Tuesday, April 08, 2008

Carpet Area Bill will Bomb Old Flat Owners

The new bill by the Maharashtra government has thrown up a positive, albeit unintended advantage: it may sound a death knell for the sales of apartments in older constructions.

Prior to this bill, and bouyed by the higher prices of newer and exquisite apartments in their vicinities, owners in old buildings were charging exorbitant rates for their apartments.

In many cases, they would add 40% to their carpet areas, and quote super built-up areas. For example, an owner of a 450 sq ft apartment in a building more than 40 years old, claims an area of 610 sq ft while advertising for his property, and then demands the current rates for his apartment.

While the new rates were applicable to new skyscrapers in the vicinity, these owners had the advantage to demand higher rates. They also claimed low maintenance charges and thus were able to bulldoze their way in a overheated real estate market.

However, the new carpet area bill will change all this. It will make sales of all apartments on par, while builders of new constructions to charge for additional facilities and spaces. Owners of apartments in old constructions will not have this luxury to claim super built-up areas and charge a premium.

Many experts apparently are missing out on the argument that once a society is formed, additional areas and facilities -- like passages, lift areas, terrace, balconies, parapets, ledges etc. -- are owned by the co-operative housing society and not the owner of the apartment. Thus, owners of old apartments claiming super built-up rates is not justifiable.

While no one expects the new bill to bring prices down, it will certainly make things more transparent for the buyer, but the best effect would be visible in the sale of used homes.



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Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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