Facts On Buying a New Flat

I got this as a forward from one of my friend..I found this to be useful as the person who has written it has calculated the cost of buying a flat considering even the minor points.Useful for people who are planning to buy a flat..or is that useful for changing the idea of buying a flat to buying a plot and constructing house?

Mail Starts:

I am never the one to go out and buy a flat to live, simply because I am so used to living in an independent house. Living in a flat would strangle me no ends. At the same time, I am not the one to just buy it for an investment purpose, simply because I would then have to make do with the loan that accompanies it, which I find it to be just beyond my reach when it comes to repayment.

My good friend, wanting to buy a flat in B'lore to go and live, told me to look around for one. Trusting my calculation instincts, my friend also wanted me to make sure that it would work out to be a profitable venture. I got in touch with prominent builders and checked out some basic facts regarding the flats on offer. But I was literally amazed at the results. I also had to quiz the builder on some basic terms used it the construction of a building, as the whole thing was new to me. Here are some facts laid out for you:

Q. What will be the actual 'area of living' or carpet area if the builder proposes 1000 square feet?
>> The actual carpet area will be 800-850 square feet only. The common area is also included in the proposal.
Inference: If two flats are in the same floor, then the builder collects the amount for the carpet area from both the parties.

What is the cost for the Builder?
Suppose Builder X proposes a flat in a decent residential area.
Rate (Unit Price) - Rs. 3500 sft.
Registration - Rs. 40 per sft.
EB and drainage - Rs. 50,000
Covered Car park - Rs. 1,25,000
Corpus fund - Rs. 50000.
For a 1000 sq ft flat (850 sq ft carpet area), the approximate cost will be Rs.37,65,000. In the same plot area (measuring 2 grounds) let us consider that the builder would have constructed 10 flats.

Now,
Total sales for the builder - 37, 65,000 *10 = 3, 76, 50000 (3.76 crores)
Cost of the land - Rs. 40 laks per ground
1) Total cost of the land - Rs. 80 lakhs for two grounds -------------------------------A
Total builtup area for 10 flats - 10*1000 sft = 10,000 sft
Construction cost per sft (for normal specification) = Rs. 900 per sft
2) Total construction cost - 10,000 * 900 = Rs. 90,00,000 ---------------------------B
3) Other expenses for the builder - Rs. 20 per sft = Rs. 2,00,000 --------------------C
Total expenses for the builder = A+ B+C

= Rs. 80,00,000 + Rs.90,00,000 + Rs. 2,00,00 = Rs. 1,72,00,000 ( 1.72 crores approx)
Total Sales = Rs. 3.76 crores - Rs. 1.72 crores
Total profit of the builder = Rs. 2.04 crores.

What is the cost for each resident?

1. Cost of land = Divided share among the other 10 residents
= Rs. 80,00,000 / 10
= Rs. 8,00,000
2. Construction cost = Rs. 900 * 1000
= Rs. 9,00,000
3. Other expenses = Rs. 2,00,000 (approx)
Total = 8,00,000 + 9,00,000 + 2,00,000 = Rs. 19,00,000 ( Nineteen lakhs)
So the total share for each resident is Rs. 19,00,000 ( Nineteen lakhs only) – at the most 20 lakhs.

But what do you end up paying?
Hold your breath, it's a cool Rs. 37.5 lakhs for the flat.
Whats more, you can definitely not make a cash-down payment. So the only option is to go for a housing loan. For this, you are lured by banks and other lenders for cheaper home loans. But when you actually sit down and make the calculations, you will be astonished to note that you will actually end up paying double the amount at the end of the loan repayment period.

So before thinking of buying a new flat the next time, collect as much information as you can and then decide to buy one.