Built up, super built up or plain loot?

This post is about the state of housing market in Mumbai and it is the third option right away. ME has been a big critique of the way housing market functions in Mumbai (and as others point out the trend is same in other places as well). It is  a market highly distorted towards the sellers and brokers with customers having no choice but to get looted as everyone wants to buy a house.

I had earlier pointed out to the economics of house in Mumbai. I thought things might improve after the ongoing crisis where realtors were the most effected. As the crisis situation has eased the builders show that they have not only refused to learn the lessons but have even decided to distort markets further.

Okthe main problem one sees in buying an apartment is this concept of built-up/super built-up (i call it plain loot). Under this, the builders say the flat size is say 1000 sq ft but is based on super built-up area. It means out of 1000 sq ft, you would get around 650 sq ft carpet area (if super built up is 35%) and rest 350 sq ft is for elevator, stairs, terrace, play-area etc. After all builders have incurred costs not just on apartment but other things as well and people should pay up for the remaining facilities as well.

Fair enough. But how much built-up? 25%, 35%, 45%?? How much?? It differs from building to building. You ask 2 sellers how much is the built-up and you get 3 different answers (and we just blame the economists and accountants for the same). What is worse is that when you see the final papers you realise the built up is much more than what you thought was already very high. When you protest, you are told if you are spending so much how does a little more matter? Some even say, if you think this way you will never be able to buy a apartment here!! Most want you to pay all the built-up minus carpet area difference in unaccounted money and we aren’t talking about a few thousands here.

The old buildings which perhaps had much lesser built-up, the sellers in the same expect same kind of charges. Why can’t we have some kind of standards across housing buildings?

When the crisis started, the realtors started crying hoarse that demand has fallen, they have high excess capacity, sources of funding have dried etc and need support. Large part of the media weer sympathetic to their cause saying they employ large number of people and should be supported. However, media also added prices were too high and need to be lowered. Some builders started lowering base prices but actually raised prices elsewhere (parking charges, increased built-up area, floor rise charge (every floor rise you pay some amount extra) etc etc). Some started offering discount but it was a % (5%-10%) which was available even before the crisis.

Now as the crisis has eased, the base prices have also started to rise and the recent advertisements show the builders are actually doing us a favor by offering flats at what they think is very low prices.

And this is not the lone factor.  If you delay your EMI, you are charged a penalty but the builders can continue to delay their projects without any penalty. Some may never even complete their projects. All you can do is do a court case against them andloose more money in process. The quality of the construction is never known. You don’t know whetherthe builder has got all approvals from the concerned authority. You don’t know whether the building is on legalised land? We don’t have a list of brokers in the market who are authorised to serve this market.  I mean you name it and we have issues with this housing market.

And despite all the issues, no one really talks about them. All we get to know is whether share price of some realty form has declined or risen.  We have seen how bad housing market is linked to the real economy in this crisis. It is time we sort out this mess.

The other issues may take time but we can surely do something about this built-up/super built-up issue. You keep hearing carpet area regulation has been passed (builders to sell on carpet area) but no one complies with it. Even if the builders are charging a built-up we need some standard %. Is it too much to ask for? It will be great if media also takes up this issue with fervour instead of just looking at share prices and landbanks.

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7 Responses to “Built up, super built up or plain loot?”

  1. Internet Marketing Email » Blog Archive » Built up, super built up or plain loot? « Mostly Economics Says:

    […] Amol Agrawal created an interesting post today on Built up, super built up or plain loot? « Mostly EconomicsHere’s a short outlineYou don’t know whetherthe builder has got all approvals from the concerned authority. You don’t know whether the building is on legalised land? We don’t have a list of brokers in the market who are authorised to serve this market. … […]

  2. Raghupathi Acharya Says:

    Well said Amol, it is high time, we need some regulation to protect the interest of home buyers..Yhey are currently being duped/fleeced by the greedy builders n brokers. Needless to mention about the political /criminal nexus because of which it is difficult for an individual to fight against them.

  3. MangoMan Says:

    Common Man- My Foot—————General feeling amongst High Class People
    Common Sense is very Uncommon.
    Our Attitude: Let Common Man Suffer, but our Children Should Have all privileges.
    Apparently, the definition of Common Man has been revised, reinvented, rediscovered and rephrashed as per the vested thinking of some builders & real estate brokers in Ahmedabad.

    Common Man is one :
    a) Who has a bunglow with large open space.
    b) Who has a decent Car
    c) Who has capability to book multiple house units & artifically jack up dwelling units price to an unaffordable level depriving the real needay first time buyers.
    d) Whose children studies in International tag school where annual fees is about 5-6 lacks.
    e) Who watches the first show of movies in Multiplex on every friday.
    f) Who goes for outing every vacation
    g) Who spends 15-20 days at least in foreign land outside India every year.
    h) Who goes to Mall for daily purchase of household eatable items.
    i) Whose children in teens goes to Australia, UK etc for further studies.
    k) Who keeps all white goods and pricy technical gadgets.
    and so on.

    Builders are eying these common man and construction houses for these people only.

    Can anybody ask these builders and real-estate brokers about the fundamentals of building price valuation in the face of the fact the property price appreciation that have taken in last 4-5 years @ 400%. What was available at 4-5 lacks for 2 BHK at Western Ahmedabad say in 2005 and the same flat is available at now 20-25 lacs. If somebody purchases at 25 lacs for 2 BHK flat at this time and if the rate of appreciation continues then after 5 years, 2 BHK flat will cost Rs. 75 Lacs -1 Crore.

    Is it not mockery. Builders are simply befooling people in the name Real Estate Shining. To further befool public so called common man, they have hijacked the first page of Dailies and insert all misguiding articles on Metro Projects, Green Building Projects, Satellite Township Project, etc

    We all know that Metro Project for Ahmedabad is not feasible till 2050 at least. Integrated Township project has not seen the light of the day for many years, however that has benefitted a lot to builders in fleecing gullible customers by charging exhorbitant prices much above their true value.

    The more you write through blog , the more GoG has turns nelson eye to the soaring problem and help the builders to keep plundering the common man in the name of Affordable House.

    Surprisingly, Affordable House means 2 BHK flat @ Rs. 20 Lakhs especially knowing the fact that the majority of Ahmedabad house seekers can not afford to have 2 BHK even at 5 Lakhs inspite of going to Banks/NBFCs for loan.

    No genuine buyers are there and it is evident from the fact that large no of units are lying vacant as orphans.

    Are we not sitting on another case of Dubai Debt.

    Builders and Brokers keep looting people and make life miserable for Common Man. You have the support of Ministers as stakeholders in your company. To absolve from this sin, you can donate food packets for beggars at times or hold Religious function on the road side at S.G Highway.

    Media can be spokesperson on behalf of Builders fraternity in befooling Common Man. TV correspondents keep attending mocktail/cocktail party of Celebs like Cricketers and Movie Stars.

    IIM Grads’ salary is not the base of common salary of people in India.
    IIMs & IITians use your intellectual knowledge to take India from Darkness.
    Sustainability can co-exist with Common Man’s Affordability only.

    What would happen to the Comprehensive Development Plan (CDP) of Urban Master Plan when its members are builders and ministers only ?
    Why is our policy not all inclusive ?
    Why the first page of Newspapers carries articles talking big about some ambitious project which has not taken any root at the behest of Builders?
    Why the society is going to Dogs?
    Why most of the commercial complex and residential units are lying vacant for last three years ? Why there is a large tract of open land in the midst and heart of Ahmedabad ?
    Why there is no regulator to ensure fair and transparency in land dealings?
    Why real estate brokers do not have to reveal their income ?
    Why there is more ads about selling housing units on portals & newspaper rather than genuine buyers?
    Why there is no Govt statistics that shows the real first time house buyers numbers every year against those who are multiplying units for the sake of fuelling and inflating real estate property prices ?
    Why there are so many Ads & Hoardings from Builders when their units are sold like Hot Cakes. ( Go to any builders at the bhoomi pujan ceremony, he will say all units have been booked )
    Why there is a pittance salary for the employees in private cos including Builders ? 4K to 5K per month.
    Why there is no voice against the unjust rise in property prices and house rentals from Industries and Academic Institution who are making all drama about Energy Saving and Climate Change ?
    Why there is no Common Man definition properly done?
    What is the population in Ahmedabad that can afford to have 2 BHK flat @ Rs. 5 lakhs even ?
    Why there is penalty against developers who complete project in many years ?
    Why Govt is not doing any residential projects for Middle Class ie Common Man ?
    Why building built for EWS goes into the hands of Brokers and then sold to high class people to make money by selling at an unaffordable price ?
    Why there is delay in bringing more Cement cos when we know that there is a cartelisation among cement cos and there is huge deficit of cement supply as demand exceeds supply.
    Why housing loan often the reason for rising succide case ?
    Why there is horizontal development instead of Vertical ?
    Why Builders & Developers have to organise trade fair to show their wares if property in Ahmedabad is so hot ?
    Why majority of high rise constructed building have mere 40 to 50 % occupancy only ?
    Why people purchasing flat have to mortgage their life in terms of paying EMI all through their life span ?

    Why IIMs and other B-Schools churn out mere Grads rather then Entrepreneurs ?

    There is no hope left and it does not look like that property price in Ahmedabad will ever follow the law of gravity ? Even if it leads to mass unrest and later on spilling over to Economic Slowdown or Recession as it happened in US. Financial system is more likely to collapse sooner or later.

    India has Democracy or Democrazy/Hypocracy ?
    GOD Save us.

  4. unicon india Says:

    This post is about the state of housing market in Mumbai and it is the third option right away. ME has been a big critique of the way housing market functions in Mumbai (and as others point out the trend is same in other places as well). It is a market highly distorted towards the sellers and brokers with customers having no choice but to get looted as everyone wants to buy a house.

  5. Tenant Screening Report Says:

    Very Helpful Info! I really think this site is very interesting. Thanks Taisha Grulkey

  6. http://cercacasa.it/ Says:

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  7. vijay Says:

    IF ANY BODY KNOWS ABT GOVERNMENT RESOLUTIONS IN RESPECT OF CARPET BUILT UP RATIO?

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