Globonomics!

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Flats/land in Bangalore

with 5 comments

Bangalore’s real estate boom and the subsequent bubble have already been mentioned on one of my earlier posts – https://ecofin.wordpress.com/2007/05/03/real-estate-in-bangalore-costbenefit-analysis/

We recently had a chance to lookup apartments from reputed and lesser known builders in various areas of Bangalore and it has to be said that flats are really going and selling at a premium.

Think about the costs.

The price of a reputed builder’s 3 BHK is about Rs. 90 lacs to a crore for about a 1900 sq. ft. house!

The price of most flats in localities in South Bangalore is about Rs. 4000 – Rs. 4500 per sq. ft. Extrapolate this to about an average of 1500 sq. ft. and you end up with an average flat cost of Rs. 70-80 lacs including the basement car park+water/electricity ameneties etc and the registration cost.

What is the markup of the builder?

I would think builders are marking up prices by almost 100-150% of their flat cost and this is a pessimistic estimate. This means they incur no more than Rs. 30 – Rs. 40 lacs per flat cost to the builder factoring the price they paid for the land etc. Think about their economies of scale too because they are usually going for a large volume of flats/units in a single complex that typically houses 200 flats. All costs for them in terms of raw materials are incremental in nature.

Land prices are no different. We had recently been to Devanahalli in Bangalore North and land prices there are at about Rs. 4000 per sq. ft. – Rs. 6000 per sq. ft. and most people have become millionnaires by selling land due to the boom of the Bangalore International airport that is coming up  at Devanahalli.

When will this bubble burst?

The RBI’s directives and banks directions to cut interest rates have led to a minor fall in demand but I expect this demand to fall further. Once that happens, land prices have to see a correction in the next 6 months to 1-year. The current pace is simply not sustainable – this is my opinion.

Any takers?

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Written by Naveen Athresh

May 20, 2007 at 2:54 pm

5 Responses

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  1. no…no takers here.

    a

    July 12, 2007 at 10:09 am

  2. I agree with you 100%. If you monitor prices for Apt’s/individual homes in Whitefield/Brookefield area, you will realize that prices are coming down. I expect them to go down further by 20-30%.

    That’s my 0.02.

    R

    October 21, 2007 at 11:10 pm

  3. Is this a good time to buy an apartment in Bangalore?

    Whatwould be the average rate (Rs/Sqft) for apartments in and around Basava Nagar, Bangalore?

    Any recomendations (particular property) for the locality?

    John S

    January 18, 2009 at 12:41 pm

  4. Stamp duty cut: Win-win situation for all – Property buyers stand to gain:

    Bangalore real estate prices dip again

    namu

    February 23, 2009 at 7:06 pm

  5. flats in bangalore

    Real potray of the situation.but the company
    http://www.relocateeasily.com searched me a nice flat which I found reasonable for me.

    Joy

    January 22, 2010 at 10:30 am


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