Double-check before falling for builders' sops

MUMBAI: It may probably win the best advertisement trophy this festive season: ‘Pay only 10% of the money now and the rest on getting the possession of the house’ . It knocked many folks out of their morning slumber. Many Mumbaikars scanned the figures twice to make sure that they didn’t get it wrong in the first reading.
Still not convinced , many started scanning the fine print for the devil .But no devil was hiding in the details. It’s true that some reputed builders are offering a deal that looks like a “winwin situation” — that’s how developers describe it — for home buyers. Imagine, you are not sharing the risk of delay in a project, you are not paying the pre-EMI interest to banks and you get full tax benefits for interest repayment once the EMI kicks in. It is too good to be true.
“There is nothing new in these schemes. Some reputed builders have been offering these schemes for a long time now. It’s just that more people have joined the bandwagon and they made a splash in the media,” says Harsh Roongta, CEO, Apnapaisa, a consumer portal that tracks insurance and consumer loans, including the housing sector.
Dharmesh Jain, managing director, Nirmal Group, is also amused by the sudden attention to such deals “It has been happening for a long time now and there is more publicity for it because of the festive season. It is a win-win situation for home buyers,” he says.
But is it such a great deal? “If you look at the promise, yes, it’s a good deal. You just pay 10% down payment, pay 85% taking a loan from the bank and another 5% from your pocket on getting the possession of the house. The developer has an arrangement with the banker, so the buyer doesn’t have to pay any pre-EMI ,” says Roongta.
Suresh Sadagopan, principal planner, Ladder 7 Financial Advisories, a wealth management firm, says, “The buyer also doesn’t have to worry about the risk of the completion of the project because the developer has his own interest to complete the project. Sure, 10% of the property value in these cases will be really high. Still, the developer’s participation is a kind of assurance to many people.”
Why have builders — blame Bollywood for our perception of this lot as unscrupulous — suddenly sweetened the deal for customers? After all, they are known to act as a cartel to keep the prices and margins very high.
Realty observers say the prices still hold the key. “The only other option these developers have is to drop prices, which they would never want to do. Most of these offerings are in the luxury segment, where prices are prohibitively high. Developers don’t have any other option but to lure customers with deals that would give them more psychological comfort,” says a real estate expert, who doesn't want to be named.
According to experts, customers should do some factfinding before chasing such deals. “If the developer is bearing the pre-EMI interest cost, that means he would have loaded the price to compensate for it. You have to check the price — what’s the price if you don’t go for the deal? — to find out how much extra you are paying,” says Roongta. “Buyers would get a clear idea if they check the prices being quoted in the vicinity. They can also check what kind of discount they can get if they make more down payment or if they get a group to buy apartments . Developers have been offering attractive group discounts for a long time,” says the real estate expert.