Published & Updated as on - 2010-05-04
Real estate developers
are using ingenious lures to sell their projects. Here are the false promises
you need to beware of.
Rohit Sinha's dream was short-lived;
it lasted 12 months before morphing into a nightmare. Lured by the builder's
promises, Sinha bought and moved into his apartment, in Delhi, in 2007. But
much like the promises, the construction quality proved flaky. The advertised
facilities were not delivered - the swimming pool was the size of a kids' pool,
the club was not even part of the plan, the green area was taken over by the
state government.
Even as he, along with other residents, is
fighting for his rights, the builder has launched another project in the same
locality - holding out similar promises. "Surprisingly, even though we
informed prospective buyers about our problems, the builder has managed to sell
a large number of units," says Sinha.
When money today
approached the builder, all he said was, "We sell our projects separately
and one has nothing to do with the other. Also, today the situation is very
different from that in 2007." It is indeed different, not in terms of the
risks buyers face, but in the ingenuity used by builders to sell projects. They
are using old tricks, new lures and many false promises. Here are some promised
attractions - and the reasons you shouldn't take them at face value.
SELLING
THE LOCATION
Real estate is all about the
right location and a project within 'walking distance' from a metro station or
'along the highway' seems good. This is one reason most developers are selling
the location more than the project. But before considering the offer, visit the
site. Some developers have renamed locations without official sanction. So you
will hear of Gurgaon Extension, Whitefield Extension or Noida Extension despite
a denial about the existence of such localities by the respective local
authorities. Similarly, a five-minute drive will probably translate to a 45-minute
crawl during rush hours.
PROPOSED
INFRASTRUCTURE PROJECTS
Most speculators, or
investors who want to sell at a huge profit, blindly follow one rule - buy
property near a proposed mega infrastructure project, such as a metro, second
airport or expansion of an existing highway. When the project is completed, the
price of the property around it or along the route tends to jump manifold.
However, beware of the word 'proposed', be it the access road or a metro
station. Housing projects are being sold on the basis of proposals that may be
at the approval stage or may not have been planned at all. The Greater Noida
location was sold on the promise of an upcoming airport, but it's not even
close to being a reality. Most such 'proposed' projects are delayed, shelved or
cancelled. In such cases, the property's value remains stagnant, even falls, as
speculators cash out and look for other investment opportunities.
READY
FOR POSSESSION
This is the most common
differentiator between a project that is likely to be delayed and one that you
can shift into as soon as you buy it. However, the meaning of the phrase varies
for different projects and cities. In some cases, buyers have been given
'possession' without basic facilities like lifts or water connection. In others,
they have been shown a tower nearing completion, only to be told later that
'their' tower is still under construction. Experts advise a site visit before
paying up.
CONSTRUCTION-LINKED PAYMENT
The
builder's marketing agent will tell you about the meticulous track record in
delivering projects on time. To make it more convincing, he will offer you a
construction- linked payment plan - "You can pay according to the
construction. Don't pay if we are slow." But irrespective of the
construction being on schedule, he will make sure you pay on time. Once you've
paid half the amount, he can threaten you with cancellation. Remember,
construction-linked payment is not an insurance against delayed projects.
GUARANTEED
RETURNS
Till some time ago, this was used as
a carrot for commercial projects, but is now being advertised for residential
ones too. It's mostly the smaller developers desperate for funds who are
offering such schemes. So, only after you make the down payment will you be
told about the fine print - you get the returns only if you share the property
with two others or the advertised returns are only for investment above a
certain amount. The builder knows that after you put in the money, you will
either stay put or invest more for better returns.
AFFORDABLE
HOUSING
It has been the buzzword for more
than a year, but before you buy, discount the project's advertised value and
see what you are actually getting. There's likely to be a huge difference
between the promised and the delivered project. So the super area-carpet area
ratio could be highly skewed. Also, find out the true cost of the project; the
builder may not have included the price of club membership, maintenance, pool
charges, etc.
TODAY'S LUXURY, YESTERDAY'S
MIDDLE CLASS
Luxury seems to be back in
demand given the number of such projects launched in the past three months. A
good opportunity for investors ? Not really. The builders are peddling these
projects because the margins are higher, but today's 'luxury' is yesterday's
'middle-class'. A comparison with the current box-sized 'affordable' projects
makes these seem 'luxury' and gives the developers the right to charge a
premium on costs like club membership and maintenance. Experts believe that a
double dip may be in the offing when it comes to premium projects as there
aren't enough buyers. Some developers have also been selling agricultural land
in the name of a 'farmhouse' development without permission from the
authorities.
DUBIOUS DEMAND
If
you tell the developer you need time to think before buying, he'll rattle off
the list of buyers queuing up to buy the property. Others will warn you of a
possible rise in prices, how these have increased in the past couple of years
or how phase 1 of the same project was sold within days. In 90 per cent of the
cases it's a lie, and if you haggle, you're bound to get a better deal.
ARRANGING
FOR FINANCE
Attractive schemes like zero EMI
come with a catch. Don't believe the builder if he asks you to make the down
payment and promises to arrange the finance later. Even if he puts you in touch
with the bank's representative and assures you of the loan, ask the bank
directly for better rates. In most cases, the rate offered by the bank's agent,
who has put up a stall at the project site, is higher than that offered by the
bank if you approach it directly.
Source: Mail Today
03/05/10.
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