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

{You are invited to share your comments on the above article here or write to us at ncrpropertiesinfo@gmail.com }