Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Originally Posted by compuwalah
    Right aamehra.
    >> TCS maintained that only "non-performers" have been asked to leave and the lay-offs at TCS are no more in number than in the last few years.

    Of course TCS is not running some charity. Some people in IT think that it still follows socialist model where you can't be fired in spite of spending hours on phone, partying and arbit leaves, putting your share of burden on your colleagues. When bad time comes , such people are low hanging fuits get plucked first. TCS stock should improve in back of this news.

    I have myself witnessed in one of the biggies . The guy performed badly. He is expert in providing excuses "why this can't be done". In process he ended up sucking other people time and team morale went low. When it was questioned why this guy can't be replaced, they say they make all effort first to see that it can be avoided. He was moved under a different boss and things did not change. Almost 2 years passed and people got used to "modus operandi" of the guy and in slump of 2009 he was finally given a pink slip. So you can imagine there are some people there who should not have been in the first place and they get ok rating just don't know how. I just wonder how IT companies can survive without firing a certain percentage every year.

    In a US company this guy would have been shown door in a weeks time.


    The definition of non-performers changes as the business climate changes.

    In good times, even idiots are tolerated to warm the seats.

    In really bad times, even good performers are shown the door.

    Moreover, I will question the efficiency of HR departments in this case that of TCS HR department. What kind of hiring practices do they have, that so many non-performers are laid off every now and then.

    I guess the HR folks should be the first ones to be fired for hiring the wrong kind of people!!
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  • Suggest to make crash theory threads non sticky - they just seem to be promoting extreme pessimism with the same arguments repeated again and again .

    Indian stock advice thread seems to be the best thread on Pune forum .
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  • Pessimism apart, personally I have learnt a lot from these threads
    Especially the cautious and doomday one. Of you believe the bldr brokers
    investors, then we might be rushing to buy property as I said on the moon.
    These have been very helpful for enduser like us who can afford a single residence only.
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  • Wondering what use have been these threads. I thought these have rather made people loose oppurtunity year after year and meanwhile prices have doubled/tripled since 2009.
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  • Originally Posted by compuwalah
    Wondering what use have been these threads. I thought these have rather made people loose oppurtunity year after year and meanwhile prices have doubled/tripled since 2009.


    Hardly - or only if you were very very lucky.

    In 2009 I purchased a flat at the same time as a few of my classmates in 4 different locations between Dec 2009 and March 2010. One chap sold his flat for a gain of 48% when he sold in October 2014. I sold my flat in November 2014 (after having it on sale for 3 months) for a gain of 51%. Rough rate of 9% per year - not bad, but not spectacular :) Another one is looking to sell his place, he will probably get 100-110% and the 4th has no interest in selling but will not make more than 50-60% if he wanted. So only 1 in 4 got his to double.

    Places where prices went down since end 2009- nowhere.
    Price where you did not get 100% appreciation - Deccan Area, Kothrud, Bavdhan, Old city, Erandwane, Model Colony, Shivajinagar, JM Road, Sanghvi, Aundh, Sinhagad Rd...
    Places you made 100%+ would be Hinjewadi, Baner, Warje, Pimple Nilakh, Wakad, Pimple Saudagar, Ravet, Pradhikaran...

    I know all my data is on the west side of town, but as I write the list down I notice the bias towards the price rise in PCMC :) Infrastructure?
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  • That's what I m pointing out -Hedging !

    the plateau in RE seems to be between 4000-4500.

    This appears to be a resistance level at current income of the buyers

    so till the prices hit these levels, bldrs are merrily increasing the prices

    Now once the prices touch these levels the selling slows down.

    The best strategy seems to be to sell max flats as soon as possible to get
    good start with good monies.

    The real gainers were the earlier movers or plane lucky jane ones.

    I don't very many have doubled there property since 2009,

    The next big push can only be sustained through higher income growth 8-10%
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  • Originally Posted by jigpun
    Hardly - or only if you were very very lucky.

    In 2009 I purchased a flat at the same time as a few of my classmates in 4 different locations between Dec 2009 and March 2010. One chap sold his flat for a gain of 48% when he sold in October 2014. I sold my flat in November 2014 (after having it on sale for 3 months) for a gain of 51%. Rough rate of 9% per year - not bad, but not spectacular :) Another one is looking to sell his place, he will probably get 100-110% and the 4th has no interest in selling but will not make more than 50-60% if he wanted. So only 1 in 4 got his to double.

    Places where prices went down since end 2009- nowhere.
    Price where you did not get 100% appreciation - Deccan Area, Kothrud, Bavdhan, Old city, Erandwane, Model Colony, Shivajinagar, JM Road, Sanghvi, Aundh, Sinhagad Rd...
    Places you made 100%+ would be Hinjewadi, Baner, Warje, Pimple Nilakh, Wakad, Pimple Saudagar, Ravet, Pradhikaran...

    I know all my data is on the west side of town, but as I write the list down I notice the bias towards the price rise in PCMC :) Infrastructure?



    well then u invested in wrong prpoerty ... i think all made 100%+ from 2009


    Kothrud near city pride the qoutes where 5000-5800 ... now it is zoomed past 13000
    pethkar is selling for 10000 i had got qoute of 6000 in 2012 march
    sahakarnager waas at 4500-5000 (including amits famous scheme) now rates are 11000+ there
    sinhagad road my frnds bought 2bhks for 2800 .....now it is 5500+ in schemes which are farther (PSPL madhukosh, darode jog etc..)
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  • Originally Posted by compuwalah
    Fair point RA.

    However during the time the Interest rates were rising (at same rate of 25 bps) , this was used as a big argument to support fall theory (arguing this will lead to less RE demand). (In hindsight we now know the RE demand kept increasing hand in hand with interest rate, wats the logic , I don't know) .

    Now since rate has fall , we are changing tune to "how much Rs 820 matter to a person " :)


    No, please don't put words in my mouth. I have always maintained that interest rates won't impact RE, even when they were rising for the simple reason that RE prices have outpaced everything. I had even given an eg. that just because Mercedes is available on 0% interest rate doesn't mean it becomes affordable. Request you to read older pages.
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  • Originally Posted by compuwalah
    At last we have some sane Govt.
    After some time there will be some money left to focus on projects that matter.

    The fall in oil prices has brought gr8 oppurtunity and govt is doing right as not to reduce prices by same amount and use the money to get the fiscal deficit figures to respectable levels.


    +1. Fiscal deficit is one big monster which is not getting tamed easily. However, mere reduction in oil prices won't help, there will be lot of cut down from Govt expenditure as well to meet the target of 4.1% for FY 2014-15.

    Apart from this, we also need to focus upon the US Fed. The moment it raises its rates, lot of FII will flow out, which may weaken INR against $ which will make oil more expensive.

    The only way to counter it is to boost exports & for this to happen, what is needed is not interest rate cuts but more economic reforms.
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  • Then 3 of the 4 of us invested in the wrong place? Hardly think so.

    To be fair, my personal data is from Jan-feb 2010 (5 years to the date from today) , not 2009. Most of the appreciation in the current upswing was during 2009 I think. I visited about 70 properties (all under construction then). My current data is from 2014-15 when I was selling my 1st place and buying another upgraded home. Today's market, for anyone who takes the effort has 100s of resales in every suburb that are priced 10-30% cheaper then builders - even for places just 2-3 years old, never lived in and best of all, ready possession.

    From a buyer point of view, trying to buy from a builder - my price may have gone up 100%, but I can roam around and buy a as-good-as-new resale instead. As a seller though, since I had to buy in 2009/10 no inventory market and sell in today's oversupply market - you do not get the rates quoted by builders/newspapers, etc.
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  • KUL Updates

    Juhu society’s redevelopment dreams crash

    Juhu's Anamika cooperative housing society building, built in 1985, was vacated by the 20 flat-owners in 2010 after a redevelopment deal with Kumar Urban Development. The building was demolished and the residents dispersed to different areas on rent provided by the developer. Almost five years later, there is no sign of their new homes. Work ground to a halt more than a year ago.

    "We have reached a stage of frustration and don't know if we will go back to our homes in our lifetime,'' said Dipak Painter, chairman of the society. Like Painter, most of the harried residents are senior citizens. They fear the Rs 75,000 a month rent each gets from the builder could stop soon if they fail to renegotiate the agreement.

    We are justified in asking for reasonable amendments and want to settle with the society amicably. I hope the press does not allow itself to be used to exploit and blackmail developers and harm their business,'' developer Lalitkumar Jain told TOI.

    http://timesofindia.indiatimes.com/city/mumbai/Juhu-societys-redevelopment-dreams-crash/articleshow/45265937.cms

    Builders pay crores for redevelopment, fail to deliver


    Builders, who paid astronomical amounts in 2010-11 to middle-class residents of two prominent housing societies in the western suburbs for redevelopment, have failed in the venture and are now believed to be scouting for buyers.

    The redevelopment of the 1-acre Bharatiya Bhavan society in Khar (W) by Parinee Developers and the 11-acre Khira Nagar society in Santa Cruz (W) by Pune-based Kumar Urban Development Ltd (KUL) have stalled since then.

    Lalitkumar Jain of KUL denied the Khira Nagar project was on the block, adding that the redevelopment was delayed because of "legal impediments".

    Jain concluded the Khira Nagar deal in 2011 to redevelop the 17 residential buildings comprising 672 flats at an estimated cost of Rs 750 crore. A few dozen residents of Khira Nagar were paid as much as Rs 18,000 a sq ft for their 330 sq ft to 600 sq ft flats.

    Property consultants said they recently received feelers from the developer to look for buyers.

    Some builders are also believed to be in serious financial trouble and are unable to execute redevelopment projects now.

    http://timesofindia.indiatimes.com/city/mumbai/Builders-pay-crores-for-redevelopment-fail-to-deliver/articleshow/45084795.cms
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  • Boisar: where apartments are lying vacant

    As one walks into the affordable housing project of Tata Housing at Boisar near Mumbai, one can see rows and rows of 3,000-plus apartments spread across 64 acres.
    But barring an occasional car or two-wheeler making its way to the estate department of the developer, one doesn’t see too many people as not many have moved into the houses.

    Mahindra Lifespaces had also launched a 1,000 apartment residential project in the affordable space in Boisar in September.

    Pankaj Kapoor, Managing Director of real estate research firm Liases Foras, said this is the state of many affordable housing projects, which due to land cost, are far away from the city. Added to this were investors who are always ready to corner offerings that come their way, especially when it is from a reputed brand. Although prices have more than doubled over four years, the sluggish market has made it extremely difficult for investors to exit.

    There were projects in the NCR where ready flats (owned by investors) were quoting at ₹3,500-a-sq ft while new launches were asking for ₹6,000-a-sq ft. Developers were also offering rental returns to promote sales. In November, a Liases Foras report said the sluggish real estate market had unsold stock of 815 million sq ft of residential space across six cities as of Q2 FY15.

    Kapoor said the inventory of apartments could take well over four years to sell.

    Boisar: where apartments are lying vacant | Business Line
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  • Originally Posted by jigpun
    Hardly - or only if you were very very lucky.

    In 2009 I purchased a flat at the same time as a few of my classmates in 4 different locations between Dec 2009 and March 2010. One chap sold his flat for a gain of 48% when he sold in October 2014. I sold my flat in November 2014 (after having it on sale for 3 months) for a gain of 51%. Rough rate of 9% per year - not bad, but not spectacular :) Another one is looking to sell his place, he will probably get 100-110% and the 4th has no interest in selling but will not make more than 50-60% if he wanted. So only 1 in 4 got his to double.

    Places where prices went down since end 2009- nowhere.
    Price where you did not get 100% appreciation - Deccan Area, Kothrud, Bavdhan, Old city, Erandwane, Model Colony, Shivajinagar, JM Road, Sanghvi, Aundh, Sinhagad Rd...
    Places you made 100%+ would be Hinjewadi, Baner, Warje, Pimple Nilakh, Wakad, Pimple Saudagar, Ravet, Pradhikaran...

    I know all my data is on the west side of town, but as I write the list down I notice the bias towards the price rise in PCMC :) Infrastructure?

    Did you and your friend take loan or bought it with full downpayment.
    Can you give rough idea as how much %age of loan you all took (average would be fine) and median buy price ?
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  • Originally Posted by realacres
    As one walks into the affordable housing project of Tata Housing at Boisar near Mumbai, one can see rows and rows of 3,000-plus apartments spread across 64 acres.
    But barring an occasional car or two-wheeler making its way to the estate department of the developer, one doesn’t see too many people as not many have moved into the houses.

    Mahindra Lifespaces had also launched a 1,000 apartment residential project in the affordable space in Boisar in September.

    Pankaj Kapoor, Managing Director of real estate research firm Liases Foras, said this is the state of many affordable housing projects, which due to land cost, are far away from the city. Added to this were investors who are always ready to corner offerings that come their way, especially when it is from a reputed brand. Although prices have more than doubled over four years, the sluggish market has made it extremely difficult for investors to exit.

    There were projects in the NCR where ready flats (owned by investors) were quoting at ₹3,500-a-sq ft while new launches were asking for ₹6,000-a-sq ft. Developers were also offering rental returns to promote sales. In November, a Liases Foras report said the sluggish real estate market had unsold stock of 815 million sq ft of residential space across six cities as of Q2 FY15.

    Kapoor said the inventory of apartments could take well over four years to sell.

    Boisar: where apartments are lying vacant | Business Line


    Why Govt is not providing required infra.
    So person does not good roads schools, hospital and transport arrangements.
    Thus location has that much premium. Bad leaders for a great country one can say.
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  • Originally Posted by Sansei
    Why Govt is not providing required infra.
    So person does not good roads schools, hospital and transport arrangements.
    Thus location has that much premium. Bad leaders for a great country one can say.


    Because lot of politicians too are involved in RE business. However, now MH state Govt is better, they are now going to build coastal road in Mumbai, a trans-harbor link connecting South Mumbai to Navi Mumbai (earlier Govt didn't do this since they had stakes in S.Mumbai RE) & also planned cities will be built around periphery of Mumbai. Once this is done, current Mumbai will become less lucrative + Pune guys having option to work in Mumbai too can stay in these new planned areas.
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