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?

Read more
12597 Replies
Sort by :Filter by :
  • Finally people are recognising the -ve effects of a Credit Boom!

    Originally Posted by realacres
    Right Sansei.
    Add to it poor monsoons & it's ill efects of the economy. The people are earning less, getting laid off & due to poor monsoons, the cost of living will go up means people will spend less which means no auto, holidays etc. let alone RE. A neigbor of mine lost his Audi Q7 last week & has been compensated with a humble Innova by the company. Many are losing their Black-berries too. No first class travel, for short distances it is now trains than flights. For long distances, it is video conferencing:D.

    Had to attend a seminar last week at The Le-Meridian, which was later shifted to a hotel at Vimannagar due to swine flu. Didn't attend due to swine flu & seminar had many western people which made it more risky in current scenario but the delagates who came from US insisted that we meet them. However could not do so as they had a flight at 1600Hrs. Earlier, never these things used to happen where the other party used to be so desperate.

    The situation is very bad, & has become worse due to poor monsoons. In all these bad news, the only good news is that the RE rates will crash even harder. Those looking at Kharadi may get one at Kalyaninagar, or atleast Vimannagar now. Baner will see rates of Wakad. I would personally keep the budget same & shift to more better locality now.

    Realacres (and other folks as well),

    In the last decade or so, much of corporate India has adopted some of the most unviable practices of the US corporate zone. One of the most offensive ones is the belief that their CEOs are worth 100s of million of $$$ even as the company (which might be 100s of yearsold) goes bankrupt on this CEOs watch!!! And as part of his package, the CEO feels entitled to the Audi A8s, etc, which is the main reason the business gets unviable!

    I had an interesting conversation with my brother (who runs his own manufacturing facility quite profitability) who told me that he would rather earn the profits first before spending it, as opposed to today's popular model of spending the money first before earning it (the VC/public funded model which motivates such profligate spending such as a Q7 where an Innova was what the business could afford)

    This is at the core of today's economic disaster facing all of us. We fell so far into that Western trap of indebtedness (anyone whose father above 60 years having a credit card?) that we even started spending beyond our means in taking high-interest loans to go for these foreign cruises!!! :o

    When people take on these habits, it becomes very hard coming down from these levels, when reality strikes and they are forced o do so. The wives, children, neighbours, friends, relatives, .... all of them start passing snide remarks which adds to the woes of the once-high-profile executives who never earned these perks in the first place, but merely rode the wave of misplaced credit expansion.

    That brings me to the point. This general decline in the World's economies will continue so long as the effects of this unviable credit expansion continues to exist. So long as the 1C flat (which was bought at 25L in 2003) does not decline to its realistic price of 35-40L, implosion will continue, sales will be sluggish and prices will decline in waves as people give up in waves and do distress sales.

    from the late 1990s I have seen many people go directly from Maruti 800 to Honda CRVs and higher vehicles, simply because a bank would come and offer ridiculous amounts as loans. These people may have been labeled executives, but in reality should have been fired because they did not have the maturity and risk-averseness to see that this uncontrolled bingeing on loans was similar to a child being overwhelmed with toys all of a sudden. They went berserk. And to imagine that companies entrusted these very same financially immature characters with millions of $$$ of their business to take care off!

    As Charles "chuck" Prince, CEO of Citigroup before he was fired and replaced with our very own Vikram Pandit (his underground nickname is reputed to be 'Pandit the Bandit'!), said about this credit binge, ... "so long as the music is playing, we will keep dancing". To which he was asked, what when it stops? Well, as we know, when it stopped (and the crash began) he was fired in a single day!!!

    You now see the results playing out further still. We may still have not seen the final bottom of this crash and therefore people ust exercise caution in rushing in to buy highly leveraged assets, when there is still chance of it going and staying down for years to come! ... Enjoy!

  • News

    Last Sat there was inauguration of handing over of affordable houses to poor people by Ajit Pawar in PCMC area in presence.

    Abt 1000 houses are planned for allotment by next yr. The batch have been made ready in time before election.

    Another article:

  • Not too authentic

    Originally Posted by realacres
    Pune RE Crash:-

    As e.g to above news, here are some reduced RE rates:-

    Beverly Hills:- Rs.3500/sq ft to Rs.2600/sq ft,

    Paranjape Saptgiri:- Rs.4000/sq ft to Rs.3000/sq ft,

    Gera Regents Park:- Rs.3700/sq ft to Rs.2850/sq ft

    Concord Portia:- Rs.3250/sq ft to Rs.2650/sq ft,

    MV Tropez:- Rs.3199/sq ft to Rs.2200/sq ft

    Mirchandani Palms:- Rs.3500/sq ft to Rs.2650/sq ft,

    Crossover County:- Rs.3600/sq ft to Rs.2950/sq ft,

    S3:- Rs.3000/sq ft to Rs.2150/sq ft,

    Parkstreet (Sapphire Park):-Rs.3200/sq ft to Rs.2600/sq ft (can be bought down further if you book in under-cons wing),

    Kapil Abhijat:- Rs.7000/sq ft to Rs.4800/sq ft,

    Felicita:- Rs.4251/sq ft to Rs.3000/sq ft,

    Add to it the townships,

    Magarpatta:- Rs.3800/sq ft to Rs.3200/sq ft (resales INR 2600/sq ft),

    Nanded City:- Rs.3700/sq ft to Rs.2500/sq ft.

    The further downfall of RE prices will continue. Better wait & see the fun.:)

    I don't intend to say that all that you quoted is incorrect... but what is incorrect is that these low prices don't hold today. They were this low some 3 months ago.
    and in your other post where Baner plot is being sold for 900/- ... well that may be an isolated case ... Prices in Baner have reached a level where they have a good support and less probability of falling through.

  • Top paint brands toxic: CSE report

    Just for a change an interesting news:-
  • Originally Posted by caprimannu
    I don't intend to say that all that you quoted is incorrect... but what is incorrect is that these low prices don't hold today. They were this low some 3 months ago.
    and in your other post where Baner plot is being sold for 900/- ... well that may be an isolated case ... Prices in Baner have reached a level where they have a good support and less probability of falling through.


    So do you now conclude that RE prices are rising? Btw, the prices are for the month of July 09 & few of them of last week.
  • Originally Posted by realacres
    So do you now conclude that RE prices are rising? Btw, the prices are for the month of July 09 & few of them of last week.

    Realacres, we are trying hard to book a flat soon for own use.
    I have tried negotiating for most of the projects being discussed above, but I'm not able to negotiate anywhere close to the rates you have quoted :( Are these rate that you have been offered or have you gatehred this info from sources?
  • Originally Posted by realacres
    So do you now conclude that RE prices are rising? Btw, the prices are for the month of July 09 & few of them of last week.

    Realacres, we are trying hard to book a flat soon.
  • Originally Posted by realacres
    So do you now conclude that RE prices are rising? Btw, the prices are for the month of July 09 & few of them of last week.

    The point is how you get the prices.. Is this is a seasoned negotiator talking with cash on table ready to buy flat..

    Or someone known to real estate sector and builders who can get better than market rates..

    Or getting one rate imagining 20% bargaining power and calculating the rate..

    Or seeing rates on paper from bookings and noting them.. even in this case you need knowledge of market rates and closeness to builders...

    Just out of curiosity..
  • Even I am surprised to see the rates quoted by realacres. I have visited most of these builders and havent managed to negotiate anywhere close to what you have quoted above.

    Are these rates offered to you by the builder or have u gathered this info from ur sources or are they mere speculations?
  • Originally Posted by dipitvn
    Even I am surprised to see the rates quoted by realacres.

    Real is hard negotiator, so he may get these rates...But for us normal ppls you can add 5-10% on real's quoted prices , As I also kind of not getting these rates in the project mentioned in his post...Or may be these rates are taken while putting 50% of total flat cost on table in front of the builder:D:D:D
  • Once again

    Hi Folks,

    I have explained it in a previous post.

    Just as prices by the Govt r mostly based on the last higher transaction so also by private players.

    I had the opportunity to interact with the asset recovery exec in a bank. A mortgaged property (apartment) was offered for sale. The reserve price was set high by the bank. I took the original sale deeds of the flat in front, bought two months previously to prove my point. The offered price was brought in line by the bank for me.

    So u can take Real's price as the base price. except

    sellers desperation + nego.
    flat premium like garden facing etc.

    all in all each transaction is a different ball game in different times
  • Negotiation Tips & Tricks.

    Agree with what Sansei,Aks & ash7979 said:-

    Look here is my procedure, sharing this as all can benefit:-

    1.) Make a site visit & see if you like it or not at first place. Also see the pace of construction work & the dates salesperson is committing.

    2.) If yes, get the details about the project like commencement certificate, sanctioned FSI, (TDR won't be issue as it is not allowed in outskirts), water sanction as well as DP road, if any. For this either you require contacts directly in town planning dept. or some heavy duty corporator. If not, try visiting the town planning dept. in PMC/PCMC & get the documents through indirect contacts. Ofcourse, you need to give some chai-pani here, but it is well worth.

    3.) Once this is hand, again make a site visit & make sure every time you should have one-point contact at the sales office. Often, it has been observed that people despite making multiple site visit speak to any available salesperson. So, better you take his/her no. in first meeting & while visiting next time, inform them beforehand. This is just to show that you are serious.

    4.) Once, this message is sent, ask them for their best offer & leave.

    5.) If you seem damn serious, expect a call from senior member of the company. Then take the nego. rate of the salesman as the base rate & nego. further on this with higher ups in the builders' company. Here make sure you compare the rates of other projects (if they serve your interests; it maybe lower price or same but with better location,specs,amenities etc.)

    6.) Since, these would be senior people, make sure that in the conversation you take up the pending issues, if any from the info you got from PMC/PCMC & trust me when this was said, most of the builders' lose their steam on the spot. In many cases, the date of bookings, the rate, possession date etc. varied by several months & in some like Mittal Bros by couple of years!!:D Hearing this, they become sure that you can't be taken for a ride, hence they cut down their expectations.

    7.) Last but not the least, you should be in a position to say that if we agree to some mutual beneficial terms, the deal can be signed in next few hours. This helps a lot.

    Trust me, I have spoken with the top management in Rachana Associates, Mittal Builders, Bramha Group, Kumar Properties, Mittal Brothers, Parmar Constructions to name a few.

    Ofcourse, these are just basics, as what matters is also the body language & no rules in that case as it depends solely on the situation. But it helps to have good contacts in RE, if not atleast with Pawar & Co.:D
    Some builders' even said,

    Aaj aap hamare saamne baithe hai, ho sakta hai kal hamain aapke saamne baithna pade!;)

    * To cut long story short, there should be 2 things:-

    Your seriousness about the project being displayed to concerned people, but make sure that you don't show over-interest as it will weaken your side. Make sure if not this, I have other options too!
    (Hey don't say this, but signal it & be calm & polite)

    You should be in a position to keep the cheque book in front of the builder, atleast for the token amount.

    Some people in their first visit sit down to nego, & then are disappointed coz the salesman never comes to know about your deep intentions & leave. I have myself tracked some projects for over 2 months to get sweet deal from the builder. Note that builders' don't disclose their cards in first meeting nor should you do.Hope this helped you all.:)
  • Great Tips Realacres.
    The art of negotiation.
  • Originally Posted by wiseman

    So, I continue to wait for this inventory to be cleared out with continuously declining prices as weakened land-owners on debt are forced to sell at lower and lower prices. I will buy when it is affordable to me! I may miss the bus waiting, but at least I will not make the bigger mistake of holding high-priced RE and paying thru my nose to builder and banker so that they can ride in their Mercs!!!:D Plus, when I buy the market will have bottomed and prices will be on the rise, so my investments are safe and readily saleable!


    hey wiseman .. just do let us all know when you decide to go for the house ...(Home if I may call it) ... so that people like me wud also avoid missing the bus ...once the market returns after bottoming out :D
    by the way ...what time frame do you foresee ???
  • Some things can not be measured by money. Home is one of them. You can delay buying your home, but not postpone it forever. One day you do want to buy a home in your life time irrespective of the market conditions. You just hope that day will come soon and you will get a good bargain. But you only delay your decision, you do not put it off forever.
    I recently bought a residential plot after researching the market more than 1 year. Now I can't wait to put all the money it takes to make my dream home. Am I concerned about the building cost now? No, housing is always in open market. You might get lucky some times, but not always. Investors are us.