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....
Read more
Reply
12597 Replies
Sort by :Filter by :
  • Originally Posted by Tangent
    dude i am not staying in US or may be you are ...so dont really need a car to move around ...

    When did public transport in Pune improved ?? Anyways, to its own, for some it maybe fine.

    what i did was the best decision .. i had 5 laks which i invested in RE rather than buy car... the flat i bought sells at 70L (actual transaction unlike your fictiuous examples ) cost price was 26L ..
    If indeed so much appreciation has taken place, you should be driving around in BMW by now !

    but you wont understand why i did it becsue if you did you would not be satying on rent for 5 years .. and trying to prove how fool ppl are to buy RE
    My investments have given me better returns than RE by miles. And even today I can buy the same flat where I staying on rent but I won't coz its not VFM deal. Simple.

    ...... i think you should have bought a flat instead of car in 2009 when you started the thread
    I didn't had car then.

    .... ... i have made engough saving to buy atleast a Honda city ,, but to me car is more luxury than nececisty
    Car is luxury ?? :D Which century are you in ?

    and btw now you are suggesting that buying a car is VFM than buying a FLAt ..
    Yes, I don't know how does buying a flat in village with third class infra for 60-70L is more VFM than say Tata Zest ?? And it seems all people think this way, hence car sales are rising & RE sales are falling. Think.

    wake up man... anyway as always you wont understrand ..... ppl raked in moolah since 2009 while you are trying to prove that ppl buyiing are fools ....... i bough a flat for 26L which now sells for 70L so now you decide who is a fool
    And still you don't drive a BMW ?? o

    investwest,

    Who said we take car loans ?? None of my friends do either.
    What we look at is VFM & quality of life rather than slogging out for banks & builder.
    CommentQuote
  • Originally Posted by pune_friend
    interesting...

    what would be more interesting is you ACTUALLY buying one more similar flat (may be next to yours) at 70L TODAY and selling it for 2 cr+ in 2018-19. Believe me it is quite possible. Not joking.

    Yes, he will now use the money of honda city for making downpayment of other flat & in 2018, he will say how he made moolah & we are idiots as we didn't buy flat. ;)
    CommentQuote
  • Originally Posted by investwest
    I was talking about 'earlier'.
    If one skids - the argument can be reversed - what's the use of owning a car (no matter what - a hatch or 15L+) and getting thrown out of house by landlord (with or without notice) and what's the use of shifting every 11 months and disturbing family and especially kids and their friend circle every 11 months. If you have elders staying with you then - what's the use of expecting them to adjust in new surrounding every 11 months?

    I am staying in same flat for past 4 years. So don't over-hype issue of 11 months.
    Today situation is such that you simply whistle & you will get 10 flats on rent nearby you, thanks to intelligent investors.

    Again, car is a depreciating asset (though I own it and happy to have it) will you be handing over it to next generation? What'll they get out of a 10-20 years old car?
    Then you should not wear clothes too as you can't even sell them. :D
    And what you talk about next generation, next generation ?? Don't make them parasites.
    Btw, my landlord has 2 flats & his kids (daughter in singapore with her hubby, son in US) stay abroad with no plan to return. They are not interested in his flats either. Now see he could have utilized this money for something better but then I consider that he did it for my good, hence bought this flat which I can rent at fraction of cost.

    I agree with you on quality of life - but, do you call it a quality of life which pays EMIs for car
    100% cash down. My friends too do the same.

    I'll prefer to stay in own house and roam on bicycle if I cannot afford a scooter after paying EMIs of home but with own home I'll ensure stability to my family - kids and parents.
    Ok, good for you. We can't. I am sure, you will eat only time in a day to pay EMIs, we can't. And what do you think that people who are on rent have their kids, parents roaming on footpaths or what ?? Now I would not like to boast this but all of us go by flight wherever possible. And there are families in our building who go by train to save money so that EMI doesn't pinches them. But then, those who don't pay EMIs but rent sleep on footpaths, right. :D

    With own home, they can make/convert it the way they want and after all this there comes an element of satisfaction of achieving something in life (even car gives that satisfaction but home is home).
    Here if one has to go on cycle, from where will they get money to buy furniture ??

    In developed countries, the concept of family itself is in question and forget about inheritance and so on.. usually people don't stay with parents so they don't have to consider that angle in owning a house (see data of US and UK and you'll find that most of the Asians and in that too most of Indians have good families and not their natives).
    And see what they do in 15 years there. Here man becomes super senior citizen but can't do even 20% of what they do. Quality of life is important man, not buying a house.
    But heck, there are egs here where the person didn't take his family to even a hotel or movie for over 2.5 years so that he could pay home loan EMI. But this is good, because they stay in house, not on footpath.

    Again, in developed countries, the thinking is - earn to live and spend for oneself and get loans if you can and spend that too on fun, holidays, hobbies and so on - remember why US faced the dangerous recession?
    I am not American, neither are those who prefer to stay on rent than buy over-hyped properties. So please compare Indians to Indians.
    Now if I give you eg. of Saudi's, entire equation will change & I will say, bah, you don't have private jet ? Even their servants own private islands, & you stay in flat ? :D

    In India, we have the best economy - we call it savings economy - everyone tries to save for future and for next generations. There's nothing wrong in that, you'll get the feeling from Indian parents that whatever I could not get, I'll try to give to my kids - this feeling lacks in developed countries and they have their own different issues. So don't compare with them.
    Again, comparing us with Americans.
    And yes, if you care for family, I don't think you will let them go on bicycle or hanging in tum-tum.

    I'll still say that owning a car (especially on loan) prior owning a house (anywhere, does not need to own at the place/city you work) is not a good idea - it's pure idiotness.
    I went through it and I know how and when it pains - as I was paying EMI on car, I had low eligibility left for home loan - where is quality of life when you need to adjust in 1 room lesser to own a car?
    You took wrong decision & hence got pain. Why do you generalize that all those who buy cars end up like you ? Shall I give examples of sealed flats due to non-repayment of home loans ?? And yes, we make 100% utilization of PPF, 80C. How many people who are paying hefty EMIs are doing this ?
    Btw, posted this from footpath outside PMC as my landlord asked me vacate the flat yesterday. :D
    CommentQuote
  • RA extremely entertaining entries. Keep the good stuff flowing! far better than the news that we get to consume far better than the news that we get to consume
    CommentQuote
  • Originally Posted by Tangent
    who is asking to buy at insane rates .. use your own discretion ...it has been established fact that buying at current level as investment is stupidty

    So what are we saying all long ??
    Anyways, point taken.

    my point is ppl who waited since 2009 are clearly at loss including many bears here
    And how do you judge ? Only on RE prices ? Do you know what sort of portfolio we maintain ? I can buy the flat where I stay on rent at drop of a hat but I won't as its not VFM. Btw, my portfolio gave much better returns than RE. Even those who put their money in RD & FD are enjoying, forget MF & stocks.

    then also consiedr if you are kicked out of your rented house in a day or two ? believe me it has happened.. so possibilities are endless .......
    4 years have passed & landlord has proposed to go for 36 months agreement next time. He asked even before, but I refused. But then, I won't be staying on rent for next 3 years or even 2 because RE prices are falling & come down further. Once it reaches logical price, I will buy, till then I am happy renting.
    CommentQuote
  • Originally Posted by anirban8
    i recently bought an apartment in pune. By reading all your comments I think you people will call me a fool for this decision. :(

    bittuc123 has put well. So won't say same points again.
    And man, if you are not going to have 'fakir lifestyle' in other areas, don't bother.
    Just ensure that financially, you are sound & don't let home loan drag you down. If you do this, you are fine.
    Now enjoy your new house.
    Cheers. :)
    CommentQuote
  • Originally Posted by suryawork
    The standard is normally 3 rent periods of 11 months(abt 3 years) to one tenant at 10% increase yearly . When you shift after 3 years you can negotiate to a lower rent . I know several people who do this including myself . What is wrong from LAW perspective here ?

    +1. This is actually logic used by RE bulls to scare people & making them think that buying alone will offer you roof on head, else you end up on footpath. :D

    There are lot of people today who rent out their own flat and rent in close to work .
    It is realistic - Avoid commute , raise children in good schools and neighbourhoods .

    +1.

    More unrealistic is this scenario - Commute from Wagholi(because someone bought a rowhouse cheap there sometime ago without water and other daily facilities) to Hinjewadi - abt 3 hours up/down - The time spent on this would have been more fruitful to family , work and the most important asset of all - health - cost of which that someone will probably regain by saling the rowhouse :)

    Man, this 3 hrs up & down are worth, staying in PROPOSED INFRA, DP ROADS is also fine. Don't you know renting will put your family on footpath or some aashram ?? To avoid this, one should always buy.

    Btw, I wonder why most of the branches of banks are itself rented ?? So are ATMs ? Next time I will tell my bank's manager, buy this property, else the owner will throw all bankers out. :D :D
    CommentQuote
  • Originally Posted by pune_friend
    11 months is too short a period. It does not help tenant.

    Apart from finding good tenant in time, it is not economically good for you too. Flat needs to be painted before renting out to new person. If you change tenant every 11 months, it can cost anywhere near 30k (2 bhk) or so every time.

    If tenant occupies flat for at least 2 to 3 years, it works out good for both parties.

    With several flats, you may want to consider this. Are you in IT ?


    30K seems too steep? For just paint?

    Originally Posted by Sj2013
    When I put my flat on rent my initial deal was 10.5K per month in 2010 in wakad. Then I asked him for Rs 500 rise in rent means (11K per month) for doing re-painting which he agreed. I given him a brand new battery as well because I never planned the tenant living more than 1 year. The total expenses which I did was automatically got shared by the tenant (partly).


    5000 Rs for paint seems more likely.

    What battery? Invertor?
    CommentQuote
  • Originally Posted by Venkytalks
    30K seems too steep? For just paint?



    5000 Rs for paint seems more likely.

    What battery? Invertor?


    If the paint is luster and full painting process is followed i.e. scratch all existing paint , fill cracks(with lambi) , apply primer , then 2-3 paint coats - then it'll cost 30k for standard 2 bhk which is is adequate for 10 years at least .
    However for renting purposes , most owners will repaint every 3 years using distemper and a substandard painting process . Paint should cost abt 4K(40L of distemper) + labour .
    CommentQuote
  • Some of the recent posts are hilarious :):):) although with a lot of exaggeration from both sides .
    CommentQuote
  • China will initially invest $7 billion in industrial parks in Pune and Gandhinagar. "The Pune industrial park — spread across 5 square kilometres with an investment of $5 billion — will be for automobiles that will employ one lakh people and manufacture 1.5 lakh speciality vehicles.
    China to invest $100 billion in India over 5 years - The Times of India
    CommentQuote
  • Originally Posted by vlokras1
    China will initially invest $7 billion in industrial parks in Pune and Gandhinagar. "The Pune industrial park — spread across 5 square kilometres with an investment of $5 billion — will be for automobiles that will employ one lakh people and manufacture 1.5 lakh speciality vehicles.
    China to invest $100 billion in India over 5 years - The Times of India


    where is this "Industrial Park"..?
    CommentQuote
  • Originally Posted by suryawork
    If the paint is luster and full painting process is followed i.e. scratch all existing paint , fill cracks(with lambi) , apply primer , then 2-3 paint coats - then it'll cost 30k for standard 2 bhk which is is adequate for 10 years at least.
    However for renting purposes , most owners will repaint every 3 years using distemper and a substandard painting process.

    Thanks for pitching in. yes it is for full process for good quality. Note that labour costs have been rising with sq rates and inflation.

    Not sure it will last for 10 years. It may work if self occupied. But new tenant always looks forward to a white wash at the least. I just wanted to highlight the need for repaint every time vs good paint and a tenant for longer duration assuming you got a good one. It is peace of mind. People often discount this aspect, especially if they delegate to agent.
    CommentQuote
  • Originally Posted by pune_friend
    Thanks for pitching in. yes it is for full process for good quality. Note that labour costs have been rising with sq rates and inflation.

    Not sure it will last for 10 years. It may work if self occupied. But new tenant always looks forward to a white wash at the least. I just wanted to highlight the need for repaint every time vs good paint and a tenant for longer duration assuming you got a good one. It is peace of mind. People often discount this aspect, especially if they delegate to agent.

    Paint regardless of quality texture and colour gets too dirty in 2 to 3 years.

    My 3BHK home got a 70K paint job recently.

    Rental flats i doubt will ever get such treatment.
    CommentQuote
  • Originally Posted by vlokras1
    China will initially invest $7 billion in industrial parks in Pune and Gandhinagar. "The Pune industrial park — spread across 5 square kilometres with an investment of $5 billion — will be for automobiles that will employ one lakh people and manufacture 1.5 lakh speciality vehicles.

    But where ?? And when ?? Signing MOU is different than actual investments.
    CommentQuote