Add to this a loading factor of 50% from carpet to built up area, the actual usable area gets reduced to half or alternatively for calculation purposes the carpet area prices double. Thus for an apartment in Bandra, you end up paying double the actual asking rate!
Thus a 500 square feet, one bed room flat costs5,00,00,000 (5 Crores) in Bandra while it costs 50,00,000 (50 Lacs ) in Dahisar.
With median income hovering around 1,00,000 per month for a family, even the apartment in far flung Dahisar is not affordable even after taking a loan from a bank to the extent of 80% of the value.
Same is true for commercial real estate. A shop in Kandivili’s Mahavir Nagar is quoted at 20,000 per square foot of built up area. A shop with an area of 400 square foot costs 80,00,000/-. A Bank term deposit of a similar amount will fetch a return of 8,00,000 per year translating to 66,000 per month. To generate a profit of 66,000 per month, a business will have to do a turnover of at least 4,40,000 per month, that is 14,500 per day. For a restaurant that averages at 300 per customer this would translate into 50 customers per day each spending at least 300. If each customer ends up spending just half of that, the number of customers required to justify the investment becomes 100.
Thus all business will be reduced to real estate play.
Add to that the march of technology. It is making the location of an organization irrelevant to its operation. Companies can now and are indeed moving to smaller cities which provide the same if not better level of infrastructure and quality of life. As companies move out, people will move out.
Thus the bubble will burst and the phenomenal rise of real estate prices will eventually sound the death knell for the city.
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