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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  • And it is only IE which exposes the scams like Bofors, Mayawati Statues, Petrol pump, Telgi etc. & continues to follow it, be it of any party whether in Govt. or opposition. How many scams have been exposed by TOI & later followed the news except for illicit relationships?
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  • Complete revival of real estate sector not soon: Hiranandani

    No substantial hike in realty prices, says the leading developer
    Nilanjana Ghosh Choudhury
    Dec 01, 2009,Tue

    Leading real estate developer and managing director of Hiranandani Constructions Private Limited Niranjan Hiranandani said that the Indian construction industry has not picked up as much as it should have been post-economic slowdown.
    Speaking to DNA on the sidelines of an event of the International Sindhu Chamber of Commerce on Sunday, Hiranandani said, "India has already seen a correction and in all probability we will reach up to 8-9% of the growth rate next year. However, it will take some time for the industry to witness a complete revival."

    Explaining the slow growth, Hiranandani said "Last year when recession was at its peak, around 20 lakh people lost their jobs in India, of which only about 2 lakh have been restored so far. Hence, it is too pre-mature to call it a complete revival."

    He, however, said that sales have started picking up in the last few months. "Things have improved since this March. In Mumbai, close to 20,000 apartments have been sold," he said.
    On the likely increase in realty prices in the near future, Hiranandani said "Sales have taken place but not on a big scale. Therefore even in a market like Mumbai, prices are not likely to go up drastically and in case of smaller cities like Pune, the situation would be more conservative."

    With speculations about the Dubai debacle posing a threat to the Indian economy, especially the real estate sector, Hiranandani said, "Those investors who have borrowed money and have invested in Dubai are likely to face a problem. However, the matter is not going to be very serious as in all likelihood the USD 80-billion debts are likely to be settled soon."
    Dubai World, an investment company that manages and supervises a portfolio of businesses and projects for the Dubai government, with USD 60-billion liabilities has sought a six-month "standstill" on its debts with all lenders. Dubai accumulated USD 80 billion debts by expanding in banking, real estate and transportation sectors.

    "But it is going to affect India the most as 40% of its population working abroad is based in Dubai and other West Asian countries. Moreover, in Kerala 30% of the population is working in Dubai. In fact, 2/3rd of their remittance comes from Dubai," the developer said.

    Not pressing a panic button yet, Hiranandani said "Though there would be initial hiccups of about six months to one year, it would not be a long-lasting problem as we expect a solution soon." Hiranandani Constructions is building a 90-storey residential complex '23 Marina' in Dubai, which will be the second tallest building in the world.
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  • Therefore even in a market like Mumbai, prices are not likely to go up drastically and in case of smaller cities like Pune, the situation would be more conservative.


    What is meaning of this sentence with respect to Pune (i.e. in case of smaller cities like Pune, the situation would be more conservative)?.
    CommentQuote
  • Retailers chalk survival strategies

    Minimum guarantee and revenue sharing model is one such mode
    NG Choudhury
    Dec 01, 2009

    Hit hard by the drop in sales during the slowdown and an over supply of readymade space, retailers across cities are finding new ways of survival.
    From sharing part of the profits to providing minimum guarantee, both builders and retailers today are looking at alternative strategies to sail through difficult times.
    "Commercial retail was one of the worst-affected sectors during recession. Even now when the market has shown signs of recovery, the situation remains the same, thereby forcing retailers and builders to arrive at formulas which can help them maintain a foothold," said president of National Realtors' Association (NAR) Ravi Varma.
    He said one such model is the minimum guarantee and revenue-sharing model.
    According to an estimation drawn by NAR, Pune alone has over 3.3 million square feet of vacant retail space with no takers over the past one year.
    A minimum guarantee model refers to an agreement between the two parties wherein instead of paying the entire rental, the retailers agree to pay only a percentage of the rent while the balance amount is collected from a percentage deducted from the monthly revenue of the malls or retail space. What percentage of the monthly revenue is to be collected is decided by both the parties.
    With this model, even if there is no sale the entire month, the builder can be assured of a minimum amount every month.
    "Exorbitant rentals were the prime reason why the Pune retail scene suffered. More people are today agreeing on this mode so that both can survive," Varma said.
    Some recent projects in Pune which have gone for this module include the Jewel Square at Koregaon Park, Market City at Vimannagar, GCorp Mall and In-Orbit Mall on the Pune-Ahmednagar Road.
    "The general stance now is that if a retailer is making money, landlords are willing to offer reductions on the rental amount, provided the retailer is willing to sharing his topline. As a result, a number of retailers in Pune are now once again looking at expansion," said an official.
    The number of retail space deals has gone up significantly after the Dassera-Diwali period, which many players agree was better this year than in the previous year.
    "Retailers are understandably displaying a predilection for ready properties," said consultancy firm Jones Lang LaSalle Meghraj, head (retail) Pune, Anand Dutta.
    "With land prices remaining unchanged and rentals high, this will be the only way left for the retailers to sustain," Varma added.
    This trend has, however, revived interests not only in malls, but also on Pune's prominent high streets of MG Road, JM Road, Parihar Chowk in Aundh and Karve Road.
    "The highest activity levels in terms of expansion are currently being witnessed among vanilla retailers in the apparel, accessories, hypermarkets and jewellery categories," Dutta said.
    Chief executive officer of Tommy Hilfiger Shailesh Chaturvedi said, "More than a survival strategy for retailers, real estate developers have now agreed to share the risks and retailers have agreed to share the upside. In this case, real estate developers are willing to reduce the rent because if sales pick up they too will get a share of the profit."
    He said the minimum guarantee and revenue sharing model is one of the most popular strategies used by retailers worldwide. Tommy Hilfiger is planning to open a showroom at Jewel Square soon.
    "Retailers all over are looking at alternative ways to survive. The minimum guarantee and revenue sharing model is one such way. Even in several of our projects across the country, we have gone in for this model," said head (corporate communications) of Pantaloon Retail Atul Takle.
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  • Originally Posted by razer
    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.



    Right, people will get the feel of what bankruptcy is, which most of us think is just a word in dictionary and something that always happens to others;) and not me!!
    CommentQuote
  • 2010 Games builder 'linked' to Koda, raided

    ]http://ibnlive.in.com/news/ed-raids-realty-major-emaar-mgfs-offices/106387-7.html
    CommentQuote
  • Maharashtra to create land banks to build affordable homes

    ]http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=6218&cat_id=3

    Hey, why is the link being shown with url tag most of the time I post?

    Hey, why is the link being shown with url tag most of the time I post?
    CommentQuote
  • You mean like this ="http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=6218&cat_id=3"]Realtyplusmag :) :)
    CommentQuote
  • Originally Posted by Technocrat
    You mean like this ="http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=6218&cat_id=3"]Realtyplusmag :)
    Like that above, post 491.
    Like that above, post 491.
    Like that above, post 491.
    Like that above, post 491.
    CommentQuote
  • Originally Posted by realacres
    Like that above, post 491.


    sometimes when i copy-paste a url link a am able to see as direct link, but some times it shows similar to wht realacres has shown. why so ?
    forum admin....pl support ;)

    sam...
    CommentQuote
  • Its abug in , I tried to correct it but it still shows bad.
    CommentQuote
  • That mostly happens when you edit the post after posting a link.
    While editing, the previous links became ill-formated.

    So when you edit the post which has link in it,
    Do remove any blocks around the link and then submit.

    Originally Posted by sam2008
    sometimes when i copy-paste a url link a am able to see as direct link, but some times it shows similar to wht realacres has shown. why so ?
    forum admin....pl support ;)

    sam...
    CommentQuote
  • Originally Posted by aditi sharma
    That mostly happens when you edit the post after posting a link.
    While editing, the previous links became ill-formated.

    So when you edit the post which has link in it,
    Do remove any blocks around the link and then submit.

    hi aditi,
    but i had experienced this even when i put my first post...

    sam...

    hi aditi,
    but i had experienced this even when i put my first post...

    sam...

    hi aditi,
    but i had experienced this even when i put my first post...

    sam...

    hi aditi,
    but i had experienced this even when i put my first post...

    sam...
    CommentQuote
  • Realty shock: Consumer court comes to aid of buyer

    Another news illustrating how crooks these Goel Ganga (both the groups)chaps are:-

    ]http://www.expressindia.com/latest-news/realty-shock-consumer-court-comes-to-aid-of-buyer/549860/
    CommentQuote
  • Govt meet to help NRIs resolve real estate woes with developers

    ]http://www.livemint.com/2009/12/06230146/Govt-meet-to-help-NRIs-resolve.html
    CommentQuote