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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  • Carpet I don't know, but 22,000 per sq ft in good gated society in Wadala.

    Rates are insanely high. But I see so many SUVs and top end cars in Mumbai and feel like people have money like anything. And no matter what rates here will never subside.

    But the truth always is that, one day rates have to fall. And they will fall.
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  • See another thing I observed is fluctuation of Traffic.

    In Mumbai, when I say that it takes me 1hr 5mins, then it almost daily takes exactly 1hr 5mins. This is because the preciseness of Local Railway System and overall public transport.

    This is not the case with Pune and Bangalore I guess. You may end up 15 mins early or 45 mins late for particular function depending on traffic in these cities. Whereas in Mumbai, mostly you know how much time it would take and it precisely takes that much time.

    Reducing commuting time is one thing. Another equally important thing is assurance that this much time would be needed, no more no less.

    Such assurance helps us plan for things in short-medium and long term.

    Now considering need of having this preciseness of timing, the cities with round the clock metro/local systems are the model for 21st century where time is money and planning is necessary due to systematic interdependence of entities. In such cities, taxis and buses can act as feeder system for main line of mass transport which runs exactly on time.

    This is where country's efforts need to be. Otherwise, our cities won't be livable.
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  • 1995- colaba- sea facing 10th floor

    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.



    1995- colaba- sea facing 10th floor

    i was in class 6-7th... we used stay in colaba.. that time my dad told me...
    u r lucky u r stying in this 2 bhk..which is +3 cr (in 1995)..

    i didnt realize,,wt he is saying...

    now i feel..n understood...wt he said...

    PS.. we were in NOFRA..(naval officer resd. area)


    Currently, i m in pune..settled..
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  • Informative thread !
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  • Originally Posted by Indian2016
    Informative thread !


    Yeah, prices are not coming down since this thread is started so finally guys diverted the topics of discussion as there seems no reason for prices to come down in near future :)
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  • Informative video on buying a flat

    https://www.youtube.com/watch?v=Zgrf2RjdjqM
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  • Originally Posted by REinvest
    Yeah, prices are not coming down since this thread is started so finally guys diverted the topics of discussion as there seems no reason for prices to come down in near future :)


    I think discussion has moved on from real estate because it's hopeless & irrelevant to discuss real estate nowadays. Few people are worried about it.
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  • https://www.youtube.com/watch?v=vUv3rO_fcTs

    KUL Ecoloch Flat Buyers & Lalit Kumar Jain, Kumar Builders KUL - Meeting
    Agitated buyers!!
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  • Originally Posted by VibhorD
    I think discussion has moved on from real estate because it's hopeless & irrelevant to discuss real estate nowadays. Few people are worried about it.


    Fact still remains the same :)
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  • Originally Posted by VibhorD
    I think discussion has moved on from real estate because it's hopeless & irrelevant to discuss real estate nowadays. Few people are worried about it.


    From my personal experience- renowned Bangalore based developer having launched one project in pune last year, For this project sales person here in singapore has come down on price by 10% in last 6 months. You just have to show some interest and keep negotiating.

    They think NRIs are easy target, but there is lot of awareness nowadays.
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  • Originally Posted by REinvest
    Fact still remains the same :)


    Yes, fact remains the same. The fact is your comments are misleading to say the least.

    Even in in the highly sought areas like Pimple Saudagar, Kothrud property prices have been stagnant since one year.

    In the poor infrastructure areas like Warje, Dhayari, Wagholi, Moshi there has been de-growth in 2015.

    Prior to that (2013 to 2014) the overall (avg.) annualized growth in Pune real estate prices has been less than 5%.

    Those who have invested at end of 2013 are actually losing the money; as same money would have earned 9% in bank deposits whereas Pune real estate has produced returns in the tune of 3-4%. Plus add the money lost in registration & taxes & its very simple to understand why people have lost the money in last two years.

    Gone are the golden days (2010-2011-2012) where there was 14 to 18% annualized avg. growth . All properties over 6500 psf rate or having tota costing close to & above crore are under serious pressure.

    Builders are offering various freebies like free kitchen, free decor, stamp duty+registration wave off & so on. This has not helped. Even 0% down payment schemes from so called reputed builders are not able to generate bookings.

    Pune is all set to see visible & outright price correction of 10% to 20%.
    In this scenario, I am surprised with your comments & optimism.

    And yes, discussions are diverted because real estate is a cold commodity now. No one is bothered to track updates now as no one is buying & nothing much is happening. Most of the people are saving money in other options.
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  • Originally Posted by bhushan911
    Yes, fact remains the same. The fact is your comments are misleading to say the least.

    Even in in the highly sought areas like Pimple Saudagar, Kothrud property prices have been stagnant since one year.

    In the poor infrastructure areas like Warje, Dhayari, Wagholi, Moshi there has been de-growth in 2015.

    Prior to that (2013 to 2014) the overall (avg.) annualized growth in Pune real estate prices has been less than 5%.

    Those who have invested at end of 2013 are actually losing the money; as same money would have earned 9% in bank deposits whereas Pune real estate has produced returns in the tune of 3-4%. Plus add the money lost in registration & taxes & its very simple to understand why people have lost the money in last two years.

    Gone are the golden days (2010-2011-2012) where there was 14 to 18% annualized avg. growth . All properties over 6500 psf rate or having tota costing close to & above crore are under serious pressure.

    Builders are offering various freebies like free kitchen, free decor, stamp duty+registration wave off & so on. This has not helped. Even 0% down payment schemes from so called reputed builders are not able to generate bookings.

    Pune is all set to see visible & outright price correction of 10% to 20%.
    In this scenario, I am surprised with your comments & optimism.

    And yes, discussions are diverted because real estate is a cold commodity now. No one is bothered to track updates now as no one is buying & nothing much is happening. Most of the people are saving money in other options.


    Not sure about Pune but following the Delhi NCR market specially Dwarka Expressway Gurgaon and Neharpar Faridabad. There has been a consistent decline in prices since 2013 of about 10% annually. Considering someone invested in 2012, his capital has eroded by about 50% taking inflation into account. Almost 50% UC properties in NCR are dead investments as they are never going to be delivered (builders bankrupt and running away).
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  • Why am i not seeing any debates and discussion on Budget?

    Have people lost all hope ?
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  • well, I think that this year will being more pain in RE, stocks and job market. There is nothing that our budget can help with :-)
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  • Originally Posted by bhushan911


    Gone are the golden days (2010-2011-2012) where there was 14 to 18% annualized avg. growth . All properties over 6500 psf rate or having tota costing close to & above crore are under serious pressure.
    .

    bhushan 911 :D . cool id.
    During period of 2009 to 2012 , there was most negative sentiment ever on this forum about RE. It has sobered since 2014.

    Originally Posted by bhushan911

    Pune is all set to see visible & outright price correction of 10% to 20%.
    .

    The prediction in 2010 was about 30% fall (by amitgupta). Later we found out that "fall" was acronym for "Fully Appreciate with Least Lethargy" (and yes, 2011 saw 30% increase in RE prices in Pune at least). Let us see what happened. After appreciating over 100% from 2009 to 2013 (Baner from 2.9K to 7K, Ravet from 2.2K to 5K, Kharadi .. ok let not talk about it). Even if price fall by 10 to 20% today, still it remains 80% appreciation since 2009. 50% appreciation since 2011 end, 30 % appreciation since 2012 end.


    Originally Posted by Deepak Singh
    well, I think that this year will being more pain in RE, stocks and job market. There is nothing that our budget can help with :-)



    Open threads by aditisharma/realacres/frugality/wiseman around 2010 period . There are much more severe prediction starting from war, deflation, stagflation (don't ask me what it is), massive job cuts (can't fit it all here) and right time to buy RE was predicted to be 2013/2014 diwali. People were asked to accumulate as much cash as possible and make merry when doomsday arrives.
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