As you all know, I run Tripvillas – one of the largest holiday rental companies in the world in addition to being the published of Holiday Home Times- a publication read widely by those looking to invest into holiday homes.
I have always wondered why more people don’t buy holiday homes and so decided to call a few holiday home developers with projects in Coorg – a destination close to Bangalore and which I am fairly familiar with.
Here is what I saw:-
Developer 1 – 4 acre plot – 30 villas – each villa being sold for 50L Rupees.
Developer 2 – 2 acre plot – 34 villas – each villa being sold for 80L Rupees.
Now Cost of Land in these places – 20-25L per acre maximum – It is more likely that these developers have acquired land at 15L per acre.
So in effect –
Developer invests – 80-90L and wants to spend 20L * 30 = 6cr in construction costs and make – 15-20cr – so he wants to operate at making between 8cr and 20cr in profit.
On the cash flow side – his only investment is 80-90L of land acquisition and if he is unable to sell, he will not build.
Is it surprising that none of the these projects have taken off with this fly by night attitude of the real estate developers?