More From Blog on Centralpark.in
March 25, 2009
Tilak said… - Hi, I am born and brought up in Gurgaon. I have seen almost all the residential projects in Gurgaon and have found that Central Park-II is theee besttt project wrt the location, planning, design, construction quality and value for your investment especially in Bellevue Phase-1. I strongly recommend everyone who wants to buy a flat(Rs. 80L to 1.5 Cr.++ budget) to go thru the details of this township before putting your money anywhere else…
Peace
Tilak R Kataria - curryzone said…
- I agree with Tilak. I have a property there and can’t wait to get possession. I am told the builder will handover phase 1 of the property to its rightful owners by July 2009.
High time!
- curryzone said…
- It is now getting really painful to hold on to this property. I bought my apartment in a 2nd sale transaction paying Rs. 3500 per sq. ft. That comes to Rs. 1.1 crores for the apartment. I am currently paying a pre-emi charge of Rs. 80,000 per month to the bank. Imagine putting 80K down the drain every month with no respite in site. The bloke who sold the house to me made a cool 35 lakhs. If I now want to sell, the property rate has fallen to Rs. 2600 per sq. ft. Which means I will have to pay an addition Rs. 22 lakhs to the bank to get rid of this property apart from the Rs. 5 lakhs (transfer charges) to the builder.
The whole thing sucks. I dont know when possession will come. And dont know what the builder will demand due to the delayed handover. I am told there is a plan to demand an additional amount as escalation at the time of possession.
Enough is enough. We all should get together and demand that the builder either give possession by June 2009 or start paying our EMI’s to the bank. No futher payments should be made to the builder till possession in sight.
Getting screwed from all sides is surely not something I enjoy … do you.
To top it all ICICI bank has reported that old customers will need to bleed till their very last. The bank has dropped interst rates for new customers. For old ones the rate of interest will be 13%. Bullshit, I say.
Can anyone help with this shit I am in.
Please post details and I will follow through.
- curryzone said…
- Tilak, I now change my opinion about the property. Recently my bank refused to honour the loan agreement stating that the builder was in trouble with commitments and the bank’s exposure is more than they bargained for. Same with HDFC and other banks.
I have tried my best to get rid of this property. There seems to be no help from any quarter.
My view is that any serious investor shoud stay away from this property at least till possession of Phase 1 is delivered. There are other properties in the market selling at sub-allotment rates. These are the ones you should go for. Possession properties should be preferred.
The funny thing is that all properties (Uniworld Garden, Unitech Close, JMD, Park View 1 & 2, Vatika City, Omaxe Nile, Petals) that launched around the same time as CP2 are at some stage of possession handover. But not so with our dear friends.
They seem to be having a really easy time and the crisis doesn’t seem to be helping the flat owners.
Curse the fellows!!!
- Vivek said…
- I am amazed on the packaging of the project vis a vis market feedbacks. i do not know what is right, specially after satyam disaster nobody knows whom to beleive. I went to citibank to fund this project and they refused saying that project has problems and not even approved by them. Market rates of the property are dropping much more then other properties. Property dealers say that Mangement of this project is not investor friendly, ( Though i do not know what it means) Property dealers were suppose to give the money back to allotees from their commission but they say that they have not been paid their commission till today. Something is not right with the project image. Every time we receive a letter for insttalment it mentions that if not paid in reasonable time they will caancel the allotment, where as all other builders just charge interest.I wish mangment could look into all these issues and set them right.
- curryzone said…
- These guys are really eerie. No one knows what and why of this project anymore. We should just stop paying these fellows. Or better sue them for interest cost for lost opportunity and costs of keeping the emi’s going. I pay close to 80K every month. Cannot sell because I bought this ‘’shit’ @3500 per sq. ft.
I feel really sick even thinking about CP2 anymore.
- curryzone said…
- I am going to write to the Ministry of Urban Affairs and stop all payments to these guys. The banks have any way put a stop to all payouts – emi or otherwise.
I think there is more to this than meets the eye. Will also consider putting the builder on notice for breach of trust and misrepresentation.
- curryzone said…
- There is confirmed news that the builder plans to charge Rs. 400-450 per sq. ft as escalation. Add to this the already weird Rs. 200 per sq. ft. of transfer charge and IBMS (at possession) and you have a dead duck.
You will have to dish our around Rs. 20 lakhs more to get possession over and above the sale price and incidentals already collected by the builder.
These guys are crooked. First there was a delay in the project because of which most investors did not have to pay much to hold on. These investors sold at margins of Rs. 40-45 lakh profit and Bakshi made a cool Rs. 5.10 lakhs each time there was a transfer. Then was the phase 2 launch with transfer charges waviers issued for buyers. Escalation for phase 2 was capped at 5%.
Phase 1 buyers are facing a near death situation. Nowhere to go. Cannot leave the project as the banks want the entire amount to close the loan; the builder wants transfer charges. Saying is more painful as there is heavy interest to pay; fear of a looming escalation charge and more in store.
Wake up and lets give the guy a taste of his own medicine. This is a clear case of criminal breach of trust. What else the guy is a criminal and needs to be dealt with accordingly.
- curryzone said…
- Even the board of directors have failed in this case. They owe a fidicuary duty to the shareholders, company and customers.
The project image has taken a bad beating. People will think twice before investing in CP2 or with this builder. These guys have stooped really low.
God will never forgive them.
I believe there are foreign investors in this project. Hope they see this message and give Bakshi some sound advice.
Cheating will not take anyone far.
- Tilak said…
- Hi,
It’s really dis-heartening to know that such a great planning has reached to this level(quiet low) because of non-execution (who-so-ever responsible) of the project as per the planning.
May God(if there’s any) give the right direction to the promoters…
After reading all this and seeing the rates falling at and even below Rs. 2400 PSF(apx. 30% lower than the projects in vicinity), I feel that one of my life’s dream to live in such a beautiful property won’t come true in near future.Tilak R Kataria
0 98111 00398 - vidhu said…
- The enclosed blog is quite surprising. I am also an owner of an apartment in CP2 and was not aware of the fact that the promoters were in financial trouble. Sometime back they had sent us a letter claiming that they had received infusion of over $ 500 mn from a equity investment fund. I imagined that everything should have been OK with them. Do let me know your views whetehr they would be able to complete the apartments finally and if banks were financing loans against these apartments.
- curryzone said…
- Hi Fellow Investors,
Some banks are supporting the project some are not. HDFC (the best home loan bank in India) does not support new loans for this project.
ICICI Bank (my loan is from this bank) gave me a massive heart attack when they told me no more money would be available for me to fund this investment. I had to spend many hours to convince them. There was an extra cost in terms of extra insurance that I had to buy to get the loan running again.
The market rate of the property now is Rs. 2300 – Rs. 2400. Ask the broker.
There is further news from local brokers that the builder plans to charge Rs. 500 per sq. ft. as escalation charges. Whereas, there is a cap of 5% on the escalation charges for Phase – 2 investors.
The builder has waived Rs. 200 transfer charges for the Phase 2 project. Not so for Phase 1 folks.
The builder is extremely greedy and cunning. There is no way out of this project except to suffer till your dying day.
Folks that paid Rs. 307 extra for PLC will also suffer more than others. There is nothing extra to be had for these inside facing flat. For a long time to come there is going to be no inside facing things to enjoy. There is an internal road. Construction will go on up to 2012 at least.
The clubhouse has been shifted to the rooftop.
The flat size will be increased by about 140-150 sq. ft. by the time possession is handed over. The 2350 sq. ft. flat will now be handed over as 2500 sq. ft.
In a nutshell, you will have to dishout about Rs. 20 to 22 lakhs to get possession of this house. The market has discounted these contingencies and therefore the price of Rs. 2300-2400 in the market – lower by about 30% compared to other projects in the area. Even JMD is selling for about Rs. 3000 in the resale market.
Sorry for all those who invested.
I love the project but will not be able to hold it by the time possession is granted. I would be bankrupt.
Ask the builder to explain these f***ups. Let us the board of directors accountable. They have failed in their fidicuary duties.
Do you know there is a sewage treatement plant coming just behind Phase 1. The EWS, the generators parking entrances, the road and all the mess will be loaded on to Phase 1.
Only fools will buy this project anymore.
- curryzone said…
- Hi, I found this on www.gurgaonscoop. This explains my comment above. Wish I had seen this before I bought my flat in March 2008. The name of the posting is apt too ‘STAY AWAY’ it says.
___________________________________
Stay away
by headbedred on Wed Mar 19, 2008 at 08:29:32 AM EST
The central park 2 project was launched in Oct 2005, when the Central Park 1 project on Golf course road was being completed. The CP1 project was constructed by Mahindra Gesco who maintained quality and integrity during the project, leading to a quick booking in the CP 2 on Sohna Road.
CP2 project was not taken up by Mahindra Gesco. During the entire period from Oct 2005 to August 2007, the company never informed buyers about the progress or reasons why the project was being delayed and no construction was being done. The cheque for the third installment which was supposed to be taken by the company upon starting of actual construction was taken in April 2006, the 3 year period for ending of construction actually ends in April 2009 but the construction started only in August 2007. Even till February 2008, only 2 of the 9 building have got their pillars and floors, the walls are yet to be built !!The builder has strangulated buyers with an agreement copy that is both illegal and ridiculous. There is a `price escalation ` clause that says prices will increase as the construction progresses based on the govt price index- it is estimated that the final price buyers will have to pay could be Rs. 300 – 500 per sq ft more than the buying price – since prices of steel, cement and labour has gone up substantially. Further, 2 out 3 flats are being charged a HUGE PLC charge of Rs. 300 per sq ft. Phase 1 has 9 towers, 14 floors each and 3 flats a floor – so that’s 378 apartments – how can a company claim PLC for 252 apartments just because the apartments face a garden ? How does it specially matter to people who are on the 3rd floor to 14th floor?
The CP2 project was supposed to have 4 phases. Phase 1 is under construction, phase 2 is still not sold out since there are no buyers and the whole real estate market is in turmoil. Phase 3 and 4 are not even launched. Even if they somehow complete phase 1 , how do apartment owners live amidst all the construction?
Please also note that HUDA has made it mandatory for all builders to get competition certificates for the whole project before registration can be done for the apartments. That means you actually don’t own an apartment till the whole project is complete – so you can’t claim tax benefits on the home loan you take for the apartment – would the company bear the losses buyers will face?
As far as I can see, this project is headed for legal complications -buyers will drag the company to court before the project if half complete , the company will abandon the project midway claiming bankruptcy – and walk away with a tidy sum! Beware!
- Gaurav said…
- If someone is offering the flat abt 2400 sq.ft. for the three bed room flat for the phase I. is it will be going out to be a good option or not. please inform immediately at my email id gaurav.arora@siemens.com
- curryzone said…
- Not really Gaurav. Your accquisition cost will not remain at Rs. 2400 per sq. ft. The builder intends to impose an escalation cost of Rs. 400 – 500 per sq. ft. A fact they will not confirm but the market is frantically discussing.
Then the project will not likely take shape before 2012 because of the ongoing construction for phase 2, 3, 4, possibly more.
I bought this property for Rs. 3600 per sq. ft. but look at where it is. Similar properties in the area are not less than Rs. 3000 sq. ft.
Start with JMD Garden – rate Rs. 3000+ per sq. ft. a stones throw away and in the same stage as others – likely possession in October 2009 before CP2. CP2 will not come about before April 2010.
Look at Uniworld Garden – rate Rs. 4100 per sq. ft. started about one year before CP2 and possession given about 2 years ago.
Uniworld Garden – just launched – rate Rs. 2995 per sq. ft.
Park View 1 & 2 launched with CP2 – rate Rs. 4100 per sq. ft. (Park View 1) and Rs. 3500 per sq. ft. (Park View 2).
Vatika City – rate Rs. 3500 per sq. ft. and rising.
This damn thing is cursed. Then it has the sewage plant right behind th complex. The sector road right through the complex. The builder is greedy and smart.
The last thing that you need to keep in mind is the fact that the though the flat area will remain 2350 sq. ft. the builder is most likely going to demand about 4 lakhs more by citing additional common spaces added.
The swimming pool will be just right next to the boundary wall. With dust and labour all around, you will have to wait some 2 years before there is any use for this facility.
There is also news that the builder will not handover the property of Phase 1 to a society before 2012 as HUDA requires the complete property to be constructed before completion certificate is granted. Alternatively, If the builder separates Phase 1 from the rest of the complex, then there is no fun in buying as the part that remains with Phase 1 will be smaller than most mordern day complexes – whereas this was sold as being part a 52 acres complex.
You decide. What you buy for Rs. 2400 per sq. ft. will cost you at least Rs. 3000 per sq. ft. around possession. Add to this the financing cost, construction status, builders reputation, HUDA bylaws, etc. etc. and you have a difficult decision to make.
The market has a lot of intelligent people. If the property was any way worth a lot of investors would have picked this up at Rs. 2400 per sq. ft. Well no one is.
- curryzone said…
- A idea of the construction status:
Phase 1 – April 2010
Phase 2 – June 2011
Phase 3 – June 2012
Phase 4 – December 2014 – possibiliy never - vidhu said…
- I spoke to anjali of CP2 and she said that they will hand ver the project by Dec 2009.
Maybe it would be a good idea to come togather and meet up with the officials of CP2 to demand a clear explanation on timelines and by when they will handover the property plus issues related to HUDA completion certificate etc…
If others are willing to come along, I suggest , give your confirmation and we can organise to meet up with them on a mutually convenient day.
My number is 9810500750 & emial id is vidhugoel@yahoo.com
- Anil
said… - Tilak, Curryzone and Vidhu
You are only 3 ppl of the over 1000 people who have invested in Central Park 2 and seem to getting together to do something about it. I am the 4th. How do we access the rest 996 people ? Unless everyone works together, we cannot take the builder to task and they will get away with everything.
As per the agreement for phase 1, they should ideally be restricting the escalation to within 10%. Also, its likely that the size of the apartment increases as has been the case with many other builders.
The problems are some of the other points raised here :
1. the PLC of 307 Rs. should not be charged till the time the 20 acres park is not completely handed over.
2. If there is a delay in handing over beyond the promised April 2009 for phase 1, the penalty amount should be paid.
3. The escalation, as per contract, should be charged only for the period April 2006 – April 2009. If the project is delayed, its not our fault.
It is a good idea to bring as many people as possible – together
- Anil said…
- I think the central Park management hasnt seen this blog since they created it. When they do see it, they will shut it down, so I’ve created an alternative blog that they can’t shut.
I would advise that we all post there regularly. its at http://centralparktwo.blogspot.com
- vidhu said…
- Hi All,
To begin with, let the four of us go across and start a dialogue with Central park 2 & report our finding on the blog.
I am sure that more people , who have bought CP2 will be logging in and will evntually locate our efforts and join in.
Until and unless we meet them and place our demands in front of them, we will not get a response / reaction.
Please let me know your views.
regards
Vidhu
- curryzone said…
- Hi Tilak, Vidhu and Anil,
I agree with you all. First things first, with some efforts of all interested parties the transfer charges on Phase 1 have been brought down from Rs. 200 per sq. ft. to Rs. 50 per sq. ft.
Which means that all our properties are a bit more tradeable.
Many of you may not know this but the management has floated some more flats on the ground floor and roof top of the Phase 1 portion. These are being sold escalation free. Which means that irrespective of what happens the owners of these new flats will not have to pay a single paisa more than what they have been asked to pay now. The price is frozen in time. This is unfortunate and unfair to all of us.
The builder has also capped escalation charges to 5% of the base price for Phase 2 flats. Then why are the older Phase 1 owners who have stuck with the builder through thick and thin been singled out and made to bear all the shit.
I agree that we could get together and discuss things with the builder. But this will not help much as Indian courts and authorities are wary of consumers who form an alliance to meet common objectives. What could have been done is for all of us and some more of us getting together and sending a combined notice to the builder to pay us interest @ 18% per annum for the delays and claimed damages to the tune of interest paid to the bank. This would help us get noticed and builder would be forced to take corrective measures.
Our notice would point out the discrimination, the irresponsible behaviour, seek confirmation that no escalation would be charged, seek confirmation that no more amounts would be due to the builder till possession, seek confirmation that all PLC’s would be waived or deffered and if any amounts have been collected towards PLC these should be interest bearing, etc.
If you folks agree, we could form a joint action group. Best way would be for someone to put a notice draft on a password protected website/ weblink with access to only the 4 of us and whoever wants to participates. We can then make amends and pool in common intellect to come up with something good.
This would require some legwork and visit to the builders office, site, meet brokers who know the shortcomings of the project and the promoters. Some of us that know lawyers could help take professional advise from these folks.
AND LASTLY, YOU KNOW WHAT SOMEONE IN CP2 READING THESE BLOGS AND HAS DELETED SOME OF THE PARTS WE HAD POSTED. BEFORE YOU ALL WROTE YOUR LAST COMMENTS ON THE BLOG THERE WERE 20 COMMENTS. THERE SHOULD HAVE BEEN 24 NOW BUT WE HAVE ONLY 21. ON CHECKING, I FIND THAT SOME OF MY HARDHITTING POSTS HAVE BEEN DELETED.
IT WOULD BE BEST TO COPY PASTE THIS CONTENT SOME PLACE ELSE.
- curryzone said…
- My blog is curryzone.wordpress.com where I have now pasted all content as backup. Just in case ………..
- curryzone said…
- JUST IN CASE YOU NEED INSPIRATION
The central park 2 project was launched in Oct 2005, when the Central Park 1 project on Golf course road was being completed. The CP1 project was constructed by Mahindra Gesco who maintained quality and integrity during the project, leading to a quick booking in the CP 2 on Sohna Road.
CP2 project was not taken up by Mahindra Gesco. During the entire period from Oct 2005 to August 2007, the company never informed buyers about the progress or reasons why the project was being delayed and no construction was being done. The cheque for the third installment which was supposed to be taken by the company upon starting of actual construction was taken in April 2006, the 3 year period for ending of construction actually ends in April 2009 but the construction started only in August 2007. Even till February 2008, only 2 of the 9 building have got their pillars and floors, the walls are yet to be built !!
The builder has strangulated buyers with an agreement copy that is both illegal and ridiculous. There is a `price escalation ` clause that says prices will increase as the construction progresses based on the govt price index- it is estimated that the final price buyers will have to pay could be Rs. 300 – 500 per sq ft more than the buying price – since prices of steel, cement and labour has gone up substantially. Further, 2 out 3 flats are being charged a HUGE PLC charge of Rs. 300 per sq ft. Phase 1 has 9 towers, 14 floors each and 3 flats a floor – so that’s 378 apartments – how can a company claim PLC for 252 apartments just because the apartments face a garden ? How does it specially matter to people who are on the 3rd floor to 14th floor ?
The CP2 project was supposed to have 4 phases. Phase 1 is under construction, phase 2 is still not sold out since there are no buyers and the whole real estate market is in turmoil. Phase 3 and 4 are not even launched. Even if they somehow complete phase 1 , how do apartment owners live amidst all the construction ? Please also note that HUDA has made it mandatory for all builders to get competition certificates for the whole project before registration can be done for the apartments. That means you actually don’t own an apartment till the whole project is complete – so you can’t claim tax benefits on the home loan you take for the apartment – would the company bear the losses buyers will face?
As far as I can see, this project is headed for legal complications – buyers will drag the company to court before the project if half complete , the company will abandon the project midway claiming bankruptcy – and walk away with a tidy sum ! Beware !SOURCE: http://www.gurgaonscoop.com/story/2008/2/16/1321/17713
- curryzone said…
- INFACT ALL THE COMMENTS I PASTED FROM WWW.GURGAONSCOOP.COM HAVE EITHER BEEN EDITED OR DELETED.
- curryzone said…
- The bakshis of central park 2 have sold the club to a goonda and have proven to the market what they are going to give to the central park 2 buyers.Now there will be people of this goonda who will open the club to outsiders…
Is there no justice in this world?
Bhapajee has shown his true colours…
Where are all those channels who fight for the rights of the consumers?
mahindras cannot leave us like this .they should file a criminal case against the bakshis and kashayap..
Till now the bakshis were not getting the brunt of the residents ire but by gods grace he will feel it now.Source: http://www.gurgaonscoop.com/story/2007/8/4/201530/6206
- curryzone said…
- IF ANY OF YOU HAVE CONTACTS IN THE MEDIA, WE COULD MAKE THIS A CASE STUDY. SEE THE POST BELOW TAKEN FROM GURGAONSCOOP.COM. PEOPLE APPROACHED NDTV FOR SCREWUPS IN CENTRALPARK 1.
“I bought a property in central park 2 and now I see what these bakshis are made of.I am definately going to sell it before noone wants to buy it.
What they have done to central park 1 owners is goondaism and cheating and I dont want to fall for that in central park 2.They have taken the peace of mind away from thse highly educated people who are reduced to dharnas and fighting battles in court.
Thanks for warning us and I hope these residents of central park 1 win the battle against the bakshis.
Yesterday I saw their story on ndtv at least ndtv is helping tem otherwise who helps aginst these builders.”Source: http://www.gurgaonscoop.com/story/2007/8/4/201530/6206
- curryzone said…
- CHECK THIS LINK OUT. REALLY FUNDOO.
http://m.twitxr.com/gurgaonscoop/with_friends/
curryzone said… curryzone said… The central park 2 project was launched in Oct 2005, when the Central Park 1 project on Golf course road was being completed. The CP1 project was constructed by Mahindra Gesco who maintained quality and integrity during the project, leading to a quick booking in the CP 2 on Sohna Road.
CP2 project was not taken up by Mahindra Gesco. During the entire period from Oct 2005 to August 2007, the company never informed buyers about the progress or reasons why the project was being delayed and no construction was being done. The cheque for the third installment which was supposed to be taken by the company upon starting of actual construction was taken in April 2006, the 3 year period for ending of construction actually ends in April 2009 but the construction started only in August 2007. Even till February 2008, only 2 of the 9 building have got their pillars and floors, the walls are yet to be built !!
The builder has strangulated buyers with an agreement copy that is both illegal and ridiculous. There is a `price escalation ` clause that says prices will increase as the construction progresses based on the govt price index- it is estimated that the final price buyers will have to pay could be Rs. 300 – 500 per sq ft more than the buying price – since prices of steel, cement and labour has gone up substantially. Further, 2 out 3 flats are being charged a HUGE PLC charge of Rs. 300 per sq ft. Phase 1 has 9 towers, 14 floors each and 3 flats a floor – so that’s 378 apartments – how can a company claim PLC for 252 apartments just because the apartments face a garden ? How does it specially matter to people who are on the 3rd floor to 14th floor ?
The CP2 project was supposed to have 4 phases. Phase 1 is under construction, phase 2 is still not sold out since there are no buyers and the whole real estate market is in turmoil. Phase 3 and 4 are not even launched. Even if they somehow complete phase 1 , how do apartment owners live amidst all the construction ? Please also note that HUDA has made it mandatory for all builders to get competition certificates for the whole project before registration can be done for the apartments. That means you actually don’t own an apartment till the whole project is complete – so you can’t claim tax benefits on the home loan you take for the apartment – would the company bear the losses buyers will face?
As far as I can see, this project is headed for legal complications – buyers will drag the company to court before the project if half complete , the company will abandon the project midway claiming bankruptcy – and walk away with a tidy sum ! Beware !
SOURCE: http://www.gurgaonscoop.com/story/2008/2/16/1321/17713
curryzone said… curryzone said… Is there no justice in this world?
Bhapajee has shown his true colours…
Where are all those channels who fight for the rights of the consumers?
mahindras cannot leave us like this .they should file a criminal case against the bakshis and kashayap..
Till now the bakshis were not getting the brunt of the residents ire but by gods grace he will feel it now.
Source: http://www.gurgaonscoop.com/story/2007/8/4/201530/6206
curryzone said… “I bought a property in central park 2 and now I see what these bakshis are made of.I am definately going to sell it before noone wants to buy it.
What they have done to central park 1 owners is goondaism and cheating and I dont want to fall for that in central park 2.They have taken the peace of mind away from thse highly educated people who are reduced to dharnas and fighting battles in court.
Thanks for warning us and I hope these residents of central park 1 win the battle against the bakshis.
Yesterday I saw their story on ndtv at least ndtv is helping tem otherwise who helps aginst these builders.”
Source: http://www.gurgaonscoop.com/story/2007/8/4/201530/6206
curryzone said… http://m.twitxr.com/gurgaonscoop/with_friends/
Copy Paste from Blog on Centralpark.in As Content Needs Backup In Case Builder Deletes From Company Website
March 25, 2009
Tilak said… Hi, I am born and brought up in Gurgaon. I have seen almost all the residential projects in Gurgaon and have found that Central Park-II is theee besttt project wrt the location, planning, design, construction quality and value for your investment especially in Bellevue Phase-1. I strongly recommend everyone who wants to buy a flat(Rs. 80L to 1.5 Cr.++ budget) to go thru the details of this township before putting your money anywhere else… Peace Tilak R Kataria December 17, 2008 4:28 AM curryzone said… I agree with Tilak. I have a property there and can’t wait to get possession. I am told the builder will handover phase 1 of the property to its rightful owners by July 2009. High time! January 6, 2009 9:09 AM curryzone said… It is now getting really painful to hold on to this property. I bought my apartment in a 2nd sale transaction paying Rs. 3500 per sq. ft. That comes to Rs. 1.1 crores for the apartment. I am currently paying a pre-emi charge of Rs. 80,000 per month to the bank. Imagine putting 80K down the drain every month with no respite in site. The bloke who sold the house to me made a cool 35 lakhs. If I now want to sell, the property rate has fallen to Rs. 2600 per sq. ft. Which means I will have to pay an addition Rs. 22 lakhs to the bank to get rid of this property apart from the Rs. 5 lakhs (transfer charges) to the builder. The whole thing sucks. I dont know when possession will come. And dont know what the builder will demand due to the delayed handover. I am told there is a plan to demand an additional amount as escalation at the time of possession. Enough is enough. We all should get together and demand that the builder either give possession by June 2009 or start paying our EMI’s to the bank. No futher payments should be made to the builder till possession in sight. Getting screwed from all sides is surely not something I enjoy … do you. To top it all ICICI bank has reported that old customers will need to bleed till their very last. The bank has dropped interst rates for new customers. For old ones the rate of interest will be 13%. Bullshit, I say. Can anyone help with this shit I am in. Please post details and I will follow through. January 18, 2009 8:59 AM curryzone said… Tilak, I now change my opinion about the property. Recently my bank refused to honour the loan agreement stating that the builder was in trouble with commitments and the bank’s exposure is more than they bargained for. Same with HDFC and other banks. I have tried my best to get rid of this property. There seems to be no help from any quarter. My view is that any serious investor shoud stay away from this property at least till possession of Phase 1 is delivered. There are other properties in the market selling at sub-allotment rates. These are the ones you should go for. Possession properties should be preferred. The funny thing is that all properties (Uniworld Garden, Unitech Close, JMD, Park View 1 & 2, Vatika City, Omaxe Nile, Petals) that launched around the same time as CP2 are at some stage of possession handover. But not so with our dear friends. They seem to be having a really easy time and the crisis doesn’t seem to be helping the flat owners. Curse the fellows!!! January 18, 2009 9:06 AM Vivek said… I am amazed on the packaging of the project vis a vis market feedbacks. i do not know what is right, specially after satyam disaster nobody knows whom to beleive. I went to citibank to fund this project and they refused saying that project has problems and not even approved by them. Market rates of the property are dropping much more then other properties. Property dealers say that Mangement of this project is not investor friendly, ( Though i do not know what it means) Property dealers were suppose to give the money back to allotees from their commission but they say that they have not been paid their commission till today. Something is not right with the project image. Every time we receive a letter for insttalment it mentions that if not paid in reasonable time they will caancel the allotment, where as all other builders just charge interest.I wish mangment could look into all these issues and set them right. January 27, 2009 6:32 AM curryzone said… These guys are really eerie. No one knows what and why of this project anymore. We should just stop paying these fellows. Or better sue them for interest cost for lost opportunity and costs of keeping the emi’s going. I pay close to 80K every month. Cannot sell because I bought this ‘’shit’ @3500 per sq. ft. I feel really sick even thinking about CP2 anymore. January 31, 2009 11:10 AM curryzone said… I am going to write to the Ministry of Urban Affairs and stop all payments to these guys. The banks have any way put a stop to all payouts – emi or otherwise. I think there is more to this than meets the eye. Will also consider putting the builder on notice for breach of trust and misrepresentation. February 8, 2009 9:03 AM curryzone said… There is confirmed news that the builder plans to charge Rs. 400-450 per sq. ft as escalation. Add to this the already weird Rs. 200 per sq. ft. of transfer charge and IBMS (at possession) and you have a dead duck. You will have to dish our around Rs. 20 lakhs more to get possession over and above the sale price and incidentals already collected by the builder. These guys are crooked. First there was a delay in the project because of which most investors did not have to pay much to hold on. These investors sold at margins of Rs. 40-45 lakh profit and Bakshi made a cool Rs. 5.10 lakhs each time there was a transfer. Then was the phase 2 launch with transfer charges waviers issued for buyers. Escalation for phase 2 was capped at 5%. Phase 1 buyers are facing a near death situation. Nowhere to go. Cannot leave the project as the banks want the entire amount to close the loan; the builder wants transfer charges. Saying is more painful as there is heavy interest to pay; fear of a looming escalation charge and more in store. Wake up and lets give the guy a taste of his own medicine. This is a clear case of criminal breach of trust. What else the guy is a criminal and needs to be dealt with accordingly. March 2, 2009 8:38 AM curryzone said… Even the board of directors have failed in this case. They owe a fidicuary duty to the shareholders, company and customers. The project image has taken a bad beating. People will think twice before investing in CP2 or with this builder. These guys have stooped really low. God will never forgive them. I believe there are foreign investors in this project. Hope they see this message and give Bakshi some sound advice. Cheating will not take anyone far. March 2, 2009 8:43 AM Tilak said… Hi, It’s really dis-heartening to know that such a great planning has reached to this level(quiet low) because of non-execution (who-so-ever responsible) of the project as per the planning. May God(if there’s any) give the right direction to the promoters… After reading all this and seeing the rates falling at and even below Rs. 2400 PSF(apx. 30% lower than the projects in vicinity), I feel that one of my life’s dream to live in such a beautiful property won’t come true in near future. Tilak R Kataria 0 98111 00398 March 3, 2009 10:04 AM vidhu said… The enclosed blog is quite surprising. I am also an owner of an apartment in CP2 and was not aware of the fact that the promoters were in financial trouble. Sometime back they had sent us a letter claiming that they had received infusion of over $ 500 mn from a equity investment fund. I imagined that everything should have been OK with them. Do let me know your views whetehr they would be able to complete the apartments finally and if banks were financing loans against these apartments. March 5, 2009 5:14 AM curryzone said… Hi Fellow Investors, Some banks are supporting the project some are not. HDFC (the best home loan bank in India) does not support new loans for this project. ICICI Bank (my loan is from this bank) gave me a massive heart attack when they told me no more money would be available for me to fund this investment. I had to spend many hours to convince them. There was an extra cost in terms of extra insurance that I had to buy to get the loan running again. The market rate of the property now is Rs. 2300 – Rs. 2400. Ask the broker. There is further news from local brokers that the builder plans to charge Rs. 500 per sq. ft. as escalation charges. Whereas, there is a cap of 5% on the escalation charges for Phase – 2 investors. The builder has waived Rs. 200 transfer charges for the Phase 2 project. Not so for Phase 1 folks. The builder is extremely greedy and cunning. There is no way out of this project except to suffer till your dying day. Folks that paid Rs. 307 extra for PLC will also suffer more than others. There is nothing extra to be had for these inside facing flat. For a long time to come there is going to be no inside facing things to enjoy. There is an internal road. Construction will go on up to 2012 at least. The clubhouse has been shifted to the rooftop. The flat size will be increased by about 140-150 sq. ft. by the time possession is handed over. The 2350 sq. ft. flat will now be handed over as 2500 sq. ft. In a nutshell, you will have to dishout about Rs. 20 to 22 lakhs to get possession of this house. The market has discounted these contingencies and therefore the price of Rs. 2300-2400 in the market – lower by about 30% compared to other projects in the area. Even JMD is selling for about Rs. 3000 in the resale market. Sorry for all those who invested. I love the project but will not be able to hold it by the time possession is granted. I would be bankrupt. Ask the builder to explain these f***ups. Let us the board of directors accountable. They have failed in their fidicuary duties. Do you know there is a sewage treatement plant coming just behind Phase 1. The EWS, the generators parking entrances, the road and all the mess will be loaded on to Phase 1. Only fools will buy this project anymore. March 9, 2009 7:06 AM curryzone said… Hi, I found this on www.gurgaonscoop. This explains my comment above. Wish I had seen this before I bought my flat in March 2008. The name of the posting is apt too ‘STAY AWAY’ it says. ___________________________________ Stay away by headbedred on Wed Mar 19, 2008 at 08:29:32 AM EST The central park 2 project was launched in Oct 2005, when the Central Park 1 project on Golf course road was being completed. The CP1 project was constructed by Mahindra Gesco who maintained quality and integrity during the project, leading to a quick booking in the CP 2 on Sohna Road. CP2 project was not taken up by Mahindra Gesco. During the entire period from Oct 2005 to August 2007, the company never informed buyers about the progress or reasons why the project was being delayed and no construction was being done. The cheque for the third installment which was supposed to be taken by the company upon starting of actual construction was taken in April 2006, the 3 year period for ending of construction actually ends in April 2009 but the construction started only in August 2007. Even till February 2008, only 2 of the 9 building have got their pillars and floors, the walls are yet to be built !! The builder has strangulated buyers with an agreement copy that is both illegal and ridiculous. There is a `price escalation ` clause that says prices will increase as the construction progresses based on the govt price index- it is estimated that the final price buyers will have to pay could be Rs. 300 – 500 per sq ft more than the buying price – since prices of steel, cement and labour has gone up substantially. Further, 2 out 3 flats are being charged a HUGE PLC charge of Rs. 300 per sq ft. Phase 1 has 9 towers, 14 floors each and 3 flats a floor – so that’s 378 apartments – how can a company claim PLC for 252 apartments just because the apartments face a garden ? How does it specially matter to people who are on the 3rd floor to 14th floor? The CP2 project was supposed to have 4 phases. Phase 1 is under construction, phase 2 is still not sold out since there are no buyers and the whole real estate market is in turmoil. Phase 3 and 4 are not even launched. Even if they somehow complete phase 1 , how do apartment owners live amidst all the construction? Please also note that HUDA has made it mandatory for all builders to get competition certificates for the whole project before registration can be done for the apartments. That means you actually don’t own an apartment till the whole project is complete – so you can’t claim tax benefits on the home loan you take for the apartment – would the company bear the losses buyers will face? As far as I can see, this project is headed for legal complications -buyers will drag the company to court before the project if half complete , the company will abandon the project midway claiming bankruptcy – and walk away with a tidy sum! Beware! March 10, 2009 5:44 AM Gaurav said… If someone is offering the flat abt 2400 sq.ft. for the three bed room flat for the phase I. is it will be going out to be a good option or not. please inform immediately at my email id gaurav.arora@siemens.com March 21, 2009 6:05 AM curryzone said… Not really Gaurav. Your accquisition cost will not remain at Rs. 2400 per sq. ft. The builder intends to impose an escalation cost of Rs. 400 – 500 per sq. ft. A fact they will not confirm but the market is frantically discussing. Then the project will not likely take shape before 2012 because of the ongoing construction for phase 2, 3, 4, possibly more. I bought this property for Rs. 3600 per sq. ft. but look at where it is. Similar properties in the area are not less than Rs. 3000 sq. ft. Start with JMD Garden – rate Rs. 3000+ per sq. ft. a stones throw away and in the same stage as others – likely possession in October 2009 before CP2. CP2 will not come about before April 2010. Look at Uniworld Garden – rate Rs. 4100 per sq. ft. started about one year before CP2 and possession given about 2 years ago. Uniworld Garden – just launched – rate Rs. 2995 per sq. ft. Park View 1 & 2 launched with CP2 – rate Rs. 4100 per sq. ft. (Park View 1) and Rs. 3500 per sq. ft. (Park View 2). Vatika City – rate Rs. 3500 per sq. ft. and rising. This damn thing is cursed. Then it has the sewage plant right behind th complex. The sector road right through the complex. The builder is greedy and smart. The last thing that you need to keep in mind is the fact that the though the flat area will remain 2350 sq. ft. the builder is most likely going to demand about 4 lakhs more by citing additional common spaces added. The swimming pool will be just right next to the boundary wall. With dust and labour all around, you will have to wait some 2 years before there is any use for this facility. There is also news that the builder will not handover the property of Phase 1 to a society before 2012 as HUDA requires the complete property to be constructed before completion certificate is granted. Alternatively, If the builder separates Phase 1 from the rest of the complex, then there is no fun in buying as the part that remains with Phase 1 will be smaller than most mordern day complexes – whereas this was sold as being part a 52 acres complex. You decide. What you buy for Rs. 2400 per sq. ft. will cost you at least Rs. 3000 per sq. ft. around possession. Add to this the financing cost, construction status, builders reputation, HUDA bylaws, etc. etc. and you have a difficult decision to make. The market has a lot of intelligent people. If the property was any way worth a lot of investors would have picked this up at Rs. 2400 per sq. ft. Well no one is. March 22, 2009 2:58 AM curryzone said… A idea of the construction status: Phase 1 – April 2010 Phase 2 – June 2011 Phase 3 – June 2012 Phase 4 – December 2014 – possibiliy never March 22, 2009 3:01 AM vidhu said… I spoke to anjali of CP2 and she said that they will hand ver the project by Dec 2009. Maybe it would be a good idea to come togather and meet up with the officials of CP2 to demand a clear explanation on timelines and by when they will handover the property plus issues related to HUDA completion certificate etc… If others are willing to come along, I suggest , give your confirmation and we can organise to meet up with them on a mutually convenient day. My number is 9810500750 & emial id is vidhugoel@yahoo.com March 22, 2009 6:50 AM Anil said… Tilak, Curryzone and Vidhu You are only 3 ppl of the over 1000 people who have invested in Central Park 2 and seem to getting together to do something about it. I am the 4th. How do we access the rest 996 people ? Unless everyone works together, we cannot take the builder to task and they will get away with everything. As per the agreement for phase 1, they should ideally be restricting the escalation to within 10%. Also, its likely that the size of the apartment increases as has been the case with many other builders. The problems are some of the other points raised here : 1. the PLC of 307 Rs. should not be charged till the time the 20 acres park is not completely handed over. 2. If there is a delay in handing over beyond the promised April 2009 for phase 1, the penalty amount should be paid. 3. The escalation, as per contract, should be charged only for the period April 2006 – April 2009. If the project is delayed, its not our fault. It is a good idea to bring as many people as possible – together March 22, 2009 8:58 AM Anil said… I think the central Park management hasnt seen this blog since they created it. When they do see it, they will shut it down, so I’ve created an alternative blog that they can’t shut. I would advise that we all post there regularly. its at http://centralparktwo.blogspot.com March 22, 2009 10:22 AM vidhu said… Hi All, To begin with, let the four of us go across and start a dialogue with Central park 2 & report our finding on the blog. I am sure that more people , who have bought CP2 will be logging in and will evntually locate our efforts and join in. Until and unless we meet them and place our demands in front of them, we will not get a response / reaction. Please let me know your views. regards Vidhu March 23, 2009 5:12 AM curryzone said… Hi Tilak, Vidhu and Anil, I agree with you all. First things first, with some efforts of all interested parties the transfer charges on Phase 1 have been brought down from Rs. 200 per sq. ft. to Rs. 50 per sq. ft. Which means that all our properties are a bit more tradeable. Many of you may not know this but the management has floated some more flats on the ground floor and roof top of the Phase 1 portion. These are being sold escalation free. Which means that irrespective of what happens the owners of these new flats will not have to pay a single paisa more than what they have been asked to pay now. The price is frozen in time. This is unfortunate and unfair to all of us. The builder has also capped escalation charges to 5% of the base price for Phase 2 flats. Then why are the older Phase 1 owners who have stuck with the builder through thick and thin been singled out and made to bear all the shit. I agree that we could get together and discuss things with the builder. But this will not help much as Indian courts and authorities are wary of consumers who form an alliance to meet common objectives. What could have been done is for all of us and some more of us getting together and sending a combined notice to the builder to pay us interest @ 18% per annum for the delays and claimed damages to the tune of interest paid to the bank. This would help us get noticed and builder would be forced to take corrective measures. Our notice would point out the discrimination, the irresponsible behaviour, seek confirmation that no escalation would be charged, seek confirmation that no more amounts would be due to the builder till possession, seek confirmation that all PLC’s would be waived or deffered and if any amounts have been collected towards PLC these should be interest bearing, etc. If you folks agree, we could form a joint action group. Best way would be for someone to put a notice draft on a password protected website/ weblink with access to only the 4 of us and whoever wants to participates. We can then make amends and pool in common intellect to come up with something good. This would require some legwork and visit to the builders office, site, meet brokers who know the shortcomings of the project and the promoters. Some of us that know lawyers could help take professional advise from these folks. AND LASTLY, YOU KNOW WHAT SOMEONE IN CP2 READING THESE BLOGS AND HAS DELETED SOME OF THE PARTS WE HAD POSTED. BEFORE YOU ALL WROTE YOUR LAST COMMENTS ON THE BLOG THERE WERE 20 COMMENTS. THERE SHOULD HAVE BEEN 24 NOW BUT WE HAVE ONLY 21. ON CHECKING, I FIND THAT SOME OF MY HARDHITTING POSTS HAVE BEEN DELETED. IT WOULD BE BEST TO COPY PASTE THIS CONTENT SOME PLACE ELSE. March 25, 2009 11:50 AM
JADE GOODY DEAD
March 22, 2009
Should the relationship between a franchisor and franchisee break down, it is not unusual for a failing franchisee to allege that the franchisor mis-sold the franchise by understating the risks of the business. This can trigger an examination by both parties of what exactly was said by the franchisor to the prospective franchisee in pre-contractual discussions, on the basis of which the latter decided to enter into the franchise agreement. The franchisor should be confident that the information given to the prospective franchisee at that stage was entirely accurate. However, in the event of any doubt, a franchisor may well point to any non-reliance clause in the franchise agreement. Non-reliance clauses are commonly used to seek to limit the franchisor’s liability for any representations made to a prospective franchisee except those expressly contained in the contract, and may state that the franchisor makes no representations or guarantees as to the profitability or any other aspect of the franchise business. On July 30 2008 the High Court considered the issue of how far a non-reliance clause protects the franchisor in Peart Stevenson Associates Limited v Brian Holland.(1)
Facts
The claimant was a franchisor who had developed a franchise model for the provision of inspection services in relation to gas and electrical appliances. The defendant had taken on the franchise in 2006 but it had failed to live up to expectations of profitability. Disputes arose between the claimant and the defendant in relation to a number of matters, including outstanding franchise fees owed by the defendant. The claimant terminated the franchise agreement, and the defendant subsequently set up a rival business within the franchise territory.
The claimant sued for damages flowing from the defendant’s alleged breaches of the franchise agreement, including alleged breach of post-termination restrictive covenants. One such covenant was a non-compete clause which prohibited the franchisee from being “engaged or interested or concerned in the supply of products and services similar to the services” provided by the franchise, within the franchise territory for a period of one year following termination of the agreement. The defendant counter-claimed for misrepresentation, alleging that, among other things, the claimant had misrepresented the average profit margin of franchisees and the failure rate of franchises.
Damages
The court found that the defendant should pay damages for the breaches which resulted in termination of the agreement. The court used the actual and projected figures of the defendant’s franchise, as supplied by the defendant, to calculate the level of the franchise fees that the claimant would have earned had the agreement continued, rejecting the claimant’s calculation based on average figures for other franchisees. On this basis, the claimant was awarded damages of £20,430.71.
The court also found that the defendant had breached the non-compete covenant, but it valued the claimant’s loss as significantly lower than the damages claimed and awarded only nominal damages of £2. This was because the court found no evidence that the breach had caused the franchisor actual damage. The court was clear: if a franchisor cannot, or will not, replace an outgoing franchisee in the territory for reasons other than the franchisee’s breach of the agreement, the franchisor’s loss will be minimal. Mere breach of a restrictive covenant following termination will not automatically give rise to damages.
Moreover, the court upheld the defendant’s counterclaim and found that the claimant had made a number of fraudulent misrepresentations which the defendant had relied upon in entering into the franchise agreement. Damages of £228,940 were awarded to the defendant (based largely on the income he lost by taking the franchise). Damages received by the defendant therefore exceeded those awarded to the claimant by £149,081.99.
Enforceability of Non-reliance Clauses
A key element in the court’s findings was its view of the effect of a non-reliance clause in the franchise agreement on the defendant’s claim that he relied on the misrepresentations when entering into the agreement. The clause stated that the defendant acknowledged that he had not relied upon any oral or written representation made to him by the franchisor or his employees and that he had made his own independent investigations into all matters relevant to the franchise business.
A further paragraph stated:
“ the franchisee hereby acknowledges… that in giving advice to and assisting the franchisee in establishing the business the franchisor bases its advice and recommendations on experience actually obtained in practice and is not making or giving any representations guarantees or warranties with regard to such matters or generally in connection with the sales volume profitability or any other aspect of the business”.
The court considered two approaches to assessing the enforceability of non-reliance clauses. The first approach concerns the fact that the clause seeks to limit or exclude the franchisor’s liability for misrepresentation, and is therefore effective only to the extent that it is reasonable, in accordance with Section 11 of the Unfair Contract Terms Act 1977. The burden is on the party seeking to rely on the non-reliance clause to show that it is reasonable. On this approach, the court held that the non-reliance clause did not meet the requirement of reasonableness.
The second approach concerns whether the clause meets the following requirements identified in the Court of Appeal case of Lowe v Lombank Ltd:(2)
The clause is clear and unambiguous;
The franchisee understood that the clause would be acted on by the franchisor; and
The franchisor believed it to be true and was induced by this belief to act upon it.
The court found that although the clause was clear and unambiguous, the fact that the defendant had signed the franchise agreement which contained the non-reliance clause was not sufficient evidence that he meant it to be acted on by the claimant. Nor was the court satisfied that the claimant believed the statement of non-reliance to be true. Instead, the court found that the claimant knew that the defendant had relied on the misrepresentations that it had made to him at various pre-contractual meetings.
The court found that it did not need to decide which of the two approaches above was correct, because they both led to the same conclusion: that the non-reliance clause did noprovide any defence to the franchisor in relation to the fraudulent misrepresentations that the court found it had made to the franchisee.
Comment
The first key lesson to emerge from this case with regards to damages is that the level of damages for a franchisee’s pre-termination breaches of a franchise agreement is likely to be calculated by reference to actual and projected figures for the franchise in question rather than by reference to average figures for other franchises of the franchisor. The second is that if a franchisor cannot, or will not, replace an outgoing franchisee in the territory for reasons other than the franchisee’s post-termination breach of the agreement, the franchisor may be entitled to only nominal damages for that breach.
Regarding mis-selling the franchise and non-reliance clauses, the key lessons are as follows:
Franchisors that deliberately or recklessly overstate the prospects or understate the failure rate of their franchise risk being found liable for fraudulent misrepresentation, irrespective of any non-reliance clause.
Accurate records should be kept of pre-contractual meetings with franchisees, particularly if a franchisee is given information or statistics regarding the risks of the franchise.
Franchisors should be careful not to be evasive with prospective franchisees when answering questions about the prospects of the franchise.
For further information on this topic please contact Richard Little or Vanessa Smith at Eversheds by telephone (+44 20 7919 4500) or by fax (+44 20 7919 4919) or by email (richardlittle@eversheds.com or vanessasmith@eversheds.com).
Endnotes
(1) [2008] EWHC 1868 (QB).
(2) [1960] 1 WLR 196.
Comment or question for author
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Source: http://www.internationallawoffice.com/Newsletters/Detail.aspx?g=3fdd1a13-2e18-40fa-8b51-dd7682a286b9#E
Discovering Old Songs – Eye of the Tiger
March 22, 2009
Go to: http://www.youtube.com/watch?v=Mu9xx5Ri278
Beautiful, timeless.
The lyrics are so clearly sung. What a great voice.
Buying Real Estate Undervalued vs. Buying UNDER VALUE!
March 19, 2009
“Undervalued” vs.. “under value”… is there a difference?
People often speak of buying a property “undervalued”, as if they are discovering something nobody else figured out. Stocks, land, and real estate can all be purchased undervalued, but this is different from buying property UNDER value.
Here’s the difference…
Let’s say you think a company is ripe to expand within the next few years. You are speculating that the value of the company’s stock will increase, so you buy AT MARKET PRICE and hope you are right. You can also buy a property at MARKET PRICE and hope demand will increase and thus its value will go up. You can buy gold at today’s price and hope it will go up in price. However, in all cases you are speculating that the asset will increase in value and that it is CURRENTLY undervalued.
Compare this thinking to buying a property UNDER VALUE, that is below its CURRENT market value. If a house is worth $200,000 based on similar houses that have sold recently, the market value is $200,000. It may be an “up and coming” neighborhood with a good school district that most people have not yet discovered, so you can buy it for $200,000 based on the idea that the future value will be more, so it’s currently ”undervalued.”
Or, you can buy a property with a current market value of $200,000 and pay $150,000, in which case you are buying BELOW value, or with BUILT-IN value. Why is there built in value? Simple – you can sell it tomorrow for up to $200,000! If you buy real estate undervalued, you have to wait until everyone else realizes what you suspect to be true, that the property SHOULD be worth more.
Certainly, buying property that is undervalued can make you money in that you are speculating future demand will be higher and prices will increase for that asset. But, a safer, smarter approach is to buy under value because a particular seller has some motivation, such as a foreclosure, estate, or divorce. Instead of looking for “value plays”, look for value built-in, which can always be found when a particular seller has extreme motivation and needs to sell quickly.
Source: http://onlinerealestatesoftware.wordpress.com/2009/03/19/buying-real-estate-undervalued-vs-buying-under-value/
5 Essential Principles For Real Estate Investing – Beautiful Article on Property Investing
March 19, 2009
Source:http://www.streetdirectory.com/travel_guide/36411/investment/5_essential_principles_for_real_estate_investing.html
It’s no secret that real estate investing has become the “weapon of choice” for many investors. With the stock market growing more and more uncertain it’s not hard to understand why. While real estate investing can be very lucrative and when done right can present very little risk, it’s important to remember that timeless adage “knowledge is key”. As with any financial decision to be made, no one should jump into real estate investing without gaining as much knowledge as possible on the front end. While it is true that experience is the best teacher, having a good knowledge base to begin with might just make your experience a little less scary. With this in mind, following are five things to consider BEFORE doing your first deal.
1. Tend to your personal finances first
Many prospective investors view real estate as a means to get out of financial trouble. Many real estate “gurus” will advocate this practice and even use it as a selling point to sell their latest and greatest real estate investing system. I am definitely not of this mindset. Real estate investing is a great way to secure your financial future but certainly not at the expense of your financial “present”. If you are having financial problems and are having trouble making ends meet, take steps to rectify the situation before risking any money in real estate. As I stated earlier real estate investing can carry less risk than many other forms of investing, but there are still risks and if you are not in a position to handle the setbacks than you are basically just gambling and that is a very dangerous investment strategy.
2. Choose a strategy.
There are many ways to make money in real estate investing. You can buy a property and immediately flip it for profit. You can buy a property and hold it banking on an increase in value in the near future. You can buy a property for rental. You can buy a distressed property and make improvements. There are countless ways to make money. The important thing to remember is that each of these strategies carries its own set of “rules”, if you will, for making a profit. Some might say you should never limit yourself to one strategy and I whole-heartedly agree in the over all realm of your real estate portfolio. What I want to stress here is that indecision in regards to each individual real estate deal can cause you a lot of heartache, frustration and LOST PROFIT, which we could all do without. Decide up front which strategy is best for you and then proceed to find a property that meets your needs.
3. Do your research
While this may sound elementary, it’s very easy to get caught up in the emotion of what seems like a good deal and in the process act hastily. Always, and I mean ALWAYS thoroughly investigate a property before you sign anything. Try to determine if the property has suffered any significant damage, find out if the property is in a flood plain, find out if there is more than 1 lien against a property, etc. Create a property inspection checklist up front and check every one off before you decide to do a deal. When doing a conventional deal with a mortgage lender the lender will likely take care of a lot of these steps (they want to protect their investment as well) however, it is always good practice to pay for a thorough inspection before you make the deal.
4. Stick to a budget
Decide what you can afford and are willing to spend on a real estate deal and DO NOT deviate. Many real estate investing coaches will tell you not to let a good deal go just because you don’t have the money. “Get creative” they say. While I do not shun the idea of creative financing completely I certainly don’t recommend it for the beginning investor. “Zero Down” deals can be very appealing but they also can increase your risk factor tremendously. In a nutshell, if you can’t afford it, it’s not a good deal.
5. Be prepared to walk away
Never get emotionally attached to a property. Emotions can cloud your judgment causing you to make unwise decisions. It’s almost a certainty that if you stick with real estate investing long enough you will come across a deal that seems irresistible. Do not get overly excited and sell yourself on the deal before due diligence is done. This mindset can cause you to overlook some warning signs that otherwise might be deal breakers. Go back and read number 3 again. Be objective and be skeptical. Reserve judgment for after your inspection checklist has been completed. Always be prepared to walk away; there’s likely another prospective deal just around the corner.
These five principles are a good guideline for anyone starting out. While real estate investing can be a rollercoaster ride at times with many ups and downs, sticking to these basic principles will all but guarantee that you will come out on top. Happy Investing!
Must Visit – www.propertyscience.com
March 18, 2009
The Boom Is—Is Not!—Over: The Great Real Estate Debate
March 18, 2009
By Daren Fonda
When Holly Schiller bought a town house in Fort Lauderdale in the fall of 2004, she figured she would pocket a profit before the place was even finished. Schiller, 51, and her husband had already flipped several properties in Florida’s sizzling market, and this one sounded sweet: three bedrooms, private elevator, designer appliances. Villa Medici, promised the builder, would be modeled after a “true Italian Tuscan village,” featuring Mediterranean façades and a resort-style pool. “As with any ‘limited edition,’” the pitch stressed, “demand always exceeds the supply.” Well, maybe not always. The housing market in parts of South Florida is melting faster than a snow cone on Miami Beach. Schiller’s town house has languished on the market for 18 months. She has slashed the price by $75,000, to $565,000, offered a $2,500 bonus to the selling agent and at one point threw in a $2,500 store credit for home furnishings–all to no avail. “Buyers are extremely hesitant,” says her broker, Rob Rose, adding that hundreds of similar properties are for sale, with similar gimmicks–from free Caribbean cruises to gym memberships (personal trainer included). Schiller is nervous. She’s renting out another property at a loss, while trying to sell that one too, and has a deposit down on a second town house under construction. “They keep telling me 1,000 people a day move to Florida,” she says. “I don’t know where they’re going. They’re not buying.” The house party had to end eventually, even if sellers refuse to believe it. Many remain defiant to the point of delusion, demanding one more drink at the housing bar. Real estate bulls point out that the nation’s median home price is still up 0.9% this year, to $231,000. But that stat is misleading. There’s a stalemate between buyers and sellers: property owners are reluctant to cut prices, and buyers are patrolling from the sidelines, hoping for fire sales. “We’ve had sellers’ markets for the last five years, and they’re transitioning to buyers’ markets,” says David Lereah, chief economist for the National Association of Realtors (NAR). “Sales go down and prices follow. Sellers are stubborn, so there’s a standoff.” Lereah says he’ll probably cut his forecast for price growth from 5% to 4% this year. It could be worse, but in certain mid-tier markets–like Cincinnati, Ohio; Dallas; Milwaukee, Wis.; Salt Lake City, Utah–prices didn’t appreciate as quickly as in the hot zones, and aren’t likely to fall as fast. In places like Phoenix, Ariz., Las Vegas and Los Angeles, epicenters of the boom, look out below. Sales of existing homes nationwide are down 8.9% this year, including a 17% free fall in the West, according to the NAR. A year ago, 2.6 million units were on the market. Now there are 3.7 million, a 39% spike. Home builders, whose stock prices have tumbled, were late to cut production, a bad sign for new-home inventories, especially with mortgage rates higher than last year’s levels. KB Home, a national builder, says its cancellation rate shot up to 37% in the second quarter, from 25% a year earlier. “People are making arguably the most significant economic decision in their life,” says CEO Bruce Karatz. “They want to feel like they’re being smart, and in some markets it’s unclear whether it’s smart to buy a home.” If you live in Bubbleopolis, things certainly look scary. In Miami there’s a 17-month supply of single-family homes for sale, according to the NAR. Some 75,000 condos are coming on the market in Miami–Dade County, many purchased by speculators with no plans to live in them. “There will be lots of foreclosures, lots of auctions,” predicts real estate agent Rose. The mood isn’t any brighter in San Diego, another overheated market. In June the city’s median home price fell 1% from a year earlier. That’s the first decline in a decade. “$579,000–Getting Desperate!” reads an ad posted on Craigslist in the metro area. “There are three times as many houses on the market as there were a year ago,” says Vikki Kuick, a broker who placed the ad. Buyers are taking their time, leery of overpaying and taking on too much debt in a rising-interest-rate environment. Some sellers figure they’re lucky to be getting out. Hewitt Hymas, a Navy commander reassigned from San Diego to Annapolis, Md., just sold his four-bedroom home for $476,000 (which he bought for $280,000 in 2002). It wasn’t easy. Hymas relandscaped the yard, spent $7,000 on kitchen upgrades and eventually dropped the price by $18,000. “People around us still live with a heyday mentality,” he says. “They got used to the boom and were asking ridiculous prices.” He made a command decision not to be greedy and moved on. Experts in market psychology say stubborn sellers have a classic case of denial. Richard Peterson, a San Francisco psychiatrist who specializes in financial decision-making behavior, points out that “people would rather gamble and hope prices come back. They ignore information suggesting that prices are dropping.” It’s the same mentality that leads blackjack players to double down in a losing streak. Conversely, when investors see prices rising, they get overconfident–the hot-hand bias that leads folks to think a basketball player will sink his fourth shot after making the prior three, even though probability says the odds are the same for every shot. That explains sellers’ reluctance to cut prices, Peterson says. Academic studies also suggest that frustrated sellers take their homes off the market rather than accept lowball offers. It happened in Boston in 1991, when condo prices tanked and two-thirds of the inventory was withdrawn for sale, says Chris Mayer, a Columbia Business School professor. Sellers then had to wait up to six years for prices to hit their previous peak. Robert Shiller, a Yale economist who has long warned of a bubble, thinks price stagnation (or worse) is here to stay but that Americans don’t want to believe it. “People still expect double-digit gains,” he says, citing surveys of homeowners.
Whether the eight-year boom was really a bubble remains a matter of debate among economists. No less a sage than Alan Greenspan started warning of “froth” in the market in May 2005–and the Fed has raised interest rates 17 times, at least partly to dampen speculative housing activity. Yet the party outlasted several years’ worth of doomsday predictions. And for every bubble guy, there’s one who thinks prices overall are about right, given mortgage rates that are still low by historic standards and other measures of affordability. “My view is that the run-up of home prices has been driven by the fundamentals,” says Dick Peach, an economist with the Federal Reserve Bank of New York. He figures we’ll have a soft landing.
Still, the slowdown seems certain to take a toll on the economy. Housing activity accounted for a full percentage point of last year’s 3.5% GDP growth. Psychologically, rising home prices have made homeowners feel wealthier–just as stock prices did in the dotcom boom–boosting consumer confidence and spending on everything from cars to restaurant meals. Those rising prices, along with low borrowing costs, led homeowners to cash out a record $450 billion in home equity in 2005–money pumped into the economy. Rising interest rates have clogged that artery. And each month millions of homeowners have to write bigger checks to lenders as mortgages with adjustable rates move higher, another clamp on spending.
Perhaps most unsettling is that cracks are emerging in the Midwest, a region supposedly insulated from real estate madness. In Glen Ellyn, Ill., a suburb of Chicago, Deb and John Tritt have tried to unload their house for seven months. They’ve spruced up the place, knocked $58,000 off the price, to $739,000, and offered a week at their Hawaii time-share to an agent who delivers an offer. None of it has paid off, and two more houses in the neighborhood are for sale. “We’re moving to a town home,” says Deb, “and the only saving grace is that it’s not finished yet.”
Nonetheless, other buyers remain convinced that their nest is a good investment, not just a place to live. Mary Trujillo and her husband Jay just moved from a home in Houston to Naperville, Ill., where they bought a split-level ranch for $290,000. They’re spending nearly twice as much on the new place and netted only $10,000 from the sale of their Houston home–after owning it for five years. “I think I have a better chance of making money off this house,” says Mary. Call it the American dream.
Source: http://www.time.com/time/magazine/article/0,9171,1223356-3,00.html
