Friday, April 25, 2008

Builders will increase the rate according to the stage of the construction, says Shantilal Kataria, while talking on rising property prices in Pune

Price hike between Rs 50 and Rs 400 from April 20:

We all, including HDFC, were talking about Pune real estate slow down. Everybody was sure about property rates in Pune will come down. But on 10th of April, Lalitkumar Jain, president of Promoters and Builders Association of Pune (PBAP), made a shocking announcement.

PBAP, association of all most all major builders in Pune, (yes, SRK Developers, promoter of OvalNest 5 Star Homes at Warje is not a member of PBAP) has decided to increase the per-square-foot rate of flat between Rs 50 and Rs 400 from April 20.

DSK and Felicita - Baner:

Flat buyers gave instant response to DSK's ads about price hike. As if it's Petroleum Minister's announcement. No, they did not stand in the queue all night waiting for D. S. Kulkarni Developers' office to open on Ram Navami but all 50 flats were booked in no time. Even Felicita - Baner got a great response to their offer to book a flat before 20th April. But, surprisingly, most of the builders in Pune and important members of PBAP did not announce any price hike or the offer.

Shantilal Kataria, Vice President of PBAP:

Has PBAP dropped the idea of officially and unanimously hiking the property rates in Pune? Angry first time home buyers in Pune and/or 1 lakh vacant apartments in Bangalore forced the builders to reconsider their decision or what! But i did not see any point in jumping to the conclusion. So, i called Shantilal Kataria's office. For the first time, since i started this blog.

I was sure, Mr. Kataria is the right person. Not only because he is the vice president of PBAP or Aditya Builders is one of the big builders in Pune but because Shantilal Kataria, i believe, is the think tank of Pune builders. At the same time, for more than 25 years Aditya Builders has developed schemes in all parts of Pune only for the middle class. Naturally, as a good builder, Shantushet, as he is affectionately called, can read the mind (and bank statements!) of middle class of Pune as if it is a balance sheet of his company.

Price hike - Under Protest:

In the last 3 months, cement and steel rates, hiked labor charges, increased operating costs because of the inflation and Pune Municipal Corporation's increased premiums have increased the construction cost. This has forced the builders to increase the booking rates of the flats.

Since the property price hike is due to the increased construction cost each builder has to calculate cost increase on the project to project basis. Depending upon the stage of the construction, builder will increase the booking rate for that scheme. Suppose, the construction is in the last phase, a builder would increase the rate for that project, only by 50 rupees. Recently launched or where construction is still at initial stage price hike can be maximum.

How and when to increase, at one time or in phases, is an individual builder's choice but to construct and complete the project there is no option for the builder but to increase the property rate.

Shantilal Kataria explained the reason behind the delay in declaring the price hike but made it clear that Pune builders are going to increase the property prices. He also told me that builders are not happy about this decision.

Pune real estate slow down:

We were talking on the phone. To me, Shantilal Kataria sounded quite comfortable about the price hike. He was confident about the bookings at hiked property rates. Of course, i was expecting this. Still, he was not talking for himself. PBAP has discussed this in the meeting and Shantilal Kataria was talking to me on behalf of Pune real estate developers. Was he really comfortable and confident? Or is it a determination to hold the fort and present a strong position to Foreign Direct Investors?

What do you think? Would builders hike the rates as announced? Would you give up the hope of real estate prices coming down and book your 2 bhk flat at hiked rates? Please, let me know in the comments.
Tip: If you could manage your anger and disappointment, you can express your thoughts well. Please, try!

14 comments:

  1. Recession just started in US & will last about end of 2008 as banks don't have money to lend to companies which produces job. India GDP is suppose to grow at 7 to 8 % in 2008 & 2009 which is less than required to find job for all people coming to working age. This is what I read yesterday in reputed column. What that mean is there will be more people for same job in India. So companies will find candidates to work at lower salary easily. So salary hikes will be less than past in near future. Unless banks in india reduce the interest rate most people find home loan is very expensive.But reduction in interest rate also increases chances of increasing inflation so due to elections Govt will be less inclined to do that. My own guess is home prices will remain about same or reduce upto 20% until end of 2009 in Pune outline areas. In prime areas they will increase upto max 10%. Those who booked flats before 2006 December will not see prices going below their cost. only affected people are those who bought flat during 2007 as investment. Others who bought flats in 2007 as home to live may feel bad but that is way of life. Long term they will also see owing a home is good investment as Pune is going to grow further. I am looking to move to Pune in 2010 after my assignment in US will over so I am in the band of people who are watching the situation. Meanwhile pray to God that PBAP should not create artificial Demand-Supply gap to keep prices in Pune up which is really difficult anyway.

    Sandeep

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  2. Dont buy property now. If things are going down, wait another 6 months. The property rates are going to crash.
    Here are the reasons:
    1) Builder/Politician nexus has caused the hype.
    2) The prices of real estate has increased by 3-5 times.
    3)There has hardly any improvement in infrastructure.
    4)No value added. Same traffic jams and trash once you get outside the community.
    5)Interest rates have gone up. Monthly installments are becoming impossible for even professionals. Not everyone is IT-Project leader.
    6)Stock markets have collapsed. DLF stocks have gone down significantly.
    9)FIIs have taken the money out to compensate for their losses in US due to sub-prime crisis.
    10)There is liquidity crunch. If you buy a property now, be prepared to stay in it for 5-10 years. You will be lucky if you can find a tenant who can pay 75% of your monthly mortgage So you will 25% every month on interest costs and even more if the property prices go further down!

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  3. First of all, the price hike is a stunt of PBAP, only to panick the buyers and put more pressure on them.
    On what basis the present prices of flats are worked upon? Price of Rs. 4000 per sq. ft. is not a joke, it's lot of money. The game plan of builders and politicians is to keep the pressure ON on the real estate space as people have no option but to put money some or the other day. Small builders are not seen any where, as economy houses are banned by this Builder and Politician lobby. This is a fact of life.
    Really speaking, a rate of Rs. 1500 per square ft is all right for any part of Pune. What PBAP is demanding and forcing people to pay is absolutely outrageous. PBAP is talking about the cost of condtruction, which is maximum Rs. 1000 per sq. ft. for a 5 star house, cost of land is negligible. A 5 star production cost to the builder is max 15 Lakhs, where as the builders forces buyers to give 75 Lakhs for the same flat. What a business...!!! What a greedy and rotten mentality, great shame on the PBAP and the gang. There are many big players behind the scene.
    The fact of life of PBAP today is there are more flats than customers. Builders lie all time and spread a word that bookings are getting over, shame on this mentality. They cheat people and make money. It is sad that the cultural capital of the state is spoiled by such greedy lobbies and gunda raaj of politicians.

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  4. No, they did not stand in the queue all night waiting for D. S. Kulkarni Developers' office to open on Ram Navami but all 50 flats were booked in no time. Even Felicita - Baner got a great response to their offer to book a flat before 20th April.
    >>>>>BOTH DSK AND FELICIA ARE FOOLING THE REAL ESTATE INVESTORS. THIS IS NOT TRUE, BUT AN ABSOLUTE LIE. DISGRACEFUL PEOPLE.


    But, surprisingly, most of the builders in Pune and important members of PBAP did not announce any price hike or the offer.
    >>>> PBAP AND THE LOBBY ARE COVARDS. IF THEY REALLY WANT TO CHALLENGE THE BUYERS IF IF THEY HAVE REAL GUTS, THEY SHOULD DOUBLE THE PRICES FROM CURRENT LEVELS. A MINIMUM PRICE OF A FLAT IN PUNE WSHOULD NOT BE LESS THAN RS. 10000 PER SQ FT. DOES PBAP/LALIT/SHANTILAL HAVE GUTS TO TAKE THIS STEP?
    THEY THINK THAT THEY HAVE ENOUGH MONEY TO BEND THE PEOPLE.
    IT'S ALL THEIR MONEY TALKS CURRENTLY, NOT THEIR INTELLACT.

    Shantilal Kataria, Vice President of PBAP:Has PBAP dropped the idea of officially and unanimously hiking the property rates in Pune? Angry first time home buyers in Pune and/or 1 lakh vacant apartments in Bangalore forced the builders to reconsider their decision or what! But i did not see any point in jumping to the conclusion.
    >>>> SHANTILAL IS A BIG SHAME ON PUNE CULTURE. GOD WILL NOT FORGIVE HIM.

    I was sure, Mr. Kataria is the right person. Not only because he is the vice president of PBAP or Aditya Builders is one of the big builders in Pune but because Shantilal Kataria, i believe, is the think tank of Pune builders.
    >>>> SHAME ON KATARIA. WHAT IS THE MEANING OF THINK TANK??? I NEVER HERD THIS BEFORE...!!! PUNE IS LEFT WITH ONLY THESE KIND OF GREEDY THINKERS. HE DON'T DESERVE WHAT HE IS AND WHAT HE THINKS ABOUT HIMSELF. IT'S ALL MONEY THAT TALKS, THERE IS NO THINKING BEHIND THE ACT, STUPID RACE...!!!

    RAVI, ANSWER'S TO YOUR QUESTIONS -

    PBAP AND THE BUILDERS DON'T HAVE GUTS TO HIKE THE PRICES. I MYSELF AS A BUYER WILL NEVER DO THIS MISTAKE OF BOOKING A FLAT IN PUNE AT THIS RATE. PUNE REAL ESTATE RATES ARE HIGHER THAN PROPERTY PRICES IN THE WEST. I CAN BUY A DECENT HOUSE IN THE US OR UK AT LESSER PRICE, THEN WHY ONE WILL PUT IN MONEY IN PUNE?
    I PERSONALLY DON'T CARE WHERE THE PRICES GO (AND MANY THINK LIKE ME)BUT CERTAINLY WHAT'S GOING ON IS NOT GOOD FOR THE HEALTH OF THE SOCIETY... CURRENT PRICES HAVE NO JUSTIFICATION AND NOR VALUE FOR MONEY. WE ARE DEAD IN PUBLIC INFRASTRUCTURE AND QUALITY OF LIFE. DID YOU EVER LIVED IN THE WEST? dO YOU KNOW THE QUALITY OF LIFE IN THE WEST? IT IS UNCOMPARABLE. PUNE AND INDIA IS NO WHERE IN THAT COMPARISON, WE ARE ABSOLUTELY UNDER DEVELOPED AND IMMATURED. WE ARE MORE GREEDY AND MOST UNRELIABLE.
    I HAVE NO REASON TO GET ANGRY HERE, AS NOTHING GOES FROM MY POCKET, BUT I THINK A PRICE OF RS. 1500 TO RS. 1700 PER SQ FT IS A CORRECT PRICE OF A FLAT IN PUNE CONSIDERING PUBLIC INFRASTRUCTURE, ROADS, TRAFFIC, POLLUTION, QUALITY OF LIFE AND THE SPOILED CULTURE OF PUNE.

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  5. bye the way, did builder's actually increased the prices after april 20th, as we are close to april 30th now.

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  6. Pune, over the last two years, has experienced a boom in the real estate industry. However, availability of land has remained a problem as the new Development Plan (DP) for Pune has not been sanctioned and executed for quite some time.Pune-based real estate developers have decided to increase the per-square-foot charge for residential construction between Rs 50 and Rs 400 from April 20 due to the increasing cost of construction and heavy taxation by Pune Municipal Corporation (PMC).There is resentment among middle class households over increasing real estate prices. The industry cannot sustain such a situation where costs are not coming down. If housing becomes more costly, nobody will buy a flat in Pune and the industry may come to a halt in the near future.For more view- realtydigest.blogspot.com

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  7. Ravi,
    I have been reading your blog for quite some time now to get a pulse of the real estate market in Pune from out here in the US. My family is planning to move back to Pune next year and i wanted to invest in a house. but looking at the current conditions, i wonder why am i coming back? With the infrastructure at an all time low and the traffic and pollution at the opposite end of the scale, i really wonder why anyone would want to settle in Pune (of course a pakka punekar would still want to come back,as my family does). On top of all these deplorable conditions, it is disheartening to see the sky high real estate prices. I believe the builders realise that they cannot keep this up and are just trying to make hay while the sun shines. Once the common man is unable to pay his EMI or cannot even think of buying a 75L 2 BHK, what will happen? I think the only reason to threaten people with a price hike is because they are unable to sell flats now and think that this will make people wonder "If i dont buy it now for this outrageous price, i will have to pay a humungous amount later". So dam-d if you do it, dam-d if you dont!
    As for me, i plan to wait and watch (your blog!) :)

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  8. I have seen some interesting comments in this blog, thanks all.

    Price hike by 50 to 500 per sq ft is a mere frustration of Lalitkumar Jain. Reality is real estate market is already slowed down in last two quarters. As many pointed out, current pricing is not at all value for money, but a waste of money. Pune all time sinks in terms of public infrastructure. The buyers are not actually getting anything worth out of Rs. 75 lakh property, so not a practical brick+lime chemistry and clearly an hype. I thought, India is really developing on the wave of globalisation but it is sad that we are developing greedy malpractices in the trade and business. We all time lack in quality of a product, quality of service and most importantly honesty. We guys are not at all reliable and honest but simply want to get rich in nights.
    I will certainly not make this big mistake to put in my hard earned money in this greedy capatilist market and make them richer and in tern I ending up in a nightmare.
    Recently, I herd about Nisarg that the developer didn't actually transfered the land rights to purchaser at the time of sale, in short he cheated his investors. The developer is a joint owner with all the plot holders, and now if a X person want's to sell his plot at current market price, he cannot do this without the developer. The developer is forcing such plot holders to give up his plot to him at 700 per sq ft where as the market rate is 1500 per sq ft.
    I literally got shocked to hear about this story. We people put in our all hard earned money and trust these greedy builders, and in turn we get this in hand.
    THINK...THINK...THINK...!!!!
    What is shown to us is not a reality but an illusion. Reality comes in picture after few years, at that time we don't have enough strength to sort them out and practically it is impossible to sort out these gangsters, so be careful.

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  9. PBAP is an official Cartel of Pune Builders. Unfortunately, all the real-estate related cartels (So-called 'Associations') are openly supported by our be-loved Finance Minister.

    He is behind Steel Industry and Cement Industry cartelling just because the builders cartel are most affected due to price hike in steel and cement.

    Why isn't he going behind Builders' Cartel?

    In fact, if they go behind the builders' cartel, they will be catch most criminals in the history of India. It is absolutely known fact that all (no exceptions) builders in India are CRIMINALS. They are goons or mafia dons. Why not break their cartel and send them to Jail?

    As far as Pune is concern, yes, it was a dream destination for me to live in, during my childhood. However, it is no longer even a preferable destination for me to live in for many reasons:

    1. Worst infrastructure I ever have seen in my life.

    2. The citizens have become greedy and absolutely ignorant about very common civic sense. This has led to Driving chaos in the city.

    3. Pune has the worst town planning to become a developed city. The most visible proof is number of 'Y' phatas across Pune. It is a globaly accepted fact that 'Y' phatas are created because of worst town planning.

    4. Off-late, I am observing that Puneikar is loosing its cool nature and becoming more and more arrogant. Talk with anybody on street and I bet, you never get smiling returns, as it used to be 10 years before.

    5. The service levels of any utility seller are worst in this city. You may try ISPs, Telecom Operators, Gas distribution companies, electric distribution companies.... etc.. etc...

    Conclusion: Pune is out of my list of desired location. Let PBAP raise the prices to 50000 psqft.. They will never find me as a customer (BAKRA).

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  10. 1) As far as Pune is concern, yes, it was a dream destination for me to live in, during my childhood. However, it is no longer even a preferable destination for me to live in for many reasons: very sorry! I almost agree with your all observations. Pune will miss you. 2)It is absolutely known fact that all (no exceptions) builders in India are CRIMINALS. They are goons or mafia dons. I do not know all builders in India but over a period of 10 years, i have worked with more than 100 big and small builders in Pune, so i can talk about them. My experience is they are as good or bad as any business man in Pune. Builders in Pune are as ethical or as corrupt as any citizen of Pune. Calling all builders criminal would be over generalization. All over the world, only politicians are allowed to make over generalization and blame some community, cast or religion. 3) I agree about what you say regarding finance minister's role in this. But after sub-prime crises in US, i feel Indian moderate type of finance policy which always believes in creating checks and balances and not giving total free hand to any one lobby is anti fast progress but safe in the long run. First Reserve Bank and now steel and cement are trying to stop real estate market. Otherwise, in the last couple of years, Wall Street Hedge Funds would have acquired all real estate in Pune except Lal Mahal! (sorry for over exaggeration!)

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  11. The average construction cost considering the standards of construction pune builders offer should not be more than 1200 rupees per sq.ft. So i appeal to all the buyers in pune to stick to a price of Rs.1500 per sq.ft to Rs.1800 per sq.ft. I had recently negotiated a flat of around 1200 sq.ft at that price.

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  12. This is purely political and builder mafia manipulating prices. No genuine buyer.
    Pune does not have any infrastructure., working culture is bad.
    Bubble is going to bust soon.

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  13. All these developments have impacted the property values in Mysore. The residential and commercial values have doubled in the past one year and are expected to grow further in near future. For example, property value for a plot measuring 2400 sq yard in Vijaynagar area was Rs 1.5 lakh in 2006. The same plot is being valued at Rs 5 lakh now.

    For more details on India Properties, log on to magicbricks.com

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  14. Kataria should be put behind bars for running a illegal cartel. This is against free trade practices and lawyers should start filing PIL's

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