diff --git a/binstub b/binstub
index 6ed06e6..4ce36ec 100755
--- a/binstub
+++ b/binstub
@@ -7,13 +7,18 @@
 VAGRANT_DIR="@vagrant_dir@"
 
 # Export gem paths so that we use the isolated gems.
-#
-# Include $USER path to ensure it does not get lost when we call
-# vagrant from already initialized environment.
-#
 # TODO: Should be repalced from .spec file.
-export GEM_PATH="/home/$USER/.vagrant.d/gems:/usr/share/gems:/usr/share/vagrant/gems"
-#export GEM_HOME="${GEM_PATH}"
+export GEM_PATH="/usr/share/gems:/usr/share/vagrant/gems"
+
+# Export GEM_HOME based on VAGRANT_HOME
+#
+# This needs to be set because Bundler includes gem paths
+# from RubyGems' Gem.paths.
+if [ -z $VAGRANT_HOME ]; then
+  VAGRANT_HOME=$(eval echo "~/.vagrant.d")
+fi
+export GEM_HOME="$VAGRANT_HOME/gems"
+
 
 # SSL certs
 export SSL_CERT_FILE="/etc/pki/tls/cert.pem"
diff --git a/vagrant.spec b/vagrant.spec
index cfbc224..35185c9 100644
--- a/vagrant.spec
+++ b/vagrant.spec
@@ -4,7 +4,7 @@
 
 Name: vagrant
 Version: 1.7.2
-Release: 4%{?dist}
+Release: 5%{?dist}
 Summary: Build and distribute virtualized development environments
 Group: Development/Languages
 License: MIT
@@ -219,6 +219,9 @@ getent group vagrant >/dev/null || groupadd -r vagrant
 
 
 %changelog
+* Wed May 06 2015 Josef Stribny <jstribny@redhat.com> - 1.7.2-5
+- Export GEM_HOME based on VAGRANT_HOME
+
 * Tue May 05 2015 Josef Stribny <jstribny@redhat.com> - 1.7.2-4
 - Include $USER path in binstub