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?

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  • Originally Posted by puser
    ready reckoner rate rise signal that prices in some localities will not come to levels that they were in 2009. at some places ready reckoner rates are exorbitant and sometimes even beats few small builder's rates like mohammadwadi now has rate of 3600+ :bab (59):.

    chances of downward correction has become dim; as builders would not sell below RR rate.

    Man, builders quote rates on SALABLE AREA, while READY RECKONER RATE is applicable on the area, which is mentioned in the agreement.

    Essentially, LOADING FACTOR is not there in ready reckoner rates. Hence, even if ready reckoner rates are increased by another 20-25%, still there won't be any difference for WHITE AMOUNT paying buyers.

    positive side is for govt only(whose efficacy of utilizing money is always under doubt), black money in circulation would be lesser than otherwise and govt would not be at disadvantage where people end up paying less to govt but higher to builders.

    Another inference i could draw that inflation has hit even govt :bab (45):

    +1. Agree completely.
  • City Ready Reckoner rates up 17%

    As we are discussing RRR, here is an update for the same:-

    MUMBAI: Notwithstanding the economic slowdown and high property prices, which resulted in at least 25% drop in sales registrations in Mumbai, the state government has increased the Ready Reckoner (RR) rates by an average 17% in the city with effect from January 1, 2012. However, some prime areas like Versova, Prabhadevi, Cuffe Parade and Dadar will see hikes of up to 30%, while Vile Parle will see a 140% jump.

    The RR is used to calculate the market value of flats for stamp duty and registration charges, which are major sources of revenue for the government after sales tax and value-added tax. As regards the rest of Maharashtra, the revision in the RR rates will be in the range of 5-30%. This year too, the government has based its RR calculus on the built-up area, a deviation from its decision of 2008 when it was based on the carpet area.

    But experts say the 17% hike will not have any major impact on transactions of new flats as the rates quoted by developers in some places are almost 40-80% higher than that quoted in the RR. The hike will, however, hurt sales and purchases of old flats because of the 16% rise in the cost of construction under the new calculus.

    City Ready Reckoner rates up 17% - The Times of India
  • Realty rates drop across Asia, Mumbai follows suit

    During the bounce back from the global crisis in 2009, Singapore and Mumbai were the Asian cities that registered maximum appreciation in realty prices — as much as 75%, in just two years. With economies and regulation in regression mode, these cities will be at the forefront of price fall too, said real estate consultant DTZ in a report.

    From Beijing and Hong Kong to Singapore and Bangkok, leading Asian cities are witnessing a drop of 15-25% in residential realty rates currently. Leading the slide is the realty market of China, where the authorities are deliberately cooling prices by imposing new taxes on multiple ownership and preventing the build-up of a bubble.

    The trend in Mumbai is also consistent with the situation across the continent, with prices heading southwards after strong resistance from the realty fraternity for over a year.

    “Residential property prices have taken a beating across Asia Pacific, and Mumbai is no exception."

    Realty rates drop across Asia, Mumbai follows suit - Mumbai - DNA
  • Currently, buyers are not expressing any interest in projects that are perceived to be overpriced, and this trend will continue throughout the first half of 2012.
    Mumbai Real Estate Market... 2012 Forecast:JLL
  • From my past 6 month experience of house hunting I realize that – if a property is good interms of locality and ready for passions only we can expect stabilization of price I don’t see any slow down in that but yes defiantly all the launch and pre launch and blab la… offers must be get impacted and will see price correction.
  • CommentQuote

  • doesn't look like in next 10 years :)
  • Can you please advise me which property/scheme i should opt for near pune - mumbai highway for a decent 3 bhk flat betn 1200 - 1400 sq.ft with a budget of around 50 lacs?
  • During any upswing every body wants to buy, and indeed buys. Those who realized the upswing in the beginning make more money then the rest. Similarly in a downturn every body wants to sell, and indeed sell. Those who live in their house do not sell, but people do sell their second and third property. Besides the investors, which have 75-85% of property are sure sellers in down market. Investors do not have deep pockets to hold property for long. Only some of the builders have deep pockets.

    Having said that, there are crystal clear signals from all sides of a prolonged slowdown in real estate. Strange, that many people still believe that market may ignore these signals and go up. That is next to impossible. The smart investors have already started selling, and obviously this has added to the slowdown. Profit means the profit that is booked, and is in your pocket. There is a HUGE over supply of property, and virtually zero demand from end users. Zero demand is because of non affordability, otherwise housing demand always remains.
  • Originally Posted by Jawhar
    Investors do not have deep pockets to hold property for long. Only some of the builders have deep pockets.

    unfortunately Pune has some investors capable of buying out big builders using their black money... mostly NCP chaps because in Pune, there are very less genuine builders... most of them are proxy for some NCP chap who is kissing yeda pawar's $%#^
  • Now 20% reservation in flats?

    In most bizarre news I have read in a long time, the MH govt has now proposed 20% reservation for the 'weaker' sections of the society in all 'big' projects.

    Builders are shamelessly claiming that if this is imposed, they will simply pass on the cost of this 20% to the remaining 80% buyers, that is you and me.

    DNA E-Paper - Daily News & Analysis -Mumbai,India

    This is wrong on so many levels, I can't even being to describe. As if dividing our country on Religion, Region and Castes was not enough.
  • Originally Posted by amoldeshmukh
    Can you please advise me which property/scheme i should opt for near pune - mumbai highway for a decent 3 bhk flat betn 1200 - 1400 sq.ft with a budget of around 50 lacs?

    Man, your area covers from Katraj to Wakad. Please be more specific about your location.
    Anyways, area between Warje & Baner, on city side of highway is good, rest is crap.
  • Looking for a flat? Good times rolling

    Get furniture free in your flat or get a car parking free if you buy an apartment — or simply grab a 10 to 15% discount on a property. Such are the bargains being offered by real estate developers as they see their sales drop. Inventories have piled up to alarming levels for developers who had borrowed a lot to build — which means they are in a mood to unload at lower prices. Industry watchers say this is a quiet trend, not seen in the advertising hype.:)

    "There is a situation where developers are witnessing a fall in sales especially in unfinished products as projects are getting delayed," said Thirumal Govindraj, executive director, global corporate services at property consulting firm CB Richard Ellis India.

    New projects are being launched at slower pace and experts say developers are resisting pressures to slash prices by as much as 30% — when customers could flock.

    AN APARTMENT GLUT - Looking for a flat?
    Good times rolling
  • Another Discount in Pune RE

    Pethkar builders are offering free stamp duty + registration + service tax + VAT for Samrajya, Kothrud. This means a discount of 9% officially. Post nego, I am sure the discounts will be more than 10%.

    Note that this project is in Kothrud, if prices can dip in central areas, then fringes won't be an exception. Infact, other builders are also in nego mode.
    In Baner where builders quote over 5k, it is being sold far below this.

    And this is just the start man, major correction is on its way :).
  • Originally Posted by realacres
    Pethkar builders are offering free stamp duty + registration + service tax + VAT for Samrajya, Kothrud. This means a discount of 9% officially. Post nego, I am sure the discounts will be more than 10%.

    Note that this project is in Kothrud, if prices can dip in central areas, then fringes won't be an exception. Infact, other builders are also in nego mode.
    In Baner where builders quote over 5k, it is being sold far below this.

    And this is just the start man, major correction is on its way :).

    i hope so...but i feel otherwise and prices would remain unaffordable for long time to come