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 AJ2008oo
    I recently got a call from an agent selling a ready to occupy property below the so-called builder rate. The discount is 5% without considering so-called floor rise. If the floor rise is considered in the builder rate, the discount is close to 10%. This is in the first discussion. (Mumbai)


    an apparent bad situation for one builder, one project doesn't indicate SKY IS FALLING in the real estate market.

    how do you explain 3900+ launch rate in Ambegaon and you can see the crowd in photos on RK's blog with photo of buyers signing cheques
    CommentQuote
  • Originally Posted by puser
    an apparent bad situation for one builder, one project doesn't indicate SKY IS FALLING in the real estate market.

    how do you explain 3900+ launch rate in Ambegaon and you can see the crowd in photos on RK's blog with photo of buyers signing cheques


    Completely agree with you that it is one data point and cannot be considered trend!

    As far as explaining the photos or launch rate is concerned ...it is beyond me! Just like I cannot explain why some people do crazy things to get a glimpse of filmstars, erect temples for them, become part of ponzi schemes or commit suicide!
    CommentQuote
  • Originally Posted by puser
    how do you explain 3900+ launch rate in Ambegaon and you can see the crowd in photos on RK's blog with photo of buyers signing cheques


    Not sure about this particular project, but yeah they do pull some "bhade ke tattu" for sure. I've read that RK's blog and he kept mentioning about a customer (I strongly believe, that customer must be from his imaginary world else bhade ka tattu) who desperately wanted to book a 2BHK flat even without looking at the plan or any other details! The reason was that the Rs.3900/- psf scheme was only for first 25 customers out of which 20 were already done! But later they announced that, the guest celebrity's wish is to extend that special rate booking to everybody present there!!! I really thank her from the bottom of my heart for showering her kindness to poor & hungry Pune customers.

    What a generosity they showed for all those loyal customers who trusted them at this level (no floor plans needed, take this cheque, just book any 2bhk for me). I feel there should be more such offers, like offering a discount of some 1000/- odd bucks per square foot rate from already reasonable rate of say 6000/- and give it at the throw away rate of 5000/-on the event of the soft pre-launch offer. In return what all customer will get is just 2-2.5 years of peace of mind and just few more bucks to the bank.s So cool! Home buying was never been so easy. :D
    CommentQuote
  • Originally Posted by iSpoke
    Not sure about this particular project, but yeah they do pull some "bhade ke tattu" for sure. I've read that RK's blog and he kept mentioning about a customer (I strongly believe, that customer must be from his imaginary world else bhade ka tattu) who desperately wanted to book a 2BHK flat even without looking at the plan or any other details! The reason was that the Rs.3900/- psf scheme was only for first 25 customers out of which 20 were already done! But later they announced that, the guest celebrity's wish is to extend that special rate booking to everybody present there!!! I really thank her from the bottom of my heart for showering her kindness to poor & hungry Pune customers.

    What a generosity they showed for all those loyal customers who trusted them at this level (no floor plans needed, take this cheque, just book any 2bhk for me). I feel there should be more such offers, like offering a discount of some 1000/- odd bucks per square foot rate from already reasonable rate of say 6000/- and give it at the throw away rate of 5000/-on the event of the soft pre-launch offer. In return what all customer will get is just 2-2.5 years of peace of mind and just few more bucks to the bank.s So cool! Home buying was never been so easy. :D


    Ultimate.. I love this post. :D :D :D
    CommentQuote
  • Originally Posted by puser
    an apparent bad situation for one builder, one project doesn't indicate SKY IS FALLING in the real estate market.

    how do you explain 3900+ launch rate in Ambegaon and you can see the crowd in photos on RK's blog with photo of buyers signing cheques



    So, when is Mango County township’s launch ceremony?
    After such an overwhelming response it should be soon right??????? :bab (59):
    CommentQuote
  • Trend is your Friend

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    But it is DLF's debt of about $4.32 billion as of December 2011 that has investors most worried.
    Since 2007-08, DLF's interest expense has jumped nearly sixfold and was 17.1 billion rupees for the fiscal year that ended March 2011. Over the same period, net profit tanked 80 percent to 15.4 billion rupees.
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    DLF Q4 net slumps 39 pct on high finance costs | Reuters
    Attachments:
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  • Unfortunately this is True.

    I liked your observation.

    Cheers
    Kiran

    Originally Posted by tarcap
    No number of references / articles / blogs can change one simple fact...

    When I have to sell my 2 BHK - I will not find a buyer who is willing to pay 35 Lacs

    When I want to buy a 2 BHK - I will not find a builder who is willing to sell
    below 50 Lacs

    This is the reality... take it or leave it....
    CommentQuote
  • Originally Posted by iSpoke
    Not sure about this particular project, but yeah they do pull some "bhade ke tattu" for sure. I've read that RK's blog and he kept mentioning about a customer (I strongly believe, that customer must be from his imaginary world else bhade ka tattu) who desperately wanted to book a 2BHK flat even without looking at the plan or any other details! The reason was that the Rs.3900/- psf scheme was only for first 25 customers out of which 20 were already done! But later they announced that, the guest celebrity's wish is to extend that special rate booking to everybody present there!!! I really thank her from the bottom of my heart for showering her kindness to poor & hungry Pune customers.

    What a generosity they showed for all those loyal customers who trusted them at this level (no floor plans needed, take this cheque, just book any 2bhk for me). I feel there should be more such offers, like offering a discount of some 1000/- odd bucks per square foot rate from already reasonable rate of say 6000/- and give it at the throw away rate of 5000/-on the event of the soft pre-launch offer. In return what all customer will get is just 2-2.5 years of peace of mind and just few more bucks to the bank.s So cool! Home buying was never been so easy. :D


    You think builder brought rented men to create crowd at launch site?

    come on man, you can try better explanation.

    and as far as incident mentioned in RK's blog i feel he was being sarcastic (as usual), nonetheless i am not debating about builder's phony prelaunch offer of 3900 which i find exorbitant, and extension of it to all customers in pandal. people predict crash or bubble burst, my question is simple - "why if there are many buyers crowding at the builder's gate to buy at the stated price range".
    CommentQuote
  • Originally Posted by puser
    You think builder brought rented men to create crowd at launch site?

    come on man, you can try better explanation.

    and as far as incident mentioned in RK's blog i feel he was being sarcastic (as usual), nonetheless i am not debating about builder's phony prelaunch offer of 3900 which i find exorbitant, and extension of it to all customers in pandal. people predict crash or bubble burst, my question is simple - "why if there are many buyers crowding at the builder's gate to buy at the stated price range".


    Why do you think builder's can't hire rented buyers? It is one of the easiest things to do especially for these crooked builders. I don't see any other reason why people will be acting so desperate to book.
    CommentQuote
  • I thought pre-launch is to attract genuine buyers/investors. Not sure why someone will rent people. The fact is there are lot of people with handy money than what we think.

    Originally Posted by rohandm
    Why do you think builder's can't hire rented buyers? It is one of the easiest things to do especially for these crooked builders. I don't see any other reason why people will be acting so desperate to book.
    CommentQuote
  • Originally Posted by rohandm
    Why do you think builder's can't hire rented buyers? It is one of the easiest things to do especially for these crooked builders. I don't see any other reason why people will be acting so desperate to book.


    who said they cant hire? saying that crowd on launch event are rented people is the last attack you can make :D:D:D.
    CommentQuote
  • Originally Posted by tushart
    I thought pre-launch is to attract genuine buyers/investors. Not sure why someone will rent people. The fact is there are lot of people with handy money than what we think.


    If the price was 1500 or 2500, I can understand. But for 3900 investors will stay away, becoz selling it would be a pain later on. When people are cribbing for 3000, imagine what can happen at 3900.

    So my gut feeling is that these are certainly hired people. Who wants to miss a free ride and free food !! :)
    CommentQuote
  • Originally Posted by mymarji
    If the price was 1500 or 2500, I can understand. But for 3900 investors will stay away, becoz selling it would be a pain later on. When people are cribbing for 3000, imagine what can happen at 3900.

    So my gut feeling is that these are certainly hired people. Who wants to miss a free ride and free food !! :)

    they may not be hired people,they might be invited by the builder for pre-launch,
    it remind me GK builder from Pimpale saudagar invited all his previous customers for the launch of atlanta near natural's ice cream on the way to hinjewadi.
    CommentQuote
  • +1

    Imagine the stupidity of people who believe this drama!

    Even if it were to be true then just think of the poor donkeys queuing up for booking a non-existent bhk .

    Indian masses (even your so called IT professionals incl.) are basically people who could be trained do to things just like dogs are trained to do things. Either by (im)proper school education, by satsang, by tv commercials, by blogs, by forums, by word of mouth each exploiting the poor psychology of Indians. India has people with extremely poor reasoning capabilities in REAL life. Give them an exam paper they will pass with flying colors thanx to ratta, but in real life?

    The only difference is that dogs will bark and bite if abused.

    But Indian janta will only growl and scratch themselves after being abused for years, arey 2012 mein possession tha abhi saale 2015 bol rahe hai....per karenge kuch nahi.

    There are many restaurants in a city but these idiots will go to one restaurant only even if it means queuing for 40-50 minutes (even 1 hour) because seats are full. Yeh nahi ki koi dusra hotel dekhen.

    Quality and tasty food chahiye iska matlab yeh nahi ki aap apna samay queue mein barbaad kare! Sab chut*ye hotel ke bahar kursi per baithenge jaise koi royal lunch/dinner honewaala hai!

    The same situation is RE. Sab site ke baaher kursi per baithen hai.

    Mere 2bhk ke aayenge, woh zaroor aayenge! Aur phir rate 4 guna ho jayega!

    Sabka haal rakhi jaisa hoga (karan-arjun wali)



    Originally Posted by iSpoke
    Not sure about this particular project, but yeah they do pull some "bhade ke tattu" for sure. I've read that RK's blog and he kept mentioning about a customer (I strongly believe, that customer must be from his imaginary world else bhade ka tattu) who desperately wanted to book a 2BHK flat even without looking at the plan or any other details! The reason was that the Rs.3900/- psf scheme was only for first 25 customers out of which 20 were already done! But later they announced that, the guest celebrity's wish is to extend that special rate booking to everybody present there!!! I really thank her from the bottom of my heart for showering her kindness to poor & hungry Pune customers.

    What a generosity they showed for all those loyal customers who trusted them at this level (no floor plans needed, take this cheque, just book any 2bhk for me). I feel there should be more such offers, like offering a discount of some 1000/- odd bucks per square foot rate from already reasonable rate of say 6000/- and give it at the throw away rate of 5000/-on the event of the soft pre-launch offer. In return what all customer will get is just 2-2.5 years of peace of mind and just few more bucks to the bank.s So cool! Home buying was never been so easy. :D
    CommentQuote
  • Originally Posted by StraightDriv

    There are many restaurants in a city but these idiots will go to one restaurant only even if it means queuing for 40-50 minutes (even 1 hour) because seats are full. Yeh nahi ki koi dusra hotel dekhen.


    Straightdrv,

    Thats nothing. There are idiots who spend enormous amount of time so they can get admission to particular course after 12th grade.

    Ye nahi ki dusara koi course karale.

    But no! These idiots and their silly parents work very hard so their kids can be showered with blessings from builders.

    Time spent in front of restaurant is far better spent than on education. AFterall, you return with satisfaction and not with disappointment.

    I am sure you will agree!
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