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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  • I asked my HDFC home loan consultant/marketing guy, do you have a flat in Pune. He said, ya, got a good deal last year !

    Well, I didn't stop there, I asked the same question a marketing guy at Shopper's Stop, he said, I am looking to 1BHK along with my 5 friends. Planning to book in Pimpri.

    And last but not least, my relative who owns a restaurant in Aundh, just got, I think, a paint house like flat.

    ITG's gave a lot of jobs/money to others who aren't in the IT field.

    Think like this IT 'kick started' the Ferrari called Indian Economy, now everyone is taking a ride on it, but when it losts its way (its too harsh, lets put it this way - may be had a little bumpo on the road). People are blaming on who started it at the first place.

    Cheers.
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  • Originally Posted by Space
    ITG's gave a lot of jobs/money to others who aren't in the IT field.

    Yep, but made life miserable for majority of them as well:(. Ashish, the issue is not just about perception but real facts as well. No doubt people consider IT paying high salaries but the sales in RE dominated by IT can't be ruled out either. See any major projects & you will see special benefits for IT employees:D. Why builders keep saying that due to IT Kharadi will grow (though this has now been busted:p)Now what does this mean?

    Fact remains ITGs are responsible not only for RE hikes but other areas like clothing, maids etc as well.
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  • Deemed conveyance clarified

    A meeting in Mumbai went a long way towards clearing the confusion on this important issue affecting several societies


    Recently a meeting on Deemed Conveyance Final Rule Notification was held in Mumbai, arranged by MP Sanjay Nirupam. Mr Sitaram Kunte, Housing Secretary, Government of Maharashtra and CA. Ramesh S. Prabhu, Chairman, Maharashtra Societies Welfare Association (MSWA) and an active member, led the discussion.
    Mr Kunte in his opening speech stated in the present market scenario, the consumer is king but this is not true in the case of flat buyers. Immediately after the formation of the new government, each department was called to give their vision documents for the next five years. Amongst other things, three important issues were discussed.

    First, the stamp duty department, local authorities and the builders will be compelled to sell the flats on carpet area basis only. Secondly, Deemed Conveyance Rules are being finalised and very shortly will be notified. Thirdly, the Central government has advised the state government to frame a legislation to regulate the real estate business by establishing a real estate regulatory authority. The housing department has started to study this and it will be enacted as a legislation shortly in which there will be Regulatory commission as well as appellate Tribunal to deal with real estate issues just like SEBI or Tele Regulatory of India. Even advertisements to be given by builders will be approved by the regulatory commission.
    He explained that many suggestions and objections were received on the draft rules and the consumer friendly suggestions have been incorporated like minimising the documentations , onus on the builder to submit the documents and so on. He also explained that many interactions were held with housing federations, officials, City Survey Department, stamp duty, builders associations like MCHI, PEATA, and NGOs. He then requested CA. Ramesh Prabhu to give a detailed presentation on the rules.

    CA. Ramesh S. Prabhu gave a clause-wise explanation. He stated that the Competent Authority will hear four important grievances of flat buyers. First under section 5 of MOFA to provide the accounts for the money received towards corpus, maintenance, property tax, conveyance etc by the builder. Secondly, U/s10, to form a legal body like society or condominium or company within four months of sale of 60% flats, Thirdly u/s 11 to provide conveyance of land and building within four months of formation of the legal body else to apply for deemed conveyance before the competent authority and finally u/s 13, to debar the defaulter builder for the next five years, in case of violation of any MOFA obligations.

    Further, he stated that in the original draft rules, 21 documents were required to be submitted by the applicant along with the application for conveyance. Considering the suggestions received, now the applications will be received with whatever documents are with the society/flat buyers and the developer will be directed to produce the same within one month otherwise an adverse inference will be drawn against the builder. Further, if the developer does not provide the same and the competent authority is of the opinion that certain documents are relevant before the same is decided, he is now authorised to appoint an authorised officer like Architect, Advocate, Chartered Accountants to get the relevant documents at the expense of the applicant and later to be recovered from the developer. The Competent authority has to decide on the entire application within six months of registering the same for hearing. He explained that if the developer has expired or there is a dispute between the developer and the land owner or if the case is filed by the landowner against the developer in the court of law, still the deemed conveyance can be imitated and obtained.
    While answering questions raised by participants, Mr Kunte explained that now lay out plot conveyance which was not provided earlier had been well explained. Conveyance cannot be stopped for any reason. Open space, gym, gardens and so on shall be provided to the respective societies as undivided interest in the land in proportion to the FSI/TDR used for constructing the respective buildings.
    CA. Prabhu explained that necessary notification to appoint District Deputy Registrar (DDR) as competent authority has already been published and in Mumbai threecompetent authorities have been notified.

    Regarding the applicability of stamp duty, CA. Prabhu clarified that if all flat owners have paid their respective stamp duty and registration fees on the deemed conveyance Rs.100/- shall be levied as stamp duty. The necessary provision is already there in the Bombay Stamp Act. However, the process of adjudication will have to be done and efforts should be made to reduce this process. Mr. Kunte stated that considering the questions received, an FAQ (Frequently Asked Questions) with relevant answers will be made available to societies for understanding the provisions . He also stated that the same will be published on the government website.
    CA. Prabhu clarified that if the builder does not appear or the land owners legal heirs have a dispute and do not appear and their addresses are not known, the same will be decided ex parte or on merit by the competent authority. Therefore a provision of making public notice in two newspapers is provided. He also clarified that the applications can be submitted by the any societies or the single flat buyers even now before the District Deputy Registrar. The rules are so exhaustive that it is criticised as builder friendly and builder oriented.

    However, Mr. Kunte clarified that the conveyance process being affected by nearly 26 laws and more than 10 departments and the various complications were required to be taken care, the rule was required to be made exhaustive leaving no room for ambiguity. He clarified that it is consumer friendly. CA. Prabhu clarified that any authorised representative can submit the applications. The cost of the applications like notice fees, payment made to government, public notice cost, authorised officer cost shall be mentioned in the order as a cost to be recovered from the builder. He also stated that the rules has provided for various forms and the draft of the order to be issued. While answering, he clarified that if the builder does not comply with the order issued by the competent authority, he has been authorised to appoint an authorized officer to execute and register the conveyance deed on behalf the builder/ land owner.

    When some of the participants wanted to know, why the same is not worded as final conveyance and called as deemed conveyance leading further chance for litigation and when the final conveyance will be available to the societies and legal bodies. Mr. Kunte and CA. Prabhu both clarified that it is compulsory for the developer to give the conveyance within 4 months of the formation of the legal body, if the same is not given, it is assumed to have received the conveyance and enjoy all the rights. But some officer has to authenticate the same and facilitate transfer of the property as provided under the transfer of property Act. Therefore , a competent authority has been appointed to facilitate this deemed conveyance. Once the order of deemed conveyance is passed by the competent authority and the same is registered with the sub-registrar through the authorised officer appointed by the Competent Authority, the societies can apply for change of property card or 7/12 extract and with this society gets final conveyance. There is no difference between actual conveyance and the deemed conveyance . Once you complete the process of deemed conveyance , it will be treated as final conveyance.
    All the participants thanked Shri. Kunte and CA. Prabhu explaining the provisions and also Mr. Sanjay Nirupam for organising such an educational seminar.

    Source: Maharashtra Societies Welfare Association
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  • To each his own.

    As for Bhopal read this


    The primary reason is constant pay revisions that Govt & BHEL employees have been getting since 2000, also BHEL has lot of orders resulting in lots of new ancillary industries being setup. With more business there are more buyers.

    Also it started rising somewhere around the time when people started getting Voluntary retirements which meant, those who opted for these got a lot of lump sum money which they could invest in properties.

    Also being a Govt/BHEL primary city many people who started out in Bhopal 30+ years ago are now either retiring or have retired which meant leaving their Govt residences & building/buying their own flats.

    I hope this clears.
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  • Originally Posted by realacres
    Yep, but made life miserable for majority of them as well:(. Ashish, the issue is not just about perception but real facts as well. No doubt people consider IT paying high salaries but the sales in RE dominated by IT can't be ruled out either. See any major projects & you will see special benefits for IT employees:D. Why builders keep saying that due to IT Kharadi will grow (though this has now been busted:p)Now what does this mean?

    Fact remains ITGs are responsible not only for RE hikes but other areas like clothing, maids etc as well.


    I agree to price hikes in RE & labor at some places but Clothing?? Please explain I dont agree to this.

    Also how have IT made life miserable for others by causing price hikes?
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  • Originally Posted by realacres
    Yep, but made life miserable for majority of them as well:(. Ashish, the issue is not just about perception but real facts as well. No doubt people consider IT paying high salaries but the sales in RE dominated by IT can't be ruled out either. See any major projects & you will see special benefits for IT employees:D. Why builders keep saying that due to IT Kharadi will grow (though this has now been busted:p)Now what does this mean?

    Fact remains ITGs are responsible not only for RE hikes but other areas like clothing, maids etc as well.


    I agree to price hikes in RE & labor at some places but Clothing?? Please explain I dont agree to this.

    Also how have IT made life miserable for others? by causing price hikes?
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  • Originally Posted by realacres
    Yep, but made life miserable for majority of them as well. Ashish, the issue is not just about perception but real facts as well. No doubt people consider IT paying high salaries but the sales in RE dominated by IT can't be ruled out either. See any major projects & you will see special benefits for IT employees. Why builders keep saying that due to IT Kharadi will grow (though this has now been busted)Now what does this mean?

    Fact remains ITGs are responsible not only for RE hikes but other areas like clothing, maids etc as well.


    And please add Sugar as well in this list , as I think these ppls are only who are eating Sugar Wearing Cloths (other non-IT ppls are still living in the Era when they used to wear leafs :D:D).....

    No, more Argument now ...I Accept it Now, that only IT ppls who are not more than 50 lacs in 100 Cr population,still they are the main reason for all Price rise in India in last 5 years:(:(
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  • Originally Posted by Technocrat

    To each his own.

    As for Bhopal read this

    Quote:
    The primary reason is constant pay revisions that Govt & BHEL employees have been getting since 2000, also BHEL has lot of orders resulting in lots of new ancillary industries being setup. With more business there are more buyers.

    Also it started rising somewhere around the time when people started getting Voluntary retirements which meant, those who opted for these got a lot of lump sum money which they could invest in properties.

    Also being a Govt/BHEL primary city many people who started out in Bhopal 30+ years ago are now either retiring or have retired which meant leaving their Govt residences & building/buying their own flats.

    I hope this clears.


    Exactly!!!...This is what I was trying to Prove man & you said it all:)....So, dont we have such govt servant or BHEL like industry in Pune as well (Even Pune is the Auto Hub of India)...And these ppls also getting salary rise in recent past (In fact in 6th pay commission salary revision now, govt servant are getting very handsome salary & Plus B-Money as well) so, reason mentioned in your post applies to Pune (for that matter other cities in India) as well...So, still if you don't want to Open your eyes then its your choice, but Fact remain the fact, whether you accept it or Not:D:D:D
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  • No my friend Pune has very little Govt employees when compared to Bhopal, it has more industries which grew with IT leading to overall hike.
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  • Some lucky IT ppl were paid real handsome onsite salaries at young age...
    And if I would pay that salary to any youngster, you have to agree that they would mess up the whole RE prices...
    They wudnt know about docs required on Builder side and documents to be demanded before parting with your booking amount and payment schedules...

    SO HAVE A STICKY SOMEWHERE WHERE YOU MENTION ALL THE PREREQUISITES FOR A PERSON TO CHECK BEFORE BOOKING A FLAT INSTEAD OF POURING OUT YOUR HEARTS ABOUT WHAT HAPPENED IN THE PAST FEW YEARS AND CURSING THE MOST VULNERABLE PPL ITG's
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  • Cool the temper man

    Originally Posted by Technocrat
    I agree to price hikes in RE & labor at some places but Clothing?? Please explain I dont agree to this.

    Well, simple exercise:- The T-shirt which is available at camp/laxmi road for INR 550/- is available for INR 460/- in Pimpri market. Once when I told a shopkeeper about this, he said:- "Tumhare umar ke log nap tol karte nahin, paisa rehta hain, kharch kar dete hai, computer se kafi paisa kama liya".

    Also how have IT made life miserable for others by causing price hikes?

    Well, the simple eg. I gave above was that of a maid. Again, as a member poited out that if you need to travel by rick in IT dominated area, the rickwala will demand more money (Area where they don't ply by meter or are far away from central areas).

    Hence, the statement.

    Originally Posted by ash7979
    And please add Sugar as well in this list , as I think these ppls are only who are eating Sugar Wearing Cloths (other non-IT ppls are still living in the Era when they used to wear leafs ).

    LoL. Sugar & leaves....herbal tea:D. Seems, ITGs Vs Non-ITGs process over-heated ash's CPU. Cool man, open the cover of cabinet if fan is not working;). Man, I have nothing personal against IT, & why do I need to say this time & again? Fact remains whenever we say ITGs, you take it personally. Man, if you working in telecom sector, why such statements? Network jammed?:D

    No, more Argument now ...I Accept it Now, that only IT ppls who are not more than 50 lacs in 100 Cr population,still they are the main reason for all Price rise in India in last 5 years

    The per capita income is US$550/annum for majority of Indians. ITGs income varies, much, much higher than this, hence no comparison should be made. The demand for illogically priced houses was mostly coming from ITGs only.

    In the Times Property Issue of 06/02/2010, these are some of the statements of the builders:-

    Dilip Mittal, Director, Mittal Brothers says, "Every area of Pune has something special to offer, whether it is the eastern side where Magarpatta IT Park exists, or the western where Hinjewadi IT Park draws the IT crowd".

    Atul Mahashabde, Partner, Om Developers, says, "We are exhibiting two projects The Island at Wakad and Angel Hills at Talegaon. We are offering free registration during the exhibition. Wakad has proximity to the IT Park and the PCMC area will be the centre of the city in the future".


    So, it is upto you to decide & note that we are not against ITGs or even investors for that matter. We are not debating whether what these ITGs did was right or wrong but that they worked as major factors for exponential increase in RE prices, that's all.
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  • Originally Posted by realacres
    Well, the simple eg. I gave above was that of a maid. Again, as a member poited out that if you need to travel by rick in IT dominated area, the rickwala will demand more money (Area where they don't ply by meter or are far away from central areas).


    You seem to completely ignore the benefit that has accrued to the maid and rickshawallah, etc., as if they were not human beings but some other category of living beings. If at all well paid people (maybe ITGs or anyone else) agree to pay more to these people for services that they provide, I don't see how it can be termed as something undesirable. It is an extremely myopic point of view which says that maid and auto becoming more expensive is a sign of quality of life being degraded by ITGs.
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  • Originally Posted by Technocrat
    I agree to price hikes in RE & labor at some places but Clothing?? Please explain I dont agree to this.

    Also how have IT made life miserable for others by causing price hikes?


    I hate that too. I hate how the prices are gone up for clothing etc. Mostly when I know all brands are manufactored from two single units in India.
    I hate when one spends stupid amount on Levi's or Lee.

    Again Logic is same. IT started it now everyone's doing it.
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  • The Reserve Bank of India (RBI), worried about soaring asset prices, has ruled out on

    MUMBAI: The Reserve Bank of India (RBI), worried about soaring asset prices, has ruled out one more round of restructuring of bad real estate

    Home loan factors
    Tips for moving into new home
    Why bank insists on guarantor
    Rights & liabilities in property sale
    loans which may increase non-performing assets of banks, but bring down prices of homes as developers sell off properties to pay lenders, said at least two people familiar with the matter.

    “Let them lower the prices and clear their inventory,” a senior RBI official had told bank chief executives ten days back. The banks were seeking permission continue classifying some bad real estate loans as standard assets even after developers failed to pay.

    One more restructuring would rather be a boon for developers to hold on to prices and profit, while hurting consumers, the official had said.

    ]http://economictimes.indiatimes.com/news/economy/finance/RBI-rules-out-further-rejig-of-realty-loans/articleshow/5550236.cms
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  • Originally Posted by aaj123
    You seem to completely ignore the benefit that has accrued to the maid and rickshawallah, etc., as if they were not human beings but some other category of living beings. If at all well paid people (maybe ITGs or anyone else) agree to pay more to these people for services that they provide, I don't see how it can be termed as something undesirable. It is an extremely myopic point of view which says that maid and auto becoming more expensive is a sign of quality of life being degraded by ITGs.


    Another view is that, general people from maid to rickshawala are looting ITGs now :)
    So said.
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