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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  • The above article reminds me of my visit to Paranjpe's Forest Trails on pirangut road with a false hope that the price would be reasonable since it is outside main city. on the second day of launch(serving free snacks and beer!!) most of the to-be-bungalows had SOLD on the model scheme. Most surprising was the fact that the 2cr+ bungalows were almost all sold out.
    CommentQuote
  • RIL mulls entry into low-cost housing

    ]http://sify.com/finance/news/new/
    CommentQuote
  • Originally Posted by realacres
    ]http://sify.com/finance/news/new/

    I think this is good news for buyers. Just hope they do some project in Pune.

    I think this is good news for buyers. Just hope they do some project in Pune.

    I think this is good news for buyers. Just hope they do some project in Pune.

    I think this is good news for buyers. Just hope they do some project in Pune.
    CommentQuote
  • hope is all that we live on in pune RE..for everything else there is MasterCard :-)
    CommentQuote
  • Infra lagging

    "During the last boom, developers neglected the aspect of infrastructure development in a rush to develop projects. This was true for projects within metros as well as in peripheral locations. Because of high demand, such projects were absorbed despite this shortcoming. Buyers soon discovered that both their standard of living and the potential market value of their properties were compromised due to this."

    http://www.indianexpress.com/news/infrastructure-deficit/544387/0
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  • Originally Posted by vfour
    ="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.

    Will it have any effect on RE rates?

    Will it have any effect on RE rates?

    Will it have any effect on RE rates?

    Will it have any effect on RE rates?
    CommentQuote
  • Another theory on World Capital Markets

    http://www.safehaven.com/article-15083.htm
    CommentQuote
  • Zagade cautions against realty deals

    Builders are handing over flats sans completion certificates, says civic chief
    DNPUN20998 | 11/25/2009 | Author : Abhay Khairnar | WC :188 |

    Elected members of the Pune Municipal Corporation (PMC) on Tuesday alleged in the general body meeting that many city builders are handing over flats to buyers without obtaining the mandatory completion certificate from the civic body.
    Demanding strict action against such erring developers, some of the corporators suggested that the PMC must issue 'stop work' orders against their ongoing projects. Nationalist Congress Party (NCP) leader Anil Bhosale said that flat owners are being compelled to pay taxes from their pockets for no fault of theirs.
    Municipal commissioner Mahesh Zagade and city engineer Prashant Waghmare admitted that some developers are handing over flats to buyers without taking completion certificates.
    Zagade said he will develop a mechanism in the civic body which will take care of completion certificates and tax assessment. He also promised action against erring builders. "A completion certificate means the project is safe for living. It is related to the safety of citizens," he said, adding, it is the civic body's duty to ensure that the builders obtain completion certificates.
    Zagade said, "Citizens should not purchase properties which have not been issued completion certificates by the PMC."
    CommentQuote
  • Not sure how much we should trust on news paper articles... but here is something to keep your brain cells ticking...

    Below an article from ET

    ]http://economictimes.indiatimes.com/markets/real-estate/realty-trends/A-weekly-round-up-of-some-big-ticket-city-deals/articleshow/5273307.cms

    The article mentions about pune.

    At Forest Trail in the Bhugaon area, a residential apartment, admeasuring 2,009 sq ft, was sold for Rs 1.20 crore. The per sq ft rate for the apartment is nearly Rs 5,973. The ="http://economictimes.indiatimes.com/markets/real-estate/realty-trends/A-weekly-round-up-of-some-big-ticket-city-deals/articleshow/5273307.cms#"]property is in proximity with the premium location of Koregaon Park and therefore, the rate commanded is comparable to this location.

    The existing capital value for high-end apartments at Koregaon Park is Rs 6,750-9,500 per sq ft. Thus, the capital value commanded by this flat is approximately 8% lower than the benchmarks in Koregaon Park.

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    Can one compare Bhugaon and koregaon park? Any view points?

    VK
    CommentQuote
  • I won't be surprised if ET shows Kabul & Washington DC side by side.
    CommentQuote
  • No longer affordable

    Here is a news which will clear the air about implications of price hike done by some builders.

    ]http://www.indianexpress.com/news/no-longer-affordable/547197/0
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  • TOI the biggest Pinacchio

    Some of the excerpts from above article ....

    According to Renu Sud Karnad, joint managing director of Housing Development Finance Corporation (HDFC), “Developers have to be cautious about raising property prices, or else they will erode long-term benefits for short-term gains.” She adds that an unexpected rise in property prices would hit the revival of the property market much harder than an increase in loan costs due to higher interest rates. Keki Mistry, managing director of HDFC, says that property rates have to be reasonable for the pick-up to turn into tangible growth. “Home buyers do not buy houses just on the basis of interest rates but on the actual prices of apartments,” he says.

    In a similar vein, VK Sood, MD of PNB Housing Finance says: “In the recent past we witnessed some pick-up in demand for home loans. But for this demand to sustain, builders will have to maintain prices and not hike them, or else demand will get affected.”


    Also Pune is at the top of demand and supply gap

    Pune had the highest number of launches — 13,971 residences. Pune also had the highest absorption at 7,043 units.
    Now the important point is: Are all these absorptions being claimed, the buyer is End user ????
    Or its underwritten properties ???


    And Every saturday I just compare the opinion expressed in TOI Real estate columns and Indian Express and always I find the complete opposite views.
    While TOI publishes: all praises of builder and its always suggests praises of Project and builders. I never find it going against any builder. Its even better then builder's salesman. It always was suggesting "its best time now to buy".
    And Indian Express and sometimes DNA publishes very true scenarios. They are guiding the new buyer about all pros and cons.

    So while most of the buyers are TOI readers, they never get the true picture of Pune's RE.
    That way the grown up elephant never tries to break the thin rope.


    For that matter one can read the top 4 - 5 articles on the Express Estate site ]http://www.indianexpress.com/section/estates/893/

    and some links are below

    http://www.indianexpress.com/news/no-longer-affordable/547197/

    http://www.indianexpress.com/news/infrastructure-deficit/544387/


    http://www.indianexpress.com/news/artificial-sales-inflated-prices/541246/

    http://www.indianexpress.com/news/regulating-realty/538312/

    http://www.indianexpress.com/news/focus-on-the-product-not-the-discount/530022/

    http://www.indianexpress.com/news/a-saga-of-delays/527372/
    CommentQuote
  • Sold group of India

    Originally Posted by veeemkay
    Not sure how much we should trust on news paper articles... but here is something to keep your brain cells ticking...

    Below an article from ET

    ]http://economictimes.indiatimes.com/markets/real-estate/realty-trends/A-weekly-round-up-of-some-big-ticket-city-deals/articleshow/5273307.cms

    The article mentions about pune.

    At Forest Trail in the Bhugaon area, a residential apartment, admeasuring 2,009 sq ft, was sold for Rs 1.20 crore. The per sq ft rate for the apartment is nearly Rs 5,973. The ="http://economictimes.indiatimes.com/markets/real-estate/realty-trends/A-weekly-round-up-of-some-big-ticket-city-deals/articleshow/5273307.cms#"]property is in proximity with the premium location of Koregaon Park and therefore, the rate commanded is comparable to this location.

    The existing capital value for high-end apartments at Koregaon Park is Rs 6,750-9,500 per sq ft. Thus, the capital value commanded by this flat is approximately 8% lower than the benchmarks in Koregaon Park.

    Can one compare Bhugaon and koregaon park? Any view points?

    VK

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...

    I was aghast after reading this article and posted some angry comments on theri website against this news item... Alas, my message hasn't been posted yet :) and we talk about sensible journalism. Most of the media is all sold (with Times of India and co being the no 1 partner of the builders). If one goes through this edition of the newspaper, you will get an impression that things are very very bullish in Pune realty. They own Magicbricks.com as well and a significant amount of revenue comes from the builder community. So no wonder they are sold... Recently I moved to Indian Express and at least it doesn't give a one side picture of the realty story... Unfortunately, TOI has the highest circulation and the maximum ads are in TOI...
    CommentQuote
  • Indian express always spoke the truth even during the time of emergency. Ramnath Goenka took Indira Gandhi head on during emergency.

    TOI on other hand is a 'Chatu' paper, so is Times Now, ET NOW channels also. Add to it magicbricks run by TOI. And why all exhibi held at Le Meridian & some grounds held by PBAP are sponsored by TOI?

    Indian Express follows what it says:- Journalism Of Courage:).

    Personally, I read IE rather than TOI coz today afternoon we can predict what the headlines in TOI could be the next day:D.
    CommentQuote
  • Originally Posted by realacres
    Indian express always spoke the truth even during the time of emergency. Ramnath Goenka took Indira Gandhi head on during emergency.

    TOI on other hand is a 'Chatu' paper, so is Times Now, ET NOW channels also. Add to it magicbricks run by TOI. And why all exhibi held at Le Meridian & some grounds held by PBAP are sponsored by TOI?

    Indian Express follows what it says:- Journalism Of Courage:).

    Personally, I read IE rather than TOI coz today afternoon we can predict what the headlines in TOI could be the next day:D.


    This is not only true for RE but for other news as well...IE is the best news paper in india & Shekhar Gupta is Best Editor......But irony of india is that very less ppls read IE...& they also get the less ads...1.coz they have less readers 2. They right against who may give ads to them... I dont know how long IE will survive with TRUE news in this VERY-VERY corrupted system....
    CommentQuote