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RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

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RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

Last updated: March 21 2012
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  • RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

    Will you purchase a USED CAR/BOOK/FURNITURE for the same price as new ONE because it is same model and brand/SAME BOOK ? If your answer is NO. Then why would you buy a used property at the same price as the new property ?

    A FIVE year old used car costs you about half the price of the new car. Assuming the life span of a car is about 12 years, you are getting the car which is used for 5 years for less than half the price.

    THEN why the heck would you shell out your hard earned money to buy an antiqualted HALF LIFE SPAN property with inferior specs ?

    Lets compare

    A : 20 year old property in an area
    B : New property by a reputed builder in the same area

    Why are you paying the same RATE / SQFT ? This is illogical. Right ?


    A : Life span left is 25 years
    B : Life span left is 45 years

    A : Does not have lift.
    B : Has lift

    A : Does not have stilt parking
    B : Has stilt parking

    A : No concelead wiring
    B : Concealed wiring

    A : All windows and fixtures need replacement
    B : Brand new

    A : ELectrical fixtures are antiquated
    B : Brand new

    A: Loading is less
    B: Loading is more

    A: No ANTI leakage system
    B : Anti leakage is in built

    A: No modular kitchen
    B : Modular kitchen

    A: This is like old stock. Construction costs were very low as well of cost at the time.
    B : Construction costs are genuinely high as well as the cost of land.

    A: School , college and all other things are present,
    B: Same

    A : The neighbors OLD. So they usually treat you as a newbie in all cases
    B : All are same


    A : 20 year old property in an area
    B : New property by a reputed builder in the same area

    So just because 'B' , which is newly launched with modern amenities, charges 'x'/sqft 'A' follows the suit ? Is this logical ?

    I doubt anywhere else this is a valid pricing.

    Some geniuses say property is different. HOW ?
    Last edited March 16 2012, 10:44 PM.
  • #2

    #2

    Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

    You forgot the most important aspect of RE.

    LOCATION

    In RE, location commands premium.... bcoz, you can change everything else but you can not ever change a LOCATION. Unfortunately, old houses are in established areas and new houses comes in not so good areas.

    In case new flat comes in an established area, RTM price is always higher than older houses ... don't go by launch price as that factor-in discounts for the risk element of under-construction houses.

    Comment

    • #3

      #3

      Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

      Thats the basis

      Originally posted by gharondabhai View Post
      You forgot the most important aspect of RE.

      LOCATION

      In RE, location commands premium.... bcoz, you can change everything else but you can not ever change a LOCATION. Unfortunately, old houses are in established areas and new houses comes in not so good areas.

      In case new flat comes in an established area, RTM price is always higher than older houses ... don't go by launch price as that factor-in discounts for the risk element of under-construction houses.

      The debate, 'in the same location'.

      I agree that 'location' draws premium ( like the brand name of a car. MERC is not same as Maruti).

      But the issue is - Does any one by a - lets say 3 month MERC same model for the price of a new MERC same model ? If YES, then there is no debate

      IF NO, then why would you pay the same RATE in RE for old as well as new buildings ?

      The BROKERS and LAND LORDS in BANDRA charge you same 20 K /sqft because a new launch in that area ( with top class amenities ) charges that rate ? There is absolutely no comparison.

      The new launch includes covered 4 wheeler parking, health clup, spa , swimming pool, tennis court , well manicured window flower beds etc. Where as the OLD ( JOONA ) buildings in that area ( Ground + 4) with no lift, no fixtures, no parking and no quality charge the same because RATE in that area ?

      WHat is a RATE ?

      Comment

      • #4

        #4

        Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

        Originally posted by murari1
        Unfortunately in case of immovable assets, the concept of calculating depreciation with age is not kicked in yet like in the west.

        In developed countries, the age of the property is taken into consideration while negotiating the deal. The real estate agent does the job for you. In India, the RE agent ( usually bottom strata broker) simply exchanges numbers and arranges a meeting to fight out the price.

        The sad precedence was set in Mumbai where space USED TO BE premium. Not any more with the extension of western suburbs until BOISAR , PALGHAR, central suburbs uptil NERAL, KASARA, KARJAT. And Navi Mumbai beyond PANVEL. Mumbai in fact has more area than any other METROS of the country.

        But the precedence ( of charging the same rate for used and new properties) remained.
        Have you ever traveled in a Virar Local? Any time?

        People pay double the price in Borivli than Mira Road, which is just two stops away. Dahisar, which is just next to Borivli has a 50% discount from prices in Borivli.

        RE is all about LOCATION. You can change everything else if you really want but you will never be able to change your LOCATION.

        Some location just has a TAG and perception value. You said Mumbai ... you know Western line commands much higher price than their central counterparts!!

        Comment

        • #5

          #5

          Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

          Originally posted by sjain123 View Post
          The debate, 'in the same location'.

          I agree that 'location' draws premium ( like the brand name of a car. MERC is not same as Maruti).

          But the issue is - Does any one by a - lets say 3 month MERC same model for the price of a new MERC same model ? If YES, then there is no debate

          IF NO, then why would you pay the same RATE in RE for old as well as new buildings ?

          The BROKERS and LAND LORDS in BANDRA charge you same 20 K /sqft because a new launch in that area ( with top class amenities ) charges that rate ? There is absolutely no comparison.

          The new launch includes covered 4 wheeler parking, health clup, spa , swimming pool, tennis court , well manicured window flower beds etc. Where as the OLD ( JOONA ) buildings in that area ( Ground + 4) with no lift, no fixtures, no parking and no quality charge the same because RATE in that area ?

          WHat is a RATE ?
          Honestly, in my entire life, I had never seen two complexes just side by side, one is 5+ years old and another one is just RTM and selling in similar price. No and never.

          What I had seen is similar location, and initially the under-construction price is almost similar to existing prevailing rates of the area and gradually as the construction progress, new building price increases and sets a new benchmark for that area.

          Once no more inventory is left in the new building, the old builing rate also increases and a new benchmark rate is set for the area.

          Unfortunately, there are no more empty space left in good locations .. we are just seeing very few redevelopments. In many of those redevelopments, flats are sold on invitation only and sometime all the flats are sold before it opens to public.

          Comment

          • #6

            #6

            Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

            There is a reason for this and thats ppl who sell old buildings hope for developers to come in buy them out especially G+4 with no lift and they 'believe' (delusional) that developer will offer them more than market rate.... Eg 3.5 cr for a 2 bedroom new building in bandra 1150 bu and carpet 850 and old building with carpert 850 but partial area stolen from outside (not in agreement) also around 3cr atleast when real value should be really like 1.5-1.75cr (most countries have bank valuations of proeprty) and prices to buy/sell use that as a guideline... and old buildings have lower values usually 30% (20 years) 40% (30 years) 50% (40 years) 60 (50 years) and really after 60 years buildings should be redeveloped as safety isn't there yet in sobo many buildings 40+ years (asking 60k + psf) and 20yr buildings asking the same..... 15 yrs too just brand new developments asking more (and even then on carpet area not much around 70k

            Comment

            • #7

              #7

              Re : RESALE (OLD) v/s NEW property - SAME COST? NO WAY.

              even better i can use myself as an example i was offered 54k psf for a old flat of 630 agreement value it has 110 sqft balcony which is enclosed now (3.4cr) with no parking just rotation parking as is standard in old buildings, however the flat is well decorated 25lac spent 2 years ago building is well maintained (new lobby/intercom/cctv/park on terrace/outer paint/but old lift only 1 many flats per floor (8) and hanging wires) 46 years old building (main thing lack of windows middle flat/airflow)

              Now same neighborhood a newer 20 year old 4 flats per floor 720sqft (3.6cr-50000psf) agreement value not including small surround balcony not enclosed but not counted in area and flat has french windows surrounding the flat great airflow easily converted to 2 bhk similar building quality but concealed wires and 2 bigger lifts plus guaranteed covered parking included (estimated value 15+ lacs just for parking last one was sold that price 2 years ago) also well dec

              differences 26 years new the building yet selling price 20 lacs and size 630+110 as opposed to 720 ???

              In the western world ppl would laugh even the guy who sold u the flat and the guy who approved your mortgage (if they approve highly unlikely)

              Comment

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