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How to get a 3-Bed Room Flat for 10-15 lakhs?

Here's the scenario:

Like most people these days, you want to own an apartment in a good locality in Hyderabad or Bangalore or any other city (leave Mumbai out of this discussion please!).

Going rates for a 3-BR from a reputed builder in Blr or Hyd are around INR 50-60 lakh. If you take a bank loan for 45 lakh for 15-20 years tenure, you will end up paying the bank approx Rs. 1 cr at the current rates of interest. And the life of an apartment can not be more than 25 years, if one looks at the construction quality these days.

So, there is every likelihood that it doesn't make sense to you to shell out so much over the next 15-20 years. Instead, you wish to buy an apartment at pre-boom prices or may be even less. Say, between 10-15 lakhs for a 3 BR?

Before you leave this site, assuming that I am going to propose some hare brained scheme, here's a disclaimer: I am just going to suggest this plan to you. You could execute this along with your friends.Some groups of friends that I know have already tried this plan with success.'s the plan then:

You and a group of friends, say, 6-10 people get together, and scout for the land where you want your apartments to be built. Let us assume you found a good site of 500 sq yds or 5000 sq ft in a decent residential locality. At the going rates in Bangalore, 2 plots of 2400 sq ft each, will cost any where between Rs. 1- 1.5 crore. Now, don't get scared.

Go ahead, take your loans and buy the site.Consult a lawyer and get it registered in the name of the society, in which you are all equal partners (assuming you all have contributed equal amounts in buying the site).

As per the current rules, after leaving some open space, we can build around 16 apartments, including 2 penthouses, in 4800 sqft of land. You will have parking space in the basement(ground floor actually).

Your group has two options now:

1. If you have some one in the group willing to spend full time on the construction, you could hire a contractor and supervise every aspect of the construction.There will be some risk involved, as you have to sell the remaining flats, after you all take one flat each. But this method will ensure that you get your individual flats for the lowest possible price.

2. If you all have very busy day jobs and can not spare the time, or if you don't wish to take any risks, simply negotiate with a builder-developer for your site. Typically, builders give you 40% of the apartments, if you hand over the site to them.They will take care of everything else. Of course, you could negotiate and ensure that the quality of the construction is very high. If the site is in a prime area where selling the flats will not be an issue at all, the builder could even offer you 50% of the apartments.

Look at the maths:

Cost of site including registration and other legal expenses: Rs.1.25 cr
Loan amount for each partner in a 6 member team: Rs. 20.8 lakh

Option 1: Build on your own with help from contractor

Total cost of construction ( 16 flats with 1400 sq ft for each flat): Approx. Rs.1.5 Cr (good quality construction)

Initial investment to start the construction: Rs. 80 lakh

Individual Loan amount for each partner: Rs. 13.3 lakh

Total loan amount for each partner: Rs. 35 lakh ( Rs. 34.1 actually, but lets add the incidentals also).

Amount that you could expect from sale of each flat: Rs. 35 lakh ( At Rs. 2500 per sqft for a 1400 sqft flat.)

Note: Okay, you can get a little more by charging for parking space (Rs. 1 lakh), Utilities connections (40-50 K) and so on. But its up to you. In the market, if the flats are going at Rs. 50 lakh (all inclusive), if you price your flats between Rs.35-40 lakh, you will sell all flats in a few weeks or even less.

Total amount from the sale of 10 flats: Rs. 3.5 Crore.

Total cost of construction: Rs. 1.25 cr (site) + Rs.1.5 cr (construction) = Rs. 2.75 cr

What each partner will get from the sale of the flats: Rs. 35 lakh.

So, in effect, if you all put in some hard work, you could actually get 6 flats for no cost !

Ok..if one of your team has worked full time on this project, he needs to make some extra money, apart from the flat. So, let him take 1-2 lakh from each sale, and end up with an income of Rs. 10 lakh for his effort. You will still have spent only Rs. 1-2 lakh for each flat.

Sounds too good to be true, right? Yeah..but some people have actually done this ! It just takes a group of friends who trust each other and resolve issues in an amicable manner. (There are bound to be issues in such a venture).

Ok, you like the idea, but don't have the knowledge or the time to do the construction and sales.

Go for option 2 in that case, but I suggest you for a 4-member team:

Total investment from your team: Rs. 1.25 Cr
Individual loan amount per partner in a 4 member team: Rs. 31.5 lakh.

40 % of the 16 flats: 6 out of 16

Take 4 flats and ask builder to sell 2 flats for you (or sell them yourselves).

Amount from sale of 2 flats: Rs. 80 lakh.

So, what your team has actually spent: Rs. 1.25 - Rs. 80 lakh = Rs. 45 lakh

Individual contribution: Rs. 11.5 lakh

So, in option 2, your team just buys the land, and then takes possession of the flats. You will have spent less than Rs. 12 lakh for your 3 bed room flat in a nice area, and have your best friends or family members as your neighbors.

Like the idea? Go ahead and do it..all the best !


Anindita said…
A great idea :) but I had this small question: Can one get a loan to buy a site? As far as I know, banks give loans only to buy flats (or, if it is a site, only if I have the "intention" of building a house thereon for myself).
Kumar Narasimha said…

Yes, there are 2 ways to do this.You can show you are taking a loan to buy the site jointly with others and build house/s. Or you can all register yourselves as a society, and apply for one huge loan. Either ways, generally if a few well-paid professionals with steady jobs approach for a loan, no bank will let go of the opportunity. And we are not doing any thing illegal :-)
sanjay said…
Good idea.

My view:
I suggest buy a site, construct a house/appartment and don't sell the remaining flats and be a proud owner of site and house/appartment always. Infact rent the remaining flats and pay the EMI.
Kumar Narasimha said…
Thanks, Sanjay.

Yes, that can be done (renting the apts). But then you will be playing the role of a builder/developer. This idea is for people who just want to own their own apt or may be one more. And get them at the cheapest possible price.
I agree that this is one way to own flats for relatively small sum or even for profit and this practice has been prevalent for quite many years now -- especially in joint families with joint property.

That said, a correction/clarification in your post:

In option-1, you say:
"Total amount from the sale of 10 flats: Rs. 3.5 Crore.

Total cost of construction: Rs. 1.25 cr (site) + Rs.1.5 cr (construction) = Rs. 2.75 cr

What each partner will get from the sale of the flats: Rs. 35 lakh."

How is that? Even considering that they are sold @ 40 lakhs/flat, the "profit" each partner gets from the sale is 20.8 lakhs.

[2.75 cr for land & construction] - [(40 lakhs * 10 flats)/6 partners]

How did you arrive at profit of 35 lakhs/partner?

Further, even if the group pays the contractor/in-charge, they'd still be making profit and not paying 1-2
Kiranmai said…
Hi Kumar...i have read u'r blog..we are a group of 6-7 friends who want to implement this in hyderabad...but have lot of clarifications.Can you give us email id of ppl who have implemented this.
Kumar Narasimha said…

I checked with couple of friends who did this, in Bangalore.They both are in US now (having rented their apartments out) and busy otherwise.I have to respect their request for privacy.

Here's what I can do:

Mail me a list of your queries and I will seek their answers. It may take a few days but you will get a response.But it will be purely their opinion or experience.You have to figure out some of the details your self. You can email me at: narasimhakumar at gmail dot com.
propidad sbm said…
Thanks for the information you have provided. In present days, the demand for real estate properties has increased in Hyderabad and it is the best place for the investors to invest in real estate activities.
Real Estate Property
shambhu kumar said…
In my point of view, this is really very well information given about How to get a 3-Bed Room Flat for 10-15 lakhs. Thanks for giving this information.
2 BHK in Thanisandra Bangalore
shambhu kumar said…
In my point of view, this is really very well information given about How to get a 3-Bed Room Flat for 10-15 lakhs. Thanks for giving this information.
2 BHK in Thanisandra Bangalore
Anonymous said…
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