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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  • I feel that in coming years, India & China will have COLD WAR just the way, US & USSR had in 1970-1980s & in this India will emerge victorious :).

    * PS:- The Govt will be lot better by 2018 lead by good people. This is my gut feeling.
    CommentQuote
  • Pune's real estate defies slowdown apprehensions

    Pune's real estate defies slowdown apprehensions

    While many of the Indian cities are reeling under the apprehension of slowdown with sales nose-diving , Pune's real estate market has defied any such apprehensions. The demand for homes in Pune does not come from the IT sector alone. Pune's manufacturing sector, which features a number of international names, also drives residential demand. "Pune markets have always been at the peak as far as real estate is concerned. Property buyers have high hopes from Pune with regards to rate appreciation, be it investors or end users. Keeping this in mind, we have launched a project in the vicinity of the most upmarket area of NIBM. We are offering two bhk boutique apartments with all amenities and affordable prices" shares Tushar Sanklecha, director, Sanklecha Constructions.

    Pune's real estate defies slowdown apprehensions - The Economic Times
    CommentQuote
  • Originally Posted by kingmanish
    Pune's real estate defies slowdown apprehensions

    While many of the Indian cities are reeling under the apprehension of slowdown with sales nose-diving , Pune's real estate market has defied any such apprehensions. The demand for homes in Pune does not come from the IT sector alone. Pune's manufacturing sector, which features a number of international names, also drives residential demand. "Pune markets have always been at the peak as far as real estate is concerned. Property buyers have high hopes from Pune with regards to rate appreciation, be it investors or end users. Keeping this in mind, we have launched a project in the vicinity of the most upmarket area of NIBM. We are offering two bhk boutique apartments with all amenities and affordable prices" shares Tushar Sanklecha, director, Sanklecha Constructions.

    Pune's real estate defies slowdown apprehensions - The Economic Times


    This looks more like an advertisement.
    CommentQuote
  • Originally Posted by UncleScrooge
    This looks more like an advertisement.


    Exactly....

    Just look at any particular days TOI.

    80% of their adv revenue comes from the real estate.

    No marks for guessing why they keep publishing such news every other day.
    CommentQuote



  • Excerpt from the article,
    "In Baner and Deccan, property has been selling on an average rate of Rs 8,000 per sq ft."

    This is joke of the year, avg. price in Baner 8,000. :D
    See the level of journalism of TOI-let paper, their reporter's do zero homework before printing the text provided to them by builder's community.
    CommentQuote
  • Originally Posted by kingmanish
    Exactly....

    Just look at any particular days TOI.

    80% of their adv revenue comes from the real estate.

    No marks for guessing why they keep publishing such news every other day.


    Hence their reputation and the well earned name of "TOI-Let" paper. They let their newspaper space to advertisers (hence TOI - Let)

    They are not the only newspaper/media outlet who are part of the "paid news" scam though. IMO, the scam where they sale their space to political/corporate nexus and misguide people in the name of news poses more threat than 10 2G scams combined.
    CommentQuote
  • I believe in coming years china will be more and more assertive and aggressive.
    They will dictate the terms in region and bully India and neighbors.
    On a slight retaliation from India they will march into Indian Territory with the entire infrastructure they have built all along the border.:bab (45):
    They will encroach parts of territories which they called disputed and sit on them forever.:bab (22):
    India with its poor preparation and weak govt. will be a meek spectator and happy to called the regions gone from india control as China occupied Blah blah blah…….
    :( :(
    CommentQuote
  • last Fri/ Sat TOI seems was of 1/2 Kg......... all property ads. Why they sell TOI, it should come for free.
    CommentQuote
  • Originally Posted by Venkytalks
    Bhuvang, agree with most of what you said on China. It is likely to weather the economic problems for the very reasons you have enumerated.

    China will encourage Pakistan India war - with tactical nukes. There wont be a direct CHina India war.

    But Chionese may put pressure on India at troubles times and encroach on disputed territories. We wont be able to do anything about it - we are too weak.

    Even Pakistan nuclear weapons are better than ours with better delivery systems and now they have tacticals also - given by China.

    Agree with all three lines above. Indo-Pak war would be like windfall for China. But frankly, don't see any direct conflict (atlease in near future) even between India & Pak.


    Iran and Pakistan are likely to get together if Paki-US relatins break totally.

    Think Iran and Pak can cossy-up only upto a certain point. Distance from US will have its impact, but there are numerous other factors. Pakistan shares its borders with only 3 nations - India, Afghan, and, Iran. Pak has already deteriorated piece in two of them. I personally think that Iran is well-aware of this fact and hence would already like to maintain a fair bit of distance with them, even maintain a HAWK-EYE view on Pak's actions. Besides, Iran-Pak border may (i don't knw) also have some tribal areas and Iran might be wary of rise of Talibanisation in these.

    Besides, a major divide b/w Iran & Pak has been Shia-Sunni factor. That's also a major reason that works in favour of Indo-Iran relations, since both nations are Shia majority. Following posts are worth reading -

    Iran-Pakistan Relations in Light of Popular Uprising in Bahrain | Foreign Policy Journal

    Iran-Pakistan Relations Overshadowed by Secondary Factors


    Russia might support this because it will improve its power in the UN - but only if their govt changes and hawks get into power after a major economic disruption - unlikely I agree - as stated, they are too smart to tie themselves to the Chinese bandwagon.

    Russia is already on an economic upswing. They are resource rich, technologically advanced nation, expecially in oil/gas. They've come a long way since 90s debacly and current economic scenario presents a Goldern opportunity to them to rise back to International Podium. Besides, they've already burned their fingers in Chechenya and Afghan, hence don't think they'll anyway cossy-up with any hardline muslim state. Their support to Iran is only to frustrate US, that's it. They would be better-of playing wait-and-watch game, and keep improving relations with both China and India, the so called new age rising economies.



    Comments marked in BLUE.
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  • Originally Posted by varghese
    I remember a recent post by somebody showing the nexus between Judges and Private Jails in USA(Two Judges were arrested for sending thousands of teenagers to jail even for petty crimes).
    In the accompanying report there was was a comparison showing USA with other countries. It shows that the percentage of the population of USA lodged in Jails are much more than that of China.


    Agree sir, that's bcoz its not as simple in US to get away with a crime as in India. Remember Monical Lewinsky-Bill Clinton story, a govt. secretary tarnished the image of US President (the so called most powerful man in the world), and, could still roam around on streets fearlessly.

    Do you think in India and China, a woman finger pointing at President/PM would even see next day's sunrise.

    Your figures prove that law enforcement agencies in US are quite active, not that US human rights record is any where comparable to China. Isn't it .... :bab (45):
    CommentQuote
  • Originally Posted by Venkytalks
    Chinese govt works because of a two fold pact between its govt and the people:

    1. Govt will make chinese rich

    2. Govt will make China superpower

    So far, they have delievred on both promises for over 30 years. Impressively.

    The day the system breaks down and Chinese people become poor - the govt is GONE


    Agree Venky bhai. Infact, i think if economic situation in China deteriorates and people's anger reaches its limit, China may get militarily involved with India to divert public attention.

    Besides, China's primary objective of harbouring Pakistan and dolling out freebies was actually to contain India, which is gradually loosing its steam. India is fast moving in its economic development, and its forces are also fast modernizing to counter Chinese threat. Pakistan is so much engulfed with its burning house. Hence, Pakistan is gradually becoming a liability on Chinese balance sheet. The only way for China is now to get directly involved with India.

    A remember few weeks back i read some news by US Dept of Defence regarding this. There are numerous of these online. Placing link of one of them -

    http://www.indianexpress.com/news/nervous-china-may-attack-india-by-2012-de/488349/
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  • Originally Posted by realacres
    I feel that in coming years, India & China will have COLD WAR just the way, US & USSR had in 1970-1980s & in this India will emerge victorious :).

    * PS:- The Govt will be lot better by 2018 lead by good people. This is my gut feeling.


    Amen.... :-)
    CommentQuote
  • Originally Posted by kingmanish
    I believe in coming years china will be more and more assertive and aggressive.
    They will dictate the terms in region and bully India and neighbors.
    On a slight retaliation from India they will march into Indian Territory with the entire infrastructure they have built all along the border.:bab (45):
    They will encroach parts of territories which they called disputed and sit on them forever.:bab (22):
    India with its poor preparation and weak govt. will be a meek spectator and happy to called the regions gone from india control as China occupied Blah blah blah…….
    :( :(


    Raja bhai, aap to sab kuch lutne ki baat kar rahe ho, hold hold..... :bab (66):

    Agree with you that Chinese are definitely too aggressive and belive in just getting the work done by hook/crook. However, i do think any kind of conflict with India would be more bcoz of there internal dwindling economic situation & social unrest, rather than any India retaliation.

    Besides, we must understand that in today's world, countries are actually not run by Goverments but by Corporations (indirectly). Its all Same Story with India, US, EU, and, China is no exception. Any kind of direct military conflict with India will create deep scars in Chinese economy as well which has received (and still receiving) billions of dollars in Foreign Investment. Even news of rising tentions or prospective military conflict between India & China will flee all these FII investors with loads of their money & tank stock markets, though it wud be same for India as well.

    And with economy already showing cracks in development, that would be the last thing Chinese would want.

    Hence a short & brisk military mis-adventure could be in the offing, but face-to-face full-scale conflict - i don't think so.

    Infact, that might be one of the reasons why Indian Forces have already already raised two dedicated Mountain Divisions, and now going all-out to buy ultra-light howitzers, gun-ships, developing & enhancing Air-force assets on the east, aquiring specialized equipments for special forces, investing in UAVs & C130Js, and, all that.
    CommentQuote
  • Did you read the comments by users. The second comment clearly indicates that the prices of apartments in Pune are falling. That person has given actual figures (Rs 33 Lac apartments is now Rs 30 Lac). It shows a nearly 10% reduction. Of course this will never be published.

    Originally Posted by kingmanish
    Pune's real e
    state defies slowdown apprehensions

    While many of the Indian cities are reeling under the apprehension of slowdown with sales nose-diving , Pune's real estate market has defied any such apprehensions. The demand for homes in Pune does not come from the IT sector alone. Pune's manufacturing sector, which features a number of international names, also drives residential demand. "Pune markets have always been at the peak as far as real estate is concerned. Property buyers have high hopes from Pune with regards to rate appreciation, be it investors or end users. Keeping this in mind, we have launched a project in the vicinity of the most upmarket area of NIBM. We are offering two bhk boutique apartments with all amenities and affordable prices" shares Tushar Sanklecha, director, Sanklecha Constructions.

    Pune's real estate defies slowdown apprehensions - The Economic Times
    CommentQuote
  • Originally Posted by UncleScrooge
    Excerpt from the article,
    "In Baner and Deccan, property has been selling on an average rate of Rs 8,000 per sq ft."

    This is joke of the year, avg. price in Baner 8,000. :D
    See the level of journalism of TOI-let paper, their reporter's do zero homework before printing the text provided to them by builder's community.


    No Slowdown in Pune Real Estate and the above article are same, although they do not cite each other, and this place doesn't even mention the author. I found this link from proptiger.com.

    Certainly there is some sponsorship behind this article.

    PS: Last weekend saw some ads in Sakaal newspaper one of which offered 0 tax+ 0 stamp duty, etc. Another ad this week stated ready possession 20 flats in Kothrud!
    CommentQuote