Tuesday, March 3, 2009

Rent Today Own Tomorrow

Here are the details of the offer:

Can you help me, please?

On my Ravi Karandeekar's Pune Real Estate Blog, where i blog on residential projects near Hinjewadi, one of us has shared his experience of visiting Mont Vert on the day "Rent Today Own Tomorrow" offer was launched. He has also asked my advice about the offer. Since, i am completely biased about Mont Vert's offer, i am sure, i will be less critical about it. I request you to share your views in the comments (Comments Policy), and help me in giving fair opinion. See, what Mr. Anonymous says in his comment:
Hi Ravi:
Me and my wife visited them on Sat after seeing the ad. It seems like they were giving things for free. A big mob of purchaser or renter or just curious Georges.
It took 15-20 minutes wait and then we were taken to a seminar room along with 10-12 other folks for a group presentation. We all tried to find a catch and comprehend the deal for next 30 minutes. None of us could find a catch.
It looks like a too good to be true deal. The rates were around 3100-3200 for their Pashan property.
It would be very nice if you being from the real estate sector, can give us an honest opinion.
They also told us that if we go for a straight purchase they will give 11 months rent as a cash back.
or it knocks down the rates by about 100-120/- making it around 3000/-
We really like their property but is this a right deal and right time? We are looking at direct buy option. Just wanted to see what you think or if you smell anything bad.
Can you visit them and give us an in depth feed back? Everyone in my company is talking about this. Thanks in advance.

Related Story:

1) Proactive Mont Vert once again devices plan to deal with uncertain times – launches innovative program for home-buyers

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50 comments:

  1. If something sounds too good to be true, it probably is.

    ReplyDelete
  2. To me, this is clear case of mounting inventory for the builders due to lack of buyers.

    Instead of their assets sitting in waste, they are trying to make at least soem money.

    However, Downfall of this offer is very bad. First, it shows builders desperateness about bad assets not finding buyers. Second, it makes the property used one and not a brand new.

    Not to mention, these are just one of the gimmiks and people are in terrible mood these days so this is not going to work anyway.

    ReplyDelete
  3. Rent is higher then market rate. So, you end up paying higher rent.
    if you purchase then it wolud be higher rate in current scenario.

    ReplyDelete
  4. Very bad situation, prices in the baner pashan area has fallen to < 2600 per sq ft.

    Builder is not ready to sell at that rate and so wants to get rent till the time market recovers. Markets won't recover though, I see it going below 2000.

    For buyers, this is a no loss sceniario, you have an opportunity to stay in a brand new flat, without paying unresonable premiums

    ReplyDelete
  5. Looks like Mr Anonymous is asking for help without giving out the facts(what he discussed in those 30 mins).

    Yes its too good to be true, if:

    * Lock down on purchase price when you rent.
    * If prices goes down further, is builder willing to make sale at lower price to you, without considering the rent. I.e if todays rate is 3200, year after its 2400, with rent benefit you rate comes out to 3000. Do you exclusive option to buy at 2400, breaking previous rent-to-own agreement?
    * Make it clear (to yourself), its rented property and you have option to buy later. Not the investment, you can cash on later (trying to transfer rent benefit to someone else).
    * Check the rent-agreement terms, what all is covered, after all you are paying 10months of rent as deposit afront.

    Things to note:
    * Mr Anonymous, also mention builder is ready to take 11 rent off the purchase price if you buy now. Which means rent you will be paying is in addition to current price of the flat!
    * Wild bet! more than 50% of those who are seriously thinking about going with this option, are going to move out.

    ReplyDelete
  6. Simple mathematics here !

    If you stay for a year in a 2 BHK (assuming 1100 sqft area for a 2BHK) and pay a rent of say 1.5 lacs/annum. When you buy this property Monte vert will adjust this 1.5 lac against your dues. This sum is very less in comparison to the loss they will make even if they reduce the price by say petty 200 Rs/sqft for a 1100 sqft flat (total saving of 2.2 lacs + registration + other proportional charges). And thus they will not budge to reduce the price; and will quote this rent scheme as an extra benefit. This works cheaper for Monte vert and sounds impressive for the buyer. However, the returns are significantly less for the buyer vis-a-vis the builder.

    Now if you don’t buy they are getting the premium rent for a flat they are not able to sell in this recession time.. Net-Net some cash flowing in for them and a chance to sell the property once the market revives.

    ReplyDelete
  7. # ref: " people are in terrible mood these days so this is not going to work anyway."

    However, i agree with you.

    Considering the good nature of the people, only those who are facing uncertainty on the job front and still want to "settle down" in their own home in Pune will go for it.

    Nobody who is renting will try to pretend that "he may book" and go for the "rent free flat"!

    We are talking about people like you, well educated IT professionals working in Hinjewadi who have 40 lakh (+) budget.

    In fact, i wish, all of you should be very comfortable in your jobs and very sure about great future and you do not need this type of a goodwill gesture from anybody!

    You all should be able to go to Mont Vert's office and say, "thanks for the offer." "However, I want to book right now. give me your lowest offer!"

    Both of us are wishing for this. Right?

    God bless you all, my clients - readers of my blog.

    # ref: "mounting inventory"

    - It is not an inventory. These are "not unsold ready flats"!

    Mont Vert is offering 75 flats for renting. All these flats are under construction. Which will be ready by June.

    # ref: "First, it shows builders desperateness about bad assets not finding buyers."

    - Since flats are under construction, not yet ready, it can not be called a "bad assets".

    - Bookings have come down or not happening is a fact.

    But in business management, dealing with the reasons of not enough sale and finding solutions to increase the sale is called marketing. Which is an ongoing activity. Not a desperation.

    # ref: "it makes the property used one and not a brand new."

    - Yes, you are right. Who's property? Builders property.

    Unless Mont Vert is not sure about the response why they will go for it?

    Or Mont Vert can afford to take a risk!

    Or Mont Vert has financial capacity. Own funds to build 75 flats which are not booked, for which they will not receive any payment when it is under construction or for the next 11 months after the completion!

    Remember, we see many projects in Pune stalled or construction slowed down for lack of bookings. Isn't it? In fact delayed possession has become very common. But Mont Vert can build without bookings.

    But what will happen to those few flats if are not purchased by those who take it on the rent?

    Mont Vert has to spend some amount to redo the flat.

    However, there is a resale market. Property is considered as an "investment instrument". Used flats and not used flats, both appreciate! Isn't it?

    # ref: "one of the gimmicks"

    Good gimmick! Property buyer is getting a "rent free" flat of 40 lakh to live for 11 months. What property buyer has to do is purchase it himself or find someone else who would like to purchase.

    I think, we should get more offers of this type. For the fridge, car, TV! Keep LCD TV if you are happy with picture quality or return. (Pay only for the cable charges!)

    ReplyDelete
  8. # ref: "Rent is higher then market rate. So, you end up paying higher rent."

    -Yes, you are right.

    Mont Vert has taken into consideration ongoing rent of flats in Mont Vert project.

    Not of any other project or the current market rate.

    # Ref: "if you purchase then it wolud be higher rate in current scenario"

    - Thanks for adding this important point.

    Yes, you are right. Mont Vert is a premium quality brand. Thanks for reminding.

    I think, Mont Vert assumed that everybody knows that they are the pioneer and leading builder in Pashan, Pashan - Baner link road area and they have constructed more than 3,000 flats which command premium. Thanks!

    ReplyDelete
  9. # ref: "For buyers, this is a no loss sceniario, you have an opportunity to stay in a brand new flat, without paying unresonable premiums"

    Yes, i agree with you. Stay in the brand new flat till the rates come down.

    If rates come down, as you say, bellow Rs. 2,000 per sq.ft. what will happen to those who have made investment in the second flat and are paying EMI?

    They have to deposit difference to their loan account, otherwise, they would become defaulters!

    God bless them.

    ReplyDelete
  10. Hello choombak - Amarendra!

    Sorry, yesterday, i let your comment publish for the point you were making, but today i am deleting it.

    Those who don't know you, may form wrong impression about you. Hope, you can understand.

    Please, see that i don't have to reject or delete your comment. I respect your views. I don't enjoy deleting it.

    ReplyDelete
  11. # ref: "Lock down on purchase price when you rent."

    Idea behind renting is booking when property rate goes down!

    # ref: "If prices goes down further, is builder willing to make sale at lower price to you, without considering the rent. "

    - Not only you but builder also expects that property rates may go down!

    That's why Mont Vert is ready to wait along with you and going to tell you the booking rate of each month.

    You are free to book when you feel that this is the lowest or right price.

    If you don't feel like booking in 11 months you can just walk away.

    Rent you had payed till you book, will be credited as your down payment when you book. May be in 3rd or 7th month. Because your rent is your down payment.

    # ref:"rent you will be paying is in addition to current price of the flat!"

    - Rent is related to down payment not to the property rate.

    # ref: " 50% of those who are seriously thinking about going with this option, are going to move out."

    - Yes, you are right. Very "wild bet"

    I think, when you have a family you become more responsible.

    ReplyDelete
  12. # ref: "Simple mathematics here !"

    Analyses of what Mont Vert will get out of this.

    Only one point. These flats are not yet ready. They are under construction.

    If you add what property buyer will get, picture will be complete

    I think, Mont Vert is doing this to sell the flat in 11 months. Not to collect the rent! Because rent is your down payment. It is not going to remain with them.

    I am sure, if you don't book, you will give it to your friend and get your cash back.

    You will not gift it to Mont Vert!! Do you?

    # ref:" However, the returns are significantly less for the buyer vis-a-vis the builder."

    What if in the next 11 months rate goes down by 250 Rs.?

    # We are missing one point here, reducing property rate is not only an issue. Not booking, not getting loan or not getting enough loan form the bank, because of the job insecurity is a major concern.

    ReplyDelete
  13. This type of offer will not helpfull to increase the sell
    As per serve Delhi and Mumbai has about 67% and 68% buyers waiting for the rates to fall,
    Pune topped with 82% of buyers looking for a reduction in real estate prices.
    Among the 82%, 32% buyers want the prices to drop in the next three months, another 39% expect the prices to fall over the next three to six months.

    Ref -
    http://www.topnews.in/home-buyers-wait-lower-price-tag-2133895

    ReplyDelete
  14. # ref:"Pune topped with 82% of buyers looking for a reduction in real estate prices."

    Thanks for the good news!
    If 82% buyers in Pune are looking for reduction in real estate prices, 75 property buyers out of that 82% can save rent while waiting for price reduction!

    But why do you feel sale will not increase?

    Though so many people are waiting and wishing, do you fear that property rates will not come down in next 11 months?

    I think, when others will start searching these 75 property owners would have been settled down in the their flats! For them signing an agreement would be just a formality!

    Do you think that they would be too lazy to go to the registration office?

    Sorry, i didn't get you!

    ReplyDelete
  15. I visited them at their office today. I am not a serious buyer but a young person interested in understanding how things work. Grilled them for quite sometime. I was quite satisfied with answers. I don't care what their economics are and I dont want to go thru the postmortem of their deal to an extent that all looks negative and gimmicks to me. All I care is what's in there for me. I was quite happy with it bcose I am not forced to buy the flat and am free to move out. I am paying the same rent now so why would I not go in there.
    Again it makes sense for me and does not cost me anything more than what my out goings are today. So dig this I AM OK WITH IT.
    Ravi it seems some guys have nothing better to do than to bash builders. I like your point to point response. I suggest you should visit them if you have not already. In fact I think you should go there as a reporter/blogger and ask them more Q to get clarity Ravi. It seems you are clear with their promo.
    I like to read your blog as a marketing student.
    All in all a very unique idea. So must give Montvert a full credit for that.

    ReplyDelete
  16. # ref: "All I care is what's in there for me. I was quite happy with it bcose I am not forced to buy the flat and am free to move out."

    - Thanks for the comment!
    - Yes, i am going to visit the site today.
    - I have been to Mont Vert's press conference and had an opportunity to ask questions along with the members of the press. Who had become skeptical after so many press conferences of PBAP.

    However, visiting site and looking at the offer from buyers point of view, like you did, matters most.

    Thanks for the complements.

    ReplyDelete
  17. Potential buyers can’t be just determined by wish. Every one wants a BMW, Mercedes but companies don’t take it granted that there is a huge demand for cars.

    The demand will be defined based on economic conditions; else there is no reason to explain huge RE demand in last 3-4 years. Economy is bad in next 2-3 years. So risk is very high & price correction will be steeper. Now how much risk is accommodated in the current price to take this decision?

    Vulture.

    ReplyDelete
  18. One correction on comment by Ravi. It’s not a marketing , it’s sales activity, Ref: Philip Kotler.

    Vulture.

    ReplyDelete
  19. #REF:only those who are facing uncertainty on the job front and still want to "settle down" in their own home in Pune will go for it.
    >>Wrong. There are cheaper, ready possetion rental options available market. Why would one with job uncertainly will opt for currently under construction, hig rented appt?


    #REF:We are talking about people like you, well educated IT professionals working in Hinjewadi who have 40 lakh (+) budget.
    >>Mark my word. You will find none.

    #REF:It is not an inventory. These are "not unsold ready flats".. All these flats are under construction.
    #REF:Since flats are under construction, not yet ready, it can not be called a "bad assets".
    >> These will be converted to bad asset in Jun 09 adn will add to piling monstrous inventory.

    #REF:finding solutions to increase the sale is called marketing.
    >>All the best. Just FYI, earlier solutions like freebies, discounts, NO EMI till possetion, low (10%??) interest for 1st yr, rate reduction guarrenty...etc. have failed. Best solution? Bring prices back to 2003-05 levels. Might work !

    #REF:why they will go for it?
    #REF:MV has financial capacity.
    #REF: Both appreciate! Isn't it?
    #REF: MV can build w/out bookings.
    >> No sale, hence they are going for it. Fin capacity is eroding day by day due to mouniting interest over unsold flats. Proeprty depreciates in a falling market. MV can of course build w/o booking but whats point in it if no sale happens.

    #REF:Property buyer is getting a "rent free" flat of 40 lakh to live for 11 months.
    >>Wrong. The rent figure is high. If you purchase, house price is high to offset savign in rent. If you do not purchase, high rent paid is big loss.

    ReplyDelete
  20. # ref: ">>Wrong. There are cheaper, ready possetion rental options available market. Why would one with job uncertainly will opt for currently under construction, hig rented appt?"

    - Yes, sir. You are right.

    - Anyone can live only in a completely constructed flat.

    - He will opt for "Mont Vert's Rent Free Flat" and save the rent he might have paid anywhere else + little more for buying his own flat in which he is already living!

    - If In the next 11 months, he is not comfortable on the job front, he will renew the agreement and save 11 more installments in his down payment account.

    - If in the next 11 months, property rates wouldn't come down as per his expectations, he will enjoy life in the same flat but postpone his buying decision.

    - But he will not let 11 months rent go down the drain.

    ReplyDelete
  21. # Ref: >>Mark my word. You will find none.

    - Sorry, sir! To get a job in IT company you must be intelligent and educated.

    These IT professionals in no time understood what "Rent Today Own Tomorrow" is!

    - See the data given by Mont Vert in the press conference on March 3rd, 2009,Tuesday noon:

    - 1,065 property buyers called Mont Vert's office

    - 98 property buyers visited Mont Vert's office

    - 9 property buyers had opted for "Rent Today Own Tomorrow"

    ReplyDelete
  22. # Ref:">> These will be converted to bad asset in Jun 09 adn will add to piling monstrous inventory."

    - Though you are not giving exactly "Good Wishes", on behalf of my readers who are getting a "rent free flat to live till the property rates come down" i say, "Thank you, Sir!" because giving is important and you can give only what you have.

    Sir, my best wishes are always with you.

    ReplyDelete
  23. # Ref: "Best solution? Bring prices back to 2003-05 levels. Might work !"

    - Yes, you are right.
    - Thanks for the good wishes.
    - God bless you!
    - What to do till that happens?

    - 75 property buyers are going to witness this happening in a "rent free flat", save money for down payment and they are going to buy the same flat only when your wish will turn into reality.

    ReplyDelete
  24. # Ref: ">> No sale, hence they are going for it. Fin capacity is eroding day by day due to mouniting interest over unsold flats. Proeprty depreciates in a falling market. MV can of course build w/o booking but whats point in it if no sale happens."

    - Yes Sir, it shows that you have deep knowledge of builder's business.

    - My focus is not builder. I blog for the property buyers.

    - I see this as a great opportunity for property buyers:

    1) to save money,

    2) test the quality of construction before buying the flat,

    3) wait till property rates come down to acceptable level.

    However, thanks for sharing your knowledge.

    ReplyDelete
  25. # Ref: ">>Wrong. The rent figure is high. If you purchase, house price is high to offset savign in rent. If you do not purchase, high rent paid is big loss."

    - Yes sir, you are right.
    - Mont Vert is a quality brand which is priced little bit more than the average rate in Pashan, Baner and Wakad. So only those who are looking for quality will opt for Mont Vert. Not those who are looking for cheap bargain.

    - Rent is actually saving for your "down payment" to purchase your own flat. There is no harm in saving little bit more for yourself. Isn't it?

    - At least my readers care for their hard earned money. They will find someone who is interested in buying a flat in Mont Vert.

    - I will love to blog about this opportunity , once again after 11 months.

    - I hope you and me will discuss this as seriously as we are discussing it today.

    ReplyDelete
  26. # Ref: "Economy is bad in next 2-3 years. So risk is very high & price correction will be steeper."

    - Yes, i agree with you. Steeper means really steeper.

    Actually many people haven't yet realized how steeper it would be. When they think about low property rates, they can only think of 2003!

    Sir, we are going into "deflation", so, when you expect less property rates, please, expect more!

    ReplyDelete
  27. It is hard to get to their phone lines. So I visited them. I complimented them for their new idea.
    I would like to agree that there is no direct catch in today's scenario.
    Leaving all arguments and counter arguments aside, I would like to wait for Ravi's Visit and in depth report.

    I think the exact success of this marketing promotion or failure of it can be seen only after 3-5 months if we can know exactly how many people exactly rented it, how many went for rent to buy option and how many quit.

    ReplyDelete
  28. # Ref: >>Mark my word. You will find none.
    - Sorry, sir! To get a job in IT company you must be intelligent and educated.

    >> You've mistaken what I meant to say. I say you will find none "With 40 lakhs+ budget". I did not mean you will find no one intelligent.

    Btw, a lot of intelligent IT people have screwed themselves by falling to marketing gimmiks and peer pressure. Not only they have paid 3 times more than what they should have, they are also finding themselves in the middle of bushfire now unable to manage the loan amounts payback.

    ReplyDelete
  29. # ref: "Btw, a lot of intelligent IT people have screwed themselves by falling to marketing gimmiks and peer pressure. Not only they have paid 3 times more than what they should have, they are also finding themselves in the middle of bushfire now unable to manage the loan amounts payback."

    - Very sorry to hear this. How are they planning to come out of this? Are we facing "sub-prime crisis"? Do we need "bail out package" for them? Please, tell them to contact me. I would like to write about this issue.

    ReplyDelete
  30. #REF: Very sorry to hear this. How are they planning to come out of this? Are we facing "sub-prime crisis"? Do we need "bail out package" for them? Please, tell them to contact me. I would like to write about this issue.

    >>

    Do you really don't know about such incidents or are you being sarcastic?

    I agree with Anonymous who says IT pros with budget 40L do almost not exist! (there can be a few but this is not a norm)

    I think you need to understand how IT works and how the salary structure is. Majority of IT people in Pune are in 2L to 6L per year bracket with more people in the lesser salary range than the higher. The freshers or people with less than 3 yrs of experience will have in hand salary of 15 thousand to 25 thousand per month. The person with a package of 6 LPA usually gets around 35 to 40 thousand in hand per month. Considering his family and other fixed living costs take 15 thousand per month, he is left with 20 to 25 thousand per month. Also there will be other expenses and savings, insurance premiums, life-style expenses as well so he will eventually have 15 to 20 thousand per month, which he can pay as EMI. So now tell me what can be this person's budget?

    You might ask how come there were deals with 40L and above. This was largely because the reckless euphoria about IT, imaginary ever-increasing pay-packages and fear that the bubble is real i.e. prices may increase even more. So most of them stretched their limits dreaming that their salary will keep on increasing forever. In short almost all these deals were based on unrealistic assumptions.

    Since last year there hasn't been any significant salary hike in any major IT company. This year there can be pay-cuts and lay-offs.

    Nobody now wants to take up this great risk of committing more than half of his/her salary for 20 years. Wisely enough many of the young professionals are defying this myth of “you must have YOUR OWN home” and defying the peer pressure. Many of them are considering themselves lucky that they did not purchase an overpriced flat and are not in a financial crisis as some of their friends are.

    ReplyDelete
  31. Shashank:
    Why would there be a hike in IT salaries. They never deserved it.
    They just got unjustifiable salaries... $60/- per hr billing in 1999 for a guys who did not even know how to set up a network printer. Calls his brother up on the phone and gets step by step instruction. Just pathetic.( I was the witness as I was on training technician in a USA hospital for biomedical engineering)
    BPO and call centers paying 25-50K for a job that can be done by an ITI graduate.
    Its these IT guys with lavish salaries got trigger happy and started buying homes like there was no tomorrow. This gave a big surge to demand and leading to cost escalation. Why would a builder not take an advantage of the demand and sell higher.
    Look who is equally to blame.
    While my wife haggle with subziwala for rates in good old traditional indian way, an IT girl comes in says pl pack 1 kg onion, 2 kg this , 10 lemons, 5 carrots etc etc without asking the rates and asks "kitna hua". Vendor says Rs. XYZ and she just gets a big Gandhi out and pays. Not even asking about rate and checking the total etc. No she was not in hurry she was just flying high.
    This is a daily scene even today at many street corner markets.
    The subzi lady tells my wife Hamare paas aise customer hai to aap ki hame kya jaroorat hai. This is a real life story and happens daily.
    This is exactly what the IT pros started doing in real estate. Kitne ka hai ye flat. Ok muje ek dedo aur mere dost ko bhi ek dedo.
    Cose of guys like you many of us could not buy a home cose we are regular folks with regular paying jobs.

    So please dont even ask for a salary hike for next 5 years cose you have been paid excess for last 10-15 years to begin with.

    Regret the harsh tone but these are the facts.

    Sorry ravi did not want to stir up another debate but if you feel this post may offend or trigger a fued please do not post it.
    Thanks
    and May God give wisdom to our IT Employers.

    ReplyDelete
  32. Mr. Anonymous,
    Nobody gets money for nothing. And as in any other profession there are competent and incompetent people in IT. It won't be wise to pass on a sweeping judgment like this.

    For your information I personally detest the behavior you mentioned, but it's grossly immature to classify every IT professional being irresponsible. I can understand your frustration and really sympathize with you.

    Fortunately the remuneration for IT professionals is controlled by more practical and reasonable people.

    If you read my comment carefully again you will find I'm trying to point out the same irresponsibility of some IT professionals which partly fueled the unrealistic growth of RE market and builders took advantage of this mad rush.

    ReplyDelete
  33. My only question is - if the real estate prices CRASH by 60% on the 11th month from today, is Mount Vert going to sell me this rented flat at this rate?
    If yes, is this part of the agreement?
    Can Mount Vert publish photographs of the schemes he is renting out, both sides - inside and out side picks, just to expost the current state/condition of the apartment...!!!!

    ReplyDelete
  34. # Ref: "My only question is - if the real estate prices CRASH by 60% on the 11th month from today, is Mount Vert going to sell me this rented flat at this rate?"

    - Yes!

    ReplyDelete
  35. # Ref: "My only question is - if the real estate prices CRASH by 60% on the 11th month from today, is Mount Vert going to sell me this rented flat at this rate?
    If yes, is this part of the agreement?"

    - This is an offer!

    ReplyDelete
  36. # Ref: "Can Mount Vert publish photographs of the schemes he is renting out, both sides - inside and out side picks,"

    - Sure! I will blog this. Thanks for the suggestion!

    ReplyDelete
  37. # Ref: "irresponsibility of some IT professionals which partly fueled the unrealistic growth of RE market and builders took advantage of this mad rush."

    Hello Shashank!

    Sorry, I don't think it was "irresponsibility". My clients can't be irresponsible.

    It was not "unrealistic growth". It was a real estate boom.

    Builders didn't "take advantage". Builders did their best to make property buyers and real estate investors happy by "appreciating" property every day.

    I still remember their enthusiasm to know about the price increase and never forget their happy faces.

    I wish to see these property buyers, creators of wealth, happy and prosperous all the time.

    ReplyDelete
  38. hahaha! I like your sense of humor, you can be really funny at times :)

    # ref: Sorry, I don't think it was "irresponsibility". My clients can't be irresponsible.

    Why not? because they are your so-called 'clients'? I don't understand. (pardon me if it was an intended joke)

    # ref: It was not "unrealistic growth". It was a real estate boom.

    If it was not unrealistic why prices are coming down and expected to come down by such an extent? (Prices do come down and go up in other sectors as well but not to the extent of what is happening in Pune and other RE hotspots)

    # ref: Builders didn't "take advantage". Builders did their best to make property buyers and real estate investors happy by "appreciating" property every day.

    They surely did take advantage of the bubble. Otherwise how can you explain the increase in the rate of ongoing projects which was not in tunes with the increase in input costs. I have seen rates go up almost every week for many schemes which was not in sync with the increase in input cost. How can you justify that phenomenon other than Builders trying to increase their profit margins?

    ......

    I also strongly recommend you to read my earlier comment about how IT salary structure is, what can be a 'realistic' budget of majority of IT professionals and how; many are in financial trouble by booking overpriced flats.

    The future is bleaker than this. As mentioned by someone in a comment somewhere we are yet to understand how deep this recession is and nobody knows how and when the world will come out of the recession. It will keep on impacting Indian IT industry for 2 to 3 years at least and if the world economy starts to recover by then it will take many years to come to a stage we were a year ago. And the situation is same or even worse in other sectors. So in all likelihood there won't be any boom in real estate sector in Pune anytime soon and the number of potential buyers and their budgets will go on shrinking until the world economy recovers in, god knows, 3, 5, 10 years.

    I am mentioning this here just to spread awareness about the gravity of the problem we are facing and to convey it to the players in RE sector that if they want to continue doing business they have to understand this and adapt to the changed world.

    ReplyDelete
  39. Hello Shashank!
    On a serious note.
    When you say 1)"irresponsibility" 2) "unrealistic growth" 3) "take advantage", you look at real estate market as provider of "housing".

    You don't consider real estate as an investment product. Like shares, gold and F.D. There are many who see real estate as an investment opportunity and trade in it. In boom these players are more active than the actual users. Besides professional investors, actual users also become investors and try to take the advantage of the boom.

    You have very well described how these 'actual users turned real estate investors' suffer in your earlier comment. Means, you are aware about "real estate is an investment product."

    But you, and many more who complain about price rise and blame builders for it, ignore this side of real estate. You consider only one side - provider of housing. Get angry about price rise and builders for rejecting your right to own a home.

    Don't you think this view is based on distorted or incomplete fact?

    - I will suggest you to take a look at your fundamental assumption.

    What is the role of a buyer - consumer in any market?

    Why manufacturers need consumers?

    If you wish to go deep, please, ask yourself,

    What is the role of the citizens in any country?

    Why any government needs citizens?

    Personally, i don't like what i see. I like to give an importance to every individual citizen than the country. I would like to see the buyer - consumer to become the center of the market and not the manufacturer. But for that instead of complaining and blaming we have to work on it.

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  40. # Ref: "I am mentioning this here just to spread awareness about the gravity of the problem we are facing and to convey it to the players in RE sector that if they want to continue doing business they have to understand this and adapt to the changed world."

    - Shashank, thanks for your concern for "players in real estate".

    However, these players know the rules of the game well.

    It was not the first boom and this is not the first recession. Pune real estate developers have seen all. More than 2, 3 times. They are well prepared to take care of themselves.

    "Are property buyers ready to face the recession or deflation?" For me, this is more important.

    I find it amusing when property buyers think less about their own interest and think more about the builder.

    For example, if you read the comments on all posts on Mont Vert's "Rent Today Own Tomorrow", most of the critics had ignored the benefits property buyers are going to get out of this offer and focused on what builder is going to get! If builder is not going to get any benefit, in the first place, why he will launch the offer!

    Is it possible that only property buyer benefits and not the builder when the transaction happen between theses two parties?

    Or look at the expectations and concerns! Can you demand transparency and rational property rates? No. Even law, for example "Right to information act" doesn't assure you that you get all information from PMC!

    You have to act, work on it, fight for it. You can't order it. Not from the government. Not from the builder.

    - Don't you think we all don't know our exact role as a property buyer and are not aware about our basic rights and the way to implement them when we purchase the property?

    - I request you to keep your focus on Pune property buyers. At least, on Ravi Karandeekar's Pune Real Estate Market News Blog and my other blogs which are for Pune property buyers.

    Let us care and respect ourselves.

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  41. # ref: You don't consider real estate as an investment product. Like shares, gold and F.D. There are many who see real estate as an investment opportunity and trade in it. In boom these players are more active than the actual users. Besides professional investors, actual users also become investors and try to take the advantage of the boom.

    The concept of ‘real estate as an investment option’ has been used very loosely by many people who claim they understand more than they actually do. How many investors take loan to invest in shares, gold and FD? If anyone wants to invest in shares, MFs he/she should have anything more than (as less as) Rs. 100. And what do you need to ‘invest’ in real estate? 20 lacs, 30 lacs, 40 lacs? Who has that much money available for investment? Well no problem, borrow it! Can you please write a post explaining your idea of ‘real estate as an investment option’ with examples and sample figures for the down-payment, loan amount, EMI and interest and possible profit scenarios?

    # ref: It was not the first boom and this is not the first recession. Pune real estate developers have seen all. More than 2, 3 times. They are well prepared to take care of themselves.

    Really? Well I would like to know when these ‘recessions’ happened before? What is happening in the world today can only be compared to the ‘great depression’ that happened in 1930s, 1940s I don’t think Pune builders were in business then. Many experts say the current crisis can be worse than even the ‘great depression’ or the ‘worst financial crisis ever’. All I can say is: educate yourself!

    And just to clear the air; though I don’t especially like Builders; I’m not against builders and not angry with them because they are still working in whatever legal framework we have. So please don’t dismiss counter views terming they came out of ‘builder-bashing’.

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  42. # Ref: " So please don’t dismiss counter views terming they came out of ‘builder-bashing’."

    - Yes, you are right. One should not dismiss the counter views. I don't. If i have done it before, then sorry for that. I will see that i never do it again.

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  43. # Ref: " ‘real estate as an investment option’ "

    Sorry, i don't think current market is right for investing in the 2nd flat by taking a loan from the bank. So, i don't see any point in talking about it.

    In fact, when property buyers call me, i tell them to focus on creating an asset and enhancing personal worth by investing for a long period of time.

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  44. # Ref: "‘great depression’ that happened in 1930s"

    - This is about American economy.

    - In India, in Pune, real estate was in recession from 1995 - 2000. In 1994-95, Gulf and NRI boom was over and recession started.

    In 2002-03 NDA government stimulated the real estate boom by offering "No Income tax scheme" for the builders and low interest rates on home loans for the property buyers.

    However, changing policy can be done in one session of a parliament but to launch the projects and convince the property buyers to book takes time, efforts and risk.

    You can see that in last 20 years, real estate boom lasted for a very short period of time. Most of the real estate companies we see in Pune were incorporated and re-incorporated in this period.

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  45. Real estate market is not a perfect market. What is it to say that the price of an apartment is so and so. Rates across schemes differ in the same area. How will the lower price be determined in this case? If almost all flats are booked in the deal, the buyers will be under stress to not lose the premium rents that they pay out and Mont Vert will not reduce prices---- well, the first question is how will price discovery be done in this case?

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  46. I am told that Mont Vert has now closed this rental offer for pashan-suz area. I was there this Saturday and was told this. Now only outright purchase but still offering 11 months rental. They told me Wakad is still open for the offer.

    Guys I need to buy a flat now and I like their 2 BHK at Grand. Rate 3133-110=3023/- plus plus
    All said and done things still loke attractive to me. Am I doing a right thing. I dont mind if my flat goes down to 2700/- as long as it bounces back to 4000/- in 5 years. This is my primary home.
    Ravi and others any comments.

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  47. # Ref: "Am I doing a right thing. I dont mind if my flat goes down to 2700/- as long as it bounces back to 4000/- in 5 years. This is my primary home"

    - You are right. It's your home. Go for it! Wish you all the best.

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  48. # Ref: "how will price discovery be done in this case?"

    - Hello Akash, thanks for the comment.

    If you are asking about "price discovery" to book while renting at Mont Vert then, it's a current booking rate at Mont Vert. Which you can cross check. Check the agreements done in the month.

    I agree with you. Lowest price is not always the "lowest asking rate". You have to consider what you are offered at that rate and how much you value it.

    But generally, not so serious buyers go by the numbers but those who buy see what they are getting.

    It's better to follow your perception about the "right price".

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  49. Dear Mr.Ravi ,

    I am impressed with the scheme Rent today ,own tomorrow.Now as you beinbg expert in the field I request you to please clarify few of my querries.

    1.Is their any flat available within a range of 10 to 12 lakhs (Rent of INR 7000/Month)

    2. If yes than how much is the hard cash required intially to get the deal done.

    3.Suppose a flat rate is 12 lakhs .Does our rent is inline with the bank loan emi wherein we after a particular period of time we end up paying almost double / trpple the flat cost.

    4.Throughout all the blog it seems people are worried about wheter thry would get the price reduction benefit in case property price slashes down .However my question will I be charged more if the property prices rise i.e do i need to pay more rent than finalsied dueing the agreement if rises upwards.

    Finally Mr. Ravi I would sincerly request your consultancy to help me procure a economical flat for the time being.I am ready to pay you a suitable consultancy charges for it.My email i.d. is

    ajaytiwari_109@rediffmail.com

    Look forwrd to you reply.

    Thanks and Regards
    Ajay Tiwari

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  50. Dear Ajay T, sorry, the scheme got over in 2 weeks after the launch in March 2008!

    I don't deal in real estate, i only write about it. However, you can enjoy free 3 minutes consultation on phone to know about investing in Pune real estate!

    ReplyDelete