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 Saurabh01
    Also count variables :)


    what count/add.....aa gaya sab issime....
    abhi isse jyada koi nahi de raha....

    subract....PF/Gratuity/Professional Tax for every month....

    If builders think ITGs are from heaven & have some 'khulja sim sim' kind of vault...then they are making fool of themselves......
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  • Originally Posted by rajtjrll
    what count/add.....aa gaya sab issime....
    abhi isse jyada koi nahi de raha....

    subract....PF/Gratuity/Professional Tax for every month....

    If builders think ITGs are from heaven & have some 'khulja sim sim' kind of vault...then they are making fool of themselves......



    well, i'm new to this topic...
    But as per me, builders never make fool of themselves, rather fool us.

    that's why every second day they organize adv. camps in IT/BPO companies. Bcoz they know that's the best place to find fools.... :bab (36):
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  • Originally Posted by rajtjrll
    what count/add.....aa gaya sab issime....
    abhi isse jyada koi nahi de raha....

    subract....PF/Gratuity/Professional Tax for every month....

    If builders think ITGs are from heaven & have some 'khulja sim sim' kind of vault...then they are making fool of themselves......


    If you count variable then the in hand would much less than what you mentioned.
    Gratuity kabhi milti nahin
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  • From what I see the general scenario for good product companies , captive units is :

    Pune average salary in lacs per annum is round about 1.5 * Number of years of experience .

    Bangalore is about 2 * N .

    For MNC service factories the above figures are a few percent points lesser .

    Even if u go onsite , if both husband and wife work then u have good savings .
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  • Originally Posted by suryawork
    From what I see the general scenario for good product companies , captive units is :

    Pune average salary in lacs per annum is round about 1.5 * Number of years of experience .

    Bangalore is about 2 * N .

    For MNC service factories the above figures are a few percent points lesser .

    Even if u go onsite , if both husband and wife work then u have good savings .


    Pune main to paisa hi na hai.. HR last round main rone lahte hain jaise unki jeb se paise ja rahe hain....
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  • Originally Posted by suryawork
    From what I see the general scenario for good product companies , captive units is :

    Pune average salary in lacs per annum is round about 1.5 * Number of years of experience .

    Bangalore is about 2 * N .

    For MNC service factories the above figures are a few percent points lesser .

    Even if u go onsite , if both husband and wife work then u have good savings .


    By the way , once you are at higher positions u've other bonuses and allowances apart from salary .
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  • Originally Posted by Saurabh01
    Pune main to paisa hi na hai.. HR last round main rone lahte hain jaise unki jeb se paise ja rahe hain....


    That is HR strategy where they'll always try to hire you one designation/band lower than what you ask.
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  • Originally Posted by Saurabh01
    If you count variable then the in hand would much less than what you mentioned.
    Gratuity kabhi milti nahin


    Yes thats true....and again...variable pay outs/PLB/Bonus in sab pe 30 % straight tax cut hai.....to PLB bhale hi....1L mila ho...hath mein to 70 hi ana hai...
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  • Thanks for the info, all of you guys.

    I really like the approach of Fundoo and Suryawork - a simple formula!!!

    (3+N) x Lakh - I will remember this - so simple.

    Suryawork's formula also seems simple and adjusts for location related pay difference also -

    Just 1.5 x N or 2 x N.

    Brilliant, all of you.

    Probably Delhi also fits in 2 x N I would think. I suppose, Suryawork's formula is less applicable for beginners and veterans, bit captures the middle part of the career.

    Tell me something - many of you must be IT people - do you find your work satisfying? Does it give you a sense of achievement - perhaps writing a difficult bit of code or extracting a bug or whatever it is that you need to do?

    Is it just the money or is the work interesting?

    Of course I know all the benefits of on site work - lots of my friends have gone to US for 2 years. Before they go, they make their flat booking already. If it is their second or third flat, when they come back, they sell one flat and pay off all loans and get to keep the other 2, fully paid off.

    Flats have become a way of life for these people
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  • Originally Posted by Venkytalks
    Thanks for the info, all of you guys.

    I really like the approach of Fundoo and Suryawork - a simple formula!!!

    (3+N) x Lakh - I will remember this - so simple.

    Suryawork's formula also seems simple and adjusts for location related pay difference also -

    Just 1.5 x N or 2 x N.

    Brilliant, all of you.

    Probably Delhi also fits in 2 x N I would think. I suppose, Suryawork's formula is less applicable for beginners and veterans, bit captures the middle part of the career.

    Tell me something - many of you must be IT people - do you find your work satisfying? Does it give you a sense of achievement - perhaps writing a difficult bit of code or extracting a bug or whatever it is that you need to do?

    Is it just the money or is the work interesting?

    Of course I know all the benefits of on site work - lots of my friends have gone to US for 2 years. Before they go, they make their flat booking already. If it is their second or third flat, when they come back, they sell one flat and pay off all loans and get to keep the other 2, fully paid off.

    Flats have become a way of life for these people


    Indian IT people: kewal gandh saaf karte hain..
    No achievement and US ja kaar.. Ek ek cent ke liye marte hain..
    In one line, live as BPL in US.
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  • Originally Posted by Saurabh01
    Indian IT people: kewal gandh saaf karte hain..
    No achievement and US ja kaar.. Ek ek cent ke liye marte hain..
    In one line, live as BPL in US.


    Pathetic reply....didnt liked...
    ek ek cent ke liye marna is not true....they enjoy and save adequately..

    many guys are lucky enough to have good enough work load....its not all crap...
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  • Originally Posted by Saurabh01
    Indian IT people: kewal gandh saaf karte hain..
    No achievement and US ja kaar.. Ek ek cent ke liye marte hain..
    In one line, live as BPL in US.


    BTW, what is this BPL stuff???
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  • Originally Posted by monds
    BTW, what is this BPL stuff???


    below poverty line unless there is some another cheap meaning behind it :D
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  • I have always felt that the person not from ITG always beleive the salary of IT ppl to be same as what Venky had in mind.

    When someone asks me my package and they say
    "X lakhs ka to hoga hi kam se kam"...I am too embarassed to tell my real package as it is nowhere near what they are expecting :D:D
    and they beleive I earn much more that's why hiding facts

    ha ha ha :D
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  • 1.5 x number of years...provided you kep changing companies. otherwise increments now in it company r rare at least in product companies :o suppose 4 year experienced person is earing 6 LpA(with this formula), he should earn 7.5 LpA (with same formula) but he may end up somewhere with 6.4 to 6.5 LpA that again if he is too lucky to get rise:bab (45):.

    rise in it packages have been exponential since 1999 to 2009 but it cant go on forever
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