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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  • @HeroHiralal, @ThodiSiZamin,

    Good points. Some fresh insight here.

    My 2 cents..

    Pune itself was a Tier II city when IT campuses were being set up. Cost of living was low. Companies went to smaller centers like Bangalore (smaller compared to the metros, that is), Pune, Hyd, Chennai (only metro in this list), etc.

    Now, if these places are proving costly, the next wave might be Nagpur, Mohali, Amdavad, Indore, Bhubaneshwar and even Trivandrum.
    Advantage of Bangalore or Hyd over Pune are the much larger number of companies and the profile of these companies (e.g. MS, Ora, FB, Goog, Cisco, EMC, SAP, Intel, GE, Dell, Samsung, Ericsson, Texas Instruments, Honeywell etc , apart from usual service delivery orgs, are all in Bangalore or Hyd, not in Pune, and I could go on and on listing the names). If you look at the salaries vs RE costs in Pune, it is a disadvantage here compared to Bangalore, or Hyd.

    It is more probable to find a profile you like, in Bangalore or Hyd, compared to Pune. In Tier II cities, it would be worse; you will be stuck for choices. So in Nagpur, you can go to only TechM or Infy or TCS. It would be worse if you work on some niche technology. It will be some time before we can choose to rush to Tier II cities :)

    Lets hope for the best.
    CommentQuote
  • Originally Posted by ThodiSiZamin
    saving 5k, 10k per month will eventually allow the fresher more financial freedom even with the option to retire early.

    Chances of growth are all a matter of chance. If the project in Bhubaneswar is on cloud computing and the one in Pune is maintenance of COBOL systems which were written when your grandparents were dating, which one do you think has more potential?

    Same goes for onsite as well. Such things cannot be predicted. And the reverse argument is true as well. In pune among a sea of people, there will be more competition for onsite. In Bhubaneswar, even the competition may be less.


    Its a game of probability. Bangalore has more captive IT units of MNCs than Pune and Bhuvaneshwar has very few IT units to begin with. So in general one has a greater chance of getting higher pay in Pune than Bhuvaneshwar. Similarly in Bangalore over Pune.

    Established projects where onsite if more common are in older cities - Bangalore, Pune etc.



    The inherent flaw in your statement is the assumption that 100% of Pune employees will have better opportunities than 100% of Bhubaneswar employees, which is obviously incorrect. As a fresher, what project you are assigned is a matter of fate. And by the time you realize you are in a shitty project, it takes 3-4 years for the fresher to realize that. The smart freshers talk to personal contacts and target what kind of work they want to do. The rest just follow the herd mentality.



    Nothing is ever 100%. U are most likely to find high paying jobs and better growth opportunities in Bangalore over Pune and Pune over Bhubaneswar. Just check out the salaries offered by captive IT units of MNCs in bangalore vs pune.
    CommentQuote
  • Originally Posted by Sat234
    @HeroHiralal, @ThodiSiZamin,

    Good points. Some fresh insight here.

    My 2 cents..

    Pune itself was a Tier II city when IT campuses were being set up. Cost of living was low. Companies went to smaller centers like Bangalore (smaller compared to the metros, that is), Pune, Hyd, Chennai (only metro in this list), etc.

    Now, if these places are proving costly, the next wave might be Nagpur, Mohali, Amdavad, Indore, Bhubaneshwar and even Trivandrum.
    Advantage of Bangalore or Hyd over Pune are the much larger number of companies and the profile of these companies (e.g. MS, Ora, FB, Goog, Cisco, EMC, SAP, Intel, GE, Dell, Samsung, Ericsson, Texas Instruments, Honeywell etc , apart from usual service delivery orgs, are all in Bangalore or Hyd, not in Pune, and I could go on and on listing the names). If you look at the salaries vs RE costs in Pune, it is a disadvantage here compared to Bangalore, or Hyd.

    It is more probable to find a profile you like, in Bangalore or Hyd, compared to Pune. In Tier II cities, it would be worse; you will be stuck for choices. So in Nagpur, you can go to only TechM or Infy or TCS. It would be worse if you work on some niche technology. It will be some time before we can choose to rush to Tier II cities :)

    Lets hope for the best.


    Lets not even compare Hyd with Pune. U dont want to invest in that city with all the mess going on there. You can be sure that u wont find a regional feud erupt up in Pune. Nagpur and Hyd are a no no for these reasons. Too much politics.

    My money is on Bangalore and Pune.
    CommentQuote
  • Originally Posted by Baruch
    Their guilt of misguiding so many people plus personally missing RE deals in 2009-2012 drive their behavior

    It seems that previous posts have been ignored. Time & again we have pointed out how debt roll-over, restructuring of loans, teaser rates for home loans & stimulus by Govt helped builders sustain the prices. And today, look where we are :-

    GDP sub 5%,
    CPI in double digits, which means negative growth,
    Saving are eroding,
    Interest rates rising,
    & list goes on.

    Even several builders have not delivered flats booked in 2009 till date & these have been discussed in detail on this forum.

    News of rising NPAs on part of builders & investors just shows how broke they are.

    Man, just by giving steroids doesn't make a person healthy, it gives boost only temporarily & at the end, fundamentals overtakes speculation.
    Now just wait & see what happens when fed further hikes interest rates.
    Already HSBC has said that interest rates in India will be hiked.

    Imagine...most of these guys want one to believe that Indian IT is in a mess when stocks are at all time highs...companies like HCL have posted 59% jump in Y-O-Y profits this quarter...its waste of time arguing with folks who think they are smarter than people who are investing thousand of crores in these companies


    Nowhere I am getting detailed bifurcation about how HCL has made such profit.

    Eg. RIL or Reliance gave best ever profits this quarter. But guess what, over 40% of it came from 'OTHER INCOME' which was TREASURY INCOME which means income from interest received on loans, FDs & bonds.

    Treasury contributes over 40% to Reliance Industries' Rs 21,984 cr FY14 profit - Financial Express

    So, though profits look good, the performance of company hasn't improved. Note the difference. One shouldn't forget Satyam.

    There is difference between body & its shadow. The shadow may look long but body maybe quite small. Focus should be on body, not shadow.
    CommentQuote
  • Originally Posted by ThodiSiZamin
    whats the point of buying in pune when you hardly get 20k per month for a 1 crore property.

    Also, in the US you need not be a citizen to purchase and own property. so even folks who are on visa or waiting for GC can buy better houses in the US which is a much more transparent market than india. not to mention you get a front yard, backyard with a two car garage.


    Folks applying for GC right now will need to wait for 8 yrs. Folks usually buy a house when they have some guarantee that is after EAD. Thats like a wait for 5-6 yrs for H1 folks.

    Have u looked at the L1 visa rejections recently? I am trying to get folks from India and its taking 3 months to get the documents done and even after that there are 80+% rejections..

    Now you can buy a house in US even on H1B but for people it take 3-4 yr to build up the credit score so there is no easy jump the country and buy a house game here.


    In case these folks wish to return to india, they can sell their equity in the house and if the prices have risen can book profit on their investment.



    Houses in US dont work that way. U dont have laws that prevent new constructions and plus houses are made from wood so folks cant treat them as an asset like they do in India.

    The market is very dynamic as compared to India where even a crap house sells for crores.



    At least in the US, companies like Apple, Google and Facebook are pushing the frontiers of innovation. the question is, why should an NRI invest at inflated prices in India? just because of emotional reasons? what makes indian RE so special that it is defying the laws of demand and supply, affordability and all other rational factors. why does india have the one of the most expensive RE market when india has has one of the lowest GDP per capita?



    Its not emotional. Its that visa + credit score issue. If folks have this sorted then they should go and buy in US. No point in buying in India. There is no comparison between US and India. US wins any day.


    and don't old parents have to take care of other things. now all of a sudden they become landlords and have to tackle all the issues which come up becoming a landlord. the bachelors staying in your apartment have a daaru party and the society has received a complaint. the family staying in your apartment wants the geyser to be fixed. the bachelors in your aparment are not paying rent on time. do you really want your old parents to have all this hassle?



    Sir u are talking about extreme cases :) Not all bachelors have a daaru party and create chaos.


    As a NRI with plenty of money, I can easily buy an apartment even in Koregoan park. The reason I am not buying is that, its frankly not worth it. And I am sure, there are many more NRIs like me who will always ask themselves, is this investment really worth it???


    Yes folks buy in newer areas. If u have the option of investing in the US then Indian RE is not worth it. Even indian stocks are not worth it. But if ur options are limited then then Indian RE is better than India FD. Indians stocks are better than Indian RE but you have to take the SIP route. Dont try to guess which way the govt policy is going to go - again this is a general statement for normal people and does not apply a rohit_warren or wiseman :)
    CommentQuote
  • Builders exit partly completed projects at big discounts

    An extremely slow real estate market across segments is pushing debt-ridden, cash-strapped developers to exit partly completed projects and undeveloped land at massive discounts of as much as 40%.

    Cash-rich realtors like RMZ, Shriram Properties & others exit partly completed projects at big discounts - Economic Times
    CommentQuote
  • Originally Posted by realacres


    Nowhere I am getting detailed bifurcation about how HCL has made such profit.



    Dont know where u look at mate. Its all there on the HCL Info website.

    http://www.hcltech.com/sites/default/files/condensed_consolidated_financial_statements_-_usgaap_jfm14.pdf


    IT companies usually have forex gains and losses in the other income section unless its Infosys which derives a big portion of its profits from interest on FDs. It has something like more than 20K crores in cash. Too big



    Eg. RIL or Reliance gave best ever profits this quarter. But guess what, over 40% of it came from 'OTHER INCOME' which was TREASURY INCOME which means income from interest received on loans, FDs & bonds.

    Treasury contributes over 40% to Reliance Industries' Rs 21,984 cr FY14 profit - Financial Express

    So, though profits look good, the performance of company hasn't improved. Note the difference. One shouldn't forget Satyam.

    There is difference between body & its shadow. The shadow may look long but body maybe quite small. Focus should be on body, not shadow.


    If you want to use these news articles in ur posts to make ur point then u need to learn to read the financial statements man :)

    22,493 is the net profit (always look at consolidated figures)

    Now here is how the figure has been derived

    Profit from operations before other income and finance costs : 23,598
    Other Income : 8,911
    Finance costs : 3,836
    Tax expense : 6,215
    Net Profit/(loss) : 22,493


    Now look at the balance sheet. Look at the debt and the cash. U will see the debt has gone up exponentially as Reliance Jio comes close to launching its services and retail business is again in the growth mode.

    So that other income of 8.9K crores may form 40% of 22.49 K crores but u need to remove the finance cost and income tax from that other income

    Then remove 30% - 40% from that remaining amount as tax and then what u will have left is the true contribution - net other income after tax and minority interest.

    Dont use pre-tax and pre-finance cost amount of other income and compare it with net profit figures. I know u want to show how all corporates cook their books and RE is going to crash 40-50% based on this but lets try to use rational figures and analysis :)
    CommentQuote
  • Originally Posted by realacres
    An extremely slow real estate market across segments is pushing debt-ridden, cash-strapped developers to exit partly completed projects and undeveloped land at massive discounts of as much as 40%.

    Cash-rich realtors like RMZ, Shriram Properties & others exit partly completed projects at big discounts - Economic Times


    The headline is incorrect. Shriram and RMA and buying property that others want to exit

    "Cashing in on the opportunity are other cash-rich developers such as Kanakia Group, RMZ, Shriram Properties and the Salarpuria Sattva Group, which are actively negotiating for projects that are stuck for want of funding."


    "Lower sales volume has dried up liquidity for the cash-starved real estate companies which have slowed construction activity across India. Tying up with big brands helps to sell the project faster," said Prashanth Sambargi, partner at Mars Realty, a real estate brokerage company in Bangalore.

    Rigged Indian RE market means that prices will be kept high for end-users by politically connected builders buying out weaker and newer players. And who will fund these builders? PSU banks which get thousands of crores in new equity every yr from politicians.

    And folks are -ve on Indian IT services which depends on salary arbitrage as its main USP
    CommentQuote
  • Originally Posted by herohiralal
    Folks applying for GC right now will need to wait for 8 yrs. Folks usually buy a house when they have some guarantee that is after EAD. Thats like a wait for 5-6 yrs for H1 folks.

    Have u looked at the L1 visa rejections recently? I am trying to get folks from India and its taking 3 months to get the documents done and even after that there are 80+% rejections..



    that means in a few years, less number of people from India will go onsite, hence less will earn foreign exchange, hence the prices in Pune should drop. The visa rejection rates have only being going up since the 2008 financial crisis hit. but the RE market has had only a minor correction in 2008-2009. After that even when the visa rejection rates have being increasing, the RE rates have been increasing at crazy rates.

    what justifies such insane valuations?

    Also, another implicit assumption in your statement is that NRIs will either buy a house in US or in India. that is not true, as a lot of people stick on cash, stocks and other financial instruments having a well-diversified portfolio. If you are going to skew your portfolio heavily towards the RE asset using leverage(loans), then you have to be really sure that RE prices are only going to go up. even a 1% drop in RE prices of a 1 crore apartment using leverage is huge.

    If we wish to learn anything from the japan RE bust, US sub-prime crisis...its that irrational exuberance cannot continue forever, and at the time it bursts the people unlucky to hold the ticking timebomb are the ones who pay heavily.

    btw...are you tracking the Canadian RE bubble? I think that's one bubble which is going to burst before India's RE bubble bursts.

    the daaru party, geyser not working are all examples of what landlords have to deal with on a daily basis. in markets like Pune which are renters markets, you do not have the luxury to choose your tenants. so instead of old parents enjoying their retirement life, they will have to deal with such kind of hassles. and in the meantime, if RE market corrects then the apartment won't even sell for the buying price thus incurring a loss.

    It's too much hassle and risk for too little gain IMHO.
    CommentQuote
  • Behind a Real-Estate Empire,Ties to India's Gandhi Dynasty - WSJ.com

    Behind a Real-Estate Empire, Ties to India's Gandhi Dynasty
    Robert Vadra, In-Law of Sonia Gandhi of India's Ruling Congress Party, Quickly Built Real-Estate Portfolio

    IMHO, all fraudlently raised prices to benefit a few land barons and politicians. the poor middle-class will end up holding the ticking timebomb.
    CommentQuote
  • Herohiralal,

    When I was talking about RIL, what I merely wanted to show is there is a difference between operations & sources of revenue. That's all.
    I have seen the debt figs & those are even bad if you see cos like ADAG & GMR.
    In news above, I was not talking about health of company but sources of income.

    As far news about builders selling to other builders is concerned, note that the builders who are buying are doing so at 40% discount. This means 2 things :-

    > Cash strapped builders have only 2 options - Sell or go bankrupt,
    > And when other builders are buying at 40% cheaper rates, they surely can sell it lower prices in market to buyers & they will have to if they don't want their investment to become dead investment.
    If former builder can't sell at market price, how will current builder be able to do so ?
    CommentQuote
  • Sonia has 3 foreign bank accounts, withdrew $10 billion recently

    Originally Posted by ThodiSiZamin
    Behind a Real-Estate Empire, Ties to India's Gandhi Dynasty
    Robert Vadra, In-Law of Sonia Gandhi of India's Ruling Congress Party, Quickly Built Real-Estate Portfolio

    IMHO, all fraudlently raised prices to benefit a few land barons and politicians. the poor middle-class will end up holding the ticking timebomb.

    +1. Ever wondered how RE prices shot up post Congress led UP Govt ?? Now read this :-

    BJP leader Subramanian Swamy has accused Congress president Sonia Gandhi of possessing three secret foreign bank accounts and that she has recently withdrawn $10 billion from a bank based in Vatican. The move comes days after Swamy accused Sonia’s son-in-law Robert Vadra of involvement in a land deal in Delhi.

    “Sonia Gandhi has three accounts in foreign banks and her total amounts in these three secret bank accounts are 1.5 lakh crore. Recently she had withdrawn $10 billion from a Vatican-based bank,” said Swamy.

    As per a report published in Hindustan Times, Swamy said that Sonia withdrew the amount from a Vatican bank after the new Pope declared that account must disclose the name of the holder. Swamy said the three banks in which Sonia Gandhi allegedly has accounts are one in Vatican, Sarasin Bank in Basell in Switzerland and Pictet Bank in Zurich.

    He said that Rs 120 lakh crore of the country has been kept in foreign banks by few individuals and if the BJP is voted to power, it would bring back all these amounts from foreign banks.


    Earlier on Wednesday, Swamy wrote to the President demanding an inquiry by the Central Vigilance Commission and probe by CBI into the alleged involvement of Robert Vadra in a major DLF land deal in the national capital.

    Swamy alleged that Vadra used his political influence to get a 23-acre property worth more than Rs 20,000 crore near Rashtrapati Bhavan allotted to DLF for just Rs 65 crore. DLF is proposing to develop high-end apartments, since its has secured permission for a housing complex.

    ‘It is obvious that without political influence this change in land use breaching national security and providing windfall profits would not have been possible,’ Swamy said in his letter to the President.

    Sonia has 3 foreign bank accounts, withdrew $10 billion recently: Swamy | Niti Central

    CommentQuote
  • Originally Posted by ThodiSiZamin
    that means in a few years, less number of people from India will go onsite, hence less will earn foreign exchange, hence the prices in Pune should drop. The visa rejection rates have only being going up since the 2008 financial crisis hit. but the RE market has had only a minor correction in 2008-2009. After that even when the visa rejection rates have being increasing, the RE rates have been increasing at crazy rates.



    Only if that were so simple. Look at the number of folks going for MS to USA. That number is going thru the roof and look at the salaries being paid by captive IT units of MNCs.

    Also the time it takes to acquire to get a GC is going up. So folks who are waiting in US for their EAD or GC is in thousands. That just makes it even more difficult for them to decide on buying a house. Plus folks who are on the east and west coast - Seattle, NJ, NY, CA etc - have to shell out 600K to 1 million $$ for decent homes so when u compare US and Indian RE prices pls compare like for like.

    Places like Texas and Georgia are where the best deals are available.



    what justifies such insane valuations?

    Also, another implicit assumption in your statement is that NRIs will either buy a house in US or in India. that is not true, as a lot of people stick on cash, stocks and other financial instruments having a well-diversified portfolio. If you are going to skew your portfolio heavily towards the RE asset using leverage(loans), then you have to be really sure that RE prices are only going to go up. even a 1% drop in RE prices of a 1 crore apartment using leverage is huge.



    Well majority invest in RE before stocks. If you think RE is crazy then Indian stock market is even more crazy. Apart from a few good companies the rest are all politically connected or govt owned. Check out returns on some of the middle cap and govt PSUs over the last 5-7 yrs.

    I don't support buying Indian RE. Didn't support it in 2008 and don't support it today. My personal preference is

    1. Stocks - SIP route
    2. RE - under construction project from reputed builders. Help me lock in the rate and spread investment over 3-4 yrs.
    3. Gold - Index traded gold ETFs



    If we wish to learn anything from the japan RE bust, US sub-prime crisis...its that irrational exuberance cannot continue forever, and at the time it bursts the people unlucky to hold the ticking timebomb are the ones who pay heavily.

    btw...are you tracking the Canadian RE bubble? I think that's one bubble which is going to burst before India's RE bubble bursts.


    Boss the whole logical world on one side and illogical Indian RE on one side.

    Where do u have yr after yr bailout of PSU banks? Where do u have thousands of crores put in Indian Airlines? Where do u have land laws which results in decades spent in courts? Where do u have a city like Mumbai with 50-60% living in slums?

    Have u seen the stance of RBI? For inflation that is driven mainly by the monsoon and irratic rainfall + supply side issues with food and fruit u have a RBI which has been increasing interest rates as if the Indian economy is like the US economy.

    Mr RBI Gov is busy sharing stage with Mr Ben B rather than doing what is correct for the Indian economy.

    I am not saying investing in Indian RE is advisable but this country does not run on sound logic. The other options available to normal Indians are land, gold and stocks. If RE is expensive the gold is even more expensive. stocks and land are still not that popular. RE is the undisputed king. It should not be that way but that is the way things are today in India.

    Millions are ready to vote for a party that if elected will make Venezuela and Zimbabwe look like small issues.
    CommentQuote
  • Originally Posted by ThodiSiZamin
    that means in a few years, less number of people from India will go onsite, hence less will earn foreign exchange, hence the prices in Pune should drop. The visa rejection rates have only being going up since the 2008 financial crisis hit. but the RE market has had only a minor correction in 2008-2009. After that even when the visa rejection rates have being increasing, the RE rates have been increasing at crazy rates.



    what justifies such insane valuations?



    Also, another implicit assumption in your statement is that NRIs will either buy a house in US or in India. that is not true, as a lot of people stick on cash, stocks and other financial instruments having a well-diversified portfolio. If you are going to skew your portfolio heavily towards the RE asset using leverage(loans), then you have to be really sure that RE prices are only going to go up. even a 1% drop in RE prices of a 1 crore apartment using leverage is huge.



    If we wish to learn anything from the japan RE bust, US sub-prime crisis...its that irrational exuberance cannot continue forever, and at the time it bursts the people unlucky to hold the ticking timebomb are the ones who pay heavily.



    btw...are you tracking the Canadian RE bubble? I think that's one bubble which is going to burst before India's RE bubble bursts.



    the daaru party, geyser not working are all examples of what landlords have to deal with on a daily basis. in markets like Pune which are renters markets, you do not have the luxury to choose your tenants. so instead of old parents enjoying their retirement life, they will have to deal with such kind of hassles. and in the meantime, if RE market corrects then the apartment won't even sell for the buying price thus incurring a loss.



    It's too much hassle and risk for too little gain IMHO.



    I think this whole point about buying in US vs India is a very small subset.

    There is a lot of rotation in IT services - from onsite perspective. Only 1 in 50 who will stay long enough will buy in West. Those guys also would probably have a house in India already. The most important point is nobody knows how long he is going to be there in West as it's all business driven. So guys after accumulating some money go for a buy in India especially if it's their first one.

    There are many people who don't think about return of investment as they don't see their house as investment.

    I have not seen people sitting on 50 lacs+ of cash or other investments and not having RE already.
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  • Originally Posted by RP Pune
    I think this whole point about buying in US vs India is a very small subset.

    There is a lot of rotation in IT services - from onsite perspective. Only 1 in 50 who will stay long enough will buy in West. Those guys also would probably have a house in India already. The most important point is nobody knows how long he is going to be there in West as it's all business driven. So guys after accumulating some money go for a buy in India especially if it's their first one.

    There are many people who don't think about return of investment as they don't see their house as investment.

    I have not seen people sitting on 50 lacs+ of cash or other investments and not having RE already.


    Yes it isnt a straight shot. There are many issues with Indians buying houses in US. Visa and credit score in addition to the ones u have mentioned.

    Indians who really want to invest their hard earned money into something that will remain valuable over a long period need to look at ways in which they can invest in US stocks from India.

    RBI allows 75,000 $$$ outward remittance and that should be aggressively used. No point putting money in RE or Indian stocks. Look at what happened in Europe when govt debt became unbearable. Savers and hard working folks will be taxed to the maximum.
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