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 mymarji
    Why do I sense some desperation in the above comments. Don't feel bad, for those who have waited, their time will certainly come.

    I have stopped worrying about buying, instead looking forward to book tickets for my next international vacation. My kid wants to visit Disneyland/Universal Studios very soon....loan ki khisht ke baarein sochne ke liya phursat kahan hai, jab loan hi nahi hai. :)

    People who bought at these high rates, should enjoy their hard earned homes and loan chukane ka majha. :D

    mymarji,
    forget real estate for some time but you must take your kids to see "Disneyland/Universal Studios"

    just been to the place and its like heaven on the earth for kids and elders too!

    I strongly support your decision.
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  • Originally Posted by guideus
    mymarji,
    forget real estate for some time but you must take your kids to see "Disneyland/Universal Studios"

    just been to the place and its like heaven on the earth for kids and elders too!

    I strongly support your decision.


    This is a digression... but can't resist putting my 2 cents here..
    If your kids are less than 6-7 years old, then do only disneyland. don't do Universal at all.

    Also in Disneyland, get the fast pass system right... time it so that you are able to get the major rides properly. Else you will end up standing for hours in queues! Do go early, and relax in the afternoon. It's bloody hot in the afternoon. Carry plenty of food.. and water! I ended up spending upwards of $200 just for food.

    Also, don't do Disneyland and the Disney adventure at one go. They are just too far apart, especially to hop from one park to another! Both the parks have good rides, but adventure is for older kids based on Pixar movies, and land is for the younger kids (generally) based on older disney movies.

    They have an iphone app, do download that, it's quite useful.

    Finally, Don't miss the parade in the evening and the lake side show later and finally the fireworks!

    ~D
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  • And dont forget to pay the rent to landlord before you leave for vacation
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  • Quote:
    But then came 2004...and the Mummy...and she said "go hell with welfare..I only want the power...to hold on to the chair till my son takes over". And so her only interest was to keep those politicians happy who would bring her vote banks.
    Welfare means health and education or what does welfare mean? Unemployment benefit or child benefit or what exactly?

    Child benefits obviously.:D:D
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  • Again, don't know generic, but In the last 1 month, Blue ridge has sold over 30 flats in the latest towers, all at rates of 5100+ floor rises + all the extra loot (1 cr+ flats). They might have sold more in the other towers.

    Man, no offence to anyone, but please read that I said 'Luxury Housing' & BR is by no means luxury. It is just any other project having school & few offices in the premises, nothing more. Just a swanky, high density project doesn't become luxury project.

    For terming something luxury, it needs INFRA, UPMARKET LOCATION & HIGH UNIFORM SPECS & AMENITIES. So, for me, luxury project in true sense is Gods Blessings, near Westin; or Marvel's at Boat club road, Panchshil Satellite Towers etc.
    Only price is not the issue. Some row houses on DP road (still incomplete) as over 1Cr, it doesn't mean it becomes luxury :D.

    personally I see reduction in new supply as a very healthy & postive development...

    it will reduce any tail risk of crash

    we were building for too many flats

    This logic won't work here for the simple reason that inventory over hang in several areas is over 34-38 months . If the current inventory is about 54%, & investors have 60% of sold units, imagine the real number of flats which will be there when investors also off-load them in the market. In Mumbai, over 80,000 flats are unsold, prices have already started to fall, news is already on this thread, Pune won't be different. I have myself seen desperation in the market from investors, first hand experience. Your logic is correct in case the RE is driven mostly by end users, but in cities like Pune where investors accounted more than buyers, situation is bad for builders & investors.

    Btw, there is also a difference between voluntarily deciding to stop further new projects & cases where projects are getting stalled due to liquidity crunch & poor/no bookings. Except for NC, rest all other projects have stalled by force & not by builders choice.
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  • Why do you resort to criticism on the personal level? This demeans the entire forum, when we are trying to have a constructive debate here. If you are a bull, keep buying real estate or keep advocating that it is a right investment. But why to trash other people and their opinions?

    I am a bear and will always encourage people to postpone their purchase till rent:price ratio comes down to 1:200. I will try to support my arguments in various ways, but personal attacks will never be one of them.

    +1. Thanks a ton for saying this Abeer. It was indeed required.
    Lets debate idea, why get personal. Look at Jitu_Sir, a builder who also is member of CREDAI :D but we see so healthy discussions, debate & sharing of ideas :).

    I am on multiple car/auto forums & there we debate whether XUV is better than Aria/Storme or Dzire Vs Etios Vs Honda Amaze etc. Now this doesn't mean we call those who buy Toyota fools if we don't like Etios or Tata buyers are idiots if they buy Aria. It boils down to your liking & requirement. If everywhere would have liked same car, roads would have been so boring !!

    Bull, bear, to buy or rent, infra, DP, PROPOSED, builder reports, sanctions, bank loans, etc. are so many issues which are discussed on this forum. I don't know why one sees entire picture of real estate as Buying Vs Not Buying only.
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  • And dont forget to pay the rent to landlord before you leave for vacation

    I give 6 months PDC. :)

    guideus & mymarji,

    Thanks a lot for bringing up this Disney Land. You reignited my spirit to take some break, think I made right decision last week by dropping couple of mails. Last time I went on vacation was 2007/08. Though I traveled lot later, all was for work. I seriously planning to get some time for myself now, I have dropped mail to Thomas Cook & SOTC last week. Lets see. Being single, I think I will prefer sincity than disney land ;).

    Btw, how is Disney Land, Hong Kong ?? Anyone knows details about it ?

    And Punerebuyer/PRB rightly raised the issue about infra. My friend was here (Mumbai) last month to get married :D, came from US, married & left. He showed some pics of his neigborhood & man, his place puts KP to shame !!

    Most importantly, issue is not just buy,rent etc. but infra & quality of life is also what matters. Pune, unfortunately has crumbled in past 2-2.5 yrs. Places where I used to travel in 20 mins earlier now require about 30 mins. :( Water situation too is bad. This year, water will be BIG ISSUE for PMC for sure. But Baramati is getting water with high pressure, at the cost of Pune.

    * PS:- Air India was started by one of my most respected person - JRD Tata :)
    It was Indira Gandhi who took it away from Tata & said pvt players need not do such business. Tata also faced issues from Govt as they were not paying bribes to Congress
    Now see where is Air India :D.
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  • Originally Posted by CAPT RAJESH
    Quote:
    But then came 2004...and the Mummy...and she said "go hell with welfare..I only want the power...to hold on to the chair till my son takes over". :D:D


    You, me and entire india put together is responsible for bringing her into power.
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  • Originally Posted by lovepune
    You, me and entire india put together is responsible for bringing her into power.


    How is someone who voted not for her responsible?
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  • Originally Posted by lovepune
    You, me and entire india put together is responsible for bringing her into power.


    Well I wasn’t even in India when you voted her back to power.;)
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  • Originally Posted by CAPT RAJESH
    Well I wasn’t even in India when you voted her back to power.;)


    We should all be present on the voting day...no matter where we are...else, who knows Congress might again come to power in 2014, unless the citizens..come forward, no matter what..and Vote..things will not change.
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  • Originally Posted by Indian28
    We should all be present on the voting day...no matter where we are...else, who knows Congress might again come to power in 2014, unless the citizens..come forward, no matter what..and Vote..things will not change.


    Doesn't matter much, opposition is as bad as them.
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  • Originally Posted by sheeshu
    And dont forget to pay the rent to landlord before you leave for vacation


    Don't worry. My owner will be surprised to see me in his hometown, to give his rent.

    Originally Posted by guideus
    mymarji,
    forget real estate for some time but you must take your kids to see "Disneyland/Universal Studios"

    just been to the place and its like heaven on the earth for kids and elders too!

    I strongly support your decision.


    Thanks. I have been there multiple times, especially to the Los Angeles one. Last time I had taken the 1 year season pass and visited it 4 times in 1 year.

    Originally Posted by rendezvous
    This is a digression... but can't resist putting my 2 cents here..
    If your kids are less than 6-7 years old, then do only disneyland. don't do Universal at all.

    Also in Disneyland, get the fast pass system right... time it so that you are able to get the major rides properly. Else you will end up standing for hours in queues! Do go early, and relax in the afternoon. It's bloody hot in the afternoon. Carry plenty of food.. and water! I ended up spending upwards of $200 just for food.

    Also, don't do Disneyland and the Disney adventure at one go. They are just too far apart, especially to hop from one park to another! Both the parks have good rides, but adventure is for older kids based on Pixar movies, and land is for the younger kids (generally) based on older disney movies.

    They have an iphone app, do download that, it's quite useful.

    Finally, Don't miss the parade in the evening and the lake side show later and finally the fireworks!

    ~D


    Yes, thanks I know about it. Also the laser show was the ultimate then, maybe it is same now. I will taking up lodge in Anaheim,LA, so that it is very easy to commute. Will take the 2 days pass, that way I can enjoy most of it as well as save some money.
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  • What do you think will happen...
    BJP is confused and a in a mess
    Left front has no spine to stand on its own.. will prop up Mayawati as their PM and people will run scurrying..
    Congress will use the direct cash transfer scheme.. as a bribe.. and people will vote them back... Even if they do not get 200+ they will get enough to buy off all these fence sitters off..

    I don't see any hope for the country..

    Originally Posted by Indian28
    We should all be present on the voting day...no matter where we are...else, who knows Congress might again come to power in 2014, unless the citizens..come forward, no matter what..and Vote..things will not change.
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  • Originally Posted by Sharpj
    What do you think will happen...
    BJP is confused and a in a mess
    Left front has no spine to stand on its own.. will prop up Mayawati as their PM and people will run scurrying..
    Congress will use the direct cash transfer scheme.. as a bribe.. and people will vote them back... Even if they do not get 200+ they will get enough to buy off all these fence sitters off..

    I don't see any hope for the country..


    Congress is going to loose heavily in Andhra,Tamil Nadu,U.P,West Bengal,Rajsthan and Haryana+Delhi(Last time they got 17/17 here).
    They will just not be able to compensate.

    They did quite well in Urban areas last time (won all seats in Delhi,Mumbai); I feel they will loose heavy here as well.
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