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 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 ]


    Stayed in Japan and found that even in the remote places (where few people live) there was infrastructure like pothole free roads with lights, footpaths with provision for visibly-challenged people, 24 hours water and shops, green and clean environment, huge public gardens, metro rail etc...

    It's utter shame when people compare RE in Mumbai/Pune with Japan (which has infra atleast 25 years ahead of India).
    People must be ass-hole to believe in such comparison and pay high-rates in Mumbai/Pune.

    BTW, I was reading posts of a real-estate investor in USA (who has witnessed 2 RE crashes).
    He described 3 early signs of RE bubble as below:
    1. When entry-level house-price become unaffordable even for middle-income first-time buyers.
    2. When banks become aggressive and give teaser loans with innovative schemes like low interest-rate for initial years.
    3. When developers start constructing house as fast as they could to cash on boom, creating huge supply.

    Result is huge supply of expensive homes with few buyers.
    All signs lead to an eventual crash like he witnessed before.

    Do you smell something similar in Pune/India?
    Is RE in Pune/India heading for crash?
    CommentQuote
  • Originally Posted by realacres
    For long we are discussing infra like water & roads in 21st century .
    Originally Posted by realacres

    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 .
    Seems neighbor means Pakis .

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

    Awesome. These guys really love to work and we guys really love to make money.:D

    Originally Posted by hitmady

    BTW, I was reading posts of a real-estate investor in USA (who has witnessed 2 RE crashes).
    He described 3 early signs of RE bubble as below:
    1. When entry-level house-price become unaffordable even for middle-income first-time buyers.
    2. When banks become aggressive and give teaser loans with innovative schemes like low interest-rate for initial years.
    3. When developers start constructing house as fast as they could to cash on boom, creating huge supply.

    Result is huge supply of expensive homes with few buyers.
    All signs lead to an eventual crash like he witnessed before.

    Do you smell something similar in Pune/India?
    Is RE in Pune/India heading for crash?


    There are signs indeed.. but till the time manipulative forces are able to manipulate things and manipulate buyers they will do it. Most buyers have mentality like what can the builder do as infra is municipalities responsibility, the builder has promised to take care of maintenance and water (which are almost never fulfilled till the end), Every building has seepage so why blame this builder, every builder manipulates area so why blame this builder, this thinking just makes builders task easier to manipulate.
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  • most RE companies in india are not professional companies. there is a huge amount of illegal money in the business. those factors will help builders. also the population density and arcane and opaque rules,procedures and law will help keep the prices stable. but these are short term factors. the prices have to come down eventually.
    CommentQuote
  • Originally Posted by hitmady

    It's utter shame when people compare RE in Mumbai/Pune with Japan (which has infra atleast 25 years ahead of India).
    People must be ass-hole to believe in such comparison and pay high-rates in Mumbai/Pune.

    True. Add to it the civic sense which is absolutely absent in India. How many beaches visited by tourists are free from garbage? Add to it people spitting Gutkha/Pan. Some people produce like cockroaches.

    BTW, I was reading posts of a real-estate investor in USA (who has witnessed 2 RE crashes).
    He described 3 early signs of RE bubble as below:
    1. When entry-level house-price become unaffordable even for middle-income first-time buyers.
    2. When banks become aggressive and give teaser loans with innovative schemes like low interest-rate for initial years.
    3. When developers start constructing house as fast as they could to cash on boom, creating huge supply.

    Result is huge supply of expensive homes with few buyers.
    All signs lead to an eventual crash like he witnessed before.

    Do you smell something similar in Pune/India?
    Is RE in Pune/India heading for crash?

    Yes its there, only hope that additional B-money should not come in. In any case, if money can't be multiplied, these 'gumnam' investors will run away. Btw, this Koda chap has invested in Pune too through a senior Congress state level minister, bloody suckers.

    Originally Posted by ttt43
    most RE companies in india are not professional companies. there is a huge amount of illegal money in the business. those factors will help builders. also the population density and arcane and opaque rules,procedures and law will help keep the prices stable. but these are short term factors. the prices have to come down eventually.

    Lets hope more & more professional corporates enter RE market. It is already being seen in metros. Let's hope other cities will see such players soon. The RE regulator bill will keep a tab on scorpio builders. This again works in buyers' interest as well as good RE companies. I am very much optimistic about this RE regulator bill will be introduced ASAP which will give many sleepless nights to PBAP:):D. In any case, I agree with ttt43 & others that prices will need to come to logical levels as the market is now driven solely by end-users alone.
    CommentQuote
  • घरांच्या दरांना सरकारी टाळे!

    ="http://maharashtratimes.indiatimes.com/"]
    17 Nov 2009, 0605 hrs IST

    मुंबईत गगनाला भिडलेल्या घरांच्या दरांवर नियंत्रण ठेवण्यासाठी राज्य सरकारने अखेर प्राधिकरणाची स्थापना केली असून ही घरे मध्यमवगीर्यांच्या आवाक्यात असावी हा यामागचा हेतू आहे. प्राधिकरणावर गृहनिर्माण विभागाच्या वरिष्ठ अधिकाऱ्यांसह विकासक आणि ग्राहकांचेही प्रतिनिधी असतील.
    17 Nov 2009, 0605 hrs IST

    मुंबईत गगनाला भिडलेल्या घरांच्या दरांवर नियंत्रण ठेवण्यासाठी राज्य सरकारने अखेर प्राधिकरणाची स्थापना केली असून ही घरे मध्यमवगीर्यांच्या आवाक्यात असावी हा यामागचा हेतू आहे. प्राधिकरणावर गृहनिर्माण विभागाच्या वरिष्ठ अधिकाऱ्यांसह विकासक आणि ग्राहकांचेही प्रतिनिधी असतील.
    CommentQuote
  • CommentQuote
  • There are some intelligent guys who are on Pune RE forum though interested in investing in Japan.
    Do u know the size of rooms in Japan & average size of Japanese?
    Do u know the cost of living in Pune & in Tokyo?
    CommentQuote
  • Originally Posted by shirishtiwari01
    There are some a** h**** who are on Pune RE forum though interested in investing in Japan.
    Do u know the size of rooms in Japan & average size of Japanese?
    Do u know the cost of living in Pune & in Tokyo?


    What has the above to do with the infrastructure in Japan?

    VK
    CommentQuote
  • Originally Posted by shirishtiwari01
    There are some a** h**** who are on Pune RE forum though interested in investing in Japan.
    Do u know the size of rooms in Japan & average size of Japanese?
    Do u know the cost of living in Pune & in Tokyo?



    How did you arrive at this post ? Any specific thread on this subject ?
    CommentQuote
  • The real question is "what do you know?".

    Originally Posted by shirishtiwari01
    There are some a** h**** who are on Pune RE forum though interested in investing in Japan.
    Do u know the size of rooms in Japan & average size of Japanese?
    Do u know the cost of living in Pune & in Tokyo?
    CommentQuote
  • I want to buy a flat.. bt M not in hurry.. is it advisable to wait until the regulator bill is passed & then buy a house.. can smbody suggest..
    CommentQuote
  • Originally Posted by shirishtiwari01
    There are some a** h**** who are on Pune RE forum though interested in investing in Japan.
    Do u know the size of rooms in Japan & average size of Japanese?
    Do u know the cost of living in Pune & in Tokyo?


    My friend, the discussion was not about investing in Japan, but what you pay for RE & what you get in return.
    And drawing comparison with developed countries to sell Pune RE which is absolute nonsense.

    Man, look at Pune builders, are they sentimental like you about RE?
    They will promise moon to extract every bit of juice from you
    CommentQuote
  • Originally Posted by shirishtiwari01
    There are some a** h**** who are on Pune RE forum though interested in investing in Japan.

    I do not appreciate your language here Shirish. Its sad.
    CommentQuote
  • Originally Posted by RAJESHP
    I do not appreciate your language here Shirish. Its sad.

    Sorry mate, but i just copied it from few posts above. hmmmm, i will try delete though.
    CommentQuote
  • Rigged Markets: Artificial Sales, Inflated Prices

    ]http://epaper.indianexpress.com/IE/IEH/2009/11/14/ArticleHtmls/14_11_2009_019_006.shtml?Mode=1
    CommentQuote