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 kaatesha
    hi venky, i couldn't quite get it. if one is looking to buy ( for living. not for investment), is this a good/bad time to buy? whats your view?. i know that people say its always a good time if its for self use. :-). but i don't buy that theory.

    Is end user money different in colour than that of investor ? If not, then what is bad for investment, how can it be good for self use ? Man, you have answered your own question here.
    End users should think from brain rather than heart to take financially good decision. As simple as that.
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  • Mumbai property sales dip, prices flat

    Property sales across tier I cities in the country have dropped.

    While Delhi and its surrounding region witnessed a 20% drop in sale, Chennai, Hyderabad and Mumbai saw 18%, 13% and 2% drops, according to the 2014-15 real estate research survey by Liases Foras. Bangalore is an exception, though.

    "Currently, property market has been quite inflated and over-stretched. No one, including end-users and investors, wants to invest his/her money... and that has resulted in decline in property sales," Pankaj Kapoor, MD, Liases Foras, said. "Besides, there is a huge gulf between the current rates and expectations of end-users. They are still waiting for price correction. All things are attributed to the stagnant sales in Mumbai and other cities."

    Liases Foras, a non-brokerage firm, is into real estate researches. The survey was released on Thursday.

    Kapoor said the change in guard at the Centre has not changed the property market scenario. "The Narendra Modi-led government cannot increase peoples' income overnight. The current property market is beyond the reach of common man. An ineffective market will continue for some time. Despite low sales, developers are not bringing down prices. But they are offering sops such as waiving off stamp duty and registration charges to lure buyers."

    Mumbai property sales dip, prices flat | Latest News & Updates at Daily News & Analysis
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  • Originally Posted by realacres
    For that you need to rely on ground reports, the deals which are on table. Please check NCR thread man.
    Rest has been put up well by Venky.



    What r u saying man?? you posted the following

    Originally Posted by realacres
    Btw, NHB has also reported a dip in RE prices in NCR by 20-25% YoY.


    So were you lying or did u not analyse the data properly? Pls clarify cause this is becoming a regular occurrence where u twist data or blatantly lie.
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  • Originally Posted by aamehra
    What r u saying man?? you posted the following

    Originally Posted by realacres
    Btw, NHB has also reported a dip in RE prices in NCR by 20-25% YoY.


    So were you lying or did u not analyse the data properly? Pls clarify cause this is becoming a regular occurrence where u twist data or blatantly lie.


    welcome to IREF...dont boil your blood on these petty issues :bab (59):

    not sure of reports...but rates in Gurgaon and Delhi have actuallly fallen between 10-20%...rates in Noida like rates in Pune are mostly flat YOY
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  • Originally Posted by Baruch
    welcome to IREF...dont boil your blood on these petty issues :bab (59):

    not sure of reports...but rates in Gurgaon and Delhi have actuallly fallen between 10-20%...rates in Noida like rates in Pune are mostly flat YOY


    And it is only a start...

    Tamasha is yet to unfold...:bab (59):

    Come with coke and chips to watch the movie.....
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  • Salient features of the REIT Regulations :

    a. REITs shall be set up as a trust and registered with SEBI. It shall have parties such as Trustee, Sponsor(s) and Manager.

    b. The trustee of a REIT shall be a SEBI registered debenture trustee who is not an associate of the Sponsor/manager.

    c. REIT shall invest in commercial real estate assets, either directly or through SPVs. In such SPVs a REIT shall hold or proposes to hold controlling interest and not less than 50% of the equity share capital or interest. Further, such SPVs shall hold not less than 80% of its assets directly in properties and shall not invest in other SPVs.

    d. Once registered, the REIT shall raise funds through an initial offer. Subsequent raising of funds may be through follow-on offer, rights issue, qualified institutional placement, etc. The minimum subscription size for units of REIT shall be Rs 2 lakhs. The units offered to the public in initial offer shall not be less than 25% of the number of units of the REIT on post-issue basis.

    e. Units of REITs shall be mandatorily listed on a recognized Stock Exchange and REIT shall make continuous disclosures in terms of the listing agreement. Trading lot for such units shall be Rs 1 Lakh.

    f. For coming out with an initial offer, the value of the assets owned/proposed to be owned by REIT shall be of value not less than Rs 500 crore. Further, minimum issue size for initial offer shall be Rs 250 crore.

    g. The Trustee shall generally have an overseeing role in the activity of the REIT. The manager shall assume operational responsibilities pertaining to the REIT. Responsibilities of the parties involved are enumerated in the Regulations.

    h. A REIT may have multiple sponsors, not more than 3, subject to each holding at least 5% of the units of the REIT. Such sponsors shall collectively hold not less than 25% of the units of the REIT for a period of not less than 3 years from the date of listing. After 3 years, the sponsors, collectively, shall hold minimum 15% of the units of REIT, throughout the life of the REIT.

    i. Not less than 80% of the value of the REIT assets shall be in completed and revenue generating properties. Not more than 20% of the value of REIT assets shall be invested in following :
    · developmental properties,
    · mortgage backed securities,
    · listed/ unlisted debt of companies/body corporates in real estate sector,
    · equity shares of companies listed on a recognized stock exchange in India which derive not less than 75% of their operating income from Real Estate activity,
    · government securities,
    · money market instruments or Cash equivalents.

    However investments in developmental properties shall be restricted to 10% of the value of the REIT assets.

    j. A REIT shall invest in at least 2 projects with not more than 60% of value of assets invested in one project. Detailed investment conditions are provided in the Regulations.
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  • This entire forum is made of and for Bears.. who may be very WISE, but in market and life there is something called time bound correction, I feel, that is what happening more than price correction, it will continue to happen for next 2-4 years. a correction of >25% , prized in many places already, so don't expect prices to fall further. So waiting is the best strategy, but one has to jump in next ride at right time, not many can do that.. will get same price at 2017-18????, if then why buy now??????
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  • corelated prices

    One has to cognisance of co-related prices.

    The current RE prices are no where the correct reflection of its inherent value.

    Its all about the black money floating in the economy waiting for an outlet.

    To think RE as an investment avenue at this inflated levels is a big risk.

    a bubble which will fizzle and find its correct level suddenly or slowly stagnate

    If it is sudden, the bubble will burst, if it stagnates it is being slowly puncturing.

    You might not get that property pre level, but other asset would have inflated much more
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  • Originally Posted by Investec
    This entire forum is made of and for Bears.. who may be very WISE, but in market and life there is something called time bound correction, I feel, that is what happening more than price correction, it will continue to happen for next 2-4 years. a correction of >25% , prized in many places already, so don't expect prices to fall further. So waiting is the best strategy, but one has to jump in next ride at right time, not many can do that.. will get same price at 2017-18????, if then why buy now??????

    So you accept >25% correction is already there ??
    This forum is not made by bears, it is made by neutral people who post based on fundamentals rather than speculation. Please explain one single logic of builders which holds true on fundamentals ?
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  • Originally Posted by Investec
    This entire forum is made of and for Bears.. who may be very WISE, but in market and life there is something called time bound correction, I feel, that is what happening more than price correction, it will continue to happen for next 2-4 years. a correction of >25% , prized in many places already, so don't expect prices to fall further. So waiting is the best strategy, but one has to jump in next ride at right time, not many can do that.. will get same price at 2017-18????, if then why buy now??????

    So you accept >25% correction is already there ??
    This forum is not made by bears, it is made by neutral people who post based on fundamentals rather than speculation. Please explain one single logic of builders which holds true on fundamentals ?
    And for a moment if we agree that one gets same price in 2018, then imagine the downpayment you have have at your disposal & amount of interest earned on this money + interest on home loan saved during this period. Why jump in sinking ship if you want to reach shore in anycase ?
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  • I m more of a stagnish than bearish on RE.

    If the money matters become more and more transparent.

    The moneyside inflation is bound to come down and hurt RE the most.
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  • Why IT fresher salaries have remained stagnant

    Flat customer demand, mining more work from employees and oversupply of software engineers have kept the salaries of freshers unchanged in the $108-billion IT industry for the last six years.

    To cope with shrinking demand from global customers and cater to customer need for cost-cutting technologies, IT firms have cut down on fresher hiring and instead shifted their focus to re-skilling employees even though the industry is estimated to grow 13-15 per cent this fiscal. The average salary of engineering graduates has stagnated at ₹3 lakh a year.

    “Six years ago, IT firms collectively hired 1.8 lakh engineers from campuses out of a pool of 4 lakh graduating engineers. Currently, they hire the same number of engineers from a pool of 14 lakh engineers,” Alka Dhingra, General Manager of staffing firm TeamLease Services, told Business Line. One of the major reasons for this is that IT services companies are being challenged by the emergence of cloud, mobility, analytics, digital and other new technologies, which require niche skills and much fewer hires, she adds.

    At Wipro, the FY-2014 revenue grew with zero headcount addition, which a few years ago for the same kind of growth, would have meant hiring some 10,000 employees. Wipro achieved this revenue growth by up-skilling employees, she says.

    Why IT fresher salaries have remained stagnant | Business Line

    ^^ This should put to rest RE bulls theory that more openings would mean higher RE prices.
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  • Inventory of realty companies on taxman’s radar

    Faced with the tough task of mopping up revenues against the backdrop of a sluggish economy, the tax department has drawn up a detailed game plan and is expected to look at various new avenues to collect taxes.

    Backed by court orders that have held that vacant flats with real estate companies are "stock-in-trade" and liable to be taxed as income from property, the department is expected to take a fresh look at the segment.

    Top officials from the tax department discussed various strategies to augment revenues at a meeting with finance minister Arun Jaitley. The government is keen to ensure that revenue targets are met to enable it to keep the fiscal deficit within the target of 4.1% of gross domestic product and also ensure resources for various social welfare programmes.

    Inventory of realty companies on taxman’s radar - The Times of India
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  • realacres bro - I'm a BULL by default, certain things run by your gene.. so I'm not fond of your over enthusiastic posts on price falls ON EVERY OTHER DAY. Yes India was over priced and is over priced at this moment.. what I'm saying we wont have any more correction. You are right for its getter to buy at 2018. what about Investors? what options do they have..Not everyone want money on FD.
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  • Originally Posted by realacres

    This forum is not made by bears, it is made by neutral people who post based on fundamentals rather than speculation. Please explain one single logic of builders which holds true on fundamentals ?


    Biggest joke!! Every single new item is twisted by you. People are waiting for correction for years while prices keep on rising in Pune. All your theories have fallen flat but u still harp your old continue.
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