This is how i calculate the cost of a house

cost of the house = ((land area or UDS) * (guideline value/value of land)) + ((super builtup area) * (cost of construction including builders margin/overhead)) + other charges(registration/carparking/corpus etc)

So, If we take an high rise apartment in a location like velachery bypass road where guideline value is now 2000 Rs/sqft.Assuming the builder bought the land at 4000 Rs/sqft.The cost of an apartment with 1500 sqft super builtup and 575 sqft UDS and Rs.1200 as construction cost per sqft should be maximum 45 Lakhs with car parking, registration etc. i.e. not more than 3000 Rs/sqft.presently, You can find resale flats on block here quoting well above 5500 Rs/sqft because new launches are being done at this price.

The guideline value was not 2000 Rs/sqft and market value not 4000 Rs/sqft 5 years back.why did the value increase? Earlier, i believe the pricing used to be only based on the land value.The basic rule was that land value appreciates and flat value depriciates.

Builders,well informed seller, brokers all started inflating and hiking the prices taking FSI(Floor Space Index) into account.

FSI is the quotient obtained by dividing the total plinth area of all the floors by the plot area. The FSI varies in accordance with the land use and category of building and is defined by CMDA taking into account whether the building is used for residential/commercial and other parameters like width of the road,frontage etc.

The following can be used as a rough guide

Independent house

Allowed FSI – 1.5
Achievable FSI – 1.25(due to restriction on plot coverage,set back restrictions)
UDS for 1000 sqft constructed – 800 Sft.

Ground + one building

Allowed FSI – 1.5
Achievable FSI – 1.35 to 1.45(reduction due to restriction on plot coverage, set back space, No. of Kitchen and carpark restrictions)
UDS for 1000 sqft constructed – 710 Sft.

Ground + 3 storied building (or) stilt + 4 storied

Allowed FSI – 1.5
Achievable FSI – 1.6 (increase due to non F.S.I. area like headroom, lumber room areas )
UDS for 1000 sqft constructed – 625 Sft.

Ground + 4 floors and above

Allowed FSI – 2.5
Achievable FSI – 2.6 (increase due to non F.S.I. area like headroom, lumber room and associate room areas etc.)
UDS for 1000 sqft constructed – 385 Sft.

If a person owned 2400 sqft of land. they can build a space of 1.5 to 2.5 times the land area.that is easily 3600 sqft of built up.We saw a new age of builders who wanted to promote flats and spaces as a non depriciating immovable asset citing heavy demand and limited supply of land.

Prices were fixed keeping in mind the end use of the land.With availability of easy money from bank, huge consumer and investor’s interest and long term benefits.it was a win-win situation and no one complained.

Considering the land value was 2000 Rs/sqft in the year 2000.the value of a 2400 sqft of land becomes (2000*3600)/2400 = 3000 Rs/sqft just on paper. so the new rate in the location becomes 3000 Rs/sqft. when a new builder starts a construction, the same math is applied to the new market value and the rate keeps on increasing.The result, highly inflated price of land and apartment in the current market.High rises started mushrooming giving less than 1/3rd of the apartment size as UDS.Buiders also started to register the cost of the built up area while registering the apartment.

with the builders gearing up to slash prices,and their cartel breaking down,and the global economic turndown.I believe its only natural that everyone return back to basics.Any property will not attract my interest unless the deal provides true value for money and is fair, satisfying and fulfilling.

Readers, Please correct me if there is fallacy in my undersanding.