BackRead the fine print of real estate ads
Read the fine print of real estate ads
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Back in 2006-07, developers of projects in Nehar Par—an area included in the Master Plan of Faridabad in 2005 by the Haryana Urban Development Authority—promised good connectivity with Delhi and quick appreciation on investment. Five years later, most projects are yet to be completed and roads are not suitable for vehicles. For those lucky ones who have got possession of their property, security remains a concern as there are only a few people living in the area and it remains deserted during the night.
Promises made to homebuyers by builders often revolve around product offerings and benefits. Builders market their projects in the best possible manner to attract customers. Here’s a summary of some interesting eye-catching gimmicks where you need to read the fine print carefully.
Premium buy-back
Usually developers do have a provision to cancel a booking if you want to exit the project. The procedure is complicated and it may take a few months before your booking amount is refunded less penalty charges. In some cases, the developer may forfeit the entire booking amount.
However, at times developers provide an option of buy-back after a specified period and you may be paid a premium on your property. This works well if you are an investor.
Developers attract homebuyers with such advertisements and if you can hold on to the investment for the advertised period, the procedure is much simpler than cancellation of the booking. However, you need to keep paying the equated monthly instalments in case you have taken a loan for buying the property.
What should you do: Though the developer may promise better returns, these deals generally have risks attached. Premium on a property value depends more on the location, demand-supply scenario and development of infrastructure in the region. Though a project may be ready within two-three years, the area may not have good roads and infrastructure. Therefore, the property may not command the kind of premium the developer promises to give if you plan to exit the project. Another factor could be inability of the builder to pay a premium price due to poor sales witnessed by the project. Says Vivek Sawhney, director, Investors Clinic, a real estate brokerage firm, “You should not prefer such deals as nobody can predict the future. It may be a case that the developer may not have sufficient funds to even build the project. You should be careful while opting for such deals."
“These kind of offerings show the desperateness of the builder to sell," adds Gaurav Gupta, director of a Ghaziabad-based real estate firm, SG Estates Pvt. Ltd.
Freebies
You may think that developers give offers such as free laptops and electronic appliances only in the festival seasons. However, some developers offer such gifts throughout the year. But do remember that such freebies cost the developer not more than Rs1-2 lakh.
What should you do: You may already possess these appliances or gadgets. So, ask for discounts instead of such offers and you may save some money. Developers also do not mind giving discounts instead of gifts. “But not all developers may offer you discounts," says Ankur Jindal, chief operating officer-sales, SVP Group, a Ghaziabad-based real estate firm. If the developer insists that the freebies are mandatory, compare the price of the property with other nearby projects. This will help you evaluate if the price is justified along with the freebies. If the developer has put a higher price tag compared with those who are not offering freebies, the deal is not for you.
Good connectivity
One-liners such as “near proposed Metro station", “two minutes drive from south Delhi", “shuttle bus service to Metro station" or “seven minutes drive from proposed flyover" aren’t uncommon. However such claims may not turn out to be true as they are meant for ideal conditions. Says Ankur Gupta, head-marketing project, Ansal Crown Infrabuild Pvt. Ltd, a joint venture between realty firms Ansal Buildwell Ltd and Crown Infrastructure, “Developers take the ideal situation of commute. The shortest time taking the shortest route without traffic snarls is considered by them."
What should you do: If a developer advertises good connectivity with a proposed Metro station, do not believe blindly. Moreover, find out whether the proposed Metro station will be ready before you get possession of your property. Says Gaurav Gupta, director of a Ghaziabad-based real estate firm, SG Estates Pvt. Ltd, “These advertisements at least give an idea about the locational advantages of the project. It may not be true that you can reach the Metro station in two minutes but you at least know that there is a proposed metro station nearby."
All inclusive deals
Under such deals, developers charge a net amount for a property including all associated charges such as parking and club membership. However once you actually book the property, you may have to pay for the apartment of your choice (preferential location charges, or PLC) or for installation of firefighting mechanism (firefighting charges). You may even be asked to pay government-related charges such as lease rent or external development charges (EDC). Explains Gupta, “All inclusive deals involve expenses which are common to most apartments." However if you want a unit that faces the park or the road or is on the ground floor, you would need to pay a PLC additionally.
What should you do: All inclusive deals may not work in your favour. There could be an increase in the government charges such as EDC during the tenure of construction. Also, the cost of raw materials could go up. The developer will simply pass them on to you. For the purpose, the developer will use the alteration clause in the builder-buyer agreement which allows him to increase prices for such unforeseen reasons.
devesh@livemint.com
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