Vikas Rikhye

Vikas Rikhye,India Real Estate Blogger

In one of my articles I had mentioned that we never seem to hear about real estate investors who go bankrupt.I had also cautioned that it does not happen very often unless the decision is rash or it is due to lack of basic relevant information and facts.

But I am sorry to state that in the recent past many innocent investors have been trapped by the” Rosy pictures painted” by some of the masterminded Broker Turned Builders (BTBs) who wanted to enter the real estate market as New Players for New Real Estate Projects.Neighbor’s prosperity, News paper &,T.V. advertisement backed up with lucrative assurance of their neighborhood broker was good enough for them to be tempted them to get ready for a Bright & Prosperous future through investment in property.

The new investor having lured by “Real Estate Prosperity” all around got eager to join the “Prosperity Race”. It is understood that while some had
put in their life time savings ,others managed to raise funds at a very high rate of interest & some had raised funds to invest in property by selling their personal belongings as well as inherited gold ornaments.

In 2006-2007 as we all know that “Unheard investment destinations” were being advertised with New Townships besides NCR townships with:

1.Pre-launch offers

2.Rock bottom Prices

3.Assuring heavy return on investment

4.Costly Sales Brochures depicting Quality of life matching International Standards supported by strategically designed marketing techniques

5.Heavy commission to Brokers

6.Cocktail Dinners on Pre-launch (In ***** Hotels)

7.Luxury Cars as gifts on achieving Sales Targets

All this as stated above was good enough for these investors to have the direction, they had in mind.

I often use to wonder ,that how would a builder be able to bear such expensive cost of marketing and yet would be able to deliver the promised project.

I could feel very close to the answer, when I remembered my Business Guru’s saying ‘The Brower who pays 10% interest never returns the original capital”

As I understand almost same thing happened, as while many of the smart investors made a quick buck at the same time where “Fly by Night Operators “have disappeared or Builder/ Promoter has failed to deliver the project, many of the victims are either running from pillar to post for refund or some accepted it as a bad luck/wrong decision .

At the same time some of the ‘Stay Back’ Builders are asking for future installments without any visible progress as the payment plan seems to be time bound & not construction linked

In Gurgaon after master plan 2021 has earmarked 58 new Sectors,
I understand from news paper advertisement that some of the new Developers are offering apartments in remote locations at a lesser price ranging 2200-2500 per sq.ft with 15% Cost along with application along with a 45day PDC of 10%, which means that with 25% of the selling cost builder receives almost more than 40% of his cost ,without even starting the construction & since the remaining payment is construction linked, therefore apparently the developer has already got his chunk of profit and yet stays in the business at the cost of his investor’s money having a stake free existence .

Secondly, even if the builder delivers the project in time in these remote locations, how would that become livable in absence of basic infrastructure like Public Transport , Sewer, Electricity ,Water etc.

Whereas , so called booming almost 12 years old “New township of Gurgaon” still is awaiting its “Infrastructure dream” to come true

It is also noticed that some of the better known builders are selling Builder floors , which as per present rules do not enjoy a clear title on secondary sales ,where, in some of the cases the builder has already taken more than 25% of the price, without any visible progress

I very frequently get, desperate phone calls from some of such investors, that they would like to get rid of their investment at any cost in some cases they are ready to sell out the booked property below cost

The scene of the Gurgaon shopping malls is no less gloomy as few of the specialized malls give a deserted look awaiting the occupants & investors/owners are asked to pay Maintenance charges, while others Malls which are under construction have slowed down the construction process with a fear of lack of occupancy.

IT office space / IT Parks ( victim of overtrading) had become an investor’s craze , who are continuing to invest ,without realizing the Government’s Plans & Policy.

To me it seems “Some can not think due to lack & greed of money others
Can’t think due to overdose of money”