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Keep these factors in mind while buying a property

April 04, 2014 14:40 IST

Image: It is extremely difficult to predict how high property prices will shoot up.
Photographs: Punit Paranjpe/Reuters Manish Shah

It might make sense to buy an under-construction property over a ready one that commands too much of a premium for being ready, says Manish Shah.

Among the trickiest predictions to make is which way the property market will go.

Financial markets are so much easier because of all the information available – Price Earnings ratios, company guidance, interest rate guidance from central banks.

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Keep these factors in mind while buying a property

Image: Delay in possession of a flat could mean additional interest payment.
Photographs: Uttam Ghosh/Rediff

We have regulators / ombudsmen to help you with Rs. 200 extra charged on your credit card or 2% taken as commission on your mutual funds but no one in particular to appeal to (yet) if your possession delay cost you lakhs in additional interest payments to your bank or in additional rents paid.

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Keep these factors in mind while buying a property

Image: Home buyers should consider all parameters while buying an under-construction property.
Photographs: Punit Paranjpe/Reuters

Which is why I’m perplexed when sweeping statements are made about the state of the market and what you should or shouldn’t do. Let me illustrate through a few examples:

I hear all around that there’s a real estate slowdown and it is true that transactions have reduced. Mumbai has been hit too.

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Keep these factors in mind while buying a property

Image: One should cross-check tall claims made by the builder while booking an apartment.
Photographs: Reuters

Ready possession, reasonable rate, great connectivity, a new mall across the road and an upcoming metro station close by. Could it have appreciated even more ? Maybe. Does it sound like this is a tough market ?  

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Keep these factors in mind while buying a property

Image: Home seekers should not get confused whether to buy or rent a flat in a bad market.
Photographs: Uttam Ghosh/Rediff

I hear with amazement declarations about this being a bad market to buy and there are now indexes that talk about particular cities being better to rent in rather than buy while some others have the reverse said about them. How can a generalization be made of an entire city?

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Keep these factors in mind while buying a property

Image: Even If property market is growing at slow pace, your EMI burden will not come down.
Photographs: Uttam Ghosh/Rediff

The other, relocating to the same city with the intention of settling down in it.

If the market is slow and appreciates at low single digits (in percentage terms) it will take over 10 years for the decision to buy to pay off.

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Keep these factors in mind while buying a property

Image: An under construction project in Chennai.
Photographs: Babu/Reuters

With respect to under-construction properties, most advice is similar – stick to ready property or near completion projects to avoid the cost of delay (not to mention the chance of projects not being completed).

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Keep these factors in mind while buying a property

Image: One should verify builders credibility before signing any deal with him.
Photographs: Punit Paranjpe/Reuters

So, the question to ask yourself is, if you, as a buyer are comfortable with the builders reputation of completing projects (judged by past record and current reputation), then is the price that it’s available at right now low enough to allow you to afford a 1-2 year delay ?

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Keep these factors in mind while buying a property

Image: Real estate sector in India remains most difficult in terms of pricing prediction.
Photographs: Ahmad Masood/Reuters

Unfortunately, the net message here is that in opaque, complicated markets like real estate in India, its best to stay away from generalizations. Evaluating each deal or project on its merit is your best bet.

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(The writer is a Co-founder and CEO, Bigdecisions.in)

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Tags: India