Buying an apartment in any of the major cities in the country is an investment most people would like to make. Each one of us may wish to strike the best deal when we buy some space in the concrete jungles, but more often than not we have to give up the place we like just because the price quoted does not match our pockets.
Most people tend to believe in the fact that a price-quality relationship does exist higher the price, more would be the facilities provided by the builder. According to Santosh Miskin, an executive with a reputed construction company, some builders maintain a price differential of nearly 30 per cent over that of the others in the vicinity as a matter of policy.
This policy has been popularised ever since the concept of building-specific price has come in vogue. Earlier the rates were decided in relation to the area where the building was located; but now better located and better quality buildings in the same locality fetch a substantial premium. There was a difference of 28.7 per cent in the per square feet (psf) price in Worli, Mumbai, in February this year. A similar trend was also noted in various other localities.
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But apart from the locality there are a lot of other factors that account for some properties being more expensive than others. A look at some of these factors will not only help in identifying the affordable property but will also indicate what you as a buyer should expect when you are asked to pay a premium.
Who is the builder?
The construction house has a lot to do with the price of the apartment. There are a few small and medium sized builders who cater to the middle and lower middle classes. They promise value for money even though most of the projects are not praiseworthy. For example, occupants of City and Industrial Development Corporation of India (CIDCO) complain of the poor quality of the flats they occupy. Rama Sen, who owns a flat in Vashi says, I am always tense that my six year old son will hurt his head when he stands up on the bed. Low ceilings and poor ventilation gives a match-box look to many of these flats.
Looking for something better with the stamp of quality? You can approach the quasi-organised sector of builders who have created an aura with their name. In Mumbai, builders like Kalpatru, Hiranandani and Lokhandwala would come under this category. As a rule these companies prefer to be tight-lipped about their policy of pricing but purchasing a flat or house from them would mean shelling out a premium anywhere in the range of 25-30 per cent. With such builders, it is the reputation of their firm that plays a major role in determining the price tag, apart from other equally relevant factors such as a strong foundation, good exteriors and interiors, and other facilities provided.
Recently, another segment of active players in the construction business has emerged. These are corporation houses which already possess large industrial estates and have diversified into construction simply for the profits that can be made by converting their land into residential or semi-industrial estates. Most of these builders concentrate on luxury apartments and offer direct competition to the quasi-organised sector. Godrej, Videocon are the active players of this segment.
Role of the government
The trend of real estate prices is also governed to a large extent by the policy decisions of the government. If the government shows a green signal to NRI investment, you may suddenly find the prices in prime targetted locations and their immediate vicinities spiralling. Changes in stamp-duties or changes in the number of floor per square inch (FSI) also have an influence on the price.
Similarly, government directives for moving key industries in an area could hike up the price. This is exemplified by the appreciation of property rates in Navi Mumbai, following the move of iron and steel markets from South Mumbai to Navi Mumbai. Alternately, the amendment of the Rent Control Bill would possibly swing the prices southwards.
One should keep track of such extraneous changes since the builder may state one of the above mentioned factors to escalate the price he had quoted earlier.
Other factors
Of course, there are some common price escalating factors which all builders cash on, such as proximity to the sea-shore in Mumbai, or green surroundings. An apartment facing the sea will cost you more than that overlooking a slum, even if they happen to be on the same floor of the same building.
If you want a prestigious address with famous personalities as neighbours, you have to pay the price for the same. So, while a flat in Jeevan Asha on Peddar road costs Rs 11,666 psf, a flat in Darya Mahal on Napean Sea road costs Rs 14,623 psf. Both the buildings are old but the latter has more famous personalities residing there and is a more upmarket address.
The presence of neighbouring slums, garbage dumps, and factories depress prices. However, a slum rehabilitation programme that cleans up the area reduces the differentials once again.
Most builders believe in setting up full-fledged complexes rather than erecting a lone structure. The presence of a shopping complex, bus stops, educational institutions, and restaurants can further escalate prices. Similarly, presence of a railway station or a post-office at a walking distance would be in favour of the builder who can charge a premium for the same.
If you are looking at some of the new buildings, you will find the builders paying more attention to the security and fire safety devices. Equipping the building with security systems, burglar alarms, heat detectors and fire escapes also hikes up the price of a building, but it does ensure safety from such hazards.
There is another interesting factor which cannot be overlooked. Presence of a place of worship is also a price determining factor. In Sion, a suburb in Mumbai, the going rate is Rs 4,000 psf. However, in the Jain Society situated there, a premium of Rs 1,000 psf has to be paid because of the presence of the Jain temple.
The mode of payment also affects the amount to be paid. Builders expecting entire payment via cheque tend to charge more than those who accept part payment in cash.
All these impinging factors need to be factored in the final price as you strike the deal for your dream apartmansion. Happy hunting.