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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  • The way people sounded in 2012 that it will happen within an year (btw all that to just support the theory of drop in prices). So my point is that even after that we have maintained leadership for 4continuous year since then. Threat is always there. Even we are threat to China in taking over as a next major manufacturing hub (and that too major investment coming from China businessmen). We are a threat to China in wooing Japan to do future investment in India going forward (given disputes over Senkaku islands and support to North Korea). We are a threat to Vietnam based on as how few month back China owned factories and investors were targeted in one incident.


    Especially after Modi has been office he has been really aggressive in marketing India all over the world and the new investments coming in speak for themselves.


    Especially the way relation between China and various South East Asian countries is developing , India may be more attractive on stability front. The low oil price is really playing out in our favor and countries like Saudi/Kuwait etc are waking up to the hard reality.


    But since that does not support fall theory, it does not come into discussion.


    The front runner will always be pushed hard by 2nd in race and that is what will keep us pushing is forward and improving.
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  • Originally Posted by rambler
    Bangalore IT companies are talking of moving to either Pune or Hyderabad because of traffic woes in Bangalore:D

    Brace for jump in your RE prices:D


    Yes.. But please dont set up offices in Hinjewadi and Magarpatta... Already overcrowded and huge traffic...
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  • many companies moved out of Hinjewadi and some are in the plans of moving.. that's where kolte patil and pharande are eyeing to grab them to their townships in future which have proximity to hinjewadi as well..

    Now you understand why and who wants companies to move out of hinjewadi?
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  • Originally Posted by compuwalah
    Hi IT companies. Please do not come to Pune ... I know you won't listen ... ok since you have decided, you are welcome :-P


    Look at this
    “Everyone is facing a serious threat as employees spend four to five hours commuting to workplace,’’ says Vinod Chandra, Vice President and General Manager, Brocade India


    and then look at the comments below to understand what local Bangalore or Bengluru people think about outsiders.


    http://www.deccanherald.com/content/522621/infra-woes-driving-firms-city.html

    Same problems are in pune that are in bangalore. Bad roads traffic pollution cost of living . And outsiders being hated by locals. And it companies being blamed for local problems.

    What difference?
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  • Originally Posted by BaagadBilla
    Same problems are in pune that are in bangalore. Bad roads traffic pollution cost of living . And outsiders being hated by locals. And it companies being blamed for local problems.

    What difference?

    NOIDA Expressway and Greater NOIDA and Yamuna expressway with metro is the obvious choice.

    Except for gangsters of SP ruling the lawless land, and poor quality of English education, everything else is favourable for a major shift of IT to NOIDA
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  • Originally Posted by BaagadBilla
    Same problems are in pune that are in bangalore. Bad roads traffic pollution cost of living . And outsiders being hated by locals. And it companies being blamed for local problems.

    What difference?



    Whereas in Bangalore you spend 4 to 5 hours in travel, you spend only 2 hours in Pune.
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  • Originally Posted by compuwalah
    Whereas in Bangalore you spend 4 to 5 hours in travel, you spend only 2 hours in Pune.

    Two hours one way. yes. Not sure bangalore is four hours one way or both.
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  • Originally Posted by compuwalah
    Whereas in Bangalore you spend 4 to 5 hours in travel, you spend only 2 hours in Pune.


    "Pune" Never seen a great place been so badly managed/exploited by politicians and people do nothing and keep mum.


    Negatives :- No public transport at all, Seriously bad roads all around "you feel like gliding on sea", unplanned growth, Look at current pollution level around places, Extreme weather fluctuations now, Traffic woes are affecting life and due to that living pockets been created, Hospitals are not adequate and not excellent, Extremely high RE prices !!




    Positive which is still holding Pune good :-


    1. Greenery - Still good than any other city I have been.
    2. Security and openness of living life is good if not excellent.
    3. Jobs - Just keep coming
    4. Weekend Gateways - Awesome
    5. Education institutes - Plenty


    I hope people of this place make their representative responsible and demand more and be more vocal else positives will turn negatives in no time !!!
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  • Reading about Pune and Bangalore makes me feel king here in South Mumbai.
    Takes me total 2 hrs each day for commute with awesome city life and very low level of pollution in southern side due to seas on all sides.


    I have lived in both Pune and Bangalore but that was at least till 5yrs before. I dont know if situation has become such a grim in last few years.

    I think some new areas of Mumbai can be thought for relocation of companies and families.

    I have lived in both Pune and Bangalore but that was at least till 5yrs before. I dont know if situation has become such a grim in last few years.

    I think some new areas of Mumbai can be thought for relocation of companies and families.
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  • Originally Posted by Hairpin
    Reading about Pune and Bangalore makes me feel king here in South Mumbai.
    Takes me total 2 hrs each day for commute with awesome city life and very low level of pollution in southern side due to seas on all sides.


    I have lived in both Pune and Bangalore but that was at least till 5yrs before. I dont know if situation has become such a grim in last few years.

    I think some new areas of Mumbai can be thought for relocation of companies and families.

    Any place in urban India have a home close to office.. good quality of life with less travel..

    People have this RE buzz so invest and office changes location or people move to a new job and then all the travel happens

    Maybe not true for Mumbai as homes in South Mumbai, Parel and Worli are not affordable even for renting

    Any place in urban India have a home close to office.. good quality of life with less travel..

    People have this RE buzz so invest and office changes location or people move to a new job and then all the travel happens

    Maybe not true for Mumbai as homes in South Mumbai, Parel and Worli are not affordable even for renting

    Any place in urban India have a home close to office.. good quality of life with less travel..

    People have this RE buzz so invest and office changes location or people move to a new job and then all the travel happens

    Maybe not true for Mumbai as homes in South Mumbai, Parel and Worli are not affordable even for renting

    Any place in urban India have a home close to office.. good quality of life with less travel..

    People have this RE buzz so invest and office changes location or people move to a new job and then all the travel happens

    Maybe not true for Mumbai as homes in South Mumbai, Parel and Worli are not affordable even for renting
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  • Originally Posted by Hairpin
    Reading about Pune and Bangalore makes me feel king here in South Mumbai.
    Takes me total 2 hrs each day for commute with awesome city life and very low level of pollution in southern side due to seas on all sides.


    I have lived in both Pune and Bangalore but that was at least till 5yrs before. I dont know if situation has become such a grim in last few years.

    I think some new areas of Mumbai can be thought for relocation of companies and families.

    What would be rough price for a 1 BHK in south Mumbai say for some new construction ?

    What would be rough price for a 1 BHK in south Mumbai say for some new construction ?

    What would be rough price for a 1 BHK in south Mumbai say for some new construction ?

    What would be rough price for a 1 BHK in south Mumbai say for some new construction ?
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  • at least 4 times than that of developing areas of Pune :) and at least twice than that of flats in well developed areas in Pune.
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  • 1BHK in my society would be 1.5crore at minimum (Wadala-Dadar area). Rent minimum 35k for 1bhk. But it varies from locality to locality.

    In my case, I must admit that its a Government leased home, otherwise my salary is also peanuts to afford anything here.

    But still, what I am trying to point is that, there is JNPT-Sewri Bridge planned and with airport in Navi Mumbai, its very low pollution level and planned nature, I think region of Navi Mumbai is one place to look forward to.
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  • that bridge is proposed and being planned at least since 12 years now (when I was in Mumbai and heard of it first time) or may be more. Based on that, the uran and surrounding areas got sold like anything, guys sold any land they found on other side of shore from navi mumbai and now everything is a complete mess. Even CIDCO is thinking again as there'll be now lot of resistance to land acquisition in that area after varied interest of many (as per a CIDCO officer who was our neighbor in Navi Mumbai).
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  • Originally Posted by Hairpin
    1BHK in my society would be 1.5crore at minimum (Wadala-Dadar area). Rent minimum 35k for 1bhk. But it varies from locality to locality.

    In my case, I must admit that its a Government leased home, otherwise my salary is also peanuts to afford anything here.

    But still, what I am trying to point is that, there is JNPT-Sewri Bridge planned and with airport in Navi Mumbai, its very low pollution level and planned nature, I think region of Navi Mumbai is one place to look forward to.

    Um.. And area.. Carpet if you can.

    I have lost the pin and all my hair is standing on it's end at these prices . .
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