfer of 326 acres of land. The trust was allegedly owned by DB Realty and Punchsheel Techpark controlled by Balwa and Pawar family members respectively.

    Khadse said that a year before the agreement, the then district commissioner of Pune, Shrinivas Patil, forged revenue department papers to make the 3.26-acre land into 326 acres. He said that after the agreement, the district administration facilitated the transfer of land that was adjacent to the plot. “After that, the land reserved for Yerwada jail, tele exchange and the public works department was transferred to the trust. The administration even changed the reservation of a playground. Only the state cabinet has the right to change reservation, but it was done at the district level,” he said.

    Khadse said that two plots owned by DB Realty and Punchsheel are adjacent to each other, and five star hotels, IT parks are coming up on the plot. “The permission for commercial construction was taken from the ministry of environment and forest, and the tourism ministry, by Balwa for projects on both plots. Balwa had signed the application for the permissions, which were given in just one day. This clearly proves the business relationship between Balwa and Pawar family,” he said.

    He demanded that construction work of these projects be stayed and the properties be sealed. He also demanded a CBI probe into the irregularities.

    Revenue minister Balasaheb Thorat announced the probe will be completed in three months. “As per our records, 336.31 acres of land has been transferred to the trust after the court nod. We will investigate into the issue,” he said.

    BJP drops 2nd bombshell, links Sharad Pawar to Rs15,000 crore scam - Mumbai - DNA
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  • Home Loan Growth Flat in Feb

    Maneesh Srivastava, chief executive officer of Muthoot Housing Finance Company, said there are three reasons why sales of property were impacted: high real estate prices, high interest rates and people waiting and watching in the hope prices will correct.
    Lenders find business in Mumbai the most slack. “That’s because,” said Anil Kothuri, executive vice president, Edelweiss Finance & Investments, “real estate transactions have come down by 25% compared with last year. Property prices have jumped up 40% in Mumbai in the last one year.”


    http://www.dnaindia.com/money/report_home-loan-growth-flat-in-february_1527919
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  • 80% Home Buyers are Unsatisfied

    Significantly, out 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.

    8/10 home buyers are unhappy with their purchase: Survey
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  • Debt Ghost is back

    As per estimates, real estate firms have debt of about Rs 75,000 crore of which at least Rs 20,000 crore had come up for repayment at the end of March 31, 2011, this includes both principal and accrued interest.

    Others are looking to tap the capital market to raise funds. Delhi-based merchant bank SMC Capitals said as many as nine companies are currently in queue to raise as much as Rs 12,268 crore but raising funds through public listings may not be easy since institutional and retail investors are still wary of the real estate sector. This probably explains why another three developers - Lodha Developers Ambiance, Kumar Urban Development - did not enter the market despite a go ahead from the market regulator. Their draft red herring prospectus expired earlier this year.

    Realty firms seek funds from PE to tide over debt - The Economic Times
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  • Is it true ?????

    A delegation of the Maharashtra Chamber of Housing Industry led by Sunil Mantri, president, met state home minister R R Patil and asked for revolver licences to its members and a strengthening of security.

    A leading developer, who did not want to be named, said this was the latest problem for the realty sector, in addition to the shortage of sand, procedural delays, tight finances and loan approvals. “Now, the extortion threats. We are soft targets for several gangs. We have told the home minister we will not succumb but also requested him to tighten security.”


    Maharashtra realty developers complain of extortion threats

    When builders are looting buyers then Mr. Patil do not make any comment. Now he is issuing revolvers. :bab (45)::bab (45)::bab (45):
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  • So what happened to the 31-Mar-2011 deadline stuff ? Prices reduced by 20-30% in Pune ? That was the new Diwali kinda bear deteline set a month back. Or should we wait for few months to see the deadline to take effect (as usual) :) .
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  • Real,

    I have heard that people in Faridabad have filed a PIL for the early implementation of the Real Estate Regulation Bill. Can we as a group do the same in Pune. I think we are close to 100 active members and it will benefit one and all. A PIL is the only way I think things move in this country. What Say ?

    What is a PIL?
    Public Interest Litigation (PIL) - litigation for public interest. PIL was started to protect the fundamental rights of people who are poor, ignorant or in socially/economically disadvantaged position. It is different from ordinary litigation, in that it is not filed by one private person against another for the enforcement of a personal right. The presence of 'public interest' is important to file a PIL.

    A PIL can be filed when the following conditions are fulfilled:
    - There must be a public injury and public wrong caused by the wrongful act or omission of the state or public authority.
    - It is for the enforcement of basic human rights of weaker sections of the community who are downtrodden, ignorant and whose fundamental and constitutional rights have been infringed.
    - It must not be frivolous litigation by persons having vested interests.

    Who may file a PIL?
    The Supreme Court (SC), through its successive judgements has relaxed the strict rule of 'locus standi' applicable to private litigation.


    Any person can file a PIL provided:

      He is a member of the public acting bona fide and having sufficient interest in instituting an action for redressal of public wrong or public injury.
      He is not a mere busy body or a meddlesome interloper.
      His action is not motivated by personal gain or any other oblique consideration.
      How to file a PIL:
      A PIL may be filed like a write petition. However, in the past the SC has treated even letters addressed to the court as PIL. In People’s Democratic union v Union of India, a letter addressed by the petitioner organization seeking a direction against the respondents for ensuring observance of the provisions of famous labour laws in relation to workmen employed in the construction work of projects connected with the Asian games was entertained as a PIL.
      The SC has encouraged the filing of PIL for tackling issues related to environment, human rights etc.

      BELEIVE WE SHOULD TAKE A VOTE ON THIS ?
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  • Loan Rescheduled....

    It’s a bit of a window dressing going on in the real-estate sector. Banks and financial institutional, on one hand, do not want mounting non-performing assets (NPAs) in their books. On the flip side, real-estate companies don’t have enough cash flows at this point in time to really keep up with their repayment schedules. So, companies have lapped up a new term loans to really repay their old loans.

    Realty loan relief: Sources say Rs 6000cr rescheduled - CNBC-TV18 -

    The loan re-schedules proves that RE is an illiquid asset class & prices are exorbitant.
    Even banks do not want the exposure to NPA but in order to avoid bankruptcies they are extending the loans. Instead of addressing the crisis now, they are pushing forward the issue. Now, RE became much more risky than past because the unaddressed pricing issue will only worsened. :D:D:D:D:D
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  • Problem With Megacities

    Ashok R. Datar, chairman of the Mumbai Environmental Social Network and a long-time advisor to the Ambani corporate group, suggests that Asian megacities should stop emulating the early 20th Century Western model of rapid, dense urbanization. “We are copying the Western experience in our own stupid and silly way,” Datar says. “The poor gain on the rich. For every tech geek, we have two to three servants.

    Datar suggest that developing countries need to better promote the growth of more manageable smaller cities and try bringing more economic opportunity to the villages.

    The Problem With Megacities - Megacities - Opportunities at Urban Edges - Forbes
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  • Originally Posted by compuwalah
    That was the new Diwali kinda bear deteline set a month back. Or should we wait for few months to see the deadline to take effect (as usual) :) .


    Well, this is not a Diwali Kinda bear but it’s a real bear. The loan rescheduled has not resolved the problem. It has just postponed the problem. Previously there was a hope that if prices correct meaningfully, again market will revive but it’s now confirmed that long term slump ahead.

    The correction can happen in 2 ways.

    1. Immediate price reduction

    2. Time base.


    When time base correction happen it grind slowly but very finely. :bab (35)::bab (35)::bab (35)::bab (35)::bab (35):
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  • There is a full page ad in today's TOI by Marvel Realtors who would be charging for Carpet Area only. This is a good initiative, but need to check for any hidden conditions/costs. Any idea, for which project of Marvel is this applicable?
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  • Originally Posted by khbarilal
    Well, this is not a Diwali Kinda bear but it’s a real bear.


    LOL :D :D . Till now all were diwali bhalus par ees baar sacchhi mucchhi ka bhalu hai :D . Lets watch and see.
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  • Originally Posted by realacres
    Gurgaon is satellite city of Delhi, so it became instant hit with those who wanted to be close to Delhi but either the prices were high or infra wasn't planned properly.

    In case of Pune, it is not satellite city of Mumbai even though some builders try to show Pune as Mumbai annexe:D. Also, there are professional builders in NCR, while in Pune, currently most of RE market is dominated by NCP & its scorpio chaps:bab (45):.

    Pune is no doubt more safer & has closer to home atmosphere than NCR but the prices are too high vis a vis it's infra.

    * PS:- Gurgaon went up due to its proximity to Delhi & buyers are from all fields, while in case of Pune, prices went up mainly due to IT. So, all the RE hype was created around IT rather than infra & quality of life.


    Thats not correct real.I doubt you have ever been to gurgaon.

    Proximity to Delhi is just one reason.
    Gurgaon did not become the millenium city just out of nowhere.

    Just look at the NH8 .....there is no match in India to that.
    The sprawling malls ....all the mals of Pune combined will be equivalent o ambience.

    Then the IT sector.......

    The airport ...And the ill gotten money of Delhi politicians businessen etc which they want to invest.

    all these and much more contribute to Gurgaon growth.

    They are so many new manufacturing plants coming up...

    Metro....and the egde of Gurgaon being in Haryana rather than Noida which is in UP
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