The Stupidity of payment schedule from Developers in India

Hello there!. I am in Chennai for the last couple weeks. I was here due to an emergency and sudden ill health of my dad. Thankfully he has recovered pretty much and about 70% back to normal. Thankful to the almighty!.

I had never invested in India up until this second. Many of my relatives said i should invest here and the property values are going up like crazy again. So we decided to look at a few properties, now that its just 2 more days to head back home.

We looked at the following properties.

1. DLF properties
2. Opaline from Olympia
3. Hirandhani Upscale
4. Land Marvel

DLF is owned by Kushal Pal Singh, apparently 3rd richest man in India. He is very known for his buildings in Delhi. Its a contruction over 50 acres or property. The main issues i saw were lack of model homes. Apparently there was some rumors about some issues with land acquisition etc. In fact i think they are a large enough builder than can easily scale out of the problems. But yet, the construction seems a bit slow compared to other properties. The other major issue is the approach to the complex is very complex. You have to drive through some communities build for people affected by the Tsunami. It just doesnt look a pretty scene heading into the area.

Opaline had some neat plans, i didnt know much about the builder, but their models were cute and nice. This is what my first choice was. Well i havent looked at the other homes.

Hirandhani Upscale, owned by Niranjan an ENT specialist. He is also now expanding to build chain hospitals. The models were really cute. The plans were very nice. Our first visit didnt go well, as we ran into a lady who didn't sound like she was interested in talking to us. But we were interested in the building compared to others. Resulted in some escalation to their Mumbai office and someone responded back who was more accommodating than the person who we dealt with earlier. (Finally we sort of decided on investing here .. sort of...)

LandMarvel at Torraipakkam seemed like it made no progress the last year or so... Unfortunate to who all paid, since they are almost paid up completely and none of the apartments are complete.

Now finally the topic of the blog. For people who have purchased their homes in USA will find this process a bit of an instant heart attach... Reason?

The payment schedule is the worst i have ever seen and doesn't absolutely any logic. Iam surprised that no banks have protested yet and that even the government has completely ignored the issue.

1. It starts like this.. Pay Rs. 5 Lakhs on booking. V.s just a token amount in USA typically only a few thousands.
2. When the foundation is done, everyone pays ~25%. This is ridiculous since if they have 27 floors even before your floor has seen the floor you pay a huge sum.
3. When the 1st floor is done, you pay another 25%.
4. Subsequent floors bring in some additional %, and by the time they have reached the 10th floor most people have paid close to 80-90% of the total cost.
   
5. If you miss a payment, you pay 18%, but if the builder skips the deadline its probably nothing.

The real bad thing is most builders take money from people who buy apartments and actually put that money as a seed for the next project. So you have to pray the next project gets sold soon, before they can get more money to put into to complete the project. This should be plain illegal, they should only start getting money as the platform/base for your particular floor is done and also have more stages.

I heard that DLF is almost constructed from money from ICICI, just that they were the preferred lender, and have funded close to 90% of the project. The Land Marvel at Torraipakkam is a similar story, and they are scores of such ill projects around town. Unfortunately there is no getting around the payment schedule in Chennai. You have to choose a better builder who is financially sound and wish he doesnt go broke before your project is done.

I have to admit.. that i have planned to become one of those people.. but have no choice.. i trust Hirandhani and hence have committed.. and i pray that they would be complete by 2011 June timeframe.

I wish this would change and the buyer experience becomes better over time in India.

Until next time...

Ciao!