Here are the false promises in the real estate sector you need to beware of.
Many persons, lured by the builder’s promises, brochures and details provided by broker, purchase flat, but much like the commitments, the construction quality proved flaky, the advertised facilities were not delivered – the swimming pool was the size of a kids’ pool, the club was not even part of the plan, the green area was taken over by the state government.
Now the same builder has launched new projects, and although prospective buyers have some what knowledge about its past, but builder has managed to sell a large number of units. Normally Indian buyers gives prime importance to price, they did not even think that how can a normal builder can provide such infrastructure at low price when no other big builder is providing the same at such prices.
Even though somebody asked builder about its past then they normally say “our all projects are separate and no one has anything to do with the other” and also normally another answer is “today situation is very different from that in past and we are in better position to deliver the current projects”.
Here are some promises – and their complete picture.
AFFORDABLE HOUSING
This is the buzzword now days in real estate market, but before you buy, discount the project’s advertised value and see what you are actually getting. There’s likely to be a huge difference between the promised and the delivered project. So the super area-carpet area ratio could be highly skewed. Also, find out the true cost of the project; the builder may not have included the price of club membership, maintenance, pool charges, etc.
CONSTRUCTION-LINKED PAYMENT
The brokers will always tell you about the positive and perfect track record of the concerned builder in delivering projects on time. To make it more convincing, he will offer you a construction- linked payment plan – “You can pay according to the construction. Don’t pay if we are slow.” But irrespective of the construction being on schedule, he will make sure you pay on time. Once you’ve paid half the amount, now you run after the broker and builder, he can threaten you with cancellation. Remember, construction-linked payment is not an insurance against delayed projects.
SELLING THE LOCATION
Real estate is all about the right location and a project within ‘walking distance’ from a new railway station or ‘along the main highway’ seems good. This is one reason most developers are selling the location more than the project. But before considering the offer, visit the site. Some developers have renamed locations without official sanction. So you will hear of AIIMS Extension, IIT Extension despite a denial about the existence of such localities by the respective local authorities. Similarly, a five-minute drive will probably translate to a half hour crawl during rush hours.
PROPOSED INFRASTRUCTURE PROJECTS
Most speculators, or investors who want to sell at a huge profit, blindly follow one rule – buy property near a proposed mega infrastructure project, such as a IIT, AIIMS, metro, second airport or expansion of an existing highway. When the project is completed, the price of the property around it or along the route tends to jump manifold. However, beware of the word ‘proposed’, be it the access road or a AIIMS. Housing projects are being sold on the basis of proposals that may be at the approval stage or may not have been planned at all. The Greater Noida location was sold on the promise of an upcoming airport, but it’s not even close to being a reality. Most such ‘proposed’ projects are delayed, shelved or cancelled. In such cases, the property’s value remains stagnant, even falls, as speculators cash out and look for other investment opportunities.
Remember warren buffet wisdom don’t go for any shares of any company whose returns are still not clear. His simple but effective rule is I look at past rather than future returns.
READY FOR POSSESSION
These three words are really dangerous. Normally one thinks that one that you can shift into as soon as you buy it and many persons plan accordingly to shift the house. However, the meaning of the phrase varies for different projects and cities. In some cases, buyers have been given ‘possession’ without basic facilities like lifts or water connection. In others, they have been shown a building nearing completion, only to be told later that ‘their’ building is still under construction. We advise a site visit before paying up.
GUARANTEED RETURNS
Even these types of advertisements are common in small cities like Jodhpur also. Till some time ago, this was used as mainly in commercial projects, but is now being advertised for residential projects also. It’s mostly the smaller developers having paucity of funds who are offering such schemes. So, only after you make the down payment will you be told about the fine print – you get the returns only if you share the property with two others or the advertised returns are only for investment above a certain amount. The builder and the broker knows that after you put in the money, you will either stay put or invest more for better returns.
LUXORY SCHEMES
Luxury seems to be back in demand given the number of such projects launched in the past three months. A good opportunity for investors? Not really. The builders are peddling these projects because the margins are higher, but today’s ‘luxury’ is yesterday’s ‘middle-class’. A comparison with the current box-sized ‘affordable’ projects makes these seem ‘luxury’ and gives the developers the right to charge a premium on costs like club membership and maintenance. Experts believe that a double dip may be in the offing when it comes to premium projects as there aren’t enough buyers. Some developers have also been selling agricultural land in the name of a ‘farmhouse’ development without permission from the authorities.
FALSE DEMAND STATISTICS
If you tell the developer you need time to think before buying, he’ll rattle off the list of buyers queuing up to buy the property. Others will warn you of a possible rise in prices, how these have increased in the past couple of years or how phase 1 of the same project was sold within days. If you check, in majority of cases it’s a lie and if you bargain and take time you will definitely get a better deal. Even in Jodhpur, every broker first says you that he has to check whether any plot left or not in the new colony, but normally the fact is majority of the plot are still not sold.
FINANCE SCHEMES
Never take finance scheme provided by builder directly without comparing with schemes with other banks. Now a day’s comparison is easy and you can do it online on sites like bankbazaar.com. Attractive schemes like zero EMI come with a catch. Don’t believe the builder if he asks you to make the down payment and promises to arrange the finance later. Even if he puts you in touch with the bank’s representative and assures you of the loan, ask the bank directly for better rates. In most cases, the rate offered by the bank’s agent, who has put up a stall at the project site, is higher than that offered by the bank if you approach it directly.
