Everyone wants to buy the house of their dream once they are settled financially. Purchasing a property in India is a huge monetary commitment. A buyer thus needs to do a lot of planning and research before making the move. One should be very cautious while weighing the pros and cons of different factors that are involved in the purchase of a real-estate.
There is an abundance of information and opinion available, but it is necessary to verify the truth behind them. More often than not a potential buyer ends up blindly believing one or more of the myths that are involved with the purchase of a property and soon they end up regretting the decision.
We have busted some common myths involved with the purchase of property in India:
Myth 1: RERA provides protection to the buyers
Reality: Real Estate and Regulation Act (RERA) implemented in 2016 provided reliefs to the home buyers. However, what many buyers do not know is that not every project is covered by RERA. RERA is applicable for projects which cover 500 square meters or more area or eight or more units. Also, for a project to be RERA compliant, the builder needs to register it with the authority. Thus, it is the responsibility of the buyer to check the details in the concerned state’s RERA website to ensure whether the project is registered or not.
Myth 2: Subvention scheme is cost-effective
Reality: It is also known as no-EMI till possession plan. The buyer pays 10% – 30% of the total amount in the beginning. Afterward, a three-way agreement is made between the buyer, the developer, and the bank. Bank pays the outstanding amount to the developer and the developer pays EMI to the bank while the project is still under construction. The buyers begin to pay EMI only after they have got the possession of the property. This scheme may seem cost-effective but in reality, the buyer is still paying the entire amount of the EMI according to the loan agreement and the principal amount does not reduce. Initial payments of EMIs are just payments of interest on the disbursed amount, which the developer pays on behalf of the buyer.
In reality, straight price reductions are much more profitable for buyers than the subvention schemes. Also, in the subvention scheme, if the developer fails to pay the EMI, it affects the credit score of the buyers.
Myth 3: Buying a property in metro cities is the best investment idea
Reality: Owning a home in a metro like Mumbai city has the potential for earning high rents. However, capital appreciation is lower in metro cities. Emerging cities and towns, on the other hand, offer a better price while there is a chance for higher appreciation. Since the purchase of a home is a long term investment, it is better to select emerging markets as the price in the metro cities became sky-high in past years.
Myth 4: Buying houses under construction is risk-free with RERA in place
Reality: Before RERA, property developers in many metro cities defaulted leaving the buyers in a soup. However, that does not necessarily mean the under-construction projects are now safer. In many states, RERA in its current form either does not exist or is modified to favor the developers.
Myth 5: Purchase of property should be based on the market condition
Reality: Market is never stable for too long. While waiting for the market to stabilize, one may end up be missing out on valuable investment opportunities. It is more intelligent to instead to focus on one’s own finances than to rely on external factors. If one has a good and stable income, along with substantial savings then it is a good idea to invest in properties, even if the market is not good. Buying property when the market is down may actually prove to be a good idea since the prices also will be lower. Once the market becomes stable, one will have made a high profit from this investment.
Myth 6: Brand name is immaterial while purchasing a property
Reality: Some people concentrate more on the price than on the brand name on the property developer. This may prove to be a big mistake. For a big banner developer, it is possible to check the quality of their construction, the time they take to complete a project and opinion of people about the property they have developed. Even though the price might be higher with the big brands, they always use top quality materials for the construction.
Projects get delayed – a problem that is faced more often with obscure developers than with the big names. This means some buyers are paying the rent as well as the EMI. Those who are making the purchase purely for investment also suffer as they are paying EMIs but missing out on the income from rent. Reputed builders are likely to deliver within the promised deadline.
Myth 7: Renting a house is better than purchasing one
Reality: Many people have a wrong notion that renting a property is more cost-effective than buying one. Renting is a good idea for professionals who have to move a lot due to the changes in their jobs. However, if someone is planning to move to a city for a long time, buying a property is the better option. For instance, rent is very high in Mumbai. Hence purchasing a house in Mumbai is a better option. No wonder, first-time buyers also prefer to rent their Mumbai house. Amount of money that is spent over the years in rent can be used to create an asset that will give a good return in the long run.
Myth 8: Offers made by the builders are profitable for the buyers
Reality: Developer will not make an offer that is not profitable for them. One of the tricks is offering freebies like a modular kitchen or AC with the flat. In reality, these things do not cost anything more than about 50,000. Some developers pay the rent till the houses are ready. In reality, they are only paying a few percents of interest on the money that the buyer gave them. Thus, while purchasing high-value properties these small incentives should not affect a buyer’s decision.
Buying a property is a big investment in which making a wrong decision can put the buyer in trouble. Keeping in mind these real estate myths will help the buyers make an intelligent decision.