Ram, a middle level executive in a corporate, has
decided to buy an apartment ; he has an investible fund of Rs.15 lacs; his
banker is ready to lend him upto Rs.35 lacs based on his CIBIL score. Ram has
zeroed in on a few properties in a southern suburb of Chennai city. He had
personally inspected six properties and has short listed three out of the same.
All the three are located in the same neighborhood with comparable civic
amenities or lack of it. All the three are built over a piece of land varying
between 2500-3000 sq.ft. in size; all the three buildings are developed by
builders who are operating in this area for more than 3-4 years.
Ram’s family is forcing him to make a choice and
commit.
Property A has a built up area of 1000 sq.ft. in
second floor and the price is Rs.4800/- per sq.ft. all inclusive ; it comes
with an undivided share of land of 250 sq.ft.; there are 10 apartments in the
block; the building is spread over part stilt+ part Ground+ first + second
floors
Property B has a built up area of 900 sq.ft. in
first floor and the price is Rs.5500/- per sq.ft.all inclusive ; it comes with
an undivided share of land of 550 sq.ft.; there are 6 apartments in the block;
the building is spread over part stilt+part Ground+first + part second floors
Property C has a built up area of 1200 sq.ft.in
ground floor and the price is Rs.4900/- per sq.ft. all inclusive ; it comes
with an undivided share of land of 400 sq.ft.; there are 8 apartments in the
block; the building is spread over part stilt+part Ground+first + second floors
Purely from the budget angle and the sufficiency of
space Ram feels property A suits him well. The builder in this case is keen to
close the deal asap. He is even ready to offer further discounts, if Ram can
conclude the sale within 15 days.
What should Ram do ?
Should he choose a property which gives him maximum
usable space with minimum cost as the common logic dictates i.e. property as
per option A ?
Do things like UDS (undivided share) of land
matter?;
How come there are 10-12 apartments in a small piece
of land? ; how will the waste water from kitchen and toilets be disposed off,
this being an unsewered area ? ; is there a sump for collection of municipal or
bought out water ?; is it too close to the septic tank for comfort? ; is the
open space around the building worth as much as the covered space within four
walls ?; why does the approved plan pertaining to property A show part of the
second floor space as an ‘open terrace’ while the entire second floor is
covered with apartment as it has been developed ? what is its implication ?
Ultimately which purchase will give him lasting
peace and hassle free life ? Is lowest price the only criterion?
How do we analyze it ?
Ram should choose the apartment which gives him
maximum UDS of land per sq.ft. of built up space because it connotes several
positive aspects as compared to the other two options :
The analysis is as follows:
Property A – the UDS of land per sq.ft. of built up
space is 0.25 sq.ft.; i.e for every one sq.ft. of apartment space he gets 25%
as the land share in undivided form;
Property B – the UDS of land per sq.ft. of built up
space is 0.61 sq.ft.; i.e. for every one sq.ft. of apartment space he gets 61%
as the land share in undivided form;
Property C: the UDS of land per sq.ft. of built up
space is 0.33 sq.ft.; i.e for every one sq.ft. of apartment space he gets 33%
as the land share in undivided form;
Thus the property B gives him the highest share of
UDS of land; this would mean the deviations from approved plan would be minimal
or nil, there will be more open space around the building as compared to the
other two options, the building will be less crowded which means availability
of more water per capita, more open space per capita and so on. The additional
cost that he would now pay will be more than offset with the faster rate of
property value appreciation as compared to the other two apartments from a much
better quality of living here. It can be shown that the additional value of
land embedded in option B will be about Rs.1000/- per sq.ft. higher than option
A. This will mean the cost @ Rs.5500/- per sq.ft. is still a better bargain.
This of course assuming all other aspects of the
property like location, quality of construction and the like are equal among
the three.
Do write to us in case you have some interesting
information or feedback!
BVe Consulting Engineers
Engineering Project Consultancy & Property
Advisory Services,
Residential-Commercial-Industrial-Infrastructure
Designs
Due-diligence studies -Asset valuation services
Chennai -600 083
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