(3 votes, average: 3.67 out of 5)Continuing from here
In my slightly involved earlier post, I had pointed out why an independent house was a better investment over a run of the mill apartment. The argument basically tried to highlight that there was a hidden risk of downward bias in apartment prices, hinging on when the state governments decide to relax the strict FSI norms prevalent in most states of India. It talked about a scenario that may or may not happen in the immediate future.
However, there is an even clearer/surer reason why apartments should be less preferred. A typical flat owner in Chennai (one of those places with the low 1.5 FSI) will have ownership of maybe 700-900 square feet of undivided land. A luxury flat may have 1000-1200 square feet. Compare this to an independent house; the land there will have to be atleast 1200 square feet (if you want to construct a small house).
Clearly, there is more land associated with even a small house than with even the larger luxury flats. When FSI is relaxed, this difference will become even wider.
Now 2 things:
1. Construction styles change over a period of time and buildings get fully depreciated in value after 30-40 years. In the short term one maybe tempted to believe that increases in construction costs mean that one’s home gains in value - it is true enough, but only for the present. In the long term, most constructions are worthless because newer tastes will become fashionable. The only part that continuously gains in value is land.
2. Even in the current times when construction costs are increasing as fast as anyone can remember, land prices in cities is appreciating faster. So even for those whose horizon is a short 1-2 years, a unit with more land maybe the preferable purchase.
I think your opinion about independent houses vs flats is completely biased and leaves back many important points. If you are only worried about the investment then independent houses score over flats. Even that is not true for an average reader of your blog which is probably middle class who will find it hard to find a decent independent house in a decent locality in any big city. Flats have many advantages:
1.Within the same budget you will get a better flat than an independent house.
2. Flats provide more security specially if it’s a small family.
3. Its easy to maintain as the cost of maintenance is divided among all flat owners.
4. You also have the advantage of having an association which will take care of any issues, so you don’t really have to worry about how to get water if there is a shortage.
5. You get additional facilities including gym, swimming pool, clubhouse. Even though you feel that these are not very useful, they actually are. How easily you can organize a birthday party for your kid in the club house.
There should be more points that I am not getting in my mind right now…
okay think of this. Considering the huge housing requiremnet in india, do you think everyone should plan for an independent house? Is it possible?
My only point is that you need to modify your post to make it unbiased by giving pros and cons of each type of housing.
Neel, I think you and I agree on almost everything. The only part where I have to differ is in the request for modification of post.. Diversity of opinions maketh the blogoshpere. Embrace it.
By the way, please also visit http://aavaas.com/2007/12/07/choosing-an-apartment-or-flat-in-india-pros-and-cons/ & http://aavaas.com/2007/08/29/independent-home-or-an-apartment/ These 2 posts should satisfy your urge to see whether aavaas covered both sides of the story…
If other nations can afford to live in houses in the suburbs of major cities, why cannot Indians? We have to push our government to provide better roads and public transportation facilities. If they are available, middle class Indians will be able to afford houses and commute to work in cities.
Also, lower middle class Indians cannot even afford flats in cities now, main reason is the ridiculously low FSI. It is one of the greatest injustices done to ordinary Indians and that too, by our own elected governments. Pick the right fight and campaign for its relaxation. Ignoring plain facts will not get us anywhere…
To address the question of house investment not being best for middle class Indians because of their non-affordability.
Middle class Indians can purchase houses in tier 2 cities. The prices are affordable in the current market - less than 30 lakhs for an avg sized house. They can continue to live in rented acco in metro cities. In a few years they will be able to sell and move to a good acco in the metro itself, if they so want. Tier 2 prices will boom with most IT/ITES companies planning to move in a big way there over the next couple of years. Am speaking of Vizag, Coimbatore, Mangalore, Kochi etc.
Have already given this advice in part 1 of the series.