Choose completed property…


For property buyers, a festival season is the right time to scout for property. Builders are expected to dole out freebies to ensure that their sagging sales get some fillip. Some like Saket Sinha are keenly watching the developments. “If I get a good deal, I will buy a property,” says Sinha, an investor in property.

There are many who are doing the same because they think much like Harsh Roongta, investment consultant, that something has to be given because the property market is going nowhere. “Deals are happening only at the Rs 30-50 lakh range. Even those have slowed down. In upper segments, things are not moving at all,” he says.

Is it because deals aren’t available? No, believes Muddassir Zaidi, national director, Residential Agency, Knight Frank. “There are already some good deals in the market. Builders who have re-launched their projects are seeking the same price that they were two years back. Even the floor rise and other costs are being cut. But while things should be better this year, I am not expecting any fireworks,” says he. According to him, there are some new projects being launched at a price which is less-than-20 per cent of a ready-to-move-in flat in the same area. In areas in which the ready-to-move properties cost as much Rs 55,000 per sq ft, builders launching projects are doing so at Rs 34,000 per sq ft. Zaidi does not expect prices to come down beyond this.

This has all the makings of a classic stalemate situation. That is, while buyers are waiting for better deals, there might not be any correction if builders are able to hold on to prices.

Obviously, views about property buying will vary accordingly. For example, information technology professional Amitabh Verma believes that there are sellers (builders, investors, owners) who are willing to pass on a good discount to anyone. It’s not very difficult to get a 10-20 per cent discount on the 2014 prices currently. “I would stay away from new launches or under-construction property, as there is uncertainty on project delivery, etc”, says Verma.

On the other hand, Ravish Ranjan, consultant, believes that even real estate investing is a terrible idea now. “Entry level housing in A or B grade town is between Rs 65 lakh and 1.25 crore, which means that the equated monthly instalment at the rate of 9.85 per cent will be anything around Rs 65,000-1,20,000, whereas the rental income will be as low as 1.5-2 per cent.

What’s wrong? Despite lack of sales, builders have not really cut rates significantly in the past few years. A report by Knight Frank, which captures the real estate trend in the first half (January-June) 2015, shows that sales volumes dropped by 19 per cent and new launches by a whopping 45 per cent. The real estate consultancy is projecting a 9 per cent drop in volumes and 34 per cent drop in new launches. The National Capital Region has shown a drop of new launches by 68 per cent – the highest. This was followed by Mumbai at 47 per cent. Except in Pune, home sales have dropped in seven out of the eight top cities including Mumbai, NCR, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad.

Lack of confidence in growth and repayment ability: Homes are purchased even at a slightly higher cost when people believe that things are going to be good for a few years. Says the head of a property consultancy: “Potential buyers are still not confident that things will be good or we are entering into a period of high gross domestic product (GDP) growth rate. Such confidence will help them make long-term decisions like home buying.” As a result, many buyers would like to wait for more correction.

The recent turnaround in the stock market’s fortunes has not helped things either. Many people rely on markets and mutual funds to raise the initial capital for buying property. With the Sensex down two per cent in the past year, the mood isn’t as buoyant as it was at the beginning of the year. Though people have made some money, especially in large-and-mid-cap and mid-cap-and-small-cap mutual funds whose category average returns are 8.33 per cent and 15.44 per cent, one does not know how long will this volatility continue. Even interest rates are on a downward trip, with many banks such as State Bank of India and ICICI Bank giving floating rate home loans at below 10 per cent. So what are the things to look at?

Should you buy? Roongta believes that if you are going to stay in a property, there is no point in going for any of the deals. “If you are going for 20:80 or any such scheme, it is actually a loan-against-property to the builder. I am completely against it. If you want to buy, go for completed property. He thinks one can go for an under-construction property as an investor but it is a high-risk, high return game.

Ranjan says: “The boom in 2006-2009 was largely due to factors like big hike in salaries, high GDP growth, low interest rates and so on”. Things haven’t been the same, ever since.


The popular schemes – 20:80, 10:90:10, 8:92 and 5:95 – are also known as subvention schemes. Buyers are only required to pay an amount equivalent to the smaller number of the ratio. The rest is funded by a bank.Registration of the property is compulsory in these cases.

In this, a buyer needs to pay 19.9 per cent of the total contribution. The rest is paid on possession or a specific period. Registration may be compulsory in these projects.

Buyers get a waiver of EMIs for the stated number of months. A bank loan and registration of the property is compulsory. Buyers should study it closely to ascertain the rates applicable after the waiver period. If it is higher than normal rates, customers should ideally not opt for the scheme.

Buyers get a reduction in interest rates for two to three years. The interest rate is lower at, say 7.99 per cent – for a specific period as offered by the developer – against the normal prevailing rate. Bank loan and registration are compulsory. Again, buyers need to ascertain the interest rates applicable after the two-three year period. The banks could charge at prevalent market rates after the initial period which could lead to higher EMIs.

Some offer flats with white goods or with pre-installed modular kitchen. Others may offer fully-furnished flats.These are typically meant for end-users and budget segment buyers.

The USP of this scheme is that developers offer guaranteed rentals for two to three years, either until possession or post-possession. This is for investors seeking income-generating assets. The lump sum of 24-36 monthly rentals is a discount that the developers give to their customers.

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