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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  • it looks like a deliberate strategy of builders.......to keep jacking up prices and enroll fools if any.....even if they don't sell much and have to bring down prices they would be to current levels where they will make hefty profits...

    buyers will be happy with price correction and builders happy by applying age old strategy

    first double the price then give 50% discount:bab (34):
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  • Originally Posted by rajtjrll
    From Where this conclusion? any reasoning behind this statment? ohterwise all this is again a big-s**t of WORDS, without any facts!!!

    Check out the land prices at the following areas:-

    1.) Behind pashankar auto, Pashan (Baner),
    2.) Spine road, Chikhali, PCMC,
    3.) NDA road, Bavdhan,
    4.) Near Bajaj School, off Telco road, PCMC.
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  • KUL Again Going Bankrupt

    Now, here is news about Pune builder, KUL, earlier called as Kumar Builders.
    This builder needs to repay over INR 400 Cr in debt & as banks are not financing, IPO is in cold storage, Kumar Builders is selling 26% stake in each project to those who will invest as PE & lend money to KUL :bab (34):.

    Man, I would be very skeptical to buy in a project of a builder who himself is begging around for money....wonder how did this fellow Lallu Jain became head of CREDAI....anyways, this organization too is junk like most Pune builders:D.

    This is a classic case of over-leverage & greed on account of builders. There are several other builders in the city who are facing liquidity crunch, it is just that the exact figs. are not out of now. Will keep you all updated in this regard.

    RE bulls, now what's your take on such reports ??
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  • still need to wait ...

    Originally Posted by kingmanish
    it looks like a deliberate strategy of builders.......to keep jacking up prices and enroll fools if any.....even if they don't sell much and have to bring down prices they would be to current levels where they will make hefty profits...

    buyers will be happy with price correction and builders happy by applying age old strategy

    first double the price then give 50% discount:bab (34):


    Your point is very valid.. the prices are hiked tremendously in last few years. Now in this correction .. even if builder get back to their one year old price it will still be good for them.. this is the only chance for us to get less price. :(

    I have enquired about BlueRidgehinjewadi scheme on this weekend and got to know that 2 BHK 1100 sq ft flat cost 54 lakh and 3 BHK 1490/1450 sq ft flat costs 67 lakh. I have just casually asked whether this rate is negotiable.. the answer was biggg NO.

    I would like to check with same person after six month for negotiation. :bab (35):

    BTW the BLISS project in wakad .. the sales person was ready for negotiation... at least some good sign.. although I dont like wakad area
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  • Originally Posted by rajtjrll
    From Where this conclusion? any reasoning behind this statment? ohterwise all this is again a big-s**t of WORDS, without any facts!!!

    Ever heard about a paphlet written by Thomas Paine called "common sense"? He had written: "It is absurd for an island to rule a continent". There must have been a rajtjrll then who would have told that what he wrote was "big-s**t of WORDS, without any facts!!!".. Tch..Tch.. America is a reality now. Reading is painful, I know. But before opening mouth, read some history !
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  • KUL has claimed to have sold 150 flats in their new project in Mhalunge. I got a mail from KUL which puts a 3 bed for 65L. One might think KUL is crazy but I've seen people crazy in 2005 and now again in 2011, specially in Pune. In Mumbai nobody can afford to buy anything barring a fraction so I'm seeing Mumbaikars flocking to west Pune by dozens.

    All builders are over leveraged so just harping about KUL's bankruptcy for over 2 years is helpful to no one. One has to accept the fact the real estate is a builder-politician business and has been as long as India has been independent.
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  • Interesting link for how NCP was formed and how they got support in the first place... it wasn't loyalty to Pawar but the loyalty to the 'M' vitamin..

    ?????????? ?????? ?????? ??????-????? -??????????-Maharashtra Times

    it also explains how the politicians steal people's money in broad daylight and how it also is used for pure politics!!

    Good decision by RBI to curb this bank.
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  • Real Estate Bill............

    The law ministry is expected to give its opinion by the end of this month. The concept of a real estate Bill has been around in the government for almost 10 years now, and a draft Bill has been in the making for well over two years.

    The disclosures must be made before launching any project, so that consumers are not taken for a ride at a later stage. Also, developers have to register themselves with the regulatory authority.

    Real estate draft Bill revised to make it a central legislation
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  • SBI Hiked interest rate by 0.75% .....

    The country’s largest bank, State Bank of India (SBI) has hiked lending rates by 75 basis points. SBI’s base rate (minimum rate at which it lends) will be 9.25 per cent and benchmark prime lending rate (BPLR) will be at 14 per cent. Deposit rate hiked by 75-225 basis points. These rates are effective from May 12.

    Interest rates have been revised after RBI’s recent hike in key policy rates by 50 basis points on May 3.

    Home loan rates will be hiked in the range of 10.25- 11 per cent depending upon loan amount.

    SBI loans to be costlier as it hikes lending rates by 75bps | mydigitalfc.com
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  • Originally Posted by BearORBull
    I have enquired about BlueRidgehinjewadi scheme on this weekend and got to know that 2 BHK 1100 sq ft flat cost 54 lakh and 3 BHK 1490/1450 sq ft flat costs 67 lakh. I have just casually asked whether this rate is negotiable.. the answer was biggg NO.

    Paranjape has a habit of saying NO initially & then opening up for nego later. I say this from my experience with Crystal Garden, Baner-Pashan link rd.

    BTW the BLISS project in wakad .. the sales person was ready for negotiation... at least some good sign.. although I dont like wakad area

    There are 2 more to the list now in Wakad:-

    Horizons & Latitude.
    Not interested in Wakad, just like you so didn't bother to go to their office for negotiations.
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  • Now, boundary wall of Nyati Meadows collapses

    Man, it was not even 2 months since Nyati's balcony collapsed & now the compound wall of the project has collapsed .

    A portion of the boundary wall of Nyati Meadows residential complex collapsed late on Sunday night, spreading panic among society members. The upmarket society, which grabbed headlines when a balcony of one of its buildings collapsed in March, is located in Wadgaonsheri and has 318 flats in a total 11 buildings.

    D Agarwal, a resident of the society, said, “A 20-feet portion of the wall crashed down because of poor material and workmanship. Fortunately, the wall fell down towards the other side where there is open land. It could have been fatal if people were staying at the other end.


    Read the complete story & see the pic here:-

    Now, boundary wall of Nyati Meadows collapses, News - City - Pune Mirror,Pune Mirror

    I always wonder how do people spend their lacs on such junk projects ??:bab (38)::bab (38):
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  • Originally Posted by realacres

    I always wonder how do people spend their lacs on such junk projects ??:bab (38)::bab (38):


    Be'z every tom-dick and harry (read bakras) feels RE is gold-mine. I have seen people desperately buy RE without checking quality, location, terms & conditions as if Warren-Buffet is going to snap the same next day :D
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  • Originally Posted by realacres
    Man, it was not even 2 months since Nyati's balcony collapsed & now the compound wall of the project has collapsed .


    How can a compound collapse! There are no engineering marvels involved as in hanging bridges. It is just a series of bricks put on top of each other. This is not a rainy season either. How can it happen?

    Next time we will hear that the persons on 4th floor will fall on heads of 3rd floor people, because 'A lot of water seeping from the bathroom has weakened the floor further!'

    Realacres, thanks for sharing the news. I remember you liking some project because of its gothic look. Forgot its name. Was it of Nyati? Remember some guy was asking opinions for a resale flat there?
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  • A post I made elsewhere:

    Real estate is hoarded by blackmarketeers (builders, investors, common people with multiple flats).

    So there is no supply. Demand in India is neverending.

    Supply and demand works in market, not in black market.

    As for PE for RE in India, it has always oscillated between 25 and 60. If you know your stocks, then you will know that some stocks always trade at PE of 40 - some sectors always trade at PE of 30 - and some other sectors always trade at 5-10.

    You need to know your sector PE and invest accordingly. Current RE PE is about 60 in Delhi.

    RE is likely to stay static for at least 4 years - unless there is massive inflation and Rupee depreciation (currently it is appreciating).

    In normal conditions, in 4 years, rents are likely to rise a lot to make the current prices seem reasonable.

    Still, better to buy at PE of 30 rather than fail to perfectly time it at 25 and be left with nothing.

    But expecting PE of 15 to 20 for RE is just ignorance talking
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