Does anybody have a way to gauge how an Apartment depreciates
over time so as can be used on calculation of investments. If there
is a general guide for chennai.

like say new - 5 year old -- 10 year old.... just want to see after what
point , selling the apartment becomes worthless.
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  • Dear friend,

    No property either be it a flat or plot depreciates in real value of worth. The plot appreciates more than a flat. The value of the property in the case of flat is dependent on many things like (1) The UDS (2) The quality of construction/builder (3) The surrounding location (4) How the flat has been maintainned (5) faciltities near by ( 6) Bus/train facilities (7) parking provision (8) floor number & lift provision (9) internal layout (10) rental income (11) age of the flat (12) possibility to add area/rooms like in TNHB flats etc. etc. I have seen in areas like Annanagar, the owners have added more area than the original plinth area in many of the flats.
    I can tell my own example regarding the second hand flat worth. I bought a flat ( 850 sq. ft. ) in Saidapet about 12 years back at Rs. 875/sq. ft. Today the running rate for a new flat is Rs. 4500/sq. ft. in the area. A new flat of this size will cost today Rs. 38.25 lakhs base price, where as there are people asking this flat for Rs. 28 lakhs, a little more if I bargain. i.e., about 75% of the current rate of a new flat in the area. It is a GF 1+1 construction with 2 wheeler parking facility. Did this not mean an appreciation of almost 375 percent over a 12 year period, giving an average of 31 % appreciation without considering the rental income. There cannot be a thumb rule to evaluate the worth of a second hand flat as the value of it is dependant on so many things including water availability and water logging.

    ks2071746:o
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  • Hi

    It is not like depreciating from the cost of the actual value. it is the value to be reduced from the current construction cost wrt to the balance life of the building. 5 years before u can construct the hous for 450 to 500 per sq.ft. Say 1000 sq.ft would cost u then at 5L now the same construction would cost u 15L. now the appreciation is 3 folds straight. Then from here u should work out the value of the building. Say the total life of the building as per the valuer is 60 years. Now u should divide the 15 L by 60 and multiply with 55 should be the value of the building now. This can be further reduced for maintenance and improvement like electrical, plumbing and white wash. This may work out to 5% on the over all cost of the flat (land not included) There is no need to explain the appreciation in land value.

    I also agree that building value appreciates till its 60% life and start declining then onwards. Land never declines.

    Regards
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  • Originally Posted by ks2071746
    Dear friend,

    No property either be it a flat or plot depreciates in real value of worth. The plot appreciates more than a flat. The value of the property in the case of flat is dependent on many things like (1) The UDS (2) The quality of construction/builder (3) The surrounding location (4) How the flat has been maintainned (5) faciltities near by ( 6) Bus/train facilities (7) parking provision (8) floor number & lift provision (9) internal layout (10) rental income (11) age of the flat (12) possibility to add area/rooms like in TNHB flats etc. etc. I have seen in areas like Annanagar, the owners have added more area than the original plinth area in many of the flats.
    I can tell my own example regarding the second hand flat worth. I bought a flat ( 850 sq. ft. ) in Saidapet about 12 years back at Rs. 875/sq. ft. Today the running rate for a new flat is Rs. 4500/sq. ft. in the area. A new flat of this size will cost today Rs. 38.25 lakhs base price, where as there are people asking this flat for Rs. 28 lakhs, a little more if I bargain. i.e., about 75% of the current rate of a new flat in the area. It is a GF 1+1 construction with 2 wheeler parking facility. Did this not mean an appreciation of almost 375 percent over a 12 year period, giving an average of 31 % appreciation without considering the rental income. There cannot be a thumb rule to evaluate the worth of a second hand flat as the value of it is dependant on so many things including water availability and water logging.

    ks2071746:o


    Picture is not actually that rosy if we look in depth

    Any RE (plots) investment doubles in 5 years by considering long span of 10 to 15 years.

    By this way your flat cost was Rs 7.5 L 12 years ago. Now actual worth should have been Rs 42L, if you had invested in land.

    You are telling asking rate is Rs 28 L. (Even this is high as you considered 75% of new flat cost. Actually people will take even at less%)

    So nearly 9L loss even after deducting rental values since you bought the flat instead of other better investment.

    Infact this flat value has incrased due to boom in 2004-2006 only and now onwards for next 5 years it may even depreciate.If the flat had been sold in 2002-03 period, price would have been much worse
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  • Originally Posted by lovebird
    Picture is not actually that rosy if we look in depth

    Any RE (plots) investment doubles in 5 years by considering long span of 10 to 15 years.

    By this way your flat cost was Rs 7.5 L 12 years ago. Now actual worth should have been Rs 42L, if you had invested in land.

    You are telling asking rate is Rs 28 L. (Even this is high as you considered 75% of new flat cost. Actually people will take even at less%)

    So nearly 9L loss even after deducting rental values since you bought the flat instead of other better investment.

    Infact this flat value has incrased due to boom in 2004-2006 only and now onwards for next 5 years it may even depreciate.If the flat had been sold in 2002-03 period, price would have been much worse


    One should calculate the opportunity cost of saving the rent for the past 12 years. Another indirect saving is the commutation and other incidental expenses towards Auto, Price of Veg and Provisionals saved being in markaet area.Saidapet is very clsose to all facilities and u get things which u cannot get even from T Nagar. If only return on investment is calculated one should live on open land as we were in stone age. What is ur ROI on the following?
    , Branded Shirts, Car, Airconditioner, Perfumes, Motor Bike, Music Systems, LCD TVs and many more. All these gives us completeness in living. It symbolises the level of our living (here i am considering the middle and upper middle class people only). Every one is working and dreaming to achieve this atleast.

    I disagree with u Lovebird. Sorry if am wrong.
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  • Great responses, just cant get direction.

    here is the problem statement :

    1.) Buy a flat for 28 Lakhs, undivided share of land say 500 sq ft.

    2.) Flat appreciates to 40 Lakhs (paper value) 2 yrs. Land rate per ground at 80 lakhs at the same time (500 sq ft = 1/5 x 80 = 16 lakhs approx).

    3.) say after 5 years paper value is 45 lakhs (as apartment is old) and new flat rate 60 lakhs and land price is 100 lakhs. (500 sqft = 20 lakhs approx).

    So after 5 years, selling the flat will not provide more than 45 lakhs max.


    Now if at Item 2. the apartment can be refinanced (loan) the paper value
    becomes money for investment, In this case it can be invested on Land or
    another flat.

    Bottom line: Seems in the long run, the FLAT depreciates a lot and making
    usable money out of it seems unlikely.

    Now that i have this flat bought at 28 lakhs and its got a paper value of 40 lakhs in 2 years. unsure, if i should sell it off now, or is there a way i will end up making money in the long run..........................
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  • Originally Posted by anandxx
    Great responses, just cant get direction.

    here is the problem statement :

    1.) Buy a flat for 28 Lakhs, undivided share of land say 500 sq ft.

    2.) Flat appreciates to 40 Lakhs (paper value) 2 yrs. Land rate per ground at 80 lakhs at the same time (500 sq ft = 1/5 x 80 = 16 lakhs approx).

    3.) say after 5 years paper value is 45 lakhs (as apartment is old) and new flat rate 60 lakhs and land price is 100 lakhs. (500 sqft = 20 lakhs approx).

    So after 5 years, selling the flat will not provide more than 45 lakhs max.


    Now if at Item 2. the apartment can be refinanced (loan) the paper value
    becomes money for investment, In this case it can be invested on Land or
    another flat.

    Bottom line: Seems in the long run, the FLAT depreciates a lot and making
    usable money out of it seems unlikely.

    Now that i have this flat bought at 28 lakhs and its got a paper value of 40 lakhs in 2 years. unsure, if i should sell it off now, or is there a way i will end up making money in the long run..........................

    Yep, land appreciates (much more than double every 5 years as another guy said!) and construction depreciates. Other factors have been listed by KS assiduously. Any investor in Flat is a fool and investment should be in Land ONLY. However a Flat is needed to live! Or buy a Land and build a house if you wanna live and you have the money.
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  • Originally Posted by vmggb1972
    One should calculate the opportunity cost of saving the rent for the past 12 years. Another indirect saving is the commutation and other incidental expenses towards Auto, Price of Veg and Provisionals saved being in markaet area.Saidapet is very clsose to all facilities and u get things which u cannot get even from T Nagar. If only return on investment is calculated one should live on open land as we were in stone age. What is ur ROI on the following?
    , Branded Shirts, Car, Airconditioner, Perfumes, Motor Bike, Music Systems, LCD TVs and many more. All these gives us completeness in living. It symbolises the level of our living (here i am considering the middle and upper middle class people only). Every one is working and dreaming to achieve this atleast.

    I disagree with u Lovebird. Sorry if am wrong.


    Dear friend,

    Good analysis. Not just because you endorse my views, but due to its reasonable contents.

    ks2071746
    CommentQuote
  • Originally Posted by Natarajg007
    Yep, land appreciates (much more than double every 5 years as another guy said!) and construction depreciates. Other factors have been listed by KS assiduously. Any investor in Flat is a fool and investment should be in Land ONLY. However a Flat is needed to live! Or buy a Land and build a house if you wanna live and you have the money.


    Dear friend,

    I am not telling the flats also appreciate like plots. There is no second opinion that land appreciates more than the flat. My only point is that flats also do appreciate but not to the extent of land, but more than a FD. Apart from a flat for own living for which one need not have to look from return point of view, I agree that invesment in land from appreciation point of view is the best option.

    ks2071746
    CommentQuote
  • Originally Posted by ks2071746
    Dear friend,

    I am not telling the flats also appreciate like plots. There is no second opinion that land appreciates more than the flat. My only point is that flats also do appreciate but not to the extent of land, but more than a FD. Apart from a flat for own living for which one need not have to look from return point of view, I agree that invesment in land from appreciation point of view is the best option.

    ks2071746


    The appreciation of land will beocme NIl if there is no house or flat located in that area. The cost of the land is more in case of more demand for good living. Good living is possible only with flat being constructed on the land. Keep this in mind for posting commets.
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  • Originally Posted by vmggb1972
    The appreciation of land will beocme NIl if there is no house or flat located in that area. The cost of the land is more in case of more demand for good living. Good living is possible only with flat being constructed on the land. Keep this in mind for posting commets.


    Dear friend,

    Any plot appreciates. More the habitation, faster the appreciation. Irrespective of the location, the plot appreciates, it is only a qusetion of time, it may be in a few years or may be in a decade like period also.

    ks2071746
    CommentQuote
  • Originally Posted by ks2071746
    Dear friend,

    I am not telling the flats also appreciate like plots. There is no second opinion that land appreciates more than the flat. My only point is that flats also do appreciate but not to the extent of land, but more than a FD. Apart from a flat for own living for which one need not have to look from return point of view, I agree that invesment in land from appreciation point of view is the best option.

    ks2071746

    Ooops hope I am not brainwashing you KS. Start disagreeing with me on the flat appreciation funda KS!!! LOL!
    CommentQuote
  • Originally Posted by ks2071746
    Dear friend,

    Any plot appreciates. More the habitation, faster the appreciation. Irrespective of the location, the plot appreciates, it is only a qusetion of time, it may be in a few years or may be in a decade like period also.

    ks2071746

    Sometimes plots can also depreciate. For example if the land gets denotified due to some govt acquisition or some hazardous chemicals come into that land etc. Just the other side of the coin but in general U R RIGHT!
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  • Originally Posted by Natarajg007
    Ooops hope I am not brainwashing you KS. Start disagreeing with me on the flat appreciation funda KS!!! LOL!


    Dear friend,

    The only difference is that I say both the flats and the plots do appreciate over a period of time. I do not hold to the view that the flat depreciates. Plots appreciate more and faster than the flats. That is it.

    ks2071746
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  • Ok KS. Hope everybody is fine at home and you are doing great. Regards.
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  • Dear friend,

    It is good that we stopped at this point on this subject.
    Let me get into another subject. I personally feel tha the ROI on house loans may drop down to 7.5 % range in another year or so, which was the ROI prevalent in 2004. This should be a tonic for the buyers to get into RE investments. In addition, I also feel that the new Govt. taking over the reigns of the country may increase the house loss IT benefit to Rs. 2 to Rs. 3 lakhs to boost the RE market. What do you feel ? Your considered views pl. Of course, I am happy to find, now you are not taking the help of some "bad" words to show your varying views.

    ks2071746
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