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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  • ASK Property Investment Advisors invests Rs 40 cr in PSCL

    ASK Property Investment Advisors invests Rs 40 cr in Pune project - The Economic Times

    never heard of Ask property before. does anyone have any info abt them?
    CommentQuote
  • Originally Posted by khujag
    ASK Property Investment Advisors invests Rs 40 cr in Pune project - The Economic Times

    never heard of Ask property before. does anyone have any info abt them?


    Thats how tinted money comes into normal circulation again!!!
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  • Feb records maximum PE exits in a year

    Originally Posted by smileplz
    Thats how tinted money comes into normal circulation again!!!

    Here is the other side of the same coin -

    Feb records maximum PE exits in a year - Indian Express
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  • Are cracks in DLF alone or is real estate sector suffering from strategic mistakes?

    Good link talking about mismanagement of funds by RE cos.

    Are cracks in DLF alone or is real estate sector suffering from strategic mistakes? - The Economic Times
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  • Minor Respite may come soon

    Folks based on the latest news today related someone who is
    -owing nearly whole pune district and vasai
    -Also owing large amount of property outside india having stakes in many dairies
    -One who eats a Rs15000 tablet daily to secrete saliva
    -One whose tiffin containing only home grown non-hybrid food which travels with him via plane wherever he goes
    -And one who has benami properties worth thousands of crores of rupees
    -One who finances all the builders and take care of under world

    It seems that a minimum of few thousand people will become crorepatis directly. That whole stacked up money may come into market where by one can see some correction to the tune of minimum 10-25% sans recession. So keep your fingers crossed and pray to god.
    -Also owing large amount of property outside india having stakes in many dairies
    -One who eats a Rs15000 tablet daily to secrete saliva
    -One whose tiffin containing only home grown non-hybrid food which travels with him via plane wherever he goes
    -And one who has benami properties worth thousands of crores of rupees
    -One who finances all the builders and take care of under world

    It seems that a minimum of few thousand people will become crorepatis directly. That whole stacked up money may come into market where by one can see some correction to the tune of minimum 10-25% sans recession. So keep your fingers crossed and pray to god.
    CommentQuote
  • android or ipad2 or apna local aakash 2 which is it ?

    Originally Posted by vhaldavnekar
    Folks based on the latest news today related someone who is
    -owing nearly whole pune district and vasai
    -Also owing large amount of property outside india having stakes in many dairies
    -One who eats a Rs15000 tablet daily to secrete saliva
    -One whose tiffin containing only home grown non-hybrid food which travels with him via plane wherever he goes
    -And one who has benami properties worth thousands of crores of rupees
    -One who finances all the builders and take care of under world

    It seems that a minimum of few thousand people will become crorepatis directly. That whole stacked up money may come into market where by one can see some correction to the tune of minimum 10-25% sans recession. So keep your fingers crossed and pray to god.

    android or ipad2 or apna local aakash 2 which is it ?

    android or ipad2 or apna local aakash 2 which is it ?

    android or ipad2 or apna local aakash 2 which is it ?

    android or ipad2 or apna local aakash 2 which is it ?
    CommentQuote
  • Originally Posted by vhaldavnekar
    Folks based on the latest news today related someone who is
    -owing nearly whole pune district and vasai
    -Also owing large amount of property outside india having stakes in many dairies
    -One who eats a Rs15000 tablet daily to secrete saliva
    -One whose tiffin containing only home grown non-hybrid food which travels with him via plane wherever he goes
    -And one who has benami properties worth thousands of crores of rupees
    -One who finances all the builders and take care of under world

    It seems that a minimum of few thousand people will become crorepatis directly. That whole stacked up money may come into market where by one can see some correction to the tune of minimum 10-25% sans recession. So keep your fingers crossed and pray to god.


    Same one with whom a Sardar took panga with on TV recently?


    Same one with whom a Sardar took panga with on TV recently?


    Same one with whom a Sardar took panga with on TV recently?


    Same one with whom a Sardar took panga with on TV recently?
    CommentQuote
  • Originally Posted by dougnet
    android or ipad2 or apna local aakash 2 which is it ?

    are bhai desi option kaise chalega? Woh to aam aadmi ke liye hota hai na
    Aur ab to ipad 3 bas aa hi gaya samjo !!

    lagta hai tumhi ne galat tablet dekar faint karvaya hai. Varna politicians to hamesha aage hote hai yeh kehane me ki...

    ..."abhi to main javan hu..."
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  • Originally Posted by vhaldavnekar
    Folks based on the latest news today related someone who is
    -owing nearly whole pune district and vasai
    -Also owing large amount of property outside india having stakes in many dairies
    -One who eats a Rs15000 tablet daily to secrete saliva
    -One whose tiffin containing only home grown non-hybrid food which travels with him via plane wherever he goes
    -And one who has benami properties worth thousands of crores of rupees
    -One who finances all the builders and take care of under world

    It seems that a minimum of few thousand people will become crorepatis directly. That whole stacked up money may come into market where by one can see some correction to the tune of minimum 10-25% sans recession. So keep your fingers crossed and pray to god.


    There is a lot of description of a person..too much to miss.


    Anyhow, if the said persons goes to 'Vaikuntha', he still has successors daugher/nephew etc. They would continue to control the property. would they not ? Then how are a few thousand people going to become crorepatis ? Suppose they become crorepatis and flood market with money would the prices go up or down ?

    I am confused by your post. Please write simple reasoning of how this is going to happen.


    There is a lot of description of a person..too much to miss.


    Anyhow, if the said persons goes to 'Vaikuntha', he still has successors daugher/nephew etc. They would continue to control the property. would they not ? Then how are a few thousand people going to become crorepatis ? Suppose they become crorepatis and flood market with money would the prices go up or down ?

    I am confused by your post. Please write simple reasoning of how this is going to happen.


    There is a lot of description of a person..too much to miss.


    Anyhow, if the said persons goes to 'Vaikuntha', he still has successors daugher/nephew etc. They would continue to control the property. would they not ? Then how are a few thousand people going to become crorepatis ? Suppose they become crorepatis and flood market with money would the prices go up or down ?

    I am confused by your post. Please write simple reasoning of how this is going to happen.


    There is a lot of description of a person..too much to miss.


    Anyhow, if the said persons goes to 'Vaikuntha', he still has successors daugher/nephew etc. They would continue to control the property. would they not ? Then how are a few thousand people going to become crorepatis ? Suppose they become crorepatis and flood market with money would the prices go up or down ?

    I am confused by your post. Please write simple reasoning of how this is going to happen.
    CommentQuote
  • One way in which it works is as follows at least in Mumbai
    -Builder meets the politician for a project
    -They arrive at a cost e.g 50 crores which include clearance, aquisition, setting etc
    -Politician routes his black money to the builder which include the cost of the project plus the profit
    -Builder has already booked his profit and now has capacity to wait and then make more profit.
    -One base agreement is that the builder will repay him some more amount than what the politician has given him.
    e.g if he has given the builder 50 crores. He will get 70-80 crores after 5 yrs or during elections etc Anything above that is an extra profit for the builder
    This is the reason that prices are not falling inspite of low sales
    Figure here are just for example purpose. I have just give out the process of how this goes about. This is possible on a larger scale only when huge amount of money is accumalated with few people. But if the money is distributed then such control over a large scale is not possible.
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  • Interesting article in moneycontrol on DLF

    So you think buying an u/c property will save you money.. read on...

    Moneycontrol.com >> Messageboard >> Stocks >> DLF >> Another one-sided clause that hurts house buyers

    Property developer DLF has proposed to introduce an escalation charge clause in its agreements with buyers in under-construction projects to ensure that the customer, and not the developer, pays for inflation by the time construction in complete.
    In the clause, DLF has assumed 50% as the cost of construction.
    Sriram Khattar senior executive director of the company, says this clause works both ways, which means if prices drop the reduction will be passed on to the buyers.
    An escalation clause is not a bad idea, but in the context of the Indian real estate market which functions with an unusually high level of murkiness, any claims to transparency or fair dealing sound laughable.
    More so coming from DLF, which has been pulled up by the Competition Commission for arbitrarily changing the terms of its original agreement with some customers. Not to mention allegations of the company shortchanging minority shareholders while merging a privately-held promoter firm with the listed flagship.
    Given the inadequate laws to protect house buyers in India, there is every chance that DLF may be able to get away with this clause. More people want to buy real estate than they would want to buy shares or mutual fund units. But thanks to the cozy nexus that property builders enjoy with the political powers, there is no regulator yet for the housing sector, while there is one for the securities industry.
    DLF may be a bit off the mark in terms of timing. Had it introduced this clause when the property market was booming, it could have still pulled it off. But the market is comatose, as exorbitant realty prices, more than high interest rates, are keeping buyers away. Sales remain depressed as developers are unwilling to cut prices. Strapped for cash, DLF must be hoping to push out inventory by cutting prices for now, and then hoping to claw back some of it through the escalation clause when the property market and the economy as a whole will be in a much better shape a few years later.
    Much will depend on if other developers too are open to introducing a similar clause. If they don’t play ball, DLF will be at a severe disadvantage.

    What do you think? Will DLF be able to push through this clause?
    CommentQuote
  • Originally Posted by msp1976
    There is a lot of description of a person..too much to miss.


    Anyhow, if the said persons goes to 'Vaikuntha', he still has successors daugher/nephew etc. They would continue to control the property. would they not ? Then how are a few thousand people going to become crorepatis ? Suppose they become crorepatis and flood market with money would the prices go up or down ?

    I am confused by your post. Please write simple reasoning of how this is going to happen.

    Many people in his gang will quit the gang if their leader goes to crematorium coz the second in command doesn't command much of respect amongst many in the gang. If this happens, the gang will weaken & in any case the other gang with whom they are working with will not support them either :).
    CommentQuote
  • Originally Posted by vhaldavnekar
    One way in which it works is as follows at least in Mumbai
    -Builder meets the politician for a project
    -They arrive at a cost e.g 50 crores which include clearance, aquisition, setting etc

    OK.

    -Politician routes his black money to the builder which include the cost of the project plus the profit
    -Builder has already booked his profit and now has capacity to wait and then make more profit.

    It doesn't include cost of project + profit. It includes only part of construction/land cost. Entire project can't be built only on black money man.

    The builder gets his pie only when he returns politicos money alongwith interest.

    -One base agreement is that the builder will repay him some more amount than what the politician has given him.

    OK. Or why would anyone put money if money is not going to get increased ?

    e.g if he has given the builder 50 crores. He will get 70-80 crores after 5 yrs or during elections etc Anything above that is an extra profit for the builder

    But for this to take place, SALES would need to happen, right ?? And when does SALE takes place ? When people buy the flat.

    And yes, even politicians have time frame for their exit. They can't wait endlessly with their money getting locked.
    As you gave eg. of Mumbai, the Mumbai prices have already started to come down.:) This is happening even in Pune, though the reduction isn't that much as that of Mumbai.

    This is the reason that prices are not falling inspite of low sales
    Figure here are just for example purpose. I have just give out the process of how this goes about. This is possible on a larger scale only when huge amount of money is accumalated with few people. But if the money is distributed then such control over a large scale is not possible.

    Gandhi-Mainos, Priyanka's hubby, junk Robert Vadra has few thousand crores invested in DLF (Robert takes care of Maino's ill-gotten money alongwith Ahmed Patel), yet this company is on verge of getting bankrupt.

    Excessive greed is bad, irrespective of money, irrespective of sector.
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  • Originally Posted by Sharpj
    In the clause, DLF has assumed 50% as the cost of construction. Sriram Khattar senior executive director of the company, says this clause works both ways, which means if prices drop the reduction will be passed on to the buyers.

    :D

    But the market is comatose, as exorbitant realty prices, more than high interest rates, are keeping buyers away. Sales remain depressed as developers are unwilling to cut prices.

    +1.

    This will however keep several investors away coz their main intention in profit, & I don't think investors will be pleased with the idea of variable profits.
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  • Yes REAL ACRES I agree with you that even the politicos need to do an exit. And even I am waiting on it. Builders in mumbai have indirectly started to reduce thou not directly. I will quote one real e.g.
    6 months before one very big luxurious builder 'gaddha' was getting an enquiry to the tune of 25-30 enquires per day. Today they call up prospective buyer 10-12 nos per day.
    As of black money is concerned you might be aware that I can turn Rs 100 into Rs 80 as white. Details of which cannot be discussed on a public forum. It is another complex dimension just as RE prices.
    There are many projects in mumbai which are 100% financed by politicos. Again would not name them but there are.
    Again if we refer Real History related to benami properties and their future the moment the main person goes away the second in command is not able to gain all of it as is.
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