“Subra will you speak to my Dad regarding his flat in Navi Mumbai?”
This was almost a frantic call from a friend. And knowing my views on Real Estate, I was surprised to get such a call from a guy whose family past time was to buy RE in Mumbai and Delhi.
A little bit of the background – here was a real rich man with a few properties and 2 sons doing very well professionally. They as a family own about about 10 properties including a real big farm house in Mumbai. Being an early starter their properties are in good locations and their portfolio of RE should be in the region of atleast about Rs. 100 crores.
The dialog went like this:
Hello Uncle I hear you have an offer of Rs. 3 crores for your Navi Mumbai flat?
U: Yes, yes, I got a call – no not for Rs. 3 crores, but Rs. 2.85 crores. I am waiting for an offer for Rs. 3 crores.
Me: Is the difference so high? It is just 5% – so what difference does it make?
U: IN 2012 itself I decided that I want Rs. 3 crore and I have not really gone up on my price.
Me: What is the best price that has been offered to you, ever?
U: In 2012 I got an offer for Rs. 2.5….but the buyer could not arrange for the money, so he backed out.
Me: So from 2012 till now the increase is only marginal at best.
U: Yes but it is increasing
Me: You have not used the flat for the past 7 years – and it is lying vacant – and just being maintained by a friendly neighbor, right?
U: Yes, yes, I do not wish to give it on rent – after all we do not need the Rs. 55,000 per month rent, what difference does it make?
U: Subra once the airport in Navi Mumbai is commissioned the price of this flat will increase – it might even reach Rs. 6 crores in a couple of years, so why should I sell now? After all I do not need the money.
If I were a broker I could be accused of pushing this guy, but this is what I said:
“Mr. Uncle you are in Delhi and there is no chance in hell that you can come and stay in this 5 bhk + servant quarters house. At 78 years given your health condition you will now continue to live in Delhi.
You have kept this house LOCKED for the past 7 years AND your notional loss on this alone is Rs. 30 lakhs or thereabouts. During this period the cash flow on account of salary for the servant maintaining it, society charges, electricity, maintenance – including the painting is about Rs. 10 Lakhs. So the total loss comes to about Rs. 40 lakhs.
Look at it this way, if you had sold it in Jan 2012 for Rs. 2.5 cr, and put the money in the bank, you would have earned about Rs. 50L as interest and saved Rs. 5L on maintenance etc. So net, net you would have more than Rs. 3 cr. which is what you are currently asking for. Just mathematically speaking you are NOT attributing time value of the money that has been offered to you.
Your sons are unlikely to come to Mumbai – and even if they come it is very unlikely that they will come to Navi Mumbai, even if the ariport becomes a a reality.
I think you should take the best offer AS OF TODAY and go ahead with the deal.
Can you get Rs. 5 crores for this house? Sure, I have no clue when. I also know that you do not need the money. Great, let me suggest some charities to whom you can send the cheque. Sigh.
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