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 Ninja_Chacha
    Agar shayari ki taang todne ka daur chal raha hai to ye lo....

    "Hawa main udd raha tha Ghallib...
    Hawa main mast udd raha tha Ghallib...
    Hawa main bindass udd raha tha Ghallib...
    Hawa rukk gayi, ***** k bal girr gaya Ghallib..."


    is it a coincidence, you have a DP of Udta Ghar...or you have a affinity to 'udna' as ninja as your name suggests.

    NOTE: its not a personal comment, just a observation. Not to take any other meaning. As this thread is turned into Shero-Shayari, just some humor from my side.

    BTW, i liked ur signature quote.
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  • Originally Posted by braveheart200
    or you have a affinity to 'udna' as ninja as your name suggests

    Yes sir, I like udna... by udna I mean to aspire...

    I have taken my online name from a character of the same name from the movie "Hello brother"... this character would lay still, peaceful and just in his own world...if provoked or bothered, just turns everything topsy-turvy....pretty much like me...

    Originally Posted by braveheart200
    is it a coincidence, you have a DP of Udta Ghar.....


    If you look closely the udta ghar is beeing looked upon with hope by a small family...thats my family sir... The RE madness is drifting my first home away from me...

    But I am not giving up just yet...miles to go before I sleep...

    Originally Posted by braveheart200
    NOTE: its not a personal comment, just a observation. Not to take any other meaning. As this thread is turned into Shero-Shayari, just some humor from my side.


    Not at all sir...

    Originally Posted by braveheart200
    BTW, i liked ur signature quote


    This is a japanese saying... and a thumb rule when you visist an online forum...
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  • Originally Posted by manu
    There were reasons for a sharp recovery after 2009.

    i) Builders were bailed out by banks as debt was rolled over.
    But if this time banks try to do this; then they are on the path to bankruptcy.

    ii) Stimulus by Indian govt.; this is highly unlikely now for two reasons -:
    a) Indian govt. is running a huge fiscal deficit.
    b) Elections are coming ; so money would be used to introduce some pro poor popular schemes rather than to save industry.

    iii) massive QE across the world.
    Now some of this money may trickle to India but the political and policy uncertainty is driving out investors.


    +1. And aprt from this, there were TEASER RATES where loans were kept artificially low to lure buyers to buy hyped property. What is unfortunate here is buyers rather than looking at worth of property looked only at EMI & took the decision. Majority of them are repenting now as they cannot cope with current interest rate regime which won't reduce in foreseeable future.

    And how can one forget offers from builders like no EMIs till possession etc. where builder used buyers money, paid off debt & delayed the project or then come asking buyers more money under the garb of x,y,z clauses. Several reports are already stated here.

    Apart from this, I would like to ask RE bulls, how many projects started in 2009 have been completed today (with CC/OC) ?? I am sure not even 20%. Issue is not when you book, issue is when you get real possession. And those buyers who took ADF in 2009 have already paid the current rate to the builder when you adjust their additional rents, interest component on it.

    To calculate real cost of flat, one should look at the total price paid at the end of the loan & not the booking rate. If Santa buys flat for 40L with 80% loan for 20 yrs, & Banta buys flat of 50L with 20% loan for 10 yrs, Banta has made better deal than Santa in reality :) & this thing is never shown by RE bulls.

    At the end of the day, it is not cost of flat which matters, but real cost of ownership.
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  • Originally Posted by spmohan
    where did my post go ?

    anyways ....

    as stated previously i find it funny that ex-weather wanes have now become predictors !

    especially funny are these 5/10/20/100 year predictions !

    we have 5 year plans we know what happens, we now have folks making predictions for in multiples !

    freaking unbelievable !

    bas karta hun bhai beginning to run out of exclamation marks.

    Man, if one can take loan for 25 years, whats the harm in discussing situation of next 3 years ?? It is OK if you go financially bankrupt after 20-25 yrs but it is bad to discuss the impact of the same after 3 years. Why double standards man ??

    And more than bears, it is the bull who claim, in xyz yrs, you will get atleast 25-28% returns YoY. Watch what builders & investors say in media. :D
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  • Originally Posted by naganyal
    Kyun chidte hain bulls dekh ke is thread ki success,
    Aur Bar-2 karte hain ise band karne ki request un-sucess..
    lagta hai unkoh lagta hai is thread se bhayanak dar..
    kyunki shayad voh bhi sure nahi hain ki unka Investment jayega Kidhar?

    Yes, and if RE bulls are thinking that this is useless thread, why bother, enjoy bull run in RE :D. The very reason RE bulls spend time here shows it matters a lot to them too. Had this thread not been there, several bulls wouldn't have had so many posts to their credit. :D

    Anyways, few days back, I posted about discounts being offered by Pune builders. Why are bulls not commenting on this aspect ??

    Btw, Pune DP is still stuck :(, those who bought on DP roads can see roads only in builders' brochure.
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  • a little off topic but very relevant to understand what value we are getting for the money we are paying.

    eSakal - http://www.esakal.com/esakal/20120906/5049614864774654104.htm
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  • Originally Posted by realacres
    Man, if one can take loan for 25 years, whats the harm in discussing situation of next 3 years ?? It is OK if you go financially bankrupt after 20-25 yrs but it is bad to discuss the impact of the same after 3 years. Why double standards man ??

    And more than bears, it is the bull who claim, in xyz yrs, you will get atleast 25-28% returns YoY. Watch what builders & investors say in media. :D


    financial decisions of this magnitude should be taken with "indifference" i.e. no emotional attachments, but this is easier said than done especially if you are an employee, "SHARKS" use this very aspect to their benefit.

    If it makes any sense, No matter what opinion one has or what advice one gives, it will be only received in the context the person asking/receiving wants it ! and not the context the giver is giving it in !

    There is a particular quote that i really like which i think makes perfect sense on this thread.

    "The greatest enemy of knowledge is not ignorance, It is the illusion of the knowledge" Stephen Hawking

    ps: i'm neither a bull or a bear i just like value !
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  • And it shows at the end ...

    Originally Posted by realacres
    +1. And aprt from this, there were TEASER RATES where loans were kept artificially low to lure buyers to buy hyped property. What is unfortunate here is buyers rather than looking at worth of property looked only at EMI & took the decision. Majority of them are repenting now as they cannot cope with current interest rate regime which won't reduce in foreseeable future.

    And how can one forget offers from builders like no EMIs till possession etc. where builder used buyers money, paid off debt & delayed the project or then come asking buyers more money under the garb of x,y,z clauses. Several reports are already stated here.

    Apart from this, I would like to ask RE bulls, how many projects started in 2009 have been completed today (with CC/OC) ?? I am sure not even 20%. Issue is not when you book, issue is when you get real possession. And those buyers who took ADF in 2009 have already paid the current rate to the builder when you adjust their additional rents, interest component on it.

    To calculate real cost of flat, one should look at the total price paid at the end of the loan & not the booking rate. If Santa buys flat for 40L with 80% loan for 20 yrs, & Banta buys flat of 50L with 20% loan for 10 yrs, Banta has made better deal than Santa in reality :) & this thing is never shown by RE bulls.

    At the end of the day, it is not cost of flat which matters, but real cost of ownership.



    During the days you are earning well and paying off EMIs and prices are buoyant you do not know your Real Cost of Ownership.

    When all is said and done, after 30 years (when you earning days are over and you can't go back and correct your mistales), the RCO emerges and the ones who have bought at bargains will eventually stand out as the ones with Real Wealth in their name. Problem is, it takes 25 years and people ar neither willing to learn from others' 25 years experience nor willing to wait for 25 years to learn! :)

    Is that why your name is "Real" Acres? :D

    cheers
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  • Originally Posted by sanjaychavan
    All i Know is that if u are earning better u can definitely buy a house instead of renting in Pune especially, Cuz the rent seen over here is through the roof.
    One can better under stand the rent seen in Mumbai but in Pune it is Just ruthless.
    I have many friends who while working brought a flat instead of renting it n sold it off after 5 years for a good profit.
    There are good builders in pune who u can trust like Vascon which offers homes with good amenities and have value for money.
    Checkout their FB page for info
    https://www./VasconEngineersLtd?ref=hl


    "Rent in Pune through the roof"


    And naming just 1 builder in Pune tells you are a builder's man.
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  • Originally Posted by sanjaychavan

    I have many friends who while working brought a flat instead of renting it n sold it off after 5 years for a good profit.


    gone are the days...This is new era.
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  • Originally Posted by wiseman
    During the days you are earning well and paying off EMIs and prices are buoyant you do not know your Real Cost of Ownership.

    When all is said and done, after 30 years (when you earning days are over and you can't go back and correct your mistales), the RCO emerges and the ones who have bought at bargains will eventually stand out as the ones with Real Wealth in their name. Problem is, it takes 25 years and people ar neither willing to learn from others' 25 years experience nor willing to wait for 25 years to learn! :)

    Is that why your name is "Real" Acres? :D

    cheers

    LoL :D.
    I have seen people getting messed up financially closely, the start to my career was also from bottom-most level (I used to work part-time when in First year college). Now my fone bill is more than my salary few years back.:D
    As I have seen the value of single rupee in my very nascent days of work, it helped me later. It is therefore, I learnt to focus on making financial goals for 6 months to 1 year, which keep changing depending upon the market scenario.

    Same is case with RE, when I look back, & then think what would have happened if I had taken plunge in peak of RE., the picture which comes in front of me is horrible. Already I see some people closely who travel on bikes even in monsoons despite having a car to save on fuel, thanks to teaser rates then that it has become difficult for them to manage with new interest rates. The fees of school kids too have shot up like rocket in past 3 years.

    Fail to understand how people can produce two but still can't see what lies just 2 years ahead.:bab (3): Over indulgence is bad, be it wine, 'shaukin adda' or borrowed money with heavy leverage to fulfil your desires.
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  • Top PSU banks' NPAs rise over 60% on year, private banks report marginal rise

    MUMBAI: Large public sector banks (PSBs) witnessed a sharp rise in non-performing assets (NPAs) during the quarter ended June 2012, compared to a year ago while private sector banks managed a marginal growth in bad assets during the period under review. Going forward, banking sector analysts expect that restructuring of stressed and bad loans would increase, mainly because of restructuring of some large and mid-size corporate accounts under corporate debt restructuring. An analysis of quarterly results of nine large PSB and seven from the private sector, by domestic brokerage house Motilal Oswal Securities, showed that while aggregate gross NPAs of PSBs rose by a staggering 63.7% on the year to Rs 85,200 crore, the corresponding numbers for the private sectors banks was 6.1% to Rs 16,900 crore.

    Top PSU banks' NPAs rise over 60% on year, private banks report marginal rise - The Times of India
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  • NPAsource.com registers Rs 13K cr properties in first year of operations

    This is one of the biggest proof to show that RE prices are crashing with many builders, buyers heading towards bankruptcy. Read on :-

    AHMEDABAD, AUG 29:
    NPAsource.com, a dedicated portal for the resolution of non-performing assets of banks and financial institutions in India and globally, has registered properties worth over Rs 13,000 crore in its first year of operations.

    Currently, the portal has over 1,000 registered users, comprising banks, corporates, chartered accountancy firms, lawyers, tax consultants and real-estate brokers, amongst others. NPA properties from over 15 banks in India can be accessed on this portal which focuses on resolving and finding appropriate buyers at optimum rates for as many of these NPA properties as possible, Devendra Jain, Chairman and Managing Director, Atishya Technologies Pvt Ltd, a financial consultancy firm which set up the portal in 2011, said here on Wednesday.

    Atishya Technologies has put in place a franchisee network which will soon span 20 major cities in India. The company has also set up operations in Dubai to get foreign banks post their NPA properties on the portal and get foreign corporates and other facilitators to register and look at investing in NPA properties in India.

    Currently, NPAs in India amount to around Rs 1 lakh crore and are expected to go up further due to a slowdown in the economy and high interest rates.

    Business Line : Industry & Economy / Banking : NPAsource.com registers Rs 13K cr properties in first year of operations
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  • This is what happens, when people insanely jump to buy real estate at ANY price; with the hope that prices will always go up.

    I agree that the prices have been going up for the last 8-10 years; but they are artificially inflated prices.

    The only ones profited from this mad run are the builders (i personally know couple of builders who have made crores of money in last 8-10 years) and the rich people who invested in the early stages.

    I don't say that job loss will happen anytime soon, but Job losses will add more fuel to this; it'll be a final blow to this real estate bubble.

    Originally Posted by realacres
    This is one of the biggest proof to show that RE prices are crashing with many builders, buyers heading towards bankruptcy. Read on :-

    AHMEDABAD, AUG 29:
    NPAsource.com, a dedicated portal for the resolution of non-performing assets of banks and financial institutions in India and globally, has registered properties worth over Rs 13,000 crore in its first year of operations.

    Currently, the portal has over 1,000 registered users, comprising banks, corporates, chartered accountancy firms, lawyers, tax consultants and real-estate brokers, amongst others. NPA properties from over 15 banks in India can be accessed on this portal which focuses on resolving and finding appropriate buyers at optimum rates for as many of these NPA properties as possible, Devendra Jain, Chairman and Managing Director, Atishya Technologies Pvt Ltd, a financial consultancy firm which set up the portal in 2011, said here on Wednesday.

    Atishya Technologies has put in place a franchisee network which will soon span 20 major cities in India. The company has also set up operations in Dubai to get foreign banks post their NPA properties on the portal and get foreign corporates and other facilitators to register and look at investing in NPA properties in India.

    Currently, NPAs in India amount to around Rs 1 lakh crore and are expected to go up further due to a slowdown in the economy and high interest rates.

    Business Line : Industry & Economy / Banking : NPAsource.com registers Rs 13K cr properties in first year of operations
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  • Got this mail from Concorde, Bangalore. The Villas are insanely priced, even though there are not much amenities and the area is not so developed; and not many people are buying at this price now. Even after the discount the Villas are not really worth the price quoted by the builder.

    The builders have started feeling the pressure now. I guess, we will see more offers like this in future.


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