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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  • TOI thrives on lies, adu_ltry and so selling like hot cakes

    Originally Posted by ash7979
    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....




    well TOI thrives on lies, adu_ltry and so selling like hot cakes....
    even the celeb pics are more X rated then the girlie magazines. So out of the 3W sins its not promoting Wine :) , or may be after reading this weakness sometime the TOI starts giving Wine sachets like the shampoo ones....

    And you will find very limited RE classified in IE. But you know truth also sells as there are some buyers of that too.....
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  • I sometimes go crazy reading articles...
    Some say Prices up... Some say demand up.. some day sales down.. some say price rise will be problem..

    Here is one which says Lots of inventory available... so people commenting on Demand-Supply being the reason for price rise read this article..

    I dont know what to infer from these varied articles...

    ]http://business.rediff.com/report/2009/nov/30/more-affordable-houses-but-not-enough-buyers.htm

    Only point mentioned in the article about Pune is given below.

    While demand for sub-Rs 30 lakh apartments went up in Mumbai, Gurgaon, Noida, Thane, Bangalore, Kolkata, Hyderabad and Pune, supply grew at a faster pace as realtors rushed into the market to improve their cash flows at a time when there were few takers for upper-end dwelling units.

    Only point mentioned in the article about Pune is given below.

    While demand for sub-Rs 30 lakh apartments went up in Mumbai, Gurgaon, Noida, Thane, Bangalore, Kolkata, Hyderabad and Pune, supply grew at a faster pace as realtors rushed into the market to improve their cash flows at a time when there were few takers for upper-end dwelling units.
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  • Originally Posted by ash7979
    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....

    IE used to be delivered at our house right from when I was in primary school & TOI used to be given to us in school:D.

    Don't worry Ashish about IE. If IE can survive Indira Gandhi, these builders are lame ducks in front of her. The other newspaper which is good is 'Hindu' (name has nothing to do with religion). However, it is not available in Pune:(.

    When I was in school & people used to discuss about page3 circuit, I used to open IE & read national news in IE on page3 & only came to know later what page3 meant:D.

    In next few years, I am sure TOI will compete not with IE but with mid-day:p.
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  • Originally Posted by realacres
    IE used to be delivered at our house right from when I was in primary school & TOI used to be given to us in school:D.

    Don't worry Ashish about IE. If IE can survive Indira Gandhi, these builders are lame ducks in front of her. The other newspaper which is good is 'Hindu' (name has nothing to do with religion). However, it is not available in Pune:(.

    When I was in school & people used to discuss about page3 circuit, I used to open IE & read national news in IE on page3 & only came to know later what page3 meant:D.

    In next few years, I am sure TOI will compete not with IE but with mid-day:p.


    They already have their Mid-day version....Have u ever read Pune-mirror....

    A whole lot of shi they publish in pune mirror.....
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  • Reading TOI on Internet sucks. They have ads. blocking the headline and ads. for each hot news.
    Though I dont value their articles, I used to read TOI for timepass, but their ads these days suck.

    I never used to read IE, now you guys inspire me to read IE.
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  • Originally Posted by realacres
    IE used to be delivered at our house right from when I was in primary school & TOI used to be given to us in school:D.


    TOI also good to be given as "Scrap" due to ads, it registers more kgs :D
    I surf through products ads in TOI for window-shopping
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  • More supply, less demand

    Another reason why RE prices need to correct further:-

    Pune would see an addition of over 53,000 residential units by 2011.
    Nilanjana Ghosh Choudhury
    Nov 24, 2009,Tue

    As per the latest Knight Frank Residential Report released on November 23, Pune would see an infusion of approximately 53,176 units, an addition of around 54.27 million sq feet, in the new residential space.
    The quarterly report released on Monday by Knight Frank indicates the development of over 533 million sq ft premium residential property between 2009 and 2011 across seven major cities.
    With 92,202 housing units, National Capital Region (NCR) will be the largest contributor. Mumbai will be second largest with 72,906 units. Pune would constitute 14% of the total national supply in the residential space.
    "In Pune, 2010 will witness the maximum infusion accounting for around 44% of the total supply. This can be attributed to the fact most of the under construction projects which were delayed have again started," said Gulam Zia, national director (Research & Advisory Services) Knight Frank India.
    Knight Frank India was launched in 1995. Today, it has presence across seven principal metros across the country. It has delivered over 3,000 valuation reports and over 1,500 consultancy assignments.
    The firm provides a comprehensive range of real estate related services covering residential, commercial, land, investments, hospitality and leisure, valuation, advisory services, facilities management and project management.
    The report reveals how developers in Pune have started re-strategising in order to increase residential demand after taking a hit in 2008.
    Members in the builders' association were asked to reduce prices to the maximum possible extent in order to stimulate demand. Some developers also offered price guarantee schemes. In case prices dipped after the booking was made, but before possession, the sale amount was revised accordingly.
    The study has divided Pune residential market in five zones. The north and north- western zone, the west and south-western zone, the south and south-eastern zone, the east and north-eastern zone and the central zone.
    The highest growth would be in the north and north western zone comprising areas such as Aundh, Baner, Wakad and areas along the expressway, which would see an addition of 22.5 million sq ft by 2011 amounting to over 20, 307 units.
    The west and south western zone comprising Kothrud, Karvenagar, Sinhagad Road and Dhayari is expected to see over 8,400 units being added by next three years adding up to 8.5 million sq ft.
    In the south and south eastern part with places like Wanavdi, Kondhwa, NIBM Road and Katraj, there would be around 9,057 units adding 5.85 million sq ft.
    In Hadapsar and Manjri areas in the east and north-east, an addition of 90 mil sq ft will be made. The central areas such as Deccan, Model Colony, Senapati Bapat Road , Shivajinagar, Boat Club Road, Bund Garden, Swargate and city areas would see approximately 0.5 milllion sq ft and 321 residential units.
    Anand Narayanan, national director (residential agency) Knight Frank India, said, "Our studies have revealed several interesting trends with regard to the residential sector.
    One of the most important trends emerging is the increased focus of developers on 2 and 3-BHK housing units from the 4 and 5-BHK and penthouses witnessed few years ago."
    Source:- 3dsyndication

    Btw, Lallu Jain after going bankrupt with Kumar Builders has floated a new company:- Kumar Urban Development Ltd:D.
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  • But it seems rates are going high again
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  • Dubai top end comparable to Pune ..its not the PJ of the day!!TRUTH

    Originally Posted by realacres
    Another reason why RE prices need to correct further:-

    Pune would see an addition of over 53,000 residential units by 2011.
    Nilanjana Ghosh Choudhury
    Nov 24, 2009,Tue


    Btw, Lallu Jain after going bankrupt with Kumar Builders has floated a new company:- Kumar Urban Development Ltd:D.



    So now even Dubai is added to the list(former entries US and Singapore) for being cheaper then Pune.....
    Sea facing apartment in Dubai being sold.

    "Jumairah Beach Residence (http://www.jumeirahbeachresidences.com/lowband/index.htm), is believed to be selling prime sea-facing apartments for around Rs 11000 per sq ft. Greens Community, another popular residential area, has larger units available at Rs 9750 per square foot. "
    When will the Pune RE bubble will burst ???

    http://www.punemirror.in/index.aspx?page=article§id=62&contentid=20091201200912010308217638fcc1a2§xslt=
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  • TOI is a pornographic publication that is sold out to all types of money interests
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  • Residex

    http://www.nhb.org.in/Residex/Data&Graphs.php

    Bottom line:
    Only Bengaluru and Hyderabad have seen a massive drop from 2007 levels.
    Pune has witnessed a 3% increase.
    Worst offender is Kolkata, where prices have increased by 60%.
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  • Long live IE

    TOI used to write against Gandhiji and Indian Independence during that era.

    IE was started by Goenka to compete such newspapers (TOI) and it really raised issues in country's favour. It is still doing the same while TOI is now publishing Wine, Western Lifestyle and Women. I bet you won't find Sunday Times without the article on and relationships.
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  • Originally Posted by anup.thakare
    TOI used to write against Gandhiji and Indian Independence during that era.

    IE was started by Goenka to compete such newspapers (TOI) and it really raised issues in country's favour. It is still doing the same while TOI is now publishing Wine, Western Lifestyle and Women. I bet you won't find Sunday Times without the article on s__e__x and relationships.


    Seems this forum deleted some objectionable words from my post!
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  • Originally Posted by frugality
    So now even Dubai is added to the list(former entries US and Singapore) for being cheaper then Pune.....
    Sea facing apartment in Dubai being sold.

    "Jumairah Beach Residence (]http://www.jumeirahbeachresidences.com/lowband/index.htm), is believed to be selling prime sea-facing apartments for around Rs 11000 per sq ft. Greens Community, another popular residential area, has larger units available at Rs 9750 per square foot. "
    When will the Pune RE bubble will burst ???

    ]http://www.punemirror.in/index.aspx?page=article§id=62&contentid=20091201200912010308217638fcc1a2§xslt=

    Those are snap-bait figures. Regardless, the maintenance fees on any of these properties would be at least Rs 40,000/month. Probably the single most important aspect that many investors who are now stuck with their properties didn't realise while buying. Properties in Dubai chew you down in ways you can't predict.

    Those are snap-bait figures. Regardless, the maintenance fees on any of these properties would be at least Rs 40,000/month. Probably the single most important aspect that many investors who are now stuck with their properties didn't realise while buying. Properties in Dubai chew you down in ways you can't predict.

    Those are snap-bait figures. Regardless, the maintenance fees on any of these properties would be at least Rs 40,000/month. Probably the single most important aspect that many investors who are now stuck with their properties didn't realise while buying. Properties in Dubai chew you down in ways you can't predict.

    Those are snap-bait figures. Regardless, the maintenance fees on any of these properties would be at least Rs 40,000/month. Probably the single most important aspect that many investors who are now stuck with their properties didn't realise while buying. Properties in Dubai chew you down in ways you can't predict.

    Those are snap-bait figures. Regardless, the maintenance fees on any of these properties would be at least Rs 40,000/month. Probably the single most important aspect that many investors who are now stuck with their properties didn't realise while buying. Properties in Dubai chew you down in ways you can't predict.
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  • Most importantly, the holding capacity of buyers is greater than builders. Builders have taken loans from various finance sources with interest rates as high as 20-35%. These are turning defaulters & if they want the finance institutions not to put an attachment to their properties, they will have no other option but to sell off current inventory a very low rates.

    Who blinks first was the question late last year. Today we have the answer:- Builders.

    Like it or not, the current Pune RE scenario is similar to that of a ship heading inside the ‘Bermuda triangle’. What is visible today is just a deflection of ‘Compass’. Once it reaches the epicenter of the ‘Bermuda Triangle’, no one can help it from sinking.

    I agree with all the myths and facts. But I am a commonman waiting for prices to drop in Pune. It never happened, maybe a bit, but no way matched to price drop in other cities - blame it on rogue builder lobby. My question is how long one should wait? ARe there any technical charts/analysis that measure price trends and they drop or rise in such and such time frame?
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