Many on this board including the so called Wise and also the Sethus to Jadhavs have a problem of my pricing on land. Just 2 minutes ago I called up a builder in Urapakkam. He is selling a flat. This is not on the better side of the Urapakkam and is quite some distance from the Railway station....1.5km. I know there are no shops on this side either and development is tardy. He was quoting a price of 2600psft on the advt posted in Oct 2008. On phone he quotes 2400psft. I said that was high. His logic...land price is 30L per ground! and it increases to 35L per ground if you are a bit closer. Then he says..."saar price of construction is also to be taken na... and he says 1K psft".
Let us come to the bare mathematics. Let us assume he wont build 2 times the land area even though that is possible in todays new Master plan but uses only 1.5 as FSI.
So it works out like this (all figures in rupees).
Cost of land = 30L/2400sft = 1250psft
Cost of land needed per sqft of building at 1.5 FSI = 1250/1.5= 833psft
Cost of construction = 1000 psft
So net cost incurred is 1000+833=1833psft.
Giving him a Fair margin of 200 rupees profit psft we can assume that 2033 is a fair price but in reality he charges 2400. So he yet has a Safety Bumper margin of 2400/2033= 18% over an above his fair profit margin. Now remember he would most likely have got a deal with the land owner where he will repay the landowner over period of time. So the builder's investment is zero on the land. Next he constructs using the buyer's money. Nowadays that is where he might be chewed a bit, since bookings are not fast enough. So he has to pay that interest portion for his construction activity.
Finally I assumed FSI=1.5. Most builders easily take this number to 1.8 and they also price car parking etc as separate. So if u use 1.8 in the argument and add 1.5L for car parking as this builder quotes it will mean his price is about 2600psft and his cost of land is 700psft. So his Safety Bumper margin is
2600-1000-700-200=700psft.
In other words he can yet reduce his price by 700psft and go home with a fair profit of 200psft.
Why am I saying this?
a. As many on this board with almost rudimentary Mathematics knowledge seem to say (rudimentary as in class 3 and no better even if one of those shit colleges gave them a B.E. degree sadly though!) if DLF reduces price by 400psft, it does not mean RE market is crashing. Just that it is stabilising at best and the pinch is felt for the EVER CONNING BUILDERS.
b. Let us assume that 2600psft is the end price and 1.8 FSI. Then if you back calculate (2600-1000(cost of construction)-200(fair profit))=1400 is the cost of land you are actually paying that too at 1.8FSI. So price of land is 1400*1.8=2520psft which translates to 60L per ground. So it is clear that if you have land (like I do) and I just become a builder I will gain 60L-30L=30L for my land. Being fair I try to ask for 45L for such a land and I know on the worst day the biggest Mathematical idiot on this board will buy it for 35L. So why should I sell land? Or why should anyone sell land...Unless he/she is hardup for money!!

In net, the builder in Chennai is minting money like mad, and in recent times his minting has come down. This will mean slightly cheaper flats. However in the process land price wont come down but with more of the buyers becoming SANER (move from Class 3 to Class 7 ... LOL ... Hopefully Wiseman reaches Class 7 soon!), they will prefer to buy land and build homes than flats.

Only when that class also disappears will there be a RE collapse. In Bangalore (I mean proper city...not Whitefield or Devanahalli which is almost same as Chengalpet or Tindivanam in development!), price of land to flat is extremely clean. Builders have clean profit margins and they are able to sell their property much more fairly than in Chennai. Ofcourse the Brigades who try to mint money have got chopped in the process. So Brigade which was quoting fancy prices in Rajaji Nagar has been forced to take a lot of shit, with FSI as high as 4-4.5 while the normal flat in that vicinity having hardly priced any bit lower.

In summary, if you want a flat to live tommorow (not after 2 years like India Bulls is selling in Medavakkam!) then buy it at that fancy price ... after all 2600psft and 2200 psft wont matter much in the long run as u might as well stay in your house today than pay rent. However if you are an INVESTOR and have cleared Class 7 mathematics (not by mugging but by understanding!) then you better buy Land for investment. If you book a flat with a long delivery time and then cry, especially if you are losing your job like that Fidelity guy, then u can use abuses like That HECK of a Fool or Like Jadhav the Bus driver, but in reality you need to improve your brain. So go to the nearest Mutton shop and try to fit that brain into yours! LOL!
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