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 patilbha
    Thanks Khabarilal for sharing latest news.



    Even in new delhi , CP area ,if u visit office towers there ,one will find lot of empty office space at upper floors,seen them myself last month.
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  • Now crash in Office and Commercial Space..

    Fall in Office and Commercial Space Demand in Mumbai

    Clearly 2011 will be a pretty interesting year in terms of demand. The challenge on pricing will continue to stay. Reason for that is compared to the 42 million square feet demand, supply is coming in for 66 million square feet. So supply far exceeds demand so possible increase in demand is not going to be there,” Anuj Puri, chairman and country head at Jones Lang LaSalle, said.

    Market sentiment continues to be subdued with players expecting large developers to reduce prices further.

    Builders are already in trouble..Sales figures are pretty low. And, due to Govt. Banks lending loans to Builders strictly as per norms. RBI has also issued guidelines to maintain a separate account, so that, the amount of loan sanctioned for the project needs to be utilized for that project only.

    That's why this crash is happening. RE Prices are moving downwards due to Lower sales Volume, and High inventory Levels.
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  • Originally Posted by patilbha
    Fall in Office and Commercial Space Demand in Mumbai

    Clearly 2011 will be a pretty interesting year in terms of demand. The challenge on pricing will continue to stay. Reason for that is compared to the 42 million square feet demand, supply is coming in for 66 million square feet. So supply far exceeds demand so possible increase in demand is not going to be there,” Anuj Puri, chairman and country head at Jones Lang LaSalle, said.

    Market sentiment continues to be subdued with players expecting large developers to reduce prices further.

    Builders are already in trouble..Sales figures are pretty low. And, due to Govt. Banks lending loans to Builders strictly as per norms. RBI has also issued guidelines to maintain a separate account, so that, the amount of loan sanctioned for the project needs to be utilized for that project only.

    That's why this crash is happening. RE Prices are moving downwards due to Lower sales Volume, and High inventory Levels.



    Even with all this bad news ,one will not see a downward trend in RE prices because of mental bullishness of ordinary people who think that RE prices go only one way----UP.
    to remove this mindset ,india needs to see a decent crash in stockmarket and jobmarket then only this mental bullishness of people will take a hit and they will be willing to accept saner levels for there RE.
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  • Originally Posted by vatsalbajpai
    Even with all this bad news ,one will not see a downward trend in RE prices because of mental bullishness of ordinary people who think that RE prices go only one way----UP.
    to remove this mindset ,india needs to see a decent crash in stockmarket and jobmarket then only this mental bullishness of people will take a hit and they will be willing to accept saner levels for there RE.

    The affordable section of the real estate is bound to rise - there are too many families in queue to buy their first house (sorry for not using the word "home").

    The builders have found that this segment is heavily dependent on bank funding and will pay any interest rate thus they are holding unto this segment flats -

    Till RBI agressively hikes the crr rates the liquidity would be available in the market thus banks would not stop lending -

    As far as the crash of stock market is concerned if we see worse correction than 2008 - sen below 8 k only that would jolt the "aam admi" otherwise for him the stock markets are just a place of .

    For jobmarket to crash - well I see that going one way up only after services sector I have seen some serious investment in old brick and mortar kind of businesses in last few month - a big shift - the iip data supports this.

    center mai fir se congress nahi aayegi this is sure - and that will be only trigger for the crash in real estate market so those want to time the markets should hold their re holdings as of now and book just before elections.
    beware that if the outcome is different than what I am thinking one might loose 10-`15% in terms of less profits. but better safe than sorry :D

    rohit
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  • Originally Posted by vatsalbajpai
    Even with all this bad news ,one will not see a downward trend in RE prices because of mental bullishness of ordinary people who think that RE prices go only one way----UP.
    to remove this mindset ,india needs to see a decent crash in stockmarket and jobmarket then only this mental bullishness of people will take a hit and they will be willing to accept saner levels for there RE.


    In 2008 jon market & stock market both crashed. Why you need one more crash? How many people could actually buy during that crash ?
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  • Originally Posted by mahesh pune
    In 2008 jon market & stock market both crashed. Why you need one more crash? How many people could actually buy during that crash ?



    dear mahesh,

    believe me i am honestly not praying for crash to happen.....but it may happen due to circumstances beyond my control ,but even then at your request i will try very hard to ensure that markets do not crash....

    happy....

    :bab (4):
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  • Indian Market......

    These risks are compounded by the fact that India's capital markets are very shallow and do not have the capacity to absorb external shocks. In 2008, for instance, an outflow of $13 billion led to the rupee falling by 30%. Even a relatively orderly outflow of $15 billion of foreign institutional investor money over a year could result in the rupee depreciating by 22% to 30%. It could get even worse if the flight of capital were to take place in a shorter period.



    http://online.wsj.com/article/SB10001424052702304066504576346434140505472.html

    The RBI has also taken measures to curb any possibility of asset-bubbles formation through a string of measures such as increasing the provision coverage ratio on teaser loans which involve staggered interest payments, among others.

    Hike in rates to rein in inflation,asset bubbles: StanChart - Economic Times
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  • Pune RE activity slowdown....

    Based on the current data, Pune RE activities are slowing down.

    On Building material side, rate of sand has came down by ~1000Rs for brass.
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  • At a time when housing has gone beyond the reach of the poor in the city, the Maharashtra government has cancelled a portion of a large reservation for the economically weaker sections (EWS) of society near the University of Pune's Khadki gate.
    The remaining portion of the reservation for EWS and a children's playground near the Padalvasti slums in Bopodi, off Aundh Road, are also under threat of deletion.
    This is because they are located on a massive plot of land where Avinash Bhosale Infrastructure Pvt Ltd (ABIL) is developing its super luxury residential project, Castel Royale Towers.
    The company is named after the prominent city builder, well known for his strong political connections. Asked by DNA to provide details about the deletion of EWS reservation on its plot, ABIL's chief executive officer (CEO), Sudhanshu Purohit, responded with a terse statement. "ABIL Corporation has complied with all the necessary regulations stipulated by the government," he said in reply to a questionnaire.
    Prominent orthopaedic surgeon, Dr Satyasheel Naik, who is the original title holder of the land, refused comment on the matter.
    "We have sold the land to ABIL group, and they are responsible for the land now. Please talk to them regarding the reservations on the land," was all he said.
    Significantly, the Pune Municipal Corporation (PMC) has remained silent rather than respond to a September 16, 2009, letter from the Maharashtra government's urban development department, asking for its opinion on the deletion of EWS reservation from the plot.
    The ABIL project is located next to the Padalvasti slums with 840 homes and about 10,000 slumdwellers in Bopodi who are already waging a bitter struggle against their eviction by the military authorities.
    The slumdwellers, who have moved court, maintain that only some houses are on defence land and there is no reason to evict the entire slum. They suspect that their eviction is related to the Castel Royale Towers project coming up in their backyard.
    Purohit in his reply to DNA said, the super luxury Castel Royale project envisages construction of five towers of 100 metres and 26 floors each. Three towers have been planned in the first phase, of which two have been completed.
    The apartments in these towers will range in size from 8,000 square feet to 3,500 square feet. Numerous high-end amenities like tennis courts, salon and banquet hall will also be a part of the project.
    Although the price was not mentioned, it was apparent that each flat will be priced at a couple of crore rupees.
    Documents accessed by DNA, relating to the environmental clearance granted by the Maharashtra government to this project state that the total estimated cost of the project is in the range of Rs 380 crore.
    File inspection by DNA under Section 4 of the Right to Information Act, 2005 (RTI) at the PMC revealed that as per a government resolution (GR) dated January 3, 1990, the Maharashtra government's urban development department deleted the EWS reservation of 13,715 square metres of the total 34,289.12 square metres that was under EWS reservation on this plot.
    Documents show that in 2007, the original title holder of the land, Dr Satyasheel Naik, executed a power of attorney (PoA), agreement with M/s Shashibindu Construction Pvt Ltd, represented by its director, Avinash Bhosale. The PoA states that Shashibindu Constructions Pvt Ltd will be solely responsible for removal of the various reservations on the land.

    http://www.dnaindia.com/mumbai/report_luxury-homes-project-threatens-public-reservations-in-bopodi_1547236

    * After cming in media, the current update is various corporators have now oppossed the de-reservation & stop of this work of further phases.
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  • Maintenance for the Mind

    These days I walk to work. I take the overhead walkway and incidentally have to walk opposite to the direction people are taking. I love this because it gives me the feeling of going against the tide with confidence and courage of taking in stride whatever is coming on. But I love this more because I get to see faces of so many people…most of whom are pretty tensed about something. Probably few are anticipating a frustrating day, some are contemplating filing taxes, some listening to sad news of another disaster somewhere, and some may be tensed about getting a raise. With the wonders of technology and high-speed interaction amongst all, most people find it more and more difficult to keep our mental machinery chugging away at optimum performance.
    I have been an engineer professionally at an early stage of my career and I know that what the mind needs regularly is a "scheduled maintenance". Like your car, your mind too needs regular care to perform like you need it to. Your brain is precision crafted instrument — there is no substitute to "Planned Regular Maintenance". Here are few routines that one must carry out:

    Sleep
    Sleep is a natural healer. Memories are processed and learnings are cataloged during sleep. Body is rejuvenated and sub-conscious talks to conscious. The mind wanders to wonderland to find solutions that never cross the real world. Sleep de-sponges the brain, catalogs the right stuff and prepares the mind to absorb more.
    If you don’t get enough sleep, and you’ll simply not think clearly because information has not cataloged and mind has not de-sponged.

    Meditate
    Unlike Sleep, Meditation is about focus. The focused concentration on right now. It gets your brain functioning in different wave patterns by clearing your thoughts and keeping your mind in the present—not worried about the future, not haunted by the past, but simply focused on right now.
    Your brain finds peace in the now – no strings attached, and feel free to relax.

    Experience beauty and creativity
    Soak in what you find to be beautiful. This is what generations have referred to when they advise us to “stop and smell the roses.” Some find beauty in the purr of an engine, others find it in a baby’s laugh. Some may take a walk, other just need to fly like a hawk. Whether you find beauty in flowers, in a fast pitch at a ball game, or in the grandeur of nature…“experiencing beauty” is the brain’s opportunity to stop and function in a different mode.
    "Experiencing Beauty" wows the grey cells and exposes the mind to wonders of the lord – brains responds to purity and "beauty' is purity.

    Experience the spiritual
    While "beauty" is God's gift, spirituality is the journey into awareness of something beyond the physical and visible. For some this comes through study of quantum theory while others may experience it in religious worship.
    Spirituality is appreciation and awareness of a “higher power", or something bigger or different than all of this and us. It humbles the mind to believe that there is more than the individual and than the cumulative wisdom of mankind.

    Smile
    Smile is an infection and a good one. It spreads like wild fire and ignites happiness in us and in everything that experiences us. Smile also triggers the right catalyst for the mind to feel buoyant. Know the difference between a "Genuine Smile" and a "Doctored Smile".
    Make "Genuine Smile" a habit because it keeps the buoyancy of the mind intact – not only for you but for everyone experiencing you.

    Idle
    Do nothing. Yes…just sit or lie down and do nothing. Keep no agenda, no deliverables, no targets. Just do nothing. Enjoy the serendipity of the idleness called the "Blank Moment"
    Our mind needs time to let go and roam where it may aimlessly. You might by perusing Facebook or by viewing YouTube. Some people might just exist for a period of time in front of TV news or comfortably with a rerun of a mindless sitcom.
    Idleness produces a sense of calmness and can be useful to let go of the day’s stresses and bygones.

    While none of these suggestions are helpful when practiced in excess, they each add to brain health. So to prevent your brain from pinging or backfiring, give it a maintenance, and your thinking will be clear and smooth.
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  • 1. Amanora is offering flats for a home loan at interest rate of 7.7%
    2. I am getting at least one call per day and atleast 3 SMSes per day for apartment selling.

    I belive the process for correction has started.
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  • Originally Posted by Blitz
    1. Amanora is offering flats for a home loan at interest rate of 7.7%
    2. I am getting at least one call per day and atleast 3 SMSes per day for apartment selling.

    I belive the process for correction has started.

    Today i heard same advertisement on the FM.
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  • Originally Posted by Saurabh01
    Today i heard same advertisement on the FM.

    Today's Times Of India - Times Property says Renewed Growth - residential market in Pune is gaining momentum driven by end users....

    WHat bullshit ??? Should we now distrust newspaper and media as well ?

    Are these newspapers rigged as well ?
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  • can you post the link ?
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  • Originally Posted by techieguy_98
    Today's Times Of India - Times Property says Renewed Growth - residential market in Pune is gaining momentum driven by end users....

    WHat bullshit ??? Should we now distrust newspaper and media as well ?

    Are these newspapers rigged as well ?



    These are paid news and very common not only in india but globally.
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