Saturday, November 26, 2016

How to survive the sinking Pune real estate market

1) Property Rate Protection,
2) Third Party Construction Quality Audit Reports
3) Compensation for Delayed Possession
are the 'life jackets' which may help the flat buyers
to survive the sinking ship of Pune real estate market!

After the demonetisation of 500 & 1,000 notes, most of the flat buyers who have already registered their Agreement to Sale have panicked.

"Should I cancel the agreement & jump off this sinking ship?" - some asked me.

"Am I going to go down with the sinking Pune real estate market?" - some are worried.

They have panicked because they firmly believe that demonetisation has completely disrupted the Pune real estate market. New flat buyers are going to postpone booking flats & wait for the rates to fall substantially. Slow bookings will hamper the progress of construction and possession would be delayed. Because of the delayed possession those who have booked will suffer huge financial losses.

Falling property rates will certainly reduce the builder's profit margins. To recover the losses the builders will cut corners and will offer inferior quality construction. Result is the flat buyers will not get value for their money and will suffer irrecoverable financial losses.

"Why are you thinking so negatively? Why are you ignoring the brighter side? Builders claim that because of the demonetisation not only the property rates but home loan interest rates are also going to go down and real estate is going get a big boost!" - I asked.

"My agreement is already signed & registered at a much higher rate - reduced property rates is nothing but a loss for me - banks & builders are famous for ignoring old buyers - they only care for the new bookings & the new borrowers" - some flat buyers said.

"Big boost - means big problems - these notorious builders divert money and launch new projects - means assured delayed possession & inferior quality construction" - some flat buyers said.

"Reducing property rates, delayed flat possession & inferior construction quality were serious concerns for a long time - even when you booked - demonetisation hasn't created these issues - right?" - I asked.

"Right" - most of the flat buyers agreed.

I fail to understand why did these flat buyers take the risk of booking a flat!

Unaffordable property rates was not the only reason why flat buyers were not booking.

Poor construction quality, delayed possession, unfair & exploitative terms of transactions in the flat agreement - were equally responsible for discouraging the flat buyer to book.

By publishing circular of director general of police even Maharashtra Government had accepted that builders are committing crimes against the flat buyers.

By passing RERA the central government of India also announced the need to end builders' criminal business practices.

Point is - for the last 3 years - booking a flat was as dangerous as drinking & driving at high speed on the wrong side of Mumbai Pune Expressway.

Glaciers of property price reduction, inferior construction quality & delayed possession had already damaged the ship of Pune real estate market. These guys boarded this sinking ship without wearing life jackets. And now, after the demonetisation they have panicked and trying to jump off the ship. How stupid!

Guys, come on. Real estate development is a 'collective investment scheme'.

A Collective Investment Scheme (CIS) is an investment scheme wherein several individuals come together to pool their money for investing in a particular asset(s) and for sharing the returns arising from that investment as per the agreement reached between them prior to pooling in the money.

When you book a flat - you become one of the owners of the project.

When you book a flat - you become one of the partners of the development.

When you book a flat - you become one of the stakeholders in the venture.

As the owner - partner - stakeholder - you have all the rights to protect yourself.

To protect yourself order your builder to install new policies about - 1) Property Rate Protection 2) Third Party Construction Quality Audit Reports 3) Compensation for Delayed Possession.

1) Property Rate Protection - Till the completion of construction & obtaining 'completion & occupation certificate' - if the property prices are reduced - the same reduced property rates should be applicable to you - even if your agreement is registered. You should get the credit note for the reduced price which you can redeem at the time of possession.

Pethkar Projects' Siyona at Punawale is offering Property Rate Protection Policy from the day project was launched in 2014.

Rohan Builders was the first builder in Pune who offered Price Protection Scheme in 2009.

2) Third Party Construction Quality Audit - Durocrete Construction Quality Rating Agency Pvt. Ltd. (CQRA) is offering construction quality assurance services since 2004. CQRA advises, trains, monitors, inspects, audits construction at every stage. Home Inspect - prepossession inspection of every flat covers over '75 parameters' including electrical, plumbing, waterproofing etc.

Order your builder to appoint CQRA or any other third party construction quality auditor.

3) Compensation for Delayed Possession - When possession is delayed every month you lose - 1) Pre EMI - which is nearly an EMI of your loan amount + 2) Monthly Rent 3) You suffer social insult & mental agony. Obviously, compensation for delayed possession must cover your all losses. It means that 9% interest or a rent - which some scumbags are offering - is certainly not enough.

Order your builder to rewrite the compensation clause in the agreement. If it is not there - add it.

The Problem of builders in Pune is - they misunderstand their role & responsibilities.

"I am the promoter & developer - means the owner of this project & I will run it as I wish" is the feudalistic delusion of these scumbags. Exactly like politicians who believe that they own this country.

Obviously, initially, you will face resistance from your builder.

So, first you have tell these scumbags that you - the flat buyers - are the paymasters - owners of this collective investment scheme. Your builder is just a facilitator - a coordinator of services. If there is a deficiency in the services offered - he will be penalized.

And do your best to teach your dumbhead builder how these policies will also help him to survive the sinking Pune real estate market!

What say you?

Can you survive the sinking ship of Pune real estate market with the help of 1) Property Rate Protection, 2) Third Party Construction Quality Audit Reports 3) Compensation for Delayed Possession?

Would you like to suggest something more?

Please, share your ideas in the comments.

Related Story:

1) Pune property rates will keep on going down

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  1. 1) Property Rate Protection -
    - When prices go up, do buyers pay builders more ? Rather they are happy that see how they bought something whose price has increased. So buyers should be ready to suffer loss as well, aren't buyers of under-construction flat partners of the builder as you say Ravi ? Hence, putting this in the clause will be more of a gimmick & doubt how many builders will agree to it.
    Those putting such clauses know somewhere at back of their mind that prices will crash. So why not wait & buy at much lower rates than get into all this stuff ?

    2) Third Party Construction Quality Audit Reports -
    - Yes, this is a must & should be part of agreement. But as usual, this too will be avoided. Better solution is to shortlist ready for possession flat & then get the inspection done by yourself if builder hasn't done it. Also ask builder why he hasn't got it done.

    3) Compensation for Delayed Possession?
    - Force Majeure clause is always there in agreement which means builders gets away by saying shortage of raw material, labour problems, issues with sanctions (even when this is mostly due to builder discrepancies) etc. & hence no compensation for delays even if project is delayed by years together.
    So, again it's better to buy ready possession flat with all approvals.
    Hoarders too are running hanky-panky. So lot of resale options will also be opening up at lower prices.
    Right now, it's best to sit back & watch the fun.

    1. 1) When prices go up, do buyers pay builders more ? - When the prices go up, the old flat buyers should get some share of increased price as a dividend on their investment. Read more at -

      Every Property Buyer Must Get Dividend:

      "Appreciation" is not enough. You must get more than that. Every property buyer must get dividend.

      Appreciation means an increase in value of a property.
      You can encash appreciation only when you sell that property.
      It means that, you won't earn anything from your investment if you decide to use that property as your permanent residence.
      This is unfair.
      You must get financial reward from your investment.
      Because property rates go up - property appreciates - only because of you.
      We all know that your bookings empower the builder to hike the property rates.
      That's why you should get the reward for your contribution in hiking the property rates and earning profits.
      You should get a piece of increased property price.
      Builder must share a part of his increased profit with you.
      You must get dividend.
      Please, visit -

    2. 2) Yes, this is a must & should be part of agreement. But as usual, this too will be avoided. - Don't underestimate the power of the flat buyers. Today's buyers have the power to change the way this business is done.

    3. 3) hence no compensation for delays even if project is delayed by years together.- This only shows that you are not aware how assertive flat buyers are monitoring the progress of construction. I am a member of many Whatsapp Group of the flat buyers. From the day one -they keep watch on the progress of construction & whenever there is some issue collectively question the builder.

    4. 4) better to buy ready possession flat - yes, it is less risky. But in the democratic process - freedom to choose - different options to achieve the same goal - is the fundamental right.

    5. 5) Right now, it's best to sit back & watch the fun. - Consumers can afford to wait. Creators prefer to innovate. Find solutions. Flat buyers are not consumers. They are creators. By being active & assertive flat buyers can improve the quality of service & property.

    6. "When the prices go up, the old flat buyers should get some share of increased price as a dividend on their investment."
      - This is possible in areas like stocks where everyone is investor without physical asset, not real estate. And for this to happen, then buyers should pay builders more amount to compensate the loss in profit of builder when prices fall like they are doing now just the way investors loose money in stock market when share prices fall. The right is only over asset, not monetory.
      If someone buys gold for 25k & price goes to 30k, do they ask for 2.5k from the jeweller as dividend ?
      Btw, some builders will like this post for a change, LoL !

      "You must get financial reward from your investment."
      - Buying flat for self use is not investment but expense.
      Infact, many yedas end up paying more money as interest to banks than the total cost of flat itself ! A buyer can get good financial reward by taking zero home loan or very less home loan for very less tenure.

      "Because property rates go up - property appreciates - only because of you."
      - Agree.

      "how assertive flat buyers are monitoring the progress of construction. -they keep watch on the progress of construction & whenever there is some issue collectively question the builder."
      - This is indeed a good thing being done by buyers. But if construction is slowed down, halted & they ask builder to which builder gives excuses, what can buyers do ? Dharna, aandolan, bhukh hadtal !!
      Bhujbal, Kumar/KUL flat buyers were doing what you mentioned, but what is end result ? Project stuck, builders bankrupt & over & above this, KUL filed case of defamation against buyers & even you !

      What I say above is not from technical aspect but from legal one. And when it comes to legal, builders have 100 loopholes to exploit like Force Majeure clause. Infact, this has already started in Pune. Lashkar-e-CREDAI, Pune has issued press statement that flat possessions will be delayed due to labor issues, though actual reason is they are bankrupt.

      Pune building projects hit by labour, cash crunch -

      Sahakarnagar resident Asha Patil said that their builder had earlier promised to hand over the flat by December, at least to carry out interior works. "However, now we are being told that work has stopped because of labourer shortage. This means that full possession will also be delayed. We are living on rent and have an agreement with the owner till February. We now have to renew the agreement and continue to pay rent," she said.

      This is why ready possession flat is better. Also, full IT benefit is received unlike in under-construction projects which get delayed.

      " Flat buyers are not consumers. They are creators."
      - When builders are bankrupt, don't have a dime respect to MOFA like laws, how will buyer activism help ?
      Had this been so simple, buyers would have been very happy with builders like Bujbal, Mittal, DSK, Marvel, KUL etc.

      What you say is theoritically correct but not practical. When simple option of ready possession flats is available, why complicate things by buying under-construction flat & create self-headache, financial loss ?

      One major chunk of Pune flat buyers- IT will be further under pressure.
      Fearing tighter US visa regime, Indian IT firms rush to hire, acquire-

      Btw, even in tier 3 cities like Dehradun, property prices have started to crash. These are 20% down from Diwali & falling further.
      Across the state, lull in real estate sector, property prices fall -

    7. As you mentioned somewhere, EMI must not exceed 25-30% of monthly income, however reality is exactly opposite. People are shelling out 60-65% monthly income towards EMIs. But naturally that might be bringing down loan tenure to 10 yrs which results into lesser interest.

      I afraid buyers would surrender flats to banks as margin call & even banks may refuse to accept. Those who opted for floating interest may get some relief but what about fixed rate loans?

    8. Problem especially incase of yedas is 65% or more amount in form of EMI is for tenure of 20 years or even more ! These are the most risk prone buyers. And then there are even bigger yedas who take joint loan towards same flat. So 2 chaps become slave of banks so that builder can enjoy by selling third class stuff at first class prices. But then why bother ? This is the price one pays for being yeda. And defaulting on loans means hopeless CIBIL ratings apart from civil case in courts. This means further loans in future will be cut off.

      "Those who opted for floating interest may get some relief but what about fixed rate loans?"
      - Forget fixed or floating when the cost of your purchase falls by atleast 50-60% !!
      You buy 1 Cr flat with 80L loan. Now if the same flat is available for 30-40L, what's the use even if interest rate is made 1% ? Don't know what's so great about buying a inflated priced flat with lot of rented money ?

      Things are not that easy like Lashkar-e-CREDAI wants to show it as. Even their own comrades in Pune are unable to pay the salaries to their own employees, let alone contractors. And this Lashkar-e-CREDAI tells buyers what is a good financial decision, LoL.

      Btw, after real estate, as expected, gold is also being hit hard. All those who put black money into gold, will also end up in mess shortly. And yes, this is just the beginning. Lot of fun in coming days. Black money chaps, real estate hoarders, builders, jewelers etc. will be hammered left, right & centre in coming time. Add to it change in US, UK Visa norms alongwith automation/AI, last hope of builders, the IT buyers, too will find it extremely hard to buy flat at current prices.

      Gold Prices Extend Slump, Fall To 6-Month Low On Demonetisation -

      Now Gold above 500 Gram owned by married women can be seized: Arun Jaitley -

  2. Rate Protection Policy : After the note-Bandi , this rate protection policy wont give you the complete satisfaction , Its gives you limited good feeling as my neighbor wont get cheaper than me... but in your neighbor projects ? :-D

  3. Finally, this one is authorized by IT company itself.