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 puser
    Why people ask more money to ITG - notion that they get paid in lacs per months

    Because this is the image ITGs have made of themselves, that they earn more than peers. Seen many ITGs who tell their total package & not take home salary. If this is not the case, then perhaps rickwalla felt that such people come from Alibaug:D.

    Also I may add that many people in IT came from outside Pune and had little or no clue to local pricing; hence got fooled by exploitations such as asking 500 Rs to drop within 1-2 Km or charging 400 Rs/month

    And this holds true not only for rick/cab but RE as well. Some of the projects with no or pathetic infra has non-Puneties as it's majority buyers. Just check this fact out as an exercise.
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  • I am thinking to write UPSC or join some PSU...Even for IT life is not easy :) (hear news of suicide by PSPL engineer? He was my close acquaintance!)...Man, there is saying in Marathi - "Doorun dongaz sajire" and there is another saying - "Melyashivay swarg disat nahi"...
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  • Originally Posted by realacres
    Seems I remain single then:D. Anyways, builders will now come up with schemes:-

    Buy a flat, get a bride* free.

    * Offer valid till stock lasts. Special offer on group bookings till 14 Feb:D.


    Are you hinting at that Pride Platinum Advt.? The lady with the spotted dog, etc.
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  • Originally Posted by puser
    I am thinking to write UPSC or join some PSU...Even for IT life is not easy :) (hear news of suicide by PSPL engineer? He was my close acquaintance!)...Man, there is saying in Marathi - "Doorun dongaz sajire" and there is another saying - "Melyashivay swarg disat nahi"...


    man ..looks like u have not been to onsite yet..otherwise u wudnt have talked about quitting IT...ITGs have this power which every other professional dont..
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  • Originally Posted by enduser
    IT is proving to be a bane to Pune.

    Ironically, what Pune has got due to presence of these IT parks? Directly nothing, since they have so many tax exemptions. Only Builders (and corresponding politicians) have benefited form the Pune IT boom.

    I guess even PMC/PCMC do not have any taxes collections due to these IT companies (unlike the brick-and mortar companies in MIDC areas)

    For non-IT guys life has become so unaffordable w.r.t. Pune RE.

    Bang on target. PMC & State govt spent in crores for Hinjewadi IT park, these IT parks exports stood at INR 15,000Cr in 2007 but the tax paid was meagre INR 12Cr. What's more, IT parks are taxed according to residential rates while the manufacturing which forms the backbone of economy & creates infra is charged heavily.

    Hence, IT earned more & spent nothing in form of tax & this made co. give more salary to ITGs, nor did they have any things like raw mterial, transportation, logistics etc. The largest revenue to govt comes from manufacturing sector only. If Tata Motors moves out of PCMC, the later will go bankrupt in 2 years:D.
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  • search4RE

    I know people who have been to Onsite and I am telling you what I have learned from them. Of course there are exceptions everywhere; but in general scenario is not as rosy as it seems to outsider.

    Also your pay onsite depends greatly on your client and your current company and your ownself. Its not like that you get 500$ everyday, companies in IT are here to do business and not on money distribution charity. Otherwise why would they come to India? Anyway, of course I do agree that there would be some non-negligible IT guys who returned to India post 9/11/2001(NRI ITGs) and started settling in India(also in Pune), adding to fuel
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  • Originally Posted by puser
    I am thinking to write UPSC or join some PSU...Even for IT life is not easy :) (hear news of suicide by PSPL engineer? He was my close acquaintance!)...Man, there is saying in Marathi - "Doorun dongaz sajire" and there is another saying - "Melyashivay swarg disat nahi"...

    What is Dongaz? Sajire or sajnare?:D And man, you can experience swarg right here if you lead a balanced life:).

    Btw, don't appear for UPSC, it is useless. To get into UPSC & survive, you need to have a tail:p. Become a MLA/MP instead. It's tonnes better than UPSC. You can then have UPSC cadres as pets.
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  • .ITGs have this power which every other professional dont


    Its a curse than power. Imagine yourself being put in Austria where you don't know anyone, you have to live in some damp room (save money to buy flat in Pune :D!); eat anything junk; hear bitter words from company client and indian manager and miss your family...And receive subtle(secondary) treatment at times...Duroon dongar sajire - if you know marathi..Each thing has some pros and cons
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  • Originally Posted by realacres
    What is Dongaz? Sajire or sajnare?:D

    दूरून डोंगर साजिरे ;)

    And man, you can experience swarg right here if you lead a balanced life:).


    Work life balance is like "special amenity" for IT companies ;) but if you work in remote secluded area land like Hinjewadi and use company's transport you get bound to time schedules (sometimes get squeezed more)
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  • Originally Posted by search4re
    2nd category is all over there...almost 80% of ITGs belong to category 2..
    Except for those who have less than 2 years of exp everyone is in bucket 2..Category 3 are investors that real keep talking about


    80% ITG belogs to category 2..are you joking??? Are you urself working in any IT company or just guessing like others:D:D:D

    If you work in such a company where 80% ppls has gone onsite at least once who has more than 2 years of work ex...then Please PM ur company's name I would be interested in that
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  • Do you think without the greed of puneites themselves, RE would have become so expensive. The landowners, the builders are all non-IT localites whose greed is boundless. Also, in India, people want to always exaggerate the price of things they own. e.g. I bought my flat for 5000 psft when he bought it for 2000. Add to that ridiculous competitive nature of people.

    Also, the lawlessness in India and difficult rules and regulations and Gundagardi has made land dealings risky.

    It is not the ITg or NRI who has made the RE expensive. NRI who is used to living in 4BR mansions for 80-90 lacks with all facilities(think sindh society * 1000) will not want to buy at these stupid rates.
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  • Originally Posted by puser
    दूरून डोंगर साजिरे

    Hmmm, got it, pasture is greener the other side. Mala tevdhe yete. Btw, how did you write this? Shrileepi?

    Work life balance is like "special amenity" for IT companies ;) but if you work in remote secluded area land like Hinjewadi and use company's transport you get bound to time schedules (sometimes get squeezed more)

    Man, I am not saying work life balance. It is work + personal life as well. Btw, tell me, do ITGs have any personal life? One of my neighbor came to meet me, had a coffee & rather than speaking with me (wanted some info about patents), he was listening to some live company conference on his cell fone. Later, he said sorry & left. I wasted my time too, doing nothing but endlessly waiting for the call to get disconnected:o. At the end, we communicated on email even when we stay in same building:(:D.
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  • Originally Posted by ttt43
    It is not the ITg or NRI who has made the RE expensive. NRI who is used to living in 4BR mansions for 80-90 lacks with all facilities(think sindh society * 1000) will not want to buy at these stupid rates.


    I went to R2I forum and got depressed by threads over there; people booked apartments without even looking at it. Who is going to buy Couture homes, kool homes, advantage homes, eco homes....? Of course; i can't generalize all NRIs but like they played their own role during panic mode of 2004-2007...Now its even beyond their reach to buy in Pune it seems.
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  • Originally Posted by realacres


    Man, I am not saying work life balance. It is work + personal life as well. Btw, tell me, do ITGs have any personal life? One of my neighbor came to meet me, had a coffee & rather than speaking with me (wanted some info about patents), he was listening to some live company conference on his cell fone. Later, he said sorry & left. I wasted my time too, doing nothing but endlessly waiting for the call to get disconnected:o. At the end, we communicated on email even when we stay in same building:(:D.


    This is the life man,when you are in IT :(:(....you have calls at wrong times (US day time) and you have to attend those, still those ppls are getting normal salaries nowadays (like Tata & Siemens are paying), now you got, why pusher wanted to quit IT...Grass always looks greener at other side , I think this is what he was trying to say in marathi (sorry I dont know marathi very well)...
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  • Originally Posted by realacres
    Hmmm, got it, pasture is greener the other side. Mala tevdhe yete. Btw, how did you write this? Shrileepi?


    Wrote in Orkut scrapbook by selecting Hindi language and pasted here :p. There is also online available


    Man, I am not saying work life balance. It is work + personal life as well. Btw, tell me, do ITGs have any personal life? One of my neighbor came to meet me, had a coffee & rather than speaking with me (wanted some info about patents), he was listening to some live company conference on his cell fone. Later, he said sorry & left. I wasted my time too, doing nothing but endlessly waiting for the call to get disconnected. At the end, we communicated on email even when we stay in same building.
    I have stayed up to 12 AM in company :). Personal life yes on weekends (and that too go in banking work, pending outside house work, RE project visits etc etc)...Man engineer on an average work 10 hours a day; now add 2 hours of commute if he stay at MP city and work somewhere in Aundh; then add sleep of 8 hours...:):)
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