Wednesday, June 27, 2007

Apartment registration mandatory

Its time for the speculators to exit the market since the government plans to make apartment registration mandatory at the time of booking. This bitter pill is a bit too late since prices have jumped up 100% and more over the past couple of years. This is an ill-conceived plan and will put the apartment buyer at risk when dealing with small time builders. More often the not, construction is delayed by atleast 6 months to 18 months and many times in times of tight liquidity the apartment is left unfinished. So speculators and end-owners of these properties will be left in a lurch. Nevertheless in cities like Mumbai where prices have reached dizzying levels, there is bound to be a slump since no-one likes to pay 10-20L (10% of 1-2 crore) as registration if they dont plan to stay in it. Lets keep watching as the party unwinds and the drunk's stagger their way home

Financial Express writes
NEW DELHI, JUN 26: It may not be easy to frequently sell property for a hefty premium much longer. With an eye to curb speculation and claim a slice of such transactions, the government plans to make it mandatory for all buyer-seller agreements to be registered. According to industry sources, registration will have to be carried out within a week or two. Since the subject falls under the state list, individual state governments will decide the registration fees.

• Registration will have to be carried out within a week or two
• Individual state governments will decide the registration fees
• Will deal a blow to the speculator market and check inflation

At present, it is mandatory to register an apartment only after one gets possession. That leaves open a window of opportunity for speculators to resell property at a premium during the period between initial payment (the advance) and actually taking physical possession.

Here’s how it works: the cost of an apartment of 2,000 sq ft at Rs 5,000 a sq ft works out to Rs 1 crore. The booking amount of, say, 5% is Rs 5 lakh. As marketing hype escalates the price by 10-20%, the speculator offloads the apartment. If the sale price works out to Rs 6,000 a sq ft, the investor pockets a cool Rs 20 lakh on an investment of Rs 5 lakh.

“In fact, property usually changes hands four to five times before it actually comes to the end-user. By introducing such a provision, the government will deal a blow to the speculator market and check inflation in the bargain.

Further, it will also enable the government to know how many times a particular property has changed hands,” says Sandeep Donald Shah, director, Taylor Devices.


Anonymous said...

Sandeep Donald Shah? Is that really his name?

Venky said...

I dunno. He works for Taylor devices :) I wonder what they do