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 compuwalah
    Please also post the psf rate of these castles :D

    These will be sold after 5 years when prices go up by 500%:D. You will also get some ghosts free as well:p.
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  • what an Irony

    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/



    what an Irony


    magarpatta ads these days .. luburum(whatever name) park is second to Queens castle..... :):D



    49000 sq feet plot at your dream place(##) is cheaper then 5200 sq feet plot in Abhimanshree Aundh (4.5 crore)...

    Price of 50,000sf plot in once's dream place - 1.84 crore
    Price of 5000sf plot in Aundh - 4.5 crore


    ##
    lake side house with your jetty stuff etc in US.
    BEAUTIFUL BUILDABLE 1.13 ACRE POINT LOT ON LAKE SPRINGFIELD. IMPROVEMENTS INCLUDE: 32X20 HEATED/INSULATED GARAGE, 400 FT. OF SEAWALL (10 FOOT PANELS) IRRIGATION SYSTEM ON ENTIRE LOT, 200 AMP UNDERGROUND ELECTRICAL SERVICE, FLOATING BOAT DOCK W/10X28 FOOT BOAT SLIP, 8000 LB. BOAT LIFT, 2 JET SKI LIFTS (3 SEATERS), 12X14 SWIM PLATFORM, 4X8 DOCK LOCKER, ICE EATER.

    check out the pics

    http://www.realtor.com/realestateandhomes-detail/42-Cotton-Hill-N_Springfield_IL_62712_1117232782
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  • The basic difference between Americans & Indians is that Americans like good things in life, while Indian may give it up for RE:(. There is a social stigma attached here unlike US about owning a house. Man, if you don't own house, it means you are unsuccessful in life according to society norms.

    Man, you declare you are buying a flat of 40L, 10 people will ask ques about that while you declare that you are buying a car of 40L, hardly anyone will be bothered.
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  • Originally Posted by realacres
    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!!


    Hey real the only factor I could see is that India is very dense country(more people per area) where in chicago less people more area and in addition to this inflated prices here in india + Indian sentiments attached with home as said by you :)
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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/



    Uhmm...No Indian castle...
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  • Uhmm...No Indian castle...
    No Indian city and for that matter Mumbai is comparable or even costlier then these top ten ...
    CommentQuote
  • From equitymaster daily report

    Real estate players may have to brace themselves for yet another correction in home prices. It is no surprise that the global financial crisis had an adverse impact on home prices in India as demand waned and financing problems ballooned. However, many of them were able to weather the storm due to financial restructuring and a revival in home buying on the back of greater consumer confidence and lower interest rates.

    But with prices once again rising, as more homes come into the market at higher price levels, a correction seems imminent. What is more, high end houses in Mumbai and the National Capital Region (NCR) are the most vulnerable to these shocks. Not surprisingly, Mumbai earned the dubious distinction of witnessing the highest price rise in recent times. And with many projects being announced over the next 6 months in the city, there could be an oversupply of homes and thereby a dip in prices. This will then turn out to be good news for those who are still looking to buy their first home and are still looking for a right price. Not just that, real estate players will need to realize that in order to maintain a sustained demand for houses, it is necessary that prices do not reach unjustifiable levels.
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  • Originally Posted by puser
    Uhmm...No Indian castle...

    Did u miss the castle of Chittogarh on the same page . I found rather that to be the best . Water bod y inside the castle on top of a cliff. Simply cool. I salute the enginners as how they solved the risk of having a water body inside a castle made during that era (a single leakage through the bed can brign down the whole structure like pack of cards) .
    CommentQuote
  • Originally Posted by nilpat
    Hey real the only factor I could see is that India is very dense country(more people per area) where in chicago less people more area and in addition to this inflated prices here in india + Indian sentiments attached with home as said by you :)

    The population density in Chicago is more than Pune, not to forget the good infra there vis a vis Pune. The real issue is that rather than population density, the bakra density (bakras/sq km) in Pune is very high, hence the reason.

    Anyways, just have a look at Chicago's skyline. You won't find this even in KP.

    http://upload.wikimedia.org/wikipedia/commons/8/8d/2010-02-19_16500x2000_chicago_skyline_panorama.jpg
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  • It says that flats of 1Cr & above prices have been severely hit. Note that these are affluent people & if they are hit, imagine what the condition of first time buyer would be. So, either the sales are not happening or the flats are being artificially hoarded by builders to create a false picture, not to forget that a broker gets upto 15% commission on sale of flat valued at 1Cr & more.

    * Why don't builders reduce prices by 15% & sell flats directly to buyers rather than hike prices & pay to brokers?
    CommentQuote
  • Originally Posted by realacres
    It says that flats of 1Cr & above prices have been severely hit. Note that these are affluent people & if they are hit, imagine what the condition of first time buyer would be. So, either the sales are not happening or the flats are being artificially hoarded by builders to create a false picture, not to forget that a broker gets upto 15% commission on sale of flat valued at 1Cr & more.

    * Why don't builders reduce prices by 15% & sell flats directly to buyers rather than hike prices & pay to brokers?

    Because few direct buyers purchase the flats at 15% raised prices.. that margin might be sufficient enough.
    CommentQuote
  • Originally Posted by realacres
    The population density in Chicago is more than Pune, not to forget the good infra there vis a vis Pune. The real issue is that rather than population density, the bakra density (bakras/sq km) in Pune is very high, hence the reason.

    Anyways, just have a look at Chicago's skyline. You won't find this even in KP.

    http://upload.wikimedia.org/wikipedia/commons/8/8d/2010-02-19_16500x2000_chicago_skyline_panorama.jpg


    Chicago is actually one of the oldest metropolitan cities in the world, and has actually had very high population density for not decades but centuries.

    To quote wikipedia, "After the Great Chicago Fire of 1871 destroyed a third of the city, including the entire central business district, Chicago experienced rapid rebuilding and growth. During its rebuilding period, Chicago constructed the world's first skyscraper in 1885, using steel-skeleton construction."

    Back to your point, your statement about bakra density was really funny :) It actually reminded me of the old Pakistani play, "Bakra Kishton Pe" by Umer Sharif.

    Considering that all of us bakras actually repay our home loans "saral kishton mein", maybe we should all watch this play again :)

    P.S. This play was a cult classic in the days of VCRs and video casettes. construction."

    Back to your point, your statement about bakra density was really funny :) It actually reminded me of the old Pakistani play, "Bakra Kishton Pe" by Umer Sharif.

    Considering that all of us bakras actually repay our home loans "saral kishton mein", maybe we should all watch this play again :)

    P.S. This play was a cult classic in the days of VCRs and video casettes. construction."

    Back to your point, your statement about bakra density was really funny :) It actually reminded me of the old Pakistani play, "Bakra Kishton Pe" by Umer Sharif.

    Considering that all of us bakras actually repay our home loans "saral kishton mein", maybe we should all watch this play again :)

    P.S. This play was a cult classic in the days of VCRs and video casettes. construction."

    Back to your point, your statement about bakra density was really funny :) It actually reminded me of the old Pakistani play, "Bakra Kishton Pe" by Umer Sharif.

    Considering that all of us bakras actually repay our home loans "saral kishton mein", maybe we should all watch this play again :)

    P.S. This play was a cult classic in the days of VCRs and video casettes.
    CommentQuote
  • Mumbai-based realty company dupes investors of Rs 40 crore

    Read this news, builder duping people, again as usual:-

    http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=8123&cat_id=3
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  • Originally Posted by realacres
    Read this news, builder duping people, again as usual:-

    http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=8123&cat_id=3



    Amazing, people are so blind and fall for such schemes. Do people even think little with their brain? Would there be word called "Poverty" in this world? Do people even need to go to office and work? Stock markets/Banks would be shut down, no one will invest there and invest in such schemes instead.

    Wake up guys, there is nothing like safe(assured) investment, with high returns in this world.

    Should not say, but I feel no regrets for such "Intelligent minds" getting duped like this. What you sow is what you reap.

    "According to the scheme, if a person invested Rs 51,000, he was supposed to get a monthly return of Rs 8,160 for one year. Those who invested Rs 7.25 lakh were to get a monthly return of Rs 1.30 lakh. “In its brochure, Aurum stated that it’s ISO certified and had promised customers high-rises with a host of amenities"
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