Apartment hunting in Gurgaon, India
Posted by Ashish on April 28th, 2006
One of the many things that impressed me greatly while I used to be in the US was their houses. I had seen houses that big only at my ancestral place that my great grandfather maintained. Otherwise, in the bigger cities of India, people are mostly used to staying in small apartments only. A 3 bedroom house with 1600-1700 sq ft area is a decent sized place. Anything more than 2000 sq ft area in a metropolitan city is really a luxury.
So, when I stayed with my cousin at his house in Seattle for the first couple of months, I used to always think what will be a good time for me to buy a house there. I didn’t really have to think much about that since I made up my mind in the very 1st year only that I will be returning back to India - soon. But, now that I have returned back to India and decided to stay here for a long time, I thought that it’s better to buy a house of my own rather than staying in rented apartments and changing them every year. And then my dad’s insistence is another reason for me to get serious about the same.
Things were good till when I had not talked seriously to a property dealer (real estate agent) - it took me a while to really believe the prices he quoted me initially for a 2 bedroom / 3 bedroom place. After a couple of apartment hunting trips based on my previous budgets, I decided that no house was really like where I will love to stay and the ones that had a strong chances of being liked was way out of my budget. I had a rough idea of the property prices in Seattle and what was surprising was that 1 sq feet of land in Gurgaon, India does not cost a lot less that 1 sq feet of land in Seattle - which is steep because of the difference in the buying power of the people in the 2 countries. Then, as I had done for petrol prices, I looked up the prices of the apartments in NewZealand and came to the following results (I considered houses of the sizes that, I thought, were the most popular in the respective places):
A 2000 sq feet house in Seattle, US costs 400,000 USD ~ Cost per sq feet: 200 USD
A 1500 sq feet apartment in Gurgaon, India costs 135,000 USD (6,000,000 INR) ~ 89 USD / sq ft
A 2000 sq feet house in Auckland, New Zealand costs 250,000 USD (400,000 NZD): 125 USD / sq ft
Now - whoever thought that India was cheaper, needs to really think again 
This is especially harder because of 2 more reasons:
1. The wages of Indian workers is a lot lower than the wages of their counterparts in US or NZ. So, a price difference of just slightly lower than half between US and India is not justified.
2. You need to pay a huge down-payment - which is because the owners typically ask almost 30% (or more) money as black money (so that they don’t have to pay taxes on that). So, if a house is for 6 million INR total and you pay 2 million as black money. Then, out of 4 million, you get a loan for maximum 3.2 million (assuming 20% down payment ~ 0.8 million). This directly translates to 2.8 million (28 lacs) INR as down-payment and 3.2 million INR (32 lacs) as loan amount.
I am not sure how many salaried people can afford to pay 28 lacs INR upfront for a house. Anyways, the search is on - the difference is that I first find out the percentage of black money the owner wants and then enquire about the other details of the house. I am always looking for tips - that can help me buy an apartment this year
Update: I got the initial area of the houses in NZ and US incorrect. Thanks DL for pointing this out in the comments - I checked again and re-worked the numbers.
April 28th, 2006 at 2:19 am
400K for a 7000 sq ft home in Seattle is not correct. When we were looking for houses in the eastside last month, we weren’t able to get even a 2000 sq ft home in Redmond for that price. Maybe the prices you quoted are true for places like Maple Valley or Marysville outside Seattle
April 28th, 2006 at 3:45 am
What can I say…. leave Gurgaon.
I am also hunting apartment in Ahmedabad. Prices are doubled here in last 2-3 years. Looking at prices you quoted, Ahmedabad is still 3-4 times cheaper than Gurgaon. Good urban infrastructure. 24 Hrs Electricity. We don’t need UPS or stabilizers to run our offices here. Good Internet connectivity. I read surveys which state Gurgaon and Pune are best to start IT business, better for large organization like infosys and wipro. Although How good these cities to start a startup like yours.
You guys are doing great but when going gets tough for startup then these high operation cost could be one reason to kill startup.
One more point is in India, construction cost is 5 times cheaper than US. Still we end up paying such extraordinary high prices for houses.
Government’s inactivity has large role in such high prices of land. Government needs to take big land reforms to control these prices. People like KP Singh of DLF only get benefit from this kind of boom. He has 5 Billion US$ worth of land in Gurgaon and surrounding areas and He is in Forbes list of billionaire this year.
April 28th, 2006 at 4:26 pm
Buy an RV !
April 28th, 2006 at 9:02 pm
When my parents insisted on buying a house about 2 years back and I started house-hunting, I had the following motives in mind:
1) Instead of paying a monthly rental, pay for the home loan repayments. At the end of the home loan tenure (say 20 years), at least the house will be self-owned.
2) Forced saving - I had seen that at the end of the year, whatever savings remained, was used for tax saving investments, if not for other miscellaneous expenses. At least monthly loan repayment can lead to investment towards one’s own house / property.
3) Tax saving - Home loan offered substantial tax saving and and at the same time leading to an alternate investment.
However, when I actually started calling up estate agents and the builders, in the later half of 2003, the prices seemed too high to afford!! The ones that I liked somewhat were either too expensive or in too remote or in developing areas with poor or no means of public transport in Gurgaon. You needed to own your own vehicle to be able to live there - and I did not have one at that time. The houses that were livable as well as affordable were the ones that were under construction and would have been ready for possession in not less than one year’s time (or even more).
Finally I compromised on a small house with the land and with good connectivity and it could be registered in my name. This was another problem that except for DLF, registration was not possible for any other property at that time. Most of the property was available on “power of attorny” which somehow did not seem safe and reliable enough to me.
The thought often came at that time that the property is too expensive and I should postpone and look for something better and cheaper. It’s been just a little more than 2 years now that I bought the house and people are telling me that I got a bargain ! The prices have more than doubled in 2 years and I don’t know where it is heading too… and as you said, now even the black money has increased substantially so it’s difficult to cover the cost by loan.
You have mentioned that you need to pay a huge down-payment as black money so that the owners don’t have to pay taxes on that. At the same time even the buyer does not have to pay for the registration charges for that amount. I payed 12-12.5% (don’t remember exactly) as registration charges for the registered value of the house (which I did for the maximum possible value so that I could get the maximum loan amount, and the seller agreed to it). On top of that you need to pay a hefty amount as bribe for the registration officers (without which it is not possible to get the registration done and they demand it openly - as a fixed % of registration fee!!). You also need to pay the commission to the property dealer on the total property value (not just the registered value).
When I payed 12-12.5% registration fee in Gurgaon, at that time the registration fee for a property in Delhi that was in the name of a woman was only 6-6.5% (not sure exactly). It was same for men and women in Gurgaon and not sure how much it is now. I could never understand why the laws and rules are so different for different states in the same country.
As far as banks are concerned, I feel it’s like a vegetable market (pardon my comparison) where you can even negotiate and bargain on the loan amount that you can get, the rate of interest, the amount that you can get as “fittings and furnishings” in your name so that it can cover a little more of the property cost, etc. Before the loan is sanctioned and disbursed, you will be obliged and serviced in many ways. However, the post loan service and customer care is poor. After loan, you will never get to meet the “right” person or the “authorised” person who can solve your problems and convince you with the queries. You will get to communicate either with the customer care who won’t have the answers or the collection dept who can’t tell you anything either. So a few tips for negotiating with the banks if you are going for a home loan:
a) Check with as many banks as possible - you never know who will give you the best bargain as all have different criterias.
b) It IS possible to negoiate with the banks on what they offer - be it rate of interest or the loan amount. The rate of interest is different for existing and new borrowers.
c) Read all documents carefully for hidden clauses - usually they won’t offer you the documents, you need to demand for it, and that too before the loan is sanctioned.
d) If they can give you, take the details before going for the loan - of concerned heads / authorities who can be approached when required even after home loan has been sanctioned.
I had opted for a “Flexi EMI” scheme where I was told that for the 1st 2 yrs the EMI would be less and fixed and would be the same and only after 2 years the EMI would be changed to the floating rate of interest that existed at that time. Even before 2 years, suddenly my EMI was increased. I talked and wrote to all concerned departments but neither could I get a convincing answer from them, nor could I get the details of the concerned authorities who are in decision making position in such matters. I spent months following it - but in vain.
I feel that the rate of interest should be monitered and decided by the RBI and should be uniform for all banks. Otherwise the people who do not have knowledge of these things end up paying a lot more than others. Finantial institutions such as banks, even if private, need to have a certain trust factor and transparency which even a layman can trust and not feel cheated.
So happy house-hunting. Hope you find a good deal soon
April 28th, 2006 at 9:04 pm
I have written such a long comment … I think I should post it on my blog too
!
April 29th, 2006 at 5:17 am
Ashish, you are admitting to paying black money. Income Tax sleuths may be reading your posts
April 29th, 2006 at 9:41 am
Oops - Sorav, you are right there
Honestly - I don’t even know how will I pay them black money, if it comes to that. I mean - I really don’t have that (I can’t have that, being a salaried person). If I withdraw money from my bank account, there is no way that I can show it as black (I mean - I can pay cash - that is something I know).
Let’s see - ideally, I really am looking for somebody who doesn’t ask for that
April 29th, 2006 at 11:15 am
I think the banks are now a days required to inform the IT authorities all withdrawals above a certain limit. So, you can’t even withdraw from the bank several lakhs and pay to the seller in cash. Doing that will surely place you in the clutches of the IT authorities to whom one has to explain (if your case happens to be under scrutiny)even withdrawals of few thousands (what you did with that amount) not to talk of lakhs.
With the long term capital gain tax having been reduced to 10% (long term cap gain is applicable when one sells the property after retaining for min 3 years) there are many owners who prefer to pay the tax and have their money in white, in the bank rather than taking the risk of keeping huge amounts in black money. Pray to god that you meet some such seller soon.
April 30th, 2006 at 11:25 am
Have you considered Palam Vihar in Gurgaon? It’s a bit off National Highway but its green, quiet and has more independent houses than huge apartment complexes. The prices tend to be half of comparable properties in DLF areas. I’m in B-block. If you’re interested I’d love to show you around here sometime.
May 1st, 2006 at 10:26 am
[…] Ashish goes house hunting in Gurgaon and finds that Indian properties are ridiculously overpriced. […]
May 2nd, 2006 at 11:49 am
Ashish even in gurgaon you can get affordable housing depending on the area in which you are looking. Typically on the “gaon” side of the highway you would find prices of everything lower and on the malls side they would be higher. Also on either side, it depends on distance, connectivity, surrounding infrastructure around that property which decide the rate. When I bought my house in late 2002 (dec), there was absolutely nothing on that road (Sohna gurgaon road). Today it’s slated to become an expressway, the metro is supposed to come till Rajiv chowk, that road is so heavily commercialised now that all the farms, country side is gone, there are ‘n’ number of malls out there. Prices have of course trebled. But it definitely is the right time to invest coz right now there’s some stagnancy in rates. It’s only slated to go up (again it depends on the location). Areas around sec-56 are still affordable. Manesar is another good option.
May 2nd, 2006 at 5:32 pm
Hi,
I am in the construction and agree that the market in India is inflated.
Its a matter of simple economics, demand is high (booming economy, lock in low interest rates)
Arcane laws such as Urban Land Ceiling and Rent Act have created artificial glut in the supply.
Builders like all businessman want to cash in on their investments and will sell to the highest bidder. Loans are easily available to builders too, so they can wait longer to find a buyer now then opposed to earlier.
The lenght of the loan period (15-30) years is another factor, emi’s are low, salaries are rising, more and more double/triple income families now, ease of buying, reduction in duties.
Most banks are raising rates now but dont feel that the fall when the bubble bursts will be small, infact expect it to stabilise just around end 2005 prices.
There are many reputed builders who do not ask for any black money. Look for buildings by DLF, Tata, Shapoorji Paloonji, Piramal holdings, Mahindra bank properties.
May 3rd, 2006 at 11:15 am
A 2000 sq feet house in Seattle, US costs 400,000 USD ~ Cost per sq feet: 200 USD
Bull Crap….Biggest Crap ever..Probably the guy dosent know where Seattle ends and an old suburban town starts…2000sq feet house for 400,000 hah.
May 4th, 2006 at 8:09 am
On the NZ side of things, Auckland is the most expensive place in the country to buy property, so take prices there with a pinch of salt
The price tends to depend more on the quality of the house than the size of the land. In the street we live in, there are lots of 800 square metre (~9000 square foot) sections that are valued at NZ$126k each, but the houses on them range in value from $40k-$400k!
In Christchurch, NZ$400k is quite a lot to pay for a house. Normally someone buying a house for the first time will spend under $200k… a few years ago, $150k was typical, although prices have gone up a lot in the meantime. For that, you’ll get a house and some land in an OK area, although it will probably get a bit cold in winter (poor insulation) and might be a bit old.
The typical family home for a middle-class family might cost between $250-350k - for that money, you’d expect a well insulated and reasonably presented 3-4 bedroom house.
“Expensive” houses (reasonably new, multi-storey, lots of land, or in a more expensive area) tend to be in the $600k-$1M range.
May 4th, 2006 at 7:15 pm
Thanks Guys. Manu, I will like to take a look around some time. Let me write to you at your email.
Twilight - yeah, looks like I will have to go and look in the non hyped areas. Personally - I found houses in the DLF area better constructed, more so because I am looking for a society house (but I haven’t really looked around a lot - so this statement might not be that true).
May 16th, 2006 at 4:10 am
Hey Ashish or anyone on this thread,
Seems like you did a fair bit of analysis when looking around. Do you have some sense of what construction costs for a 2000 sq ft plot in say DLF or Palam Vihar would be..? I’m talking about reasonably decent type construction — nothing very upscale or not too bare bones either. Piyush mentioned that construction costs in India are 5 times cheaper than US. I think that to some extent depends on where you live — If you’re in New York construction costs are typically much higher vs. say Kansas or a smaller town.
June 16th, 2006 at 1:50 am
Ashish, Just visiting this thread after ages. Have you settled on a house or a location yet? You’re most welcome. Yeah send me a mail if you’d like to see the place.
June 17th, 2006 at 2:57 pm
hi guys I am new to this house/flat hunting….. well it seems like a tough and dirty job
..
any ways Manu can you tell me how’s property prices in palam Vihar.
Also, I would appreciate if any body can tell me the new developing area’s where it will be little chep to buy a house.
thx
June 21st, 2006 at 12:45 am
Rohan, Gurgaonscoop.com has good listings of current and upcoming properties in Gurgaon. This particular poll for example will give you a fair idea of the current property price for apartments in Palam Vihar. Independent houses however, are more expensive.
February 16th, 2007 at 10:46 am
The real comparison can never be made. U guys are trying to match two opposites. Prices in USA include your so much of benefits which no one can imagine here in India.
Price what you pay in USA is a REAL WORTH.
1. Good Infrastructure
2. Safe & secure Environment, Police is there to help you NOT harass you.
3. Your Kids get free education
4. Quality of buildings & maintenance is far superior the here in India.
5. Apartments there have separate playing grounds & recreational facilities, here in India they just have for the name sake.
6. And remember Gurgaon is NOT the Best place to live in the state. & you guys are trying to compare the best Locals in Seattle.
February 16th, 2007 at 10:51 am
Living in Gurgaon is harrasing urself & u have to face blocked traffic for hours everyday.
Builders have just imitated the Foreign names to fool the people.
In my opinion In USA or NZ you get the worth of your spending, but here its not like that.
More over in USA you get Semi furnished Appartments with gas range, Washer Dryer, refregrator, Centrally heating & cooling
May 15th, 2007 at 2:37 am
Aashish,
Firstly, let me clarify that I am no property dealer and am trying to simply make a suggestion.
I am not sure, if you have accomplished ur search and are settled down in your new house. However, I would like to suggest you that if you work in Gurgaon, then living in Faridabad won’t be a bad option atall, especially areas like sector 49 (very close to Gurgaon road.) I am working in US and bought a villa in Status Expandable Villas - Sector 49, Faridabad two years back in the same area. Its in a township and here is the builders website, incase u want it: www.AchieversBuilders.com
Also, I compare this scenario no different than living in NewJersey and working in Gurgaon, Delhi or NOIDA. Also, give it a couple of years as Metro has plans to connect these cities soon.
KG
February 25th, 2008 at 8:05 pm
In the above post, please read it as-:
Also, I compare this scenario no different than living in NewJersey and working in New York. Also, give it a couple of years as Metro has plans to connect these cities soon.