Choices Available To Home Buyers
Home buyers are always looking for the best deal with the resources and time available to them. With muted real estate prices, buyers are again active in the market.
Buying a home is the most exciting yet tedious task. While the excitement of owning your own home pushes you harder to expedite the process, the herculean task of going through enormous amount of details frustrates you. But going through the process is a necessity. Though the process is demanding, any negligence on due diligence can have serious consequences.
In this article, we will take a look at some options home buyers have and how they can choose the best based on their requirement.
Buying An Under-Construction House
This is the most popular way of buying a home. A builder advertises a new housing complex through newspapers, TV, or any other media. Agents start going around the market, companies, malls, and even homes of people to advertise the same. The goal of the builder is to sell as many as possible before the housing complex is built. In fact, more than 75 per cent of the flats of known builders are booked even before a brick is laid.
The Advantage
Cheaper – Buying an under-construction home is cheaper compared to buying the one that is already built or about to be built. The cost difference is significant. In the Delhi and NCR region, a ready-to-move-in flat with 2 bedrooms that costs about 40-50 lakh can be bought anywhere between Rs 30 lakh and Rs 40 lakh while the construction is under way, depending on the location. On average, the difference is anywhere between 20 per cent and 40 per cent. This is a big difference for a majority of the home buyers.
Low EMI – The EMI is paid as the work progresses hence the initial EMIs are low in the case of an under-construction home.
Win-win situation for buyers and sellers – Buying an under-construction home is a win-win situation for the buyer and the seller. The seller gets a ready set of customers even before he starts laying the foundation while buyers get the cost benefit.
High returns – Since the prices are low, you may get higher returns on the under-construction home. However, high returns come with high risks. To give an example, people who invested in Noida authority plots earned high returns while people who invested in Samshabaad in Hyderabad are still waiting for the price to rise.
Caution Points
Risk is high –There have been cases where builders could not complete the housing complex and buyers lost the money. Real estate sector is full of such stories where builders could not complete the construction because of cash crunch, high interest rate, and high raw material costs.
On the other hand, the market outlook may also change like how it happened in Samshabaad in Hyderabad. Samshabaad was supposed to host the largest Infosys campus, a chip factory, few engineering & medical colleges, banks etc. but none of it happened due to the 2008 crisis.
Many times, you don't get what is promised – This is another common complaint the home buyers have. They usually do not get what was promised in the documents. What is distressing is the carpet area that buyers get once the home is constructed. The carpet area is usually 70% of the super built area. The illusory swimming pool may never come up.
Important Points For Buying An Under-Construction House
Buyers should also check the past history of the builder. If the builder has done great in the past, chances are very high that he will repeat the same. However, if he has a checkered past, history will repeat itself. Hence, the track record of the builder is of paramount importance.
Buyers should clarify loan tenure and how the money will be released to the builder. Typically, it is completion-based.
Buying A Ready-To-Move-In Home
A new trend is observed in home buying since the last couple of months. A good number of home buyers are slowly shifting towards moving to 'ready-to-move-in' homes than buy an under-construction home and wait for a couple of years to get the possession. The reason is not hard to guess. Since the economic slowdown in 2008, there have been many cases where builders could not complete the construction. There have been many such cases.
The Advantage
Immediately available – Investors do not have to wait to move to their new home as it is ready and all buyers have to do is to pay the money, sign necessary documents, get all titles and required documents and transport their baggage to the new home.
Either EMI or rent but not both – In the case of ready to move, you just pay the EMI. In case of buying an under-construction home, you have to pay the EMI and live in rented apartment till you get the possession.
You get what you see – In the ready to move home, you get what you see. Since the housing complex is ready and there are people living there, getting feedback about the area, maintenance, locality, shopping centers, and utility centres become easy.
Caution Points
The biggest negative of ready to move home is that you will have no idea of what went on behind the scenes, i.e. in terms of materials used, in terms of strength of the foundation etc. If the maintenance is shabby, the house can start to look old in no time!
Also, the price of ready to move home is about 25% higher than the price of an under-construction home.
Important Points
Ready-to-move-in homes are generally more expensive but do your research; speak with a few people in the locality to find out the fair value of the home.
Group Buying
Since the last couple of months, many new companies such as www.groupbookings.in have encouraged home buyers to form a group and thus increase their bargaining power. Once the group is fairly big, the group buying companies will negotiate with builders on their behalf and get extra discounts. Essentially these companies act as a mediator between the builders and home buyers. For builders, giving extra discounts is not a problem because they are saving big in advertisement and sales force.
The Advantage
Group buying empowers home buyers to negotiate better with the builder. The group home buyers usually get a better discount than what they can get individually.
Caution Points
In group buying, an individual buyer doesn't make much difference and hence group's interest takes priority over individual's choice.
The down payment usually is higher.
Important Points
The buyers should study the documents carefully. Don't assume that someone is reading these documents. You will be surprised to know that everyone has the same assumptions.
Group buying of homes take time and hence you have to be patient. The group buying company has to build the group, and negotiate the price with the builder for additional discounts. These activities take time.
Buying Run-Down Homes
This option is not yet popular in India but slowly picking up. Essentially buyers choose to buy a rundown home at dirt cheap prices. Once the house is yours, you can fix it and spend some money to get it up to date. This can fetch a better value in the market and the investor can make a killing in profit.
The Advantage
The houses are much cheaper even when you add the cost of repairing the house. Run-down houses are generally row houses and hence you get the land with it too.
Caution Points
The look of run down houses can be deceptive. You may have thought how must it should cost to renew but when you start to repair it, it may exceed your cost estimation.
Important Points
Unless you have experience about this field, do not venture into it. You may end up buying a worthless property in an area where people are migrating from.
What Should You Choose?
Your choice should depend upon your financial condition, timing, and your choice of location. Location is the most important factor in real estate.