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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  • Does anybody know how to use the http://igrmaharashtra.gov.in site to search for "Agreement to sale" within a given date range for a property/survey number?

    The date range on the site appears to be fixed to 2002-2014 and there is no way to restrict by document type.
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  • I am thoroughly confused by the search facility of the registration site http://igrmaharashtra.gov.in

    The survey numbers for BR towers 9-14 are: 124/1,124/2,125/1,125/2,156/1,156/2, 56/3,161/1,161/2, 162,163/1अे,163/1बी, 163/1सी,164/1,164/2,165/1,165/2

    I searched on all the numbers. Was able to see registration details for the original sales from Flagship Ltd to the initial owners.

    However the last data I was able to find was Dec 2009. How do we see sales post that?

    I know several flats that have been on sale in Towers 12-14 for over 1.5 years. Similarly I know flats in tower 9-11 that are on sale since May 2014 (even before possession).

    While I am of the belief that prices at BR are artificially high and that sales are difficult, even I don't believe that not a single sale has taken place since 2010.

    Experts please guide.
    CommentQuote
  • Originally Posted by sudhashbahu
    I am thoroughly confused by the search facility of the registration site http://igrmaharashtra.gov.in

    The survey numbers for BR towers 9-14 are: 124/1,124/2,125/1,125/2,156/1,156/2, 56/3,161/1,161/2, 162,163/1अे,163/1बी, 163/1सी,164/1,164/2,165/1,165/2

    I searched on all the numbers. Was able to see registration details for the original sales from Flagship Ltd to the initial owners.

    However the last data I was able to find was Dec 2009. How do we see sales post that?

    I know several flats that have been on sale in Towers 12-14 for over 1.5 years. Similarly I know flats in tower 9-11 that are on sale since May 2014 (even before possession).

    While I am of the belief that prices at BR are artificially high and that sales are difficult, even I don't believe that not a single sale has taken place since 2010.

    Experts please guide.


    Same problem for Megapolis..
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  • Nice effort, pathetic interface.
    For any given location, does anyone know how to get the survey number & other stuff required in the search?
    Can anyone point me to the right data set?
    CommentQuote
  • Originally Posted by priyankt
    Nice effort, pathetic interface.
    For any given location, does anyone know how to get the survey number & other stuff required in the search?
    Can anyone point me to the right data set?



    I got the survey numbers from data included in the rental agreement. One of the attachments has the original registration receipt.
    CommentQuote
  • Originally Posted by sudhashbahu
    I am thoroughly confused by the search facility of the registration site http://igrmaharashtra.gov.in

    The survey numbers for BR towers 9-14 are: 124/1,124/2,125/1,125/2,156/1,156/2,

    56/3,161/1,161/2, 162,163/1अे,163/1बी, 163/1सी,164/1,164/2,165/1,165/2

    I searched on all the numbers. Was able to see registration details for the original sales from Flagship Ltd to the initial owners.

    However the last data I was able to find was Dec 2009. How do we see sales post that?

    I know several flats that have been on sale in Towers 12-14 for over 1.5 years. Similarly I know flats in tower 9-11 that are on sale since May 2014 (even before possession).

    While I am of the belief that prices at BR are artificially high and that sales are difficult, even I don't believe that not a single sale has taken place since 2010.

    Experts please guide.



    I guess, SRO office in which registrations of agreements for MP, BR is happening may not be available through eSearch facility. Can you someone confirm the SRO name from Index-II? If it is Mulshi-2 then the data is not available
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  • High inventories force realty price slump in big cities

    Analysts say the asset class will underperform in times to come.

    A vibrant festive season notwithstanding, things are hardly looking up for the real estate sector. The notion that real estate is the best asset class to fight inflation as it gets high positive returns on investment may not hold true in the coming times.



    http://www.mydigitalfc.com/news/high-inventories-force-realty-price-slump-big-cities-650
    CommentQuote
  • Originally Posted by Sj2013
    I guess, SRO office in which registrations of agreements for MP, BR is happening may not be available through eSearch facility. Can you someone confirm the SRO name from Index-II? If it is Mulshi-2 then the data is not available


    It is Mulshi. Data should be available since 2002 till date.

    For offices where data is not available, no data is available. Since I could find data till Dec 2009 that should not be the case.
    CommentQuote
  • Originally Posted by sudhashbahu
    It is Mulshi. Data should be available since 2002 till date.

    For offices where data is not available, no data is available. Since I could find data till Dec 2009 that should not be the case.


    I guess
    - agreements till dec 2009 registrations might have happened in SRO Mulshi but
    - agreements of sale of flats might have happened in SRO Mulshi-2 for which eSearch facility is not available

    So it depends on which SRO registration is done.

    You should check with sales office of BR, MP for the actual reason.
    CommentQuote
  • With no buyers in sight, unsold houses pile up

    Mudassir Zaidi, national director Knight Frank India, observed that developers have continued to add to supply in the hope that the market would rebound. Zaidi also explained that demand has slowed down both from the end users as well as investors. While the higher prices scared home buyers, investors have stayed away due to the weak economy, which has deprived them of meaningful appreciation.

    With no buyers in sight, unsold houses pile up - Financial Express

    Btw, Bramha builder is offering discount of 14+L for their Kondhwa project.
    CommentQuote
  • Originally Posted by realacres
    Mudassir Zaidi, national director Knight Frank India, observed that developers have continued to add to supply in the hope that the market would rebound. Zaidi also explained that demand has slowed down both from the end users as well as investors. While the higher prices scared home buyers, investors have stayed away due to the weak economy, which has deprived them of meaningful appreciation.

    With no buyers in sight, unsold houses pile up - Financial Express

    Btw, Bramha builder is offering discount of 14+L for their Kondhwa project.


    Isn't it good time to go and negotiate further and buy? 14+ L discount is mouth watering but is it on current average market price of the area or on builders inflated price?
    CommentQuote
  • Originally Posted by NCRTalk
    +1

    Builders will make more profit in reducing their inventory with profits at reasonably good margins. That will save them bank interest, increase profit and hence allow to go ahead with other projects and building their repo. Holding off flats with unreasonable prices is detrimental to the very same business.


    Builders generally don't reduce prices as this will spook the investors and cause a downward spiral.

    Since Indians are not that finance savy, most of them will not understand time deterioration. that is, it is better to buy a 50 lakh flat 2 years from now than to buy a 50 lakh flat today as you can assume 9% risk-free interest on your principal.

    what these builders will most likely do is offer discounts, free stamp duties, etc to lure the buyers.
    CommentQuote
  • Originally Posted by ThodiSiZamin
    Builders generally don't reduce prices as this will spook the investors and cause a downward spiral.

    Since Indians are not that finance savy, most of them will not understand time deterioration. that is, it is better to buy a 50 lakh flat 2 years from now than to buy a 50 lakh flat today as you can assume 9% risk-free interest on your principal.

    what these builders will most likely do is offer discounts, free stamp duties, etc to lure the buyers.


    "Time deterioration" usually doesn't help much to people living on rent, since rentals nullify the benefits of interest earning.
    CommentQuote
  • Originally Posted by bhuvang
    "Time deterioration" usually doesn't help much to people living on rent, since rentals nullify the benefits of interest earning.


    And why doesn't it help?

    Under present circumstances, rental for a 1.80 Cr flat in Bangalore where I live (fairly upmarket area) is 45k pm or 5.40L pa.

    Interest on 1.80 Cr even at 9.25% is 16.65L, which is 11.25L more than rental (200% higher than the rent!!!)

    How does rental nullify the benefit of interest?

    In a static or falling prices market, where the price is at current ridiculous levels, rental is always far better than buying. Until prices come down to levels where, inclusive of tax implications, rental compare to interest.

    That is far away and prices need to come down significantly (perhaps 30-50%) before interest can compare to rental, unless house prices also start rising again.

    cheers
    CommentQuote
  • Festival fails to cheer loans

    2014 sees slowest start to festival season in at least 7 years

    Festive fervour ahead of Diwali appears to have done little to support banks’ sagging credit growth. Despite attractive interest rates being offered and processing fees getting waived, lenders’ credit at the start of this year’s festival season has grown at the slowest rate in at least seven years.On a year-on-year basis, the present rate of growth in bank credit has been the slowest since June 2011, thanks to an economic slowdown. According to data from the Reserve Bank of India, annual credit growth had fallen to a single-digit rate of 9.7 per cent as of September 19, compared with 17.6 per cent in the year-ago period. The rate for this financial year so far has been 2.5 per cent, against 6.5 per cent a year ago.

    Festival fails to cheer loans | Business Standard News
    CommentQuote