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
    It may be true. I am not sure, but I heard that in Gujarat, the property prices are still very affordable.

    This fact can be verified by the NCP/Congress scorpio class in Pune, itself. :D


    If you consider the median or average income of Ahmedabad then the RE prices are quite high. Ahmedabad has few IT companies as compared to Pune.

    You will be surprised how much the opposition parties in maharashtra also benefit from the RE boom. change is govt is only going to change the name people will blame. today it is pawar tomorrow it will be munde :)
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  • Originally Posted by compuwalah
    Data from NHB website

    Ahmedabad
    100 2007
    167 2011
    191 2012

    Pune
    100 2007
    184 2011
    205 2012


    affordable ? haha

    myth busted :) as usual


    FUNNY how easily you are manipulating facts . did you consider base value that is considered 100 in 2007 ?

    where the 191 value of Ahmedabad stands. (36 L current 2BHK avg price)
    Taking the current rates from for all the 2 BHK ads from the two cities gives the below data.


    And where the 205 in Pune stands (56- 60 L avg 2BHK price)


    .... what base the 100 means in Ahmedabad -> 18 - 20 L 2 BHK????

    and Pune's 100 base on current 205 index value implies 28-30 L 2bhk.


    * All above data taken from which will be higher then what Residex mesures ;)

    *** I keeps on forgetting that its a NEW NORMAL world ... where manipulation is order of day.
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  • Originally Posted by herohiralal
    If you consider the median or average income of Ahmedabad then the RE prices are quite high. Ahmedabad has few IT companies as compared to Pune.

    You will be surprised how much the opposition parties in maharashtra also benefit from the RE boom. change is govt is only going to change the name people will blame. today it is pawar tomorrow it will be munde :)


    frugy, Globeson et al. this post answer your question. was gonna say same.
    The reason being the much higher component of black in the dealings for obvious reasons peopel posted.

    So one can decide himself which city rates are more speculative in nature.
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  • Originally Posted by frugality

    *** I keeps on forgetting that its a NEW NORMAL world ... where manipulation is order of day.


    Innovative way to compare property prices! One thing to note is, Pune's property listings are mostly populated with brokers listing same property or imaginary property again and again. So repeated data may be higher in Pune than in A'bad.
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  • Rates of BJP MLAs is comparable to Congress MLAs. Expecting corruption to go down if BJP comes to power is not right.
    Our politicians are our own people...we have not imported them from Zaire. They are just reflection of us.

    Now, by no means I advise one to go against the current and live a 100% honest life. One could still live without paying direct bribes if you have a steady job in an MNC...but try setting up a business and see how difficult it is to live an 100% honest life. There is a reason why so many Indians want to move abroad.
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  • Land Deals Getting Canceled

    Some insider info from Pune RE :-

    This week, I came to know that builders have pulled out from the land deals which they did anywhere 3-6 months ago due to lack of funds & poor sales in current projects. They now are waiting for current inventory to get over as they are finding it difficult to raise money & repay debts. Some have also let go the token amount of anywhere between 15-20L.

    I also came to know that post death of Vilasrao Deshmukh, some guys who did business in RE are now stuck as they aren't finding any new political patronage. Atleast 3-4 people have exited Pune RE post Vilasrao's death. They were holding on thinking things will fall in place, but their hopes were dashed & they are out.

    The land deals involved not only some descent localities but even spread in far outskirts of Pune like Undri, Rahatni, Ravet, Talegaon etc. Some even had land for JV on sus road, which also has been scrapped.
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  • I have some contrary news, right from the developer's desk. Outskirts projects started from 2600-3200, and are now touching about 4k. The funds generated by such projects which were purchased and developed on comparatively less prices are used to buy/JV lands on Saswad - Handewadi - Fursungi area. Even more wealthy persons are willing to join hands with established builders for financing such projects. This is not some chipaad construction of a 3 floor building, but big projects.

    I have no comment on the future of real estate market, but I can very clearly see that land acquisition and JV formation has not taken any back seat at least for time being. Realacre's news may be true, but it's not the definitive state of today's real estate.

    If anything, the land owners have become unbelievably greedy and deceitful that finding a good JV partner or clean seller is almost impossible task. Almost every person with a good amount of land is trying to make the best buck, and yet builders are buying, because they know they can recover the money manyfolds.

    Undri is definitely not a 'far outskirt'. It's about 13-15km from Pune station, and the development is unbelievable. Can't comment about other mentioned areas, as I haven't visited there. One should visit such places with an open mind to judge reality, rather than using old scales to compare what is near and what is far. I have no interest in Undri area, but was intrigued because rising developments there, and am thoroughly amused! A few years ago, corinthian club visit was like an outing, now some people pass it daily on their commute!

    This is my first post on this id. If someone accuses me of being a builder/salesman/whatever just because I don't join the circlejerk of imaginary falling prices, let him be. This is my throwaway id, so I don't care if someone gets hurt by above truth.
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  • Originally Posted by TheTruth
    This is my first post on this id. If someone accuses me of being a builder/salesman/whatever just because I don't join the circlejerk of imaginary falling prices, let him be. This is my throwaway id, so I don't care if someone gets hurt by above truth.


    So, you are saying that whatever you are saying is junk and shouldn't be taken seriously. Good for the Frank self opinion. I will honour it. :D
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  • Originally Posted by ani_meher
    Innovative way to compare property prices! One thing to note is, Pune's property listings are mostly populated with brokers listing same property or imaginary property again and again. So repeated data may be higher in Pune than in A'bad.


    Rightly said.

    Another way these brokers jack up prices is for eg, if an owner is ready to sell his property for X amount, chalo ishe X+5 lacs bolte hai, reasoning, itne kam mein koi kharidega nahi. This is I heard first hand, when a 2-3 brokers, where having their chai-coffee break.

    One more instance, an appt was shown to me by one broker, & was quoted 43 L negotiable. After few days, when inquired with him, i was informed that it was sold off. Now to my surprise, another broker in the same area shows me same appt through another middlemen & now price is 43 L non-negotiable.

    Both are my first hand experience.
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  • Originally Posted by mymarji
    So, you are saying that whatever you are saying is junk and shouldn't be taken seriously. Good for the Frank self opinion. I will honour it. :D


    Your marji :D My post was meant only to those who seek truth for informed decision, not just self satisfaction through imagination and limited information.

    Wonderful how you arrived at conclusion: "you are saying that whatever you are saying is junk and shouldn't be taken seriously" from my statement "I don't care if someone gets hurt by above truth". Guess it's that famous RE Bears mentality.
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  • Layoffs coming:

    Data storage company NetApp announced layoffs in May. They have big development center in Bangalore.

    Bmc laid off 15% in April, have big ODC in Pune.

    Symantec layoffs have begun and rumoured to have planed to cut off around 1700, have big odc in Pune.

    All the above companies are technology giants in software products and pay masters. New hiring is almost frozen everywhere.

    Let's see where this RE bubble heads now.

    Sent from my KFTT using Tapatalk 2
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  • Originally Posted by TheTruth
    This is my first post on this id. If someone accuses me of being a builder/salesman/whatever just because I don't join the circlejerk of imaginary falling prices, let him be. This is my throwaway id, so I don't care if someone gets hurt by above truth.


    Nothing new said and nobody hurt .
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  • Originally Posted by realpune
    Layoffs coming:

    Data storage company NetApp announced layoffs in May. They have big development center in Bangalore.

    Bmc laid off 15% in April, have big ODC in Pune.

    Symantec layoffs have begun and rumoured to have planed to cut off around 1700, have big odc in Pune.

    All the above companies are technology giants in software products and pay masters. New hiring is almost frozen everywhere.

    Let's see where this RE bubble heads now.

    Sent from my KFTT using Tapatalk 2


    Companies are going to keep on rearranging business and people to remain competitive in todays world and you have to live with it .People who keep updating themselves to align to new tech and business models will surely find decent work . Unfortunately lot of people are neglecting core skills and focussing on RE alone .
    Stop worrying about layoffs and job cuts , that is not in your hand most of the times , instead , focussing on ones skills is the biggest investment that one can make .
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  • Originally Posted by suryawork
    Nothing new said and nobody hurt .


    Same can be said for the whole thread!

    Originally Posted by suryawork
    Unfortunately lot of people are neglecting core skills and focussing on RE alone .


    Great reply. Layoffs and restructuring is a part of process.
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  • Originally Posted by suryawork
    Companies are going to keep on rearranging business and people to remain competitive in todays world and you have to live with it .People who keep updating themselves to align to new tech and business models will surely find decent work . Unfortunately lot of people are neglecting core skills and focussing on RE alone .
    Stop worrying about layoffs and job cuts , that is not in your hand most of the times , instead , focussing on ones skills is the biggest investment that one can make .


    Thanks for preaching me, but I have weathered severe layoffs earlier and know how to sharpen the skills. People are not laid off just due to lack of skills. I have seen even the most skilled ones going out and not finding the right opportunity for months.

    Focussing on RE alone ? Dude, this is iref and we are here to discuss about RE!

    Layoffs is going to be a big dent to realtors. RE is already unaffordable to many and people are becoming cautious due to uncertainty in jobs.

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