15 to 20 % Loading : The difference between Super and Carpet area : AND YOU PAY FOR IT !

15 to 20 % Loading : The difference between Super and Carpet area : AND YOU PAY FOR IT ! @atulaynehra writes

Comparison of two residential flat of the same area may surprise you at the end, if you actually measure the actual usable area or the carpet area with the super area or the area for which you have made payments to the developer.  The builders advertise that the flat on sale is of 1,500 sq ft. But be aware this includes areas like staircases, passages and lifts and so on. Hence, it’s important you know how much the carpet area is. The carpet area is the actual usable area. The difference between super built-up and carpet area is called loading. In most case this difference should not exceed 30 percent.

The property buyers today pay for the construction cost of the area that falls under the FSI- free areas. The carpet area is confined to the four walls of a house or habitable area. Everything outside, such as balcony, terrace deck, passageway, flower beds, lift area, entrance lobby, clubhouse, common passages, lift lobbies, terrace area and in some cases even open spaces, is included in the super built-up or the useable area. At times super area also includes the area which you don’t use but is part of the complex you stay in.

For eg : Assuming there are four flats on say 4^th floor of a residential complex with 1500 sft super area, of which 20% is super area which cumulate to 300 sft . This 300 sft area goes in lift lobbies, passages , balconies etc , interestingly at least 150 sft of this area is such on which developer is paid 4 times (150x4), i.e by 4 owners of flats at 4^th floor. As the developer is being paid 4 times , If given a thought the cost of house can be bought down if the construction cost of the lobby is divided into four equal part  rather than loading same amount to all four, as the developer pays for only 150 sft while charges for 600 sft. 

In consideration to the current ongoing cost of acquiring a house, it is important that certain regulations are set to control the menace and the costs differences in the super and carpet area concept.

So, is there a way out……..

The answer is NO, as there is no strict regulation to control this loading and each developer has its defined percentages of loading. It is advisable to check the exact carpet , buildup and super area details while considering an apartment to buy. 

Multiple Pricing for Same Project: Good for Smart Investor @atulaynehra writes

Multiple Pricing for Same Project: Good for Smart Investor @atulaynehra writes

It is no more surprising for investors or even the end users to feel cheated even after securing the best deal from the market for the best chosen project.

Recently a friend bought a property in a leading developer’s project, which was offered an apartment with plush specification for some 5000 psft plus the additional costs of another 250 psft, he after researching a lot about the project managed to secure a deal at 4500 psft, plus the additional costs. A month down the line similar property is offered to him at an all inclusive price of 4500 psft, which comes as shocking surprise to him.

So how exactly is this Happening?

In most of the projects today the developers accepts advance payments from the so called channel partners (Brokers) , widely known as underwriting, where in a size able number of apartment is committed by the consultant to be sold within a given time line for which the consultant may or may not have given a financial commitment to the developer. This commitment comes to the underwriter at an advantage of 13 to 15 percent lower than the market price.

This inventory (the number of flats booked by the underwriter) that the underwriter has booked is further distributed to the other small brokers in the market to be sold to the investors or the end users on a 10- 11 percent fee. These brokers retail these units to their investors against the minimal possible discount of the 10-11 percent they will get.

As the investor by now would have already inquired with the 10 -20 brokers a standard discount of 5 to 8 percent is offered (depending on the project).

This is where the issues like Credit Note, promissory notes start. The developers generally have a fixed price on which they will register any booking hence any discount given lower than the booking amount has to be adjusted from the fee which the broker will get, this is when the broker issues the credit notes, these notes – These notes whether honored or not at the time of third installment is a separate discussion.

In nutshell, if we look at the multiple pricing that is being circulated in the market –though beneficial for investors but sometimes leads to a chaotic situation where the investor end up not buying too.

Investors should  always compare the company , services  with the offered discounts as you might be missing on the customer services and support against those luring short term gains. 

CREDIT NOTE what are they and THE SCAM attached @atulaynehra writes

CREDIT NOTE what are they and THE SCAM attached @atulaynehra writes

We got to go some 6-7 years back to understand the story behind the credit and debit note concept. The interesting fact behind the "NOTES CONCEPT" is that it's a virus that has spread in Just the Delhi NCR area and not any other parts of the country.

The Background

The developers especially the B, C , D category and the new entrants, to sell there over priced products offer some mouth watering "Commissions" "Fees" to the brokers / consultants / agents/ channel partners  and that's where the game of  "NOTES CONCEPT" start.

As we all understand that the real estate industry in India is the most UNORGANISED sector and provides ample opportunities to uneducated to professionals to earn as much as they can, be it ethically or unethically, is where the unethical players (most of them) of the business find out ways to cheat on investors.

The Modus Operandi

A game where Consultants / Brokers / Agent play the host…..

Here is it:

The developers who put there intellectual knowledge, expensively sourced technology, efforts, man hours to deliver a project generally offers a set percentage of BSP (basic selling price) (PLC in some cases and mostly does not pay on any other EXTRA loaded costs) to the consultants. These percentages generally vary from 2% - 10% of the selling* price, there are very few consultants who are offered a percent or more not exceeding 3-4 %. So, in nut shell we have consultant with brokerage fee varying from 1-10%-13% depending on location, price and developer.

I would now try to explain the Credit Note scam in consideration to example of Mr Sharma , who wanted to buy a property on Noida – Greater Noida expressway. Mr Sharma prepared himself to buy a 3 BHK apartment in a well known developers project , he approached the developer and enquired about the project. All the available details were furnished to him by the executive at the developer office. Post studying the details of the project Mr. Sharma out of curiosity of the full page adverts by the mushroomed guides, property marts, clinics, lion, cheetah , tigers and various estate agents , approached few of them. To his surprise, there was a remarkable difference in the price quoted to him by the developer and the agents.

Interestingly, prices offered to him by various consultants for the same property were not same too, and most of them assured him of guaranteed lowest price “bas ek baar meeting kar lijiye sir”.

Finally after days of research Mr Sharma short-listed one of the very reputed well known agents and was offered 12% discount on his purchase as compared to 8,9 or 10% offered by other agents. As expected Mr Sharma wanted to have the additionally benefit of that 4-5%  of windfall gain and booked the property. At the time of booking Mr Sharma was conveyed “as per policy only 2% discounts can be adjusted ON FORM (developer’s booking form) and the balance discount of 10% will be adjusted at the time of THIRD INSTALLMENT for which They (the agent) will issue a credit note on there LETTER HEAD mentioning the adjustment of 10% discount. Mr Sharma finalised the booking through the agent and went back home unknown of the fact that what has happened with him. 

The Agent’s office followed up for  second instalment and on enquiring by Mr Sharma he got to know that the agent through whom he bought the property is not well hence not come to office. Cheque for 2^nd instalment was picked by some other agent. Same was done by the agent’s office at the time of the 3^rd instalment, but here’s it .

On discussion of the amount that needs to be paid to the developer Mr Sharma mentioned about the 10% discount adjustment that was to happen during third instalment, of which Mr Sharma was told the agent who sold the property to him is no more working with the company and they can not guarantee/ fulfil false commitments made by an agent who has been fired cause of cheating, on producing the LETTER HEAD of the company , Mr Sharma was told the said employee has done the similar activity with many investors , which was spoiling there name and reputation , is why they fired him and nothing can be done on the commitment made by him.

Mr Sharma approached the developer with his concerns and was conveyed about no such information and documentation has been received from the agent, hence the full instalment has to be paid. ,Mr Sharma now had two options

a.     He cancels his booking

Ø  Mr Sharma has already paid 20-25% to the developer

Ø  His cancellation will call for a deduction of 10-20% of the paid amount

Ø  He would end up loosing 10-20% of his investments

b.    He continues and pays

Ø  Most sensibly the investors continue with the investment as done by Mr Sharma.

There have been innumerable cases as above and can be Googled  to have a detailed understanding on more such excuses given to investors by the XYZ agent’s flourishing in every corner of the city.

In Brief

Credit note

Ø  Furnished by consultant to investor for a later date of adjustment of discount

Ø  Extremely high usage in Noida , Greater Noida , Greater Noida West (previously known as Noida Extension) by brokers

Ø  Very few case of Honoured credit notes

Ø  Insist to take a Debit note

Ø  Always rely on well known consultants and check antecedents of pay backs before accepting credit notes.

Debit Note

Ø  Rarely used by brokers

Ø  Issued by brokers in favour of the developer to adjust the discount in various instalments over next few months or upfront.

Ø  98% of the consultant will not issue.

Ø  Insist for debit note, in original and submit the Original copy   of the debit note with the developer office in presence of your agent and take a signed receipt of the debit note from the developer.

In summation I’d recommend to First buy property at realistic prices , not inflated prices, second don”t fall for heavy discount , third if required ask for debit notes last but not the least if picking up a credit not , at least have it from some one who has a clean transactional experience.

Happy Investing

Unauthorized Colonies: FOR THE NAMESAKE

Unauthorised Colonies: FOR THE NAMESAKE

Isn’t Razing of illegal buildings illegal | can’t they be put for better use then bringing them down | Atulay Nehra writes

Pune Municipal Corporation spent Rs 2cr to raze 900 buildings

http://articles.timesofindia.indiatimes.com/2012-10-15/pune/34471753_1_demolition-drive-illegal-construction-demolition-work

Delhi's demolition drive leaves hundreds homeless

http://www.projectsmonitor.com/detailnews.asp?newsid=10270

A n old colleague called up few days back mentioning he has received a notice from MCD and they would be bringing down his 5 floors building which he got constructed for commercial purposes in Chhattarpur Extension area of Delhi. As discussed he provided few reasons and managed to get a Stay Order on his building, BUT his neighbour was not lucky enough for the same, and the thump and roar of the Bulldozers and falling of roof pulled by these automated demons broke the early morning silence of the area.

Now, what’s more concerning is not that the building was illegally constructed, what alarms is the kind of money the owner would have invested in constructing the building.

There are few questions which remains UN-ANSWERED

a.      What was the need to bring down / demolish the said or many other such buildings?

b.      With Governments having TOOLS like SEALING the properties with them , “WHY DEMOLITION”?

To have a detailed understanding about the illegal move of various Government bodies let’s analyse this step by step.

A.     What’s an Unauthorised colony / an illegal building / an illegal construction

Unauthorised Colony

A residential development that has come up on private land without any government sanctions and approvals is considered as an Unauthorised colony.

An illegal Building

Any build up structure constructed in an unauthorised area, or not adhering to the master plan of the area or constructed bypassing the Building By laws of the zone or constructed with unsanctioned plans is considered as illegal building

B.     THE SENSITIVE One’s

Most of the unauthorized colonies  have

a.      Water connection by Municipal Corporation (may or may not be there)

b.      Electricity connection

c.       Land Line telephone connection VSNL/BSNL/MTNL etc

d.      Voter’s ID card  “ A VOTING RIGHT”

e.      LPG connections

The above creates lot of unanswered questions for the regulatory bodies as the unauthorized colonies have all or some of the facilities provided by the government bodies it self , WHY should they call these colonies illegal / unauthorized .

The way out

a.      Don’t call these colonies unauthorized when government bodies itself has issued valid identity cards and service to these colonies.

b.      Regularize these colonies as soon as they meet the criterion of providing safe and healthy living to all.

c.       Furnish proper notice to individuals for changes in the structures of individual houses as required

d.      A follow up on the changes should be done

e.      Seal the property instead of bringing it down.

f.        In case nothing as above can not be done , It is more sensible to create a centrally controlled database system to make sure that no person gets facilities as per section B above.

The illegal Mega Structures

A recently published news by Times of India said Pune Municipal Corporation razed 900 building and spent 2 crore of taxpayer’s money to execute this demolition

Few Facts

Ø  There are 78 million homeless in India

Ø  There is a current shortage of 3 million houses

Ø  Millions of children still study under trees and open areas

Ø  Millions of Old Age / Elderly require old age homes

Ø  Millions of Unemployed youths can not start any business as they can not afford real estate.

With such scarcity of houses across India and so called illegal building and colonies being razed , is it not good to put these properties for a good use  as PUNISHMENT to the owners of the property instead of razing these building.

Few Major Losses after razing of an illegal building

Ø  The building as well as plot is devastated

Ø  Millions of money invested goes to zero

Ø  Property can not be used until reconstruction

The Way Forward

It’s the time now when the various civic and other government bodies which are involved in such illegal activities to start using there grey matter’s and utilize these building in form of old age homes, low cost housing , schools, hospitals , government offices , instead of demolishing and making them useless.

  

Real Estate Investment : a broker or real estate consultant ?

A good investment adviser/consultant would learn about the client's financial situation and determine an investment strategy that makes sense for him/her.

Buying or selling of any real estate property can be a complex venture. There are a number of complications and legalities involved in any transaction. If one  is  going to buy or sell any real estate property he/she would be thinking of buying through a broker or a consultant. It would be important here , to understand the difference between a broker and a consultant.

Real Estate Broker

A real estate broker is a person who acts as an intermediary between sellers and buyers of real estate and attempts to find sellers who wish to sell and buyers who wish to buy. As a representative of the buyer, the broker acts as the buyer’s agent. The broker can also take the side of a seller, thus becoming the seller’s agent.

Real Estate Consultants

A real estate consultant means a person who renders advice, consultancy or technical assistance, in respect to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate.

A good investment adviser/consultant would learn about the client's financial situation and determine an investment strategy that makes sense for him/her.

Difference between Real Estate broker and consultant.

The broker is primarily focused on selling homes, and making a profit from the sale of that home. In lieu ,of their work they charge some commission on successful conclusion of real estate business deal which is a fixed percentage of the total cost of the property in deal, the commissions taken up by broker differ according to the area and it also depends on the locality in which the client is planning to get a property, generally the commission starts from 2% and sometimes goes as high as 10% . Because of this, he/she will have a slightly different approach to their dealings with a client. 

A consultant on the other hand is completely unbiased in the purchase or sale of a property. His primary concern is helping the investor/buyer satisfy his needs in the real estate. There is no financial gain based on the sale of a home. Instead , profits are by the services offered .

A broker will usually do what is necessary to convince a client to purchase a home, the consultant will be perfectly honest with client . If he believes that the property will not meet the needs of the client, the client will be advised not to purchase the house.

A consultant wants to be sure that correct results will be achieved in a real estate transaction. To do this, he will ask many questions about the client's wants and needs . He will then look for different ways that the client's objectives can be achieved. This is very much unlike a broker who believes that all the needs of the client can be met with the sale of a home.

With hiring a consultant for all real estate solutions,one can be assured of being in safe hands and can easily sail through the tiring and difficult process of   buying or selling .

“Buy land , they' re not making it any more” -Mark Twain

Everyone wants a piece of land. It's the only sure investment. It can never depreciate like a car or a washing machine. Land will double its value in ten years. In less than that. Land is going up every day. - SAM SHEPARD

Real estate is  considered as the most lucrative industry for investment. Investing in real estate has become increasingly popular over the last many years . The value of the real estate investment in commercial, residential or land property appreciates overtime. People prefer to invest in real estate as it fetches better returns without much labor as compared to investment in other products. However, one needs to be sure of the investment scales and property type in which they are investing.

Land as compared to any constructed property is considered as a better investment as it appreciates over time and will always is in demand due to availability reasons.

SEVEN GOLDEN REASONS - on why investing in land is the best option within real estate as compared to much more flaunted and publicized options of built up spaces in buildings are:

Reason 1

Elasticity of Usage. You have options to choose any size or dimension or any value, and can be used for multiple purposes, for e.g. If you invest in a agricultural land, it can be used for farming, can be used as a farm house, post zoning can be used for commercial purposes, and any thing build on it can be redeveloped.

Reason 2 

Land is evergreen, ever growing asset. Brick and mortar assets like buildings deteriorate with time where as land does appreciate with time. Studies confirm that value of a commercial building becomes zero  in  27 years. Even when the building is useless and demolished what is left behind is land. 

Reason 3

Land is an asset from day one.  In case of a residential or a commercial property it takes 3-5 years to get the property registered on your name and also to draw handsome returns from it, but in case of land, the land gets registered immediately and can start generating returns. 

Reason 4

Low Investment Management .Once bought it doesn’t incur high costs , as maintenance costs as compared to other built up properties.

Reason 5 

Bigger Houses .  With the economy projected to grow at a fast pace, and with disposable incomes being higher, the aspiration of green living, bigger houses, better amenities will take over. These can only be achieved through bigger land parcels being bought under development, so invest in land today.

Reason 6 . Land Affords the right balances in your real estate portfolio. While investing in real estate one should consider right product mix to diversify the risk with one or two products which are low on risk high on returns & that is what Land is.

Reason 7

Supply and Demand: If we analyze the real estate requirements of our country, land would be in demand for at least a couple of decades, there is an acute demand of constructed properties which has to be built on land. .Hence investment in land is bound to grow. For e.g Delhi as a state is forecasted to grow from 138 lacs to 250 lacs in next decade, that necessitates another few thousand of hectares to be brought under development, hence invest in land today rather than wait for appreciation at much later date and lower returns.

Considering and mentioning all the above we advise our clients to exercise the right amount of caution and source expertise while buying land, seek out experts rather than taking “Gut -Feel- Approach”. Analyze, understand, replicate the success stories in land as a portfolio rather than try to re write the success stories. Remember all leading developers in our country grew at this scorching pace on valuations, using land as the growth engine.

Get a better deal by making purchases together!!!

Group buying is an entirely new concept and only few are aware of the concept. Group buying has its origin in China where team buying was accomplished for having the discount prices on a property when there are a large number of people who are willing to buy the same property.

The advantage of Group Buying to the buyers is the deep discount on the property they want to buy.

Group buying which is also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. It allows the people who have the same preferences in the real estate options to come together and avail better discount as a group. Discounts on group buying vary from 5-25% depending on the location of a project ,its construction stage and the people in the group.

Planman Realty , in the interest of its buyers has recently started the Group Buying concept to enable its investors to avail discounts of which they are sometimes deprived of ,because of which they sometimes loose an opportunity of a best deal. As the developers are some times very rigid on giving away discounts.

Mr. Subhash Arora (Senior Lawyer,High Court)shares his experience saying that when he approached the developer directly he was offered an inaugral discount of 100 to 300 Rs .However, when he made the same deal through group buying he availed a discount of 15-18% and happily made investment in two houses.

Thus registering with a company of repute for group buying deals may promise big discounts and big savings. So, register now and start investing. Investing is real estate is no longer a dream.