carpet area based pricing

How Carpet Area Based Pricing Can Affect Home Prices

The Real Estate Regulation and Development Act (RERA), the central law that came into force on 1st May 2016, stipulates every state to implement the act within a year’s timeframe. As we are approaching 1st May 2017, RERA is still under the process of implementation in West Bengal although it is unlikely to meet the deadline. But it is sure to be applicable at a later date and we must be aware of certain provisions while buying an apartment, especially the carpet area based pricing parameters.

RERA will make disclosure of project details compulsory, including developer’s credentials, documents related to the project and land, such as the title deed, clearance certificate, and the land status. The process will create trust, enhance the credibility of developers, and ensure the protection of consumer rights as well.

However, the biggest benefit transpiring out of RERA that will interest buyers is the carpet area based pricing module for both residential and commercial properties. Till now, the widespread practice in real estate has been to sell spaces based on the super built-up area, but come 1st May, prices will be clearly defined by the carpet area of a property.

According to industry experts, the law, also applicable for – ‘affordable housing for all by 2022’ – the union government’s flagship program, will drive an uptrend in the Indian real estate market with new reforms that are expected to forge a transparent environment throughout the home buying process.

So What Is Carpet Area Based Pricing?

For example, an apartment with a super-built area of 1,000 sq. ft in an upscale area in southern Kolkata has a saleable price of Rs.5,000 per sq. ft, which totals to a price of Rs.50 lakh. Let’s assume, out of this 1,000 sq. ft the carpet area (or the usable space excluding the space occupied by walls & common area) of the property is 700 sq. ft, and the rest 300 sq. ft is space for walls, common spaces like passages, staircases, lift-well etc. From now on, with the implementation of the new rule, buyers will be paying only for the carpet area of 700 sq. ft.

What Is the Financial Equation and How Does it Affect You?

Irrespective of whether it’s super-built or carpet area, there wouldn’t be much difference as far as the net pricing of a property is concerned. Developers won’t be paying for the common spaces out of their own pocket, so they will adjust the price per sq. ft and charge the carpet area of 700 sq. ft at Rs.7143 to get their desired price of Rs.50 lacs for the apartment.

Carpet area based pricing won’t affect property prices directly. Rather, it will infuse more transparency by eliminating the practice of calculating prices on the super-built area, which creates a lot of confusion in the minds of the buyers as they aren’t quite sure about what exactly they are paying for.

RERA, from May 1, 2017, will empower buyers in most states with a standardized carpet area value comparable with various other offerings from different developers in the same locality. It is under the process of implementation West Bengal too. The new pricing model, if it becomes a norm, will offer a level playing ground for both buyers and developers, improve the buyer-developer relationship, and make the domestic real estate market more reliable and transparent.

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15 thoughts on “How Carpet Area Based Pricing Can Affect Home Prices

  1. Excellent posts.I am very happy to read this. This is the kind of manual that needs to be given and not the random mis information that’s at the other blogs.

  2. This is a nice article and you write up very well and you choose a very good topic. It’s right RERA will definitely useful for buyers. Thanks for sharing such a valuable information.

  3. i want to buy a flat in south kolkata like thakurpur to joka area in around 600 sq ft…when should i buy so that i can get benifit

  4. i think you should write to revenue minister or finance minister that they should charge stamp duty on carpet .as in maharastra it is 5% on built up area so we have to add carpet +20% and on that maharastra govt charge. now if they charge 6% on carrpet the stampduty will be same but hastle of calculating built up will remove. so my request to maharastra govt. start chrging on carpet only.

  5. Thank you for the article on RERA ! It was quite informative. Since West Bengal hasn’t implemented the new rule do you suggest one should wait to invest in a property in Kolkata till RERA comes into effect . Also is New Town a good option ??

  6. The matter is clear. Only thing that the price I am paying for certain carpet area can be verified before taking possession. Otherwise the price I am to pay for super built or carpet area is same to the buyer. No benefit to the buyer at all because the developer has to keep the profit at any cost.

    • The matter is clear. Buyers have no benefit. They are to pay the equal price whether it is carpet area or super-built. Facilities will be curtailed to keep the price low for common people.

  7. New Act will not give any benefit to buyer. Price will be same but facilities will be curtailed to keep the price low.

  8. The central Real Estate Regulation and Development Act (RERA) will focus on the carpet area based price for the both commercial and residential properties. And with the implementation of RERA the buyers are likely to pay for the only the carpet area of the apartment. But the carpet price don’t affect the pricing of the projects. The way you explained in your blog is really impressive and those who have no knowledge about the carpet area pricing, they can get the brief knowledge about this.

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