SOBO - Dying Market or a Buying Market?
The prevailing circumstances make a prospective buyer think twice about his investment. Now to everyone sailing in the same boat that are worried, let me tell you two facts.
Fact No. 1
Lodha is constructing luxury collection of residences in SOBO. Rahejas, Wadhwas, Ashford, Peninsula and the likes are launching a lot of projects. Why would a builder even attempt to sell anything in a dead market?
Fact No. 2
Initially the space crunch and the exorbitant rentals drew away people from putting up an office at the SOBO’s best office spaces such as Nariman Point, Ballard Estate and so on. Now, with rentals in BKC increasing exponentially and with many offices that are empty in SOBO, it has actually made it easy to enter SOBO in a good location and at a competitive price. Many have already seized this opportunity.
SO WHAT WE NEED TO UNDERSTAND
People who are hoarding flats/offices for better price will definitely realize that they need to also calculate Opportunity Cost.
A sample calculation for illustration.
Seller A gets an offer from Buyer A for Rs. 5 Crores for his flat (which is a fair price, much more than the ready reckoner too). Seller A however thinks if he waits for more time, his property price may get appreciated and fetch him a good price. The greed prevails and he refuses the offer.
7 years later, Seller A gets an offer of Rs. 8Croresfrom Buyer B and he happily sells it at 60 % appreciated value (hypothetical). What Seller A fails to realize is that had he sold the flat 7 years earlier, he would have received Rs.5 crores. Had he invested in financial instruments bearing a minimum 10% yield (much more in blue chip stocks in equity market or mutual funds), he would have got 90% (accrued interest). Subject it to a few changes, it still would have yielded 70 % which still is way higher. Thus Opportunity cost is very important to be included and calculated when it comes to offers for all the Sellers and Licensors.
Many of the Sellers and Licensors are mostly aware of this Opportunity cost, being financially prudent, or by learning it the hard way. However, all the above facts and factors definitely show us the way that SOBO by no means is a dying market. To invest or not, merely depends on two factors, One if you are getting the desired space, car parks, and miscellaneous minute details and Two, if the financials work in their favour. There is nothing that is stopping SOBO from losing its charm. It has, is and will be one of the best destinations and one of the best-selling destinations. Tides always surge and ebb, but that doesn’t stop the beach from looking beautiful, if that makes you understand the gravity of the situation!!!
- by Feroza Mehernosh Bharucha
Source:- Accommodation Times
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