ASKS AN AGITATED YOUNG NOIDAN - WHY NO MRP ON HOUSING PRODUCTS?

"WHY IS THERE NO MRP (MAXIMUM RETAIL PRICE) FOR HOUSING PRODUCTS SUCH AS FLATS APARTMENTS VILLAS PLOTS?"

- ASKS A VISIBLY UPSET YOUNG TENANT IN NCR...!

The recent Real Estate Regulation bill passed by the Indian government has been appreciated widely by majority of property buyers in NCR and across rest of India, too. However, it has made some tenants who have been unable to buy property for a long period due to unreasonably highly inflated property prices, to wonder as to why no MRP has been fixed for property also just as the government has fixed MRP for nearly all consumer products ranging from match-box to refrigerators...!

An angry NCR resident said, "The government must fix MRP for housing sector also to solve housing problem faced by millions of Indians despite the existence of a large number of Apartments lying unused and locked in big cities such as Pune, NCR....! Why should these property owners (who cite advantageous infrastructural factors for charging HIGHLY INFLATED RESALE PRICE when these factors are actually created by the government in terms of better means of communication, connectivity, roads) be permitted to charge premium amount? Does the free market mean unbridled freedom for the resellers to exploit the prospective buyers?"

According to him, the government must fix MRP for property also and link such MRP with national banks savings rate for fixed deposits. This shall discourage the property owners (read it as the Flat/Apartment owners) to horde their goods (Flats/Apartments) for long periods without their actual usages.
For example, a person bought a 1650 square feet 3BHK Apartment in 2003 for Rupees 15 lakh ( 12 lakh as 20 years' loan from the bank - 80% cost component and 3 lakh from own savings).
Assuming that this hypothetical purchaser was needed to repay 12 lakh as Bank interest along with principal amount of Rs 12 lakh over 20 years' period.
As per the calculations worked out in an earlier blog-article, she/he must have earned at least Rs 19 lakh as rent till March 2016. Subtract society charge at the rate of 10% of the rent which comes to roughly Rs 2.0 lakh in round figures. That leaves Rs 17 lakh at her/his disposal in 2016.
Assume further that, she/he has repaid this earned RENT Rs 17 lakh to the bank till 2016. This means that she/he still has to repay Rs 7 lakh more to the bank in next 7 years to have zero liability to the lender bank.
Assume that the money doubled every 6.5 years. Her/his 3 lakh became Rs 6 lakh in first 6.5 years which in turn became Rs 12 lakh in 2016 (the prevalent fixed deposit rates are quite lower than the ones assumed here for simplicity sake).
This original buyer need receive Rs 12 lakh + Rs 7 lakh = Rs 19 lakh in order to be able to repay her/his property loan financed by the bank as well as recover the hypothetical interest on personal investment of Rs 3 lakh. Mind, the bank had invested Rs 12 lakh and she/he only Rs 3 lakh. Therefore, she/he should ideally resell her/his Apartment to you for Rs 19 lakh only...!
In a gone case scenario, assuming that she/he earned no interest at all, even then the amount is just Rs 19 lakh (interest if not actually earned) + Rs 19 lakh (investment by bank+her/him) = 38 lakh only...! THE RESELLER IN ANY CASE MUST NOT BE PERMITTED TO RESELL HER/HIS 3BHK APARTMENT FOR MORE THAN Rs 38 LAKH IN THE YEAR 2016. THUS, Rs 38 LAKH MUST BE FIXED THE MRP FOR SUCH A PROPERTY...!
Let us now assume that the current maximum fixed deposit bank rate is 7% per annum and the Flat/Apartment remains unresold in the year 2016 and finds a buyer instead in April 2017. What must be its MRP in 2017? Add 7% interest amount on Rs 38 lakh (Rs 2.45 lakh) to the current MRP Rs 38 Lakh. The MRP for the year 2017 then becomes Rs 38 lakh+ Rs 2.45 lakh = 40.45 lakh...!
The MRP can similarly be worked out for all types of properties on a year to year basis...! Of course, property owners are likely to cry foul. But, then the PROPERTY OWNERS NEED TO BE REGULATED TOO WHEN THE GOVERNMENT HAS REGULATED THE WORKING OF THE REAL ESTATE BUILDERS...!
Seen from another perspective, the builders are merely job-workers who manufacture a product (property - Flat/Apartments/Villa) for the owner/manufacturer/entrepreneur (the first purchaser)...!
The angry young NCR tenant says, "Why should the reseller cry foul when MRP exists for all goods? Why do the resellers cry foul when the local authorities extract their share (very high circle rates) from the pie of unreasonable profit earned by the reseller?"
One result is sure to flow from this novel implementation of the novel concept of the MRP for properties - The people who had invested in properties such as the Flats/Apartments and have made these properties unused by keeping them locked for years shall be discouraged from hording such properties and also simultaneously encourage the millions of tenants to buy such resale-properties. Thus, the MRP on properties can help millions of homeless Indians (who really need a home) own a home in view of the resultant within reach reasonable resale prices...!

- SPECIAL NOIDA PROPERTY CORRESPONDENT

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THE CLARIFICATION ABOUT CALCULATIONS IN A BLOG BY THE SPECIAL NOIDA PROPERTY CORRESPONDENT

The Special Noida Property Correspondent has to clarify regarding the blog "ARE YOU A VICTIM OF INFLATED RENT OR PRICE FOR PROPERTIES IN NOIDA?" that the ORIGINAL purchase price shown as Rupees 15 lakh is for the Flat on the Fourth floor of the GAIL APARTMENTS housing society. 
The original purchase price in the same society for the First floor is Rupees 16 Lakh.
The purchase prices vary in the 4-storey GAIL APARTMENTS, with the prices decreasing upwards from the First floor.
The rent earned also decrease from the first floor Flat upwards with the lowest being for the Fourth floor Flat/Apartment.
The GAIL employees who purchased the first floor flats must have earned a rent of Rupees 20 lakh from 2005 to 2016. These purchasers need recover only 48.31 lakh-20.00 lakh= Rs 28.31 lakh to make their earnings from the First floor flat equal to the average earning (Rs 48.31 lakh approximately) on a fixed deposit of Rs 16 lakh in the national savings bank accounts at fluctuating savings rate prevalent from 2003 to 2016.
Add another 7 lakh roughly as interest on repaying the loan as EMIs, assuming that the original purchaser had purchased the Apartment by borrowing the money from some bank. Then, this becomes 28+7= 35 lakh, the amount which actually is the resale price of such a First floor Apartment if the logical genuine calculation is done based on the savings bank rates...!
Alright, add another 5 lakh if you wish to pay as premium for buying such property. It would become 35+5=40 lakh.
Thus, the CURRENT LOGICAL RESALE PRICE OF A First Floor Apartment in GAIL APARTMENTS MUST NOT BE MORE THAN 35-40 LAKH...! ANY AMOUNT BEYOND THAT IS UNREALISTICALLY UNTENABLE AND UNREASONABLY HIGH...!
Add to this the FACT THE PRESENT OVER-FLOODED OVER-SUPPLIED PROPERTY MARKET IS TOTALLY IN SHAMBLES WITH HARDLY ANY SENSIBLE WISE BUYER WILLING TO PAY MORE THAN RS 35-40 LAKH FOR 13-14 YEARS' OLD 1st Floor GAIL APARTMENTS WHEN THEY COULD BUY IN RESALE A 1650 SQUARE FEET BRAND NEW FLAT IN NOIDA EXTENSION (ORIGINALLY sold by builders AT Rs 1800-Rs 2500 per square feet FOR RUPEES 29.7 LAKH TO 41.25 LAKH...!) FOR RUPEES 45-50 LAKH (VARYING ACORDING TO FLOORS) BY PAYING 5-10 LAKH EXTRA...!
CONNECTIVITY ISN'T A BIG ISSUE. ANY HOUSING SOCIETY AREA TAKES NO MORE THAN 5 YEARS TO DEVELOP FULLY WITH ALL AMENITIES IN NOIDA...! SAME GOES FOR NOIDA EXTENSION AND OTHER HOUSING AREAS IN NOIDA...!

THE CLARIFICATION ABOUT A BLOG BY THE SPECIAL NOIDA PROPERTY CORRESPONDENT

The Special Noida Property Correspondent has to clarify regarding the blog "WHY ARE CURRENT PROPERTY PRICES IN NCR INFLATED UNREASONABLY?" that
a reputed property dealer/agent had indeed confirmed off the record the fact that the unscrupulous property dealers make a neat commission of upto Rs 10 lakh from the resellers on each successful 3BHK/2BHK deal brokered through such property agents...!

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WHY ARE CURRENT PROPERTY PRICES IN NCR INFLATED UNREASONABLY?

The multimillion dollar question is as to why are the UNREASONABLY HIGHLY INFLATED PRICES IN NCR ARE being quoted for properties by the property dealers/agents?
In my last blog-posting, I had showed you clearly the dear discerning reader that the factually correct price of properties in NCR is quite low compared to that being shown to you wrongly by property dealers on websites and offline...!
There are several reasons for this culture of inflated rates...!

It is basically the greed of property dealers/agents...! This correspondent was recently told by a deep-throat in the property business that the property dealers/agents inflate the prices in an unethical effort to become super-rich overnight. 
For example, this correspondent was told that an unscrupulous property dealer/agent makes a neat commission of nearly 5-10 lakh Rupees on each deal [2 BHK (1200-1400 square feet)/3BHK (1650 square feet) otherwise really worth Rupees 25-35 lakh] by making you buy these for highly inflated rates (2BHK - 40-55 LAKH, 3BHK- 50-85 LAKH ) for deals involving sale of Apartments in housing societies in NCR...!

The brokerage shown as 1% on websites is an eyewash. Such unscrupulous agents charge this 5-10 lakh from the reseller without the knowledge of the buyer in such inflated deal...! The reseller also keeps quite in view of the possibility of making extra money on the sale...!

How is this notorious game played? Lets say, a BHK dwelling unit (1650 square feet) is really worth Rupees 35 lakh only. The property agents create a false impression through websites, press and word of mouth that the going rate for such a unit is Rupees 60-75 lakh...! The resellers who are greedy for a BIF PROFIT OVERNIGHT, readily believe in and do not resell it at the REASONABLE rate of Rupees 35-40 lakh!

The real estate/property agent makes a cool commission of 25-50 lakh if she/he succeeds in brokering such 5 deals in a year. Of course, not all property agents succeed in doing so. And of course, not all resellers are able to sell their Apartments at these UNREASONABLY HIGHLY INFLATED PRICES. But, the word goes round in the market that the properties are hot.

Misled by one or few successful resellers, most resellers wait for buyers who would buy their Flats/Apartments at UNREASONABLY HIGHLY INFLATED PRICES and end up instead not being able to sell their Flats/Apartments for a long period of time because not all buyers are FOOLS!

In this game of unethical pricing, most resellers lose interest (which they would have otherwise earned on their resell value) by not reselling their dwelling units at reasonable rates...! The unscrupulous property dealer/agent loses nothing in this game...!

Thus, the unscrupulous property agents are the only BIG GAINERS in the above narrated unscrupulous game...!

Of course, most property agents/dealers when contacted, refused to accept the factual reality described above...! But, then the saying goes - there is no smoke without fire...!

So, dear resellers become wise and don't be misled by the property agents. Resell your Flat/Apartment at REASONABLE PRICE without being greedy if you really wish to resell your property and not lose interest rates that you would gain by such timely resell at REASONABLE RATES...!

Even the Haryana government Officials have admitted to the DEMAND for properties being very low and hence have decided to DECREASE the Circle rates in Gurugram (Gurgaon)...!

THE CURRENT FACTUAL REALITY IS: HUGE OVERSUPPLY OF DWELLING UNITS EXIST IN NCR AND THERE ARE NO SIGNIFICANT NUMBER OF BUYERS...! THIS SITUATION ISN'T LIKELY TO EASE BEFORE ANOTHER 2 YEARS...! SO, EITHER WAIT FOR 2-3 MORE YEARS TO RESELL YOUR FLAT/APARTMENT/PROPERTY OR ELSE RESELL IT PRESENTLY AT THE REASONABLE RATE THAT YOU MAY GET FROM THE CURRENT BUYER...!

WHO KNOWS YOU MAY NOT GET A BUYER FOR ANOTHER 2-4 YEARS IF YOU CHOOSE TO MISS OUT ON ANY REASONABLE DEAL THAT YOU MAY BE GETTING FROM A BUYER RIGHT NOW...! ANYWAY, THERE ARE NO BUYERS (SO TO SAY) AND ONLY SELLERS/RESELLERS ARE CROWDING THE CURRENT PROPERTY MARKET...! CHOICE IS YOURS, DEAR SELLER/RESELLER...!

- Special Property Correspondent
{ You are invited to share your comments here or you may contact us on ncrpropertiesinfo@gmail.com }

ARE YOU A VICTIM OF INFLATED RENT OR PRICE FOR PROPERTIES IN NOIDA?

Many unsuspecting citizens in NCR, especially in NOIDA are paying exorbitantly very high unreasonable rent or else are buying a second hand accommodation such as a Flat or Apartment at highly inflated prices!
This is despite PRESENT DEPRESSED DEMAND AGAINST HUGE OVERSUPPLY of housing dwellings in this region.
Why? The simple answer is that many accommodation seekers or buyers have no factually correct information about the true monetary value of the Flat or Apartment that they wish to rent or buy second hand.

For example, the rent that prevailed in 2005-2006 for a 3BHK (1650 square feet ) Flat/Apartment in Sector-62 of Noida was Rupees 6,000 per month.
In many housing societies, the first purchase price for Flats with 1650 sq feet area in 2003 was around Rupees 15 lakh.
Now, let us see how the second hand buyers or tenants have been victimised...!
Let us take up the GAIL Apartments, a housing society floated by the Gas Authority of India limited for its employees in Sector-62. The 3BHK (Bedroom, Hall, Kitchen) Flats in this society were given possession to the owners in the year 2003 at prices not more than around Rupees 15 lakh per such a Flat. 

A CRITICAL EXAMINATION

(1) LET US FIRST EXAMINE THE RENT PATTERN AT THE RATE OF 10% INCREASE PER ANNUM SINCE THE YEAR 2005:

YEAR     MONTHLY RENT      YEARLY RENT

2005-06                         6,000                                                       72,000

2006-07                         6,600                                                       79,200

2007-08                         7260                                                        87120

2008-09                         7986                                                        95832

2009-10                         8785                                                       105420

2010-11                         9664                                                       115968

2011-12                         10631                                                     127572

2012-13                         11694                                                     140328

2013-14                         12863                                                     154356

2014-15                         14149                                                     169788

2015-16                         15563                                                     186756

2016-17                         17119                                                     205428

The monthly and annual rent figures are in Indian Rupees. The year is taken from April to March. The monthly rent is inclusive of all housing maintenance charges. It is clear from the table given above that the current RENT in GAIL APARTMENTS and other housing societies in the Sector-62 for the financial year April 2016- March 2017 should not be more than Rupees 17119 per month for a 1650 sq. feet 3BHK accommodation!

So, you have either been fooled into paying more rent or else are being forced to pay more rent per month if you are paying more than Rupees 17,119 as the rent for 3BHK, 1650 Sq. feet Flat in Sector-62...! You can easily see with the help of the table given above whether you have paid hugely unreasonably inflated rent or not...!

(2) LET US THEN EXAMINE THE RETURNS ON RUPEES 15 LAKH PAID BY THE FIRST PURCHASER FOR BUYING ONE FLAT (1650 SQUARE FEET) IF IT WERE DEPOSITED IN BANK FROM YEAR 2003 TO 2016:

YEAR     AMOUNT DEPOSITED   AMOUNT WITH INTEREST

2003-11                                       Rupees 15 lakh                Rupees 30 lakh

( assuming the principal amount doubled in 8 years' time)

2011-12                                                    30                                     33.00

2012-13                                                    33                                     36.30

2013-14                                                    36.30                                39.90

( assuming the 10% per annual returns on fixed deposit)

2014-15                                                    39.90                                42.89

2015-16                                                    42.89                                46.33

( assuming the 8% per annual returns on fixed deposit)     

The above table clearly shows that the GAIL employee who purchased a 1650 sq. feet 3BHK Flat by paying Rupees 15 lakh in 2003 would have earned Rupees 46 lakh and 33 thousand Rupees had that amount been deposited in a nationalised bank such as the SBI with attendant interest rate fluctuations. The interest rate fluctuations given here are for simplicity sake. The actual interest rate fluctuation may not be much significantly.

Now, supposing that the GAIL employee gave her/his above cited case Flat on rent from April 2005 to March 2016. The rent table shows clearly that such an employee has already earned Rupees 18.68 lakh as rent till 2016 since April 2005. Such employee must have in addition earned further recurring interest on monthly rent earning if she/he had invested this monthly earned rent in recurring/savings account..!

For the sake of simplicity, we will consider only Rupees 18.68 Lakh earned as rent. In other words, this means that the employee has already recovered Rs 18.68 by way rent which means she/he should actually need recover only 46.33-18.68= Rupees 27.65 lakh. This also means that the current value of the 3BHK 1650 Square feet Flat is Rupees 27.65 Lakh only.

NOW, LOGICAL MORAL QUESTION IS FOR HOW MUCH MORE SHOULD THIS EMPLOYEE SHOULD SELL THIS APARTMENT...? NOT MORE THAN RUPEES 30 LAKH, TO BE PRECISE...! ALRIGHT, LETS ADD FURTHER 5 LAKH...! IT BECOMES RUPEES 35 LAKH.

THUS, YOU MUST NOT PAY MORE THAN RUPEES 35 LAKH FOR BUYING A FLAT OF THE SIZE 3BHK 1650 SQUARE FEET IN GAIL APARTMENTS SOCIETY IN SECTOR-62, NOIDA...!

IN ADDITION TO ABOVE-EXPLAINED LOGIC, FOLLOWING REASONS ALSO SHOULD WAKE YOU UP DEAR BUYER AND NOT PAY MORE THAN RUPEES 35 LAKH IN THE ABOVE CITED CASE:

(I)  Most housing societies in NOIDA are on leased land and not free-hold land. It means the land belongs to state government which can throw you out of your Flat after the period of lease is over, say which may be 90 years out of which 40-50 years might have already been over...!

(II) In the case cited above, the flats have already aged-out, that is, have become old by almost 14-15 years. They are no more new! That means, you will have to spend a lot of money on renovation/maintenance work!

(III) The upcoming Metro railway in Sector-62 can not in any way logically justify any artificial hike or inflated selling price of these above mentioned Apartments...! If owner asks you high selling-price by quoting the new Metro coming to the town, it would mean that the Delhi Metro Railway Authority would/should charge a certain percentage as fees from the owner at the time of sell of such a Flat, SAY 5% AS METRO-PROXIMITY FEES SAME WAY THAT THE NOIDA AUTHORITY CHARGED 5% AS TRANSFERENCE FEES...! But, in reality, the Delhi Metro Railway Authority doesn't do that...! So, don't be fooled by the logic of Metrorail-Proximity pushing up the price of the Flat/Apartment...!

(IV) THERE IS DISPROPORTIONATELY HUGE OVER-SUPPLY OF FLATS/APARTMENTS DUE TO GREAT CONSTRUCTION WORK DONE BY BUILDERS IN NOIDA, GREATER NOIDA, YAMUNA-EWAY, ETC. SO, THERE ARE MORE DWELLING UNITS AVAILABLE, BUT THERE ARE ONLY FEW BUYERS...! SO, THE PRESENT HOUSING MARKET IS BUYERS' MARKET...!

(V) BUILDERS AND BANKS HAVE COME OUT WITH "NO INTEREST FOR NEXT 10 YEARS' SCHEME" FOR BUYERS WHICH MEANS YOU NOW HAVE TO PAY ONLY RUPEES 40 LAKH IN 10 YEARS INSTEAD OF 80 LAKHS IN 20 YEARS IF YOU ARE PURCHASING A NEW DWELLING UNIT COSTING 40 LAKH...! SO, THIS IS THE CORRECT TIME TO PURCHASE A NEW HOUSING UNIT IN THESE NEW BUILDING COMPLXES...!

The 5 factors elaborated insightfully above must wake you up dear prospective buyer and educate you to not waste your money by buying old dwelling units at unreasonably high price. For example, a property website shows the current sell price as Rupees 60-65 lakh and Rupees 19000-21000 as monthly rent for a 3BHK 1650 Square feet Apartment in GAIL Society of Sector-62 in Noida...! BUT, THIS DOES NOT REFLECT GROUND REALITY. WHEREAS THIS ARTICLE HAS GIVEN YOU THE CORRECT WISE INSIGHT INTO THE CURRENT MONETARY VALUE OF SUCH A FLAT WHICH SHOWS THAT ANY GAIL EMPLOYEE WISHING TO SELL GAIL APARTMENTS FLAT MUST NOT ASK YOU MORE THAN RUPEES 35 LAKH AS SELL PRICE OR MUST NOT CHARGE YOU MORE THAN RUPEES 17119 AS MONTHLY RENT INCLUSIVE OF ALL SOCIETY CHARGES...!

IF SOME OWNER ASKS YOU TO PAY RUPEES 60 LAKH TO 75 LAKH AS PRICE OR A MONTHLY RENT OF RUPEES 22,000 FOR ABOVE CITED APARTMENTS, YOU HAD BETTER SAY NO TO SUCH A BAD AND HIGHLY INFLATED UNREASONABLE DEAL....! INSTEAD, YOU SHOULD MOVE OUT TO NEWLY CONSTRUCTED DWELLING UNITS THAT ARE ON OFFER IN DIFFERENT PARTS OF NOIDA AND NCR...! THESE NEWLY CONSTRUCTED DWELLING UNITS ARE REASONABLY PRICED IF YOU WISH TO PURCHASE THEM OR HAVE THM ON REASONABLE MONTHLY RENTS.

FOR EXAMPLE, A 3BHK IN NOIDA EXTENSION HAS THE CURRENT GOING MONTHLY RENT OF RUPEES 14,000-15,000 AND A SELL PRICE OF RUPEES 40-45 LAKH....!

So, be wise while deciding to buy a new Flat/Apartment/Villa or any other property in NCR. Also, do some real ground work while moving anywhere as a tenant so that you don't end up paying unreasonable/inflated rent.

WHEN MANY OF YOU CRY SO MUCH OVER EVEN A MARGINAL INCREASE IN TUTION FEES OF YOUR CHILDREN BY SCHOOL AUTHORITIES THEN THERE IS NO REASON WHY YOU MUST PAY RUPEES 60-75 LAKH FOR BUYING A PROPERTY/APARTMENT THAT IS REALLY WORTH RUPEES 35 LAKH OR PAY A MONTHLY RENT OF RUPEES 22,000 WHEN THE REAL RENTAL VALUE IS JUST AROUND RUPEES 17,000 ONLY AT THE RATE OF 10% ANNUAL INCREASE...! ADD TO THIS THE FACT THAT THE CURRENT INTEREST RATES FOR FIXED DEPOSITES FOR MORE THAN 5 YEARS HAVE BEEN BROUGHT DOWN TO NEARLY 7% PER ANNUM BY THE INDIAN GOVERNMENT...!

- SPECIAL NOIDA PROPERTY CORRESPONDENT

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