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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  • Have money, waste it

    Originally Posted by asliarun
    I find Pune apartment prices totally unjustified and overpriced by at least 60-70%. Ironically, I find the outlying areas overpriced much more than the more central areas.

    I too find it very illogical but when you observe carefully, it was the IT guys who used to purchase at outskirts as their offices were at outskirts be in Hinjewadi or Kharadi. As they had more money to give, the builder asked for more. Had the demand in outskirts like Kharadi, Balewadi, Hinjewadi been from non-IT people, the rates would have been much lower. Add to it the investments made by Mumbai based speculaotrs who thought that IT guys would be the best bakras & they too drew the prices up. What's more, the outskirts of Pune is not like that of US or Germany where you get good infra & people prefer to then stay there.

    I find really funny when people buy a flat for 2.5-3.5k/sq ft & don't even have proper water connection let alone roads:D.
    CommentQuote
  • Originally Posted by realacres
    I find really funny when people buy a flat for 2.5-3.5k/sq ft & don't even have proper water connection let alone roads:D.


    This is best descried as “BRIDAL OPTIMISM” .

    Anyways I agree that pune real estate is not organized as Bangalore. This may be because Bangalore growth was steady from 90’ to until, where as Pune IT started growing with astronomical pace in last few years. And news paper lies adds to that. “Infosys will have highest number of employees from pune” I think its white lie strategically Bangalore will always be ahead in that, for that matter it will be same for all IT companies.

    State govt should have planned (Well it never does things just happens and they claim credit) for encouraging IT coupled with manufacturing. I suppose pune is loosing manufacturing projects to Uttarakhand(Bajaj) , Gujarat(nano), Chennai. Well politicians don’t want to promote industries as there is easy money is building houses, they assume even with status quo industries will grow and to surprise it happez :))
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  • Originally Posted by realacres



    Before buying just ask a question:-

      Should I borrow money (loan) or
      Should I borrow house (rent).
      This should take care of your worries:).

      Very wise thought and very true.

      Very wise thought and very true.

      Very wise thought and very true.

      Very wise thought and very true.

      Very wise thought and very true.

      Very wise thought and very true.

      Very wise thought and very true.
    CommentQuote
  • Hi everyone! I'm Eva

    Hi guys, my names Eva and im completely new to this forum.I hope that I'll learn and share a lot of interesting things.Thanks,Eva
    CommentQuote
  • go thru this article ... some one earlier said price won't go down 50 percent ...at least they will go down 30 percent :)

    Wait till then

    http://www.indianexpress.com/news/artificial-sales-inflated-prices/541246/
    CommentQuote
  • 2000 per day of income and no big huge starting capital

    Hi there!
    I would like to burn a theme at here. There is such a nicey, called HYIP, or High Yield Investment Program. It reminds of financial piramyde, but in rare cases one may happen to meet a company that really pays up to 2% daily not on invested money, but from real profits.

    For several years , I earn money with the help of these programs.
    I don't have problems with money now, but there are heights that must be conquered . I get now up to 2G a day , and my first investment was 500 dollars only.
    Right now, I'm very close at catching at last a guaranteed variant to make a sharp rise . Visit my blog to get additional info.

    =http://easymoneyltd.info]http://easymoneyltd.info
    CommentQuote
  • Originally Posted by Nuguplimi

    For several years , I earn money with the help of these programs.
    I don't have problems with money now, but there are heights that must be conquered . I get now up to 2G a day , and my first investment was 500 dollars only.
    Right now, I'm very close at catching at last a guaranteed variant to make a sharp rise . Visit my blog to get additional info.

    =http://easymoneyltd.info]http://easymoneyltd.info

    Nuguplimi,

    Thanks, but we people in Pune have a better way to make easy money. Invest in Pune RE:D:D:D,
    more you Invest more you get back.(Shhhhh..... now this is real secret, buy near Hijewadi or in Kharadi
    for more returns :) dont tell any one ok!!) Think about it.

    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.

    Nuguplimi,

    Thanks, but we people in Pune have a better way to make easy money. Invest in Pune RE:D:D:D,
    more you Invest more you get back.(Shhhhh..... now this is real secret, buy near Hijewadi or in Kharadi
    for more returns :) dont tell any one ok!!) Think about it.

    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.

    Nuguplimi,

    Thanks, but we people in Pune have a better way to make easy money. Invest in Pune RE:D:D:D,
    more you Invest more you get back.(Shhhhh..... now this is real secret, buy near Hijewadi or in Kharadi
    for more returns :) dont tell any one ok!!) Think about it.

    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.

    Nuguplimi,

    Thanks, but we people in Pune have a better way to make easy money. Invest in Pune RE:D:D:D,
    more you Invest more you get back.(Shhhhh..... now this is real secret, buy near Hijewadi or in Kharadi
    for more returns :) dont tell any one ok!!) Think about it.

    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.
    CommentQuote
  • While I agreethat Pune RE is hugely inflated & that all the news article & long time expereince people's opinion on an expected downfall of RE prices, I have one question.

    See last year was bad for most of the people be it IT or otherwise, so people were not able to buy any property.

    Now this year business guys have started getting good business, even IT folks are expecting hikes around April, wouldnt this prompt many to dive in fearing a further rise in the price (Thanks to all the media hype) & if this happens (Which I think it would) This will again push the rates high or atleast at same levels.

    So all those who are saying mid year fall, have you concidred this scenario. I mean people have peer pressure to buy a house which they havedelaying due to market conditions, with things improving they would be even more tempted/prompted & not every buyer is on IREF or doing so much study.
    CommentQuote
  • Originally Posted by RAJESHP
    Nuguplimi,

    Thanks, but we people in Pune have a better way to make easy money. Invest in Pune RE:D:D:D,
    more you Invest more you get back.(Shhhhh..... now this is real secret, buy near Hijewadi or in Kharadi
    for more returns :) dont tell any one ok!!) Think about it.

    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.


    LoL. Good One My Friend.
    CommentQuote
  • Originally Posted by RAJESHP
    BTW do you have any secret of easy and cost effective way to generate water? You know
    we have to get water by Tankers. So that will be great help.

    God bless you.

    LoL:D. Why not start tanker service? A tanker costing 11-12L will fetch you more returns than a flat which is worth 20-22L;).
    CommentQuote
  • Japan's Infra

    For long we are discussing infra like water & roads in 21st century:(:D.
    For a change, just have a look at Japan's infra, you will find Pune is ages behind & yet builders' will advertise:- Owners Pride, Neighbors Envy:D.
    Seems neighbor means Pakis:D.

    http://www.funonthenet.in/articles/japanese-bridges.html
    CommentQuote
  • Originally Posted by realacres
    For long we are discussing infra like water & roads in 21st century:(:D.
    For a change, just have a look at Japan's infra, you will find Pune is ages behind & yet builders' will advertise:- Owners Pride, Neighbors Envy:D.
    Seems neighbor means Pakis:D.

    ]http://www.funonthenet.in/articles/japanese-bridges.html

    Add Germany to it as well...and for most of the ppls knowledge, both Germany & Japan has been destroyed by Allied forces such a extent that they thought that wont ever come up in next 50 years..... And we got independence from Britishers almost at the same time & see where they are & see where we are...And we say that we have achieved alot in last 50 years:)

    We can not provide drinking water to various parts of City like Pune & we talk about becoming super power...hmmm

    Add Germany to it as well...and for most of the ppls knowledge, both Germany & Japan has been destroyed by Allied forces such a extent that they thought that wont ever come up in next 50 years..... And we got independence from Britishers almost at the same time & see where they are & see where we are...And we say that we have achieved alot in last 50 years:)

    We can not provide drinking water to various parts of City like Pune & we talk about becoming super power...hmmm

    Add Germany to it as well...and for most of the ppls knowledge, both Germany & Japan has been destroyed by Allied forces such a extent that they thought that wont ever come up in next 50 years..... And we got independence from Britishers almost at the same time & see where they are & see where we are...And we say that we have achieved alot in last 50 years:)

    We can not provide drinking water to various parts of City like Pune & we talk about becoming super power...hmmm

    Add Germany to it as well...and for most of the ppls knowledge, both Germany & Japan has been destroyed by Allied forces such a extent that they thought that wont ever come up in next 50 years..... And we got independence from Britishers almost at the same time & see where they are & see where we are...And we say that we have achieved alot in last 50 years:)

    We can not provide drinking water to various parts of City like Pune & we talk about becoming super power...hmmm
    CommentQuote
  • Originally Posted by ash7979
    Add Germany to it as well...and for most of the ppls knowledge, both Germany & Japan has been destroyed by Allied forces such a extent that they thought that wont ever come up in next 50 years..... And we got independence from Britishers almost at the same time & see where they are & see where we are...And we say that we have achieved alot in last 50 years:)

    That's because the people elected bad leaders who had simple principle:-
    Chair First, Country Last.
    Anyways, it is we who are supposed to be blamed. Add to it the massive population. We are adding 1 Australia every year:D.

    We can not provide drinking water to various parts of City like Pune & we talk about becoming super power...hmmm

    Sad but true:( & Baner road construction goes on & on & on..........
    CommentQuote
  • very true Real acres and Ashish, bang on target!
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  • realacres ... nice ideas you provided in your top post.

    But dude .. you are telling people to invest in stocks, FD etc. I think very few .. very very few people make substantial profits out of stock markets. Most of them make losses only. Because buying a house(at good price) and paying back is still easy... but buying a stock and when to sell it is really tough.

    I agree with only few points of realacres .. most of the others are just assumptions. Yes builders are sucking blood of people ... but if you get a good deal and can afford it, then always buy some property/house, it will always be beneficial in the long term.
    Even if value depreciates for couple of years, you still have a house of your own, have a shed over you and peace of mind too. Stocks are too volatile and tough for common people to understand them properly. RE .. more of like Rich Dad - Poor Dad, even common person will less education can make a wise decision on that.

    So guys dont take realacres advise to heart, judge yourself, We guys add more then One Australia to our population every year. When would all these people live in the future.

    I am very sure, Pune will be one of the best cities in India/world in future, look at the IT/Auto(Volkswagen) companies investment there. So go for it if you are getting good deal. You wont regret later.
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