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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  • To whoever thinks India is improving :

    Please visit any govt. office to do any simple work - e.g. add/remove an entry to ration card - let us know if as an educated person do you understand what is the process , is there anybody to guide you , do you have any idea how many times you have to go there , whether work will be done and in how many days etc. and how many hours of your job will this work consume . This is just an example , try any govt. office or service .
    Pls dont tell that u've to check online first and then get knowledge on the process .

    This is what the poor think abt elections :
    Election is a good time for our maid and similar people as this is the only time when somebody even shows any care for them . So they make sure to take money and benefits from all candidates possible and vote for one they like which is better than educated people who dont vote at all . 25% votes of the total vote is enough for a party to cling to power , thats why nobody cares for middle class who hardly vote .

    This country is not going to develop at least in our life times .
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  • herohiralal
    "'us' is not just the people on forums and on facebook"
    There has to be a beginning.We cannot expect 1.2 billion Indians will start becoming ideal citizens at one shot.I try at my individual level.I work in a place where many come to me,I insist the rules get followed and not anything else.
    "The really smart people will leave the country"
    How long will we be welcome in other countries. Visa bonds of 3000 pounds is an indication that we are not all that welcome in foreign countries.UK welcomes our students and gets considerable income out of them but rules are difficult for students to stay back after getting a degree etc.
    Giving way to a sense of defeatism about the country's future is not going to do good.I was part of organizing a voter ID campaign in my own society and got 90% of members to get voter ID.We will push them to vote on election day also.
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  • Originally Posted by vaibav123
    herohiralal
    "'us' is not just the people on forums and on facebook"
    There has to be a beginning.We cannot expect 1.2 billion Indians will start becoming ideal citizens at one shot.I try at my individual level.I work in a place where many come to me,I insist the rules get followed and not anything else.
    "The really smart people will leave the country"
    How long will we be welcome in other countries. Visa bonds of 3000 pounds is an indication that we are not all that welcome in foreign countries.UK welcomes our students and gets considerable income out of them but rules are difficult for students to stay back after getting a degree etc.
    Giving way to a sense of defeatism about the country's future is not going to do good.I was part of organizing a voter ID campaign in my own society and got 90% of members to get voter ID.We will push them to vote on election day also.


    May your tribe succeed and prosper but I recently spent 3 weeks running from door to door of each and every govt office to get work done and each time i was told about a different process. Felt like everyone was just there sitting on their chairs to stop people from doing any work. I didnt hire a agent to do the running around for me (I strive to make my life as difficult as possible :) ) but could have easily paid a person 15-20-30K to do the running around and grease palms. Dont know what I was thinking - maybe I had decided to inflict self pain after reading all those forwards on facebook and posts on this forum like yours :)

    No increase in people going to vote on election day is going to improve things as the number of corrupt people far outweighs the clean.

    Came back to UK last week and spent 2 hrs online and on phone to get the same amount of work done which took me 3 weeks in India. Now do you expect me or someone else to suffer on a daily basis in the hope that someone from the most amazing state in India will soon become PM and save all of us :) or wait for the hunger strike in delhi to change the corrupt practices of the corrupt? I dont think so, so all the best to you and your tribe. Hope you change India.

    Regarding being welcome in other countries. Be worthwhile and the whole world will welcome you but trying to change a complex and corrupt system like India is nearly impossible for a small group.
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  • Opinions may vary some say India cannot change.Things will remain the same with corruption riding high.BUt change will come if we are to survive.
    If you referring to the "amazing " leader from a nearby state,then I also do not beleive that he is some messiah who will lead us to prosperity and utopia.
    What you said of running from door to door is unhappily enough true and to change it is difficult.
    But attempts to change must be made the peaceful and democratic way.
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  • Kya Hero Hiralal .. I have vice versa problem ...

    In UK it is hard to get work done by me.. Lot of process and do most of things over phone.. or first read process.. painful..

    In India get link to correct person or get approach of correct person .. WORK Done without doing phone call.. see the power..

    But You are right it is good only for some people.. Bad for long term ..


    UK is having its own problem.. we are having our Own.. You Enjoy in UK.. Get your PR & Red passport soon as it suits to good people like you..

    We will fight and find correct leader sooner or later.. :) Till then like Wisey says Monarchy Zindabaad.. a long wait & quick decision Telangana Zinadbaad..



    Originally Posted by herohiralal
    May your tribe succeed and prosper but I recently spent 3 weeks running from door to door of each and every govt office to get work done and each time i was told about a different process. Felt like everyone was just there sitting on their chairs to stop people from doing any work. I didnt hire a agent to do the running around for me (I strive to make my life as difficult as possible :) ) but could have easily paid a person 15-20-30K to do the running around and grease palms. Dont know what I was thinking - maybe I had decided to inflict self pain after reading all those forwards on facebook and posts on this forum like yours :)

    No increase in people going to vote on election day is going to improve things as the number of corrupt people far outweighs the clean.

    Came back to UK last week and spent 2 hrs online and on phone to get the same amount of work done which took me 3 weeks in India. Now do you expect me or someone else to suffer on a daily basis in the hope that someone from the most amazing state in India will soon become PM and save all of us :) or wait for the hunger strike in delhi to change the corrupt practices of the corrupt? I dont think so, so all the best to you and your tribe. Hope you change India.

    Regarding being welcome in other countries. Be worthwhile and the whole world will welcome you but trying to change a complex and corrupt system like India is nearly impossible for a small group.
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  • Originally Posted by herohiralal
    The really smart people will leave the country but the educated but disillusion will stay back


    There is something called as patriotism.
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  • "Dont know what I was thinking - maybe I had decided to inflict self pain after reading all those forwards on facebook and posts on this forum like yours"
    While winding up this discussion from my side,I want to add that getting jobs done by normal means which does not include hiring of an agent to grease our way through,has in general worked out for me.
    Trying to do jobs the right way cannot be termed as inflicting self pain anyway to my mind.
    .Other than registration of property where certain grease is forced upon you by builder, I have in general managed to get all work done by the same "inefficient" Governmental agencies.Yes it has meant extra trips but it was worth it.
    Certain jobs which were grease filled have now changed -You can get your license issued from RTO without grease.All you have to do is go to RTO office and do the full process of online test,paper submission and driving test. Passports are also now being issued without intervention of grease.Changes are there with more computerization taking place.I had been to civil police for handing over tenant information papers and things moved without any grease. I had to wait for some time and answer some queries,but at the end they accepted papers and matter over.They are all small jobs which should in ideal situation get done instantly,but India is India and incomparable.Yes the jobs do take time.You have to take leave from your office.But to say nothing moves is probably an exaggeration.
    Well everyone has his own line of thinking.
    All the best to those who think going away from the country is a good solution.
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  • I superlike this...I have also managed to do a few things without grease..its possible if you have the right attitude and are willing to spend time and energy for a great cause

    Sent from my GT-N7100 using Tapatalk 2
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  • Originally Posted by herohiralal
    No one is going to look at how much its going to cost or how it will bankrupt the country. The really smart people will leave the country but the educated but disillusion will stay back and fight a losing battle on facebook, twitter and forums who should be the next PM and how to improve the country. Best of luck to such folks but the odds are heavily stacked against them.


    The points you shared are valid and technically correct - moving India to a more efficient state looks like trying to move the Himalayas (probably tougher).

    One point on moving to other countries, athough a valid option is that one will always remain a 2nd grade citizen there - very difficult to become at par with the citizens there - probably as tough as correcting India. Very few examples of otherwise.

    Here issues are galore and its very irritating and also shameful, but fundamental right of citizenship is at same level as anyone else.
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  • Originally Posted by vivekdhawan
    well theres something i would like to add..., just how many of us.., have went to cast their votes.., every1 can post stuff on facebook.., but even those die hard fans dont take the pains to stand in queue for half an hour to cast thier votes..., the urban consider themselves too sophisticated to stand in line ..., rural india on the other hand is still upfront about their voting ryts..., even though motivated by wrong factors..., or mislead by goons.., and that is what brings criminals to power.., the urban class prefers indifference till they actually feel the heat .., and for those who argue that ol d candidates are corrupt.., i can say that you hardly know all of dem..., cuz in every election...no matter what level..dere's atleast one candidate who is d least corrupt and most determined to development...
    n.b personal views...


    well you should know that sweat is bad for humans ,even upper middle class in india , sweat produces germs and also doesnt smell good does it ? so standing in line for vote is a stupid idea

    rather standing in ques for the movies , matches ,concerts ,and malls is much better idea and dont forget holiday on voting day , thats a super coll sleeping idea
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  • Originally Posted by rsrsin
    The points you shared are valid and technically correct - moving India to a more efficient state looks like trying to move the Himalayas (probably tougher).

    One point on moving to other countries, athough a valid option is that one will always remain a 2nd grade citizen there - very difficult to become at par with the citizens there - probably as tough as correcting India. Very few examples of otherwise.

    Here issues are galore and its very irritating and also shameful, but fundamental right of citizenship is at same level as anyone else.



    There is a story of a tortoise in Panchatantra who refuses to leave his motherland and repents while dying in a severe drought while the rest of his friends migrate to new land and live happily ever after .

    Patirotism gifts us the life of a 3rd rate citizen here .
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  • VOTING IS FUTILE EXERCISE AND WASTE OF TIME. The voting boxes/machines are later on exchanged when they are in control of the collector. I have seen this with my own eyes. And if this can happen in Pune/Mumbai rest of the places it is obvious. The collector if not him the divisional magistrate if not him it is the police battalion which is managed to slip in the rigged boxes.
    What do you think they cannot manage this small stuff when they can do such big scams?
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  • Originally Posted by RP Pune
    There is something called as patriotism.

    So the corrupt can do what they want but the educated and delusional have to suffer pain under the name of patriotism? Is this the same thought process that makes people buy property worth 70-80-90 lakhs while suffering the agony of little water, electricity and roads?

    Realacre was asking for 10 reasons why RE in Pune hasn't come down in-spite of all the data points suggesting towards a correction. Maybe he can patriotism to that list now.
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  • Originally Posted by unniboy
    I superlike this...I have also managed to do a few things without grease..its possible if you have the right attitude and are willing to spend time and energy for a great cause

    Sent from my GT-N7100 using Tapatalk 2


    So a businessman who has to interact with the system probably 1000s of time more than a normal individual is supposed to spend time and energy following the right path while his competition can save all that time and energy by paying bribe and investing that time and energy in expanding the business?

    Now you see why we have this big corrupt system? The people who want to go ahead pay bribe and go ahead. At an individual level you can think about taking leave and spent hrs in govt offices but for a small or medium businessman or women the options are limited.

    Accepting the current state of affairs and suffering under it thinking you are helping a great cause is beyond belief.

    Maybe thats the reason so many buy property just looking at the plan - helping a great cause and also maybe spend money on generator electricity and mineral water - again helping a great cause and suffer hrs of traffic on a daily basis - again helping a great cause.
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  • The great cause i was referring to is to not contribute to a corrupt society....property prices have increased due to greed of people..I know of small businessmen who do not grease and still have grown their businesses...

    Sent from my GT-N7100 using Tapatalk 2
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