Is a 55 crore flat the sign of the next bust?

Alok Rodinhood Kejriwal

13 years ago

Sometimes, the smallest signals can be the beacon for the next BIG BUST.

For me personally, an e-mail proposing that I buy a flat for 55 crores in Pot Hole ridden, crammed and jammed, scam tainted, politically bankrupt Mumbai – is one sure signal.

I mean this is 12 MILLION US$…..

So, why is it a sign of a bust?

– Even if I assume that the builder is earning a 20% profit margin, that means that the apartment has cost 45 crores to that construction firm. Now the building has at least 15-20 such apartments, and there are at least 10-15 such properties coming up on that stretch of Napeansea Road (I see it almost every other day). That means that 15,000 CRORES is invested by Banks (yeah) to build and finance these CASTLES in the air ON JUST a 1-2 kms stretch??

South Mumbai has 100+ such developments coming up – so you can calculate the value of the capital locked in.

– Now, lets assume that these flats get sold. Obviously these will be Bank Financed also – so that’s another 20,000 CRORES injected into these assets. (Note that the builders who will get paid from these buyers will move on to the next project and hence keep their original bank loans in rotation).

– What happens if there is a massive stock market slump or a job market re haul or a massive political instability or god forbid even large communal tensions in India? If the dollar collapses and the India Rupee becomes so strong that it bankrupts exports? The folks who have bought these apartments will not be able to pay their installments (calculate the monthly outgoing on a 55 crore flat) – the flat as collateral will never be able to sell at the same price; builders will be unable to sell new properties and HUMPTY DUMPTY will come crashing down into the Arabian Sea….

(PS – If this sounds fictional, just read up the reasons that led to the crash of Lehman Bros in 2008)

Having said so, please go ahead and buy some of the flats listed below and do mention my name to the agent – I wouldn’t mind earning a couple of BMW’s as pure commissions!!!

Forwarded message

From: <homes@terraahomes.com>
Date: Thu, Aug 4, 2011 at 2:59 PM
Subject: Premium Apartments for Sale in South Mumbai
To: alok@c2wgroup.com

Hi,

With our commitment to bring you the latest and the best offerings in Mumbai real estate, we present to you some premium apartments for sale in South Mumbai

Anupam CHS, Manav Mandir Road, Walkeshwar
- 2920 Sq ft Carpet
- 5 BHK
- Lower floor
- Asking Price: Rs. 24 CR

Vaibhav CHS, Breach Candy
- 1600 odd Sq ft Carpet
- 3 BHK
- Higher floor, full sea view
- Asking Price: Rs. 18.50 CR

Urvashi, Nepeansea Road
- 2650 Sq ft Carpet
- 3 BHK converted to 4 BHK.
- Higher floor
- Asking Price: Rs. 27 CR

Rajat Apartments, Mount Pleasant Road
- 1420 Sq ft Carpet
- 2.5 BHK
- Middle Floor

Lodha Costeria, Nepeansea Road
- 7600 Sq ft Built up
- Higher Floor, Sea View
- Bare shell Apartment
- Asking Price: Rs. 55 CR

If the above property interests you then request you to please call me on +91 98210 06331 or email on ritesh@terraa.com with all your contact coordinates and your preferred day and time for inspection. Incase the property is not to your choice then we request you to share with us your requirement and accordingly we will get back to you with suitable options.

If you are looking to SALE any residential / commercial property in Mumbai, then request you to please send us an email with your property details on ritesh@terraa.com.

Awaiting your reply at your earliest convenience. Looking forward to long-term mutually beneficial business association.

Best Regards,
Ritesh Juthani – Associate Vice President