04 January,2011 10:43 AM IST | | Sudeshna Chowdhury
With real estate prices in the city escalating like crazy, lakhs is no longer the new lingo but it is all about crores these days. Buyers feel they are being priced out of the city and pushed northwards towards the outer edge
Last year was special for the Vyas family with them finally being able to buy a one-bedroom flat in Malad. The couple were relieved to be the proud owners of what they now call home, with its tastefully done up living room and bedroom. They endured a four-year ordeal to find the right place.
u00a0
More importantly though, they may be the last of the prospective buyers, still able to buy properties in Mumbai in lakhs.
Rajiv and Reena Dogra with their baby daughter
"I bought this apartment just eight months ago. The apartment is 700 sq.ft but I had to shell out almost my entire savings to buy this place," says Rachit Vyas.u00a0
They paid Rs 70 lakh for the 700 sq.ft one-bedroom flat. That too will become a pipe dream for many middle-class people. Realtors say soaring property prices mean the tiniest of places may cost over one crore rupees in a few years' time.
Rajesh Buhecha, a Borivali resident who bought a one-bedroom flat recently in Borivali, warned, "Prices will soar beyond, our reach. After a few years, it will be impossible to find anything in less than a crore in Mumbai." Already, many who want to buy a dream home in Mumbai say they have been priced out of the city.
u00a0
A senior media professional, who worked half his life abroad and earned in dollars says he still doesn't have enough to buy a two-bedroom flat of his choice in places such as Bandra (W), Juhu or South Mumbai.
He cannot move beyond Juhu. So, he has no choice but to keep staying in rented apartments. Even couples with two salaries are finding it hard to take a loan and buy property, which is within their budget.
Consequently, many end up buying in far-flung suburbs, such as Mira Road and Bhayandar or maybe beyond that. Or there are those who scale down their needs and settle for smaller places.
Take the example of the Buhecha family of seven. They needed a two-bedroom flat in Borivali but within their budget there was no property available in the area.
They had to either move further north to Mira Road or Bhayandar or buy a one-bed apartment rather than a 2BHK flat. Rajesh Buhecha (35) says he nearly shifted to Mira Road.
"I used to stay in a rented place at Borivali. Since my office is also in Borivali, I wanted to stay in this area. But prices have gone up so high that I had once thought of shifting towards Mira Road, Bhayandar," he says.
"We are a family of seven including myself, my wife, three kids and my parents. So I wanted a 2BHK in Borivali.
u00a0
But right now I have dropped the idea of staying in a 2BHK. With 45 lakhs, I had to settle for a 1BHK in Borivali."u00a0
Shridhar Jagannathan and Shweta Iyer, a young couple getting married next year, are looking to buy a place of their own.
The Mulund residents are bent on settling in Mulund only, close to both their parents. "It's been tough," says Shridhar who works with Red FM. "We want to move into our new home right after marriage."
Shridhar and Shweta have been looking for a place for more than two months. "The ones we are getting are for 45-47 lakh, above 400 sq.ft. Charging Rs 10,000/sq ft in a place like Mulund is insane," says he.
They are not looking for a place beyond Mulund. Travel is an issue. He travels to Lower Parel everyday while Shweta goes to Prabhadevi.
"Anywhere beyond Mulund is a bit of a stretch. The travel will be just too much. Anything above 500 sq.ft is in between 50-60 lakh.
u00a0
It's the brokers who are pushing the prices up. Bandra rates are Rs15,000/sq.ft, that's okay, but Mulund rates around Rs10,000/sq.ft?" Shridhar and Shweta are now looking for a joint loan to buy their dream home.
REASONS
Experts say there are multiple factors for the non-stop escalation of property prices in Mumbai.
One big reason according to them, is the acute space crunch. The city is already bursting at the seams, with hardly any open, breathing space in sight.
Bereft of land for construction, developers and builders are buying old, dilapidated buildings and knocking them down to construct multi-storey apartment buildings.
High-rise buildings, which are mushrooming all across the city, are encroaching upon almost any piece of land. "Even if there is place for just four cars to park, the parking space is encroached upon and some building is constructed in that area," says a disappointed Vyas.
Sangeet Hemant Kumar, Chief Executive Officer (CEO) of 1st Mumbai Properties, a real estate firm blames the investors, who he believes are responsible for escalating what he calls artificial prices.
"Reason for the hike is that unlike any other commodity, real estate markets do not operate at the basic level of supply and demand. The problem is also with investors.
They buy a property at a certain rate during the construction of a building and then when the finished product is ready the prices shoot up by almost 200 per cent, which ideally should not be the case.
u00a0
So the price of the property is absolutely unrealistic," he ends.
Ramdas Mangodi, a property and investment consultant, says material costs and government taxes are sending property prices up.
He says, "The material cost is going up. The government charges tax on almost anything and everything." According to a high profile property dealer black money too is playing its part in increasing the property prices.
u00a0
He, on condition of anonymity, said, "Tax exemption is the reason why we demand payment through cash. There is no proper account, which shows the actual price of the apartment."
u00a0
CONTROL PRICES
Industry experts believe that there should be some official regulatory body, which should keep a check on real estate prices.
"There is a huge artificial price, which has been created," says Kumar. Some believe self-regulation by the industry could also help put a brake on soaring property prices.
CHALLENGE
One of the most expensive parts of the city is Bandra (W), where the going price is Rs 30,000-Rs 40,000/sq.ft. Even a small 1BHK apartment in this area would cost you more than a crore.
Luxury apartments in South Mumbai are sold at Rs 50,000-Rs 60,000/sq.ft. If your budget is in lakhs then Mira Road and Bhayandar are the best options. According to real estate agents, housing for the lower income group is a challenge.
However, there is a demand for large size luxurious apartments. "1BHK apartments are becoming fewer. Builders are now concentrating on 2BHK and 3BHK apartments in posh localities. And there are enough people who can afford to pay exorbitant amounts to buy them.
Also, we have noticed that very few people are likely to move to far flung places like Mira Road or Bhayandar," explains Kumar. But he is quick to add that, considering the present scenario, one can still get a 2BHK in far-flung places within Rs 75-80 lakh.
Far flung Navi Mumbai may not be one of the best options, but several couples have to settle for that.
Navi Mumbai resident Rajiv Dogra says, "We've been mulling over buying a new house for the last two years. But we've been actively looking for the last six months."u00a0
Rajiv (35) and Reena Dogra (30) have been married for about two years and have welcomed a baby girl into their household.
"Our budget is about Rs 25 lakh and the place we've found to fit into our budget is in Sector-21 of Kharghar." Rajiv, who grew up in CBD-Belapur says that Navi Mumbai is home and he did not want to shift towards Mumbai or any other area.
u00a0"We've been looking for quite a while and are still zeroing in on a place. Also, I've heard rumours of price correction. So we are waiting for the rates to settle and then will finally buy."
INTEREST RATE
Bank loans are available but after the global economic meltdown, they have become more careful who they loan money to for buying properties. "We are not a charitable institution," says KVRSA Raju, Chief Manager, Canara Bank, Ghatkopar (W).
Every bank charges a base rate (rate of interest) for a certain amount of loan and the rate of interest depends on the repayment period and the amount.
"Our bank has a minimum base rate of 8.5 per cent for a sum of Rs 30 lakhs for five years. For 30 lakhs to 1 crore, we would charge 9 per cent. The rates have been revised just a few days ago," says Raju.
"Mumbaikars are now buying houses as far as Karjat. They apply for Rs 15-18 lakh loan. Mostly, couples who are working take loans above Rs 30 lakh but cases where only one of them is working they would apply for loans below Rs 30 lakh.
u00a0
In Ghatkopar, there are couples and they have applied for loans for Rs 70-80 lakh," ends Raju. Ram Kumar (35), a business analyst from Thane bought a 2BHK apartment recently. "One-and-a-half years ago when I bought this flat, a 2BHK in Thane went at Rs 3,000/sq.ft. Now, the same place is almost double at Rs 6000/sq.ft," he says.
GOOD HOME
Rojita and Bhasker Tiwari live in a rented apartment in Seven Bungalows, Andheri. Rojita is working with a publication while her husband is into financial services.
u00a0
"About three years ago, we wanted to buy a place of our own. Our budget was 95-96 lakh for a nice apartment in Andheri (E). However, the new constructions were exorbitantly priced at 1.5 crore for a 1.5 BHK.
Old buildings were out of the question. Of course, the building was by a well-known builder and had great facilities. But it was out of our budget," she said. "We finally bought a 2 BHK in Kandivali for Rs 40 lacs and rented it out.
1.5 cr is too much money for a cramped 1.5 BHK." The couple plans to move into their Kandivali home next year. Travel, which had earlier been a deterrent is something they will have to deal with.
Many believe that finding a place is not difficult but finding a place of your choice is a challenge in Mumbai.
Kinjal Pandya, 21, had bought a flat of 500 sq.ft (1 BHK)u00a0 in Dombivali for Rs 19 lakhu00a0 just a month ago, but that was not her first option.
"I saw flats in Royal Palms in Goregaon, Thane-Ghodbunder Road and considered Mulund too but all of them were quoting exorbitant amounts. Most of them were not worth it," says Pandya.
"Not worth it because the construction quality was very bad ufffd cement mixing, rusted iron rods etc...so I did not like the under construction buildings at all," she adds.
Pandya and her family finally bought an apartment at Dombivali, which they thought was, "apt for a quiet family life and far away from the city's chaos."
(Inputs by Natasha Gupta)
