Heard DLF is coming up with another residential project in New Gurgaon to be priced at ~Rs5500psf.

Not sure whether it will be an extension of Regal towers or a completely new one...... Any clues?
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  • Originally Posted by rahul40
    now a days every builder is adding escalation clause


    None of the builders on GCX has the escalation clause. Please define ALL.
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  • Originally Posted by rahul05
    None of the builders on GCX has the escalation clause. Please define ALL.


    I know Bestech doesnt have one....
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  • Are you sure there is 38% to 42% increase ? Can you please point me to the RBI indices that you have used for calculation.
    In fact it would be great if you could use actual values from indices to show some calculation.
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  • Originally Posted by FarazKhan
    Are you sure there is 38% to 42% increase ? Can you please point me to the RBI indices that you have used for calculation.


    Do the Math yourself if my calculations are in doubt. Please google for the RBI index, you will get the link.
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  • Originally Posted by rahul05
    Do the Math yourself if my calculations are in doubt. Please google for the RBI index, you will get the link.

    I did google and came up with the following link http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=13885
    I don't think i can get 42 months figure from this link. Can you pint me to your link ?
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  • Originally Posted by FarazKhan
    I did google and came up with the following link Reserve Bank of India
    I don't think i can get 42 months figure from this link. Can you pint me to your link ?


    It's the same link just select 2008 in the Quick search on the left hand side to see the data for 2008
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  • Escalation formula in its current form is designed to “escalate profits” for the builder. One can easily spot the evil intent
    - If the intent is to compensate builder for increased cost, builders should agree for an open book system where flat owners can verify project account to check the actual expense … as is done in cost + EPC contracts. Cost arrived by formula should not exceed actual expense.

    - While it’s good to link cost with various indexes but what is the logic of linking base cost with cost of flat? Going with 50% logic, expected Park II BSP 15,000 BSP, escalation would on 7,500/sq.ft

    - Construction cost will be distributed through the project execution period then how escalation can be applied on entire value from agreement date to possession date? It’s similar to banks charging interest on entire sanction amount irrespective of disbursement.

    - Escalation should not be applied after promised delivery date as per BBA. Delay delivery compensation will never compensate for higher escalation due to delay.

    Escalation clause has far reaching repercussions. It is going to fundamentally change the way investors evaluate properties.
    Most Flats are 80% funded by banks. A conservative 10% increase in escalation would mean 50% increase in contribution by flat owner. Bank may consider higher limit but that will be subject to borrower's paying capacity and valuation of property and these two may not keep pace with inflation.

    I would not be surprised if RBI puts conditions on bank funding for projects with escalation clause.
    Most people seek maximum possible funding from bank. They should consider potential outflow for escalation while working out long term financial planning
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  • Originally Posted by connectanuj
    Escalation formula in its current form is designed to “escalate profits” for the builder. One can easily spot the evil intent
    - If the intent is to compensate builder for increased cost, builders should agree for an open book system where flat owners can verify project account to check the actual expense … as is done in cost + EPC contracts. Cost arrived by formula should not exceed actual expense.

    - While it’s good to link cost with various indexes but what is the logic of linking base cost with cost of flat? Going with 50% logic, expected Park II BSP 15,000 BSP, escalation would on 7,500/sq.ft

    - Construction cost will be distributed through the project execution period then how escalation can be applied on entire value from agreement date to possession date? It’s similar to banks charging interest on entire sanction amount irrespective of disbursement.

    - Escalation should not be applied after promised delivery date as per BBA. Delay delivery compensation will never compensate for higher escalation due to delay.

    Escalation clause has far reaching repercussions. It is going to fundamentally change the way investors evaluate properties.
    Most Flats are 80% funded by banks. A conservative 10% increase in escalation would mean 50% increase in contribution by flat owner. Bank may consider higher limit but that will be subject to borrower's paying capacity and valuation of property and these two may not keep pace with inflation.

    I would not be surprised if RBI puts conditions on bank funding for projects with escalation clause.
    Most people seek maximum possible funding from bank. They should consider potential outflow for escalation while working out long term financial planning


    Yes this is so unfortunately true. And DLF always seems to be the leader in such abusive practices. As a buyer in DLF I would tell them to get all their Cement and Steel today rather than wait for 42 months to buy them. And why it it 42 months later that the computation happens; when most of the structure should be completed in 24-27 months as per their plan and the interior work will take the rest of the time.
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  • Originally Posted by rahul05
    It's the same link just select 2008 in the Quick search on the left hand side to see the data for 2008

    I got the data for 2008. But how you are using 2008 data for calculation ?
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  • Originally Posted by FarazKhan
    I got the data for 2008. But how you are using 2008 data for calculation ?


    A CA friend of mine did the compute. I can ask him for his worksheet and post here.
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  • Originally Posted by rahul05
    A CA friend of mine did the compute. I can ask him for his worksheet and post here.

    Can you be a little more specific, what period you used and what data you used ? As per my understanding, for a period of 3 years there should be an increase of somewhere around 15%. For example for steel, index was 142.8 in 2010 March and 156.5 in October 2012, this is approximately 9.59% for 2 years and 7 months. For cement also, the numbers are comparable. I just cannot understand how the hell it is going to be 38% - 42%. It would be insane.
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  • Originally Posted by FarazKhan
    Can you be a little more specific, what period you used and what data you used ? As per my understanding, for a period of 3 years there should be an increase of somewhere around 15%. For example for steel, index was 142.8 in 2010 March and 156.5 in October 2012, this is approximately 9.59% for 2 years and 7 months. For cement also, the numbers are comparable. I just cannot understand how the hell it is going to be 38% - 42%. It would be insane.


    Friend I am not a CA and my guesstimate was a 25% increase due to the escalation clause. It was my friend who did the computation based on the rules laid down by DLF in their contract and he came to that number.

    Now reading the contract we could not figure if the PLC would be applicable on the increased BSP or not. So that was not computed.

    And yes this escalation clause is insane. Even an increase if 25% on a 1CR flat is 25 lack rupees. 25 lack rupees is a lot of money to pay extra for a house.
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  • Originally Posted by rahul05
    Friend I am not a CA and my guesstimate was a 25% increase due to the escalation clause. It was my friend who did the computation based on the rules laid down by DLF in their contract and he came to that number.

    Now reading the contract we could not figure if the PLC would be applicable on the increased BSP or not. So that was not computed.

    And yes this escalation clause is insane. Even an increase if 25% on a 1CR flat is 25 lack rupees. 25 lack rupees is a lot of money to pay extra for a house.

    I am not going to BSP or PLC or whatever that total amount is. I am merely talking about average percentage increase in multiple indices to be used in calculation. Secondly, if you do not understand how calculation is done then how can you claim that it is going to be 38% or 42% or whatever that number is ? It just doesn't make any sense to put forward any number without understanding logic behind the same.

    I will take your number even if it is 70/80/90, but please provide me some data or at least give me some way to calculate this number.
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  • Originally Posted by FarazKhan
    I am not going to BSP or PLC or whatever that total amount is. I am merely talking about average percentage increase in multiple indices to be used in calculation. Secondly, if you do not understand how calculation is done then how can you claim that it is going to be 38% or 42% or whatever that number is ? It just doesn't make any sense to put forward any number without understanding logic behind the same.


    DO You know how to read or are you one of this DLF employees trying to push away the truth? I said a CHARTERED ACCOUNTANT did the calculation; I did not. And if you are so smart why don't you do the compute and post here.
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  • Originally Posted by rahul05
    DO You know how to read or are you one of this DLF employees trying to push away the truth? I said a CHARTERED ACCOUNTANT did the calculation; I did not. And if you are so smart why don't you do the compute and post here.

    I already showed a sample calculation and my estimated is based on that. I won't argue on what I am and what I am not. It makes no sense. Only thing I was interested in was understanding how these numbers are arrived at, and I don't see any progress on that front.
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