Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Originally Posted by SanjanaSingh
    In 1819 - 1820, American writer Washington Irving published a collection of stories that included a tale of a traveler who left England, bound for the West Indies.

    The traveler’s sailing ship was part of a convoy, and they had a favorable breeze for a rapid day of sailing, and then a beautiful sky at sunset when the wind died down and the sea lay calm. The traveler remarked to the captain that all augured well for a prosperous voyage, but the veteran ship’s master said the peaceful calm was a “weather-breeder.”

    And indeed, that night, a terrible storm battered and scattered the convoy, leaving some ships demasted, and others firing signals of distress. . . .

    The final paragraph of the story is:
    “When a man of business, therefore, hears on every side rumors of fortunes suddenly acquired; when he finds banks liberal, and brokers busy; when he sees adventurers flush of paper capital, and full of scheme and enterprise; when he perceives a greater disposition to buy than to sell; when trade overflows its accustomed channels and deluges the country; when he hears of new regions of commercial adventure, of distant marts and distant mines, swallowing merchandise and disgorging gold; when he finds joint stock companies of all kinds forming, railroads, canals, and locomotive engines, springing up on every side; when idlers suddenly become men of business, and dash into the game of commerce as they would into the hazards of the faro table; when he beholds the streets glittering with new equipages, palaces conjured up by the magic of speculation, tradesmen flushed with sudden success, and vying with each other in ostentatious expense; in a word, when he hears the whole community joining in the theme of ‘unexampled prosperity,’ let him look upon the whole as a ‘weather-breeder,’ and prepare for the impending storm.”

    Very enjoyable read indeed.

    Wiseman - follow the money right now is leading back to fed and its "low rates till 2014!!!)

    Enjoy the party while it lasts, dont forget to book timely profits.

    Very enjoyable read indeed.

    Wiseman - follow the money right now is leading back to fed and its "low rates till 2014!!!)

    Enjoy the party while it lasts, dont forget to book timely profits.

    Very enjoyable read indeed.

    Wiseman - follow the money right now is leading back to fed and its "low rates till 2014!!!)

    Enjoy the party while it lasts, dont forget to book timely profits.

    Very enjoyable read indeed.

    Wiseman - follow the money right now is leading back to fed and its "low rates till 2014!!!)

    Enjoy the party while it lasts, dont forget to book timely profits.

    Very enjoyable read indeed.

    Wiseman - follow the money right now is leading back to fed and its "low rates till 2014!!!)

    Enjoy the party while it lasts, dont forget to book timely profits.
    CommentQuote
  • Punekars needs to know before election

    Want to share some info for punekars here as this is most visited thread in Pune.

    Corporator Report card

    A good initiative by Parivartan to prepare a report card for Corporator
    CommentQuote
  • Prices of luxury homes in Mumbai fell by 18% last year

    MUMBAI: Prices of luxury houses in Mumbai fell by 18% in 2011, the most among 23 world cities, according to a Knight Frank Prime Global Cities Index released on Monday.

    Prices of luxury homes in Mumbai fell by 18% last year - The Economic Times
    CommentQuote
  • Funding woes to continue for the real estate sector

    MUMBAI: Funding woes for the real estate sector is likely to continue, due to dwindling alternate sources of funding and delays in project implementation, said a report released by Care Ratings

    "The credit outlook for the industry remains negative until the cash flows are streamlined." the report said.

    The sector has been ridden with problems like slowing demand which is on dual grounds of rising EMI on rising interest rates and high level of inflation and the problem of delay in project implementation is also not helping.

    It is likely that flow of credit to the sector may not increase anytime soon, even as cost of funding through other routes like private equity and NBFC or non banking finance company loans is unaffordable for the developers.

    Funding woes to continue for the real estate sector: Care Ratings report - The Economic Times
    CommentQuote
  • Why has this thread become so anaemic recently? Used to have the best posters, now they all seem to be in Gurgaon's bubble bursting again thread - looks like Pune bubble watchers have become tired of waiting 3 years and not see any burst at all - quite the reverse - and have decided to watch the bubble in Gurgaon instead!!!

    Rest assured, Pune more likely to burst than Gurgaon - that GGN bubble is going to inflate for ever or might have a slow leak from time to time - but no way it will EVER burst
    CommentQuote
  • Originally Posted by Venkytalks


    Rest assured, Pune more likely to burst than Gurgaon - that GGN bubble is going to inflate for ever or might have a slow leak from time to time - but no way it will EVER burst


    Hmmm...interesting and will be happy if rates get down...what makes you say that Pune likely to burst ?
    My observation seems that prices have not moved much in Pune in last 4-5 months , but not reduced either...most of the builder sites , I still see lot of prospective customers on the weekends .
    CommentQuote
  • Originally Posted by suryawork
    Hmmm...interesting and will be happy if rates get down...what makes you say that Pune likely to burst ?
    My observation seems that prices have not moved much in Pune in last 4-5 months , but not reduced either...most of the builder sites , I still see lot of prospective customers on the weekends .


    Rightly said. This post has been running since ages. And i don't see any real estate crash in pune at the least. The only direction property rates in pune have is "upwards". I hope the RE market crashes soon so that common people could be benefitted.
    CommentQuote
  • Reserve Bank puts new clamp on home loans

    Industry fears order to lenders to exclude stamp duty and other registration charges may hit market further
    Raghavendra Kamath / Mumbai Feb 06, 2012, 00:54 IST

    The Reserve Bank of India’s latest notification to banks, to exclude stamp duty, registration and like charges while calculating the value of a property they intend to finance could lead to a further decline in home sales in the lower and medium segments, say developers and consultants.

    The notification effectively means home buyers would have to arrange for more funds on their own, as banks will not lend for these charges any more. “Home loan borrowers are already stretched…Property prices are high, interest rates have peaked , stamp duty and registrations are high in many states and job markets are also not that great. I think buyers of homes in the Rs 20-70 lakh bracket will get hit further and sales in this segment could fall by a further five to 10 per cent,” said Sanjay Dutt, chief executive, Jones Lang LaSalle, a property consultant.

    “If home buyers have to pay more, there will be an impact on home sales,” said Paras Gundecha, president of the Maharashtra Chamber of Housing Industry. Already, property sales in most cities are on a decline due to stagnating incomes, high property prices and rising interest rates.

    Complete news here -

    Reserve Bank puts new clamp on home loans
    CommentQuote
  • Wall Collapses in Marvel Diva

    Man, after Goel Ganga, Nyati, Mittal, Wadhwani, Bhujbal etc. even the premium builder, Marvel realtors has joined the list where wall has collapsed killing a 9 year old boy . What's the use of high end specs, home automation etc. if the structure is junk ?

    Complete story here -

    Wall comes crashing down in Magarpatta hsg society, kills boy, News - City - Pune Mirror,Pune Mirror

    Wall collapse: Engineer booked - Indian Express

    If such thing can happen in projects where flats costs over a crore, builder being Marvel, wonder how the situation would be of scorpio grade builders.
    CommentQuote
  • Originally Posted by realacres

    The Reserve Bank of India’s latest notification to banks, to exclude stamp duty, registration and like charges while calculating the value of a property they intend to finance could lead to a further decline in home sales in the lower and medium segments, say developers and consultants.

    The notification effectively means home buyers would have to arrange for more funds on their own, as banks will not lend for these charges any more.

    This is a positive step in curbing the prices without putting extra charges on buyer. These are fixed charges buyer has to pay either as loan or down payment. It will also reduce the exposure of bank to real estate.

    This is a positive step in curbing the prices without putting extra charges on buyer. These are fixed charges buyer has to pay either as loan or down payment. It will also reduce the exposure of bank to real estate.

    This is a positive step in curbing the prices without putting extra charges on buyer. These are fixed charges buyer has to pay either as loan or down payment. It will also reduce the exposure of bank to real estate.

    This is a positive step in curbing the prices without putting extra charges on buyer. These are fixed charges buyer has to pay either as loan or down payment. It will also reduce the exposure of bank to real estate.
    CommentQuote
  • Originally Posted by amit3011
    This is a positive step in curbing the prices without putting extra charges on buyer. These are fixed charges buyer has to pay either as loan or down payment. It will also reduce the exposure of bank to real estate.


    This also means buyers should have at least have 25% amount in cash for down payment!
    CommentQuote
  • Originally Posted by realpune
    This also means buyers should have at least have 25% amount in cash for down payment!


    Yeah..this is quite +ive..

    it would atleast 30% ....20% downpayment+ 6-7% registration/stampduty+ 3.3% Service tax + 1% Maharashtra VAT

    Also banks no more entertain charges like clubhouse, society, legal etc..which forms atleast 3% of property cost..

    Overall..Self sourcing has reached 32-35% ..
    CommentQuote
  • Originally Posted by realacres
    Man, after Goel Ganga, Nyati, Mittal, Wadhwani, Bhujbal etc. even the premium builder, Marvel realtors has joined the list where wall has collapsed killing a 9 year old boy . What's the use of high end specs, home automation etc. if the structure is junk ?

    Complete story here -

    Wall comes crashing down in Magarpatta hsg society, kills boy, News - City - Pune Mirror,Pune Mirror

    Wall collapse: Engineer booked - Indian Express

    If such thing can happen in projects where flats costs over a crore, builder being Marvel, wonder how the situation would be of scorpio grade builders.


    Seems to me Pune builders really cut corners - these news of balcomies falling, walls crashing always seem to be from Pune for some reason.

    Even the burglary of apt - thieved smash 5 locks to find them empty, smash 6th and loot hous block highlighted in national news a few weeks ago - with pictures - mocking the burglars and lamenting locked up flats - to me pointed out only one thing - how flimsy the front door was - so easy to break in.

    Pune flat quality seems more suspect than rest of the country
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  • I do Agree with Venkey.....:bab (48):
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  • Originally Posted by Venkytalks
    Seems to me Pune builders really cut corners - these news of balcomies falling, walls crashing always seem to be from Pune for some reason.

    Even the burglary of apt - thieved smash 5 locks to find them empty, smash 6th and loot hous block highlighted in national news a few weeks ago - with pictures - mocking the burglars and lamenting locked up flats - to me pointed out only one thing - how flimsy the front door was - so easy to break in.

    Pune flat quality seems more suspect than rest of the country

    I wonder if those were thieves or builder's men who knew the owners were not present in India:bab (59):
    Pune RE is not only overpriced,but also low in quality. Hope the NRIs understand this before putting money in RE.
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