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 ani_meher
    NG2012: A flat costing 55L and on rent 10k is not worth buying (strictly for Pune)! Either increase the rent to 15-20k or reduce the price of the flat to 30-35L max in your equation. When you screw up the equation to show one sided math of low rental yield, of course the returns will be dismal.


    Actually I see a few more flaws in my calculations. WIll correct them once the weekend is over.
    Cheers and have a good weekend folks!!!
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  • Originally Posted by RealHunter1
    MUMBAI: Uncertainty in the real estate sector is keeping the Indian home buyers away, according to a survey.

    "While property still remains the preferred choice of investment of nearly all the Indians, as high as 92 per cent, they are pretty scared of trading in the property market now," real estate market tracking news portal Track2Realty's survey titled `Home Buyer's Satisfaction Index' said.

    The survey further said that buyers are looking at other options including infra bonds for investment.

    "Nearly 70 per cent of Indians who are looking to invest again after occupying a house assert they prefer relatively safer bets like infra bonds than be sorry after the new launches are stuck up due to developers' poor financial condition, regulatory hassles or other legal issues."

    The survey was conducted in ten cities: Delhi, Mumbai, Kolkata, Bangalore, Kochi, Ahmedabad, Chennai, Patna, Pune and Chandigarh. As many as 2,000 house-buyers were surveyed.

    "Almost 60 per cent of home seekers active in the property market believe there is artificial demand in a new launched project and after 12-24 months, prices can be realistic, if not outrightly downward," it said.

    Due to lack of confidence in the new launches, buyers are preferring ready-to-move properties.

    "Nearly 62 per cent prefer to settle for a flat in the secondary market as against the temptation of brand new in the recently launched apartment."


    Indians wary of investing in property: Survey - The Economic Times


    tomorrow in "Property Times" get ready to see opposite views. i have stopped believing both in favor and against such opinions
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  • Originally Posted by puser
    tomorrow in "Property Times" get ready to see opposite views. i have stopped believing both in favor and against such opinions

    Well this isn't news papers' views. These are the output of the survey conducted by some agencies. These are the views of the end users who wants buy/invest.
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  • Originally Posted by RealHunter1
    Well this isn't news papers' views. These are the output of the survey conducted by some agencies. These are the views of the end users who wants buy/invest.


    survey cant be rigged? i am not saying that this particular survey is rigged. just i stopped believing in these news anymore.
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  • Real estate ideal for investors looking for high returns and no risk

    http://economictimes.indiatimes.com/markets/real-estate/realty-trends/real-estate-ideal-for-investors-looking-for-high-returns-and-no-risk/articleshow/13291954.cms

    So what do realacres and bears have to say to this?? Article posted by builders on economictimes?
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  • Originally Posted by real_pro
    Real estate ideal for investors looking for high returns and no risk

    Real estate ideal for investors looking for high returns and no risk - The Economic Times

    So what do realacres and bears have to say to this?? Article posted by builders on economictimes?


    Read the comments under the article, that should be self explanatory.:bab (34):
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  • I agree with this Article.. this is golden opportunity to invest as there are lot of options available....

    The 3 bhk in wakad for under construction is only for 80 lakh. So after three years the same can be sold for 1.2 Cr (may be i'm very conservative.. you can consider 1.5 Cr). I'm sure people working in hinjewadi will get double salary by that time and can easily afford this. This is now or never situation for investors so rush as there are only few flats left

    I think this article has not provided why investment in Pune RE is going to be great decision in current situation.. never the less.. let me mention some of them.. Pune has unmatched infrastructure .. public transport is world class.. big roads... no traffic jams... world class hospitals which are easily accessible (due to no traffic jams).. easily accessible world class premium education institutes.. good connectivity between various areas of city.. less population.. less pollution.. less crime rate.. less road accidents... IT hub growing day by day producing millionaire IT population every year.

    I'm really sorry couldn't find more reasons requesting experts to add more.;)

    Originally Posted by real_pro
    Real estate ideal for investors looking for high returns and no risk

    Real estate ideal for investors looking for high returns and no risk - The Economic Times

    So what do realacres and bears have to say to this?? Article posted by builders on economictimes?
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  • The only think I can add is :bab (59): and:bab (4):......though I am no expert in RE field.

    Originally Posted by BearORBull
    I agree with this Article.. this is golden opportunity to invest as there are lot of options available....

    The 3 bhk in wakad for under construction is only for 80 lakh. So after three years the same can be sold for 1.2 Cr (may be i'm very conservative.. you can consider 1.5 Cr). I'm sure people working in hinjewadi will get double salary by that time and can easily afford this. This is now or never situation for investors so rush as there are only few flats left

    I think this article has not provided why investment in Pune RE is going to be great decision in current situation.. never the less.. let me mention some of them.. Pune has unmatched infrastructure .. public transport is world class.. big roads... no traffic jams... world class hospitals which are easily accessible (due to no traffic jams).. easily accessible world class premium education institutes.. good connectivity between various areas of city.. less population.. less pollution.. less crime rate.. less road accidents... IT hub growing day by day producing millionaire IT population every year.

    I'm really sorry couldn't find more reasons requesting experts to add more.;)
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  • Originally Posted by BearORBull
    I agree with this Article.. this is golden opportunity to invest as there are lot of options available....

    The 3 bhk in wakad for under construction is only for 80 lakh. So after three years the same can be sold for 1.2 Cr (may be i'm very conservative.. you can consider 1.5 Cr). I'm sure people working in hinjewadi will get double salary by that time and can easily afford this. This is now or never situation for investors so rush as there are only few flats left

    I think this article has not provided why investment in Pune RE is going to be great decision in current situation.. never the less.. let me mention some of them.. Pune has unmatched infrastructure .. public transport is world class.. big roads... no traffic jams... world class hospitals which are easily accessible (due to no traffic jams).. easily accessible world class premium education institutes.. good connectivity between various areas of city.. less population.. less pollution.. less crime rate.. less road accidents... IT hub growing day by day producing millionaire IT population every year.

    I'm really sorry couldn't find more reasons requesting experts to add more.;)


    Good sarcasm...

    People - specially IT cannot get double salaries - infact most IT companies are looking to decrease/stall salary rises. This is because India as a IT service provider - is no longer the destination of "cost arbitrage" if you know what I mean..We are losing out to Phillipines, Australia, and other local US startups which are doing better work...so the inflection point has already been reached - its a question of when the "growth" of 5-10% in all IT companies goes into negetive...
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  • Long time!

    Originally Posted by pcpune
    Good sarcasm...

    People - specially IT cannot get double salaries - infact most IT companies are looking to decrease/stall salary rises. This is because India as a IT service provider - is no longer the destination of "cost arbitrage" if you know what I mean..We are losing out to Phillipines, Australia, and other local US startups which are doing better work...so the inflection point has already been reached - its a question of when the "growth" of 5-10% in all IT companies goes into negetive...


    Hello Pcpune! Long time no see.

    So finally, on the topic of IT we are in the same boat? :)

    cheers
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  • Yeh, got busy ! Things are shaping up not too well it seems for our economy....All thanks to Madamji & Singhji.
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  • Originally Posted by BearORBull
    I agree with this Article.. this is golden opportunity to invest as there are lot of options available....

    The 3 bhk in wakad for under construction is only for 80 lakh. So after three years the same can be sold for 1.2 Cr (may be i'm very conservative.. you can consider 1.5 Cr). I'm sure people working in hinjewadi will get double salary by that time and can easily afford this. This is now or never situation for investors so rush as there are only few flats left

    I think this article has not provided why investment in Pune RE is going to be great decision in current situation.. never the less.. let me mention some of them.. Pune has unmatched infrastructure .. public transport is world class.. big roads... no traffic jams... world class hospitals which are easily accessible (due to no traffic jams).. easily accessible world class premium education institutes.. good connectivity between various areas of city.. less population.. less pollution.. less crime rate.. less road accidents... IT hub growing day by day producing millionaire IT population every year.

    I'm really sorry couldn't find more reasons requesting experts to add more.

    LoL. That was good one man.

    What I don't understand is why are these pro-builder guys giving out their trade secret at first place ?? It is like informing which horse will win the race in advance :D. Doesn't one smell a fish in this !!
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  • Black money white paper focus on real estate, gold

    New Delhi: Under fire from all quarters for its inability to tackle the problem of black money, the government plans to focus on the real estate and gold and jewellery sectors to stanch the movement of unaccounted funds.


    The proposed white paper on black money, to be tabled in Parliament’s current session, is likely to propose a debate on “offshore voluntary compliance” for tax evaders with large sums stashed abroad, officials involved in the exercise told The Indian Express.

    “The paper will focus on bullion, gold jewellery and the real estate sector. It suggests that there should be more transparency in land dealings, and registration of land should be regularised,” an official said.

    Black money white paper focus on real estate, gold
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  • Eurozone debt crisis: how it affects India & you

    New Delhi: As the world braces for a probable Greek exit from the Eurozone as part of the latest development in the Eurozone sovereign debt crisis, it is prudent to take stock of the situation and of the effect it might have on India. It is only wise to be prepared for the worst after the unsavoury experience of 2008 and 2009 during which many professionals were laid off in different parts of the country though the economy was not significantly affected.

    The resilience of the Indian economy is very often cited by many in advocating the 'India is insulated from the Eurozone crisis' theory. In my view, that is a myopic view. The 2008-09 global meltdown was a fallout of corporate greed, malpractices and lack of government control. Banks and companies collapsed for their own fault. While the band-aid came in the form of government bail-outs or, in simple terms, socialising private losses, one has to bear in mind that we are no longer looking at the prospect of failing companies or banks. We are looking at prospects of collapse of countries altogether.

    A very good article. Complete story here :-

    Eurozone debt crisis: how it affects India & you - India Global News - IBNLive
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  • RE Exhibis in Pune

    This is what will be mentioned in news articles in coming days about the exhibis :-

    The builders got over-whelming response for the XYZ exhibi held on 00/00/00 at ---Location----.

    Mr. Chalu of Chalu Developers said, " We managed to sell over 50 flats in 2 days". This has been a good experience for us and we shall participate in future RE exhibis of XYZ further also."

    Mr. Topi-lal of Demolished Builders & Promoters said, " The Govt should take steps to reduce taxes on RE sector to make houses more affordable. High taxes, delays in sanctions ultimately lead to higher costs for the developers. Granting industry sector to RE will also help in getting low cost loans for builders which can reduce prices ".

    A lecture was also organized where the Chief analyst of leading research agency, Tapri -Chap Associates Inc said, " Pune being hub of IT & auto industry is poised for RE growth. The proximity to Mumbai is an added advantage for people to invest in Pune. Rising incomes, increase in demand for housing will surely lead to appreciation in prices. It is the ripe time to invest in Pune RE to get good returns."

    Quick Bytes -

    * Pune is poised for RE growth due to IT & auto sector,
    * Investing now will yield good results as there will be appreciation of property rates,
    * Lower prices compared to Mumbai makes Pune RE more lucrative.


    With inputs from our reporter-

    Mr. Chamcha

    :D
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