Dharni we may be a great marketing and distribution company, but we are no patch on the steel, cement and finance companies. This was said by one of the World’s great FMCG company….this is so true.
Let us see how the real estate market works AGAINST the renter and FOR the owner:
1. ‘You cannot rent your house to bachelors, unmarried girls and college students’: not sure whether it is legal, ethical or moral, but this is a condition in many, many building societies.
2. There will be a 10% Non Occupancy Charges if you give your house on rent. So if everybody else is paying Rs. 1000 per month as a society charge, you will end up paying Rs. 1100/-. Logic? well none.
3. The funny story in Mumbai is the Government said ‘you can hire your house to visitors (like a hotel) and charge on a weekly, daily or a monthly basis’. Which means you could buy a house and use it like a guest house, right? Well the builders lobby made sure that you can do this ONLY AND ONLY IF all the people in the building agree to do this! It completely killed the opportunity.
So Mumbai has many, many flats bought and kept EMPTY (young boys and girls are the biggest market)….so this forces parents to buy a flat for their kids!
And if you buy a house for say Rs. 1 crore – it contains land appreciation (call it interest?), cement, steel and of course the INTEREST paid by the builder.
Now if you buy a house for Rs. 1 crore, you end up paying an EMI of Rs. 100,000 per month for 20 years…so you will end up paying 100,000 x 12x 20 = Rs. 2.4 crores.
What is the Rs. 1.4 crores called? (over and above what YOU thought is cost) – it is called INTEREST!
Who gets it? Your banker!! call him SBI, Hdfc, Icici, …….LOL…
Source:Subramoney.com