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 aditi sharma
    Nice article. I have seen such examples myself.
    A few weeks ago I came to know about an ITG, staying around where I stay.
    He Owns one 2BHK and one 1BHK. Now earning handsome salary, he bought both of these houses on speculations. But now is unable to spare money for expenses after paying EMI. so he decided to rent out both the houses and he himself lives in another cheaper and smaller 1BHK that saves him extra 2K per month. little surprise that this kind of people are around in society.

    This is due to Karmas, greed is injurious to health. Reading this, I was reminded of the case which I posted few months ago where a chap bought 3 flats thinking he will get one of it by selling other 2:D & now he is stuck. He took money from his friends to buy books for his kids. One of his friend stays in our society & he didn't gave him money, just said that your kids fees can be paid by me, but no other help like payment of car, home loan EMIs etc.
    Originally Posted by ziblu
    ]http://economictimes.indiatimes.com/quickiearticleshow/5603045.cms
    Good link man:). Hope some sanity prevails after reading such stories in the mind of RE speculators.
    Good link man:). Hope some sanity prevails after reading such stories in the mind of RE speculators.
    Good link man:). Hope some sanity prevails after reading such stories in the mind of RE speculators.
    Good link man:). Hope some sanity prevails after reading such stories in the mind of RE speculators.
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  • Visit to some sites

    Friends,

    I feel ashamed to inform that I visited some sites like Rajyog, Cross-over county (Ravi K fav) & Paranjape Madhukosh (had seen this land early too), Sun Residencyo. Had gone to SUn universe while traveling on NH4 & hence decided to travel here for TP:D.

    Will post in depth details for the same soon.
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  • Why are you ashamed to tell this :p
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  • Originally Posted by Technocrat
    Why are you ashamed to tell this :p

    Coz these were some of the worst projects I came across in recent times, only some projects at Wakad can come close:D. I was almost stuck in lift at Rajyog project.
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  • Originally Posted by realacres
    Coz these were some of the worst projects I came across in recent times, only some projects at Wakad can come close:D. I was almost stuck in lift at Rajyog project.


    One chap in Gurgaon was beheaded by a lift without proper safety devices.
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  • Tata Inora Park Undri Pune

    Folks, just came across this blog, good that players like Tata's are launching their schemes in Pune, rates are not very attractive but better than pune's crook builder lobby...

    Tata Inora Park Undri Pune - Tata Housing launches 6 acre township of compact and large 2 BHK....

    Property rate: Rs. 2,575 per sq.ft. for Saleable area

    2 BHK Flat: 976 sq.ft. Saleable:
    All inclusive property price Rs. 29.60 lakhs

    Compact 3 BHK Flat: 1,132 sq.ft. Saleable:
    All inclusive property price Rs. 33.80 lakhs

    Large 3 BHK Flat: 1,322 sq.ft. Saleable:
    All inclusive property price Rs. 38.91 lakhs

    Extras:

    1) Garden Facing: Rs. 100 per sq.ft.

    2) Hill Facing: Rs. 75 per sq.ft.

    3) Partial Hill Facing (!): Rs. 50 per sq.ft.

    4) Covered Car Parking (!?): Rs. 1,50,000

    5) Open Car Parking (?!):Rs. 50,000

    6) MSEB Meter Charges: At Actual

    7) Water Meter charges: At Actual

    ]http://ravikarandeekarsblog.blogspot.com/2010/02/tata-inora-park-undri-pune-tata-housing.html#
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  • Why they doing at Undri; what a choice of area to thwart buyers :D
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  • Tata Housing In Pune

    Man, whatever the price, one thing is for sure, it will hit all the builders in nearby areas really hard. Those who are willing to spend 2300 will pay 200 more, while those paying 2500+ will definately buy here.

    Whatever, the best part is that one of my personal favourite builder is now in Pune:). Tata Housing is not member of PBAP, yet it will kick them hard:D. Seems someone from Tata Housing is reading this forum as well. I wish them all the best.
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  • But I m not much happy seeing this.
    They too have parking charges like 1.5L and 50K for 'open parking'. If Pethkars are including these charges in psft charges, why can't TATA do it.

    Also there rate is on saleable area. I would expect TATA to take a bold step and quote all inclusive rate on Carpet area. (No saleable concept, no parking charges, no MSEB etc.. This doesnt mean charge less, but QUOTE the real price ).

    Originally Posted by realacres
    Seems someone from Tata Housing is reading this forum as well. I wish them all the best.
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  • Details for Tata Inora

    Man, got the details for the same:-

    TATA HOUSING DEVELOPMENT CO. LTD. PUNE 310, 3rd Floor, B Wing, City Point Apartment City Tower, Street No. 17, Boat Club Pune – 411001 Call: Sanjay Joshi : +91 9822054580 Amit Pustake : +91 9766773344 Swapnil Gaikwad : +91 9665396330 Email: inorapark at tatahousing.com
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  • Originally Posted by aditi sharma
    But I m not much happy seeing this.
    They too have parking charges like 1.5L and 50K for 'open parking'. If Pethkars are including these charges in psft charges, why can't TATA do it.

    Also there rate is on saleable area. I would expect TATA to take a bold step and quote all inclusive rate on Carpet area. (No saleable concept, no parking charges, no MSEB etc.. This doesnt mean charge less, but QUOTE the real price ).

    True, this should have been the case, atleast for the car park. But as far as salable area is concerned, very few people have knowledge about carpet & salable. Maybe this was the reason to do so. Just hope that carpet area is mentioned in the agreement as well.
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  • And VASCON is 123 today against its issue price of 165.

    Originally Posted by realacres
    ]http://www.moneycontrol.com/news/ipo-new-listings/db-realty-ends-day-1-below-issue-price_443536.html
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  • 100 Crores Rs. - 1 Flat - Indian Express news

    South Mumbai high: Rs 100-cr flats


    Ten duplex apartments at the under-construction Lotus Villa in the Napean Sea Road area of south Mumbai have been priced at a minimum Rs 100 crore each.



    Each square foot of the apartments costs Rs 1 lakh — nearly thrice as much as the per-square foot price of an apartment on the hundredth floor of Dubai’s Burj Khalifa, the world’s tallest tower. For the price of one Lotus Villa apartment, you could buy about 1,500 low income flats in the public housing project in the suburb of Ghatkopar.



    Each apartment will have a super-built up area of 12,750 sq ft including a private terrace garden. These castles in the air will be India’s costliest apartments, and among the largest on offer in India’s financial capital.
    Kalpana Shah, Chairman and Managing Director of the Satellite Group, which is building the apartments, declined to comment on the price. However, insiders in the realty business confirmed the rates. “We do not want to announce the prices until the project is launched. But this will definitely be one of the most high-end apartments,” Shah said.

    Apart from the ones booked initially by investors, most apartments in the 27-odd storey Lotus Villa remain unsold. Shah said she would re-launch the project in April. The building is coming up on an over-one acre plot on which the Morarka Bungalow stood until three years ago. The first 10 floors will be reserved for parking.
    Every inch of land in south Mumbai commands astronomical prices. Mumbai’s last big-ticket apartment sale took place in 2007, when a flat at NCPA Apartments on Nariman Point went for Rs 34 crore. At Rs 97,000 per sq ft, that is the country’s record residential deal so far. The Mumbai-based Satellite Group has over 48 projects including residential projects in Ghatkopar and Goregaon. It also has commercial projects in Andheri and Worli. The Group’s then MD, Pankaj Shah, was killed in the 26/11 terror attack at the Taj.
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  • 100Cr flat.....hmm better to put that money in FD & rent a duplex at Nariman point + get couple of Rolls Royce too.
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