Investor Vs End User

Builders for lack of funds have, in the last 4 years, opened up a new avenue for people with money but not seeing returns in their own business or equity markets. Investors are typically offered prices 35% less than currently quoted prices.  Most of the options are available in pre-launch stage or in the first six months of a launch.  Given that the project will take 3 years to complete, the investor will lose 12% compound interest (compared to a bank FD of 9.75%). The discount more or less covers the interest cost and the investor can exist at a higher price say 20% and pocket the difference.  To cover any downside, the builders promise minimum capital protection of around 65%, a cheque that can encashed by investor in the worst market conditions where there is a big drop.  The cheque might bounce, but that is a different issue. The returns, in nominal terms, are expected to be 18-20% in the best of the markets like Bangalore. 

This scenario has played out in NCR and Mumbai, but most of them are really stuck because the markets don't have the job creation of Bangalore.  Someday, in the future, Bangalore also might reach that stage, because human mind has the tendency to take the game too far.  Looking at the launches in Bangalore this year, I am sure investors have to play a big role to sustain the game. The year of reckoning for the Bangalore market is 2017, when most such project will be ready to move in and the investors try to exit at the same time.

Lansum Etania project in Gachibowli offered Rs. 2,800 per sqft for 100% upfront payment where as it is quoting upwards of Rs. 3,700 sqft for regular milestone based payment purchases.