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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  • Apartment rentals dip 30% in south Mumbai, south Delhi and Gurgaon

    Apartment rentals in south Mumbai, south Delhi and Gurgaon have fallen by 20-30% in the last one year, according to property consultants. Property brokers say a slowdown in the job market and commercial office space leasing over the last two years have put rentals in check.

    Compounding the problem is a rise in supply of apartments and homes in many locations. "Corporates have reduced their rental budgets for their executives, but many landlords still have unrealistic expectations," said Ramesh Nair, chief operating officer, business and national director at property consultancy JLL India. In south Delhi, rentals have dropped by up to 50% in areas like Vasant Vihar, Greater Kailash and Shanti Niketan.

    "Owners are finding it difficult to rent out their apartments or homes unless they are willing to reduce their demand," said Sunil Kapur of Delhi-based KK Real Estate. South Mumbai is facing a similar situation because expats have started to move towards Bandra. "In some parts of south Mumbai, you can get two-year-old rentals today. The supply is very high and demand still slack," said Mumbai-based broker Akhil Kapur of AJ Housing.

    According to brokers, rentals in posh buildings in south Mumbai, such as Raheja Atlantis, Imperial heights, Samudra Mahal, Beau-Monde and NCPA, among others, are down by 10% to 30%.

    "Many owners are preferring to let existing tenants continue without asking for an increase when the tenure ends," Kapur added. In Gurgaon, where several companies are setting up shop, rentals have fallen significantly. In prime projects on Golf Course Road — Pinnacle, Belaire, Palm Springs, Exotica and others —rentals have slid 30% in the past one year.

    Apartment rentals dip 30% in south Mumbai, south Delhi and Gurgaon - Economic Times

    ^^ Another reason to prefer rent than to buy & with such falls, renting becomes even more lucrative.
    CommentQuote
  • I did not get the entire discussion as I had not logged in for sometime.
    Here is something and not the entire details as identity would be revealed.
    Depth is missing now among the newbies.
    For the past two months for one special project IT guys were needed with attractive salary and interviews were conducted,Hardly one out of ten was selected yet required number of people could not be found.Those rejected were not really dumb but lacked depth.
    This is the case across many companies.There are good opportunities for those who develop quickly with depth.Many companies are conducting interviews regularly but it is not possible to get many with some good understanding of the subject.
    Brightest ones may be one in hundred but out of 99 you find only a few with a lot of development in the field because of laid back approach and no enthusiasm to learn new things.
    Venky must be a doctorate in Economics but venky how many bright doctorates do you find ? Most of them must have written some dumb thesis on the most useless topics.
    This is the malady in all the fields.One in 100 is good but the others are run of the mill types.
    This is not merely typical to India.All countries have similar problems in all fields.
    All people don't have same capacity and the number of the brightest differs from country to country.And throw in the surroundings bit and you get some more motivated people.
    All " phoren " people are not bright but their number is low because of the environment they get in education and also demographic scale.
    The parents may be farmers but brightness is genetic and many bright engineers have below average children. A brilliant mathematics professor's children are just ordinary even with some good schooling.
    Many such examples have been in news papers where ordinary parent's children making it to IIT has been reported.


    Originally Posted by Venkytalks
    I am also non ITG.

    But I am an investor in IT stocks. It is now a mature business. It will have to improve efficiency = do the same job with less people.

    IT employed a pent up frustrated group of capable people who were underproducing before. The children of the Nehru educated generation. Largely upper caste and English speaking.

    Even this cream was only of above average capability as compared to Western Japanese or Chinese (of Singapore Malaya Hong Kong or other expat) population i.e. the cream of India in top 1% matched the above average of these countries i.e. top 20%.

    That group is now used up. The rest of Indian population are less capable. It will take 2 to 3 generations to train them up i.e. the British rule babu + Nehru educated babu had kids who could do average IT services.

    Present youth is in 1st generation and cannot compete at global capability efficiency and productivity levels.

    Except the children of the IT generation.

    Growth in IT employment is now over. Addition (from IT kids) and attrition (of IT dads) will balance out.

    All Indians are not at same level.

    Exceptions will always transcend these barriers.

    But the bulk will not.
    CommentQuote
  • Originally Posted by rembrants
    This post sounds so weird to me. May be I have misunderstood...but right now this is what I interpret:

    India = IT + Farmers
    Children of ITGs = above average and can compete globally
    Children of farmers = first educated generation in the family and not capable enough

    So, if your Dad has not worked in an IT company, you are incapable and everybody else other then IT employees and Farmers do not exists?


    i think Venky's statement need not be taken literally. The point perhaps is that.... an average IT guy today is not as capable as he was 10-15 yrs back. And this is true. IT companies today recruit lakhs of fresh engineers every year. The intake today is 10-15 times of what it was in the 90s. You can't expect the same quality of folks at that rate.

    While IT companies do a lot of run-of-the mill projects which are largely in the ADM space (Application Dev and Maintenance), most companies are trying to build capability around products and consulting. Their is a conscious effort to increase revenue from these streams.
    CommentQuote
  • Originally Posted by realacres


    What is important is not high population but high productive population. Just make population 35-40 Cr & 90% of problems will vanish.


    for bringing down population from 120 Cr to 40 Cr, we probably need to build a lot of gas chambers. :-)

    But as we all know, our only option is to make those 120 Cr productive, literate and skilled so that they can contribute to the GDP, and not be a drag on the economy.

    btw, our sister nation - Pakistan, has a population of only about 20 Cr, and has all the problems that we have, and more.
    CommentQuote
  • IT, like any other industry, has gone through a high growth phase followed by stabilisation and then slowdown. I dont think they paid absurdly high compensation to undeserving people. It was just correction of the income base in India. High skilled, educated youth was available at cheaper costs compared to western countries.

    Now that IT sector has slowed down, the next growth, and a more sustainable one will come from what Indians do the best - banya

    Indians have an amazing sense of enterpreneurship and trade. Centuries back, India was the hub of global trade and it was called the "Sone ki Chidiya" because of the glorious trade and enterpreuship here.

    unfortunately, first the invaders and then the Congress have finished the free trade markets and the country is now the most difficult place to start a shop in.
    CommentQuote
  • Originally Posted by rambler
    I did not get the entire discussion as I had not logged in for sometime.
    Here is something and not the entire details as identity would be revealed.
    Depth is missing now among the newbies.
    For the past two months for one special project IT guys were needed with attractive salary and interviews were conducted,Hardly one out of ten was selected yet required number of people could not be found.Those rejected were not really dumb but lacked depth.
    This is the case across many companies.There are good opportunities for those who develop quickly with depth.Many companies are conducting interviews regularly but it is not possible to get many with some good understanding of the subject.
    Brightest ones may be one in hundred but out of 99 you find only a few with a lot of development in the field because of laid back approach and no enthusiasm to learn new things.
    Venky must be a doctorate in Economics but venky how many bright doctorates do you find ? Most of them must have written some dumb thesis on the most useless topics.
    This is the malady in all the fields.One in 100 is good but the others are run of the mill types.
    This is not merely typical to India.All countries have similar problems in all fields.
    All people don't have same capacity and the number of the brightest differs from country to country.And throw in the surroundings bit and you get some more motivated people.
    All " phoren " people are not bright but their number is low because of the environment they get in education and also demographic scale.
    The parents may be farmers but brightness is genetic and many bright engineers have below average children. A brilliant mathematics professor's children are just ordinary even with some good schooling.
    Many such examples have been in news papers where ordinary parent's children making it to IIT has been reported.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    True.

    I have worked abroad and in India. Very few of the whites without the talent take up doctorates.

    Most of the below average doctorates abroad were also Indians gulf philipino east europeans and even Belgians or Italians. Rarely Chinese or Japanese or Germans. Among the English also there was vast difference between depth of knowledge between upper class and working class.

    Indians in large numbers were just average but hard working. But enough were also brilliant.
    CommentQuote
  • Originally Posted by GlobeSon
    for bringing down population from 120 Cr to 40 Cr, we probably need to build a lot of gas chambers. :-)

    But as we all know, our only option is to make those 120 Cr productive, literate and skilled so that they can contribute to the GDP, and not be a drag on the economy.

    Do you think 30, 40+....can be made literate now ??
    And do you think those who are already literate now are doing well ??

    Issue is not about literacy but skills....industry specific skills.
    Eg. There are lots of electricians around, but only handful of them have finesse to do work properly. Why can't we have good electricians, plumbers etc. ??
    Giving these egs. as this is RE forum & easy for people to understand.

    btw, our sister nation - Pakistan, has a population of only about 20 Cr, and has all the problems that we have, and more.
    And what are the resources there ?? Nothing. Just see the land size, & resources there & then compare. And if the only work of people here is to spend resources fighting India, even God can't develop this country. :D

    Issue is not just population but ratio of Population : Resources.

    Man, we add 1 Australia every year. :o
    CommentQuote
  • 92 percent dip in tax collection from real estate sector

    The tax collections from Pune builders has fallen by 92% compared to last year as sale of flats takes a hit. This itself shows the real state of RE.




    CommentQuote
  • Originally Posted by realacres
    The tax collections from Pune builders has fallen by 92% compared to last year as sale of flats takes a hit. This itself shows the real state of RE.







    What a load of crap man!!! Those are income tax figures and not stamp duty or registration or home price figures. RE companies pay income tax on revenue and revenue is recognized based on project completion and not on project launch sales or just booking.

    Pls use correct data atleast to make ur incorrect analysis!!!
    CommentQuote
  • Originally Posted by realacres
    You should be bothered about prices abroad now since you are going to shift out. Heck, I thought you must have already shifted.
    Btw, in HJW, Megapolis is sharing 50% EMI amount with buyers, but as said before, the liability of loan is on buyer & not builder.

    Anyways, this is just another eg. of builder trying to raise money via buyer since other sources of funding have dried up.



    So instead of accepting that prices in Hinjewadi have skyrocketed u take the discussion into something unrelated. No wonder people give u such a hard time on this forum. U never ever accept ur mistake. Keep it up.
    CommentQuote
  • Originally Posted by realacres
    First of all, yes, this era of abnormally high incomes is now over. Those who will be getting good salaries will be only those having some core specialized strengths. The normal ITG getting placed in campus & so on shouldn't expect the growth like earlier.

    And with companies like Wipro who have started to downsize the strength by atleast 30% in next 2 years, only those with specialized skills will survive & entry for freshers will be difficult.

    Also see this :-
    Spate of Layoffs Clouds PM Modi's 'Make in India' Push

    India's third largest outsourcer Wipro is planning to slim its workflow down by about a third through automation.


    Business Finance, Stock Market, Quotes, News, Sensex, Nifty - NDTV Profit
    india-push-676396


    U r not from IT but are expert in making in such predictions?? I threw this challenge to wiseman and will throw it to u as well. Fine me 10 people with 10+ exp who have US GC or citizenship and willing to work for 120K in Atlanta.

    All talk without substance to fill in thread pages is getting boring man.
    CommentQuote
  • Originally Posted by realacres
    With government borrowing touching 90 per cent of the budgeted target till October, leading brokerages have said this may force Finance Minister Arun Jaitley to announce another round of spending cuts.


    Blaming high fiscal deficit to poor revenue receipts due to lower tax collection and lack of divestment proceeds, Nomura India chief economist Sonal Varma described the fiscal position as a “tighter spot” and said the finance minister will be forced to announce more spending cuts over and above the 10 per cent he has already announced.


    Nomura said the fiscal slippage is largely due to lower receipts, as was the case last month.


    Lower receipts are due to the weak tax collection (April-October net tax collection grew at just a paltry 5.9 per cent y-o-y compared to a target of 19.8 per cent) and no progress on the disinvestment process, Varma said.


    It can be noted that the government has cut its spending and growth has fallen to 4.3 per cent y-o-y in the April-October period from 6.6 per cent in April-September period.


    Deficit at 90%: Analysts see Finance Minister effecting more spending cuts | The Financial Express


    ^^ Apart from this, the GDP for Q2 has slowed down to 5.3% from 5.7% in Q1.



    Pls change the newspaper u read :) Jaitley has raised taxes on oil so that govt can raise more revenue. The massive drop in oil - which many on this forum said would not happen as the US shale boom was fake - has resulted in a bonanza for India. The govt is taking advantage of it and raising revenue instead of reducing prices dramatically and increasing imports.

    This single move will help the govt raise 30-40K crores and also keep oil import bill down.
    CommentQuote
  • Actions of GOI are wise and logical in this case.
    Good luck of lower oil prices is being encashed in constructive manner and not reducing prices drastically to secure votes.
    CommentQuote
  • Originally Posted by vaibav123
    Actions of GOI are wise and logical in this case.
    Good luck of lower oil prices is being encashed in constructive manner and not reducing prices drastically to secure votes.


    Depends on what they are using the taxes for. If its used just for more useless social schemes then its a utter waste of money. If they are used to lower taxes or invest in infra or pay down debt then its very good use of the money.

    Oil prices have fallen very rapidly so using this rapid fall to raise revenue is good but I am hoping that the govt can cut income tax - individual and corporate - in the next budget.
    CommentQuote
  • Herohiralal,
    The government will cut IT in next budget for both corporates and individuals.Both sections will benefit.
    NDA philosophy if pro business.My only worry is in the process of being pro business-environment will be destroyed.
    The good luck phenomena of lower oil prices should be used for structural reforms and building up alternate energy sources.
    Railways should aim to reduce their diesel consumption.
    CNG should be given a boost.
    Falling oil prices have a link to international situation also.The west is determined to bring Russia down to its knees.
    The break even point for Russia in oil is 90Dollars and this fall in prices is squeezing the "expansionist "Russia.
    Fall in oil prices impacts weak Russian economy severely.
    but whatever be the matter it is good luck for India and we should latch on for betterment of our economy.
    I am confident that Namo will cash on to this good luck to bring "Aache Din"
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