Own Apartment / Flat - in Buy and Build Strategy
Background: Trends in owning a residential unit, in timeline -
Before year 2000 - land rates are moderate & construction is manageable - Construct Individual House
Year 2000 - 2008 - land rates started to increase - purchase apartment flat (or) be part of Group House by an Individual
After 2008, construction became tough and need great deal of effort - either because of rules/permissions (or) getting quality work done from workers (or) lot of interior models to design. Individuals are mostly owning a residential unit by purchasing a flat in apartment or group house built by a builder.
Before year 2000 - land rates are moderate & construction is manageable - Construct Individual House
Year 2000 - 2008 - land rates started to increase - purchase apartment flat (or) be part of Group House by an Individual
After 2008, construction became tough and need great deal of effort - either because of rules/permissions (or) getting quality work done from workers (or) lot of interior models to design. Individuals are mostly owning a residential unit by purchasing a flat in apartment or group house built by a builder.
Introduction: Apartment construction involves lot of investment, to purchase the land and construct the building. A builder has to invest lot of money, for which he has to service the finance interests. The bigger the venture - the more tenure, the more interest costs. In addition, builder has to pay VAT, service and income tax for his construction company / firm. At the end of the day, all these costs will be passed onto the individuals.
In new strategy BUY AND BUILD, suggested by us, - a group of individuals (4-5 people - either colleagues, friends, relatives of like-minded people) gather and own a flat one apartment complex by purchasing the land.
In new strategy BUY AND BUILD, suggested by us, - a group of individuals (4-5 people - either colleagues, friends, relatives of like-minded people) gather and own a flat one apartment complex by purchasing the land.
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Factors
How does it operate? ----- ----- ----- What is the sale price to individual? ----- ----- ----- |
Own Flat - by purchasing flat from builder
a. Builder purchases land from land owner
b. Apply for plan with multiple units / flats c. Invests money for construction of apartment d. Sell apartment flats to individuals ----- ----- ----- ----- ----- ----- Sale Price = Land cost allocated to individual (+) Plans and Construction cost of apartment (+) Finance Interest costs - for the capital amount to land purchase and construction (+) Risk premium - for flats which will be sold late (+) Various taxes - VAT, service and income tax (+) Profit expected by the builder ----- ----- ----- ----- ----- ----- |
Own Flat - in buy and build strategy
a. Gather 4-5 people of your circle
b. Purchase land from land owner c. Prepare plan with ONE FLAT per floor d. Give construction contract to builder ----- ----- ----- ----- ----- ----- Sale Price = Land cost allocated to individual (+) Plans and Construction cost of apartment (+) Low interest cost for home loans from bank (+) Only service tax (+) Marginal work profit for the contract work ----- ----- ----- ----- ----- ----- |
Illustrative calculation on plot-1:
Let us consider, a plot of 380 sq.yds in Kanuru area came up for sale @ Rs.36,000/- per sq.yd. rate.
Land purchase cost - 380 * 36,000/- = 1.37 Cr, Registration charges = 4 Lakh,
Apply for "stilt+G+4" floors plan with APCRDA by purchasing TDR bonds.
Plan costs - 5 Lakh, Bond purchase costs - 15 Lakh
ONE FLAT per floor, 5-floors, with plinth area of flat around 1475sft - 4BHK flat
Construction cost of apartment with "stilt+G+4" floors will be 1.5 Cr.
Total cost of the building to the individuals = 1.37 + 0.04 + 0.05 + 0.15 + 1.50 = 3.11 Cr
Cost of the flat to individual = 62 Lakh per flat, for 4BHK flat with 1475 plinth area and 1900 sft of total area.
If the same is purchased from a builder in Kanuru, its 1900 sft @ 4000/- per sft = 76 Lakh minimum......
Let us consider, a plot of 380 sq.yds in Kanuru area came up for sale @ Rs.36,000/- per sq.yd. rate.
Land purchase cost - 380 * 36,000/- = 1.37 Cr, Registration charges = 4 Lakh,
Apply for "stilt+G+4" floors plan with APCRDA by purchasing TDR bonds.
Plan costs - 5 Lakh, Bond purchase costs - 15 Lakh
ONE FLAT per floor, 5-floors, with plinth area of flat around 1475sft - 4BHK flat
Construction cost of apartment with "stilt+G+4" floors will be 1.5 Cr.
Total cost of the building to the individuals = 1.37 + 0.04 + 0.05 + 0.15 + 1.50 = 3.11 Cr
Cost of the flat to individual = 62 Lakh per flat, for 4BHK flat with 1475 plinth area and 1900 sft of total area.
If the same is purchased from a builder in Kanuru, its 1900 sft @ 4000/- per sft = 76 Lakh minimum......
Advantages with BUY AND BUILD strategy -
- Final Price of the Unit - The first and biggest advantage is the LEAST price for the flat. As part of project viability, builder adds lot of things in his calculations. Now all these are avoided and saved by the individuals.
- Customization - As individuals are not buying under-construction flat, they can customize the flat orientation and construction specifications as per their requirement before start of the apartment.
- Like-minded people - In apartments, you will find different mindsets, religions people as your neighbors. In this case, group of 4-5 like-minded people are gathered and share the building.
- Apartment Maintenance - Any decision (or) arrangements related to apartment maintenance in future will be easy. You will not find too many arguments or discussions.
Conclusion: In our opinion - its a WIN-WIN situation for both parties, i.e., builders and individuals.
From builder point of view - as there is no investment and sale concept, its zero risk business.
From Individual point of view - least price, customized floor plan and specifications.
From builder point of view - as there is no investment and sale concept, its zero risk business.
From Individual point of view - least price, customized floor plan and specifications.