My housing society has gone to the dogs. Yesterday, they sent across a notice which read on the lines of “There is severe water shortage in Baner, Pune and only 20 mins of corporation water will be supplied. Water tankers come every alternate day so citizens are requested to make their own water arrangements.” I had moved in this society as it seemed to have everything going for it – now within 6 months, at the start of the summers, there is no water ! Luckily, I stay on rent. But I was wondering whether the folks who bought the property knew there could be a potential water problem. Did the real estate builder even talk about this or did he offer baits about real estate investment that were un-resistable ?
1. The locality is mind blowing ?
When you walk in to buy a property, the builder will often tell you that the location is going to be a gem in the future. He will say that ample development will happen in a short time frame – DP roads will be built by the corporation cutting right beside the housing complex and other amenities will mushroom as well.
The real estate builder might suggest that a hospital, school and shopping mall will crop up near to this locality.
In reality, it might be anything but that. Real estate investment is a massive one and you cannot go wrong with it – tame your expectations that basic amenities are guaranteed in the future. One should rather buy a property where some of the basic amenities are already existing.
2. A major real estate investment is going to happen !
In India, real estate builders often rush to build a major housing complex when a infrastructure project is announced by the Government. The new airport in Navi Mumbai or the one in Greater Noida are classic examples. A whole world of housing complexes have sprung up around these places but the international airports are no where to be seen.
So when you buy, ask yourself why you are buying – to make a killing on that real estate investment or to stay in the house ? While expectations of both is not wrong, it comes with undue risk and sometimes the risk impacts the most important reason why you are buying the apartment, which is for staying there yourself.
Buy because you need to say in the house, not because Ambani is building a launch pad next to it !
3. Only 2 units are left, hurry !
This is a an old tactic that real estate builders use all the times. When you go over to see the apartments, they tell you that only some units are left and you think if you don’t buy now, even those units will get sold off.
In reality, it could be anything but that. Creating a false demand supply scenario helps the builder lock in more buyers quickly.
Another common tactic the builders will use is to quote the price when the housing society was launched and at what it is selling now to showcase the fact that the price will rise further so you better buy now to take advantage of the current offer.
4. Real Estate Investment’s Construction linked payments
To impress upon the buyers mind, the real estate investment will offer another bait which links your payment to the construction progress. No progress, no payment is the sales pitch here.
The issue here is that even if you pay a small amount of money, you are locked in. After that, your only option is to pay all the money over whatever period of time the builder builds the property. He can even nudge you and force you to make the payment even though he might be going slow on his progress.
This cannot be a guarantee that your money is safe.
5. We will pay your rent !
I remember having visited a housing society which is just beside my daughter’s new school. The real estate builder was very particular about one point which she kept repeating every now and then.
If there is a delay, she said the builder will pay 1%. She said a lot of people had bought in with this assurance they were providing as it equated to their monthly rents – so, in short, the builder was actually paying the buyer’s rent in case of a delay.
1% of what, I asked, the value of the property ? No, she said, of the payment you do with us in the next 3 months !! That worked out to say Rs 10 lakhs. 1% of that is Rs 10,000/-.
Not bad I thought, Rs 10,000 per month is not bad. Wait, screamed the lady, its per year. Nice, very nice. And come to think of it, many folks bought apartments on this ground !!
6. Ready possession
The definition of ready possession is scrambled. Many builders have the apartment ready and will sell it off to you while he sleeps though building the amenities causing a huge discomfiture to everyone who have already moved in the complex.
Without basic amenities like a lift or a water connection to the apartments, the complex is not yet ready. So think before you fall for this bait. Still other builders will tell you possession will happen in 2 months but in reality it would take 6.
All these methods are “old wine in new bottle” tactics used by builders. How would you stay away from them ? Do you know of any other methods builders use to sell their properties ?
Pretty informative article I must say. I can’t tell the number of times I was offered these baits when I was looking for a flat. Here is how I dealt with them: –
1) The locality is important in terms of cleanliness and greenery and that’s what I focused upon. I stayed away from malls, schools etc because these places will end up consuming majority of water allocated to the area and entire neighbourhood will have scarcity of water. Staying 2-3 kms away from these places is not going to make much difference.
2) Major investment nearby was never my criteria because I am buying a house to live in and not to sell it off when the price goes up. The entire construction duration is going to give you a difficult time in terms of dust, noise, security etc. One should never buy house due to this factor unless of course the sole intention is investment.
3) Only 2 units are left!! I would laugh at such statements and say thank you I am not in a hurry. There are always better options available, one just need to be patient.
4) Construction linked payment is better than paying lump sum amount. It will probably go into a debate of pros and cons of buying an under construction apartment or ready to move in. I feel if builder has good reputation then this option is the best. I personally adapted this option with penalty clauses.
5) You need to carefully read the sale agreement and penalty clauses. Since builder had put penalty for any delay in the instalments, I also asked him to pay 80% of my rental amount [per month] in case possession is delayed by more than 3 months of the proposed completion date.
6) Again this should be handled by putting a penalty clause around delay in the possession date. Builders will always resent such clauses but if you stay firm, you can get your way in.
Thanks Vivek for the detailed reply. Note that Construction linked payment is the only option for projects that will take a long time to be built – we cannot downpay fully here, the bank will not allow you. The question this raises is, once we down pay, we are at the mercy of the builders.
They may take a lot of years to build but we are locked in. Real estate is a huge investment, is unregulated and is a large investment by retail investors. So one cannot be taken for a ride, but it happens so often. How do we stop this ? Can we stop this ?
The biggest pain point you rightly mentioned is real estate is not regulated.
There are a few things a buyer could do but that still won’t gurantee any safety.
Sale agreement is very important document and every buyer should read it very carefully and note the penalty clauses. The buyer should insist on putting a penalty clause for delay in possession.
Try to meet other buyers and deal with any issues together rather than individually.
Keep a close eye on progress and don’t just wake up on the day of promised possession.
I think the regulations are badly needed – did you check this out -http://articles.economictimes.indiatimes.com/2012-04-02/news/31275320_1_residential-projects-regulator-dwelling-units
It better come out fast. Dying for it.
Not sure how long will it take to pass. The builder lobby is very strong and they have good tie-ups with politicians, they will try all within their power to stop/amend the bill. The famous Adarash scam is a good example.
I am positive the regulator will come. But the bigger challenge like any other government scheme/regulation is its implementation. This is where we have failed miserably in the past.
Let’s see how this one goes with builders and politicians sharing power. Hopes are always alive 🙂
So rightly said, India suffers from implementation of policies. I think we have moved to a new phase now called policy paralysis where we are not even talking about policies, leave alone implementation.
The other baits I was offered: –
1) The bank associated with the project will wave off loan processing fee if you apply for loan in next 5 days.
2) You can pay the booking amount now and we will refund the money if you decide not to buy the apartment. This was when I asked for papers for verification.
3) We will give extra parking if you do the booking now. When enquired further I got to know the extra parking is for 2 wheeler in a common area. LOL!
4) After completion of project if you decide not to move in we will give you X amount as monthly rental till we find a tenant for your apartment.
5) All the units facing pool or garden or any open area are sold out. This is the only one left.
6) We are starting second phase of the project next week. If you do the booking now in the first phase, we will give you 20% discount for an apartment in the second phase. You can pass on this discount to your friend or relative.
7) The most weird and funny one – the project will be approved soon but in the mean time you can apply for personal loan and do the booking.
@Vivek,
That’s very comprehensive, thanks for putting altogether. Personal loan to do the booking????
The last one takes the cake – personal loan for booking the house.
I personally haven’t heard that but I might laugh at the guy’s face if he says anything near to that !
This incident happened with one of my friends. He was looking for an apartment on Sarjapur road in Bangalore. He found a project on website and went to see the site and meet the executive. He was quite surprised when he saw the site. There was just one board with the company and project name and no construction had started. The executive said next week they will get the approvals and start the construction. When my friend asked for papers for verification he said he will give after the approvals have come.
But he kept on insisting to pay 1 lakh for booking. Just to avoid that conversation my friend said I don’t have 1 lakh available and that was the time when the executive replied you can apply for personal loan and do the booking. My friend was shocked with such reply and simply left.
Later when he told me this incident we had a good laugh. Hope no one had fallen for that project because they were offering dirt cheap prices.
Reminds me of that movie “Khosla Ka Ghosla”.
Builders can go to any length to do such things, haan !
Very good article, When i was house-hunting many builders told me the above points.
One was that a Five Star Hotel would come nearby, its over 3 years now but no sign of it. Many adds too come in the newspapers with the above offers. Another builder said he had tie-ups with leading banks and he could offer interest on home loans at 1% below other banks and no processing fees too. This offer was quite tempting and i almost fell over it.
But can the banks offer home loans 1% less than normal for some specific projects or it is just a gimmick ? Not sure how they make up for the 1% loss…
@TheWealthWisher,
Even I posed the same question to the builder and he said that he had tie-ups with the bank and since he recommended many customers, the bank gave him good rates. The bank in question was ICICI bank.
ICICI..?? LOL !! Why am I not surprised?
Good point Rakesh. Even I got such offers from some builders but not exactly in reducing ROI. They have tie-ups and can get processing fee waived off or might get you an old scheme that just over or a new better scheme that would be introduced next month. These kind of offers are generally with large scale builders where they get customers in bulk for the bank.
Hi,
One of the bait offerd by builder are sample flat. They design sample flat like heaven and many people falls on it and if your wife’s falls on it they only god save you:)
Terrific catch – the sample flat is so well decked up with furniture and all that it gives a overall great look and feel to the apartment.
But when we move in, we get to know that the builder had done a really nice job of making it look spacious.
Really good one. But the downside is that if there is no sample flat, the buyers might feel disappointed as almost all the builders provide that. And sample flats which are not decked up might look poor for display.
Catch 22, I guess !
Yes that’s another great bait offered by builders. Initially when i started house-hunting i would look at sample flats only and then go and check other details. Some of the sample flats were just amazing and so well-organized with imported furniture’s and modular kitchen, i almost ended up paying the down-payment.
Almost bought a house, lol !
Perfect example Kranti. I know how hard it was for me to explaim my wife that this is a bait and actual flat will be no where close to it. Forget the furnishing and the lighting, we should focus on the architecture and the quality of construction.
But yea you are absolutely right there are plenty of people who fall for the glittery display.
Good to see this article and comments almost all baits are covered. Happy to see that many people have experience them and have good knowledge, intelligent buyers are here!!!!! I must say that.
One common bait offered by all is ‘Vastu Compliant’; I think almost all are write this in their ad. Once you go they will say all east facing are booked except this. I see people in south, gives very much importance to east facing. If there is no east facing, they show some other and explain as if they are even more important. Sir this is north facing, it’s called Nandi Dwar and once you shift into this house, you always grow.
Hardly have we known much about vastu to judge them. Ya as per our religion, facing is given importance and east facing is good. Once they understand buyer is conscious about vastu, they use the trick to hide other things behind.
It’s really not easy zeroing your choice when you make this huge investment and good research with patience is a must. As everywhere here also sometimes luck plays role on top of your efforts, if you get a really good one.
Good one Chirag. Vastu compliant is also a common bait. When salesman notices you are losing interest in the property they throw this bait at you and make you reconsider your decision.
If a buyer is really into property being vastu compliant then they should do their homework before dealing with the salesman so they don’t fall prey to the “made up” vastu compliant.
That is a good one Chirag – vastu compliance. No one checks this at all !