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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  • Down-payment schemes are back in Pune

    ADF or Advance Disbursal Facility have been introduced in the city yet again.
    The latest one to opt for this route is Gera builders, who are offering discounts on ADF. However, one should see the link put up by pradip_pune above where a buyer has been screwed in ADF. And more so, there is no guarantee that this money will be going towards completion of your own flat. It can go to servicing of debt, other project or somewhere not related to RE at all.

    However, this clearly indicates that discounts are now back & these are only tale-tale signs for the same. Gera was selling his projects through agents earlier & now ADF.

    And Amit builders 7.75% loan scheme has also fallen flat, just like DSK Vishwa.
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  • Corporate defaults hit a 10-year high

    Corporate credit defaults surged to the highest in a decade last fiscal, at 188 cases, with textiles, steel and construction & engineering sectors accounting for a quarter, rating agency Crisil said on Tuesday.

    Corporate defaults hit a 10-year high - Money - DNA

    -------------------------------------

    Crisil Ratings, which rates almost 9,000 companies comprising 40 percent of the corporate exposure of banks, today warned about the intensifying credit quality pressures of Indian companies .

    It said the number of corporate defaults (on interest payments or principal) surged to 188, the highest annual figure so far. That puts the annual default rate at 3.4 percent, which is the highest in this decade, it said.

    It feels like a repeat of 2008-09. In fact, this time, it’s a lot worse.

    In a conference call to media, Pawan Agrawal, director of Crisil Ratings, and Somasekhar Vemuri, head of Crisil Ratings, explains, that after the global credit crisis of 2008, the Indian government allowed massive restructuring of loans to ease the liquidity pressures of companies. This time, there is not much scope for that. In fact, there are increasing liquidity pressures in the system and weakening demand in India as well as globally.

    http://www.firstpost.com/business/corporate-default-rate-hits-10-year-high-situation-still-grim-crisil-264805.html

    ---------------------------

    The builders had expected something for them like IT 80IB benefit etc. from budget, nothing happened & the Govt & RBI was in no mood to allow roll-over of loans or restructuring them. Rather RBI sent a note stating all taxes should not be covered under loan amount which has led to higher DP for flat, as high as 30% or more.
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  • Are we back in 1991 ?

    India the only country in Asian region with current account deficit - The Economic Times

    An eye opener for many of us. Are we back in 1991 again ?
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  • Originally Posted by realacres
    ADF or Advance Disbursal Facility have been introduced in the city yet again.
    The latest one to opt for this route is Gera builders, who are offering discounts on ADF. However, one should see the link put up by pradip_pune above where a buyer has been screwed in ADF. And more so, there is no guarantee that this money will be going towards completion of your own flat. It can go to servicing of debt, other project or somewhere not related to RE at all.

    However, this clearly indicates that discounts are now back & these are only tale-tale signs for the same. Gera was selling his projects through agents earlier & now ADF.

    And Amit builders 7.75% loan scheme has also fallen flat, just like DSK Vishwa.


    Amit's scheme did not gey response? I thought it must have gathered few more customers as my friendand his colleagues were planning to finalise on it. Not heard further from them though.
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  • I have stopped searching for a new underconstruction property and currently looking for resale properties. I am sure many people are opting this option.

    So if the number of buyers reduce for under construction property and resale/ready possesion properties are in demand then whether the rates of latter become competetive? As many investors might be alert that people aare opting for resale/ready possesion properties?

    Like Bulls will be in action again? Just a scenario I am considering.
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  • But how many people can afford to buy a resale/ready property. So it will balance out. Also some of the folks who have booked earlier will try to exit, such as investors. This is a self correcting scenario.

    Originally Posted by JumboHulk
    I have stopped searching for a new underconstruction property and currently looking for resale properties. I am sure many people are opting this option.

    So if the number of buyers reduce for under construction property and resale/ready possesion properties are in demand then whether the rates of latter become competetive? As many investors might be alert that people aare opting for resale/ready possesion properties?

    Like Bulls will be in action again? Just a scenario I am considering.
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  • Originally Posted by mymarji
    But how many people can afford to buy a resale/ready property. So it will balance out. Also some of the folks who have booked earlier will try to exit, such as investors. This is a self correcting scenario.


    Many Mumbai investors are already exiting, rather trying to exit :). Go to any under construction nearing possession and enquire. After the sales person gives all the details, ask if there are any investor flats to be sold(you need to give some cut, but that will be very less than the brokerage charged otherwise:bab (59):).
    Believe me, you can get much better deal and save at least 10-15%. You don't have to pay service tax + you can bargain. Investors are willing to exit at lesser prices, but buyers are hard to find.
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  • Metro changed the life of NCR drastically and now will change GN also.
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  • Originally Posted by Saurabh01
    Metro changed the life of NCR drastically and now will change GN also.



    Saurabh bhai,

    har forum me apna gyan failate failate thak gaye hoge..
    Bolo to neebupani bhijwa du..sath me apni secretary bhi..
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  • Originally Posted by vatsalbajpai
    Saurabh bhai,

    har forum me apna gyan failate failate thak gaye hoge..
    Bolo to neebupani bhijwa du..sath me apni secretary bhi..


    Gayan phailne ke liye hi hota hai :) neebu bhijwa do.. pani main khud le longa :)
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  • Originally Posted by Saurabh01
    Gayan phailne ke liye hi hota hai :) neebu bhijwa do.. pani main khud le longa :)



    Batao...

    4 choices thi..

    1)neebu
    2)secretary
    3)secretary with neebu
    4)secretary with neebu pani.

    liya bhi to neebu....

    Bhai lag raha hain ki RNE me jo aapko 5-6-7 lac ka paper profit hua hain usse aap tensionia gaye hain.
    CommentQuote
  • Originally Posted by vatsalbajpai
    Batao...

    4 choices thi..

    1)neebu
    2)secretary
    3)secretary with neebu
    4)secretary with neebu pani.

    liya bhi to neebu....

    Bhai lag raha hain ki RNE me jo aapko 5-6-7 lac ka paper profit hua hain usse aap tensionia gaye hain.


    Badi hardik iksha thik ki jawab dain.. per fourm dharm rok raha hai...
    Anyway, hamain laga neebu ke sath sab aa gayega...
    aur agar tensionia gaye hote to gyan nahin raita phailate..
    CommentQuote
  • Originally Posted by Saurabh01
    Badi hardik iksha thik ki jawab dain.. per fourm dharm rok raha hai...
    Anyway, hamain laga neebu ke sath sab aa gayega...
    aur agar tensionia gaye hote to gyan nahin raita phailate..



    Arre mere kalyug ke yudhistir.

    Apke Gyan aur Raite me kuch fark hain kya ?????
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  • State looks to municipal chief to protect flat buyers' interests

    Municipal commissioner Subodh Kumar may lead the state government’s housing regulatory commission to protect buyers’ interests and control malpractices in the field.

    The housing regulatory bill was introduced in the state assembly session on Wednesday. It is likely to be tabled for discussion on April 16 and subsequently, passed by the end of this session. Mantralaya sources said that chief minister Prithviraj Chavan has narrowed down on Kumar’s name as the commission’s chairman. Kumar’s three-month extension as BMC chief will end with this month.

    Kumar, however, said, “I have not yet been informed of my appointment as the chairman. The bill has just been introduced in the assembly. It’s not sure whether it will be passed in this session itself or will be carried over to the next session.”

    There will be two more members in the commission who are expected to have extensive experience in housing and legal sector. “Developers and buyers’ issues are very complicated. There should be somebody who understands the nitty-gritty of the construction industry, including floor space index, development control rules and various housing rules, to resolve cases,” said a senior government official.

    He added Kumar has brought transparency in the construction industry by bringing everything under compensatory FSI.

    He doesn’t buckle under pressure from anyone. :)However, all decisions are at the rudimentary stage. It’s possible that his name may be replaced at the last minute,” he clarified.

    A real estate expert believes that if the state government appoints Kumar, it will help the government in winning back people’s trust.

    “Citizens have lost faith in government’s decisions. More often than not, government officials are hand in glove with developers, and the common man ends up getting cheated. Kumar will be a ray of hope to disgruntled buyers,” he said.

    Developers, on the other hand, are not happy.

    “We are not against Kumar. But if he becomes the chairman, he shouldn't block the city’s development by finding something wrong in every proposal. We are already facing problems of our own and don’t want him to worsen the situation,” a developer said.
    :D

    State looks to municipal chief to protect flat buyers' interests - Mumbai - DNA

    It is high time that builders too should feel the pain of their misdeeds.
    And the junk builder above says - " he shouldn't block the city’s development ". Does city consists only of builders ?
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