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I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over... Warren Buffett
Well, well, well when the subject is finance that too for real estate, who better than this man's quote I could have used & if you don't know the name Warren Buffett, then it's off if you stop reading this sharing right here. As, what's the point in explaining an address of a temple to a non-believer of the god, right? So, when the subject is related to the real estate & its finance or say economics it’s not just because he is one of the richest people so I used Mr. Buffett's quote but by me he is a visionary & a philosopher (actually) is why I used his words. Another thing when it comes to finance or economics, I myself is the dumbest of the students in the class of business & its words of wisdom (philosophy) about doing the business which has helped to remain afloat & survive. And it’s in doing so I could think a little by myself about the weakest links (kamjor kadis’) of this industry which for a long time has been the Super Star of the money-making industries! Here I used the term Super Star as analogy for many entrepreneurs or aspirant to become one , the way when someone wants to go for the best of academics he (or she) opt for IITs' or IIM"s or if someone wants to make a sure 100 crore film (read as super hit), then he makes it with Salman Khan or Akshay kumar as lead role (well, these names also can tank, that's different aspect), same way ask any youngster in big city (Pune for e.g.) who wants to make money (and fast) & his dream of aim will be becoming a builder i.e. real estater!
Unfortunately making just money can’t be target of any business (read as, right target), this again I have realized by reading wisdom words from Buffett's; & his likes only but then words of wisdom seldom go to deaf ear when your aim is only money making & real estate isn't exception to this law of human psychology! Now, if you are thinking why this sudden gyan.com, then it’s because of three things happened post lockdown in Pune (and in general on horizon of real estate) & they were sudden advertises or say sale boom in real estate which you can see in every form of media, like there was frenzy to sale the homes of all formats i.e., flats, plots, shops offices etc. Then there is news which as usual no one paid much attention about except some wise people (in real estate) & it was about concern over the hike in construction materials such as cement & steel which is substantial in compare to last year’s prices i.e., nearly 40% to 50% hike & its impact on the construction costs as well end product prices i.e., flat's prices. Lastly, there was news about the arrest of an retired Chairman of State Bank of India (India's number one & biggest bank) for a loan proposal of mere Rs 17 crores (for SBI scale, I meant) that to six years back which involved local builder’s project's finance & this happened in Rajasthan! Oh, yes & one more thing, nearly every financial institute has lowered their interest rates on the home finances, this also was news in the media. Now, one will ask, what's the link between all these & if at all any connection is there then what's big deal, this happens with any industry, right?
Well, agreed like Shahrukh Khan said in a film, "Bade bade Shaharome, Chote Chote Hadase Hote Rahete Hai" i.e. in big cities , small accidents keeps happening but then first does real estate is considered as industry in first place by the govt & indeed its biggest business or turnover trade if not industry whatever is happening it’s not small accident but a catastrophe actually i.e. Tsunami or Avalanche, which is or will cause big damage, this is the link of all above incidents & my object of the writings! As, look at the first aspect, the lockdown has hit real estate in many ways especially in Pune or say Maharashtra region, apart from labour crisis due to extended lockdown period the real estate depends majorly on the service class & this is the segment which got hit most. There were & are lay-offs as well revised (read as reduced) salary structures all of which is direct (and negative) impact on buying capacity of the real estate's clients. And more than that the entire negative emotions or mind set which was the biggest enemy but fortunately with efforts of all (and blessings) the situation in & around Pune region on public health front at large started improving faster than other regions & immediately the effect reflected on real estate front also (positive this time). And indeed, the lockdown & pandemic has its own impact on the mindsets of buyers but it’s a boon in a way as it has made most of them realize that it's “the Time" to buy a home of their own in & around Pune because one rates are at their best to buy & more than that Pune region offers one of the most ideal surrounding for a home rather permanent home is proper term! Right from jobs (salary may be a bit less but a job matters most) to public health infrastructure for the seniors in the home everything is perfect & outcome is more & more people are turning to buying a home for their own & fast & a ready possession or nearing possession home is what they want! This means the builder has to buy a land with his funds, get it sanctioned, spend on construction cost, marketing costs & then only wait for the clients, mind it builders, it’s not a cake walk anymore ahead!
Now you will ask, it’s a good thing for real estate & builders that people are buying homes so what is my problem now, right? Well, every coin has two sides & if people are buying homes is the good side then affordability of those homes from construction cost & finance cost is the bad side of the coin is my concern for real estate! As people are buying flats but they are negotiating till the builder bleeds is a fact & I won’t blame people as their budget is a matter of concern for them & not builder's bleeding! At the same time every other industry seems to take out the losses which the lockdown period has made from other industry & as real estate industry is dependent on hundreds of other products for making a home, it has become like a "Punching Bag" to absorb losses of other industries (and even that of the govt also)! Every material from tiles to generators to plumbing fittings & not just cement & steel has got a price hike (thanks to sky rocketing fuel prices) & home rates are expected to get reduced by the home buyers! And not just materials but the labour rates are also nearly doubled as real estate industry up to a certain level can’t be mechanized; like auto industry as you can't plaster the walls by a CNC machine neither you can fix taps by a robot nor you can do waterproofing with a drone, right? And labour costs also make a significant part of total construction cost for the real estate industry adding to the making cost of a home!
Last salvo fired on the real estate is finance cost (if you get finance in the first place) here is the third incidence or news about arrest of Ex-Chairman of SBI in the matter of real estate finance case comes in the picture! I am not justifying wrongdoings of a system but already builders are treated like "Step-Sons" by most of the nationalized banks (read as small or general builders & not the big ones) is a known fact! And on top of it, if senior bank officers are going to send behind the bars for loan sanctions to the builders (read as wrong loans) then you need not have to be a fortune teller to tell the impact of this news on the mindsets of banking system when it’s a loan proposal of a builder! Outcome is builders have to surrender to loan sharks for a phenomenal rate of interest making the entire ship sink under the burden of hiked construction costs, high interest rates & low sale rate & govt blames builders for making the homes costly!
Why doesn't the govt which is so keen on regularizing real estate & taking lead in forming RERA authority take some steps in controlling material prices also of real estate & makes enough finance available at the rate of home loans, is my basic question not just as a builder or engineer but as a common man? Because, which industry or business accepts or bears (read as pays from own pocket) any overhead or burden on its manufacturing costs by compromising profits & if some business does so, we all know its end, correct? High time the govt understands these "kamjor kadis" of the real estate & act proactively to strengthen it or else there will be regulatory authority for the builders but no builders left (read as good builders) for the regulation, mind it (Builders too, mind it)!!
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Sanjay Deshpande
Sanjeevani Dev.
Please view my sharing about real estate in Pune at You Tube link below...
https://www.youtube.com/watch?v=g4xX7eopH5o&t=5s
Please do visit my blog links below to read about real estate & home buying!
https://visonoflife.blogspot.com/2021/09/choosing-right-home.html
http://jivnachadrushtikon.blogspot.com/
Creating Togetherness; team Sanjeevani Way (Click link below)
https://www.flickr.com/photos/65629150@N06/albums/72157627904681345
For any of your complaints about city, log in at link below
www.punecorporation.org
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