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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  • The World Gold Council stated today that sells of gold in India has significantly dropped due to less amount of disposable incomes due to high inflation & higher cost of living. This has led to reducing the gold sales target revision by WGC.

    Besides this, yesterday at 9o Clock news, even national news channels had economy as headline (can understand for biz channels). Times Now & NDTV 24x7 were discussing the scenario with some of the top economists, CII etc. for almost 40 mins. And even today, there is special coverage about economy on CNN-IBN at 8 o clock with Karan Thapar.

    BTW, the fin min, pranab m has already said couple of days earlier that he can't do much about economy & inflation now as this is due to global scenario than domestic. What the hell planning commn is doing ? It should be the first thing to get dumped.

    And due to recent hike in inflation figs, food inflation back in double digits means that rate cuts will be delayed even further.
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  • Originally Posted by realacres
    The World Gold Council stated today that sells of gold in India has significantly dropped due to less amount of disposable incomes due to high inflation & higher cost of living. This has led to reducing the gold sales target revision by WGC.

    Besides this, yesterday at 9o Clock news, even national news channels had economy as headline (can understand for biz channels). Times Now & NDTV 24x7 were discussing the scenario with some of the top economists, CII etc. for almost 40 mins. And even today, there is special coverage about economy on CNN-IBN at 8 o clock with Karan Thapar.

    BTW, the fin min, pranab m has already said couple of days earlier that he can't do much about economy & inflation now as this is due to global scenario than domestic. What the hell planning commn is doing ? It should be the first thing to get dumped.

    And due to recent hike in inflation figs, food inflation back in double digits means that rate cuts will be delayed even further.

    realacres...so now what then...world coming to an end?? sell off your stocks...dont buy RE...oh you cant invest in banks because banks would go bankrupt...dig hole and put all the money in it??...let things take their course...dont stress out people here...
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  • Originally Posted by real_pro
    realacres...so now what then...world coming to an end?? sell off your stocks...dont buy RE...oh you cant invest in banks because banks would go bankrupt...dig hole and put all the money in it??...let things take their course...dont stress out people here...

    World is not coming to an end. Don't exaggerate. And it seems out of sudden lot of unknown members here have joined RE bull bandwagon.

    Anyways, what I said was just the news, it was to make members here aware of what may happen, & be aware of situation, thats all. Just because a big ship carries life-boats doesn't mean they will sink. It is just precautionary measure. Consider our posts (non RE bulls members) as life boats, simple.

    And as far as stress is concerned, simply ignore my posts man. Simple. :)
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  • Originally Posted by realacres
    World is not coming to an end. Don't exaggerate. And it seems out of sudden lot of unknown members here have joined RE bull bandwagon.

    Anyways, what I said was just the news, it was to make members here aware of what may happen, & be aware of situation, thats all. Just because a big ship carries life-boats doesn't mean they will sink. It is just precautionary measure. Consider our posts (non RE bulls members) as life boats, simple.

    And as far as stress is concerned, simply ignore my posts man. Simple. :)

    Hahaha...no no..I never get stressed with your posts...they are hilarious!!! your so called boat is sinking since years and years....you are making members aware since an era about the boat sinking...

    I am neither a bull nor a bear...I like to face reality when it happens...rather than keep brooding over it for years and stop making decisions in life!!
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  • the new jsutification for the buy call

    The next justification for RE buy call is :

    It is not falling in nominal value hence buy

    There is stupidity and there is insidiousness, take your pick !

    central premise to this entire canard is this "value of the cash depreciating over the period but the value of the asset(so called asset) i.e. house appreciating"

    people have real weird definitions of assets these days !

    Not too mention even weirder timelines !

    sau chuhe khake billi tirth pe chali
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  • Originally Posted by spmohan
    The next justification for RE buy call is :

    It is not falling in nominal value hence buy

    There is stupidity and there is insidiousness, take your pick !

    central premise to this entire canard is this "value of the cash depreciating over the period but the value of the asset(so called asset) i.e. house appreciating"

    people have real weird definitions of assets these days !

    Not too mention even weirder timelines !

    sau chuhe khake billi tirth pe chali

    If you have the money and need a house...a buy call is always there...whatever the state of the economy...simple.
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  • Originally Posted by realacres

    And it seems out of sudden lot of unknown members here have joined RE bull bandwagon.

    Agree with you. Suddenly the thread is flooded with lots of new members proving their bull theory.
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  • I would like to meet one person who is happy with how things are

    I would like to meet one person who is happy with how things are shaping up as far as projects are concerned , and weather if they have any say anyting which is going on

    eg , if the builder says that the maintenance is going to go from 4 to 8 rupess will those people fight it and say we are not ready to pay 8 rupess or just go with the flow

    Originally Posted by real_pro
    You are copy pasting links that you agree with and I am copy pasting the comments that I agree with...nothing wrong in that!! I don't ever see you copy pasting links where it says Real estate prices will increase...all those articles you consider are written by builders!!

    Anyway...check out Hiranandani, Kalpataru Panvel's price....it is not Down...it is UP! My friend has invested in Kalpataru Panvel and he has made good profit...

    BKC, Colaba commercial per square feet rate are quoted in tens of thousands...lets not even talk about price being up or down there...there is no math or calculation to even calculate the increase or the decrease!! Only random deals at random prices happen there...
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  • Originally Posted by real_pro
    realacres...so now what then...world coming to an end?? sell off your stocks...dont buy RE...oh you cant invest in banks because banks would go bankrupt...dig hole and put all the money in it??...let things take their course...dont stress out people here...


    ROFL :D :D :D
    I was thinking how to answer the realacre post when I saw this. Now this got me cracked . I will come back later for answering realacre post . But his in a way answers it. So whenever such doomsay posts have been made in past the price has only increased (may be acclerated increase). So wise person can themselves decide best course of action and gullible can keep reading such prediction of number of channel covering economy and hence market will fall. These news channel always have to provide some variety. Let one scam happen now all these news channel will drop economy and run like a hound behind this new incicent.

    What I think why channel are covering economy more since no new scam has happened in recent past. C'mon my politicos and celebrities , you have to generate work for new channels to keep economy afloat. Shah Rukh. You tried your best but that is not enough.

    Apologies for spelling mistake. MOS > Laughing and typing does not go well together.
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  • one thing... those who need house for their need should search diligently..

    essentials:

    construction quality, near time possession... real flat under construction should be visible.... take developer promises with a pinch of salt... verify them.... keep the emi to income ratio in mind... proximity to necessaries in the next 2 to 3 yrs time in view. good localities get their share of malls, shops, eating joints... may take some time..... but they do come up. so real buyers need not worry abt... timing.. any time when one decides is a good time...

    i agree with real pro... those who fear now.. will fear forever... falling prices scare more than fear of prices likely to fall... such a breed are called investors.. and not real home buyers...

    note: mall proximity airport proximity railway station proximity.... are add ons but not necessary... if one gets them within budget.. gr8 ... else focus on essentials as our family is going to stay there... keep there comfort in mind...

    those who buy for investment as many forum members seem to be... they should worry abt timing ... appreciation... malls etc... quick bucks early returns fast appreciation etc are all investors' worry.

    real pro is talking from a real buyers perspective... and realacres is giving more fodder for the investor... how far they digest.. it is for the investors to see.. but

    real buyers should follow essentials....listed above.
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  • i bought my first home 1.5 bhk recently at lake district.. followed the same principles.. so i am saying all this out of my personal experience.. the project is not close to airport... etc.. but it has all the essentials that i had suggested...

    so real buyers should always understand their pocket constraint and search well..

    a home is a home... its priceless... for real home buyers... timing w.r.t availability of funds budget matter to them more.

    but for investors.. home is an asset so it should be valuable.... timing w.r.t prices... rising prices or falling etc matter to them.

    therefore two; real buyers and investors.. will never reconcile their thoughts.. ..
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  • Originally Posted by realacres
    World is not coming to an end. Don't exaggerate. And it seems out of sudden lot of unknown members here have joined RE bull bandwagon.

    +1 lot of activity in the last few days, just sit back and laugh at their comments and arguments.....

    +1 lot of activity in the last few days, just sit back and laugh at their comments and arguments.....
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  • Originally Posted by Dixitawasthi


    real pro is talking from a real buyers perspective... and realacres is giving more fodder for the investor... how far they digest.. it is for the investors to see.. but

    real buyers should follow essentials....listed above.


    This must be a joke. Best of luck to those investor who are following realacres. A true investor quickly learns from his past mistake. Some may take a week, some may month or some may take year (slowest to learn) to come to term with reality. But if you keep harping same therories in spite of all the reality going the opposite direction for many years. Its like someone advising you : don't worry the needle is pointing to north , its all b'coz of crooked builders doing some black magic but very soon it will point south).

    Even if price correct by 10-20% , they are still 40 to 60% higher than 2009 prices.

    A broken clock is far better to rely on predictions since its at least correct twice a day.
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  • Unitech Q4 profit plummets as sales slump

    Net profit fell to 22.6 million rupees ($0.42 million) for the fiscal fourth-quarter ended March 31 from 1 billion rupees a year earlier. Net sales dropped 32 percent to 7.16 billion rupees, the company said late on Tuesday

    India's Unitech Q4 profit plummets as sales slump | Reuters

    --India's 3rd largest RE company profit plummets
    --1st largest RE is already down.
    Guys can you please advise these companies…
    These stupid are losing money, sales are going down and book value is getting eroded. Please…. please your great appreciation ideas, rental income scheme, infinite demand etc………. :bab (59):
    Dude… if they could have purchased flats in Koregaon park in 2009 they could have made 2.2Cr easily , why are they making so much hassle to earn peanuts.........????? May be they have earned a lot & incurred losses
    Hummmm..... missed the Pune RE bus.......
    Hummmm..... missed the Pune RE bus.......
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  • We merely laugh at different times ...

    Originally Posted by compuwalah
    This must be a joke. Best of luck to those investor who are following realacres. A true investor quickly learns from his past mistake. Some may take a week, some may month or some may take year (slowest to learn) to come to term with reality. But if you keep harping same therories in spite of all the reality going the opposite direction for many years. Its like someone advising you : don't worry the needle is pointing to north , its all b'coz of crooked builders doing some black magic but very soon it will point south).

    Even if price correct by 10-20% , they are still 40 to 60% higher than 2009 prices.

    A broken clock is far better to rely on predictions since its at least correct twice a day.


    Compu,

    You have given a golden opportunity to potray BOTH sides of the debate between Real's side of the argument and yours.

    The only point where you both agree is, buying a home should be for own use.

    FRom here your take is prices will keep on increasing and therefore buy no matter what. Real states that prices are already too high to afford and buying with lots of debt is a bad idea.

    I then decided, let me do a quick computation to see which is a better idea, taking your own parameters as the basis. Here goes ...

    Let us assume the following ...

    Assumptions. Home costing 50L. Home Loan rate 10%pa avg. EMI 50k. Initial Capital 5L (10%). Loan of 45L (90%). FD rate 10% pa. Rent 12k avg.

    Now let us flashback to 2009. After the HUGE crash in markets, things seem to be coming back.

    We now see 2 persons. One named Compufast and the other named Realist (any resemblance to Compu and Real purely coincidental :D)

    Compufast decides he has to buy a home asap! He puts down the 5L and starts paying EMI regularly.

    Realist decides he has to wait for prices to come down! He puts the 5L into FD and starts paying saving EMI amount regularly.

    Now, flash-forward to 2012, 48 months in the future. World looks bleaker, but surprise! RE has risen 50%!!!

    Compufast is laughing very hard! Realist is looking downcast. Looks like all the forum fence-sitters are ready to jump into Compufast camp and buy like mad!!!

    Real looks at wiseguy (again all resemblance purely coincidence) as if saying ... " Can you help me a little here?"

    Now, let is let us look a little harder … What do we see here?

    Compufast shows the following score …
    Down payment + EMIs - Rs.29,00,000 (5L+24L)
    Interest to Bank - Rs.16,65,000
    Principal paid down - Rs.7,34,000 (via EMIs)
    Total Equity in home - Rs.12,34,000
    Principal yet to be paid back - Rs.37,66,000

    Realist shows the following score …
    Initial Capital + Savingss - Rs.29,00,000 (5L+24L)
    Interest from Bank - Rs.26,00,000
    Rent paid out in 48 months - Rs.5,76,000 (already included in monthly calculation)
    Total Capital in hand - Rs.55,00,000

    Now let us assume Realist wants to buy that house.
    He pays 55L for a 75L home and takes a loan of ONLY 20L for a brand new home. While Compufast has an outstanding principal of 37.66L for a 4-year old home.

    If we assume that price growth will slow down over the next 4 years, then, in all probability
    Realist can perhaps buy out that home after 3-4 years with practically no loan if he continues saving 50K every month till he buys later!!!

    This is an a.pples to a.pples comparison and assumes the postponement also includes saving EMI amount every month till future purhase.

    What an Idea, Sirji!!!

    It appears that the common point made by both Compu and Real that one needs to take as little loan as possible is based on good thinking.

    Rest is upto each individual!

    cheers
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