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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  • Central banks buying argument has turned 180 to central banks selling....more fundamental pressure on Gold :-(

    Yesterday GS tragets created major pressure on Gold and it crashed...

    Detered by no gains in gold from 1-1.5 years...hope Indians will stop buying this non-productive asset and that it turn will solve some of the CAD problem

    If Cyprus can sell gold to help bailout, why not others? - The Economic Times
    CommentQuote
  • Originally Posted by Baruch
    Central banks buying argument has turned 180 to central banks selling....more fundamental pressure on Gold :-(

    Yesterday GS tragets created major pressure on Gold and it crashed...

    Detered by no gains in gold from 1-1.5 years...hope Indians will stop buying this non-productive asset and that it turn will solve some of the CAD problem

    If Cyprus can sell gold to help bailout, why not others? - The Economic Times


    Oil is a bigger drag on CAD than Gold.

    Hopefully Indians stop buying gas guzzling SUVs and Sedans.

    Gold imports should be considered in capital account rather than in the current account.

    Why is RBI sitting on so much Gold?
    They can sell their Gold to reduce the CAD.
    CommentQuote
  • Hi all

    This is my first post to IREF. I never thought of buying real estate, because I never believed its worth the price. I also do not accept the theory of 'missing the bus'. I strongly believe that housing in India is a very immature sector. The right way is infrastructure first -> make cities with proper planning -> improve law and order -> build houses of good quality and space. I expect housing sector will move in this direction once this euphoria of missing the bus gets down. As late you start, you will be winner ( if you are buying for living ) . Till then I have the privilege to choose a better place for rent and I can enjoy my life with money to spend on other less-costly happiness.

    Someone may laugh on my day-dreaming. But thats what it should be going otherwise all the new developments will turn in filthy 'old city' kind after 20 years or so and new developments will only look attractive. Chandigarh,mohali,panchkulla was a right initiative in this direction. I hope India will realize soon the way housing sector should go, otherwise all this investment will have no meaning after 25-30 yrs.
    CommentQuote
  • RBI has around $26 billion worth in gold, kind of peanuts.

    Gold will be capital account only when RBI retains the option to sell it when needed, not the case, since people just buy and store it.

    Gas/petrol is a necessity and it is controlled by price, no need to do much since petrol is already expensive, just remove subsidy on diesel and kerosene.

    Maybe the inflation indexed bonds will stop people from buying gold for investment.

    Originally Posted by abc111
    Oil is a bigger drag on CAD than Gold.

    Hopefully Indians stop buying gas guzzling SUVs and Sedans.

    Gold imports should be considered in capital account rather than in the current account.

    Why is RBI sitting on so much Gold?
    They can sell their Gold to reduce the CAD.
    CommentQuote
  • Originally Posted by mysantoshin
    Hi all

    This is my first post to IREF. I never thought of buying real estate, because I never believed its worth the price. I also do not accept the theory of 'missing the bus'. I strongly believe that housing in India is a very immature sector. The right way is infrastructure first -> make cities with proper planning -> improve law and order -> build houses of good quality and space. I expect housing sector will move in this direction once this euphoria of missing the bus gets down. As late you start, you will be winner ( if you are buying for living ) . Till then I have the privilege to choose a better place for rent and I can enjoy my life with money to spend on other less-costly happiness.

    Someone may laugh on my day-dreaming. But thats what it should be going otherwise all the new developments will turn in filthy 'old city' kind after 20 years or so and new developments will only look attractive. Chandigarh,mohali,panchkulla was a right initiative in this direction. I hope India will realize soon the way housing sector should go, otherwise all this investment will have no meaning after 25-30 yrs.


    I believed the same thing for 15 years and stayed away from RE till recently.

    Indian RE is lousy. To be avoided until it becomes necessity and then allocate minimum possible.
    CommentQuote
  • Originally Posted by techynt
    RBI has around $26 billion worth in gold, kind of peanuts.

    Gold will be capital account only when RBI retains the option to sell it when needed, not the case, since people just buy and store it.

    Gas/petrol is a necessity and it is controlled by price, no need to do much since petrol is already expensive, just remove subsidy on diesel and kerosene.

    Maybe the inflation indexed bonds will stop people from buying gold for investment.


    Total velue of gold within india is one trillion.

    We import about 50 billion worth every year.

    RBI can definitely crash the gold market in India releasing just 3 to 4 billion worth every year.

    But the best way to discourage gold is to keep its cost high since consumption demand vastly overshadows investment demand.

    Gold will fall because it is unaffordable nowadays
    CommentQuote
  • Originally Posted by mysantoshin
    Hi all

    This is my first post to IREF. I never thought of buying real estate, because I never believed its worth the price. I also do not accept the theory of 'missing the bus'. I strongly believe that housing in India is a very immature sector. The right way is infrastructure first -> make cities with proper planning -> improve law and order -> build houses of good quality and space. I expect housing sector will move in this direction once this euphoria of missing the bus gets down. As late you start, you will be winner ( if you are buying for living ) . Till then I have the privilege to choose a better place for rent and I can enjoy my life with money to spend on other less-costly happiness.

    Someone may laugh on my day-dreaming. But thats what it should be going otherwise all the new developments will turn in filthy 'old city' kind after 20 years or so and new developments will only look attractive. Chandigarh,mohali,panchkulla was a right initiative in this direction. I hope India will realize soon the way housing sector should go, otherwise all this investment will have no meaning after 25-30 yrs.



    But even then u'll need a place to stay right? if u dont buy one...somebody else will, and then you will keep on paying rent.

    Old vs new properties is a different choice and depends on what u can afford. of course the rent of newer buildings is more then that of old buildings too
    CommentQuote
  • Builders Can’t Sell Flat’s Parking Space Separately

    http://pbytes./builders-cant-sell-flats-parking-space-separately/

    In a significant order, a consumer forum has ruled that a parking space that comes with a flat cannot be sold by the builder to a party that has not purchased the flat. The forum on April 4, directed Royal Palms (India) Pvt Ltd to pay a Juhu-based couple Rs 5 lakh as compensation for not handing over a parking space along with the flat the couple had purchased in a Goregaon complex in 2006. “Handing over possession of the parking space along with the flat is binding on the developer,” said the Mumbai Suburban District Consumer Disputes Redressal Forum.
    In the judgment, the forum pointed out to Section 36 of the Development Control Regulations, which states that for a four-wheeler the minimum size of a parking space should be 2.5m-by-5.5m. The regulations also have a chart that specifies the parking spaces to be allotted to flats according to their size and number. “This proves that a parking space was a part of the flat and not a separate subject from the flat,” the forum said. The forum added that just by handing over possession of the flat a developer cannot say an agreement has been completed.
    CommentQuote
  • Rent is usually 20% of the EMI
    Originally Posted by rembrants
    But even then u'll need a place to stay right? if u dont buy one...somebody else will, and then you will keep on paying rent.

    Old vs new properties is a different choice and depends on what u can afford. of course the rent of newer buildings is more then that of old buildings too
    CommentQuote
  • Total private ownership of gold by people of India is around 18k tons. But that does not belong to the govt or RBI. So unless GOI comes up with a plan like USA/FDR did in 1930 to seize all gold in exchange for cash, Govt cannot sell all that gold.

    BTW with inflation so high it’s a bad idea to seize gold and give cash.

    RBI needs its reserve of gold for to meet its current account if things go bad, just like they did in early 1990.

    Gold is neither expensive nor cheap since its industrial use is very small, it’s kind of an ancient currency used as an emergency fund. Doomsday preppers in USA buy gold and silver for that purpose when the system collapses currency may be useless(IMO its silly to prepare so much instead of enjoying life today).

    Originally Posted by Venkytalks
    Total velue of gold within india is one trillion.

    We import about 50 billion worth every year.

    RBI can definitely crash the gold market in India releasing just 3 to 4 billion worth every year.

    But the best way to discourage gold is to keep its cost high since consumption demand vastly overshadows investment demand.

    Gold will fall because it is unaffordable nowadays
    CommentQuote
  • Originally Posted by rembrants
    But even then u'll need a place to stay right? if u dont buy one...somebody else will, and then you will keep on paying rent.

    Old vs new properties is a different choice and depends on what u can afford. of course the rent of newer buildings is more then that of old buildings too



      Not everyone who lives in a house need to own it.
      I'll pay the rent which will be far less than EMI and the flat which is getting older(depreciating in a way) doesn't belong to me.
      I do not have any liability related to property( Taxes, loans, maintenance ).
      If my income sources are less, I'm free to move to a place with less rent. This is not the case with EMI.
      If my income increases, I can choose to move in a luxurious apartment.
      I can change my place any time with job change.
      I can save/invest my money in assets which are easier to liquidate and maintain.
      I can spend my money on other quality aspects which would not have been possible for a person of my income level to afford with an EMI pending.
      Life is short. I want to live it fully.


      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.
    CommentQuote
  • Originally Posted by mysantoshin

      Not everyone who lives in a house need to own it.
      I'll pay the rent which will be far less than EMI and the flat which is getting older(depreciating in a way) doesn't belong to me.
      I do not have any liability related to property( Taxes, loans, maintenance ).
      If my income sources are less, I'm free to move to a place with less rent. This is not the case with EMI.
      If my income increases, I can choose to move in a luxurious apartment.
      I can change my place any time with job change.
      I can save/invest my money in assets which are easier to liquidate and maintain.
      I can spend my money on other quality aspects which would not have been possible for a person of my income level to afford with an EMI pending.
      Life is short. I want to live it fully.


      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.

      I agree with most of the points provided we have a better solution of return mentioned above.
    CommentQuote
  • Dude you are the man. How do you deal with peer pressure? (wife, in-laws, relative, friends etc think you are not great if you live in rental home)

    Originally Posted by mysantoshin

      Not everyone who lives in a house need to own it.
      I'll pay the rent which will be far less than EMI and the flat which is getting older(depreciating in a way) doesn't belong to me.
      I do not have any liability related to property( Taxes, loans, maintenance ).
      If my income sources are less, I'm free to move to a place with less rent. This is not the case with EMI.
      If my income increases, I can choose to move in a luxurious apartment.
      I can change my place any time with job change.
      I can save/invest my money in assets which are easier to liquidate and maintain.
      I can spend my money on other quality aspects which would not have been possible for a person of my income level to afford with an EMI pending.
      Life is short. I want to live it fully.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.
    CommentQuote
  • He said he never follows the herd. Wife, in-laws may not be in the picture.

    PS: Sorry if I am being judgemental here, but statements like these leave a lot for interpretation

    Originally Posted by techynt
    Dude you are the man. How do you deal with peer pressure? (wife, in-laws, relative, friends etc think you are not great if you live in rental home)
    CommentQuote
  • Excellent, if you are able to follow it.

    Inflation is huge in India, so people prefer to own a house.

    If u have worked out your finances ok, then its great.

    Originally Posted by mysantoshin

      Not everyone who lives in a house need to own it.
      I'll pay the rent which will be far less than EMI and the flat which is getting older(depreciating in a way) doesn't belong to me.
      I do not have any liability related to property( Taxes, loans, maintenance ).
      If my income sources are less, I'm free to move to a place with less rent. This is not the case with EMI.
      If my income increases, I can choose to move in a luxurious apartment.
      I can change my place any time with job change.
      I can save/invest my money in assets which are easier to liquidate and maintain.
      I can spend my money on other quality aspects which would not have been possible for a person of my income level to afford with an EMI pending.
      Life is short. I want to live it fully.

      I've a very wrong habit of not following the herd. Till now I'm satisfied with my strategy in every aspect of life and I'll continue it till I'm proved wrong and I've a good habit to take only calculated risk, so that even if I'm proved wrong, I will not be severely affected.
    CommentQuote