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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  • Awesome!! And Oprah Winfrey in the neighbourhood!! dimaag fod(mind blowing)!!
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  • Originally Posted by realacres
    Though not directly related to RE, I thought it is important to inform you, hence the post.

    http://sify.com/finance/without-tax-petrol-costs-rs-23-litre-imagegallery-economy-kd0kbMbchfb.html



    Did you take permission from Utopian2009 before posting this unrelated info?:D:D:D

    I assume you must have taken permission so I too have some info below:

    Petrol in USA costs approx Rs 34/liter after tax.

    Mr "Utopian2009" does this violate your rules of what one is allowed to post in this thread?
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  • Originally Posted by gsa177
    Awesome!! And Oprah Winfrey in the neighbourhood!! dimaag fod(mind blowing)!!



    Hahaha :D:D

    Let us also keep in mind that US real estate market has crashed; what would be its cost in the boom period in US;)

    Pune tithe kay uney :p Pune has costly apartment in Chicago, because NRIs are desperate to come back to India; and are willing to pay 50L for 1250 sqft apartment in fringe area with road where only Santro can go and block entire street:p
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  • Corianthan Club area is selling "Villas" with 87L cost; and Shoba Carnation is selling apartment starting from 72L (special gudi padwa offerD)..

    Even Oprah Winfrey may not be able to afford home(of same size of her existing house in Chicago or USA wherever) in Pune :D

    Even she will go in Dimaag phod situation hearing rate of Pune's RE market ;)
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  • No way Rajeshpbhai. Who is utoppu to give permission?

    Only we should rename it American Real Estate Forrrrrrrum. :D:D:D

    Originally Posted by RAJESHP
    Did you take permission from Utopian2009 before posting this unrelated info?:D:D:D

    I assume you must have taken permission so I too have some info below:

    Petrol in USA costs approx Rs 34/liter after tax.

    Mr "Utopian2009" does this violate your rules of what one is allowed to post in this thread?
    CommentQuote
  • Thanks for these links Frugal, very good indeed:). This though really makes me wonder why Indians pay so much here? The Chicago house is just a tad expensive than Samrajya. Hmm, compare infra of Kothrud with Chicago & see where you get what!!
    Originally Posted by puser
    Let us also keep in mind that US real estate market has crashed; what would be its cost in the boom period in US

    Man, but the purchasing power in US is much, much higher than here. Add to it the ROIs which are much cheaper than India. Man, if these type of houses are available in Pune with such infra, at such price, I will be the first one on this forum to change my side & become RE bull:D. Look really VFM to me. It would be like buy a house, get Oprah Winfrey Live In Concert Free;).

    Pune has costly apartment in Chicago, because NRIs are desperate to come back to India; and are willing to pay 50L for 1250 sqft apartment in fringe area with road where only Santro can go and block entire street

    Pune houses are expensive than Chicago because builders mistakenly considered Afghanistan as US & hence thought that the local infra is tonnes better than US:D.
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  • RE updates on Gudi-padwa:

    Checked 1BHK in Ganga-Sparsh (UC), Undri (Mohmadawadi-NIBM junction) 10-12 KM from pune-station.
    Initially was quoted 2900 psf for garden facing. After 15 mins of discussions they gave 50 psf discount :D.
    I countered that at similar rate I can get decent resale in a developed project & location like Ganga-Savera, Wanowari.
    Mktig said, Undri has the potential to be next kalyani-nagar. May be i.e why Mondira-Bedi agreed to promote them :D
    I left without much ADO coz, neither liked the project(cracks in sample-flat), nor rates for location.

    In past 2 weeks, they're calling every 2 days requesting to revisit & negotiate rates even after me showing no interest.
    It seems, with current state, this new kalyani-nagar has long-time in making (may be 10 years) :D
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  • Originally Posted by hitmady
    RE updates on Gudi-padwa:

    Checked 1BHK in Ganga-Sparsh (UC), Undri (Mohmadawadi-NIBM junction) 10-12 KM from pune-station.
    Initially was quoted 2900 psf for garden facing. After 15 mins of discussions they gave 50 psf discount .
    I countered that at similar rate I can get decent resale in a developed project & location like Ganga-Savera, Wanowari.
    Mktig said, Undri has the potential to be next kalyani-nagar. May be i.e why Mondira-Bedi agreed to promote them
    I left without much ADO coz, neither liked the project(cracks in sample-flat), nor rates for location.

    In past 2 weeks, they're calling every 2 days requesting to revisit & negotiate rates even after me showing no interest.
    It seems, with current state, this new kalyani-nagar has long-time in making (may be 10 years)

    LoL:D. Man, these Goel Ganga are one of the biggest crooks in Pune which has been seen again from your post above. However, what made you to even look at Goel Ganga?
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  • Originally Posted by realacres
    LoL:D. Man, these Goel Ganga are one of the biggest crooks in Pune which has been seen again from your post above. However, what made you to even look at Goel Ganga?


    Planning to shift my kid to a school in Undri. When passing by Bishop school, I saw this project.
    As lots of RE projects are coming up there, out of curiosity, entered site-office. Found mkting ppl dozzzing :D

    Also checked kolte-patil's (I guess, Hills & Dales) adjacent to it. Watchman showed some flats (1187sq 2-1/2 bhk almost ready-possession. Rate quoted 2500 psf negotiable.
    Real, what is opinion on living in Undri and rates?
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  • Originally Posted by hitmady
    Planning to shift my kid to a school in Undri. When passing by Bishop school, I saw this project. As lots of RE projects are coming up in area, out of curiosity, entered site-office. Found mkting ppl dozzzing. I disturbed their sleep :D

    LoL:D. Man, did you visit Tata Inora (forgot the spell)?
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  • Originally Posted by realacres
    LoL:D. Man, did you visit Tata Inora (forgot the spell)?

    Could not check, Tata's projects. Would be visiting, Undri again to check Vatslaya school and more RE projects.

    Plz share your opinion/experience on Undri area/rates (1800-2500 psf)?
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  • Originally Posted by hitmady
    Plz share your opinion/experience on Undri area/rates (1800-2500 psf)?


    It seems nobody is interested in Undri :D
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  • Originally Posted by hitmady
    Could not check, Tata's projects. Would be visiting, Undri again to check Vatslaya school and more RE projects.

    Plz share your opinion/experience on Undri area/rates (1800-2500 psf)?

    Most of Undri falls out of PMC limits. Hence, confirm first where the project is located at. Again, the rates:- It would be dependent where at Undri the project is located, not to forget the poss dates, specs & amenities with it & the infra. Anyways, I am not betting on Undri as of now as lot of developmental works needs to be done. Till then, keep us updated about your visits, the Tata Inora as well.
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  • Nice pics

    Friends,

    Taking a break from RE of Pune, simply have a look at these beautiful pics:), some are of castles built centuries ago while other link is about current highrises. Really nice pics, hope you all will like it:).

    http://www.funonthenet.in/articles/castles.html

    http://www.funonthenet.in/content/view/139/31/
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  • Originally Posted by realacres
    Friends,

    Taking a break from RE of Pune, simply have a look at these beautiful pics:), some are of castles built centuries ago while other link is about current highrises. Really nice pics, hope you all will like it:).

    http://www.funonthenet.in/articles/castles.html

    http://www.funonthenet.in/content/view/139/31/



    Please also post the psf rate of these castles :D
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