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 puser
    Even I am feeling to get out of Pune.

    I've been to Bangalore as well as Hyderbad. Such a good roads they have!

    In Hinjewadi p 1, you have dust and sand everywhere; if you go on a walk around; be sure to get dirty(and feel dirty) when you return


    Not just you and me, even corporates will want to move out, if Pune is demanding premium over peers and not
    supported by premium Infra, Pune is bound to loose, I bet.
    CommentQuote
  • 1.6 crore Rs offer made to IIM K passout

    10 million new jobs expected (as per CNN IBN).

    Price hike by 40% expected in Pune for 1.6 c offer to unknown IIM K dude.
    CommentQuote
  • Originally Posted by puser
    1.6 crore Rs offer made to IIM K passout

    10 million new jobs expected (as per CNN IBN).

    Price hike by 40% expected in Pune for 1.6 c offer to unknown IIM K dude.


    Everyone keeps adding to the fuel of bubble...
    best example news articles like these...
    CommentQuote
  • Originally Posted by home123
    The real question is what value should we enter in "Annual appreciation rate" for property and "Annual rate increases" for rent?

    What is the average value from past experience? For Pune?
    May be Experts/Senior members can tell.


    I started staying at Fatima nagar for 6K rent & 25K deposit. An year later is was 6.3K.
    Now rent is 6.7K with same deposit. So effectively, rent increase by 5% per year.

    Thank god :D I did not buy house in Pune else would have effectively, paid interest of 18% in 2 years on home-loan.
    On top of maintenance and high-inflation.
    CommentQuote
  • Originally Posted by hitmady
    I started staying at Fatima nagar for 6K rent & 25K deposit. A year later it increased by 5% to 6.3K.
    This year rent is 6.7K with same deposit. So effectively, rent increase by 10% in 2 years.


    I am surprised to see consistent rise in rent from last 2 yrs in your case; I have heard otherwise.
    Though it seems you started with a very low rent. Is this a 2BHK or 1BHK?
    CommentQuote
  • Originally Posted by RAJESHP
    I am surprised to see consistent rise in rent from last 2 yrs in your case; I have heard otherwise.
    Though it seems you started with a very low rent. Is this a 2BHK or 1BHK?

    Started Low. 1 BHK with big garden society.
    CommentQuote
  • Originally Posted by puser
    1.6 crore Rs offer made to IIM K passout

    10 million new jobs expected (as per CNN IBN).

    Price hike by 40% expected in Pune for 1.6 c offer to unknown IIM K dude.

    Some facts:-

      These are not fresh recruits but did MBA post few years experience,
      Most importantly, these have been hired by Swiss Bank UBS for their operations in London, NYC & Singapore. Hence, this fellow is not going to be based in India.
      Coming to CNN-IBN news, it reads EXPECTED & not CREATED. It is just like builders' DP roads:D.Coming to CNN-IBN news, it reads EXPECTED & not CREATED. It is just like builders' DP roads:D.Coming to CNN-IBN news, it reads EXPECTED & not CREATED. It is just like builders' DP roads:D.Coming to CNN-IBN news, it reads EXPECTED & not CREATED. It is just like builders' DP roads:D.Coming to CNN-IBN news, it reads EXPECTED & not CREATED. It is just like builders' DP roads:D.
    CommentQuote
  • Originally Posted by puser
    1.6 crore Rs offer made to IIM K passout

    10 million new jobs expected (as per CNN IBN).

    Price hike by 40% expected in Pune for 1.6 c offer to unknown IIM K dude.


    Dude .. propaganda...thy name is iim(indian it male):D:D:D
    http://www.pagalguy.com/2010/02/six-degrees-of-separation-between-chinese-torture-and-b-school-placement-data/
    CommentQuote
  • Overseas realty funds struggle, shut shop

    http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=7912&cat_id=2

    “In 2005-06, there were 400-odd foreign investors targeting real estate, of which 250 had managed to register, 150 had applied for registration, of which today 40-odd exist,” said Amit Goenka, national director, capital transactions, at property advisory Knight Frank (India) Pvt. Ltd.

    Fund infusion is down from an estimated $20 billion (Rs 90,800 crore) to just $2 billion, an erosion of 90 per cent, he added. Goenka blamed the shrinking market on foreign limited partners (LPs), on whom PE funds depend for money, trying to make up for trading losses at home.

    PE investment, excluding real estate, declined from 453 deals worth $10.29 billion in 2008 to 263 deals worth $4.02 billion in 2009, while PE investments in real estate declined from 90 deals worth $6.64 billion in 2008 to 26 deals worth $950 million in 2009, according to Venture Intelligence, a Chennai-based research service that focuses on private equity and mergers and acquisitions.
    CommentQuote
  • Originally Posted by aditi sharma
    Fund infusion is down from an estimated $20 billion (Rs 90,800 crore) to just $2 billion, an erosion of 90 per cent, he added. Goenka blamed the shrinking market on foreign limited partners (LPs), on whom PE funds depend for money, trying to make up for trading losses at home.

    This has serious implications for Pune RE as well as there are foreign investors especially in townships like BR. If you see, REITS funds through which FIIs used to pump money in Indian RE too has dried up as well.
    CommentQuote
  • Lavasa

    Here are some financial facts about Lavasa from their official figs.:-

      Total turnover in 2009 is INR 339 Cr,
      PAT (Profit After Tax) is INR 99 Cr,
      Total Sales:- 1600 units,
      Rental sales, some under development:- 500 units.
      This means that the avg price at Lavasa comes out to be just over INR 21L/unit. PAT of INR 99 Cr on INR 339 Cr sales means that the profit margins are really big. Net Profits would be much higher.


      Here are some banks who have put in their money in this project-

        ICICI:- INR 250 Cr,
        Axis Bank:- INR 250 Cr,
        IndusInd Bank:- INR 50 Cr,
        Allahabad Bank:- INR 50 Cr.
        The company is also planning an IPO late this year through which it expects to raise about INR 2,000 Cr.


        So, 2 things to be noted:-

          Profits for builders are big,
          Cost/unit sales in actual take place at much cheaper rate than quoted on desk.
          Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.Most of the purchases here are made out of adjustments. What's more, the co. has also got the land almost of cost due to forceful acquisition by Pawar goons. Hence, the real picture of RE including it's price is far different than shown to mango man buyers.
    CommentQuote
  • Below is picked up from a different forum.

    Originally Posted by XXXXXXX
    rumours lashing the street say that a SCAM involving a real estate giant may open the pandora's box soon !!!;)


    Wonder if anyone here has heard about this rumor.
    CommentQuote
  • Originally Posted by realacres
    ...


    So, 2 things to be noted:-

      Profits for builders are big,
      Cost/unit sales in actual take place at much cheaper rate than quoted on desk.
      ...


      Builders, Politicians, Financers and RE Agents; ALL want to extort the buyers.
      Even if Pune RE gets sold at less than half (or even one third) the current quoted prices,
      ALL these guys would still make decent profits.

      But then there are also Buyers who want to just grab with whatever rates that are quoted .....
      :(
      :(
      :(
      :(
      :(
      :(
      :(
    CommentQuote
  • Originally Posted by enduser
    But then there are also Buyers who want to just grab with whatever rates that are quoted .....
    :(

    This remains the sole reason for all the RE bubble we see around. Had buyers shown some maturity, this would not have happened at first place, but unfortunately, many people give priority to heart rather than head:o.
    Originally Posted by veeemkay
    Wonder if anyone here has heard about this rumor.

    Man, is this related to Pune RE or some other city or India in general?
    CommentQuote
  • Originally Posted by realacres
    This remains the sole reason for all the RE bubble we see around. Had buyers shown some maturity, this would not have happened at first place, but unfortunately, many people give priority to heart rather than head:o.


    I agree - you put in a lot of research and planning to select a relative better project and once you are absolutely sure that this one is just right .. then "the women" in your life says .. she did not like it that much !!!!
    So its generally someone else's heart - one gives priority to :p !!
    CommentQuote