Many young people are planning to buy their dream houses, but have been held back by high property prices and an uncertain job market.
This is prudent because the decision to buy a house should be based not just on the need, but also on the individual's financial readiness.
It involves a big financial commitment, and one should go ahead only if one is absolutely sure.
As the festive season approaches, salesmen and agents are preparing to lure you with freebies and discounts.
Here's how to see through some of their sales pitches and take a decision based on facts.
Correction does not mean that the builder has brought down the prices.
Recent media reports have talked about a correction in real estate prices, but if you mention this to the builder, he might laugh at you. Even if he agrees that some locations have witnessed a price correction, he will contend that the area where his project is coming up has not been affected. However, if you look around, you will see the signs.
A correction in the property market does not necessarily mean that the builder has brought down the prices. Even if there has been an increase in price in the past year or so, it effectively means a correction in real terms if one accounts for inflation. Likewise, steeper discounts than the previous year on the same property are a correction in real terms.
This is the most affordable project in this area:
If a new project has 2-BHK flats priced at Rs 42 lakh each, when the going price in the area is Rs 50 lakh, isn't it a steal? Not really. The full-page ads in newspapers speak a lot about the facilities and features of the project, but miss out on an important detail - size of the flat. Experts say that the average apartment size has come down in top metro cities. In Mumbai, for instance, the average unit has shrunk 31 per cent in the past 5 years.
We will deliver on time since there’s a penalty clause:
Project delays are a reality and very few are completed on schedule. Some builders do offer compensation for delays in handing over possession, but it's not something you can bank upon. The amount offered will be nowhere close to the EMI you are paying. This is because you would be paying the instalment for the total cost of property, but the compensation offered will be linked to the base price, which does not include additional charges for parking, club membership, etc. Some builders slip in a clause in the agreement, which insulates them against any claim by the buyer. Others have an upper limit for the compensation they will pay.
These rates will be revised soon:
IT is the favourite trick used by almost every builder to entice buyers. If you tell a builder that you need time to think it over, he will say that the project is almost sold out and prices will soon be revised upwards. The fact is that today developers are more desperate to sell than buyers are eager to buy. Overheated markets, sliding stock prices and rising interest rates have made matters worse.
What you see is what you get:
Is neither true for the price quoted by the builder, nor for the sample flat that you see at the construction site. The latter may look like the perfect home you have been dreaming of, but the reality is quite different. The interior designers hired by the builders to do up the sample flats are experts at creating optical illusions through lighting and furniture to make house appear bigger.
The freebies bring down the effective cost:
Freebies are the flavour of the season. From registration fee to modular kitchens, even cars, all are being offered when you book an apartment in a project. Don't fall for these lures. All freebies are already factored into the price of the apartment. The same goes for the attractive schemes on offer. The truth is that developers urgently need the cash and many of the projects have not even got approvals from the authorities. This puts a question mark on these projects.
You can never go wrong with property:
The first thing a builder or realtor is likely to tell you is that real estate prices never go down. This is also the wisdom you may have received from friends, relatives or parents, the people who had bought property earlier. However, real estate, like other asset classes, goes through periods of ups and downs. The only difference is that it is not as volatile as, say, stocks or gold. Property prices in some markets have been stagnant for the past 1-2 years. In fact, some areas have actually witnessed a fall in prices.
Don't fall for projections of high rental income:
Don't fall for projections of high rental income from property if you are not planning to occupy it immediately. 'No one can predict the rent a property will fetch in the future. These days, a reasonable annual rent is 4-5 per cent of the value of the property. However, in most cases, it is not possible to earn this much because property prices are very high,' says Pankaj Kapoor, managing director, Liases Foras, a real estate rating agency.