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Calculate before you buy
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8/29/2008 12:42:09 AM
In a recent letter to the HDFC shareholders, the chairman of HDFC, Deepak Parekh slammed developers for not differentiating between super built-up area and carpet area (internal wall to wall area) of the houses that they sell. He further said that developers misguide buyers by selling on the basis of super built-up area, without clearly mentioning how much is the carpet area. Parekh added, “There are instances where the difference between the carpet and super built-up area is as high as 50 per cent. Bifurcating the carpet area and common amenities increases transparency in the transaction. Ironically, though some states have legislation for flats to be sold on the basis of carpet area, what is lacking is enforcement.”

If experts like Parekh feel that carpet area should be the basis of transactions then why do developers charge buyers on the basis of super built-up area? In Delhi, the authorities are following the recommendations of new the Master Plan of Delhi 2021 (MPD 2021). But these are not enforced.

Buyers pay extra
Anuj Puri, chairman and country head, Jones Lang Lasalle Meghraj says, “Building bylaws and regulations differ from state to state and even city to city. However, it invariably turns out that property buyers are required to pay for construction that falls in FSI-free areas—areas of congregation, passage, and common conveniences. In a typical project, these areas do not tend to constitute more than 15-20 per cent of the overall FSI. Nevertheless, all that a buyer would really wish to pay for is the exact amount of space available for personal use in the property—in other words, the carpet area.” However, as Puri says, you can’t have a house without walls so the buyer ends up paying for the space occupies by the walls as well occupy, by this criterion, he buyer will have to pay for built-up area. Puri contends, “This is, of course, unavoidable.”

Als if one takes an example of any of the projects in the country, he will find by a simple calculation that he is being charged extra. Let us say the developer is charging Rs 2,500 per sq ft as a basic rate. The buyer is interested in buying an apartment of 1,250 sq ft. So the value of the apartment stands to be Rs 31.25 lakh (Rs 2,500 sq ft X 1,250 sq ft). But this does not include the parking charges and maintenance charges. The price calculated does not include the preferential location charges (PLC) either.

Optionals have become mandatory
Pradeep Mishra, a real estate consultant says, “Developers fix the price on their own. Charging PLC is not logical. Sometimes developers charge a PLC on the ninth and tenth floor also. The reason they give is that the apartment is facing a green, when in fact the green is just a small park in the centre of the project. Moreover, the developer charges PLCs on corner and road-side flats also. Usually, there should be PLCs only for ground floor apartments.”

The preferential location charges are usually 5 to 20 per cent and developers adds their cost to the price of the apartment.
Puri of JLLM says, “In yet another twist to the situation, the developer adds facilities (read common spaces) to the area of the apartment, which the law does not require him to.” He adds, these spaces because they enhance the ambience of his project. For example, the law requires a residential building to have only one parking place for a certain number of flats. However, almost all prospective buyers in a metropolitan city would own cars, so the developer provides more than what the law requires. He offloads the enhanced cost on his clients, definitely charging them for more than they are getting.

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