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 have stayed in both the places and I still beleive Noida is much better than Gurgaon in terms of convenience and cost
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  • Originally Posted by compuwalah
    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) :) .

    It seems that 4 days are like 4 yrs for you post 31st Mar!! Man, it seems you believe in the logic that 9 women can deliver a child in 1 month:D:D...expect over-night results.
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  • Originally Posted by khbarilal
    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


    Realty firms seek funds from PE to tide over debt - The Economic Times

    Builders will arrange funds by paying higher interest rates from NBFCs. Anyway their profit margins are high so can sustain slighly lower margin for some duration.
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  • Originally Posted by compuwalah
    Realty firms seek funds from PE to tide over debt - The Economic Times

    Builders will arrange funds by paying higher interest rates from NBFCs. Anyway their profit margins are high so can sustain slighly lower margin for some duration.

    In all this, the key aspect which you ignore is slump in sales which are happening not due to interest rates alone but lack of buyers.
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  • Originally Posted by realacres
    In all this, the key aspect which you ignore is slump in sales which are happening not due to interest rates alone but lack of buyers.


    Real & all senior folks on this forum,
    We all appreciate your comments and suggestions, and hope you won't mind with the question I am going to ask -
    Lot of folks on this forum talks abt slumps in sales -
    where is it?? I don't see it at all. e.g. last week I visited DSK Gandhkosh, all 3 BHK sold out, pre launch offer was 4500 or 4600, next day they increased it to 4700 or something like that. Grand stand in the morning were quoting 3851, in the evening it went upto 4200 and just for single bldg. (rest 2 will be of course sold at much higher rates) irrescpecitve of pathetic location, on either side of highway whether its so called kothrud or bavdhan or baner, WHY and how come ppl are buying at such higher rates? And if they keep doing so, why would builder reduce the rates??
    Everyday new reports comes out (latest Indiabulls report - why they don't invest in reality in Pune) abt slump in rates in Mumbai or other parts of country whereas its not affected to Pune at all!!!!!!! Just count how many projects were launched in last 3-6 months; and all are sold out >50%.
    Isn't builders proving our analysis wrong??
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  • Check Registrations. More precise data

    Originally Posted by punekiune
    Real & all senior folks on this forum,
    We all appreciate your comments and suggestions, and hope you won't mind with the question I am going to ask -
    Lot of folks on this forum talks abt slumps in sales -
    where is it?? I don't see it at all. e.g. last week I visited DSK Gandhkosh, all 3 BHK sold out, pre launch offer was 4500 or 4600, next day they increased it to 4700 or something like that. Grand stand in the morning were quoting 3851, in the evening it went upto 4200 and just for single bldg. (rest 2 will be of course sold at much higher rates) irrescpecitve of pathetic location, on either side of highway whether its so called kothrud or bavdhan or baner, WHY and how come ppl are buying at such higher rates? And if they keep doing so, why would builder reduce the rates??
    Everyday new reports comes out (latest Indiabulls report - why they don't invest in reality in Pune) abt slump in rates in Mumbai or other parts of country whereas its not affected to Pune at all!!!!!!! Just count how many projects were launched in last 3-6 months; and all are sold out >50%.
    Isn't builders proving our analysis wrong??



    All you have to do is to check out registrations and compare to appropriate relevant period (last year same time, last Qtr, last month, whatever).

    cheers
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  • Grand Theft Auto

    Mohan Mishra (30), an executive of a real estate company, has been arrested on Monday for his weird "habit" of lifting cars and motorbikes. He stole vehicles to enjoy the ride and create impression of being a rich man in front of his clients. The police caught him after he stole a small car of a DSP-ranked officer of the vigilance department.


    Car lifting hobby', executive nabbed - Times Of India
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  • RBI Worries on realty Loans

    The Reserve Bank of India has expressed concern over the rise in loans to real estate in its pre-monetary policy meeting with bankers on Tuesday.

    In response, banks said that there was nothing unusual about the increase in bank credit as the overall share of bank credit in bank loans have not risen. Banks said that credit to real estate has grown slower than overall non-food credit which has grown 22%. According to latest RBI data, credit offtake by the commercial real estate (CRE) sector at 17.8% y-o-y in February 2011 was higher than the growth of 0.9 % during the corresponding period of the previous year. On a financial year basis, credit to the CRE sector grew by 17.1% as against a decline of 0.9% during the corresponding period of the previous year.

    Surge in realty loans worries RBI - The Times of India
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  • No Gudi Padwa for builders

    Analysts say a decline in sales is the primary reason behind fewer launches. “There was a supply glut last year, but several new projects were launched during March-April,” Abhishek Gupta, head of research and real estate intelligence service, Jones Lang LaSalle, said. “Lower sales because of high property prices could be the main reason.”

    No Gudi Padwa for builders - Mumbai - DNA
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  • Why prices will Correct?

    Just a transfer of loan from one lender to another will not resolve the problem. Yes, NBFC will lend money but the cost is very high 18 to 22%. PE is another form of capital source where funds demand 30 to 40% returns. If you will go to conventional black market, monthly rate is 2 to 3% per month. Overall, bank source of capital is cheapest one. Capital will be always available but only at what cost is the question. This kind of capital borrowing is not sustainable.

    On the other hand current price level does not have any support.

    Interest rates are going up. Definitely interest rates are not going to cool down in next 2years. In fact till year end it will go up by at least 50bps.

    NRI are not doing well. Middle east is facing crisis. US & UK have tightened the visa norms. Australia is rejecting visas. Due to European debt crisis, there are restrictions on non-European immigrants.

    IT sector can not support the exorbitant prices.
    IT bids adieu to big hikes >> Watch Video



    Oil is trading 121, last time when it had reached 140+ we have seen global crash.



    If at all, there is any bull case people can share it. Market is already reflecting it’s view, through sales.:bab (60):
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  • Originally Posted by punekiune
    Real & all senior folks on this forum,
    We all appreciate your comments and suggestions, and hope you won't mind with the question I am going to ask -
    Lot of folks on this forum talks abt slumps in sales -
    where is it?? I don't see it at all. e.g. last week I visited DSK Gandhkosh, all 3 BHK sold out, pre launch offer was 4500 or 4600, next day they increased it to 4700 or something like that. Grand stand in the morning were quoting 3851, in the evening it went upto 4200 and just for single bldg. (rest 2 will be of course sold at much higher rates) irrescpecitve of pathetic location, on either side of highway whether its so called kothrud or bavdhan or baner, WHY and how come ppl are buying at such higher rates? And if they keep doing so, why would builder reduce the rates??
    Everyday new reports comes out (latest Indiabulls report - why they don't invest in reality in Pune) abt slump in rates in Mumbai or other parts of country whereas its not affected to Pune at all!!!!!!! Just count how many projects were launched in last 3-6 months; and all are sold out >50%.
    Isn't builders proving our analysis wrong??

    Lets take the latest eg. of Darode-Jog. They launched a new project (some county as usual) at Dhayari, sinhagad rd at pre-launch offer of 3500/sq ft. One week later, the price was 3000/sq ft. This news is of about 1.5-2 months ago.

    Similarly, crosswinds by Mittal at Baner-Balewadi said SOLD OUT & now they have relaunched the same flats as 'Vogue Residences':D.

    Same was the case with other project at Baner (it was either Vyankatesh Mirabel or Felicita) where launching rates were more than booking rates!!!

    You gave the eg. of DSK....DSK Frangipani, Sadhu Vaswani chowk had couple of flats left......& these were left for over an year:D. Same is the case with it's new buildings in DSK Vishwa.

    Another recent eg. is Paranjape's schemes Yuthika, Baner. Majority of the flats got sold on first day & project got over-whelming response. Then, the news came out that the land on which this project is to be built is itself in litigation. Now, when the banks themselves are not giving loan for this project, how did it got over-whelming response?? The builder has now stopped the bookings.

    Look man, the fact of the matter is DON'T TRUST THE BUILDERS WORDS. Even Blueridge's flat were sold out in first 4 days, same was the case with Magnolia & Crystal Garden but flats were available later too.

    The figs. which are posted here by various members which indicate slump are based on registrations & not what builder claims.

    * PS:- Bajaj had introduced a bike with mileage of 80km/l....did any one get that?? On road conditions are different, same is the case with RE.
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  • http://maharashtratimes.indiatimes.com/articleshow/7888458.cms

    No Gudhi pawda... Link from Maharashtra times
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  • PE Funds Exiting RE

    India's private equity firms' exits, while profitable in general, also saw more losses in 2010 than in the previous two years primarily due to poor bets on real estate and retail companies.

    Losses, Low, But Rising as Private Equity Firms Exit - WSJ.com
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  • One more news on this...

    Indian Express :

    Property in Dubai cheaper than Mumbai

    A growing number of investors from India are showing interest in Dubai as they look to capitalise on 60 per cent savings per square foot in the Dubai property market, a Dubai-based real estate company has said.
    DAMAC Properties said in addition to the price disparity, Dubai's property market is becoming increasingly attractive to foreign investors due to the implementation of a raft of new regulations, such as the new Strata law, which favours home owners.
    "As these new tougher and more stringent regulations take hold, Indian investors are looking to take advantage of the plethora of investment opportunities that exist within the emirate's real estate market," it said in a statement.
    At an average price per square foot of USD 264 in Dubai, according to Colliers International, property is now 60 per cent less expensive than in central Mumbai, where the price per square foot is USD 664 according to Jones Lang LaSalle.



    DAMAC Properties Senior Vice-President Niall McLoughlin said: "At DAMAC Properties, we have seen a marked rise in interest across our Dubai portfolio from Indian investors; in January 2011 we had double-digit growth in enquiries on the same period last year.
    "Not only are we seeing a surge of interest from potential Investors from India but also from other emerging markets such as sub Sahara Africa and China who are looking for quality assets, at competitive prices.”
    According to McLoughlin, even though confidence was shaken following the global slowdown, the introduction of new regulations in Dubai gives property buyers more security over their investments. DAMAC Properties has also welcomed the return of liquidity into the mortgage market, which it cites as another major factor in the revival of the emirate's real estate sector.
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  • Originally Posted by home123
    Indian Express :

    Property in Dubai cheaper than Mumbai


    At an average price per square foot of USD 264 in Dubai, according to Colliers International, property is now 60 per cent less expensive than in central Mumbai, where the price per square foot is USD 664 according to Jones Lang LaSalle.

    Not to forget about the infra which Dubai provides & the quality of constro too. It is good that investors are venturing outside India which clearly shows that local RE has been all hyped up. Absence of investors is also good for end users.
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