Freedom of Expression
My friend Mr. Pandaw told me that his nephew has decided to return to India from U.S. and wants to purchase a flat in Mumbai. He wanted to consult me on that matter. I am always consulted by my friends on any matter before they commit in them and so I told him to come any day and we shall sort out as to how to go about that. Actually the issue of purchasing a new flat in a new building should not be an issue for any consultation; I thought, but when we sat to discuss the details of the subject it was found to be a very interesting a matter, I want to share it on this blog posting with all my readers.
My friends nephew is a civil engineer and had worked as that in many countries on deputations by his American employer for almost twenty years. His experience in the matter was by that standard quite authoritative and so I wanted to learn from him his style of working on such topics. I mean how he thinks about selecting a flat and all those things. It came out to be a very out of the ordinary.
As planned Mr. Pandaw, accompanied with his nephew Mr. Harshal, his highly educated wife Snehal Agnihotri came to my house, and we after preliminary introduction sat to work on the topic. Harshal told me that he would like to know the average life expectancy of buildings built now in the city before we begin the discussion. I told him that the Mumbai Municipality expects that it should be around 40 years.
“That means the structure maybe not be serviceable after that period and that the building as has become not suitable for occupation shall be pulled down by the builder and a new building will be built on the site. Considering the environmental conditions in this city, moist salty air having excessive percentage of corrosive gases with high humidity, iron corrodes much faster and so the reinforcement within the concrete members of the building such as columns, beams and slabs become short life.
I know technically cement concrete is recommended for places where ambient temperature is around 15 to 20 degrees C and at Mumbai and most of the places in India ambient temperature is always far exceeds this limit. That implies high temperature of the atmosphere causes cracking of concrete exposing inner steel reinforcement to the corrosive air and that accelerates corrosion of the steel reducing its size eventually making the structure weaker and vulnerable to forces such as gravity, volcanic and other vibrations due to surrounding sounds.
Harshal told me; that is the practice in the western countries, and quite often even seemingly good constructions are also pulled down by the authorities. I remarked that we are now copying western ideas in almost every matter and so it is quite possible that the same practice will be working in due course in Mumbai also.
Here for the first time Snehal, wife of Harshal spoke; suggesting that in such a situation the price of the flat should be in relation with this small life of the structure. If it is not; then it is not worthwhile to purchase the new flat. She told me that in old times as we all know normal life expectancy of structures was about a hundred years and the costs were considered from that. I told them that as per my knowledge at present the costs of flats are more decided by the location and carpet areas and this short life expectancy is hardly considered by people. This remark surprised the couple.
What are other options available was the next point for discussion. I told and Pandaw concurred that other option in case they want to stay in the city is to make a lease agreement or a rental and pay the rent. When both of them made some calculations and found that if they take a loan from the bank as bank loans are readily available, then the monthly EMI comes to the same as the plausible rent for that flat. That automatically suggested that it is better to go for rent than for purchase. We worked out other calculations and eventually came with values those showed that it is by all standards advantageous to go for rental than take the trouble of paying stamp duty and then other hustle and bustle to keep that short-lived flat.
Snehal inquired if there is any protection for the flat owners in case when the building is pulled down and new structure is made, she meant to know if flat owners have any right to a flat in the newly made building. I phoned to one of my other friend who is a part time estate agent and he told me that as yet; there is no such protection to previous owners of flats. That clearly shows that a flat owner is on the street as the old building is pulled down. All the money he has spent and the troubles undertaken to buy that flat are in vain! He is back to square! That means the price he pays is for only 40 years of holding and after that period, his right is automatically canceled.
We worked on other aspects of the concept of owning a flat in the city. Many points came up when we together decided to compare owning verses rental and to my surprise we dug out quite a few points that showed very clearly that owning a flat in this city is not worthwhile. Let me give you our finding.
When owned a flat you are stuck up to that locality and even if you want to leave that place for better location that you may discover at latter time, it is not possible easily. You keep paying for the flat installments and by the time you have finished paying the installments the life of the building is already less than half and so if you want to resale it; may be you will not get the correct compensation and the whole deal will prove to be a loosing proposal. Later on to dispose the flat is not easy unless you are ready for compromise as the structure is now old and may be needs frequent repairs which you have to do as you are the owner (temporary) of that flat! Other troubles related to the society matters of the building are not any less annoying.
Structures made before 1980 were made to last 100 years by putting appropriate extra steel in the reinforcement but after that as the local body decided that life expectancy need not be more than 35-40 years, builders are making structures of poorer reinforcements. Ready reckoners declared by the government also do not take into consideration this short life of the structures and so the complete affair seems to be dubious. By definition, the costing method must take into consideration three measure factors and they are cost of actual construction, location of the flat, life of the building. Sorry to say, that is not happening, life of building is not considered at all.
As for rental you can leave the place after the lease period to any better location and there is no trouble. It is often found that many flat owners like to retain a tenant who is paymaster and so in case you want to continue the flat owner is very ready to accept to extend the lease. At any given time a tenants is better positioned than the flat owner. The present law gives fabulous protection to tenants than the owners and so the option of rental is at any time better than to take the trouble of purchasing the flat, particularly in view of the fact that the building in which you are going to buy the flat is not going to last more than just forty years!
While making lease agreement one should make it for as long a period as mutually possible and that makes this option far better than owning a flat. At present builders insist that people buy the flats but if all become wise about the short life of the flats they make; a time will come when builders shall be ready to lease the newly built flats.
We also studied the clandestine methods builder these days indulge in to cheat the gullible, innocent buyers who take loans from banks and pay the money to the builder, pay the first few installments to the bank, and then come in trouble as the builder did not complete the building. In such eventuality the borrower is at risk while the builder is safe! Present law does not hold the builder any responsible for the loan; both the bank and the borrower are in trouble. One more incidence was discussed in that a borrower took loan from the bank and was paying EMI regularly but by bad luck he lost his high pay job. He had to stop payment to the bank and the bank confiscated the flat, all previous installments he had paid were lost and he was literally on street nowhere to go! Many such cases were sited. As for rental the flat is all ready and no troubles of this nature are possible, you are absolutely sure of getting the possession of the flat. As of the legal protection to the borrowers, better say nothing, the delay tactics of our judiciary almost kills the complainant.
Finally the couple, Mr. & Mrs. Agnihotri decided to go for rental and the meeting concluded on even note.
You are requested that you inform your friends who are likely going to buy a flat in new building in this city of Mumbai; you may ask them to log on this blog and read it. My intentions are very clear; I do not want simple ordinary people like me and you to be in any trouble just because we are not well informed. The very purpose of this blog is to entertain and with that to enlighten.
Adieu
You may contact me on my Email ID given below,
I invite you to visit my other blog if you are interested in stories.
You may visit, Ideas and tips on any subject for intelligent discussions.
|
|
