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 realacres
    lol:D. This lallu chap may even try to sell land on moon:D. They tried to paint rosy picture but got thorns instead:D.


    Now who is this lallu chap in Pune RE?
    Kallu I could make out.
    Sallu I know..
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  • I think he is talking about Lalit Kumar Jain from Kumar builders
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  • Originally Posted by bloger
    Yes I agree with this. Else why would builders keep doing rounds of other cities with meaningless exhibitions (nashik, Nagpur, Aurangabad), try to see if they can get buyers. I wonder who are they really fooling, people or themselves, by assuming that if there are no takers in Pune, they will find elsewhere..i read somewhere..it is darkest before dawn..could this be that phase ?


    These days buyres are not keeping builders busy, so builders found out this new way to past time which is rounds and rounds of Exhibitions...and that all come almost free for Builders :D; how...!!! it's like this -
    Catch 4-5 local co-op banks and as usual HSBC/IDBI/SBI in that town and sell them stalls and recover rent of the space for exhibition...keep prime location stalls with them and give corners to banks :) cheat banks as well :D
    Builder's sales/marketing material is the same old story, as all builders are still selling same 5-6 year old schemes, what they need is some effort to display all their colourful banners, create the atmosphere (high class hi tech, paradise, very few left i mean only 3 remaining stuff :D )....and sit at the stall for next 3-5 days telling the same old story to all visitors...I just wonder if Puneri people who are earning around a millon (rs.) per annum can't afford it, how come guys in small town coud think about it...and what is the point advertising Pune RE in Nagpur, Kolhapur etc.

    I wish, this exhibition saga continues like this and the present time indicates the same...but now a new trend is setting up which is small scale developers are coming up with syndicates of end users and offering small schemes like what INSIGNIA guys are doing...and it will work well...
    So better don't wait for RE to fall, just IGNORE the builders and come up with your own group/syndicates...
    Make extensive use of forums like this (which is free :) ) and form groups, tie up with small developers or civil contractors... sit together...get all your dreams on paper and work it out guys...!!!!
    Nothing is difficult guys...where there is a will, there is a way...!!!
    Good luck.
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  • Originally Posted by birendra
    I think he is talking about Lalit Kumar Jain from Kumar builders

    buyers ..beat them hands down...make it buyers market as it should always be!!:D
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  • Originally Posted by puser
    Baner Pashan link is not on my list. Don't have luxury to paying 50 L for 930 psft at such area



    50L for 930 sqft looks high. Who is asking this rate btw ?

    Some good news on economy front

    ]http://economictimes.indiatimes.com/news/economy/indicators/Imports-rise-27-confirm-economy-back-on-track/articleshow/5526109.cms

    economictimes.indiatimes.com/news/news-by-industry/jobs/India-Inc-plans-to-reward-employees-with-double-digit-increments/articleshow/5526086.cms
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  • Originally Posted by compuwalah
    50L for 930 sqft looks high. Who is asking this rate btw ?

    Some good news on economy front

    ]http://economictimes.indiatimes.com/news/economy/indicators/Imports-rise-27-confirm-economy-back-on-track/articleshow/5526109.cms

    economictimes.indiatimes.com/news/news-by-industry/jobs/India-Inc-plans-to-reward-employees-with-double-digit-increments/articleshow/5526086.cms

    This means double=triple rise in RE prices confused::(

    This means double=triple rise in RE prices confused::(

    This means double=triple rise in RE prices confused::(

    This means double=triple rise in RE prices confused::(

    This means double=triple rise in RE prices confused::(
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  • Comforting with the High price

    Originally Posted by bloger
    Yes I agree with this. Else why would builders keep doing rounds of other cities with meaningless exhibitions (nashik, Nagpur, Aurangabad), try to see if they can get buyers. I wonder who are they really fooling, people or themselves, by assuming that if there are no takers in Pune, they will find elsewhere..i read somewhere..it is darkest before dawn..could this be that phase ?



    The idea of doing exhibitions at other cities to make them realize that Kholapur property prices are cheap looking at Pune Picture .... they will tie up with local builders and get the rent from them ....as Kholapur buyers will start believing that they are getting better local deal .... which may be expansive for them .....
    over all these exhibitions are to comfort the buyers that 80 Lakhs is not too high cost .... which by the way is slightly less then US average home price ....

    Now everyone is comfortable with 40L 2BHK .... so they popularize the high price so much that 35L with bargain of 5 L may seem to be cheap and value for money to you
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  • Not sure. It may mean stable prices or slight softening. Anyway my conclusion is that predicting RE prices or stock indices is futile and left to experts (so called :D ). However there is one factor that may play into increase in further prices.

    ]http://economictimes.indiatimes.com/RBI-hints-at-curbs-on-capital-inflows/articleshow/5525961.cms

    If things go not so well in western economy, that money flows into emerging economies like India thus adding to inflation and asset price rise.

    If things go not so well in western economy, that money flows into emerging economies like India thus adding to inflation and asset price rise.
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  • Originally Posted by frugality
    The idea of doing exhibitions at other cities to make them realize that Kholapur property prices are cheap looking at Pune Picture .... they will tie up with local builders and get the rent from them ....as Kholapur buyers will start believing that they are getting better local deal .... which may be expansive for them .....
    over all these exhibitions are to comfort the buyers that 80 Lakhs is not too high cost .... which by the way is slightly less then US average home price ....

    Now everyone is comfortable with 40L 2BHK .... so they popularize the high price so much that 35L with bargain of 5 L may seem to be cheap and value for money to you


    As per my knowledge Kolhapur property is already crossed 1500+.....so not cheap anymore...
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  • Originally Posted by frugality
    over all these exhibitions are to comfort the buyers that 80 Lakhs is not too high cost .... which by the way is slightly less then US average home price ....

    Now everyone is comfortable with 40L 2BHK .... so they popularize the high price so much that 35L with bargain of 5 L may seem to be cheap and value for money to you


    Fantastic point. They will keep on hamering 80L - 80L at all places and slowly it will become normal.

    To counter this all of usshould go to Builders office and laugh out Loud hearing their rates and quote rates like 1500 psf and walk out.. more numer of people doing this more will they questio their own rates.

    VK
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  • China's RE bubble

    Good article on China's RE bubble.
    http://chovanec.wordpress.com/2010/01/30/reference-points-on-china-real-estate/

    "Now, if you look at the prices for the property being sold versus the rent you collect there is a real disconnect. Prices are too high, rent is too low, so if you hold property in order to get yield you are likely to get very little. For us it makes no sense to hold property, so our strategy is to sell everything. We see ourselves very much as a manufacturer. We buy land, we build, and then we sell. And the asset bubble has compelled us to be even more of a manufacturer . . . the strategy is to keep a lot of cash, to sell as fast as possible, and to turn around assets faster — even faster than before.... ""
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  • Happening

    Originally Posted by veeemkay
    Fantastic point. They will keep on hamering 80L - 80L at all places and slowly it will become normal.

    To counter this all of usshould go to Builders office and laugh out Loud hearing their rates and quote rates like 1500 psf and walk out.. more numer of people doing this more will they questio their own rates.

    VK


    Yes, thats happening slowly. Builders are quoting over 40 lakhs sell price and buyers are offering 20-26 lakhs with cool smile and walking out by saying if it is not below my budget, any fears of further increase is meaningless from my point of view, even if u raise it to 80 lakhs.

    They say "Paishache song anata yet nahi" (you can't fake to have money) so eventually market will understand high prices can not be susutainable. Whatever sales at high prices are happening now are more of "Udhar ki aish" with borrowed money. Fireworks are in store when crud reality of unmanagable EMIs unveils.
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  • This may lead to some correction in rates in integrated township projects

    ]http://ravikarandeekarsblog.blogspot.com/2010/02/on-going-and-upcoming-integrated.html
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  • Worst to come in U.S. commercial real estate - S&P
    http://in.biz.yahoo.com/100202/137/bav07v.html

    Only God know who is right and who is wrong. Only time tell us..
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  • Congts forum members.
    Due to continuous negetive talks about Indian RE, Indian investors are now shifting focus to international locations :D


    ]http://economictimes.indiatimes.com/markets/stocks/market-news/Indian-investors-take-24-pc-chunk-of-property-sales-in-Dubai/articleshow/5527028.cms
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