Purchasing Property Practically Impossible

By Dr Sanjay Chaturvedi

Banks are now offering loans to value as 60% on agreement value. Prices have gone out of proportionate with income level. Supply is restricted and majority is constructed by private players.

These are the facts which restrict a home seeker person to find his dream home. In Mumbai, a minimum 2BHK is selling for a crore of rupees. And to purchase it, you must be able to pay an EMI of one lakh a month. Housing Finance Companies are making the loan process difficult day by day. Previously, it was 110% of agreement value and without O.C., and the housing finance was available. But now, the O.C. is a must to get a home loan. By increasing the margin upto 40% for such expensive assets, it is now practically impossible for a common man to purchase property in Mumbai.

Those purchasing are mainly financed by family partition or compensation received from redevelopment of society or government projects. A common man is simply left with nothing but to ask rates every day with the hope that property market will drop to his affordable limits.

Politicians, margin investors and speculators and mediators are inflating property rates by 1000%. Now mutual funds and other fund managers are speculating for a margin of above 30 % IRR in a year.

Taxation like property tax for recurring expenses after acquisition is also one of the most vital aspects in deciding to purchase property. There are no buyers and takers for such costly properties. From Goregaon to Borivali, the rates have reached to Rs.10,000/- level again. Those who have purchased are funded by redevelopment money offered by builders. But by and large the sustainability of such rates is not likely in near future. The same situation is with the Central Suburbs. Chembur and Ghatkopar are the only localities where the sale is happening but at a discounted rates.

The rates will fall in near future since the festive sensitivity is over and affordability rule will prevail in the market. Housing Finance is hard to come by for under construction projects and the economic scenario is very dull even after a strong government. Real estate will take time to become real.

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6 thoughts on “Purchasing Property Practically Impossible

  1. Well said and rightly said…..

    The prevailing rates are simply unaffordable for the common man… people who are buying presently are buying real estate as an investment option rather than as a user as a result of which many have 2 to 3 houses each.. especially when both the husband and wife are earing.

    Hope this situation changes soon ……..

  2. They say fair price of an house is between 150 to 200 times of monthly rent for the similar house. For example rent at Bhandup (w), LBS marg are arround Rs 18000 for 900-1000 sq ft 2BHK flat. The rates in and arround are Rs 5000-6000 psf. Hence the flats costs 5500×900=4950000 plus additional charges (stamp, regd, mseb, society etc) of min 4 lacs.
    According to the 150-200 rule, even if you consider the max limit the fair price is 200×18000=3600000!

    So price correction is required and I believe according to nature’s low of self correction at least 25 to 30% correction will be seen by the end of 2010, however builder lobby try to create hype. Hype cant sustain for long time. You have to face the reality realty.

  3. Govt. is encouraging to property rate hike to get more money from people and more money under table from builders to give permission. Builder Govt. and Bankers made a syndicate to full a common man. An average family earning of Rs. 15,000=00 per month cannot even to dream to purchase a 350 sq. ft . carpet area home . He has to spend more than 25 years earning . In other countries one can get a good home in mere 3 to 5 years earning. All law makers are useless and hopeless.They are like a blind man Dhrutarasta in Mahabharat. Time has come to crush the corrupt govt. otherwise ,be ready to crushed ourselves by corrupt systems.

  4. We also would have to consider that builders are charging additional for resale flats in way of transfer fees and club charges (twice) for a new buyer which typical amounts for at least 4-5lacs. 
    I pretty surprised as most these same people raised their concerns on buyers plight when the budget had stipulated service charge for a new construction. 

    Hope the goverment and real estate companies realize that they should stop milking the same cow.
    Suggestion to my dear friends is not to buy which are excessively high, markets here always may not have a northward trend.

  5. I do believe that rates will fall down and will not prevail this much high for long. The only reason that keeps the rates of property high is the corruption, black money, hype and earning couples.
    According to the current scenario if one is buying flat then he has to pay for it till his job lasts. He can only earn at max 2 flats and a car by the time his job career is over. My suggestion would be to wait for atleast a year for correction in price. I hope by the end of 2012 prices will get revised.

  6. Yes, people just think , at this moment you can easily live in 2 BHK on rental basis throughout your life instead of buying  a 2BHK  & wasting 1lacs permonth . By doing this one can save a huge fund for this dependants in future. Let the investors,corrupt leaders & Govt. go to hell as they are not for poor people any more.

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