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
    paaap,

    Was expecting this news from you.
    Now tell me, has Infy hired 8,000 in Pune campus in last quarter ?? Man, these cos do such stuff to give their stocks a boost, while no one talks about attrition.

    Most importantly, hardly any news seats are coming in Pune. See carefully & from their previous reports, the expansion will be in tier-2 cities where actual expansion is taking place. Now certainly more jobs in Nagpur or Hyderabad won't benefit Pune RE, will it ??

    Sat234,
    +1.


    The figures above are net of attrition. Infosys has 18% attrition where as TCS has 12%. Every analyst talks about Infosys attrition and why its so high as compared to TCS. So I dont know who u mean by "no one"

    Below is the Infosys infra data. As you can see Pune has 32K seats - all in Hinjewadi - and is adding another 4K seats - again all in Hinjewadi.

    I am seeing the report I cant see Nagpur or Hyderabad. You again have ur -ve bias glasses on? :)
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  • How the UPA made a mess of India's economy

    The UPA is being praised for high economic growth during the first seven years of its regime, but analysts have conveniently ignored the hard work done by the previous NDA government. The lagged effects of the UPA's acts of omission and commission will be felt in the years to come and again the next government will be blamed for non-performance. Here's why:

    Government debt: The central government's debt/GDP ratio was just over 60 per cent during the NDA years, but combined with state government debt, the ratio moved above 80 per cent. That ratio now is at about 70 per cent of GDP (chart 1). The important reason for the bloated debt of the central and state governments in NDA's era was the implementation of the Fifth Pay Commission, which led to a doubling of wage bill from 1996-97 to 1999-2000.



    Economic growth rates and inflation rates: The difference between the annual growth rates in NDA and UPA years in real terms was only 1.7 per cent. But, the difference in the nominal GDP growth rates was 4.6 per cent. It is obvious that the rate of inflation was much higher in the UPA years (7.4 per cent) than in NDA years (4.5 per cent). Higher inflation erodes the real value of debt faster. Hence, debt/GDP ratio came down in UPA years.

    Interest burden in NDA and UPA years: The ratio of interest payments/budget receipts did not rise above 40 per cent during the NDA years. Only the narrower and conceptually flawed interest payments/tax receipts ratio was above 50 per cent. There is no economic logic in comparing a government's interest payment to its tax receipts alone as government borrowings are not applied only for the limited purposes of levying and collecting taxes. Interest payments were higher in NDA years because rates were high when they took office in 1998. It steadily declined during their regime. The case was opposite for the UPA. Interest rates started low - they had an excellent advantage - and steadily increased during their regime.

    Market Borrowings of the central government (NDA versus UPA) :

    The reduction in the central government's debt ratio in the UPA years was primarily due to higher inflation, which resulted in higher nominal GDP.

    The market borrowings of the central government actually grew at phenomenal rates during UPA years and the ratio of government net market borrowings/budget expenditure ratio was markedly higher during the UPA years, especially in UPA II (2009-14). The more the government borrows from the market the less it is available for productive uses.



    Simply put, the UPA government when it took office inherited possibly the best initial conditions - internally and globally - and proceeded to make a royal mess of the economy.

    Opinion: How the UPA made a mess of Indias economy - NDTVProfit.com
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  • Originally Posted by ThodiSiZamin
    look at the net employee addition chart at infosys:

    http://capitalmind.in/wp-content/uploads/2013/01/image_thumb9.png

    on an average the net addition is less than 2%

    people who are stuck in infosys with 4+ years of experience start realizing that the only way to grow is to quit infosys. so such people leave infosys in hordes. infosys is hiring freshers not because business is doing good, but because they have to somehow replace the experienced chaps in a cost-effective manner.


    And these folks leave Infosys for higher pay or lower pay? I have seen many Infosys folks joining the company I work in on higher pay - 30-40% rise. I work in a Hinjewadi based company.



    the mass exodus of high-level executives at infosys should give you an idea of which direction the company is heading. these guys who have spent decades at infosys can clearly see what's in future for the company. even infy's age old companion LIC has more than halved its stake from 6.75% to 3.25%

    people working in infosys who have bought at these rates in the RE market are in for trouble IMHO. infy is not going to grow fast or provide raises to catch up with inflation and the RE market which is heavily dependent on IT and infosys in particular is in for trouble. from a de-risking point of view, these two risks are intermingled so the upside is less and the downside is huge.


    But u just said above that people leave infosys so why would someone stick around with Infosys if lets say they are having trouble paying thier EMI?

    Have u been to Hinjewadi? Look around. Do u see massive campuses by TCS, TechM, Cogni and many other IT companies? Have u seen the traffic that comes into and goes out from Hinjewadi every single day?
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  • As per Wiki "About 3-5 Lac workers travel daily to and from the IT park." of hinjewadi.
    How many percent of these do you think: Already have a flat, Do not need a flat, Cannot afford it, are not looking for it and can afford it
    My guess:
    Already have a flat - 30%
    Do not need a flat - 10% (Bachelors) + 8% localities
    Cannot afford it - 20% fresher/less salaried
    Not looking For it - 10% (temp residents)

    So as per me around only 20% ie in some thousands are eligible and willing to buy RE in and around hinjewadi.
    Now compare this demand with the supply !!!

    Just a guess, though I fell demand has become less than supply.
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  • I dont know where else to post it, but why was IREF showing "enter your cell phone number" page on every link ?? Was anybody facing the same problem. now after a while, it isnt asking for cell number anymore.
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  • Same issue here since last 2 hours but now its resolved.
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  • Originally Posted by paaaap
    The figures above are net of attrition. Infosys has 18% attrition where as TCS has 12%. Every analyst talks about Infosys attrition and why its so high as compared to TCS. So I dont know who u mean by "no one"

    Below is the Infosys infra data. As you can see Pune has 32K seats - all in Hinjewadi - and is adding another 4K seats - again all in Hinjewadi.

    I am seeing the report I cant see Nagpur or Hyderabad. You again have ur -ve bias glasses on? :)

    Man, these are all PROPOSED nos.

    And most importantly, how many freshers are going to get 17L/yr salary ?? If this is not the case, it's of no use atleast for RE bulls. Else, please explain how a 3-4L/yr earning guy can buy flat in Pune.
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  • Originally Posted by paaaap
    Have u been to Hinjewadi? Look around. Do u see massive campuses by TCS, TechM, Cogni and many other IT companies? Have u seen the traffic that comes into and goes out from Hinjewadi every single day?

    Have you been to Shirdi ?? Look at the traffic there.
    Now by your logic of traffic, Shirdi is property hotspot. :D

    It seems RE bulls don't have any fundamental points left, so they have started to speak like Pappu.
    Now paaap, give me 5 reasons why one should buy flat in Pune at such high prices. This answer was not given by any bull, including compu. Hope you can share something on it.
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  • Highly stressed: Banks sold record level of bad loans to asset restructuring cos

    Faced with unprecedented levels of stressed assets, banks, led by the country's largest lender State Bank of India (SBI) sold over Rs 10,000 crore of bad loans to asset reconstruction companies (ARC) in March alone.

    "This single-month figure is higher than any other yearly number from the past," an industry source was quoted as saying by PTI.


    Due to the high accretion of non-performing assets (NPAs) in the recent past — total NPAs stood at 4.2 percent as of September 2013— banks are being nudged to sell bad assets to the 14 asset reconstruction companies (ARCs). Together with restructured assets, the total stressed assets in the system touched 10.2 percent as of the December quarter.

    Banks have recast nearly Rs 1 lakh crore worth of loans in the past fiscal alone, taking the total corporate debt restructuring (CDR) book to over Rs 4 lakh crore.

    SBI, which had reported an NPA level of 5.73 per cent in the December quarter, led the chart by reportedly selling close to Rs 4,000 crore to ARCs. This is the first time the bank has done so. Apart from SBI, other lenders have also gone public with their intention of selling bad assets. Public-sector Bank of India said it was mulling offloading Rs 900 crore of NPAs to ARCs in the March quarter alone, after auctioning Rs 2,000 crore in the first three quarters. The troubled United Bank of India, which reported a spike in gross NPAs to over 10 per cent as of December, was planning to sell Rs 700 crore in bad assets.

    However, it was quick to caution that even if Narendra Modi-led BJP wins the most number of seats in parliament, it is likely to need the support of smaller political parties to be able to form a government. This means policymaking will become difficult and little can be achieved to kick-start the growth process at least in the first six months of the new government.



    In fact, in the report, HSBC analysts Devendran Mendran and Dilip Shanahi go on to say that India’s credit profile is more dependent on the actions of the Reserve Bank of India than the outcome of the country’s general election.

    Highly stressed: Banks sold record level of bad loans to asset restructuring cos - Firstbiz
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  • Originally Posted by realacres
    Man, these are all PROPOSED nos.

    And most importantly, how many freshers are going to get 17L/yr salary ?? If this is not the case, it's of no use atleast for RE bulls. Else, please explain how a 3-4L/yr earning guy can buy flat in Pune.


    So this was ur statement

    "Most importantly, hardly any news seats are coming in Pune. See carefully & from their previous reports, the expansion will be in tier-2 cities where actual expansion is taking place. Now certainly more jobs in Nagpur or Hyderabad won't benefit Pune RE, will it ??"

    We looked carefully and there in nothing new coming up in Nagpur or Hyderabad as far as Infosys is concerned.

    So now u change ur stance to PROPOSED??? have u lost it man? U have got trashed on other forums that I have read but u still continue this illogical posting technique - when u r proven wrong instead of accepting it (u have been wrong for many many yrs now and ur analysis is utter crap) u go on some tangent.

    Pls stop replying to my posts. U have no value to add so just so propogate ur crap elsewhere. Ban me if u want but I am done here..
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  • Originally Posted by realacres
    Have you been to Shirdi ?? Look at the traffic there.
    Now by your logic of traffic, Shirdi is property hotspot. :D

    It seems RE bulls don't have any fundamental points left, so they have started to speak like Pappu.
    Now paaap, give me 5 reasons why one should buy flat in Pune at such high prices. This answer was not given by any bull, including compu. Hope you can share something on it.


    This post shows ur way of thinking and analysis and why u have been so consistently wrong. Continue u whining and -ve approach. If u cant figure out the difference between Shirdi (religious place with temp visitors) and Hinjewadi (business park where IT companies have their permanent campuses) then there is not point discussing anything with u. Its just a waste of time.
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  • paaap,
    Dont have to get so worked up about discussions.
    Hit back with facts,figures,instead of personal remarks- ur negative,whining etc.
    If you feel so strongly about anyone use ignore option.
    These figures of likely employment are impressive but do they happen in reality? or are they announcements of intention and hope of expansion etc.
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  • Paaap as per todays news wipro added just 241 in the last year. Hiring news is actually meaning that they are replacing experienced and settled hands with freshers to cut costs! Think ...
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  • Originally Posted by vaibav123
    paaap,
    Dont have to get so worked up about discussions.
    Hit back with facts,figures,instead of personal remarks- ur negative,whining etc.
    If you feel so strongly about anyone use ignore option.
    These figures of likely employment are impressive but do they happen in reality? or are they announcements of intention and hope of expansion etc.


    If one has made his/her mind to behave/post like a irrational person then no amount of facts, figures or data is going to change it. Thats why I said I am done here. Folks can continue to post their personal -ve biases all day long but there is no decent discussion based on facts by some senior and moderator folks. Last post....

    Details from Infosys Q3 2008-09 below.
    http://www.infosys.com/investors/reports-filings/quarterly-results/2008-2009/Q3/Documents/fact-sheet.pdf

    Every quarter Infosys puts out such fact sheets. TCS, Wipro, TechM, HCL all do the same but its only Infosys which does it location wise.

    Cognizant, IBM, Accenture. ATOS, AMDOCS, CapGemini and other international IT services companies dont publish data but one can see that they have grown the Pune presence in the past few yrs. One can see that just by talking to friends and keeping an eye out on what is happening in the business parks, IT parks and SEZ. Just a 1 hr spent in Hinjewadi will do the job.

    HCL - file:///C:/Users/sf5800/Downloads/hclt-q3-2014-jfm14-ir_release.pdf

    Wipro - http://www.wipro.com/Documents/investors/pdf-files/Data-Sheet-Q4-FY14.pdf

    TCS - http://www.tcs.com/investors/Documents/Presentations/TCS_Factsheet_Q4_14.PDF

    TechM - http://www.techmahindra.com/sites/resourceCenter/Financial%20Reports/Q3_FY14_Fact_Sheet_Merged_Final.pdf
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  • Originally Posted by paaaap
    If one has made his/her mind to behave/post like a irrational person then no amount of facts, figures or data is going to change it. Thats why I said I am done here. Folks can continue to post their personal -ve biases all day long but there is no decent discussion based on facts by some senior and moderator folks. Last post....

    Details from Infosys Q3 2008-09 below.
    http://www.infosys.com/investors/reports-filings/quarterly-results/2008-2009/Q3/Documents/fact-sheet.pdf

    Every quarter Infosys puts out such fact sheets. TCS, Wipro, TechM, HCL all do the same but its only Infosys which does it location wise.

    Cognizant, IBM, Accenture. ATOS, AMDOCS, CapGemini and other international IT services companies dont publish data but one can see that they have grown the Pune presence in the past few yrs. One can see that just by talking to friends and keeping an eye out on what is happening in the business parks, IT parks and SEZ. Just a 1 hr spent in Hinjewadi will do the job.

    HCL - file:///C:/Users/sf5800/Downloads/hclt-q3-2014-jfm14-ir_release.pdf

    Wipro - http://www.wipro.com/Documents/investors/pdf-files/Data-Sheet-Q4-FY14.pdf

    TCS - http://www.tcs.com/investors/Documents/Presentations/TCS_Factsheet_Q4_14.PDF

    TechM - http://www.techmahindra.com/sites/resourceCenter/Financial%20Reports/Q3_FY14_Fact_Sheet_Merged_Final.pdf


    Hello paaap,

    Just think.. the companies you mention also lay off experienced hands who actually might be in a position to buy RE. Companies laying off a 1000 and hiring 1100 is actually bad for RE !! Think.. think again.. (let me help.. those 1000 would have bought RE today, but those new 1100 cannot for the next 8 years ! ).

    the worst part about IT is that if you have experience, you may actually be at a disadvantage ! Sad.. but true..

    also think that any average IT guy who can be more productive is not, because he wastes two hours everyday in commute only (because of pathetic Pune infra). Plus he gets tired because of commuting. Therefore, it is a waste of productivity because of fatigue as well as commute time. My own personal experience - I am too tired after inhaling diesel fumes for an hour and a half to reach my workplace. I cannot even concentrate on my work for the first half hour.

    If (that is, IF) anyone says - "buy in Hinjewadi if you want to avoid all this". I can only say - can everyone afford it. two - even if i can, should I ??

    What nobody realizes is that these problems should never even occur in the first place. My friend in Washington DC used to drive 40 miles everyday from Maryland (crossing state borders!). And believe me, that is pretty common !! He does not have to pay a premium to live closer to his workplace, in order to avoid wasting three hours stuck in traffic everyday.
    What I mean to say is that, ideally, we should have better infrastructure. We do not have that, so places closer to workplace charge a huge premium, even though the infra is pathetic. It is like - road nahi, pani nahi, bijli nahi, gaon public kee problems, etc hai to kya hua, mere office ke paas to hai !!


    Pune is pretty saturated. Nobody knows the future. It may improve and RE will shine. Or it may not. See what you are getting today, and at what price. The best laid plans can come to naught. If you are looking to buy, just calculate and play safe. What RealAcres says is not wrong. Think again...
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