After a long time I was attracted towards real estate and what prompted my attention was the advertisement and offer from Puravankara.
The offer from Puravankara was that it was offering a rebate on interest on the home loans taken for buying a flat in Puravankara Swanlake in excess of 6.99% and capped at 10.25%.for a period of 2 years. We can see the details later. But, first on the project.
Puravankara the property developer and promoter announced this project in May 2012 and the completion was slated for July 2013.
The cost of the flat was Rs 3700 per square feet ( psf)
The area of the flat taken for calculation is 1272 sq feet.
If you had booked this flat in May 2012 and assuming you paid, your initial margin and availed bank loan and start paying emi from Oct 2012, the cash flows would have worked as below.
a. Cost of the flat = 1272*3700=Rs 47,06,400
b. Initial payment ie Margin money paid Rs 9,06,400 ==19.25%
c. Balance amount taken loan Rs 38 lacs.
d. EMi for this loan at 10.5%, for 20 years is 37,938.
e. Total pay out is rs 91,05,120
f. Total cash paid= 91,05,120+9,06,400=100,11,520
Now if you purchase the flat now
a. Cost of the flat is Rs 53,41,128
b. If you had not purchased earlier, the amount could have been kept in FD for 2 years and that would be now 10,78,616
c. You would have paid for 2 years, a principal of 1,24,606 and an interest of Rs 7,85,916. Of the interest you would have IT exemption of RS 2,35,774.
d. By postponing the purchase by 2 years, you would have saved Rs 1,24,606+7,85,916-2,35,774=6,74,751
e. Therefore the amount available for initial payment is 10,78,616+6,74,751=17,53,367
f. Balance amount required for loan a- e =35,87,761. say 36 lacs
g. EMI for this amount at 10.25% current rate of interest for 18 years is Rs 36,575 and the total pay out is 79,00,200
h. Interest rebate for 2 years offered by puravankara = 10.25-6.99=3,26% on 36 lacs for 2 years=2,34,720
i. Total cost – 79,00,200 plus 9,06,400= 88,06,600 – Though the initial payment is 17,53,367, this has been generated for the initial payment and money that would have been saved and hence not considered.
j. Therefore there is a cost saving of Rs. !2 lacs.
Add to this the cost of rent for 16 months delay which 5,08,800 @ 2 psf rental.
Hence you save a total amount of approximately Rs 17 lacs in the total cost of ownership.
You would have still completed payment by 2032 as per original plan
Still you get better deals and there is glut in the market place.
This does not include the bargain which you might have done now.
The time is not right for investing in real estate now and all the physical assets Gold, Silver and Real estate are not doing well and it would be at least a couple of years before they pick up.
The promoters and developers are not reducing the prices but artificially maintaining the price. In my opinion, you could get better offers and prices down the line.