Buy 1800 sq ft, Get 1000, Housing Industry Chamber Says Developers Digging Own Graves

SALEABLE AREA From 40 per cent of carpet area, jacked up to 60-100 per cent; housing industry chamber says developers digging own graves

Aspiring home buyers, already grappling with spiralling prices, have a new problem: developers are jacking up the sale able area in most new projects by "unrealistic proportions".

Developers sell flats not on the basis of carpet area (the net usable wall-to-wall area) but on the basis of sale able area, also known as super built up area, which includes facilities like staircase, lobby and lift as also add-ones like sun decks.

Traditionally, these spaces have been limited to a maximum 40 per cent of the carpet area. Of late, developers have increased this notional "loading" to 60 to 100 per cent of the carpet area. As a result, a flat-buyer paying for a 1,800-sq-ft flat may end up with only 1,000 sq ft floor area to live in.

"We have tried explaining to developers that we are digging our own graves by resorting to such practices. The MCHI (Maharashtra Chamber of Housing Industry), time and again, appeals to developers to stick to selling flats on carpet area basis but we cannot impose any regulation on them," said real estate developer Pravin Doshi, president of MCHI.

Two years ago, the government had approved a Bill, whereby any developer who does not sell flats according to carpet area is liable to face imprisonment for a period of three years, a rule that has failed to take off with no one appointed to oversee implementation.

Developers, on the other hand, get to maximise their profits as the BMC rules allow them to build parking lots, elevators and other frills free of FSI. Also, developers are allowed to build four-foot pro jections in the form of sundecks or flower beds in addition to building a balcony free of FSI and enclosing it as part of the flat.

"We had to discontinue giving permission for such projections as they were mostly misused. But recently the BMC has started sanctioning these once again," said an official from the building proposals department.

This is the very reason why balconies, which had mysteriously disappeared from facades of flats in Mumbai, have made a comeback in new projects along with fancier versions like sun decks, viewing gallery, planter's box and individual terraces.

All these were earlier charged at one-third the rate (per sq ft) for the flat, but now everything is sold at a flat rate. Brochures of new launches by Orbit Corporation, Dheeraj Realty, Wadhwa Developers, RNA Corp, Lodha Group, Oberoi Constructions, Indiabulls, DB Realty and a string of many others show a huge discrepancy between the actual usable space and the saleable space the buyer is made to pay for.

Real estate experts said there is an upper cap of 2 on FSI in the suburbs, but by constructing the components free of FSI and selling them at market rates, developers effectively get an FSI up to 3 or 4.

"In the absence of a regulator, loading is sort of an eyewash by developers to salvage high land costs.

So while per-sq-ft rates in Ghatkopar is Rs 9,000, with loading the rates are as good as being a high Rs 13,500. While actual rates in Bandra-Khar are Rs 20,000 to 25,000 per sq ft, customers end up paying up to Rs 45,000 per sq ft of the usable area due to huge element of loading," said property consultant Sandeep Sadh.

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Customer continues to be the king

Realty sector in Mumbai: High prices hit demand

Realty sales in Mumbai Metropolitan Region (MMR) have fallen. The total area (m sq ft) sold in MMR in December 2009 as compared to September 2009
quarter, has come down. Prices have risen or remained flat in some cases. This shows that homebuyers are holding on to their demand and exercising restrain. Demand for big-ticket houses has been the worst hit.

As per the data compiled by Liases Foras, a real estate research agency, flats costing Rs 1 crore to 2 crore have seen a sharp fall in demand which is contrary to what many developers in the region have been saying. Homes costing over Rs 2 crore are also witnessing the same trend. This is in contrast to cities like Bangalore, Hyderabad and NCR, where sales have risen, thus proving again that Mumbai property market defies rules applicable to other markets. The main reason for the same being that prices have fallen in the above-mentioned cities whereas Mumbai based developers have been increasing their prices.


They must realise that ‘Customer continues to be the king’, at least for the time being.

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Redeveloped Bandra-Khar buildings lack open space

I have seen many such buildings in Mumbai where balconies jet out to the road. There is no setback and all architecture norms are flouted. Now it appears these guys flout civil aviation norms where the maximum number of floors in the Bandra Khar, SantaCruz, Vile-Parle, Andheri (east) zone is set to be 8-9 floors. Bribe and get away is the age old mantra. Buyers need to be extra vigilant else they may find that their floor is illegally constructed. The best thing is to go for floors below 8 just in case something comes up in the future. Given the prices I wonder who is buying in these areas.

Locals fear that these redeveloped buildings which have their entry points on roads and footpaths could cause serious safety hazards. According to the rules, compulsory space of 15 feet should be left open around the buildings for free movement of people during emergencies.

“From the roadside, at least 4.5m of space should be kept open. If this is not the case, then there is a cause for worry. We first have to verify if the building line is from the inside. This varies from case to case and on how the plans are passed. If buildings are constructed under section 33(7), then relaxation of open space is found. It also depends on whether relaxations were allowed by the municipal commissioner or the SRA commissioner,” said Uday Tatkare, chief fire officer.

According to Right to Information (RTI) replies,these redeveloped buildings without compulsory open spaces are on Linking Road opposite Khatwari Darbar, at the SV Road and Khar Station Road junction, at the Waterfield Road (near Popley Jewellers) junction of 13th and 8th Road in Khar (W) and on 33rd Road.

When VL Joshi, chief engineer (Development Plan) was contacted, he said, “We will call the building proposal officials from H (West) ward and clarify this. We approve certain plans, but if DC rules are not followed we don’t give the occupation certificate.According to DC Rules 1991, the plot potential has increased for builders in Bandra.”

A builder on condition of anonymity said: “If builders have a commencement certificate for six floors, they construct an additional six illegally. Many new commercial and residential buildings have even flouted civil aviation norms.”

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Over eight months, property prices at Powai in central Mumbai have almost doubled

Moneylife.in reports

Powai is a tony residential location in central Mumbai. Property prices here are reaching for the stratosphere. Rates have almost doubled over the past eight months. Recently, a two bedroom-hall-kitchen (BHK) of 985 square feet (sq ft) in Lake Homes, a residential complex—developed by Ekta World and Supreme Universal— sold for between Rs 90 lakh-Rs 95 lakh. During the slowdown (around nine months back), an apartment of the same size would have sold for Rs68 lakh. In 2007, when the real-estate segment was at its peak, this apartment would have sold for Rs78 lakh, revealed a source.

Prices have been steadily going up in this apartment complex (Lake Homes). Around a month back, the property was priced between Rs80 lakh-Rs85 lakh; four deals took place at these prices. “Prices have been rising quite rapidly. I have seen four-five deals happening at Rs80 lakh-Rs85 lakh—recently a deal took place between Rs90 lakh–Rs95 lakh,” said a resident of that area, who preferred anonymity.

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Subbarao Warns of ‘Hard Landing’ as Goldman Expects Rate Rises

Bloomberg reports

By Kartik Goyal and Anoop Agarwal

March 23 (Bloomberg) -- Reserve Bank Governor Duvvuri Subbarao said India risks a “hard landing” if inflation isn’t reined in as Goldman Sachs Group Inc. and Morgan Stanley said last week’s interest-rate rise isn’t sufficient to curb prices.

“If we don’t tighten now and take action, the adjustment that we will have to make later on will be strong and we might indeed have a hard landing,” Subbarao told reporters in Bangalore yesterday. “Even if there’s a short-term trade-off between growth and inflation, in the medium term it is important that inflation is kept low in order to sustain growth.”

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Big ticket land deals end 18-month

18 acres 570crores = ~31 crores per acre in Ghatkopar, with an FSI of 1:1 one can build 90,000 sq ft leading to a price of 3400 per sq ft. With an FSI of 1:2 that is down to 1700 per sq ft. Now with a construction cost of 1000 rs per sq ft, the cost basis is 2700 rs per sq/ft. These properties will be loaded up 35-40% , so a 1000 sq ft apt will actually have 600-650 sq ft living space . An apt with a cost price of 2700 x 600 = 16L will be sold for 10,000 Rs per sq/ft leading to a price of 1 Crore(1000 x 10000) , thereby generating a return of 600% to the builder. Great job guys in looting the Mumbaikar of every available living space.

Livemint.com reports


Raghavendra Kamath / Mumbai March 22, 2010, 0:23 IST

High-value land deals are back in the country’s commercial capital after an 18-month break. The first two-and-a half months of this year have already seen developers, with more cash at their disposal from rising home sales, close half-a-dozen deals worth Rs 4,000 crore.


Three large property deals have already been finalised this year in Mumbai. The largest among these is the bid to develop a 250-acre plot in Kharghar (Navi Mumbai) for Rs 1,530 crore. The deal was won by a consortium of Bhushan Steel and Subhash Chandra’s Essel Group from the City and Industrial Development Corporation of Maharashtra (Cidco).

This is the biggest land deal in Mumbai for the past 18 months.

Soon after came a Rs 571 crore deal by the Wadhwa group to buy 18.18 acres in the Ghatkopar suburbs from Hindustan Composite, and Sheth Developers bought Golden Tobacco Company’s property in Vile Parle for Rs 591 crore.


More mega-deals are expected. For instance, sources said Jet Airways, which bought land in the Bandra Kurla Complex, for Rs 826 crore around two years ago, is close to signing a deal to sell the land in a joint development project.

Despite facing setbacks in land auctions in 2009, government agencies like the Railway Land Authority (RLDA), National Textile Corporation (NTC) and Mumbai Metropolitan Region Development Authority (MMRDA) are planning to auction their land this year again.

Leading the pack is RLDA, which managed to sell only one plot last year due to the property slowdown. In the next financial year starting April, the authority is planning to raise around Rs 4,500 crore from selling 25 sites covering 172 acres.

“Overall participation from developers has also improved,'' confirmed P D Sharma, member, planning and infrastructure, RLDA, the nodal agency for developing surplus land of Indian Railways.

He said RLDA received 20 requests for qualification (RFQ) from well-known developers for its Sarai Rohilla plot and 14 expressions of interest (EoI) for the Bandra land. RLDA is having to re-auction the Sarai Rohilla plot because the previous winner could not pay the bid money.

Though NTC's last attempt to sell its Finlay Mill in Mumbai to the Lodha group is yet to materialise, it is planning to sell two or three more defunct Mumbai mills to developers.

Bolstering the upsurge in demand for commercial land is the rise in home sales. After a 25 to 30 per cent drop from their peak, home prices have gone up 15 to 20 per cent in the last nine months as demand returned to the residential market.

“Finished product (home) sales have gone up. As a result, developers are willing to pay higher prices and buy land now. They would not have paid such prices a year ago when home sales were low,'' said Anuj Puri, chairman of global property consultant Jones Lang LaSalle Meghraj.

“Developers’ liquidity positions are certainly better now than a year-and-a-half ago. We are seeing a lot of non-banking finance companies and mutual funds lending money to developers now,'' added Parry Singh, managing director of Red Fort Capital, an India-focused realty fund.

Most land buyers in Mumbai are planning to build premium residential apartments to make the most of their expensive investments.

“Today an average product does not sell. Only good products by good developers sell. A lot of developers are stuck with title issues, poor sales and so on,'' said Vijay Wadhwa, promoter of Wadhwa group.

Wadhwa has already pre-sold 0.5 million square feet out of 1.6 million sq ft of built-up space in the Ghatkopar residential project and Sheth Developers is planning premium residential apartments on its newly acquired land.

DLF, the country's largest developer, recently changed its plans to build an office-cum-retail complex into a high-end residential complex in Lower Parel because commercial rents have fallen sharply. DLF bought the 17-acre Mumbai Textile Mill land from NTC for Rs 702 crore in 2005.

Puri says developers’ interest and ability to pay have also improved because the floor space index (FSI), the amount of construction permitted on a given plot of land, is increasing in Mumbai. Though the base FSI is 1.33 in the Mumbai suburbs, re-development projects on defunct mill lands, slums and so on get a higher FSI.

This time, however, the revival in land deals is marked by caution. This was evident at the MMRDA's recent land auction when none of the developers turned up because the agency's quoted price of Rs 3 lakh a square metre was considered too high.

“Though markets have revived, deals are being closed only at reasonable levels. There is money to be made but developers have realised that they need to be cautious,'' said Red Fort's Singh.

Developers such as Wadhwa group who bought expensive land parcels, say they are focusing on executing their current projects than buying new land.

Private equity funds are also equally cautious. “Though we are looking at property deals actively, we are focusing on those in which risks have been taken out and proper approvals are in place,'' Red Fort's Singh added.

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When we see such articles hitting the mainstream media, we know that the bubble is on its way to pop, sooner or later. Fast money never lasts and Mr Yadav will soon realize this. New York times link. Farmers owing land in outlying areas of all Indian metro's have experienced this windfall. Personally I have witnessed farmers become overnight millionaries in Pune, Bangalore and Nagpur. However as we all know that is just a fraction of the farming population in India.

On the other post of Persistent, that IPO has been oversubscribed 93 times. I would not be surprised if the stock doubles in a few days. Some people are going to be very rich, and others very poor.

NOIDA, India — Bhisham Singh Yadav, father of the groom, is stressed. His rented Lexus got stuck behind a bullock cart. He has hired a truck to blast Hindi pop, but it is too big to maneuver through his village. At least his grandest gesture, evidence of his upward mobility, is circling overhead. The helicopter has arrived.
Kuni Takahashi for The New York Times

At a wedding on Delhi’s outskirts, the groom, Kapil Yadav, and the helicopter his father hired.
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Kuni Takahashi for The New York Times

Girls protected their faces from the dust near Delhi as a helicopter carried the groom to his bride’s village less than two miles away.

Mr. Yadav, a wheat farmer, has never flown, nor has anyone else in the family. And this will only be a short trip: delivering his son less than two miles to the village of the bride. But like many families in this expanding suburb of New Delhi, the Yadavs have come into money, and they want everyone to know it.

“People will remember that his son went on a helicopter for his marriage,” a cousin, Vikas Yadav, shouted over the din. “People should know they are spending money. For us, things like this are the stuff of dreams.”

The Yadavs are members of a new economic caste in India: nouveau riche farmers. Land acquisition for expanding cities and industry is one of the most bitterly contentious issues in India, rife with corruption and violent protests. Yet in some areas it has created pockets of overnight wealth, especially in the outlying regions of the capital, New Delhi.

By Western standards, few of these farmers are truly rich. But in India, where the annual per capita income is about $1,000 and where roughly 800 million people live on less than $2 a day, some farmers have gotten windfalls of several million rupees by selling land. Over the years, farmers and others have sold more than 50,000 acres of farmland as Noida has evolved into a suburb of 300,000 people with shopping malls and office parks.

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