Thursday, 26 January 2012

Power of "*"

Now or Never Offer: Decent 3 BHK Flat – 1500 SQ Feet, Just 8 Km away from XYZ Ring Road.  Price - 50 Lakh*

Well I am not marketing any flat or an apartment.  Two things that stand prominent or eye catching in the above ad is Now or Never Offer” and ”50 Lakh” Right?.   It is so tempting and you feel that your dream home is so affordable.    The only little thing that might shatter your dreams is the little “*”.

Did you notice that “*” is missing when I highlighted the prominent part of the ad in Red fonts?  Well many of us ignore the little “*”
Let’s see the power of little “*”:  A Sunday Morning, Ramesh’s wife Kavitha gets to see this ad in News Paper. Quickly she calls up Ramesh and say “ Hey Look at this ad, 3 BHK flat at just 50 Lakh. This sounds quite within our reach”. Kavitha continues saying, some of her friends were of the opinion that Real Estate prices can only Go UP. There is no way they can come down. Even the analysts on the news channel are saying the same thing.  Ramesh is yet to respond, Kavitha hasn’t stopped yet. She quickly grabs the pen and paper and lists down all the savings they have. Finally she ends up saying, in all we have 10 lakh and Banks can fund the rest of 40 Lakh.  In less than 10 min Kavitha was ready with plan.
Knowing that together (Kavitha and Ramesh) have a take home salary of 80K per month, a loan of 40 lakh appeared quite manageable. Before they call up the builder, she calls up all her friends to tell them about her dream home.  She spends another hour calling up her cousins, parents, etc to inform about this. 
Now that the plan is ready, she is done with informing everybody, Kavitha is all set to list who can be her neighbors. She shortlist couple of her best friends and invites them for tea. Over Tea meet, Kavita wants to share her plan. Ramesh is yet to respondJ.
Ramesh Calls up the builder: The phone is ringing, receptionist picks and says a warm Good Morning Sir and is prepared to give the details. Ramesh has a piece of paper and is all ready to note down the details

Here are the details:  50 Lakhs is base price for the South Facing Flats. This price is applicable only for the flats that are available on ground floor. For East and North Facing flats you need to pay additional 2.5 Lakh. If you are looking for east or north facing + balcony facing Pool or Park, you will have to pay additional 2.5 lakh. If you are looking for a flat on higher floors, you pay 2 lakh per every higher floor. Ramesh is confused and asks for clarification.  Receptionist says “Sir, If you are looking for flat in 5th floor, you will have to pay 10 lakh (2 lakh * 5th Floor). So effectively the Base Price for flat on 5th floor is 60 Lakh*.  Ramesh Calls up Kavitha for Additional sheets (Supplement you see
In addition to the Base price and extra changes for the premium flat, you will have to pay VAT, Car Parking Charges, Electricity Charges, Sinking fund Charges, Maintenance for 3 years and Registration charges extra. In all this will not exceed 15 lakh.  Ramesh thanks her for all the details and hangs out the call.
Here is the final cost of the East, Pool Facing flat on 5th floor.
BASE Price
Other Charges+ Registration
Premium Charge

The value of the “*” was just 30 Lakh. It bumped up the price by 60%. Do you agree?

Now let us see the impact “*” on Kavitha and Ramesh: The plan was to take 40 lakh loan for 15 years tenure @ 10.5% interest. This works out an EMI of 44,215 for 15 years.  Remember 80k was the take home and shelling out 44,215 for EMI means compromising a lot in terms of their life style.
Now that “*” has bumped the price by 30 lakh, for their dream to become reality they would need loan of 70 lakh instead of 40 lakhs.The new Emi would be 77,377. No Bank on this earth will be ready to fund 70 Lakh Loan for Kavitha and Ramesh.
Was it not the little “*” that shattered their dreams?
Take away is, read the fine prints they mean a lot. Please share your views.


Anonymous said...

Excellet write-up buddy

WealthUCreate said...

Thanks jgmm for the appreciation..

Shankarraju said...

Excellent article. In this article atleast Ramesh is lucky to know the extras behing the "*". In reality we will get to know this only after we are emotionally and financially much involved ... making it too difficult to withdraw.

WealthUCreate said...

Right... we Indians are very emotional about "House/Flat" and "Gold". More over, before we know the reality we would have already started dreaming of living in the new home.

Need to watch out and focus on fine prints.

Tapas said...

near my place there is one similar ad. for a 100 sqft 2 bhk with a base price of rs 4000/ sqft, the total price is around 58 Lac.

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