Getting
the value of apartment right The
“techies” have a few points to ponder before investing
in a flat, says MOHAN BABU. [Originally published in Deccan Herald]
THERE
is a huge gold-rush on in Bangalore with everyone
wanting a share of the ITES (IT enabled services)
and BPO (Business Process Outsourcing) pie. Certain
sections of the print media seem to be doing its
part to flame the fire by hyping up front-page
stories, extolling people to “jump in or loose
out”. An entire generation of techies that relocated
to Bangalore to be a part of the “Indian Dream”
is looking for an abode to complete the dream.
The Indian dream is a term lifted from the quintessential
American Dream of sixties and seventies where
the young college graduates dreamt of buying a
car, a house in the suburbs and all other consumer
goodies. The trend now is that a year or two into
the new jobs, the young professionals begin to
dream of settling down. This trend is a far cry
from even a decade ago where the working class
would squirrel away their savings hoping to buy
a house after retirement.
Builders and developers of different stripes have
shifted gears to overdrive by trying to cater
to this urge for a slice of the “Bangalorean Indian
Dream”. Interestingly, as with the Great American
Gold Rush, those raking-in the real big-bucks
are vendors of spades, not those in the trenches
digging for the elusive gold. The gold-diggers,
in this case, are the techies. And the spade sellers?
The real-estate agents and large builders and
developers, who are pandering to an artificial
demand from techies wishing to have an abode in
south, south-east Bangalore. Newspapers have dedicated
entire weekend sections to help bridge the demand-supply
of real estate. Bulletin boards and lunch-time
conversations at major software and tech companies
are abuzz with real-estate gossip eagerly traded
by wannabe property-owners.
When Allan Greenspan coined the term “Irrational
Exuberance”, Bangalore’s real-estate market was
far from his mind; however the current state of
the market echoes his sentiments to the tee. How
else can one justify paying close to Rs 2,000
a square foot for a 10th floor apartment in a
city where land is abundantly available a few
kilometers away at a fourth of that price?
Market value
Being a native of Bangalore, I have been sitting
on the fence, contemplating jumping into the “market”
for a while. However, I am beginning to wonder
if I am among the minority of my techie peers
who is thinking “logically” when it comes to matters
of investing in real estate? I am beginning to
question if this irrational exuberance be sustained
at all.
To set the tone for my argument, a case in point:
A 1,470-square-foot apartment in a six-storey
apartment house in New York costs approximately
$183,045 (converting to rupees, this comes to
about Rs 5,354 per square foot). This is roughly
about three and half times the Rs 1,500 or 1,600
that builders are charging. Now, by a weird co-incidence,
this is exactly the multiple factor used by Indian
IT companies who claim to charge clients a fourth
of what a “typical” programmer would cost in the
US.
Myths
Having set the ground for this discussion, here
are a few observations based on my interactions
with builders and fellow techies. The most common
myths circulating among those paying upwards of
forty to fifty lakhs for flats include:
Myth 1: Invest in a flat for long-term asset building.
The fact remains, pre-built flats generally depreciate
over the long-run, due to wear-and-tear etc. The
only redeeming factor is the location of the property.
A flat located in a prime area is probably going
to retain some value due to the fact that the
convenience of location will override other factors.
This is not a flat-versus-houses discussion: Built-up
houses too depreciate but since the value of land
is built into the price of property, one can consider
rebuilding a house after a few decades, something
that would be very hard to do with a flat.
Myth 2: Prices of flats are only bound to go up
and up. It is indeed true that prices of a few
flats located in prime areas like Koramangala
and Jayanagar have doubled (and in some cases
even tripled) in prices during the past five or
six years. If one were to blindly use the above
examples to hypothesise that a flat that one is
paying forty or fifty lakhs is going to double
in the next five years, it will be hard to sustain
the argument. The reasons for the previous boom
are many; and include the sudden inflow of multinationals
who set up development centers concentrated around
the Electronics-City and ‘IT Corridor’ belt. However,
the fact remains that multinationals and Indian
IT giants have already begun a massive diversification
and are planning newer developments and expansions
in other metros including Chennai, Hyderabad and
Pune. Betting on the future of South-Bangalore’s
real-estate would be like driving while merely
observing the rear-view mirror.
Myth 3: I must get an early-mover advantage, so
I must invest in “this” property. This is the
hardest myth to crack since the concept of “early
mover” is highly subjective. As with any major
investment, there is no real right-time or wrong-time.
Financial analysts suggest maintaining a “balanced
portfolio” for this very reason. If one is intending
to speculate based on a few guesses, there are
other investments with equally high risk that
may be a better bet.
Myth 4: My friends can’t be wrong. Many of the
techies buying property paying over half-a-crore
are doing so because of the typical “herd mentality”.
The assumption is that since a fellow techie is
doing well in his job, he is bound to be equally
astute in analysing the intricacies of the real-estate
market. Taking investment decisions is a highly
subjective affair which needs to be personalised
according to one’s individual priorities and goals,
not that of one’s peer or friend.
Reading thus far, you are probably wondering why
this writeup? To even stick one’s neck out during
this euphoric phase can be tantamount to being
foolhardy; but I wish to stir some debate with
my views. What really surprises me is that contrary
to what I read about sales and marketing during
my MBA days, selling to “better informed” consumers
— in this case educated folks with a stronger
logical-left-side of the brain — seems to be a
walk in the park. And the builders and developers
who are subtly pushing individuals into thinking
that the “shortage” of land is more than it really
is are only too happy pandering to the myths.
With this, I rest my case.
KR
Capital provides 'comfort buying' of properties
in India (Vinod Dhawan)
NEW
DELHI
: The demolition of
unauthorized constructions in
Delhi
and some other cities of
India
must have sent a wave of concern among NRIs trying
to buy property in
India
.
On the contrary, claims Pankaj Manchanda, Managing
Director of US-based KR Capital Management, his
real estate business has received a boost for
this very reason. The simple explanation is that
he deals only with authorized constructions in
India
- all lawful and above board.
Manchanda
says his KR Capital Management company, operating
from
Las Vegas
,
Nevada
, is
the only one to promote authorized Indian properties in
US. He possesses a
US
business license to sell properties abroad to
NRIs. He is accountable to US laws and strictly
follows the procedures in his transactions.
In
India
he works with top builders and reputed brand names.
It is a clean business with no cash transactions
involved. KR Capital is international promoter
for some of the largest real estate developers
in
India
.
Manchanda
claims KR Capital and its group companies have
more than 30 years of experience in development
of world-class residential and commercial projects
in
India
.
Their aim is to bring together real-estate investment
opportunities for investors, land owners, collaborators
and strategic partners. "We accomplish this
mission by combining our extensive research with
on-going market opportunities, and creating a
portfolio of real estate investment programs based
on the risk/return scale," he says.
KR
Capital has pioneered the concept of convenient,
reliable and informed investment in Indian real-estate
market.
KR
Capital can provide a range of investment advisory
services to Property Developers, Foreign Direct
Investors (FDI), High Net-worth Individuals (HNI),
Real-estate Funds, Infrastructure Developers (e.g.
Power, Highways,
Sea
Ports
,
Theme Parks,
Business
Parks
and Group Housing).
KR
Capital has offices in both
India
and US with
New Delhi
functioning as the hub. The
US
office serves as controlling center.
At
present properties are being offered in Pune,
Bangalore
,
Bombay
and
Calcutta
.
The company plans to expand soon to
UK
and
Canada
.
The
Delhi
office is headed by his cousin, Amit Manchanda.
The
secret of KR success is the opportunity it affords
customers for "comfort buying". "Our
customers are happy. All they have to do is to
fill up form and attach documents. Indian banks
provide 90 percent of the loan. Financing is done
within 10 days- two weeks. Every day or second
day we receive some enquiry from US itself. All
this is based on word of mouth. There has been
no publicity. Only honest customer service."
There
is a local team in US, bound by local law, which
interacts 24 hours with business prospects.
The
highlights of KR Capital Investment are:
•
Providing investment opportunities in pre-launch
and completed projects by leading developers in
India
•
Investment in
Software
Technology
Park
(STP), Special Economic Zones (SEZ), Shopping
Malls
•
Investment in Real-Estate Funds and Real-Estate
Investment Trusts (REIT)
•
Facilitating agreement with leading developers
for exclusive investment and/or joint development
Manchanda
says NRIs look for two things in
India
:
•
Want to invest in
India
•
They are all interested in ultimately settling
down in
India
He
explains to them that this investment in
India
is repatriable, bound by Indian laws. Capital
gains can be taken back after paying capital gains
tax.
Manchanda
is now floating a fund for NRIs. His ultimate
aim is to do group housing for NRIs.
Source:
India
Post News Service
|
