In your interest.
Online Personal Finance Magazine
No beating about the bush.
Here are some crucial things to keep in mind while buying your dream house which will help you navigate the treacherous world of real estate
The sheer number and size of advertisements and marketing gimmicks for real estate cannot be ignored. In and around New Delhi, we see them on the front pages of newspapers and magazines, pop-ups and other tricks on internet websites, direct and indirect visuals on television, promotions in movies and hoardings at every conceivable location and so on. It has come to a point where fields and land along the roads leading out of Delhi, in any direction, are now being promoted as the future of urban development, where it will create great wealth and eventual posh destinations.
However, if you are not careful, many of these literal “castles in the air” will likely end up as destinations for your money—at a very rapid rate of depletion.
Here’s a short list of things to keep in mind, if you want to pre-empt and prior to putting your money down. Do this with a cool head and do not fall for hard-sell hustles like “prices are going up” or “last few apartments are left in the project”, and so on. Always be prepared to walk away without feeling remorseful.
1) Do not place any money as booking advance with a broker or intermediary, in cash or cheque, by way of a “credit note” or anything else. A good broker will try to keep his books and liabilities clear by not bringing transit money into his accounts. A crooked broker, on the other hand, will try and entice you to do exactly the opposite. Insist on direct payments to the builder, or the bank if it's a loan.
2) Ask for a copy of the Builder Buyer Agreement (BBA), or the Letter of Allotment, or the Terms & Conditions (or whatever the builder calls it), before you place any advance with a builder or promoter. If you do not get hold of one, for any reason, then walk away. Very often, buyers are stuck with extremely one-sided BBAs, and the threat of forfeiture of advance is real.
3) One clause to look out for in the BBA is the one which permits a builder to increase the chargeable area, arbitrarily, without notifying the buyer. Read this carefully. Also double check on what rate the builder will use for such a clause, if you do agree to it. Paying “market rate” for additional area charged for with the last payment can be an unpleasant surprise.
4) Rates of interest and method of calculating interest on delayed payments needs to be spelt out clearly and accurately. At the same time, a clause covering early or excess payments by the buyer must be part of the BBA, at the same rate of interest. Do not accept overdue interest charged without getting details of how the figure was arrived at.
5) Single or joint ownership is a very personal matter and you need to be clear on this before you sign anything. So please get good advice from your tax and legal consultants prior to documentation. Do not leave this to the last moment when emotions can run high.
6) Construction-linked payments make a lot of sense. Ask for a proper statement of account, within this context, every time the builder raises a demand note. Do double-check with a site visit. If the amounts are similar, which they often will be, make a small surplus payment of a few rupees so that your statement is always in credit and each payment is of a slightly different amount.
7) Get the builder to define well in advance, at the time of paying the booking amount, what ‘possession’ will mean. It should mean when all codal formalities and adherences required for registration are complied with, and when you are ready to occupy a completed project. Do not fall for terms like “temporary possession” for fitments and final interior work.
This is by no way a composite list, but most of these pointers will help you differentiate the good builders from the bad. Of course, nothing like it if a builder is highly transparent—specifics on carpet area for instance.
In the next article, we shall try and list out what you can demand and expect at time of delivery, and how you could go about issues in case of problems.
However, in a sector as unregulated as real estate, the golden rule is caveat emptor or ’let the buyer beware’. This is of paramount importance—look after your own interests before parting with your hard-earned money.
(Veeresh Malik had a long career in the Merchant Navy, which he left in 1983. He has qualifications in ship-broking and chartering, loves to travel, and has been in print and electronic media for over two decades. After starting and selling a couple of companies, is now back to his first love—writing.)