Repost from the original
Are you an Idiot? Well Mantri developers think that you are.
Well 100% returns over 3 years is definitely eye-catching and I could not resist reading the 4 full page insert by them in the Times of India on 25th August 2015.What the property documents on verification says a very different story.
Here are the few things that I observed.
1. Since the down payment is only 10%, A 100L property being sold back at 110L after three years is a blip for me, 3% returns on under construction real-estate does not interest me. But then the company thinks it is a windfall for its investors.
2. Double the money in 3 years is 26% compounded returns not 33%.
3. How can an investment be a low risk investment if the company is not ready to include the guaranteed buy-back in the contract?
4. In fact the contract has terms like 6 months’ notice has to be given to the company if the individual so that mantra will find a buyer on their behalf. This is disclosed nowhere in the advertisement, also the letter (not notarized, not stamp duty paper) has no provision of what will happen if there are no buyers? In fact Mantri will be charging a brokerage on it
5. Everybody knows how much leveraged (laden with debt) these real estate developers are. So this scheme is no more than a ruse to transfer the debt and liability from their books to yours.
6. The buyback price does not compensate for the registration, documentation and other miscellaneous charges that one is expected to shell out. In fact since your down payment is only 10% of the property value, these prices are substantial.
7. The breakup of the project is 10% downpayment, 60% loan via PNBHFL (interest to be paid by builder) and 30% on possession. Am I a margin trader that will take an expore 10X of the investment for a measly 3% returns?
8. Finally, the prices that they have quoted for these projects are ridiculously high for the remote properties.
There are some schemes that just are meant to prove that the builder thinks you are an idiot. The regulators turn a blind eye so it is up to the individuals and their advisors/consultants to help them navigate the waters successfully.