Wednesday, March 31, 2010

Buy 1800 sq ft, Get 1000, Housing Industry Chamber Says Developers Digging Own Graves

SALEABLE AREA From 40 per cent of carpet area, jacked up to 60-100 per cent; housing industry chamber says developers digging own graves

Aspiring home buyers, already grappling with spiralling prices, have a new problem: developers are jacking up the sale able area in most new projects by "unrealistic proportions".

Developers sell flats not on the basis of carpet area (the net usable wall-to-wall area) but on the basis of sale able area, also known as super built up area, which includes facilities like staircase, lobby and lift as also add-ones like sun decks.

Traditionally, these spaces have been limited to a maximum 40 per cent of the carpet area. Of late, developers have increased this notional "loading" to 60 to 100 per cent of the carpet area. As a result, a flat-buyer paying for a 1,800-sq-ft flat may end up with only 1,000 sq ft floor area to live in.

"We have tried explaining to developers that we are digging our own graves by resorting to such practices. The MCHI (Maharashtra Chamber of Housing Industry), time and again, appeals to developers to stick to selling flats on carpet area basis but we cannot impose any regulation on them," said real estate developer Pravin Doshi, president of MCHI.

Two years ago, the government had approved a Bill, whereby any developer who does not sell flats according to carpet area is liable to face imprisonment for a period of three years, a rule that has failed to take off with no one appointed to oversee implementation.

Developers, on the other hand, get to maximise their profits as the BMC rules allow them to build parking lots, elevators and other frills free of FSI. Also, developers are allowed to build four-foot pro jections in the form of sundecks or flower beds in addition to building a balcony free of FSI and enclosing it as part of the flat.


"We had to discontinue giving permission for such projections as they were mostly misused. But recently the BMC has started sanctioning these once again," said an official from the building proposals department.

This is the very reason why balconies, which had mysteriously disappeared from facades of flats in Mumbai, have made a comeback in new projects along with fancier versions like sun decks, viewing gallery, planter's box and individual terraces.

All these were earlier charged at one-third the rate (per sq ft) for the flat, but now everything is sold at a flat rate. Brochures of new launches by Orbit Corporation, Dheeraj Realty, Wadhwa Developers, RNA Corp, Lodha Group, Oberoi Constructions, Indiabulls, DB Realty and a string of many others show a huge discrepancy between the actual usable space and the saleable space the buyer is made to pay for.

Real estate experts said there is an upper cap of 2 on FSI in the suburbs, but by constructing the components free of FSI and selling them at market rates, developers effectively get an FSI up to 3 or 4.

"In the absence of a regulator, loading is sort of an eyewash by developers to salvage high land costs.

So while per-sq-ft rates in Ghatkopar is Rs 9,000, with loading the rates are as good as being a high Rs 13,500. While actual rates in Bandra-Khar are Rs 20,000 to 25,000 per sq ft, customers end up paying up to Rs 45,000 per sq ft of the usable area due to huge element of loading," said property consultant Sandeep Sadh.

28 comments:

shailesh said...

Realty regulatory bill this year: Reddy

New Delhi, Mar 26 (PTI) The much-awaited real estate regulatory bill, which seeks to protect home-buyers from fly-by-night developers, will be passed this year, urban development minister Jaipal Reddy said here today.

"The bill will be passed in 2010 and there will be a regulatory authority in Delhi," he said when asked about the status of real estate regulatory bill. He was speaking on the sidelines of a realty conference organised by Assocham.

The proposed bill is meant for Delhi and will be a model for other states to follow, he had said earlier.

Reddy said the comments from different ministries on the bill is being sought. "The regulator will see that buyer is not cheated and fly-by-night operator do not flourish in the market to the frustration and dicomfiture of consumer," he said, adding the regulator would have no role in determining the prices.

Lets home this becomes law soon

Anonymous said...

Indian outsourcers eye bonanza from US healthcare bill

NEW DELHI (AFP) – Indian outsourcing firms are banking on a business bonanza from US President Barack Obama’s landmark healthcare reform as cost pressures prod insurers and hospitals to become more efficient.

“The influx of newly insured represents a big, exciting opportunity for the industry,” Ananda Mukerji, chief executive officer of Firstsource Solutions, which was an early outsourcing mover in the US healthcare market, told AFP.

“These 32 million Americans represent a considerable rise in consumption of healthcare services and the legislation is especially significant with its new limits on how much can be spent on administrative costs,” he told AFP.

–found at yahoo news

Anonymous said...

The Chinese thought the same about making a windfall on the wind power in the Stimulus Package. Senator Schumer was on that quicker than he is on a camera, which is pretty darn quick. Result: they’re working on new regs(?) for no gov stimulus money overseas. It wouldn’t surprise me if they did the same with Medicare or gov subsidies.

Anonymous said...

Vik,

Everything you posted here is true and almost everyone agrees with it. But when I want to buy a house, whichever developer I go to, I am going to get same kind of scheme.
Recently I went to one developer, he is charging 2.6 L for single car parking area.
But I could see some people making deals.
It seems we are at minority when we say these prices are jacked up. Everyone else seems to be happy or atleast okay with it. It seems everyone is in a hurry to buy a house.

Venkatesh Babu K R said...

Only Mr. Anonumous is in a hurry to buy home ... Enjoy with smaller flats buddy ;) ... People should stop buying flats. Do they know the real value of flats??? You approach the builder after your flat becomes old, u'll get to know their real values.

Vik said...

Individuals should buy as per their need and bank balance. I'm of the firm opinion that one should be able to withstand a drop of 40% in house values without losing sleep. If you can do that, go ahead and buy it, else buy move to a location which this is the case.

People are normally optimistic until they realize they are in sinking sand.

Which area you are looking at and what is the price ?

Anonymous said...

India wants cheap homes

New Delhi: Amid a flurry of housing project launches for flats worth crores of rupees, a new survey on Thursday said Indians are mostly interested in buying houses worth Rs 20-50 lakh.

Besides, housing demand in the National Capital Region, which has seen a plethora of luxurious and high-end projects being launched in the recent past, is much lower than cities like Mumbai, Hyderabad and Bengaluru.

But the irony is that the National Capital Region, which includes Delhi and adjoining cities like Noida, Gurgaon and Greater Noida, has a higher supply of under-construction houses than any other region in the country and lags at the bottom in terms of availability of ready to move-in projects.

These are the findings of a survey conducted by the country's top brokerage house ICICI Securities, which sampled the trend in eight Indian cities (Mumbai, Delhi/NCR, Bengaluru, Chennai, Kolkata, Ahmedabad, Hyderabad and Pune).

As per the survey, Indian home buyers are cautiously optimistic about the property prices. They are primarily interested in mid-income housing (Rs 20-50 lakh).

While 50 per cent of prospective buyers are interested in houses worth Rs 20-50 lakh, 35 per cent want a price lower than Rs 20 lakh.

Less than three per cent buyers want houses worth more than Rs one crore and 12 per cent are interested in a price tag of Rs 50 lakh to Rs one crore. Within Delhi, most of the recent project launches have flats worth Rs one crore or more.

This is despite 48 per cent respondents anticipating an increase in price over the next 12 months, and 22 per cent expecting the prices to remain at current levels. An estimated 30 per cent expect further correction in prices, although as much as 73 per cent perceive the current prices to be high.

Among brokers, 65 per cent believe prices have moved up in the past three months and 73 per cent expect prices to move up in the next six months.

"End-user demand is higher in Mumbai, Hyderabad and Bengaluru, while investor demand is higher in Ahmedabad and Pune," ICICI Securities said in its Real Estate Pulse survey.

The survey also found that more than half or 53 per cent brokers have seen increased queries in affordable housing and 44 per cent have seen drop in queries for the premium segment.

While the total under-construction supply in eight major cities at around 378 million square feet exceeds the current annual demand of around 372 million square...

Anonymous said...

It seems that the builders have stopped giving "donations" to the political parties. The puppet Central Bank aka Reserve Bank seems to have asked the agents not to play the evil trick of hiding losses any more.


Another price correction may be in the offing in realty space
2 Apr 2010, 0023 hrs IST,Supriya Verma,ET Bureau

As RBI has prohibited further restructuring of debt , developers will either have to approach secondary placement of shares or resort to other high-cost sources of funding. The fact that the percentage of shares pledged by promoter continues to rise, it is clear that we may just be heading towards another glut in the sector.


There are no supply-demand fundamentals here. The Real Estate companies/builders have shoved the money down the gutter and they want the genuine home buyers to pay for their profligate spending. So far the cartel of The Government of India, Reserve Bank of India, Real Estate Companies has held the entire real estate sector to ransom . Let these guys play the dirty game.

However, an industry official who did not wish to be named, said that Delhi builders sell in bulk at discount to underwriters in Delhi and actual sales happen only when end consumers book flats, which is not happening as the inventory index of NCR shows

Anonymous said...

You have to appreciate the audacity of the builders and foolishness of people buying these apartments..The builders get away with giving 50% carpet areas..doing side deals with big investors and bulk deals with corporates at 25-30% discount and no one seems to notice.. A prominent builder who bought a huge piece of land in Ghatkopar West recently which was in the news..has done deals with investors at 25% below what he offers when you walk in..And these builders are shamelessly liars when you ask them about how much is remaining unsold inventories..WE NEED A REGULATOR AND BUYERS TO WAKE UP..This rally is going to fizz out soon..

Anonymous said...

Recession is over and the economy is improving.

The touts spinning the "Jobless Recovery" should hang their heads in shame. Also the pink media of India should stop publishing the stories of their real estate friend's claim of NRIs buying over-hyped properties.

MBA Mows Grass To Make Ends Meet

Anonymous said...

WTF man.
MBA degree costs easily 80-100K USD and this is what one gets.

I think higher education is also in a major bubble. With exhorbitant salaries a lot of PhDs are making in their cushy tenured jobs at B-Schools. Some I know personally make close to 300K USD for 9 months of teaching crap.

Anonymous said...

I think MBA degree would be the next to fail. Salaries may come down more easily. MBAs who use to command anywhere upwards of 125K to 200K for entry level jobs can be now hired at 60-75K.

The most non value added degree is MBA.

Anonymous said...

Imminent Property Bubble Bust

To people who think economics means nothing in India and to people who think prices in India are not rigged. The Article by no less than Economic Times of India clearly states that builders are manipulating the prices and its becoming unsustainable.

I think they have gone beyond the point of no return and the bust is going to be of gargantuan proportions...

Praful Vora said...

Let us accept that the hugely corrupt building industry has to make profits. These may be very high or very low, let the market forces decide. There is a huge boom in construction and almost everyone has become a builder or contractor. So let the market forces decide and this force will decide which builder gets promoted and which gets demoted.

The laws require purchase agreements to specify 'carpet area'. The various relevant NGOs must ensure and enforce this. Such citizen bodies should analyse each project and publish full details on the carpet area, add on area, facilities provided and average market rates. If legitimate information is freely available, where is the problem. Let the buyer decide. Information can be posted at the websites, blogs, newspapers, etc.

Anonymous said...

Rates at malbar hill corrected .I was offered 3 BHK at 82.5 L a week back! Is this price OK???

Anonymous said...

3 BHK at lower 80's sounds like a good deal. What is the carpet area, what are the amenities? is it a new contruction or old?

Anonymous said...

If this is not an April fools joke, go ahead and buy it.

Anonymous said...

3 BHK in Thane is Rs.1Crore...Thanks for the April Fool Joke about Malabar Hill. Those days were so 7 years ago.
The builders and brokers have fucked up the whole market. I went to see Vasant Iris - a Tower built of promised garden to the folks of Vasant Valley by Sheth Builders at GoreGaon E - it only has 3 BHK and in the span of one year it is full booked. It had one flat - the sample flat on the 1st floor going for 2 Crores total cost.
I called a broker and he said "thophe mein pada hain" 3 BHK. And he promptly quoted me Rs1000psf extra over the developer. If its Thope mein then why is it so fucking out of reach.

Anonymous said...


Another price correction may be in the offing in realty space


World economy: China sounds alert over asset bubbles

Higher property prices put off buyers

There was a telecast shown on CNBC Awaz channel.
Many malls in Ahmedabad, Mehasana are not able to find customers. So these malls are either being demolished or closed or lying empty.

See, the way black money comes, it also goes away into the drain that much easily and quickly.

I am not able to stop laughing.

More or less, the situation in Real Estate is similarly grim and dull all over India.

So many bad news for Realty.

RE crash is imminent.

Anonymous said...

Last month, my friend was looking forward to buy house at godhbandar road thane. We went to few developers and was surprise to find, they are fully sold out for next 2 years and book was only available for building who's possession will be after 3-4 years.

I don't see any shortages in demand. This blog seems totally incorrect to me.

Rahul.

Anonymous said...

Rahul

Good for you. Did you ask the following question to yourself?

How much is the “Carpet Area” ?

If you were to take the home loan then how much would be the EMI and what percentage of your monthly income (money getting deposited in the bank) would be going towards fulfilling that obligation?

What would be the ratio of the EMI and the current rent you are paying?

What would be your savings 3-4 years down the line if you were to stay in a rented house?

What is your plan if the home loan interest rates shoot up if the Reserve Bank of India tighten up the screw i.e. increase CRR, Repo Rates?

Do you think that the unholy nexus of Bankers, Real Estate Developers, Real Estate "shadowy" bank system and the foreign investors has the infinite power to steal away your money "legally" ?

Anonymous said...

@Anonymous 12 25AM

Almost all bookings are from investors who are relatives of the builder or financier of the project. Some flats are reserved for government officials lest they may not create problems. This quota may include judiciary, police and political parties. If you dont have connections, forget about booking a flat. Investing money in a project that is going to be completed in 3-4 years is not only risky but foolishness

As for real estate crash, I don't think that will ever crash as the market is flush with unaccounted money and people who own it just want to park it somewhere and to do so their best bet is real estate. Ever wondered what happens when you buy shares in corporations ? You get a pittance return where as your money is invested and the bulk of the returns are consumed by vested interests.

Anonymous said...

Less than 7% of the apartments purchased in Mumbai for the last 12 months have a mortgages. The 7% that are mortgaged to banks, the banks have already recovered their investments as the money advanced by them is only 50% of the real value.

Now, those of you talking IIM economics, do your maths and find out how little the indian real estate depends on western economies

Anonymous said...

@ Rahul,

Builder is clearly cheating you.
He will take your money and either make payments where he is defaulting or redirect your money in another project. And you will wait for your flat for 5 years and keep on paying EMI. Plus you will have to pay the rent.

EMI + Rent - What a double whammy and sureshot formula to go bankrupt !

Anonymous said...

Buyers file FIR against DLF over refund refusal

NEW DELHI: A group of property buyers have lodged a first information report (FIR) against the country’s largest builder DLF and its top executivesChoosing a home loan scheme after the firm allegedly reneged its commitment to refund about Rs 300 crore for a delayed project. The FIR was registered by Delhi’s Connaught Place police station in the last week of March and named, among others, billionaire promoter KP Singh and vice-chairman Rajiv Singh.

“They have diverted the money to other projects,” said a spokesman of DLF Okhla Allottees Association, representing companies such as Escorts and Haldirams, besides several high net worth individuals who booked space in the Rs 750-crore project.

The DLF spokesman declined to comment. But a person close to DLF dismissed the allegations as baseless and said the company will complete the project as per schedule by 2011 end. “This is a trick being played by the investors to withdraw from the project,” he said. Prices in the property market came down after the buyers booked space in the Delhi project and that is the reason why they want to take out money.

Close to 200 investors had booked office spaces and invested in DLF Towers in Okhla (Delhi) when the project was launched in March 2008. As per the initial agreement between DLF and the buyers, the property developer was to convert the land classification from industrial to commercial use within a year or by early 2009. As per the agreement, if DLF failed to obtain the land use conversion as per schedule, it would refund the buyers along with an annual interest of 9%, the buyers association spokesman said.

In March 2009, when DLF failed to get the conversion done, investors demanded a refund. The spokesman of the property buyers association said DLF agreed to return the money in May 2009, but it has not done so far. In mid-February, the buyers filed a case with the Economic Offence Wing and a police complaint, besides a case with the consumers’ forum.

The person close to DLF said the project is scheduled to be completed by 2011 and the builder has adequate time to transfer the property to a commercial unit.


This clearly shows that -

1) The investors have panicked and that means RE is in real trouble and a RE crash is imminent.
2) The Bindas Bhais and Ssussus are misguiding the forum by giving wrong misleading info regarding RE demand.
3) The builders misuse the buyer's payments. Builders either redirect buyer's money in another project leaving the buyer in lurch or they make payments where they are defaulting resulting in indefinite delays in flat possession.
4) A good lesson taught to a lawless RE company. It should be followed by arrest and punishment of the culprits.

Buyers don't buy at unaffordable levels and help bringing RE crash sooner.

Anonymous said...

Buyers file FIR against DLF over refund refusal

NEW DELHI: A group of property buyers have lodged a first information report (FIR) against the country’s largest builder DLF and its top executivesChoosing a home loan scheme after the firm allegedly reneged its commitment to refund about Rs 300 crore for a delayed project. The FIR was registered by Delhi’s Connaught Place police station in the last week of March and named, among others, billionaire promoter KP Singh and vice-chairman Rajiv Singh.

“They have diverted the money to other projects,” said a spokesman of DLF Okhla Allottees Association, representing companies such as Escorts and Haldirams, besides several high net worth individuals who booked space in the Rs 750-crore project.

The DLF spokesman declined to comment. But a person close to DLF dismissed the allegations as baseless and said the company will complete the project as per schedule by 2011 end. “This is a trick being played by the investors to withdraw from the project,” he said. Prices in the property market came down after the buyers booked space in the Delhi project and that is the reason why they want to take out money.

Close to 200 investors had booked office spaces and invested in DLF Towers in Okhla (Delhi) when the project was launched in March 2008. As per the initial agreement between DLF and the buyers, the property developer was to convert the land classification from industrial to commercial use within a year or by early 2009. As per the agreement, if DLF failed to obtain the land use conversion as per schedule, it would refund the buyers along with an annual interest of 9%, the buyers association spokesman said.

In March 2009, when DLF failed to get the conversion done, investors demanded a refund. The spokesman of the property buyers association said DLF agreed to return the money in May 2009, but it has not done so far. In mid-February, the buyers filed a case with the Economic Offence Wing and a police complaint, besides a case with the consumers’ forum.

The person close to DLF said the project is scheduled to be completed by 2011 and the builder has adequate time to transfer the property to a commercial unit.


This clearly shows that -

1) The investors have panicked and that means RE is in real trouble and a RE crash is imminent.
2) The Bindas Bhais and Ssussus are misguiding the forum by giving wrong misleading info regarding RE demand.
3) The builders misuse the buyer's payments. Builders either redirect buyer's money in another project leaving the buyer in lurch or they make payments where they are defaulting resulting in indefinite delays in flat possession.
4) A good lesson taught to a lawless RE company. It should be followed by arrest and punishment of the culprits.

Buyers don't buy at unaffordable levels and help bringing RE crash sooner.

Anonymous said...

Hey I stareted following this blog in 2006 . i just kept my 40 lack rs. Now I am not able to buy anything in Navi Mumbai. My plan was to buy at Cadel Road or Prabhadevi as price were supposed to b 25% of that times ( 2006a) value, Insted of that it is now 200-300% of that value.

So all the visionaries till what time i'll wait?

rajni sharma said...
This comment has been removed by the author.