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?

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  • Originally Posted by suryawork
    If 10L could become 80L in the first decade of the new millenia , then why can't 50L become 8Cr or 80L become 12.8 Cr in 20 years ???

    Because past performance need not be the same in future. Please read offer document carefully. :D And if you are so bullish, why inventory is going up & builders piling up debt ??
    Just because a batsman hits six on first ball, does mean all balls will be hit for sixes......he may get clean bowled in next ball. :D
  • Housing prices drop as investors prefer equity over realty

    The rapid rise in the stock market since the new government was formed has taken the sheen off real estate, where investments have not only dropped but investors are trying to monetise their existing assets, creating a scare of price correction. While the stock market has risen by over 12% since May 26 when the government was sworn in, property values have either remained stagnant or dropped in several micro-markets across the country.

    "Many HNIs are today stuck with their existing real estate portfolios, so the surplus money they are now generating in the businesses is finding its way to the stock market," said Rajeev Bairathi, executive director, north and capital transactions group at Knight Frank India. Investors have also been worried about the huge delays in execution of real estate projects and the overall wait and watch attitude of end-users, which has impacted property sales.

    Prices of new residential projects in the National Capital Region, for instance, was down 10% in June this year compared to a year ago. In Pune, it was down 25%, while in Bangalore it remained stagnant.

    Unsold inventory levels at the end of June 2014 stood at 765 million sq ft or about 7.6 lakh apartments, which would take about 35 months to be sold at the current pace of sales.

    Where does one invest if you want to be part of the up cycle? "The easiest is equities as it is relatively liquid. Whenever there's a change, money first goes into the most liquid of assets," said Gulbir Madan, chairman of Brahma Management, an India-focused investment firm.
    Cheruvu said there's a question mark in the minds of investors about affordability of property as prices had risen risen sharply and continue to remain high.

    Pankaj Kapoor, managing director of Liases Foras, said the downward pressure on property prices today is pushing investors away from real estate. "They see very little hope of a turnaround any time soon."

    Housing prices drop as investors prefer equity over realty - The Economic Times
  • Originally Posted by realacres

    Prices of new residential projects in the National Capital Region, for instance, was down 10% in June this year compared to a year ago. In Pune, it was down 25%, while in Bangalore it remained stagnant.

    Housing prices drop as investors prefer equity over realty - The Economic Times

    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?

    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?

    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?

    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?
  • Originally Posted by Sj2013
    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?


    The below is more usual-

    Price 12 months ago - 4800/-
    Price today - 5000/-

    Discounts - 50/- to 200/-

    Sale price - 4950/- to 4800/-
  • Originally Posted by Sj2013
    So does it mean if builder list price today is say Rs 5000/- in Pune, last year was it Rs 6666/-?

    good point .. the very ppl who call this paper Toilet paper will believe evertyhing if it is in their favor ... i am surprised to see paper mentioned 25% drop ... i wiuld say its a trap to lure new buyers into thinking that market has dropped ... surprised that members on this forum have been searching for homes since many years but no one has reported a drop in proces so far (except from the artcel above) .. i mean even bears havent come up with examples of drops apart from free taxes .. so not sure .. between last yeart and this year i have seen actual increase of 4-8%.. .. if 25% drop aundh would be in range of 5500 PS should be in range of 4500-4800...
  • Originally Posted by realacres
    NCR_Talk has already made correct points, so I won't elaborate the same.
    And yes, when one talks about INVESTMENT, it should be based 100% on ECONOMIC FUNDAMENTALS & 0% on EMOTIONS.

    Why should someone invest for 20 years !! I mean isn't that little long from investment point of view?
  • Originally Posted by Venkytalks
    Banks dont give loan for old flats?

    I didnt know this. Can someone provide details?

    i think for proerties that are 15yr + you wont get a bank loan
  • Originally Posted by Tangent
    i think for proerties that are 15yr + you wont get a bank loan

    Can anyone confirm and provide details?
  • Originally Posted by NCRTalk
    Atleast for change of addresses - I have seen many young folks specially those in IT doing -

    1. Email mode e.g. getting Bank statements, Postpaid bills etc.
    2. Preferring postal communications to a place where parents stay / permanent address / older house.

    Advantage is folks change jobs, cities, go onsite without worrying about changing address in Banks, LIC, DL etc.

    They may still hold many properties but do sale/purchase freely without worrying about address change every time. This gives flexibility so I don't see much difference on living at rent vs own flat at least in this regard. Have seen people selling their own flats after 2-3 years and buying a bigger one/ new area/ new city etc so this address strategy works well with many - tenants/owners alike.

    First thing I asked to RA in response to his post. Probably you didn't see RA's post.
    By the change of address point I wanted to point out the physical hassles of changing addresses frequently not really related to bank statements etc. thirdly as he was taking a 20 years timeframe I assumed that its not for investment purpose but as end user. Finally, as you said address strategy works well with many,but not for all right? Then how can someone generalise things? Don't you think it varies case to case basis?
  • Originally Posted by vaibav123
    Premium for garden facing is always there,because one does not know what view he will get from non garden facing flats.
    May be view of some other flat bathroom or kitchen.
    But in case of garden view at least you can see some open space an garden(unless builder changes the plan and puts up another building there later on.

    one drawback of garden facing flat is noise from kids and ppl talknig along with noise coming from sew-saws swings etc , beliwve me it can be annoying .. also all social gatherings happen there ... add to it dust if you have open gruond.....

    agree with te fact that flat floors 4-8, corner flats ,amenity facing flats and flats with mountain view etc will always get good demand
  • Originally Posted by ThodiSiZamin
    1. Even rent payments have tax advantages in india

    2. Rent is saved for apartment, but you are paying rent(interest) to the bank for 20 years. One missed EMI and you will realize what mess it is.

    3. Do everything electronically

    4. 40 lakhs, 90 lakhs in itself has no value. I mean what is the use of property being 90 lakhs in 20 years, if 90 lakhs itself cannot buy you a happy meal because of inflation or currency devaluation.

    There are of course numerous advantages to owning a good house and calling it your own. the only disadvantage i see is the lack of flexibility to pack my bags and move to a different place. with all the restructing taking place in all the companies, you never know what kind of a boss or what kind of a company you will end up in the next 5 years. its always good to be a part of the pan indian job market, rather than restricting yourself to a 1.5 hours commute from your house job market.

    1. Right. And even that is also not considered right? People giving half cooked information.
    2. Yes and that is what is covered in point 4? i really don't understand what you are saying here.
    3. Yes I guess most of the people does that.
    4. Correct. And today also you dont have this 40 lacs. So, today also you can't buy a happy meal. You r borrowing from bank and you are paying back to bank. And whatever you paid back probably you will get equal / more / little less from that amount after 20 years right? And you also stayed in the apartment.

    Frankly I didn't understand your points clearly. T
  • Originally Posted by suryawork
    You can quote more while selling and renting but I think premium money is made by builder for all these features not the buyer later on though he may think so .

    How do you know while selling that garden facing flat is getting 4L more ?

    Renters look for a good apartment - I dont think many renters will give 1-2k extra for garden facing apartment .

    All these marketing stunts came to Pune from Mumbai builders and mumbai investors .

    true generally rent does not change between different veiws (garnden,non garden).. to some extent even floor rise does not affect rentals
  • Originally Posted by Venkytalks
    In NOIDA, prices have dropped 10% in last 3 months due to heavy competition. From 2800 to 2550 psf levels.

    Cracks are beginning to show.

    If slowdown comes, expect another 2008 Sept like situation with builder crisis and delayed construction.

    This post is from Feb 2010. We all know what happened thereafter.

    RE has bounced back time and again sometimes quickly enough before people could completely realize it's a slack period.
  • Venkytalks,
    This link talks about housing loans for old properties:
    Canara Bank :: Housing Loans FAQ
  • Last year I got my flat in prolife for 4550 psqft in Its 5400..but yes rise is slow from jan had Reached 5100 by jan itself

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