Arun Purohit’s Weblog

                             The Fabrication Advance

I recently encountered the faudulent practice of metal fabricator in Pune .My relative was overseeing all contract work for my home and tried to fix up iron work with a fabricator called Mr Bhadke who had come to our place with a reference from society electrician. He when asked to quote for a work told us  a lump sum. This was Rs 16000/= for a grill outside a kitchen balcony and safety door outside the other balcony. Once we  agreed on scope of work and gave him the design. He  asked for material purchase advance. Normally the cost of material is the bulk cost of article to be made for home viz. security door, window grills etc. We gave him an advance  to buy  Rs 8000/= worth.

The Cheating

 He began the work and completed the grill work for kitchen. When we asked him for thesecurity door he sheepishly said that it was being fabricated at his workshop. When we questioned him more about the gate he started avoiding us. After 3 reminders he stopped taking our calls. When we confronted and tracked him down, he said the entire money was consumed in the kitchen grill and he would do no more work.  This was outrageous and brough us to question what was the value of work done by him ? We tried to weigh the grill he had made and found it weighed not more than 70kgs. Going by the most expensive fabrication rate of Rs 60/kg of finished Iron work it was not worth more than Ts 70*6o = Rs 4200/=  . he shamelessly duped us of Rs 3800/= . This brought me to the fore of this problem of how to deal with the Iron fabricators.

The Thumb  Economics of Fabrication

About 2 yrs back when i was looking after a Product Dev company in Noida we had found that the running rate of all Iron woerks including ,raw material, cutting, welding, grinding, primer and spray painted finished goods was Rs45/kg. The cost of iron then was Rs 35/kg. roughly 30% was the cost of job work on the total cost of material.  Now the cost of Iron is approx 45-50/ Kg ( Mild steel) and this is how I negotiated with a new fabricator who offered to make safety door for me.

Wrestling the Iron Fabricator

1. When he came to me I asked how he would do it. He said for the fully finished door he will charge Rs 6500/= . THis was Rs 1500/= more than what my friend had paid for a similar door 2 months back.
2. My question to him was how much will be the weight of the door. He was hesitant to tell. But on persisting, he said 70 kg.
3. Going by his quote he was trying to sell Iron finished work @ Rs 92.85/kg.
4. I asked him what was thwe runnning rate of Iron raw material . He said Rs 47/=// This he tried to cover up buy quoting highest rate.. The actual rate is Rs 42/kg.
5. The figures showed that he was trying to get 100 % billing on the cost of material .This was heavily unjustified.
6. I told him , I had got work worth Rs 2,00,000 on wood and ply at 30% of RM cost. THis wood work was of very high quality and involved greater skill than metal. He said he would do the wood work @ 22%. Now I was seeing that he was coming to real wages term.
7. Since he agreed on labor charges if material was bought by us I cajoled him to quote the metal fabrication labor charges as % of raw material.
8. He quickly changed stance and said , it will be 35 % of total RM cost.
9. A quick argument and rational basis had brought this fabricator to agree to cut down labor charges from 100% to meager 35 %.
10. I tried to bring him down to a standar 30 % but he held on to relatively handsome margin of 35 %.

The Wisdom in dealing with Fabrication works

This incident brings me to following findings :

• Never ever buy a finished Iron good without checking its weight.
• The processing cost varies between 20% for just ok work to 35 % for very complicated work having highest degree of finish.
• The cost of iron work is between Rs 55 to Rs 65/kg if the mild steel rates are between Rs 42 -47/kg 
• Never ever release more money to a fabricator than the value he is delivering to you.
• As far as possible inspect the factory / workshop before you finally place the order.
• Before placing the order work out an agreement on benchmarking the  thickness of metal used, quality of paint, quality of weld seams and grinding quality. Keep samples to compare the finished product.
• Be very articulate in releasing money to fabricators. Keep at least 20 % in hold for final performance check.
• While the fabricator will try to eliminate all his risk by taking huge advances , for the work . He takes possession of all raw material etc. Its the buyer who foots maximum risk of fabricator not delivering at all to doing partial delivery.
• The art of negotiation and general rule is : See who stands to gain/profit in the deal. She should be the one who takes the risk. As a customer you will only conceed profit , so you should bear minimum risk if at all. 

The visit to Mumbai was an enormously enriching one . The major gains wisdom earned is as follows :

1. Appreciation:Housing is one sector which will always appreciate in cities of opportunities. THe coast of housing inMumbai have almost doubled up in Mumbai and Pune in last one year. Its has gone up 4 times in areas adjoining IT parks in Pune.

2.Time to buy: The best time to buy a house to live in is now. Later the decision, greater is the price you pay. Historically and even in current times, real estate always moves in upward spirals
3. Demand and Supply:Land is shrinking. People looking for house are fast multiplying. The demand for good quality housing will outpace supply in prime cities atleast for next 10 years

4. Stocks VS Real estate:Thumb rule for investment gains. Keep churning the stocks and stay invested in real estate. Stocks are vulnerable to factors beyond your control. They catch cold when any body influential sneezes or barks.

5. Over heated estates : Land and real estate is still undervalued . With economy on a roll, these will continue to grow . There will be no slowdown, stagnation in Mumbai, Pune, Bangalore, Delhi, Hyderabad.

6. Why buy when jobs are mobile :One must establish relation with land to be professionally stable. Anchor yourself in a city and then persist with your growth plans.Find yourself a city where opportunities related to your skills are aplenty. Move in there, anchor and then climb the ladders there only.

7. Rent Indicators : Global thumb rule is : 20 to 25 years of accumulated current rent values shows the intrinsic value of a property. Example for a 2 room house fetching a rent of 10k, the intrinsic property values is 24 to 30 lakhs. Bit in India ofr booming economies , rentals are not the truest indicator of value of a property. To preclude risks people go for higher deposits and lesser rentals. Some times people give their property on rent to see that its sustained. I currently am staying on Rent of 12K in a house valued at 65 lacs . In the same city , a property valued @ 42lacs in established locale is also fetching 12K

8. Residential address :There is a self esteem involved with where you stay. Do not go too far from basic necessities to get cheaper house. Pay a premium to live in established areas with school , shops, temple, pubilc conveyance etc. The appreciation in a premium locale will be higher in the long run.This will also provide easier resaleability.Also look for a more respectable address. Avoid Basti, Chawl improperly defined addresses.

9. Buying land or commercial property : Whenever possible, buy land, commercial property . IT will fetch better rentals and appreciation as corporates will buy them in long term and will give you better prices.

10. Business ventures or housing :On an average, 3rd Business ventures for individuals click . Dont postpone buying a flat or house to invest in your first venture. You will learn a lot in the first two venture and sink money. Debutante star businesses are less to find

11. Accumulate money to buy house ?Idle , uninvested money is vulnerable to vagaries of spendings, loan seekers and mood impulses. Constraining yourself with house is a good idea. Upgrades in lifestyle equipments, gadgets give you transient pleasure. The royalty of a good living space is one which you enjoy and relish on a daily basis.