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Beware of newly developed developers

Wednesday, 14 November 2012 - 8:25am IST | Place: Mumbai | Agency: DNA
This kind of returns on investment have turned many in the satellite city into developers overnight — from APMC market traders and stationary store owners to DVD library operators and even restaurateurs.

As I stood waiting for my puttu-and-kadala curry parcel on a Sunday morning, the enterprising Malayali owner of the restaurant handed me a brochure of a building project at Roadpali on the outskirts of Navi Mumbai. Even as the restaurateur-turned-realtor shared the vision of his maiden venture and explained the virtues of booking early for better appreciation, I was wondering what motivated the man adept at kitchen commerce to land into a concrete mess, other than the prospect of profits.

The plan is simple, and the profits superb. Get together with a bunch of friends with excess cash, buy a plot of land in the emerging areas for less than Rs5 crore, rope in a seasoned contractor, throw in the construction cost of Rs1,000 per square foot and if all goes well from start to finish, each of the partners rake in at least 40 per cent returns on their investment.

This kind of returns on investment have turned many in the satellite city into developers overnight — from APMC market traders and stationary store owners to DVD library operators and even restaurateurs. The entry barriers are low and hard cash can iron out any bumps on the road to realty success. Even after taking care of the demands from the sons-of-soil, officials and local politicians, there’s enough left for everyone. It’s the same story in all the satellite area of the metropolis — from Navi Mumbai and Thane to Kalyan-Dombivli and Vasai-Virar.

Of course, the catch phrase is: if all goes well. And there’s a lot that can go wrong along the way during the two-year period of project execution. It’s not only the excess cash of these entrepreneurs that’s at stake here, but also possibly the lifetime’s savings — and home loan instalments — of those who buy their homes. If history repeats itself, the buyers of homes in these standalone projects have a lot to be worried about. A similar construction boom from 2004 to 2008, fuelled by the Patel developers of Navi Mumbai, crashed with a thud when the economic slowdown took the wind out of the sails, leaving hundreds of developers — and their home buyers — stranded. Till date, many of those buyers are still running around for their dream homes that are stuck in different stages of construction after the developers went bust.

While not getting possession of the home at all is a worrying thought, there are many other pitfalls that ensure heartburn for home buyers even if the home comes through – right from getting civic permissions and adequate water supply, to allocation of parking lots and formation of the society. Not to mention leakages and seepages for years to come thanks to cost-cutting driven construction.

Though these factors can surface even in case of a reputed builder, the chances are manifold when many partners have fractional ownership – and responsibilities. It’s one thing getting over a Rs40 curry gone bad and another living with a Rs40 lakh home deal gone bad.


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