Repayment blues to hit realty prices

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Real estate companies, which are already under severe financial strain, have to make a bullet repayment of over Rs 14,000 crore in the next two months to banks. This will force builders to cut prices of real estate stock, especially residential units, to boost cash flows to help them repay dues.

The huge repayment burden in December and January was created when many banks restructured real estate loans for one and a half years in June 2009 under the Reserve Bank of India’s (RBI) special dispensation. “This is falling due in the next two months,” said a senior executive of a bank, who did not want to be named.

But a senior banker from a public sector bank said, “Real estate companies will have to drop prices and sell properties so that there is a regular cash flow into their books.”

The problem started when developers began to jack up prices, stifling sales at lower rates. This hit cash flows of developers. Banks aggravated the situation by helping developers to roll over debt by recording repayment on the due date and granting a fresh loan to the same company the next day.

This helped the bank to continue the account as a standard asset while the developer got funds with no pressure to lower property rates and generate cash flows. Now, banks are watching their real estate exposure and implementing strong checks.

US warns India about possible WikiLeaks release

Another embarrasment is about to hit the Indian politicians and government officials.
This might help the 2G scam accused as the Wikileaks.org disclosures will dominate the news headlines on Sunday and the coming week. Any guesses what US diplomats think about Indian politicians and Babu's.

DNA India reports.

The US has warned India and other key governments across the world about a new potentially embarrassing release of classified documents by the whistle-blowing website WikiLeaks which may harm the American interests and create tension in its ties with its "friends".

"We have reached out to India to warn them about a possible release of documents," state department spokesperson PJ Crowley told Press Trust of India.

"We do not know precisely what WikiLeaks has or what it plans to do. We have made our position clear. These documents should not be released," Crowley said, ahead of the expected release by the website of millions of sensitive diplomatic cables.

Property prices could crash due to loan scam

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Finance Minister Pranab Mukherjee directed state-run lenders to avert the reappearance of the loans-for-bribes scandal and recommended banks to go for a critical appraisal of all real estate loans above Rs 50 crore. This, however, may curb projects and drive developers to private funds, according to industry experts. On Wednesday, Central Bureau of Investigation (CBI) arrested 8 finance executives on charges of taking bribes to pass loans.

Liquidity for the sector could dry up since bankers look cautious to sanction fresh loans which in turn will force builders to reduce prices to enhance cash output. But for prospective buyers, this is good news as many have been holding on due to high prices.

DB Realty dipped to 10%, Indiabulls Real Estate lost 5.2%, DLF fell 3.8%, and Unitech declined 6%. Shortage of funds is now threatening to act as a major hitch for project execution. This is an important cause for concern as the sector is only recovering now after the economic hiatus of 2008.

Mukherjee said, “Banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it”

A Bank of India official said, “All big-tickets loans, particularly to builders, will come under the scanner now. Recall of loans can happen if there is a fear that the quality of loans may suffer. But as of now, there is no such worry and hence it would not prompt us to recall loans.”

2G scam, corrupt nexus between policiticans, business and the media

Full transcript of calls between politicians/lobbyists and journalists including the Ambani Gas deal, Air-India ripoff by Praful Patel and more. It appears that Prabhu Chawla had advance information of the judgement and Nira Radia is fishing for information. More juicy details by Outlook

By roping in the media the politicians and businessmen have nothing to fear. The 4th estate is as corrupt as the other three and these tapes provide damming evidence to that effect. When I said that the Indian media will never report the truth on the state of real estate because of vested interests like builders placing advertisements into the same publications I didn't realize the extent of the rot which had seeped into the system.

Forget real estate one can replace 2G scam with any other scam and the same nexus will operate with high efficiency.

There are also news articles which now put the stock market boom in recent months into question as the recycled corrupt money enters India thru Marutius and other tax havens.

Open Magazine has provided links to Barkha Dutt's conversation with Nira Radia. The media in India is the wolf in the lamb's clothing. Who will trust the messenger ?

Here are Magazine's links

Mumbai realty gives affordability the go-by

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Mr Pankaj Kapoor, Managing Director of property consultant firm Liases Foras, said the prices are so high that “no one can buy”. Of course, if one limits his options, he can move that much further into the suburbs looking for properties that match his budget, he added.

Mr Kapoor said that while the average cost of an apartment in Greater Mumbai (municipal limits) was Rs 27 lakh in January 2004, it skyrocketed to Rs 1.47 crore in November 2008, slipped marginally to Rs 1.28 crore in June 2009 (when a correction set in) only to spiral to Rs 2.03 crore in September 2010.

Now, the preferred route for PE is akin to that of home buyers.

They move in at the project conceptualisation stage and book a definite number of flats or units for about 25 per cent down-payment at a pre-agreed price.

Property registration data for Mumbai indicate that after hitting a peak in property sales in December 2009, the subsequent monthly sales continued to decline till June 2010. While about 9,000 registrations were recorded in December 2009, only about 6,000 were recorded in February 2010. Preliminary field data show that there were only 4,500 registrations in May 2010, he said.

RBI tightes home loan norms

How can you beat this real-estate bubble?

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As property prices are showing only a few signs of abating, analysts predict that a potential real-estate bubble is looming large. So how can you achieve your long-awaited dream of owning a house? Moneylife went into a huddle with some industry analysts to give you the answers

Solution No. 1: Work hard, jump jobs, do anything to reach an annual Rs40-lakh salary.

Solution No. 2: Forget Mumbai or Delhi, there are a lot of other urban conglomerates in this vast country.

Solution No. 3: There is strength in numbers.

Vikhyat Srivastava, former analyst with the Kotak Mahindra Group and co-founder of GrOffr.com, a real-estate site for group-buying, told Moneylife, "As a group, you can get a discount for any service. If a developer is selling 100 houses, and a group comes to buy 20 or 30 houses together, he would lower the prices for them as he would be able to do away with one lot. As a group, one can get a discount of about 20%-30% in real estate purchases."

If statistics bore you to death, consider this. Until now, buyers trading on GrOffr.com have been able to garner bulk discounts of Rs19.85 crore on a piece of real-estate which had a market tag of Rs93.5 crore for 88 flats. Do the math. That's a lot of money saved.

Solution No. 4: The pre-launch phase is the best time to buy. But there is a caveat, though.

Solution No. 5: Rent, don't buy.

Solution No. 6: Be patient, very patient.

"I expect a price correction but the focus has to come back to consumers. If the property price does not increase in the next three years, it in itself is a correction. There are chances that property prices may undergo correction by 10%. If it doesn't appreciate in the next three years, it's overall a 30 % correction."

Must see video and article on the Kargil Adarsh society scam

Mid-day has an excellent article on this topic. Simpreet Singh deserves full credit for this RTI expose. Click here for the full article.

Parade ground, Transit camp for SRA, security issues all thrown to the wind by Congress-NCP

Prices go north as space ‘shrinks’ in Mumbai

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Developers across Mumbaihave hiked project prices by 7-43%, leaving genuine home buyers in a fix. Worse, despite the price hike, the carpet area, or the actual space the buyer receives for his use in the property, is nowhere near the usual proportion of saleable area the developers used to offer. Earlier, developers used to give as much as 70-75% as carpet area, which has now shrunk to 55-60%.

Among the bigger realty brands, Lodha Developers has hiked prices 11-30%, Ackruti City by 10-42%, Dosti group and Godrej Properties 10-18%, Kalpataru Constructions 9-24% and Runwal Group by 10-25%, to name a few. All the developers have increased prices for properties in Thane and nearby regions substantially.

“Across all the major micro-markets, prices have risen by 10-30% since April 2010. This is after the 20-40% increases between October 2009 and April 2010. For example, prices in Borivli, are quoting Rs8,000-11,000 per sq ft, up from last year’s Rs6,000-8,000p sq ft.”

An analyst from a domestic brokerage, who spent the whole day trying to gauge sale conversions, said, “We waited the whole day, but hardly saw any inquiry translating into a sale.” An analyst from an international brokerage had this reaction to offer, “if you don’t work in the financial services sector, you can’t buy these properties; they are unreasonable.”

Will this Analyst Firm give their honest opinion to Media, I guess not....

Pay 10% of the flat value now and remaining 90% on possession

Unreal estate…Manic buying before a likely panic collapse

The 10:90 schemes have got such a good response. Buyers of such real estate projects have now become investors or rather traders. They are paying 10% upfront and buying a call option. If prices collapse, they will have to simply write-off the 10% they invested. We have heard enough that derivatives are weapons of mass destruction. These weapons appear to have entered the real estate now. Is it a prelude to a crash?

From the builder’s perspective, the scheme works because he gets potential buyers into the system. The supply which is coming in central Mumbai is huge, just look around the Parel landscape and you will get an idea of the number of buildings that will come up in the coming years. Kamala Mills, where our office is located, is in the epicenter; the world’s tallest tower is coming up on one side and world’s greenest tower launched by DLF is on the other. There will be about 13,000 apartments which could cost anything upwards of Rs4 crore each coming up in the central Mumbai area. To put it in perspective, in the last five years less than 6,000 apartments of somewhat similar quality have been sold. So we are talking about 21 pricey flats being sold a week over the next four years, which I think is too ambitious. Informed people tracking the real estate market say property prices overall will have to cool from these levels.

If at all prices remain high it would be due to failure by some builders to deliver their projects on time, which would reduce the supply in these areas. If all the supply materializes, then some builders will be forced to cut down their amenities and luxuries and make the prices more affordable to sell their flats.

Real estate prices hit the fast track in New Delhi, Mumbai

Is real estate becoming an asset bubble?

DNA invited some leading real-estate players to help readers understand the trends in the industry in Mumbai.

Prakash Shah: Mid-town means areas like Lower Parel. I don't see a price correction happening in distant suburbs like Thane where the price is about Rs8,000. That is affordable middle-class housing. That’s a place where land availability is still possible. Enquires and business are going on. There is reasonable demand and supply. Not at the same levels as in 2008, buta reasonable demand-supply position is there. And Rs7,000-8,000 is an affordable rate in Mumbai. Maybe in other cities I understand Rs3,000-4,000 is an affordable rate, but Mumbai has a peculiar way of thinking. Compare the prices of Central suburbs, which are around Rs8,000 a sq ft, with those of Western suburbs like Borivli-Kandivli where prices are around Rs10,000-11,000 sq ft. These differences will remain.

Anand Narayanan: In Delhi, you can just keep expanding. Manesar or Gurgaon. The Delhi model is to give the first investor all flats, who then sells them to a second investor and then to the third. In Mumbai, because land is scarce, the builder (except for the small part he has sold to original investors) normally wants to sell to the real user. It also ensures that the market does not get too speculative, and prices don’t fall. The flats may sell very slowly, but the builder can afford to wait because he does not have a million square feet to sell, with the knowledge that he can develop another million square feet tomorrow. That is why, in Mumbai, when I go and buy a product in Hiranandani or any of the good developers. there is a lock-in period. If I put in money today I may not be able to sell for a period of time which is a reasonable period of time. It could be as high as one year to three years. Then there is a high exit cost.There is a transfer charge which is designed to stop investors from flipping it and which can go as high as 15% of your sale value. These exit costs could be in the region of Rs50-100 per sq ft.

Article Link

when we talk of the possibility of a bubble, we’re actually only talking of property in Mumbai and Delhi right now.

The real estate market in Delhi led the correction, and Mumbai fell in line next. Both bounced back after the introduction of stimulus packages and the government’s actions in restructuring debt. During the revival phase, a large amount of capital sitting on the fences immediately saw an opportunity. This was first seen in the equity markets, and then later in the real estate and gold commodity markets - all three classes bounced back convincingly.

There is, therefore, a concern that these two markets have demonstrated higher-than- expected enthusiasm, especially in the central parts in the case of Mumbai, and Gurgaon and Noida for Delhi. A lot of investors have plugged in considerable amounts of capital in these regions, and the values, on an average, have now gone 30% higher than the last peak. Some of the residential developments in central Mumbai in 2008 had peaked at `30,000/sq ft. Today, they stand at 38,000/sq ft.

The kind of volumes that we have witnessed in the first half of 2010 has come down dramatically but the liquidity situation in the market has not dropped, and neither has the appetite for investment. In fact, the same enthusiasm, which had been previously contracted by the central parts of Mumbai, is now spreading towards the other parts of the city.

Mumbai property rises above slums

Article on FT.com

A real estate boom in Mumbai is fuelling the building of elite high-rise apartment blocks, such as the 117-storey World One.

Their high-priced exclusiveness as they tower over the city’s slums, which house two-thirds of its population, highlight the growing gap between haves and have-nots in what is already one of the world’s most unequal societies.

“With the new buildings, there is much more segregation than in the Bombay I grew up in [during the 70s],” says Suketu Mehta, the author of Maximum City, the novel about Mumbai whose title has become a synonym for India’s financial capital.

Mumbai’s property market, Asia’s third most expensive, has staged a dramatic recovery from the global financial crisis in line with the country’s economy – expected to grow 8.5 per cent in the current fiscal year.

But the difference between this and previous real estate booms is the size and increasingly elite nature of the new buildings.

With no hope in sight of an increase in mass housing for lower income earners, the new buildings will only serve to underline social inequality in Mumbai, known as India’s “City of Dreams” for its Bollywood movie industry and powerful tycoons.

“Most of the people I know in Bombay ‘high’ have no interaction with Bombay ‘low’, except that they look down upon them from a great height, like barons in medieval fortresses,” says Maximum City’s Mr Mehta.

ET interview with Pranab Mukerjee

Essentially the Finance Minister says that they will not curb FII investment in the near term, RBI will intervene whenever the rupee tries to rise quickly and higher prices are here to stay forever. To quote him "Prices do not go down. In fact they never go down". I foresee the following happening over the period of the next year.

1. Sensex hits an all time high however retail investor participation remains very weak. The common man has not forgotten what has happened in 2008-2009 and is going to stay on sidelines for atleast few more years before his memory begins to fail.

2. RBI raises interest rates as stock markets hit record highs. Interest rates begin to pinch the common man who has taken loans for his own house, education, home improvement, credit cards etc. Buyers keep buying houses in all cities except Mumbai where without 1crore of black money nothing moves

3. Prices of goods keep going up as speculators hoard commodities and producers reduce supply to maximize margins.

4. Companies try to be efficient to keep up with rising costs. Wages remain stagnant. No Pink slips yet.

Net effect

Stagnant wages, Higher loan payments, higher monthly expenses , lower savings, say bye bye to financial independence.

Welcome to the Matrix. If you take the blue pill, you get to see how deep the rabbit hole goes

Here is the finance ministers interview

In an interview with ET Now, Finance Minister Pranab Mukherjee says it’s not a time to put any restriction on the inflow of FII and that the regulators are closely watching the market. Excerpts:

What do you think are the primary reasons for the market rally we are experiencing currently?

Always the fear of having some sort of bubble would remain. I do not think this is a time to put any restriction on the inflow of FII. Certain market sentiments are there. Prospective investors are looking into the market, and naturally, India as an emerging economy, along with China and some other Asian economies, is considered a safe destination for investment. One of this upswing is that robust recovery which was expected in North America and Europe has not yet taken place and the IMF forecast has also been revised. We shall have to watch the situation. We reached more than 20,000 in January 2008. So, the stock market fluctuation always takes place, but we shall have to see that it does not have that adverse impact just like a bubble effect.

Is it safe to presume here that you are in touch with the market regular and keeping a close eye on how the market has really moved today?

At Rs 1.91 cr, average cost of flat in Mumbai now at all-time high

Even if prices drop 50% they are not affordable to 95% of the Mumbaikars. Other cities like Chennai, Bangalore,Pune, Hyderabad are still affordable to most of their residents. If only I could move I would do so in a heartbeat. Unless someone has pots of money, white or black it makes no sense to buy in Mumbai. However if someone has to sell, this couldn't be a better time.

Indian Express reports

In Mumbai, the average cost of a roof over one’s head is now at an all-time high of Rs 1.91 cr.

Raghav N. Bhatnagar

With property prices soaring to dizzying heights in the country's financial capital, aspiring home-buyers have to be much more than a crorepati to buy a flat in Mumbai, where the average cost of a roof over one’s head is now at an all-time high of Rs 1.91 crore.

According to figures put together by the real estate research agency Liases Foras, the weighted average cost of a flat in Mumbai at 1.91 crore has leapt by 49 percent over the last one year. The weighted average cost is the total capital value of all flats divided by the total inventory in each city. In comparison, five other cities like Bangalore, Hyderabad, Chennai, Pune and the National Capital Region (NCR) have witnessed either a drop in rates or a negligible increase. An average flat in these places is relatively affordable at Rs 35 to Rs 50 lakh.

India Just Broke Its Record For Most Foreign Investment In A Single Year

I'm predicting a short term correction followed by a gigantic rally and then a big thud. All this short term mania has to end up in the dumpsters. The greater fool theory is in the works now. Its a matter of time before the chickens come home to roost. Be very careful for we all know Bulls make money, bears make money, Pigs gets slaughtered. Somebody has to lose in this game, just make sure you are not the last man standing. Comparing the S&P 500 with the Sensex is really poor journalism. The Sensex is only 30 stocks compared to the blue chip 500 in the S&P. The current sensex rally is driven by few chosen stocks. Even bellweather Reliance has not participated in the rally. State Bank of India is up 50%. Anytime a big gorilla like SBI rallys 50% there is a clear indication of the greater fool theory. Only here the FII's are playing the game hoping the Indian retail investor will participate thru the Mutual funds who they can then dump on. Last time this ended badly the Japanese investors were the last ones to enter and they must have been left holding the bag. Not to mention other Sovereign wealth funds which must have been beaten down to the core.

Business Insider reports

India just broke its single year record for foreign investment and it's only the end of September.

The mark, set today, is $17.89 billion, according to the Business Standard. That beats 2009's total of $17.86 billion. The specific class of investment is foreign institutional investment, which includes equity funds.

The pace appears to be picking up too, with $300 million invested in the country for the week ending September 22.

The question then is whether or not the Indian economy, and its Sensex exchange, is in a bubble.

Currently, the P/E ratio of the Sensex is 19.1, which doesn't seem ridiculous. The U.S. S&P 500 is trading just above that right now.

Forget Mumbai, the real bubble is in Ahmedabad

It looks like Gujju investors are returning to their homeland and sparking a buying frenzy in Ahmedabad. Ahmedabad is now resembling Mumbai when you compare prices. Ahmedabad has no known industry which draws thousands of job seekers like Mumbai, Pune or Bangalore.

Ahmedabad can be a good city to live in if one has good job prospects or if one is running a good business. Same goes to Nagpur, Coimbatore and Mysore. However as of now I know noone in my current set of friends who would like to relocate to these cities. Maybe times will be different in a few years

DNA reports

About a year and a half ago, recession in the city realty market had builders and buyers alike, worried. However, about a year since the first signs of recovery in June 2009, realty in Ahmedabad is back and booming. In fact, property prices in the city have inched up by nearly 35%.

The high economic growth and rate of urbanisation, along with the improvement in infrastructure in the state, have been catalysts in the growth of the real estate market. And the boom is not restricted to the western side of the city alone - properties across the city, irrespective of location, have witnessed a steep rise in prices.

However, Ahmedabad had been anything but spared by the global meltdown. The property market in the city had been considerably hit by the recent economic slowdown. But property prices started moving northwards in June 2009.

"If you compare the pre-slowdown prices with the present ones, there has been an increase of about 22-25%. However, if you consider the cumulative rise in prices since the worst phase of the downturn, the increase has been almost 35%," said Suresh Patel, GIHED president.

He said that the property prices in the city went down by around 12-15% due to the recession, and it took around four-five months for the prices to get back to the pre-slowdown level. "After that, they have increased by around 22-25%," said Patel.

Online real estate service provider company Makan.com's property index shows that realty prices in Ahmedabad have grown by 36.8%, compared to the national average of around 18.6%, between June 2009 and June 2010.

Jaxay Shah, president of the Confederation of Real Estate Developers Association of India (CREDAI) - Gujarat, also acknowledged the same and said that the higher GDP rate in the state and the infrastructure available have lent a boost to the market. There still remains a lot of scope for the real estate industry in Ahmedabad, he said.

Realtors believe that better living conditions could be making Ahmedabad a viable alternative to Mumbai.

Bad realty loans threaten to nibble at banks’ pre-tax profit

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Home prices have shot up as developers keen to cash-in on the booming economy have bid land prices to new highs in land-scarce cities like Mumbai. For instance, last month, city-based Neepa Real Estate paid Rs 830 crore for an 18-acre plot in Andheri, Mumbai. Earlier, Indiabulls Real Estate successfully bid over Rs 1,900 crore for two NTC mill plots — the 2.39-acre Poddar Mills and the 8.37-acre Bharat Textile Mills property.

Sanjay Dutt of Jones Lang LaSalle, in his blog, has raised the prospects of a real estate bubble in pockets like Mumbai, pointing out that some properties in central Mumbai peaked at Rs 30,000/sq.ft in 2008 and today stand at 38,000/sq.ft. “There is yet another reason for the concern over a bubble building on the market. All developers who had ventured to buy land overseas or across India are now buying only in their primary cities. In other words, Mumbai developers are concentrating on acquiring land solely in Mumbai, and the same is happening in Gurgaon. Investments are now chasing these Tier-I markets, and if this continues, there is certainly the probability of a bubble in residential property by the end of the year,” he said.

RBI hikes interest rates to tame inflation

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MUMBAI: The Reserve Bank today raised its key short-term lending rate by 25 basis points and borrowing rate by 50 basis points to check rising prices.

" Inflation remains the dominant concern in macroeconomic management", RBI said while raising the repo (lending) and reverse repo (borrowing) rates to 6 per cent and 5 per cent, respectively.

The new rates, which comes into effect immediately, were announced as part of the first scheduled mid-quarterly review of the monetary policy.

The hike in rates will lead to a rise in cost of funds for the banks and eventually makes loans expensive, which will reduce consumption.

Builders resorting to distress sale?

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Hiral Shah, who has been scouting new residential projects in Kandivali to buy a house, got two rude shocks. “No one is quoting less than Rs 1.2 crore for a 1,000 sq ft house in Kandivali! And surprisingly, I also discovered that almost half the flats I saw in the two new projects were vacant,” said Shah.

Even as developers maintain that sales are brisk, crevices are beginning to show up, and one indication of this is that some developers are resorting to distress sales – disposing of homes by offering as much as 40-50 per cent discount. Zen Towers in Tardeo is a case study. Set to complete in December this year, you can buy space for Rs 15,000 per sq feet as opposed to the market rate of Rs 25,000.

But here’s the catch: you must make a bulk buy of at least 10,000 square feet.

“The market is over-heated, and with a price correction being anticipated, investments are drying up. Though big builders can hold on, it is the small players who have started to feel the pinch, and are creating distressed assets even as market sentiment is positive,” said Atul Khekade, partner, Netz Realty, a property consultancy firm that has sensed opportunity here.

A builder, who is selling bulk stock at 40 per cent discount, said on condition of anonymity, “As big builders go on increasing rates for their projects, the average market rate is pushed up. They get funding through FDIs or big private equity firms. But when rates reach a brink, even investors who fund small projects like mine become wary. One Gujarati investor group that had promised to pump some money into my project backed out. Now I am desperate.”

Real estate analysts speculate the cracks could widen. Pankaj Kapoor, Managing Director, Liases Foras said, “Creation of distressed assets is an indication that the residential market will undergo a correction, which could be to the tune of 25 per cent in the short term. This is not just because property prices are unrealistic, but also because a chunk of flats are being traded by investors instead of being bought by actual users.”

If you have to buy, buy from an investor

We've seen some excellent articles posted by fellow bloggers in the comments section along with some great arguments for the rise/fall in prices. I wish to thank everyone for that.

Here is my anecdotal evidence based on my interactions with brokers in Mumbai and other parts of the country.

Market has gone up rapidly in the past 7 months. They do not expect prices to rise much more beyond this. Investors are selling their properties however they are asking for almost 50% black. Some investors cannot exit with a high white component. Such properties are 20% lower the other all white deals sold by the builders. Like they say cash is king. In this case if you have cash you can negotiate any price. One of my friends put his house on the market. An offer was made within a day for 10% lower then the quoted price. For sellers the best thing is to decide the lowest price you are willing to take and then mark it up by 20%. People always like discounts so a 10% discount on a 120% marked price is better then a 5% on the 100% price. For buyers it makes sense to cut prices by atleast 20%. Give reasons like loan is not available for that amount. Funds are available but deployed elsewhere. This gives a sense of relief to the seller that even though you may not buy the flat, atleast you are capable of making funds available at some point in time and he is not dealing with a someone with an empty wallet.

Another person I met put his house on the market and got a quote right away, again at 10% below. This made me smart and I tried to do the same. I put my parents house and priced it 25% up and told this to the broker. The broker is like 'bahut jyaada quote kar rahe ho'. I know then that the rate I've quoted is what I should not be paying to buy the apartment from the broker.

In today's market in Mumbai it makes no sense to buy directly from the builder. The builder has already sold many properties to investors who keep rolling their money with him so the price is already higher then when the first flat got sold. In fact by buying the property you are decreasing the already reduced inventory and causing the price rise for the next buyer.

Secondly there are a plethora of taxes imposed by the government, BMC and other departments. This is true for all cities where I've looked. Pune, Chennai, Bangalore, Mumbai are all the same when it comes to government fees, all these fees are up some even by 40-50%.

There is Service tax due which can be almost be 3% of the total agreement value. There is VAT, impact fee, premium housing fee all which add to the underlying house price. The government sees this as a quick way to make money since they expect most of these prices to get passed down to the housing loans of the buyers

Its best for somebody else like the investor to pick up the taxes and you get what you pay for. The investor is happy to exit at the agreeable price so even though he makes money, he saves you money since the newer fees from the builders are much higher. Investors are also happy to negotiate a discount to the builder so your final price is also lower then what a builder will charge you.

In Chennai the first sale is registered at the UDS (undivided share of land) value, a fraction close to 10-15% of the full apartment value. If you buy an apartment from an investor before registration you can easily save the 9% registration cost of the full price plus you get an almost ready apartment if you buy an apartment nearing construction

Everywhere I've seen investor flats seem to be the best bet for any underlying house purchase.