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 StraightDriv
    Buddy,

    Please don't drop clues on the forum.

    Now the builder chaps will hold exhibitions in direct in US.

    They will show full Glory of India in more grander way than Slum-dog did.

    All the glistening nalas and perfumed gutters flowing right across your complex with 2 CR-2 bhk. Imagine PPT showing the tankers carrying water to your doorstep everyday.

    The power-cuts taken over by gen-sets which you need to pay from your pocket if there is anything left after paying all sorts of EMIs.

    Boss, if they hold exhibs direct in US or EU displaying PSF rates in dollars toh Bachi kuchi izzat ka bhi bhaaji paala ho jaayega!


    Houses in the US cost less than houses in India.
    Here is a house for 2 cr, in Fremont, CA, one of the suburb of San francisco that has bad houses that are very expensive due to IT guys:
    38983 Swordfish Cmn, Fremont, CA 94536 MLS# 81213698 - Zillow

    Of course, if you are living in smaller city like Sacramento (capital of California with fairly large number of businesses including IT), here is what you can get for 1.5 crores:
    5666 Da Vinci Way, Sacramento, CA 95835 MLS# 12029520 - Zillow

    Or in the area where I lived when I was in IT:
    http://www.zillow.com/homedetails/9755-Gable-Dr-Eden-Prairie-MN-55347/67872808_zpid/

    Check out prices of houses in any city that you know in the US and you will find that houses in the US are cheaper than houses in India. Not with PPP but in absolute numbers too. ANd Fridge, Washing machine, dryer, kitchen trolleys and cabinets, bathroom fixtures, window covers, lights, fans, central AC, water boiler, kitchen stove, exhaust fans, hobs are ALL included unlike Indian house where you don't even get a curtain rods from the builder!

    I am sure this must have been discussed in this forum a numerous times.

    I know there are reasons why RE is so expensive in India but I don't think NRIs can afford comparable RE in India....without going all the way.

    And so Pune property exhibitions in the US may backfire.
    CommentQuote
  • Originally Posted by NG2012
    Houses in the US cost less than houses in India.
    Here is a house for 2 cr, in Fremont, CA, one of the suburb of San francisco that has bad houses that are very expensive due to IT guys:
    38983 Swordfish Cmn, Fremont, CA 94536 MLS# 81213698 - Zillow

    Of course, if you are living in smaller city like Sacramento (capital of California with fairly large number of businesses including IT), here is what you can get for 1.5 crores:
    5666 Da Vinci Way, Sacramento, CA 95835 MLS# 12029520 - Zillow

    Or in the area where I lived when I was in IT:
    9755 Gable Dr, Eden Prairie, MN 55347 - Zillow

    Check out prices of houses in any city that you know in the US and you will find that houses in the US are cheaper than houses in India. Not with PPP but in absolute numbers too. ANd Fridge, Washing machine, dryer, kitchen trolleys and cabinets, bathroom fixtures, window covers, lights, fans, central AC, water boiler, kitchen stove, exhaust fans, hobs are ALL included unlike Indian house where you don't even get a curtain rods from the builder!

    I am sure this must have been discussed in this forum a numerous times.

    I know there are reasons why RE is so expensive in India but I don't think NRIs can afford comparable RE in India....without going all the way.

    And so Pune property exhibitions in the US may backfire.


    1 Cr is alomst $200,000. Not very high end but very decent houses are available in NJ suburbs at this price. Indian property prices in cities are already at average American levels.

    I have heard of US based people buying apartments in Wakad at high rates and being disappointed when actually seeing the constructed matchbox flats.
    CommentQuote
  • Originally Posted by msp1976
    1 Cr is alomst $200,000. Not very high end but very decent houses are available in NJ suburbs at this price. Indian property prices in cities are already at average American levels.

    I have heard of US based people buying apartments in Wakad at high rates and being disappointed when actually seeing the constructed matchbox flats.


    Have you seen floor plan of future apartments in Blue Ridge? Any person with decent IQ won't buy such apartment... one flat's bedroom inside vastu area of another flat. Paranjape has constructed chawl. It seems old life style is coming back again. ;)
    CommentQuote
  • Originally Posted by BuyerVSeller
    Have you seen floor plan of future apartments in Blue Ridge? Any person with decent IQ won't buy such apartment... one flat's bedroom inside vastu area of another flat. Paranjape has constructed chawl. It seems old life style is coming back again. ;)


    Well !! Jesus said Love thy neighbour !! Paranjape arranged it for you !
    CommentQuote
  • Originally Posted by NG2012
    Houses in the US cost less than houses in India.
    .


    Ok. We have very simple solution to the problem then . Whoever is dissatisfied with the RE prices in India , all those take US citizenship and buy house there :)
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  • Originally Posted by compuwalah
    Ok. We have very simple solution to the problem then . Whoever is dissatisfied with the RE prices in India , all those take US citizenship and buy house there :)


    It seems you haven't analysed the problem correctly.. let me give better solution.. let's send our RE builders and speculators to USA... they will create hype in real estate there and our NRIs will find Indian RE more attractive ;)

    ... ofcourse we will invite US builders in india to deliver world-class projects professionally
    CommentQuote
  • Instead of making life of desis simple you are bent on making life of USA people tough . Ok. Maybe do that aftre our people have bought houses in USA. :)
    CommentQuote
  • Originally Posted by compuwalah
    Instead of making life of desis simple you are bent on making life of USA people tough . Ok. Maybe do that aftre our people have bought houses in USA. :)


    why to send millions of people to USA for buying house when we can send few to solve this issue.. isn't it rational?

    I only bother about Indians not USA people. ;)
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  • they already have started direct marketing

    LiveNRI

    exhibitions happening in NJ , CA , Texas

    infact hiranandani have a office in Dallas texas ?? go figure ... prices " non-negotiable" 8500 some hira project in thane

    Originally Posted by StraightDriv
    Buddy,

    Please don't drop clues on the forum.

    Now the builder chaps will hold exhibitions in direct in US.

    They will show full Glory of India in more grander way than Slum-dog did.

    All the glistening nalas and perfumed gutters flowing right across your complex with 2 CR-2 bhk. Imagine PPT showing the tankers carrying water to your doorstep everyday.

    The power-cuts taken over by gen-sets which you need to pay from your pocket if there is anything left after paying all sorts of EMIs.

    Boss, if they hold exhibs direct in US or EU displaying PSF rates in dollars toh Bachi kuchi izzat ka bhi bhaaji paala ho jaayega!
    CommentQuote
  • If those NRIs didn't do their homework, they will stuck with some property which will be useless by the time they visit India.

    After all it is their money, they take the risk.

    Originally Posted by dougnet
    LiveNRI

    exhibitions happening in NJ , CA , Texas

    infact hiranandani have a office in Dallas texas ?? go figure ... prices " non-negotiable" 8500 some hira project in thane
    CommentQuote
  • Originally Posted by compuwalah
    Ok. We have very simple solution to the problem then . Whoever is dissatisfied with the RE prices in India , all those take US citizenship and buy house there :)


    Getting US citizens is difficult mroeover its for the US govt decide who to give citizenship to. Easier option woul dbe to just eliminate the people who are dissatisfied.
    CommentQuote
  • Originally Posted by NG2012
    Getting US citizens is difficult mroeover its for the US govt decide who to give citizenship to. Easier option woul dbe to just eliminate the people who are dissatisfied.


    Shows the desperation of RE investor to people that don't buy the over inflated priced flats that you may have invested in:bab (34):
    CommentQuote
  • Realty sector hit as IT industry demand goes down

    The trend is likely to continue for the next few quarters, with absorption of office space expected to drop by 10-15 % for 2012 due to lower demand from the information technology sector.

    Demand from IT/ITES sector has dropped from the peak of 68% in 2005 to 35% at present due to increasing cost pressures faced by these firms. Growth expectations of India's IT sector has been lukewarm so far, with software services exporters complaining of clients' delay in deciding on the technology spend. Compared to around 16% growth in year to March 2012, trade body Nasscom has forecast an 11-14 % growth rate for the year to March 2013. "Things are not as rosy as they were in 2010

    Realty sector hit as IT industry demand goes down - The Times of India
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  • Realty share in FDI slumps

    Owing to global financial crisis, the foreign direct investment (FDI) in the real estate sector between April 2009 and December 2011 (Q1 FY10 and Q3 FY12) declined by a drastic 92 percent, a recent survey says

    The year 2008 had no new issues in the form of IPO/FPO while there was just one issue in 2009. In 2010, post the global crisis, the economy saw some support in terms of stronger UPA government at the centre which helped as many as five promoters to raise Rs 43.12 bn from the public through IPO/FPO route, it said.

    However, 2011 witnessed a phenomenon of high property prices, high interest rate and low sales, the report said

    Realty share in FDI slumps to 1.94% between Apr'09 and Dec'11
    CommentQuote
  • Originally Posted by khbarilal
    Owing to global financial crisis, the foreign direct investment (FDI) in the real estate sector between April 2009 and December 2011 (Q1 FY10 and Q3 FY12) declined by a drastic 92 percent, a recent survey says

    The year 2008 had no new issues in the form of IPO/FPO while there was just one issue in 2009. In 2010, post the global crisis, the economy saw some support in terms of stronger UPA government at the centre which helped as many as five promoters to raise Rs 43.12 bn from the public through IPO/FPO route, it said.

    However, 2011 witnessed a phenomenon of high property prices, high interest rate and low sales, the report said

    Realty share in FDI slumps to 1.94% between Apr'09 and Dec'11


    does it impact cost sheet of 1,2 or 3 BHK in pune projects? i think not....
    CommentQuote