In India, people have a distinct craze and attachment for real estate, be it a flat or a plot. Every one wants to live in their own house and yes it is logical also, as in India we do not have a very organised rental market and people have apprehensions about renting a flat due to various reasons. If we talk about the flats, mostly the buyers are from working class and the major source of funding for the purchase of flat comes from bank loans. First and foremost reason for buying a flat is surely for own consumption, the other reasons could be for investment purpose and for rental income.
Let's see, what kind of information we seek from the sales person or the builder while booking the flat, few informed customers ask for the possession date, the type of amenities offered etc. Very few do some research on the builder's reputation, his past projects or ask for the status of the government permissions required for the construction project. And what response we get from builder for these questions, a verbal promise for a possession date, promise of amenities etc. The innocent flat buyers believe in the builder's promises and go ahead with the booking of the flat and later registers the agreement. So far so good, you are happy and proud of your decision. But wait, this is just the beginning.
After some time, mostly when major portion of your home loan is already disbursed and you have paid major chunk of you own contribution to the builder, you start to sense that not everything is happening as per the promises, plans and schedule. Changes are being made to the original layout plan, construction work is not happening as per the schedule and the feeling that the project might get delayed sinks in. At this point what do you do, you try to contact the site office to get more information, but as it happens, you do not get enough or satisfactory information, and it becomes a norm. And after some time of this continuous follow up, builder and site representative starts ignoring you, you do not get responses to your emails and your calls go unanswered.
Fast forward, few years goes like this and finally you get the possession of your flat. But are you happy, excited and satisfied? Probably not, right, the reasons are obvious:
If you still want to go for an under-construction property, do spend good time on research of the property and the builder, his past projects, compare properties in the vicinity. Get the property documents throughly checked by a good lawyer. And its also a good idea to get introduced to other flat buyers in the same project and form a group with some common objectives.
Through this blog post I intend to highlight the points which one should consider while buying a flat for own consumption, for rental income from the property, or for that matter investment purpose too. Let's first see what all happens once you plan to buy a flat.
So, you have decided to purchase a flat, what are the next steps, first you check your financial condition and your loan taking capacity. Based on that, you decide on the size of flat i.e. 1, 2 or 3 BHK and the locality of your choice that fits in your budget. Next step, you start your search for the flats in the locality through online search, personal visits or by taking the help of property agents (that surely costs you).
So, you have decided to purchase a flat, what are the next steps, first you check your financial condition and your loan taking capacity. Based on that, you decide on the size of flat i.e. 1, 2 or 3 BHK and the locality of your choice that fits in your budget. Next step, you start your search for the flats in the locality through online search, personal visits or by taking the help of property agents (that surely costs you).
Mostly people look for a new property which is in under-construction state, though there are some adventurous ones who decide to go for pre-launch offers by builders. So, once you like a project and you find that it fits in your budget, without wasting further time you pay the booking amount and book our dream home.
Let's see, what kind of information we seek from the sales person or the builder while booking the flat, few informed customers ask for the possession date, the type of amenities offered etc. Very few do some research on the builder's reputation, his past projects or ask for the status of the government permissions required for the construction project. And what response we get from builder for these questions, a verbal promise for a possession date, promise of amenities etc. The innocent flat buyers believe in the builder's promises and go ahead with the booking of the flat and later registers the agreement. So far so good, you are happy and proud of your decision. But wait, this is just the beginning.
After some time, mostly when major portion of your home loan is already disbursed and you have paid major chunk of you own contribution to the builder, you start to sense that not everything is happening as per the promises, plans and schedule. Changes are being made to the original layout plan, construction work is not happening as per the schedule and the feeling that the project might get delayed sinks in. At this point what do you do, you try to contact the site office to get more information, but as it happens, you do not get enough or satisfactory information, and it becomes a norm. And after some time of this continuous follow up, builder and site representative starts ignoring you, you do not get responses to your emails and your calls go unanswered.
Fast forward, few years goes like this and finally you get the possession of your flat. But are you happy, excited and satisfied? Probably not, right, the reasons are obvious:
- You got the possession of your dream flat after a long delay from the promised possession date
- There were significant changes made to the original layout
- In this process you incurred significant financial loss i.e. the income tax benefit you could not claim on the loan interest, rent you paid while waiting for your own flat, loss of rental income if you were planning to rent out you flat etc.
- Constant mental stress and fear of project getting stalled or getting completed without the required government permissions
- There could be many more
At the hindsight, let's see, what you could have done differently at the first place to avoid all this hassle.
The best solution is, if instead of a under-construction property, one buys a ready possession property directly from the builder or from investors. The benefits are obvious: you get what you pay for as the property is in front of you. It can be examined properly and all the documents pertaining to the property are available and can be verified by a lawyer. But if it is so simple, why not many go for this option, these are few of the reasons:
- The foremost reason is, people think that the ready possession property is costlier (or at least it appears to be) as compared to an under-construction one. And few years back this was true to some extent, as the property prices were appreciating at an unreal pace of 15-20% per year but not any more. Also, if considered all the points mentioned above, the benefits of a ready possession flat certainly outweigh an under-construction flat.
- People do not want to miss the opportunity because of the impression that there are a very few units available and the stock will not last for too long, also the prices will keep on rising. . But if you look at the stats, there are quite a lot of unsold flats available to be grabbed. Also, in such a situation there are good chances of getting a good price if you bargain hard.
