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 kothrud_pune
    Whom will u blame now..ITG or nonITG.

    The one who wrote this email & works in Hinjewadi. After all wife's have final say in some cases:D.
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  • kothrud_pune and realacres plesae don't start debate on this topic again. I just wanted to convey that people are buying at this rate in Wakad. builders succeeded in increasing fear among people about prices going northwords in Pune.
    One more thing to add the couple is from Mumbai. So even in one of the post it is mentioned that Mumbai people contributed to price rise in Pune so you can consider this as an ex for the Mumbai factor.
    My humble request not to start debate. We have more interesting subjects to discus here.
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  • Originally Posted by Dipti
    kothrud_pune and realacres plesae don't start debate on this topic again. I just wanted to convey that people are buying at this rate in Wakad. builders succeeded in increasing fear among people about prices going northwords in Pune.
    One more thing to add the couple is from Mumbai. So even in one of the post it is mentioned that Mumbai people contributed to price rise in Pune so you can consider this as an ex for the Mumbai factor.
    My humble request not to start debate. We have more interesting subjects to discus here.

    Hey, no debate from my side...just answered the question. I have given my clarification already here:-

    http://www.indianrealestateforum.com/pune/t-property-research-website-9628/page2.html

    Anyways, this IT & ITG issue for me is closed now.

    Hey, completed 2k posts!! This should be the rate for Wakad!!
    CommentQuote
  • Originally Posted by ash7979

    If we have so much money, then why we always looks Poor,Dirty, Depressed??? If Mumbai has produces equal to shanghai then why we have old & crumbling transport system & why shanghai has 400 Km/hr train???


    Hmm.. you have a point there. It IS quite obvious that Mumbai is pretty much one giant slum studded with high-rise apartments here and there. Comparatively, other cities like Shanghai, KL, etc. seem to be much more devleoped and modern.

    Let me turn the question around. Why is it that even though cities like Shanghai, Kuala Lampur, etc. are so modern and developed, they are only able to manage per-capita income and total income only a little higher than Mumbai and Delhi??

    Could it be that the modernism and development that we see in say Shanghai is only a facade or "haathi ke daant"? Is there perhaps an uglier reality that is hidden behind the high-rise buildings that nobody focuses on? Could it be that these areas have equally bad slums as Mumbai, only they are neatly partitioned off in certain areas of the city that nobody goes to? Dubai would be a good obvious example.

    Or, could it be that we Indians are so hard-working and tough that despite these inefficiencies, we are still able to be as productive as other modern cities?

    This would be a worthwhile question to think and debate. Perhaps, it will also allow us to make a better decision on our long term RE strategy.
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  • Originally Posted by realacres
    Hey, completed 2k posts!! This should be the rate for Wakad!!


    Realacres, in that case, can you please slow down your posts? My salary hike cannot catch up with the rate at which you post ;)
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  • Originally Posted by realacres
    Hey, completed 2k posts!! This should be the rate for Wakad!!


    I will happily book at this rate :D.
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  • Intehan ho gayi intazar ki (2k)
    Kab se kare hian tera intzaar (2k)
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  • While watching Zee News yesterday there was this report on RE.

    The report said that since Builders have increased the prices again without thinking the inventory levels are rising again. I know Real has been saying that Pune has the highest inventory in India… but in that report they said Bangalore has the highest followed by Mumbai, Delhi and the Pune. (Maybe some other cities were menti0oned as well).

    They also mentioned that people once again are finding the rates too high and are shying off from buying RE. Although they did mention that affordable housing are finding buyers.

    I am not sure what to make out of it.. cause even in Media we get so many contradictory reports. Some say “What a recovery!!! India is absolutely shinning like a sun”.. some say “Recovery still not complete please don’t remove stimulus”.. some say “Demand huge so prices up.. people buying like flats like crazy”.. while some say.. “Inventory levels are going high because rates have been increased by Builders”

    In all this confusion.. sometimes I feel like ARJUN and want to ask LORD KRISHNA.. “Who am I? what will I achieve buying a flat? What am I wanting money/Flat etc. if I am going to die taking nothing? Mera Marg Darshan kijiye Keshav.. mera Marg Darshan Kijiye?”.. :D:D

    Unfortunately I am no Arjun and I have no Lord Krishna to help me.

    VK
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  • Hum intezaar karenge tera qayamat tak ...
    Khuda kare ke qayamat ho aur tu aaye .... :D


    Cushman expects further 10% rise on residential prop (if interest rate do not increase in the budget). Situation looks bad on commercial space

    ]http://economictimes.indiatimes.com/Residential-property-prices-may-rise-by-10-Cushman/articleshow/5557062.cms

    Also new houses to cost more as Mah govt decision to apply 5% VAT on new constructions (agreement after June 2006) been uphelp by High court (there was stay order on the same). Seems 5% is applied on the difference between agreement cost and ready reckoner rate . Experts pls advice.

    Also new houses to cost more as Mah govt decision to apply 5% VAT on new constructions (agreement after June 2006) been uphelp by High court (there was stay order on the same). Seems 5% is applied on the difference between agreement cost and ready reckoner rate . Experts pls advice.
    CommentQuote
  • Originally Posted by veeemkay
    While watching Zee News yesterday there was this report on RE.

    The report said that since Builders have increased the prices again without thinking the inventory levels are rising again. I know Real has been saying that Pune has the highest inventory in India… but in that report they said Bangalore has the highest followed by Mumbai, Delhi and the Pune. (Maybe some other cities were menti0oned as well).

    They also mentioned that people once again are finding the rates too high and are shying off from buying RE. Although they did mention that affordable housing are finding buyers.

    I am not sure what to make out of it.. cause even in Media we get so many contradictory reports. Some say “What a recovery!!! India is absolutely shinning like a sun”.. some say “Recovery still not complete please don’t remove stimulus”.. some say “Demand huge so prices up.. people buying like flats like crazy”.. while some say.. “Inventory levels are going high because rates have been increased by Builders”

    In all this confusion.. sometimes I feel like ARJUN and want to ask LORD KRISHNA.. “Who am I? what will I achieve buying a flat? What am I wanting money/Flat etc. if I am going to die taking nothing? Mera Marg Darshan kijiye Keshav.. mera Marg Darshan Kijiye?”.. :D:D

    Unfortunately I am no Arjun and I have no Lord Krishna to help me.

    VK


    If a certain business news or recommendation migrates from the business magazine to a general newspaper or TV show, it is already too late for an investor. We would be better off in such a case to hold on to our money and wait and watch, or do the opposite of what everyone is doing.

    For whatever it is worth, I find that this strategy holds true most of the time, at least for long term investments. Then again, I am a complete "bachha" in this world of finance and real estate.
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  • Originally Posted by Saurabh01
    Intehan ho gayi intazar ki (2k)
    Kab se kare hian tera intzaar (2k)


    I think this is a y2k bug.
    We should call some ITGs to solve this and make this a y4k bug ;)
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  • Originally Posted by realacres
    Hey, no debate from my side...just answered the question. I have given my clarification already here:-

    ]http://www.indianrealestateforum.com/pune/t-property-research-website-9628/page2.html

    Anyways, this IT & ITG issue for me is closed now.

    Hey, completed 2k posts!! This should be the rate for Wakad!!

    Congrats real. You contribute 2000 posts out of total 16000 post on this channel which is 12.5% . A sizable contribution.

    Congrats real. You contribute 2000 posts out of total 16000 post on this channel which is 12.5% . A sizable contribution.

    Congrats real. You contribute 2000 posts out of total 16000 post on this channel which is 12.5% . A sizable contribution.

    Congrats real. You contribute 2000 posts out of total 16000 post on this channel which is 12.5% . A sizable contribution.
    CommentQuote
  • Originally Posted by compuwalah
    Hum intezaar karenge tera qayamat tak ...
    Khuda kare ke qayamat ho aur tu aaye .... :D


    Cushman expects further 10% rise on residential prop (if interest rate do not increase in the budget). Situation looks bad on commercial space

    ]http://economictimes.indiatimes.com/Residential-property-prices-may-rise-by-10-Cushman/articleshow/5557062.cms

    Also new houses to cost more as Mah govt decision to apply 5% VAT on new constructions (agreement after June 2006) been uphelp by High court (there was stay order on the same). Seems 5% is applied on the difference between agreement cost and ready reckoner rate . Experts pls advice.

    ANY SOURCE FOR THIS NEWS? as it will make a huge impact for many RE investments in last few years

    ANY SOURCE FOR THIS NEWS? as it will make a huge impact for many RE investments in last few years

    ANY SOURCE FOR THIS NEWS? as it will make a huge impact for many RE investments in last few years

    ANY SOURCE FOR THIS NEWS? as it will make a huge impact for many RE investments in last few years
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  • Originally Posted by sanav3
    ANY SOURCE FOR THIS NEWS? as it will make a huge impact for many RE investments in last few years

    Our own backyard :)

    ]http://www.indianrealestateforum.com/mumbai/t-beware-of-vat-on-flat-before-buying-a-flat-5190.html

    However just realized this was posted in June. However I do not see any of this VAT in new bookings.

    However just realized this was posted in June. However I do not see any of this VAT in new bookings.
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