search2010

Hi All

From last few days i am gettting lot of queries where people are asking for future of Noida Real Estate. Is it right time to invest in Noida or not??They should invest in Ready to move flats or in under construction flats or in new launched projects.To get answers of these questions, it is better to know about Noida Real Estate. Past, Present,Future of Noida Real Estate. I am starting this thread so we can discuss on Noida Real Estate present/future.

Why in past Noida Real Estate rates went very high?

In Noida few projects started in 2003/2004 in Sec 50/61 and that time rates were Rs 25-30 Lakh for a decent 3BHK flat. These projects came in possession in Year 2005/2006 and till that time rates were not very high but during the period of Year 2003 to Year 2006 lot of new IT companies started, existing companies increased their strength so working population increased a lot. During 2006 to early 2009 only Antriksh launched project so virtually there were no supply during pick of these 3 years so rates of existing flats/soceity started increasing and came to pick in 2008. 3BHK flat of size 1600 started costing Rs 80 Lakh in Sec 50 in some good soceities althrough number of transactions were very less as there were very few people who could afford in that range but one transaction on higher rate started making stable rate in that sector.It all was just due to demand/supply gap and nothing else.Duing this time even Unitech Grande was having rates of Rs 7000 and Jaypee launched his product Rs 5500/sq ft as sky was limit and there was no supply. Rates went high only due to limited supply. There was no problem during this time in Gurgaon so still on Sohna road ready to move flats are available 3500/sq ft but in Noida, there is no sector where you can find ready to move flats 3500/sq ft.

What is present situation?

From Early 2009 due to recession and need of money(failure of few big govt land deals like BPTP Rs 5500 and Unitech Grande giving back half land to Noida authority) governemnt started realising land in Noida for Residential flats and with this supply started coming in Noida. First it was jaypee who started sellling flats in cheap rates and then projects on new land started coming cheap. Government didn't reduce the /sq meter rates but they increased the FAR from existing 1.5 to 2.75 (in normal terms it is the ratio of construction area) so virtually rates of land came down 40% by increasing FAR so /sq ft cost for builders came down. Even with high construction rates , builders on new plots were able to sell flats 3000 /sq ft . Now people who were waiting from last 4-5 years to have a flat in Noida grabbed this opportunity with both hands and project started selling in very less time. By this way, Jaypee, Amrapali, 3C,Mahagun,Divine meadow, Gardenia sold around 10,000 flats in 6 months and sudenly Noida became very hot market. In second round new projects came in sec 70, 121 with approx. 3500 flats in these 2 projects. In today's TOI there was auction ad from Noida authority for plots in Sec 120 & 110. Total area of these plots is approx. 3.3 lakh sq meter and with FAR of 2.75, total construction area will be 90 Lakh sq ft with approx. 10,000 flats in those 4 plots. As per rumours new plots also coming in Sec 75,118 and 43 in next 2-3 months wiht around 10,000 more flats in those sectors. With all this approx. 25,000 flats in market with rates approx. 3000/sq ft
with this, there is very less chances that rates in Noida will go up in another 6-12 months however there can be movement of Rs 200-300 /sq ft based on builder reputation, layouts of flats, location of the project but hoping that rates will go very high is remote. Due to all these new projects and very high supply rates of ready to move flats should also not move now because it is worth waiting for another 2-3 years for flat instead of paying difference of Rs 2000/sq ft(RS 5000 for ready to move and Rs 3000 for under construction projects). This difference of Rs 2000/sq ft will make a difference of Rs 30 lakh for flat size of 1500 sq ft so increase of EMI of Rs 30,000 /month for next 20 years. This huge difference will attract new buyers to new projects instead of ready to move.

Future of Noida Real Estate

Due to new projects and less rates for next 2 years there won't be much hype in terms of rates and with time even rates of Ready to move flats will start coming down or number of transactions will be very less...Flats today 3000/sq ft in Sec70/121/Sec 46 with all interest will cost Rs 3300-Rs3500/sq ft after 2-2.5 years, now people who wants to exist at that time won't mind selling those flats 3500 - 3800/sq ft and assuming that there will be no increase in rates of flats in sec 61/50 still difference will be Rs 1200-Rs 1500/sq ft so still differnce of Rs 20 Lakh in 3BHK flat i.e Rs 20,000/month EMI for next 20 years. Most of the people will still prefer to go to Sec 70/121/119 to save Rs 20 Lakh.Beside this major difference will be layouts/size of flats. In existing soceities of Sec 61/50, normal 3BHK is of size 1600 but in new projects 3BHK is of size 1400 sq ft with bigger room size so 3BHK is sec 61/50 will cost Rs 80 Lakh however 3BHK will cost approx. 50-52 lakh in those projects. so difference of Rs 30 Lakh in terms of budget. Second there will be more facilities in these new projects(Tennis court, bigger gym, club house etc.) as compare to existing soceities.

So guys in my view, do buy flat in Noida as it is good time to buy but keep reputation of builder, layout of flat, location of plot in mind. With high speed builders are buying residential plots in Noida, it can be dangerous also specially for the builders who are running multiple projects. if recession is coming again or little bit slow down in supply in Noida, these builders will not have funds to run multiple projects without selling flats. So be careful while investing at this time. Another suggestion will be that try to invest only in Construction link or Flexi payment as it will bound builder to continue the construction.

These are simply my views so open for discussion.

umesh_jain

Thanks for a details disscussion on Noida properties, will help buyers alot.

mav123

Agree to most of it. Just not sure if the prevailing mkt rate of~3500 psf is justified. It seems very expensive to me and I don't think there are enough people to absorb the kind of supply that is coming in Noida. I'm hoping that RE bill gets tabled and approved soon so that people can get a better sense of the deal they are getting. I sense that property prices are still pretty high for the state of world economy we are living in. If you consider the macro situation I think property prices should go down further by atleast 25% but as they say - markets are never priced right so this might as well be the best time to put your money in RE assets. But do not expect any returns in near future.

search2010

Hi Mar

Except 3C, most of the projects are available approx. Rs 3000/ sq ft . for example Amrapali 70, AGC 121, Sec 119 Amrapali, Unitech, Gardenia 46 they all are available in range of 3000/sq ft including all charges. 3C rates have gone up and now I think , it is not worth putting money in that.

In Noida, I don't see any possibility to go rates down further because on these rates also margins are coming down. By simple math, land is costing them Rs 1200-1500/sq ft and assuming a normal construction of Rs 1000, it is going to be around Rs 2200-2500/sq ft and adding 3 years staff salary, profit margins, risk factors etc. it is ok to have margin of Rs 800 and don't see that they will go further down. yes in new proejcts for initial bookings of 200-300 flats will be Rs 200 down to get the cash flow and make good reputation of project with customers...

rakeshsonii

Hey ,
Builders are not selling independent houses, its one time land cost and multiple flats..they margin you can't calculate ...it's huge...
how did you forgot to calculate that a builder construct 22-30 floors on the same land , so its not like direct adding (land cost + construction cost + staff salary) ??

The below calculation is absolutely wrong !!
"land is costing them Rs 1200-1500/sq ft and assuming a normal construction of Rs 1000, it is going to be around Rs 2200-2500/sq ft and adding 3 years staff salary, profit margins, risk factors etc. it is ok to have margin of Rs 800 and don't see that they will go further down."

mav123

"land is costing them Rs 1200-1500/sq ft"
This is not correct. I have seen relevant agreement papers and it actually cost around 15-10K/sqm for the plot and if you build ~25 floors it comes to way less than you quote.

"normal construction of Rs 1000"
This is again more than reality. For builder who have bulk purchasing agreements and optimize contruction cost (economies of scale), it does not cost more that 700 psf for construction for a good quality construction. This is an industry standard.

sanjeevchaudhri

Take price of land as Rs Y per sq meter.

For sq ft, it comes out to be Rs Y /10 per sq ft.

FAR is 2.75.

Hence effective per sq ft rate is = Rs (0.1 Y ) /2.75.

Hence, the land lost comes out to be Rs 727 per sq ft if rate of land is Rs 20,000 per sq meter.

For Rs 30,000 per sq mt, it comes out to be Rs 1090 per sq. ft.

Venkytalks

Excellent analysis, searching property, especially historic trends of the past.

I disagree that supply and demand will cap price rise and will bring down prices.

It will take 3 years for delivery of current flats. By then inflation will be rampant. Prices of newly built flats will bump up to the price of already built flats. Nobody will short sell their flat as you propose, when they know holding out will fetch better price.

So actually, those who book now will get a 60-100% return in 3 years in NOIDA (from 3000 psf to over 5000 maybe 6000, who knows?).

Thats why NOIDA is different from Gurgaon in todays market and it makes sense to book now.

My problem is that I have already committed bulk of funds and loan and cannot afford anything unless it is less than 20 Lakhs (closer to 10 Lakhs). Thats why I am contemplating things like Ceyane tower, which I would normally ignore.

Guys, anything available in that price range? Ideas will be most welcome.

findingnemo

Hi Folks,
SearchingProperty has provided very good analysis and there are lots of assumptions in his analysis which i think won't be true. He says there would be lot of supply, but does he know that we(India) add one Australia every year (in population) to our more then a billion now. Do you need to know from where the demand will rise.

I agree with Venkytalks that prices will be way higher after 3 years.

FYI though if you look at the Noida Master Plan, Sector: 104 is Sports Comples & Green Park and Sector 101 is Golf Course. Areas for both of them are quite big, both of these sectors are near to Sec 100(3C -Lotus Boulevard). So you can imagine once they are completed where would the prices go. Historically areas near Golf Course's are very expensive and with world class Sports complex, this particular area should ROCK after 3-5 years. Maybe the best place in the whole of Delhi NCR.
I think thatswhy 3C - Lotus Boulevard comes at premium right now, and with a good builder who has received FDI for this project. Nonetheless whole of this corridor near the Expresshighway should be one of the best places in Delhi-NCR, with other benefits like good connectivity to Delhi, Good infra which is already in place, 2 Golf Courses, Sports Complex etc etc.
Rest i think its the time to put your money and i already did.
Good luck Folks.

search2010

Hi All
Few clarifications raised by few people :
1. Calculation done by someone to find out /sq ft rates is correct but when calculating the cost of land, add atleast “25%” as “B”(I hope you will understand this word which is having 5 characters..heheehe), this % goes up to 40% based on location of plot and demand of that plot among builders. If you add this %, you will see that figure will be what I was saying in my initial post. So FSI or land cost goes in that range only (Rs 1200 to Rs 1500)
2. Now coming to construction cost, please let me know any company who can even ready to do the construction at Rs 800/sq ft , I will give him lot of work and also keeping my big margin in that from builder. I am not in construction field but still it is the main area while we do research for real estate projects. Now coming to second things that with big volume (more floors) cost will go down, however in reality it is reverse. After 12th to 14th floors(standard floors on one building) cost starts going higher because it needed more efforts/technologies to carry material(cement, bricks, tiles etc.) on higher floors. So in general terms, cost of carrying material to make first floor is less than carrying the same material on 15th floor. While I am saying “cost of carrying material” , it can be in terms of more labor cost, more time to carry things or using heavy/fast lifts/cranes to carry material. So please understand that it is reverse when you are increasing the height of building. Another way of comparing or finding cost of construction is that ask any contractor for quotation to make just 1 or 2 floors buildings and even his quotation will be > 700 sq ft.
3. Now coming back to question of master plan, I think no need to say that it changes very frequently based on money needed for development by authority and demand from builders. Sec 70 plot where amrapali project is coming was reserved for “LIG/MIG” flats in scheme of 2006 but now there was good offer from builder so they made this project as residential group housing society.
4. Good question regarding demand/supply question and regarding “India producing one Australia in a year”, I know this statement from last 10 years and just to update, now India is adding more people in a year than Australia population. But adding population doesn’t mean that rates will go with rocket speed. If it is true then rates in China should be more than India. My point was that with lot of sudden supply rates will stabilize not only in new projects but also for old ready to move flats. In pick time, Rates in ATS Village went upto Rs 7000/sq ft but do you feel that today in Rs 7000/sq ft anyone would like to go. Even if there is any, very very few buyers. Because it makes more sense to buy in “3C” at Rs 3500/sq ft and pay interest of around Rs500/sq ft till possession so have flat in “3C” at Rs4000/sq ft with latest facilities. So my point was that in these new projects rates will go up little bit in next 6-12 months and rates in “Ready to Move” flats will stabilize or will come down little bit. It already started happening in sector 50, sector 61 & sector 62. You can go and verify this from any broker in that area or spend some time on /99acres websites. To understand this more deeply, in last 6 months 3C have sold 1500 flats (brokers claimed 2000+), Jaypee including Aman sold 5000 flats, Amrapali sold around 2000 flats, Gardenia sold around 1000 flats (including sec 46,61), Mahagun/Prateek sold around 400 flats , Unitech 117 sold around 500 flats , All builders in Sec 119 sold around 1000 flats so total around 10,000 flats sold in last 6 months. Do you think that if there would not have been any new project, these 10,000 people would have taken flats in “old projects”, Answer is big “NO”, out of these 10,000 flats, 90%-95% people are new buyer who were not having plan to buy house as they always thought that Noida is out of their pocket and it is better to stay in rented house. Only 5-10% people were looking for house and without these projects they might have taken flats in “Ready to Move” in Noida/Indirapuram or somewhere. In these cases, people compromise on size, instead of 3BHK they go for 2BHK. Now these people gone from market and they have taken flats in new projects so naturally demand of “Ready to Move” flats will come down. Even I know lot of people who were planning to have just “Ready to Move” flats but after seeing difference in rates they took flats in all these new projects. So my view was that this situation will be for next 1-1.5 years until all these new projects will be having “lot of free” flats and due to low demand of “Ready to Move” flats , rates will be stable or will come little bit down. Now after 2 -2.5 years, 2000 flats will be ready in Sec 119, 1500 flats in 3C (assuming only 50% flats possession), 1500 flats in Sec 121 and around 1000 flats inside sectors in Noida. Due to some personal/professional reasons, few people would like to exit from these projects and those flats should be available on Rs 3500 to Rs 3800 /sq ft so my view is that it will make more sense to buy these flats from these sellers instead of again paying very high for flats in Sec50/61.
I hope it will clear my views due to which there were few doubts.
P.S : Nice to see that this thread is going into very good discussion.