Here are some factors that one should check before booking your dream home this festive season.
The September-November season is typically festival season in India. Two of the biggest Hindu festivals viz. Dussehra and Diwali are celebrated during this period. Remember, these are not just a one-day celebration. On both the occasions, the celebrations go on for 10-15 days at a stretch. The Diwali season is also auspicious for many traders and businessmen for a different reason. This marks the beginning of the new Samvat, or the traditional calendar.
It was not surprising, therefore, when Sarita Shah opened her morning newspaper to a deluge of advertisements regarding attractive properties available at bargain rates. Since Sarita was looking to buy a 2-BHK flat in Mumbai, she was keen to consider whether she should jump into the fray during the festive season and make the most of the discounts offered. While Sarita will surely be entitled to some interesting benefits during this festive season, here are some of the points Sarita needs to keep in mind while buying property in the festive season.
1. Convince yourself that you need the property and can afford it right now…
That is the acid test. All discounts and festive offers are secondary. Before you convince yourself that you need the property, you need to be convinced about 3 important things. Firstly, you must be convinced that you are going to be stationed in that place for some time and hence plan to use that property for your residence. Secondly, you must be clear that you are in a position to arrange the up-front margin of 15% that is normally required when you take a home loan. That must not become an additional burden on you. Thirdly, you must be in a position to service the EMI with your current income. While planning your house, do not bet too much on rising incomes to plan your EMI. Be as conservative as possible. Festival offers are secondary to this basic test.
2. Ensure that the cash discounts are actual discounts…
Many builders have the tendency to hike prices prior to the festival and then give discounts during the festive season. Do not fall for this trap. She must check with similar property deals done in that area in the last one year to judge whether the discount is real. Secondly, she must also check that the property does not have inherent disadvantages like an open drain nearby, too much noise from main road traffic, high rises coming up around the building etc. Once these factors are considered, Sarita will have a much clearer picture of whether these discounts are meaningful or not.
3. Understand the fine print of the payment plans offered…
Builders normally tend to entice you with lip-smacking offers. There are offers where you do not pay any EMI till the time you get you possession. In such cases, Sarita needs to remember that EMI is an agreement between you and the bank and if the builder does not honour his part then you need to shell out the EMI. There are typically 10:90 schemes that most builders will offer during the festive season. Here you can book your apartment by paying just 10% of the cost and pay the balance 90% at the time of possession. Here again, get clarity about the assumptions of the scheme and the conditions therein. Many payment plans may not be as attractive when you read the fine print of the conditions involved.
4. Talk to the builder if the offers are fungible…
There are builders who offer you freebies that may not exactly be useful to you. For example, one of the builders approached by Sarita offered to install split ACs in all the rooms and also a free washing machine and a dish washer. These were hardly useful for Sarita as she had all these white goods available with her. In this case, Sarita must negotiate with the builder if she can be compensated either in the form of a lower price or probably some other cash benefit. Don’t accept gifts just before they are being offered, even if you do not need it. Remember, the cost of your gift is being indirectly billed to the buyers in a subtle way. As well get the best value for the same.
5. Who are the funding partners for the project?
This may appear to be very straight forward but it does matter. In the case of Sarita, the project in question had funding options only from NBFCs and not from banks. NBFCs have cost of funds that are higher than traditional banks and therefore they will be forced to load a higher cost on you. Even if the rate of interest appears to be low, you will end up paying a higher cost overall. Ensure that large PSU and private banks are the funding partners for the project as it will ensure that the project will better evaluated and funding cost will also be more reasonable.
6. Check out the track record of the builder…
Festive season is normally the time a lot of smaller builders try to make hay while the sun is shining. Such builders may be looking at the festive season to collect margins for projects which may not be completed on time. One of the projects that Sarita had evaluated was from a builder who had a bad track record of project time and cost over-runs in most of his projects. Such builders are best avoided as they are unlikely to do anything different even in their festive offers. Also check out quality of buildings completed and talk to some of the residents. Do they have problems of water supply, drainage and water seepage? Asking these basic questions will help you separate the wheat from the chaff.
To summarize, Sarita should make the best of the offers in the market but must also convince herself that these offers are meaningful. Here is a checklist:
• First, ensure that you are actually in need of buying a house and can afford to pay the margin as well as the monthly EMIs.
• Read between the lines of the discounts and payment plans. Short term discounts and dressed up payment plans will not amount to much.
• Check the track record of the builder. Nothing helps you better than talking to previous buyers and getting an idea of the builder’s commitment and responsiveness.
• Funding is the key and that is where the overall cost of funding needs to be understood properly. Try to go with quality financers to the extent possible.
Builders are trying to make the best of the festive season and Sarita can too. It is just these basic points that she needs to keep in mind before making her festival property buying decision.