5 minsOctober 23, 2018
Purchasing a new house, particularly one to live in (known as the primary home) is every family’s dream. Actually, most individuals approach real estate as a wealth-creating asset class to invest hard-earned money to counter inflation.
While looking to buy a ‘ Big-Value ’ asset such as a house, here are six things to be aware of:
- Invest in a RERA Registered Property only
- The Real Estate Regulation Act, 2016 has engendered more transparency and vigilance in the functioning and operations of the real estate industry, holding developers/builders more accountable with an aim to protect you, the buyer/investor.
- RERA specifically states your rights as a property buyer along with certain rules and regulations that builders/developers must strictly adhere to. And in case of any malpractice on the part of builder/developer, there’s the Real Estate Authority and Appellate Tribunal in each state to address buyers complaints. So if the developer/builder resorts to any unethical practices, you have a legal recourse before approaching the Court.
- When you come across an advertisement of a project, first check if it is RERA registered. Before making a final choice, conduct some online and ground research. This includes:
- Who is the builder / construction company?
- What is the construction company’s track record?
- Have they completed the construction of previous projects as per schedule?
- Visit the site and inspect the quality of construction
- Time-lag for possession
- The rate of the amenities offered
- You may also visit other sites developed by the same builder just to check whether they have fulfilled all the promises made even with respect to the amenities
- If need be, speak to others who have already bought into a project of that developer/builder
- Title of the property on which the construction is taking place or has taken place (to ensure that it free from any encumbrances and litigations)
- Have they obtained all statutory permissions
- Is the builder listed or recognized by the housing finance company (in case if you want to avail a home loan facility)
- Before you buy a property, ensure you’re dealing with a RERA registered developer/builder and that the project registered under RERA is also on the approved list of projects of the bank or Housing Finance Company (HFC).
- Further, in order to avoid unpleasant surprises later, please read the terms & conditions carefully before signing on the dotted lines of your agreements (purchase deed and home loan).
- Look out for tangible deals
- Around Diwali, developers/builders usually offer certain tangible benefits, such as free parking, free clubhouse membership, free gold coins, free home appliances, no EMIs until possession, and discounts. These could be deal sweeteners, so be on a lookout for projects with an attractive value proposition in the area you wish to buy your dream house and strike the best deal.
- Evaluate what would be your total purchase price
- As you may know, in addition to the basic cost of the property, there are charges over and above it that cannot be ignored viz. for parking, stamp duty (which varies from state to state) and registration fees, legal fees (for the requisite paperwork), brokerage charges (if you have approached through a broker), property insurance (if you have opted for one to indemnify risk to property), and so on. All these costs add to your total purchase price.
- Keep a check on your affordability
- While home loans are available to make this big value purchase, factors such as maintenance cost and property tax you would pay in the future could weigh heavily on the affordability.
- Usually, the maintenance and property tax depends on factors such as the location of the property, the area occupied the age of the property, the amenities, etc.
- Make sure you’re getting the best home loan deal
- When you buy a new house through a home loan from a bank or HFC (for the tax benefit it offers), the interest rate on the home loan is one of the vital deciding factors. Higher the interest rate, higher your EMI will be and vice-versa. Hence, pay close attention to the interest rate you are getting.
- But remember, acquiring the cheapest interest rate on home loan does not necessarily mean that you are getting the best deal. There are many more aspects to be studied.
- Select between floating rate of interest and fixed rate by sensibly taking cognisance of the interest rate cycle and what suits you.
- Apart from the rate of interest, check the processing fee. This is the fee charged to process your home loan application. Generally, it is around 0.5% - 1% of your home loan amount. The percentage charged depends on your profile, income, and type of loan.
- Besides, interest and processing fee, evaluate the other hidden cost associated with the home loan. Typically these are:
- Legal fee
- Technical evaluation fee
- Franking fee
- Documentation fee
- Notary fee
- Adjudication fee
- Cheque/ ECS/ repayment dishonour charges
- Switch fee (to switch a floating rate home loan to a fixed rate and vice versa)
- Cersai charges
- Duplicate statement issuance charges
- Loan pre-payment charges
- Document retrieval charges (levied at the time of home loan closure/ pre-closure)
- Compare these hidden costs between lenders and ensure they are competitive to secure a worthy home loan deal. Keep in mind to borrow only as much you repay, so that your home loan EMIs do not turn out to be a financial burden to you and your family.
- Select the tenure of your home loan thoughtfully
- Apart from the interest rate, it is the tenure of the home loan that decides your EMI. A shorter tenure increases your EMI, while a longer one reduces it.
- Therefore, sensibly choose the tenure of your home loan so that it does not jeopardise your long-term financial well-being.
When buying a property, do not let emotions override your decision-making ability. Remember, purchasing a house is one of the most important long-term financial decisions that you will ever make, plus a big-ticket investment.
Recognise your needs, your affordability, assess your home loan eligibility, and borrow only within your means. Remember to include your family’s views while you consider this important financial decision.
Wish you a Very Happy Diwali & Bright Financial Future!
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.