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 AryanKB
    I have been following this forum from quite some time wherein people from all streams are sharing the RE prices are on the verge of crashing (thread started in 2009) but in actual till May 2011 nothing of this sort has happened and prices are increasing and increasing only.

    Guys do you really feel this thread still hold its significance or need to be revived :-)


    You have Joined the Forum in May 2011.
    Then how are you following this thread from 2009?
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  • Originally Posted by patilbha
    You have Joined the Forum in May 2011.
    Then how are you following this thread from 2009?


    I Joined this forum in May 11 - correct - but i am not new in Reality business and since the thread heading was so interesting i had been reading it as a guest from a long time.
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  • Originally Posted by AryanKB
    I have been following this forum from quite some time wherein people from all streams are sharing the RE prices are on the verge of crashing (thread started in 2009) but in actual till May 2011 nothing of this sort has happened and prices are increasing and increasing only.

    Guys do you really feel this thread still hold its significance or need to be revived :-)

    In light vein .... Sorry buddy. We are strong convictions here . Can't you appreciate all those charts members take effort to paste here and some much effort they try to link 2 + 2 = 5 ? And what about those bearish news weblinks they find after so much efforts ? What will take you to understand what we are saying is true ? Aren't those big words like "global" and "recessionist" and "GDP" and "comparison to america" etc enough to convince you ? I do not see what is your problem ? So what if prices in reality are rather growing for last 2 years. I mean we understand your concern that real world is different from what we think. Think we are bit confused.
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  • Originally Posted by patilbha
    You have Joined the Forum in May 2011.
    Then how are you following this thread from 2009?

    Good detective work patilbha. We need alert members like you.
    CommentQuote
  • Originally Posted by compuwalah
    In light vein .... Sorry buddy. We are strong convictions here . Can't you appreciate all those charts members take effort to paste here and some much effort they try to link 2 + 2 = 5 ? And what about those bearish news weblinks they find after so much efforts ? What will take you to understand what we are saying is true ? Aren't those big words like "global" and "recessionist" and "GDP" and "comparison to america" etc enough to convince you ? I do not see what is your problem ? So what if prices in reality are rather growing for last 2 years. I mean we understand your concern that real world is different from what we think. Think we are bit confused.


    :D Yeah. If this thread is closed then where will all 'khabars' be posted?

    Also notice that few veteran members predicting price correction by March end are missing on the forum nowadays. So what's the next timeline for price reduction guys?
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  • This thread will only close with doomsday :D
    jokes apart.
    This is one of the most valuable and informative (RE) thread avl on the internet with personal experiences and real life opinions. I will never want it to be closed.
    Big sorry to all those who dont support this thread.:bab (58):
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  • Originally Posted by patilbha
    You have Joined the Forum in May 2011.
    Then how are you following this thread from 2009?


    May be he was following the thread as guest (read only mode) and became member when he wanted to post something. :bab (35):
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  • Originally Posted by UncleScrooge
    May be he was following the thread as guest (read only mode) and became member when he wanted to post something. :bab (35):


    Yes..may be...ha..ha...ha...
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  • High prices, interet rates impacting housing credit: NHB head

    High prices, interest rates impacting housing credit: NHB head - The Economic Times

    :)Demand for housing credit has been impacted by high prices and interest rates, National Housing Bank Chairman and Managing Director R.V. Verma told reporters on Thursday.
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  • Firstly i would like to share that i had done 5 deals in Pune in late 2009 and early 2010. I have received possession of one appartment in April 2011 (which i kept for my brother use who has shifted to Pune recently). Out of remaining 4 I had sold 2 properties at such premium that my first property has become free for me.

    Again please do not get misguided by joining dates of any members as that is not a criteria for any body's experience.

    Again I would reiterate that RE of India vs RE of western countries are way too different in all manners. Courtries like India where every body has a dream to own his house and after he owns one he dreams for a better house which will never end. India is young and Middle class is surging and becoming stronger. This segment will be increasing for many more years and will keep RE profitability alive (not true for super luxurious properties).
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  • Originally Posted by AryanKB
    Firstly i would like to share that i had done 5 deals in Pune in late 2009 and early 2010. I have received possession of one appartment in April 2011 (which i kept for my brother use who has shifted to Pune recently). Out of remaining 4 I had sold 2 properties at such premium that my first property has become free for me.

    Again please do not get misguided by joining dates of any members as that is not a criteria for any body's experience.

    Again I would reiterate that RE of India vs RE of western countries are way too different in all manners. Courtries like India where every body has a dream to own his house and after he owns one he dreams for a better house which will never end. India is young and Middle class is surging and becoming stronger. This segment will be increasing for many more years and will keep RE profitability alive (not true for super luxurious properties).


    Why not?

    As the cream of our population earns in millions, they will form an ever growing market for luxury property.

    Unless you are living in a city which will make extortionists visit you if you go in for conspicuous consumption, in other areas with law and order, super luxurious properties can only keep increasing.

    Most of the flats being sold now would have been considered luxurious 10 years ago.

    On the other hand, selling a 2BHK (thats not luxury!!!!) for half a million dollars is another kind of crime - much worse than extortion - which our Bombay builders are guilty of doing every day
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  • Originally Posted by AryanKB

    Again I would reiterate that RE of India vs RE of western countries are way too different in all manners. Courtries like India where every body has a dream to own his house and after he owns one he dreams for a better house which will never end. India is young and Middle class is surging and becoming stronger. This segment will be increasing for many more years and will keep RE profitability alive (not true for super luxurious properties).


    Westerners were no different, they also wanted to buy a house, a better house and a better better house. They may be older but have more money than us. They were already strong and all have more dispensable income than us. They also thought it's next to impossible that RE can ever crash but still...
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  • On the other hand, selling a 2BHK (thats not luxury!!!!) for half a million dollars is another kind of crime - much worse than extortion - which our Bombay builders are guilty of doing every day


    Your are very right. Unfortunately the RE sector is the one the provides the most black money to these politicians to stand for elections and get supporters. And these same politicians get elected and make more money by increasing the rates and keeping the RE sector unregulated. There is no end unless the Lokpal bill and full Electoral reforms happen.
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  • Originally Posted by Venkytalks
    Why not?

    As the cream of our population earns in millions, they will form an ever growing market for luxury property.

    Unless you are living in a city which will make extortionists visit you if you go in for conspicuous consumption, in other areas with law and order, super luxurious properties can only keep increasing.

    Most of the flats being sold now would have been considered luxurious 10 years ago.

    On the other hand, selling a 2BHK (thats not luxury!!!!) for half a million dollars is another kind of crime - much worse than extortion - which our Bombay builders are guilty of doing every day

    Dactar saheb luxery matlab farm house - period baaki sab to eye wash

    aur farm house bhi aisa jisme aap horse riding kar sako nahi to bas bangla hai

    - sorry for the typos wanted to convey msg in laloo estyle.

    rohit

    arre ha ek baat to bhool gaya - agar aap ambani ho to fir aapka farm house to hawa mai hoga - magar uske liye aapke paas modern horse (helicopter) hona chahiye.
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  • MARGINS OF BUILDERS

    Here is a link from Marathi newspaper, Sakal

    eSakal

    Herein Shroff builder himself is claiming that he paid FULL PAYMENT of 53 LACS and 82 thousand rupees to farmers as price for 57000 sq ft land in Balewadi. That makes the price per 1000 sq ft (1 guntha) land less than 1 lac rupees. And this transaction happened in February 2005! Not very old.
    Now add other charges for developing land, construction and NA. I believe FSI is 1 in Pune.
    Compare how much you pay for 1000 sq ft flat. You can imagine profiteering and super excessive profit margin in RE!!!

    Middle class just does one taks get looted by builders, politicians and babues! Be it any generation
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