Saturday, March 28, 2009

Homebuying Advisory For Kerala - 2009-10 - Seasonal Magazine

With the Kerala real estate market soaked in uncertainties, here are the only safe options for buying a home during 2009-10:
Fully ready to occupy homes make some sense. That is, if you get it for bargain prices. Not at fancy rates like Rs. 2500 per sq ft. Yes, that is fancy these days. Especially, if it is from a local, Kerala-only builder. Rs. 1000 per sq ft for the 1 or 2 cents of undivided share in the land, and another 1000 per sq ft for the construction. Surprised? Yes, that is what it really costs them, including decent profit. Need you pay for their overheads? If you have 10 or 20 lakhs to spare for their overheads and ‘brand’, donate to them. But remember, it is no BMW or Merc you are getting. Our advice is to ask for Rs. 1800. It is a bargain. Let them take it or leave it.
Nationally branded homes still make some sense. Because, even if you want to go for a distress sale, the buying community will be wider. The design, amenities, and build quality are also much higher. We don’t know of any local, Kerala-only builder who measure up to this level. According to the location, a good price for a nationally branded home can range from Rs. 2000 to Rs. 4000 per sq ft in Kerala. When buying above that, you should be sure that you really need it. Like, for owning a piece of Marine Drive or such luxe desires. Try for projects that are racing to completion, say, 6 months or so, from now.
These units make immense sense, even if they are ongoing projects. But make sure that they are big enough for your current requirements, and, if it is a villa, extensible enough for your future requirements, say, five or ten years down the lane. Also, ensure that the lower prices are achieved by lower per-sq-ft rates and not lower sq-fts. Good prices to look for are in the Rs. 1250 to Rs. 1500 range. That way, you can own a 1000 sq ft apartment for Rs. 12.5 to Rs. 15 lakhs. If it is a 1000 sq ft villa, look for prices between Rs. 1900 to Rs. 2200 per sq ft for a 3 to 5 cents unit. It will come up to Rs. 19 to Rs. 22 lakhs. Villas also have the advantage of better completion times, as there is no need for a superstructure.
Home prices across
India have shrunk by 30%. Banks are pressurizing builders to cut costs further to realistic levels. But if these lower rates are not reflected in your locality, a price cartel might be working. They come in different forms, industry associations or forums being one. The strategy is simple. You want a home in a particular suburb. You go to Builder A; you are offered Rs. 3000 per sq ft. Pretty sure that it doesn’t cost that much for a home there, you go to Builder B, but is again met with Rs. 3000 per sq ft. You may continue visiting C, D, or up to Z, but the response will be the same; Rs. 3000 per sq ft. Finally, you are convinced that the running rate at your favourite suburb is Rs. 3000. Such cartels often have non-competitive clauses in their charters, which will include mechanisms to maintain prices at exorbitantly high levels. Thankfully, there are still many honest high-volume developers who are not part of any such cartels. Always, opt for them first.
With the organized market in uncertainty, do-it-yourself homes are making a strong comeback in Kerala. Even in a dense district like Ernakulam, you can still get pristine land for Rs. 1 lakh per cent. And that too within a 30 minutes to 45 minutes travelling distance from the city centre. With building material costs down, even posh construction will cost only Rs. 1000 per sq ft. So, for a 1000 sq ft independent villa on 5 cents of land, all it costs is Rs. 15 lakhs. But a do-it-yourself home is not for the faint-hearted. Nor does it require much courage. Some hard work, and that is it. Your home, according to your dreams, in your favourite location. You can avail loan to buy property, take another loan later to build, or build it in a staggered way on your own funds. Another definite plus is the very low pollution in the affordable suburbs. Savings will also come on hospital bills. If you can afford 10 cents to plant a couple of fruit trees, that is what we call luxury. Not shared spas.
If you don’t have an ancestral home to live now, but still feel uncertain to commit to a home loan or home, we don’t blame you. Continuing on rent still makes immense sense. When the interest rates are high – as it is now – home loan EMIs don’t make much sense. An FD of Rs. 25 lakhs will fetch Rs. 20,000 per month for the rest of your life, in this interest regime. Building such a nest egg is also a viable option during these times. But be on the lookout always for that tipping point when home EMIs make better sense than monthly rent payments. In any case, investing in a small piece of land for future use is a wise decision. Homes – branded or not - never appreciate like vacant land.

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