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Flat owners bear the brunt of low rentals, high EMIs

Visakhapatnam: Unlike their counterparts in the Vijayawada-Guntur region, flat buyers in the Port City are distraught as they are not only having to deal with stagnant rentals, but also having to pay out higher EMIs (equated monthly instalments) on home loans taken to purchase flats in the city. Flat owners depending on home loans for purchasing their dream homes lament that they are shelling out more than double the actual rental amounts prevailing in the city to pay their EMIs.

Explaining the situation, a flat buyer from PM Palem located about 14 km from the RTC Complex, Srinivasa Murthy (name changed) said, “I purchased a 1,000 sft flat for Rs 22.5 lakh. I had taken a home loan for Rs 16.5 lakh over a period of 20 years and my monthly EMI works out to around Rs 16,000. However, the rental in our area is around Rs 4,500-Rs 5,000. So, I’m paying triple the rent amount prevailing in the area for EMI.”

Furthermore, he said, “In fact, I am paying only Rs 5,500 for a two-bedroom house near Ravindranagar, which is much closer to the city. Due to the pressure from family members to own a house of our own, I took the decision to buy a flat and now I am wondering if it was a wise decision. The only solace is that I will have a flat of my own after 20 years.”

While Murthy’s case is that of a first time flat owner, even those who purchased their second flats as an investment are also wondering if it would have been better if they had bought plots instead, for which the prices have been steadily increasing.

“We purchased our second flat thinking that we would get good rentals as Vizag is the largest city and we will witness a huge growth here due to the growth of IT sector and other industries. But now, I am paying Rs 8,000 more than the rent that I am getting at Madhurawada,” observed Ramachandra Rao, a central government employee.

 According to developers, the major cost factors in construction of flats is due to land cost component and also due to taxes such as the service tax and registration fees. “The land cost component forms around 50-60% minimum on the outskirts, whereas it is around 70% in the core areas of the city. The land prices have a cascading effect on the apartment prices,” opined a builder from the city. “If you take a flat costing around Rs 22.5 lakh, then the service tax comes to around Rs 1.1 lakh and apart from that people also have to shell out registration fees which adds to the burden,” he said, adding that unless there is an increase in migration to the city due to new industries, flat purchasers will have to bear the brunt.