Ever thought what you are actually paying for when you buy a developer apartment in India? You may think you do but may be surprised to read what I'm about to tell you next. You may have heard of carpet area v/s super area. For those of you not familiar with the terminology, carpet area is the covered area inside your apartment (excluding balconies or patio or terrace) and super area is the carpet area plus the loading developers add for things such as elevators, fire escapes, staircase, etc (Yes, you pay for that too!). This loading I referred to can vary anywhere between 15 -30%!! The problem is most agreements you enter into with developers when buying an apartment only state the super area and not the carpet area. As you may have realised by now.....that is a big problem. Therefore, two apartment complexes next to each other may have different loading but an identical price. Obviously, the price is not the same (as it may appear on the face of it) as in one case you are getting less space for the same money!
Why has the market nor the regulator cared to address this very significant and apparent anamoly? Well, to be fair, one of the government agencies (the name escapes me) did float the idea of making it mandatory for developers to disclose the carpet area. I'm sure the builder lobby viewed this as an attempt to hack the "hen that lays the golden eggs" and therefore the plan is still to be implemented. However, as a buyer or an investor it is your privilege to get this information and I suggest you demand it.
Let's take an example and you will be suprised at what the numbers reveal;
Case 1 (Load of 15%):
Aptt. super area =2500 sq ft (including balconies)
Effective carpet area= 2174 sq ft (2500/1.15)
Balcony space = 275 sq ft (this is based on a 2500 sq ft aptt. I own in Gurgaon. The numbers therefore are real and not assumptions)
Therefore, carpet area (excluding balconies) = 1899 sq ft
Market price = Rs.6000 per sq ft
Total purchase price = Rs. 1,50,00,000 (based on super area of 2500 sq ft)
Implied or effective price =Rs.7899 per sq ft (based on carpet area of 1899 sq ft)
Case 2 (Load of 25%):
Aptt. super area= 2500 sq ft (including balconies)
Effective carpet area= 2000 sq ft (2500/1.25)
Balcony space = 275 sq ft (as above)
Therefore, carpet area (excluding balconies) = 1725 sq ft
Market price = Rs.6000 per sq ft
Total purchase price = Rs.1,50,00,000
Implied or effective price =Rs.8696 per sq ft (based on carpet area of 1725 sq ft)
Case 3 (No load):
Let's compare case 1 & 2 above with builder apartments available in Delhi. In the case of builder apartments in Delhi, the square footage is generally not discussed. However, the advantage in case of Delhi apartments is that in general these apartments are available for viewing before buying (ofcourse, you can get a substantial discount if you are willing to commit to purchase before start of construction). Therefore, you can actually measure the carpet area of the apartments. If GK is quoted at Rs.14000 psf, it is based on carpet area and not super area unlike Gurgaon/Faridabad where quoted prices are based on super area.
In summary, the load factor in a development can make the difference between a good buy and a bad buy!
More on this later,
Ashish
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