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 realacres


    Man, late 20s to early 40s are golden years where you should explore the world in all senses, expand, increase your investment portfolio & enjoy time with friends & family. If one keeps repaying heavy EMIs, will s/he be able to enjoy rest of the good things in life ??

    There is lot of things to do in life than to own a house. Even birds build house, that too on their own without taking any loans & see how happy they live :)....one needs to learn something from birds.


    As usual,realacres would end with a metaphor/nice sounding words to leave a good impact...

    The fact is that each one of us is different and thus have different view on life.

    I would say,
    late 20s to early 40s are golden years where you should spend all effort and energy building your career and dream home.... so that you can enjoy rest of the life with your friends and family...trust me...there is life after 40... else pension funds will not be in business...
    and who says that one cannot enjoy while paying high EMI... infact when you are staying under your OWN roof.. you wont bother that much about financial pressure.. living in your dream home will give you that much needed motivation to get up and go to work every day....

    One really needs to learn from the birds... the birds work very hard and sacrifice all the things to build a nest... for whom ??? For their children..

    I take a huge loan and work hard for the next 20 years to re-pay it...so that my children can reap the benefits for next 40 years... they dont have to go through the same trouble... I cant imagine seeing my children going through pain...

    getting real...
    ;) The world is very different from where I see it ....
    CommentQuote
  • Living under debt is certainly not a fruitful proposition even for house, have seen first hand experience in my family.

    I fear debt so much that bought a cheap car with 100% downpayment, rather than a premium car which my salary would have allowed me to do so on loan.
    This is what debt do to you, live beyond your means.

    In today's scenario the prices seems to be so unrealistic that loan repayment may take generations. Our children instead of reaping benefits might end up with huge debt the moment they are born .

    This is already happening in WEST, and the rate at which we are aping them, the scenario my not be impossible here too.
    CommentQuote
  • Things that can spoil the calculation!

    Originally Posted by stinaikar
    Originally Posted by ashishi
    Very well said. The effect of teaser loanss have just started showing - because for the first two years teaser loans are like soft loans. /QUOTE]

    You are under-estimating the intelligence of the average Indian home loan buyer. Most home buyers understand that interest rates follow a cyclical path. If they're "paying through their nose" now on the teaser loans, they are aware that things will return to normal once the cycle is over. Only the mentally challenged will sell because their EMI went up by a few thousand rupees. Meanwhile, these same buyers have experienced capital appreciation of 50% in the last 4 years. Besides, other options exist - you can renegotiate with the bank for an increase in tenure. You can also pre-pay the principal amounts and keep your EMI's steady. Don't superimpose what you might do in a specific situation, onto others.



    You are correct in general. But the devil is in the details ...

    Let me give you an example ...

    Someone well known to me bought a flat at the perfect time of 2002 from a reputed builder for around 40 L. The floating rate at that time was 7.5% with fixed at 8.5%.

    Around 2006 I told him that my information was interest rates would start climbing and that he should switch to fixed asap. He nodded and didn't do anything.

    Remember, when he took the loan of 35L, he had 240 installments.

    ... today, after 8 years (96 installments) he has paid interest of 26 lakhs, principal is still 29 lakhs left, his current interest rate is over 16%!!!:bab (45): and still has got 208 installments to go (while he should have had only 144 installments left if interest hadn't gone up).

    Interest rate cycles are long drawn out cycles. In unprecedented times like these (which world has not seen for many decades) these can last as long as a decade!

    All-in-all, when you get into these long term up-cycles in interest, along with down-cycles in currency value, you could end up with a house nominally worth 5 crores but in real terms worth less than the originally bought 40 L (thus still having a real negative return).

    cheers terms worth less than the originally bought 40 L (thus still having a real negative return).

    cheers
    CommentQuote
  • The reason why such loans are called teaser definitely has a meaning. Teaser is actually a euphemistic term. The right term should be slow poison. Just that you heard that farmers committed suicide due to loan burden, don't be surprised to hear such news from home loan borrowers.

    Every body is not lucky enough to sell property to pay off teaser loan burden. They will still remain in deep red
    CommentQuote
  • My 2 cents

    Originally Posted by tarcap
    As usual,realacres would end with a metaphor/nice sounding words to leave a good impact...

    The fact is that each one of us is different and thus have different view on life.

    I would say,
    late 20s to early 40s are golden years where you should spend all effort and energy building your career and dream home.... so that you can enjoy rest of the life with your friends and family...trust me...there is life after 40... else pension funds will not be in business...
    and who says that one cannot enjoy while paying high EMI... infact when you are staying under your OWN roof.. you wont bother that much about financial pressure.. living in your dream home will give you that much needed motivation to get up and go to work every day....

    One really needs to learn from the birds... the birds work very hard and sacrifice all the things to build a nest... for whom ??? For their children..

    I take a huge loan and work hard for the next 20 years to re-pay it...so that my children can reap the benefits for next 40 years... they dont have to go through the same trouble... I cant imagine seeing my children going through pain...

    getting real...
    ;) The world is very different from where I see it ....



    I'm not disagreeing with you and this is an endless argument.

    But, I've seen heavy debt situation. I'm seeing no-debt situation.

    The only thing that permitted me to be sane in the heavy-debt situation was the guarantee of a high-paying job (with rapidly increasing pay) forever. I was in the thick of the IT boom from 1985 till 2008 seeing my salary go from 3000 pm (which was pretty high for a starter back in 1985) to 5L pm taxfree with additional substantial annual bonus exceeding the monthly gross (this is a stupendous rise in pay over those 22 years).

    Today, I don't think these kinds of pay hikes are going to happen and I don't even think those kind of job guarantees are going to happen over the next 20 years.

    And, having seen both situations, a no-debt situation with a Maruti 800 keeps me far happier and stress-free than a high-debt situation with a Vento! Actually I have moved to cycle for 5km radius, bike (my 25 year old RX100!) for anything 5km - 10km and my 15-year old 800 (run 42k kms and gives me 14-15 / ltr) even for a run down to Mysore!

    While Indians may be intelligent, I believe excess money is making us stupider by the minute. And when this excess is nothing but debt, one can get very stupid indeed, believing that its his own money he's spending!!!

    An example. I go to Mysore more often today and have been taking the KSRTC volvo which takes 3-3.5 hrs and cost 250/- one-way. Recently I decided to return by a train (which, back in the old days was the preferred way to go) just to see if a bus is indeed all that better. Can you believe that it left precisely on time, took exactly 3 hours and cost me all of 42/-? It rocked and braked less, allowed me to read quite a bit and was, in general a better experience than the luxury bus.

    It needed a little more discipline to get to the station on time and now-a-days too many of is have lost the discipline of time and cost and make excuses to throw money around as though we are rich, which only makes us live longer under the yoke of debt in the golden period of life (20-45).

    I extend this to all parts of my life. When apples went beyond 100/- I refused to buy them. When grapes were priced at 120/- just until last week, I simply switched to cheaper fruit. Today, its 60/- and I buy it.

    As a nation, especially in the "affluent" cities we have become indisciplined, lazy and stupid (like the cattle-class in the West) and have adopted their habits of spending what isn't ours in the first place (after all we do get the affluence from them via exports and investments, right?) . Are you surprised that Builders (and others who have increasingly expensive "things" to sell to your ever expanding appetite to buy) keep on increasing RE prices and are always surprised to see people queueing up to buy at any price? How many of those "features" you pay the extra 5 lakhs for in your car have you ever used more than a few times when it was new? I can understand my 14-year-old going gaga over ABS, PQR and XYZ, but when at 30 one still goes gaga (and hardly ever uses it later), perhaps the 14-year old has never grown up? :)

    I think if enough of us said "NO!, Only at this price or I will wait", prices would perhaps have been far lower than what they are today. Its a demand-supply thing and if demand exists at any price, builder laughs all the way to the bank (which, incidentally also gave you that loan and in reality owns your house till you pay back the increasingly-expensive last penny!) I may have a crore in the bank, but I will buy only at my price (this used to be the purchasing behavior back then, which we seemed to have lost once "Credit" became freely available. Now you can see the end-result of too much "Credit" all over the West today! Chaos! And eventually financial ruin and poverty. Going the same way as them, will we be smart enough to avoid their fate?).

    When we become indebted (to the bank or money-lender) we lose a lot more than the golden years. We lose our freedom, our independence. We are forced to do unethical and immoral things in our jobs (because of the fear of losing it and not being able to pay the installments at the end of the month!). So we face little-little ignominies like having an abusive boss and not being able to tell him where to go, or having to hide from the collection agent when you are a little late in payment. We feel fear, we feel shame! I'm sure we all see this every day right? But by then its rather late, since, even though one faces these things daily, one cannot tear himself away from over-using that credit card and seeing ones pay getting over by the 20th of the month and wondering where the next-month EMI is going to come from.

    Indisciplined, lazy, stupid! And eventually broke!

    This is wrongly termed "sacrifice" when one has to get into excess debt well beyond one's capacity!

    A no-debt situation with a house on own land on the outskirts of a 2nd-tier town also makes me far happier and stress-free than a high-debt 1.2C flat in Bangalore (with its ever-increasing unliveability risking my 1.2C + interest over the next 20 years)! In any case, quality of life in 2T town is getting far, far better and since I do all my work with a broadband connection, I could do it from anywhere.

    I suppose everyone is not in this position, but aiming to get there might be a good idea!

    Just my 2c.

    cheers
    CommentQuote
  • tarcap,

    Problem is people of my age are still not even sure where they will settle. I have already posted experiences before how guys bought in Pune & they got shifted to either new city or went abroad.

    Until & unless one is in business, he shouldn't buy house before 35 coz you never know where the job will land you into. Also, the down-payment has to be min of 60% to ensure than home loan doesn't pinch you with loan duration not more than 10 yrs max to max.

    Originally Posted by AJAY_GGN
    Living under debt is certainly not a fruitful proposition even for house, have seen first hand experience in my family.

    I fear debt so much that bought a cheap car with 100% downpayment, rather than a premium car which my salary would have allowed me to do so on loan.
    This is what debt do to you, live beyond your means.

    In today's scenario the prices seems to be so unrealistic that loan repayment may take generations. Our children instead of reaping benefits might end up with huge debt the moment they are born .

    This is already happening in WEST, and the rate at which we are aping them, the scenario my not be impossible here too.

    +10000000000000000000000000000000000

    Bang on target man. Agreed completely. Same here, all things for personal consumption should not be on loan, despite I getting 0% interest rate for 6 months for stuff bought on credit card. My bike, car etc. all I got on 100% down-payment. I went around on bike for more time coz I was saving for car.
    Similarly, I am staying on rent & saving so that I can make max down-payment for house, whenever & wherever I buy one.

    I am of the firm opinion that loan should be taken only if you are going to make more money than interest you are going to give to bank. If it is for personal consumption, it has to be 100% down-payment. I could have bought a D segment car with ease, but rather settled for C+ segment one & am happy coz I pay nothing more than fuel & maintenance on her now. :)

    I have said this umpteen times before :-

    Staying on rent is your rent a house,
    Buying a house on loan is you rent the money.

    Essentially you either rent house or money & therefore remain a renter in real sense. Outright purchase is when you buy anything with 100% downpayment.
    CommentQuote
  • Originally Posted by wiseman

    An example. I go to Mysore more often today and have been taking the KSRTC volvo which takes 3-3.5 hrs and cost 250/- one-way. Recently I decided to return by a train (which, back in the old days was the preferred way to go) just to see if a bus is indeed all that better. Can you believe that it left precisely on time, took exactly 3 hours and cost me all of 42/-? It rocked and braked less, allowed me to read quite a bit and was, in general a better experience than the luxury bus.


    Example of Neeta Volvo (private Pune-Mumbai Vovlo operator with buses every 15 minutes). Badly maintained (or not maintained) buses, tons of time delay but no time for bio-breaks, halt at their own hotel on the way, very poor service and so on...

    When volvos got introduced at rate of 200/220 with 3 hrs for Pune-Dadar, trains had competition and people thought who will now travel by train. Slowly, trains started finding ways to further reduce travel time to < 3 hrs and volvo operators kept on becoming arrogant.

    Situation today: Mumbai pune trains are almost always fully reserved, even on odd days. If option is available, people do not want to spend 300 to 350 Rs. and get pathetic+delayed service and are ok with non-AC train ticket costing much less.

    Even ST volvo (Shivneri) starts on time and reaches destination on time. But not the private operator who can afford to buy so many volvos. I have heard each of these buses cost 50L + and they do not even maintain it !


    Originally Posted by wiseman

    I extend this to all parts of my life. When apples went beyond 100/- I refused to buy them. When grapes were priced at 120/- just until last week, I simply switched to cheaper fruit. Today, its 60/- and I buy it.


    Fruits are now being sold at equivalent of their $ price or even more.
    Biggest irony is: I see lots and lots of fruits getting wasted as these remain unsold. Stores do not want to keep reasonable price so that these fruits get sold when they are fresh and actually give you nutrition. Worse, you buy fruit that looks fresh from outside and it turns out to be stored in cold long enough that it has started becoming soar from inside!

    Pricing is probably again driven by earning max. by selling part of the total. Anything else that gets sold at whatever price is additional profit. If it
    goes waste, store is anyway not losing anything as they have already recovered their money.

    In this whole thing, there is no consideration that so many fruits are actually going waste . And this feeds into the eco-system of high pricing and no nutrition benefit to the buyer.


    I think the RE business is also following the same principles. Buyers end up paying heavy prices, huge delay in getting the house, what is delivered may look great from outside but tons of issues inside (design + construction + running costs). And finally, buyer does not get value even after paying hefty amount.



    I believe time is ripe for RE to get dumped just like people started dumping volvos or buying fruits. Because it is not satisfying the basic need that it started with - a shelter with good quality and affordable price.

    There is simple principle of life - when others start making things complicated (with aim to fool you), go back to basics !!
    CommentQuote
  • Originally Posted by stinaikar
    Originally Posted by ashishi
    Very well said. The effect of teaser loanss have just started showing - because for the first two years teaser loans are like soft loans. /QUOTE]

    You are under-estimating the intelligence of the average Indian home loan buyer. Most home buyers understand that interest rates follow a cyclical path. If they're "paying through their nose" now on the teaser loans, they are aware that things will return to normal once the cycle is over. Only the mentally challenged will sell because their EMI went up by a few thousand rupees. Meanwhile, these same buyers have experienced capital appreciation of 50% in the last 4 years. Besides, other options exist - you can renegotiate with the bank for an increase in tenure. You can also pre-pay the principal amounts and keep your EMI's steady. Don't superimpose what you might do in a specific situation, onto others.


    Ummm, I can see the point ashishi was making. When you area already on the edge, (which, quite a few buyers seem to do by succumbing to the pressure and riding the easy-credit wave) and when the going gets tougher, one might topple over. You are giving way too much credit to people who do not have enough liquidity to ride out the tough wave in hope for the next "cycle". Most first time buyers barely have the cushion to last 6 months if the source of income takes a beating.

    On a side and may be personal note, since I see you vehemently defending buying elsewhere as well, I have a question: Are you one of those multiple property owners who buy to rent?

    Just curious.

    Ummm, I can see the point ashishi was making. When you area already on the edge, (which, quite a few buyers seem to do by succumbing to the pressure and riding the easy-credit wave) and when the going gets tougher, one might topple over. You are giving way too much credit to people who do not have enough liquidity to ride out the tough wave in hope for the next "cycle". Most first time buyers barely have the cushion to last 6 months if the source of income takes a beating.

    On a side and may be personal note, since I see you vehemently defending buying elsewhere as well, I have a question: Are you one of those multiple property owners who buy to rent?

    Just curious.
    CommentQuote
  • Take a bow, Wiseman! If there was a hall of fame of posts here, this would belong right there along few others.

    How many of those "features" you pay the extra 5 lakhs for in your car have you ever used more than a few times when it was new? I can understand my 14-year-old going gaga over ABS, PQR and XYZ, but when at 30 one still goes gaga (and hardly ever uses it later), perhaps the 14-year old has never grown up? :)


    Next time when I see a new gadget (my probably only unhealthy spending habit/weakness are electronic gadgets) I am going to refer to this sentence of yours and try to restrict myself.


    Originally Posted by wiseman
    I'm not disagreeing with you and this is an endless argument.

    But, I've seen heavy debt situation. I'm seeing no-debt situation.

    The only thing that permitted me to be sane in the heavy-debt situation was the guarantee of a high-paying job (with rapidly increasing pay) forever. I was in the thick of the IT boom from 1985 till 2008 seeing my salary go from 3000 pm (which was pretty high for a starter back in 1985) to 5L pm taxfree with additional substantial annual bonus exceeding the monthly gross (this is a stupendous rise in pay over those 22 years).

    Today, I don't think these kinds of pay hikes are going to happen and I don't even think those kind of job guarantees are going to happen over the next 20 years.

    And, having seen both situations, a no-debt situation with a Maruti 800 keeps me far happier and stress-free than a high-debt situation with a Vento! Actually I have moved to cycle for 5km radius, bike (my 25 year old RX100!) for anything 5km - 10km and my 15-year old 800 (run 42k kms and gives me 14-15 / ltr) even for a run down to Mysore!

    While Indians may be intelligent, I believe excess money is making us stupider by the minute. And when this excess is nothing but debt, one can get very stupid indeed, believing that its his own money he's spending!!!

    An example. I go to Mysore more often today and have been taking the KSRTC volvo which takes 3-3.5 hrs and cost 250/- one-way. Recently I decided to return by a train (which, back in the old days was the preferred way to go) just to see if a bus is indeed all that better. Can you believe that it left precisely on time, took exactly 3 hours and cost me all of 42/-? It rocked and braked less, allowed me to read quite a bit and was, in general a better experience than the luxury bus.

    It needed a little more discipline to get to the station on time and now-a-days too many of is have lost the discipline of time and cost and make excuses to throw money around as though we are rich, which only makes us live longer under the yoke of debt in the golden period of life (20-45).

    I extend this to all parts of my life. When apples went beyond 100/- I refused to buy them. When grapes were priced at 120/- just until last week, I simply switched to cheaper fruit. Today, its 60/- and I buy it.

    As a nation, especially in the "affluent" cities we have become indisciplined, lazy and stupid (like the cattle-class in the West) and have adopted their habits of spending what isn't ours in the first place (after all we do get the affluence from them via exports and investments, right?) . Are you surprised that Builders (and others who have increasingly expensive "things" to sell to your ever expanding appetite to buy) keep on increasing RE prices and are always surprised to see people queueing up to buy at any price? How many of those "features" you pay the extra 5 lakhs for in your car have you ever used more than a few times when it was new? I can understand my 14-year-old going gaga over ABS, PQR and XYZ, but when at 30 one still goes gaga (and hardly ever uses it later), perhaps the 14-year old has never grown up? :)

    I think if enough of us said "NO!, Only at this price or I will wait", prices would perhaps have been far lower than what they are today. Its a demand-supply thing and if demand exists at any price, builder laughs all the way to the bank (which, incidentally also gave you that loan and in reality owns your house till you pay back the increasingly-expensive last penny!) I may have a crore in the bank, but I will buy only at my price (this used to be the purchasing behavior back then, which we seemed to have lost once "Credit" became freely available. Now you can see the end-result of too much "Credit" all over the West today! Chaos! And eventually financial ruin and poverty. Going the same way as them, will we be smart enough to avoid their fate?).

    When we become indebted (to the bank or money-lender) we lose a lot more than the golden years. We lose our freedom, our independence. We are forced to do unethical and immoral things in our jobs (because of the fear of losing it and not being able to pay the installments at the end of the month!). So we face little-little ignominies like having an abusive boss and not being able to tell him where to go, or having to hide from the collection agent when you are a little late in payment. We feel fear, we feel shame! I'm sure we all see this every day right? But by then its rather late, since, even though one faces these things daily, one cannot tear himself away from over-using that credit card and seeing ones pay getting over by the 20th of the month and wondering where the next-month EMI is going to come from.

    Indisciplined, lazy, stupid! And eventually broke!

    This is wrongly termed "sacrifice" when one has to get into excess debt well beyond one's capacity!

    A no-debt situation with a house on own land on the outskirts of a 2nd-tier town also makes me far happier and stress-free than a high-debt 1.2C flat in Bangalore (with its ever-increasing unliveability risking my 1.2C + interest over the next 20 years)! In any case, quality of life in 2T town is getting far, far better and since I do all my work with a broadband connection, I could do it from anywhere.

    I suppose everyone is not in this position, but aiming to get there might be a good idea!

    Just my 2c.

    cheers
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  • Banks are auctioning these property of loan defaulters - many victims of teaser loans. In the next couple of years banks will sell more property than builders.

    New Delhi Bank Auctions | ForeclosureIndia.com | Bank Auctions India | India Bank Auctions | Foreclosure Properties
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  • Originally Posted by realacres

    > Issue is not few thousand rupees but 30%. If the net outgo in home loan EMIs was 60% or more, this 30% hike makes huge difference,


    No bank lends you money if your EMI to Gross Income is 60%. Banks will factor in your affordability when approving your loan.

    Originally Posted by realacres

    > See the inflation rate of 2008-09 & now. What was the oil prices at that time ? See the cost of running your vehicle, from 2009-2012. What was rate of gold, silver etc. at that time ? What were the school fees at that time ?? Even public transport has got expensive.

    Fact is the cost of living has gone up in past 3 years.


    Why don't you also factor in that Inflation also reduces the value of your debt? Even moderate increases of 5% in salary can make your EMI payments look smaller and smaller with the passage of every year. Also note that income growth is typically more lumpy than growth in food or oil prices. While the latter respond quickly within days, incomes are reviewed over less frequent intervals. So you need to be a little patient before incomes catch up.

    Originally Posted by realacres
    Increase in loan tenure - This is the most idiotic thing one can do. Be slave to the banks & builders for more few more years, right ?? And by the time you would have repaid the loan, seeing the crap quality of most of the builders, the building would have come for redevelopment :D.


    You can't have your cake and eat it too. You can't whine about affordability and then dismiss options that increase your affordability. I was only suggesting temporary alternatives to make your loans more affordable while it goes through a tight interest rate period. You still retain the option to pre-pay when interest rates go down.


    Originally Posted by realacres
    There is lot of things to do in life than to own a house. Even birds build house, that too on their own without taking any loans & see how happy they live :)....one needs to learn something from birds.


    Height of oversimplification! :)
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  • I may have gone a little overboard there!

    Sorry folks. I had nothing personal towards anyone in mind when I went into that long one.

    I may have gone a bit overboard there, but I believe in every word I said that prudent handling of finances is critical to your comfortable lifestyle throughout your lifespan! :)

    I liked the one from Real and plan to use it in future ...

    "You either rent a house or you rent money when you don't have 100% resources to buy"

    That was classic ...

    cheers
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  • Interesting. Never knew

    Originally Posted by ashishi
    Banks are auctioning these property of loan defaulters - many victims of teaser loans. In the next couple of years banks will sell more property than builders.

    New Delhi Bank Auctions | ForeclosureIndia.com | Bank Auctions India | India Bank Auctions | Foreclosure Properties



    Thanks Ashish.

    Btw, are these properties' reserve price anywhere near market price? Or are these at some kind of discount?

    cheers
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  • Originally Posted by wiseman
    Thanks Ashish.

    Btw, are these properties' reserve price anywhere near market price? Or are these at some kind of discount?

    cheers

    The reserve price is below the market price. Anyway, the point I was making is that there has been a phenomenal increase in properties where the borrower had failed to pay. And if prices fall even as little as 10%, you would see a logarithmic increase in such auctioned properties .

    If you borrowed 50 lakhs one year back for 20 years , and wish to pay back today- you easily loose 11-12 lakhs. If the property did not appreciate by 11-12 lakhs than you are a looser and not a winner. In the current scenario it is NEXT TO IMPOSSIBLE for property to go up by 10% every year
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