A friend with pots of money wanted to invest in RE. So he went to a Mid sized mid Mumbai builder (for So Bo people Worli is not So Bo)…and asked for the price of a flat..he was told Rs. 18 for a flat. He saw a few flats and did not revert to the builder’s manager.

The manager called a few times and when this person said ‘yes i wanted to buy a few flats’ he got his boss the MD/owner to call him.

So they met…and this friend goes with a cheque book visible kept in the top pocket….and the conversation (as told to me) goes like this:

Builder: I heard you wanted to buy a few flats…

Friend: Yes, I have some money to invest for 5-6 years and was looking for an opportunity

Builder: How will you pay

Friend: Cheque, here is my cheque book…and puts it on the table and keeps his pen on top of the cheque book.

Builder: How much money do you wish to invest SIR?

F: I wish to buy 3-4-5 flats..tell me the price

Builder: Sir 4 flats will be Rs. 72

F: Chief that I know the math, please tell me the cheque amount for 4 flats

B: Sir 72 is the sticker price, will give it to you at Rs. 36..immediate cheque..NOW.

F: Here is a cheque for 36..i will leave it with my lawyer…he will whet the agreements…and make the payment across d table…

Moral: My friend got a 50% discount….this was not small.

Learning: My F told me he did not do any home work, but his brother tells me, they did fantastic background work. He found out that a builder in mid Mumbai had a payment to make to a housing finance company and was willing to borrow Rs. 100 for a period of 2 years. He was willing to pay up to 24% interest. This is a very good deal – considering that the was willing to give 10 houses costing Rs. 18 crs – which meant a 50% margin – almost. So this friend of mine knew that the builder was  a) short of cash b) interested in preserving his credit rating c) desperate to sell the flats.

After knowing this he carried out this operation.

Learning for u and me:

We may not be in a position to sign a big cheque, but we can use FB and create a group for buying a flat. Suppose you are able to collect 20 people wanting to buy in Ulwe (a happening place!!! if u believe the RE dominated press). Once you have 20 people YOU can take the initiative buy land and build a building on your own. Instead of that go to a builder (Goldilocks – not too big not too small and negotiate. I will eat my right arm if you do not get a huge, hefty discount – from the builder AND from the financing company – free search fee, waiver of admin charges, discounted rate…..

WE DO NOT KNOW HOW TO BUY REAL ESTATE….THAT IS THE PROBLEM….

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  1. a friend in Chennai got around 30% discount for buying a single flat, things are bad in RE to say the least. Yesterday Prof Bakshi tweeted about a RE co ad which was touted as debt free co !!

  2. Nice to know about it. I thought real estate developers are the most difficult guys to bargain but having lots of money will certainly help. 🙂

    One another note, Mr. Pattu shared the video of your presentation. Many thanks for sharing with people like me. You have completely changed the way I think about finance and I consider fortunate to have discovered your blog. I only wish that I found your blog earlier than after wasting 5 years of my journey in corporate world, but better late than never!

  3. Subra,

    I am a religious follower of your blog, and I like your constant reminders about how Stocks are much better in long term than real estate.

    But I’d request you to also remind people that a place to stay is important and people should buy their home for personal use before investing a lot in stock. A home means stability and stability leads to growth, isn’t it?

    Thanks!

  4. @ Prabu Raja :- Which either can be bought using the sales proceed from shares or better stay on rent, if prices are unaffordable.

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