sanjeevchaudhri

Every municipality/corporation/authority needs a certain amount of working annual capital for its operation and to undertake various projects (like flyovers, roads, water/sewage plants, transport, schools, hospitals etc.).

Prior to 2009, the GHP plots were auctioned to the highest bidder and authority used to get 40% of the bid price within 90 days and the remaining 60% in 8 half yearly installments.

After 2009, the terms of payment have been changed, authority gets 10% of the bid price initially, then for next 2 years, only interest needs to be payed, after that principal (along-with interest) is to be paid in 16 half yearly installments.

Suppose Noida authority requires x crores in a particular year.

Prior to 2009, authority was getting majority of this "x" as 40% of "y" no of GHP plots.

By current formula, x is 10% of z.

40% of y (no of GHP earlier) = 10% of z (no of GHP now)

z (no of GHP now) = 4 times y (no of GHP earlier).

Then authority has to cover for the freeze in principal payment for the next 2 years and after that principal recovered on a yearly basis is also half of the amount used to be earlier.

If we extrapolate further to cover the above, z = 6 times y.

By doing this, Authority would get its full working capital per annum but this has resulted in a flood of housing units in NOIDA and this would lead to price stagnation in the next 5-7 years.

Its a win-win-win situation for Noida authority/builder/actual flat buyer cum user but "lose" for investors/renters.

search2010

Hi Sanjeev

Good point but this is not only the reason. Govt tried to release plots in Greater Noida but was not successful and due to recession lot of big builders like Omaxe,BPTP,Purvanchal returned their plots and main reasons was payment plan of noida authority. If they would have continued with same payment plan , it was impossible for builders to buy plot and that also bigger size plots so main reason for this was to give flexibility to the builders so that they can buy bigger plots assuming that they don't have to give much money initially.

Venkytalks

Sanjeev and searching, always enjoy your very informative and knowledgeable posts.

Do keep them coming.

But GHP explosion in NOIDA sounds more like an election war chest being prepared by ..... ????? !!!!!

sanjeevchaudhri

Your Dream Home May Cost More



http://navbharattimes.indiatimes.com...ow/5577517.cms

trialsurvey

superb post .. but just one query .. how is it a "lose" for renters ?
By renters , do you mean tenants or landlords ?

sanjeevchaudhri

Its landlords.
Rent in Noida will surely dip once these new flats flood the market.

trialsurvey

thanks for clarifying .. thats what i thought as well !!

seems to be a good time for end-users and tenants !

vaibhav_arora

The simple reason for 'massive sale' of all these plots in Noida are the general elections in UP. The current CM requires a war chest to fund elections and also, it would not make any sense to leave the gains from approvals for a future government that may not be controlled by the incumbent party.

My bet is, we will see a complete sell out of available GH and commercial plots by end of 2010 . Regarding rents going down, its unlikely. There're a few reasons:

1. A typical renter is someone who's there for work related reasons and hasnt been able to purchase his own house due to either affordability or due to location uncertainty.

2. New job creation rate due to industrial expansion is highest in Noida in the NCR region. Gurgaon is comparatively overbuilt in terms of residential real estate availability for rental purposes. Still, rents in gurgaon are on average higher due to number of jobs available there.

3. Newer apartments will fetch higher rents due to expectations of the landlords and possible collusive behavior by brokers. If you recall, in 2005 there were a lot fewer brokers in Noida and you could get a kothi - floor in prime sectors for as low as 9k / month. Today, its nearly impossible for an individual looking to rent a place in a newly constructed society by talking directly to landlords - they are mostly absent (in other cities or country).

My understanding and submission is, rents are a function of supply but the market is not perfect and nor is buyer behavior while renting a place a rational decision. Nearness to place of work, facilities of education and healthcare are factors, but typically, the lack of perfect information of availability of suitable apartments and the perceived desirability of a particular society and location play a much larger role in the rent being asked for and paid.

I very much doubt if rents would go down from here.

trialsurvey

damn .. ! i was hoping rents would go down .. !!

but anyway looks like as an end user i should book a flat now before its too late !

vaibhav_arora

yes, as an end user, this is a good time - not from a rate perspective though. I think the rate factors in the location more than anything else, sector development etc. However, from a distance from delhi perspective, the later you book, the worse off you are. So yes, this is certainly a good time unless delhi govt at some point of time allows high rises in delhi itsel - in which case, the NCR property value growth will get arrested.