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Thursday, December 27, 2012

Are Pune Builders Squeezing & Deceiving Property Buyers?

Most Popular Projects Launched in 2012 - Part 3

Ravi Karandeekar's 12 Most Popular Pune Real Estate Market News Blogs on the Residential Projects Launched in 2012
- According to Google Analytics:

Shrinking Size of Your Flat - Are We Getting Poorer?:

When I had a look at the most popular projects launched in 2012, I asked myself - Are we getting poorer?

It looked to me that builders have decided that Pune property buyer deserves to live only in a 2 BHK Flat - Small Size - Compact 2 BHK Flat.

Of course, the builders don't say so openly. They put it in a customer friendly way and announce that demand is more for Small Size - Compact 2 BHK Flats. And add to it - but we, the builders, care for the unfortunate few too and offer 1 BHK Flats. For the 3 BHK Flats - the builders' explanation is - those who have bigger budget are also human beings who need houses.

The enlightened property buyers blame the builders. They don't buy builder's argument. They complain that Pune builders collectively dominate the real estate market. To earn high profits, Pune builders conspire together to hike the property prices and squeeze & deceive Pune property buyers. Result is majority of salaried young Punekars are not able to buy homes. If one can, he has no option but to buy a Small Size - Compact 1 BHK or a 2 BHK Flat.

However, those who buy a home at the current property prices, I am sure, have stopped bothering whether Pune builders are exploiting them or not. Because they know for sure that we all are getting poorer.

Size of our home is shrinking. Our working hours are increasing. High cost of living is affecting our standard of living. High running & maintenance cost of our cars and homes are depreciating their worth. Education & medical expenses have become nightmares. We are not earning to live. We are living to earn. We have stopped thinking about prosperity. We are only managing to survive.

We are not only squeezed & deceived but are abused by all. By the government. By the grocery shop owner at the corner. By the petrol pump owner on the way to work. By our bank. By the politician who is difficult to jail. In this situation how can we expect that a builder will not do the same?

We look rich on paper. But in reality we are poor. And getting poorer every day.

Have a look at the floor plans of 2 BHK Flats offered in the most popular projects launched in 2012, and in your comment tell me your views - Are Pune Builders Squeezing & Deceiving Property Buyers? Are we getting poorer?

Evidence Number 1 -
A 2 BHK Flat - 418 Carpet - for Rs. 15,48,000 Agreement Value + Stamp Duty (2.5 %) + Registration Charges (1%) + VAT (1%) + Service Tax (3.9%) + Maintenance Charges:

Xrbia Hinjewadi 2 BHK Flat Type 1-D-1 - 418 Carpet for Rs. 15,48,000 Agreement Value + Stamp Duty (2.5 %) + Registration Charges (1%) + VAT (1%) + Service Tax (3.9%) + Maintenance Charges
Evidence Number 1:

Evidence Number 2 -
A 2 BHK Flat - 855 Carpet - for Rs. 44,85,658 - 47,20,409 Non Garden & Rs. 45,44,345 - 47,79,096 Garden Facing:

2 BHK Flat 855 Carpet for Rs. 44,85,658 - 47,20,409 Non Garden & Rs. 45,44,345 - 47,79,096 Garden Facing in A3, A4 & A5 Buildings - Splendour - Megapolis Smart Homes 3: 2 BHK, 2.5 BHK & 3 BHK Flats at Hinjewadi Phase 3, Pune 411 057
Evidence Number 2

Evidence Number 3 -
A 2 BHK Flat - 1153 Saleable - for Rs. 46 Agreement Value + All Other Charges:

Sahara City Homes Pune 2 BHK Flat - 1153 Saleable for Rs. 46 Agreement Value + All Other Charges
Evidence Number 3

Evidence Number 4 -
A 2 BHK Flat - 1266 Saleable - for Approx Rs. 67 Lakhs Onward:

Monarch Renaissance Wakad 2 BHK Flats 1266 Saleable for Approx Rs. 67 Lakhs Onward
Evidence Number 4

Evidence Number 5 -
A 2 BHK Flat 791 Carpet + 62 Dry Balcony + 167 Sit out + 274 Terrace for Rs. 55 Lakh Onward:

Paranjape Schemes' Forest Trails Bhugaon 2 BHK Flat 791 Carpet + 62 Dry Balcony + 167 Sit out +  274 Terrace for Rs. 55 Lakh Onward
Evidence Number 5

Evidence Number 6 -
A 2 BHK Flat - 1102 to 1192 Saleable - for Rs. 45.82 to 49.28 Lakhs + Service Tax @ 2.575 per cent + VAT @ 1 per cent + Maintenance for 2 years at the rate of Rs. 2.90 per sq.ft. per month on saleable area + Rs. 15,000 Society Formation:

Goldfinger Avenir Wakad 2 BHK Flat - 1102 to 1192 Saleable - for Rs. 45.82 to 49.28 Lakhs + Service Tax @ 2.575 per cent + VAT @ 1 per cent + Maintenance for 2 years at the rate of Rs. 2.90 per sq.ft. per month on saleable area + Rs. 15,000 Society Format
Evidence Number 6

Evidence Number 7 -
A 2 BHK Flat - 825 to 850 Carpet - for Rs. 53 to 55 Lakh:

2 BHK Flat 1037.25 Saleable on Odd Floors - Gera's Park View 1, 1 BHK & 2 BHK Flats at Gera's Emerald City, near EON IT Park, Kharadi, Pune 411014
Evidence Number 7

Evidence Number 8 -
A 2 BHK Flat - 1161 - 1294 Saleable - for Rs. 83 to 96 Lakhs:

Amit Sereno Baner Pune 2 BHK Flat for Rs. 83 to 96 Lakhs
Evidence Number 8

Evidence Number 9 -
A 2 BHK Flat - 540 Carpet + Terrace - for Rs. 18,74,284 + 75,000 Parking +16,800 Advance Maintenance of 24 Months + 38,000 Corpus fund:

2 BHK Flat in Gagan Akanksha Prayagdham - 540 Carpet + Terrace - 6th floor - Rs. 18,74,284 + 75,000 Parking +16,800 Advance Maintenance of 24 Months + 38,000 Corpus fund
Evidence Number 9

Evidence Number 9 -
A 2 BHK Flat - 596 Carpet with Sit-out & Balcony - for Rs. 20.81 Lakhs:

2 BHK Flat, 596 Carpet with Sit-out & Balcony for Rs. 20.81 Lakhs in A2, A3, A5, A7 & A8 at Kanchan Vrundavan Koregaon Mul, near Uruli Kanchan Pune 412 202
Evidence Number 9

Evidence Number 10 -
A 2 BHK Flat - 621 Carpet + 66 Terrace - for Rs. 38 Lakhs:

Pate Developers' West Coast Park Shivane 2 BHK Flat 621 Carpet + 66 Terrace for Rs. 38 Lakhs
Evidence Number 10

Evidence Number 11 -
A 2 BHK Flat - 850 - 862 Saleable - for Rs. 26 - 27 Lakhs (approx):

Collina at Kanhe - Tulip - 2 BHK Flat for Rs. 26 - 27 Lakhs (approx)
Evidence Number 11

Evidence Number 12 -
A 1 BHK Flat - 411 carpet + Dry Balcony + Terrace - for Rs. 27 - 31 Lakhs (Approx) :

1 BHK Flat in O P Wing - DSK Meghmalhar Phase 2, 1 BHK & 2 BHK Flats at DSK Vishwa, Dhayari Gram Panchayat, off Sinhagad Road, Pune 411 041
Evidence Number 12


1) FRIDAY, DECEMBER 28, 2012

Most Fearful Housing Projects of 2012

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Most Popular Projects Launched in 2012

3) Ravi Karandeekar's Most Popular Pune Real Estate Market News Blogs

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  1. Absolutely right.
    Homes are becoming smaller cause builder are taking now Balcony as 100% 10 years ago when my brother bough a house at that time it was just 30% means 1/3rd. This is really cruel. Property prices are increasing but house size are decreasing mainly cause this kind of ridiculous loading strategies.

    1. I agree with you, Vinayak. How about considering property price based on a carpet area. Would you buy 1 sq.ft. carpet at 10,000 per sq.ft.?

  2. Ravi! the fight is to keep the total price of the flat comparable to the competition in that area!! customer gets fooled by the total cost of the flat rather than comparing room sizes, terrace sizes etc!! its duty of the customer to compare the entire flat cost with the flat area excluding terrace too before buying any property!! rate per sq feet given in the cost sheet is just a gimmick to fool the customer!!u must educate your readers on how to buy a property before buying which one!!!

    1. Yes, Kedar. I completely agree with you about the gimmicks and need to educate the buyers. Yes, I will try to dissect the property price.

  3. Complete overhaul is needed in terms of Property Law but also from the mindset of Property buyers too. But changing mindset and come as a unit seems difficult for buyers, specially when right from birth we have been told to "Adjust". Difficult to find good house on rent under budget. Thinking House as a investment and not for purpose of living,. Easy income for 25% population creating hype and contributing in property rise

    1. Yes, I agree with you. Property buyers' mindset contributes a lot.

  4. Builders are selling flats on saleable area, built up area, super built up area. There is not a single builder who is selling on carpet area. Also Balcony they consider as 100%. Above this builders are asking for legal charges (??), development charges (then what is per sq ft rate for), club house charges, parking charges etc. On the top of this, saleable area they add is around 25, 30, 32 % !!! There is no law to monitor and enforce on builders. Customers are paying more money and buying small space to live. If we add all prices and divide it by actual carpet are of the flat then that will tell what price we are paying and what we are getting. The amenities builders are providing are not enough for the society. For 600 flats how many amenities they provide? If we consider average 3 members in one family then for 1800 people are these amenities enough? Is it a joke!!!
    Do not buy unless you get the flat for the rate which you think is good. Don’t run behind the investment bone and make these builders rich!!!

    1. Yes, Abinav! I agree with you - "Do not buy unless you get the flat for the rate which you think is good. Don’t run behind the investment bone and make these builders rich!!!"


  5. Blog on Songbirds-SKYi is pending from diwali 2012.
    YOu being responsible blogger, I was awaiting for ur post.....

    Because of that, I missed the prelaunch offer @ 3800/sq.ft and now the rate is 4450 /sq.ft and no flat of choice is left.......

    Guyz.........pre-launch of reputed builders can help you..........

    RIP my dreams to book in Songbirds

    1. I don't agree with you about pre-launch offer, markus.

      By the way, those wanted to know my opinion about Songbirds, are calling me for last couple of months.

      I am sure you will be fine.

    2. Sirji.........

      got it now....
      will call u soon

  6. never understood the concept of floor rise and why it varies from each builder --Ravi would you have any idea how it started or where it started. Dont remeber seeing floor rise cost a couple of years ago ---

    1. Dear Binoy,

      Technically, floor rise is based on higher cost of construction of the upper floors.

      Practically, floor rise is nothing but greed. An opportunity to exploit the property buyers.

      Rationally, most of the property buyers don't understand that Pune real estate runs on their money - they are the paymasters. And the builder is 'service provider'. Property buyer's servant. Who has no right to dictate the terms to his master.

  7. When the per floor rise comes into effect in any city, it is a sign that its no longer healthy. Think about it, as bunk bed in a room, where lower levels are infested with mosquitoes and cockroaches. You would never get sound sleep down there!

  8. Why doesn't the government intervene to protect the consumers and buyers? Government must promulgate clear guidelines.

    1. Government is nothing but a biggest real estate company. Which only bothers about the lands in it's control. Not the people who occupy it.

    2. Baramatikar have started controlling cities like pune, nashik, and many other cities in maharashtra.

    3. Thanks! Long time no see, Trupti! Looking forward to see you more. Happy new year!

  9. Thanks Ravi for writing this article..it was thoughtful. I am a prospective buyer and such articles and peoples comments help me educate about the nuances of property buying. I liked Kedar's thought and would appreciate if you could dissect the property price to reveal the actual value of the flat. Looking forward to it.

    1. Yes, Sir.
      Besides focusing on the risk & suffering because of the booking a flat, in 2013, I will write about the selling price as well as
      the actual construction cost.
      After all my aim is to help you change the way you buy a home
      - stop booking & start buying a ready possession home.

  10. I agree with your statement "we are not earning to live, we are living to earn".

    I have a friend who is struggling to sell his flat. He bought it for a reasonable price at Wakad and now with the so called realty boom, he wants to sell it but he's not able to find a buyer. Why would anyone buy a resale at the same price when they can get a brand new after waiting for 18 months?

    Overall looks like due to the greed of builders and with so many empty houses...I feel the Pune real estate market would see a rough patch soon.

    Ravi, by the way I have cancelled the booking I made at Vesta (not sure if you recollect, but we met there that evening) :)...does not make any sense to buy match-box flats at such heavy prices...Pune trying to imitate Mumbai :-D

  11. You are right, Prasad. Pune real estate market is already in trouble.
    Of course, for me, not the builders and their projects but property buyers in Pune is the market.

    Means you & your friend are the market. Look at you - you want to invest but don't find the suitable property. Your friend wants to encash his investment - he doesn't find buyer. Doesn't this prove that the Pune real estate market is not doing well?

    Add to you - all those IT professionals who can get 40 - 50 Lakh home loan but don't have enough money to pay own contribution.

    What it shows?

    Pune real estate market is going through a rough patch!

  12. Nice blog!!
    Investment in Real estate only possible thru Self money , but not thru Loan where making the Builders and Banks Rich at same time !!

    and as a IT professional , we dont have be having such huge downpayment, what i have learnt all these days is never ever invest with Loan in hand !!! it burns!!

    If we can accumulate atleast 50 % of the flat cost as downpayment we can still think of investing ! but that seems difficult for an avg IT guy like me (us).

    coming to original post ! its eye-opener , i also suggest everyone to look at the room sizes rather than Carper area/built-up area

  13. Ravi,
    There is something called as "Financial Education" for the common man...
    Until we have it taught it high scool or college we will not learn to make right financial decesion in life.
    I know 100's of my friend who earn like 1 lac per month but fail to understand the basic consepts like "Compound annual growth rate", "Compounding"
    What we are today into real estate mess is an effect of such poor knowledge.
    When we calculate the return on real estate investment we conviently forgot to ignore the cost like property tax, soceity charges, maintainance cost etc.

    When a friend called me saying “I am planning to buy a house for Rs. 60 lakhs, should I buy it?”. I asked him what was the cost of the house. He said Rs. 60 L, I just told you. I asked him again. He grew silent. Then I said “If the cost of the house is equal to the amounts paid, then the cost is EMI * No. of months. In this case it was working out to 75,000 (emi) * 240 months = Rs. 180 lakhs, not 60 lakhs
    This calculation of course ignores the time value of money – but given maintenance costs, painting…and other costs, real estate cannot give great returns.

    Another point is rental yield. How much rental yield one is going to get in the current market for a flat costing 50-60 lacs ?

    Rs. 12000 to 13000 per month * 12 = Rs. 1.44 to Rs. 1.6 lacs
    Rental yield is less than 3% of the amount invested(which is 50-60 lacs). Add to it the property tax, maintainance cost after 3 to 4 years. When the tenant changes property might left empty for 1 month or so...sometimes more than that. So Effective yield decreases to 2.5% per annum of the cost of flat

    but most of the people ignore this cost and make statements about their return...

    YES, property apprecites over the time but then other instruments too...

    We need to start discovering other instruments like mutual funds, quality stocks, bonds

    1. Thanks! Amolw, yours is the best comment of 2012.

    2. I agree that flat cost is out of reach of common man.

      I don't agree with the calculation for rent ! This calculation is based on short term view. If you see long term, earlier investing is always better, of-course not with taking hefty loans.

      I give you one example - 7 years ago, flats in Magarpatta city were costing around 13-15 lacks. At that time rent for 2bhk was around 7-8K. so if you calculate annual interest at that time ~ 8*12=96K.
      But now rent is around 16k for unfurnished 2bhk ! so annual rent is ~ 16*12=1.92 lacks. Plus flat value is around 65 lacks. Also rent increases by 10-12% per anum. So in long term buyer is in profit, and that's the reason "investors" are putting heavily in this sector. If there were no profits, inverters not surely fools to put their money in ! :)

    3. @Parimal : I respectfully disagree, It also depends when you entered Magarpatta

      If i buy a 2 BHK for 65 lakhs and as most mere mortals do, i pay 20 % as down payment and take the rest on loan, i would be shelling out close to 45 K a month as EMI. Even if i give the house out for rent after fully furnishing it, i would be able to recover a max of 20 K per month. Which means 25 K from my pocket + the rent i shell out to live in another house). It would take a considerable amount of time for the rent to reach 40 K so i begin to breakeven.

    4. Correct ! Its the time when we purchase it. I not saying one can purchase it now ... But should be think upon long term view. Probably when people were buying Magarpatta at cheaper rate, other people think why to go so far ...

  14. Ravi you seemed to be hell bound to keep punekars homeless... just mention some good properties in pune as well for investment...

  15. Hi Ravi

    I would like to equate this to the reason why the "quarter" plate chicken curry was introduced by all the food joints when a half plate was too expensive and a full plate was a "bad idea". A 2 BHK should be at least 1200 sqft of carpet area. They are now doing if for 1/6 of that space.

    I was recently house hunting for fun (and some free ice cream) when the sales woman told me they sell the path leading from the lift to the door as the "angan" !!!!

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