In a Facebook Live discussion with Mint, Vikram Goel, chief executive officer, HDFC Realty, discussed the residential real estate market in the country and the offers and freebies that developer are offering to homebuyers at in this season of festivals. How much value should buyers give these offers while making their homebuying decision? Edited excerpts:
The festive season is considered auspicious for big ticket purchases such as buying a house. What would you advise homebuyers in this season?
If you are an end user, and have been wanting to buy a property, have your finances in place—either through savings or a home loan—I would suggest that you look at buying a property whenever you think it’s the right time. Festivals in India are a time when we find it auspicious to buy properties. Go ahead and do it. But otherwise, it’s always a good time to buy a property if you need one.
Apart from being an auspicious time, what are the other factors that one should look at while buying a property?
I would say that you may buy things like a shirt or electronics, just because it is an auspicious time. But house, for most of us in India, is much more than these things. It is a matter of social security. We take the pride in owning it. It is priority No. 1 for a lot of us. Some buy the first home, some upgrade to a bigger house. So this is (one of) the most important decisions in our lives. Thus one should be very careful that when you are buying a property, it should not be just because a friend has also bought it. It should not be because there is somebody who is offering you a refrigerator with the house. It should be because you need one.
And the selection criteria should be those that would have been there even when there are no festivals around, which is how our parents used to buy properties. Ask yourself: Do you need a property? If you need it, what size do you need? What is the kind of social infrastructure you want to have?
If you are a youngster, maybe you want a building with Wi-Fi, or places of social interaction such as a gym and a club, or restaurants.
If you are married with kids—you may value school infrastructure and local transport. If you have elderly parents staying with you—you would want a hospital and place of worship nearby. So these things: location, social infrastructure and your actual requirements would be the three things that one would look at before buying a residential property.
During every festival season, we have seen developers launching different offers and freebies rather than bringing down the prices. Don’t you think it would be better if they brought down the prices rather than offer discounts?
Couple of things here. One, if you look in the last 2 or 3 years, the rates actually haven’t gone up for most projects. And that’s true whether these are in the National Capital Region (NCR) or in Mumbai or in Bengaluru, or anywhere across India.
Now if you see net inflation and then you look at the inflation-adjusted prices; the prices haven’t gone up, and there is a discounting that is inbuilt. So today, in most locations in the NCR, such as Noida, if you could have bought a property at Rs5,000 per sq. ft 2 years back, you can still buy a property there at a similar price. At Thane, in Mumbai, where a lot of people buy homes, you could look for a property between Rs7,000 and Rs9,000 per sq. ft a few years back, and broadly the price remains the same.
Coming to why developers are offering these schemes: one has to look at the multiple offers. There are times when these offers are very interesting, depending on how you want to use those facilities. The subventions scheme—or no-pre EMI scheme—is one such example.
What you have to see is whether the subvention scheme being offered on a particular project is from a financial institution of repute or not. If a reputable lender is involved, it would have done a lot due diligence before approving a project. So one should see which reputed financial institution you have a comfort with, and if that financial institution can give you subvention.
Now, subvention can save you about Rs1.5 lakh to Rs3 lakh on the price of a flat. (If you want to get the house financed) and you speak to a developer, it will be able to adjust such discounts in most cases, if you think you want to pay the money upfront.
But getting the house financed is also very convenient if you think that you don’t want to risk too much capital, or are expecting a bonus to come in, or are expecting a raise, or also have a car loan for the next 6 months. By taking benefit of a subvention scheme, you can pay a small amount now and may not have to get into the obligations and liabilities of paying another EMI (till later). What you need to see is the net benefit of the subvention scheme: what the price is and what is the benefit subvention interest which you are getting from the developer, and if they are on parity, then it absolutely fine.
For homebuyers it is very difficult to ascertain the real benefit or value that they are deriving out of the offers and freebies. What should they do?
So you’re right that for most of us it is difficult to figure out how much is the actual price: there are floor-rise charges, additional charges for swimming pool view, external development charges; so if somebody tells you that the price is only Rs60 lakh for the apartment you want to buy, by the time you actually add all those charges, the price would go to about Rs75 lakh. So you may ask, rather than giving offers of white goods and infrastructure fee, why can’t that be adjusted?
My answer to that would be that there are all kinds of opportunities. We research when we buy a phone. But unfortunately, when we buy a house, we don’t do that kind of research. So in those cases, you should seek professional help, like when you invest in mutual funds and stocks, not every layman can invest in this, you need expert advice. Buying property is an even a bigger decision.
We are an institutional broker and like us there are many who are in this business. None of these brokers—when you buy a property from a developer—will charge the customer. So, if you know a broker you can trust, if you have brokers who are part of an institution, speak to them; they’ll be able to do this work for you because they get paid on each sale. They should be able to do this value-add for you. But even otherwise, look at the developers and the multiple offers you have. And if you sit down with the developer, you should be able to understand that I’m buying a property worth Rs60 lakh and I’m getting white goods worth Rs3 lakh. Even if a developer gives me Rs2 lakh discount, I’m fine with it. So if you sit across the table with the developer, he should be able to adjust in some cases. But otherwise, like I said, a discount on a property or an offer for white goods on a property—some developers may also give you a small car—should not be your decision-making trigger.
Your trigger is—do you need the property? If yes, which developers to go for? Which projects are in the location you would want to be in? And then use a broker who can work out the other details. And then, if you want to, you can involve a home loan institution, because it can do the legal and technical due diligence way better than you and I can.