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Beware of foxing freebies while buying a property

Most developers are offering freebies to attract buyers into investing in their property.

Written by Adhil Shetty |
March 23, 2013 9:14:32 am

Most developers are offering freebies to attract buyers into investing in their property. While some are genuine,most offers are advertised to lure investors and hide the actual cost in such projects.

The tactics don’t seem to be working of late in the Indian market. Investors have become doubly cautious of any dubious deals and pay close attention while investing money. The property investment scenario has changed and it is not ‘following the herd’ as was the case a few years ago. No doubt,schemes related to property purchase are welcome by middle class buyers but one should check the underlying asset. Some of the common tactics adopted by builders and the prerequisites to check before investment include:

Imminent rate revision: Mass messaging by developers,usually on FM radio is an easy option for advertising property. One of the common methods is to send messages of asking a buyer “hurry now,as prices would get revised soon”. These messages are usually louder during festivals. If you plan to invest with such developers,the better option is to go and check out the “promised land” in person. Don’t rely on any housing agents and brokers because they often work for maximising their incentives.

Targeting human psychology: Developers often appeal to human psychology and target buyers. Indian customers are lured to gold,cars,modular kitchens and travel vouchers etc. However one should check the property and relate it with these extras the developer is giving. For example,if he is offering a car along with an apartment,the investor should check the distance of the workplace from the location of the apartment. If the location is very far and the travel time and traffic is more than what you have to deal with every day,it is better to stay away from the deal or invest the money in an option that will reduce your travel time.

Compare the effective cost: As the adage goes,“there is no free lunch” and applies to freebies too. They are included in the cost of your property. If one is comfortable in investing with these extras thrown in,it is fine but if the costs are too high,it is advised that you apply a value for money approach.

Check your Capacity: The clientele of the property developers or the target segment often plays a crucial role in driving demand. If the property is for high net worth individuals (HNI) who often don’t mind paying extra for the property,then offering the freebies approach becomes irrelevant in this context. Affordability is a critical aspect when you hunt for a property,do not spread yourself too thin by stretching your budget and loan capacity to purchase your dream home. Remember investing in a fixed asset like a house requires careful planning and allocation of funds and more importantly there should be a certain comfort level in paying the EMIs,with sufficient funds present for contingencies,savings and other commitments.

Reality of Realty: The reality of real estate is that the affordability of the middle class is getting challenged by high inflation that has reached almost 11 per cent. The prices are high in property markets and that is maintained by a very affluent business class that can afford to keep the rates intact due to the cash float they have. In India,we don’t have ‘ghost cities’ like in China yet but there are increasing cases where the aspirations are not meeting the end result.

A large section of the middle class is in the purchasing power band of Rs 30-35 lakh at the lower end and Rs 40-45 lakhs on the upper end. A property which is lower than the base-end of Rs 30-35 lakhs carries more disadvantages than advantages. The accompanying table shows the merits and demerits in different bands.

The order of the day is to check and invest and not to get lured by freebies. Quite a few have become vigilant of attractive and luring schemes while some others still need to acquire the right awareness surrounding a property purchase.

—The author is CEO,BankBazaar.com

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