Commercial vs Residential Property. Where to invest?

The average first-time property investor in India generally chooses to buy a residential property not only because a self-owned home is a highly valued form of security, but also because commercial property is a much more expensive and riskier proposition. Investors who already own a home however and are looking for investment opportunities are more likely to consider commercial options. Residential and commercial properties each have their own pros and cons. When making a choice, investors should consider the triumvirate of Cost, Risk and Return onInvestment.

Key Factors In Decision-Making Between Residential and Commercial Property

Cost

  • Initial investment in residential property is generally much lower as compared to commercial property unless buying individual shops.
  • Bank loans can finance 80% of residential investment, whereas they grant loans only upto 60% on commercial property.
  • Rates of Interest are 2% to 4% higher on commercial property as compared to residential property.
  • Home loans have tax benefits, unlike those taken for commercial property, which have none. 

Return on Investment

  • Experts believe commercial property can fetch anywhere between 10% – 15% return on investment, depending on the quality and location of the asset. a property worth 4-5 crores in a prime location can fetch upto 40 lakhs in annual income! However, capital appreciation is limited.
  • Residential property investments are unlikely to yield more then 4% rental yield especially when managed by individuals.

Risk

  • Commercial property demands a high capital investment as compared to residential property.In addition it is vulnerable to economic slowdown, low demand, location and competition from other locations/builders.
  • Residential property is relatively immune from these risk factors since it is end user driven & there is a huge shortage.

Overall, both residential and commercial properties have their own drawbacks and benefits and where investors put their money is largely dependent on a combination of how much of risk they are willing to take and their financial status. Generally, most real estate investors start by investing in residential property before stepping up to investing in commercial spaces. This table lists the salient features of both kinds of property that will help in easier decision-making.

  Residential   Commercial
Return on Investment Lower capital investment with steady, moderate returns that will increase with property value.   Higher initial investment but with higher return on investment that will also increase with property value.  
Risk  Relatively low risk venture. The huge shortage in the housing sector means property will always be in demand and values will continue to appreciate.   Relatively high-risk venture that is vulnerable to economic slowdown, location, and competition from other businesses amongst other factors.
Maintenance Maintenance of the property is usually the owner’s responsibility.   Maintenance and interiors are usually done by the tenants according to the needs of their business.  
Financing Better financing options from Banks.   Banks will offer financing to a lesser degree with 2%-4% higher rates of interest on loans.  
Tax Benefits Home loans are eligible for tax benefits.   No tax benefits on loans.    
Legal Relatively simple and easy to follow legal formalities.   Legalities can be complicated.
Lease  Short-term leases (1 to 2 years) are the norm with option to renew.   Long-term leases (5 years) are the norm with an option to renew.
Renting  If tenants are hard to find, which is uncommon, self-occupation is an option.   If tenants are hard to find, vacancy costs can be crippling.

Breathe Green, Breathe Clean

Studies have shown that indoor air quality can be up to 10 times worse than the outdoors, especially in developing countries! This is because potential pollutants can accumulate more in closed areas than in open spaces.

Though the air we breathe looks clean, it is saturated with dust, fungi, moulds, formaldehyde found on carpets and furnishing, and volatile organic compounds found as solvents in hair spray, perfumes, and air fresheners.

Statistics suggest that in developing countries, health impacts of indoor air pollution far outweigh those of outdoor air pollution. Metros like Delhi, Mumbai, Calcutta and Chennai and even our very own garden-city of Bangalore have 2 – 4 times the permissible levels of pollution! Even in these cities however, outdoor air is cleaner and preferable to indoor air, because trees and plants are constantly cleaning the air outside!

Poor indoor air quality is the second largest killer with 1.3 million deaths in India each year.

Indoor plants are Nature’s natural purifiers! By bringing these natural purifiers into our homes, we can improve the quality of the air we breathe and beautify our spaces at the same time.

NASA has conducted a study that studied how plants purify the air, not only by absorbing Carbon dioxide and releasing oxygen but by removing toxic solvents such as benzene, formaldehyde and trichloroethylene from the atmosphere.

Here in India, Kamal Meattle, Delhi-based, environmental activist and business owner conducted his own research after becoming allergic to the polluted Delhi air. His office in Delhi with its air-filtering plants and sustainable architecture, is a model of green business.

NASA’s top 10 air purifiers

The Areca Palm (Chrysalidocarpus lutescens)

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NASA Purifying Score: 8.5

The top air purifying plant as ranked by NASA’s study is the Areca palm tree. It is called “the most efficient air humidifier”, the Areca can be counted on to keep your home moist during dry times and continuously remove chemical toxins from the air. During winters it can replace the use of electric humidifiers altogether!

According to Kamal Meattle, 4 shoulder-height areca plants for every person placed around the house is ideal. The plant’s leaves should be wiped clean daily or weekly depending on how polluted the air is. It is ideally best to grow the plant hydroponically (in nutrient-rich water) in vermin manure. It is also best to place the plant outdoors every 3-4 months, to promote growth.

The Lady Palm (Rhapis excelsa)

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NASA Purifying Score: 8.5

Just as effective as the Areca Palm, this versatile plant survives in dry or humid climates and is fiercely resistant to most types of plant insects.

The Bamboo Palm (Chamaedorea seifrizii)

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NASA Purifying Score: 8.4

The Bamboo palm thrives when kept moist and in indirect sunlight. Provided these conditions are kept stable, the Bamboo palm can be counted on to purify the indoor air of anywhere you happen to be.

The Rubber Plant (Ficus robusta)

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NASA Purifying Score: 8.0

Rubber plants excel at removing chemical toxins (especially formaldehyde) from indoor air. They require less light than many other plants and outperform all other ficuses. However, rubber plant leaves can be toxic so caution is advised in homes with pets.

The Dracaena (Dracaena deremensis)

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NASA Purifying Score: 7.8

This popular houseplant is efficient in removing benzene, formaldehyde, trichloroethylene, xylene and toluene from the air.

Mother-in-Law’s Tongue (Sansevieria trifasciata)

Image result for Mother-in-Law's Tongue (Sansevieria trifasciata)

Kamal Meattle recommends this hardy plant, also called the Snake plant because it converts carbon dioxide to oxygen even at night. He recommends 6-8 waist-high plants/person placed in the bedroom. As with the Areca palm, growing the Snake plant hydroponically is best.

Peace Lily (Spathiphyllum sp.)

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NASA Purifying Score: 7.5

The peace lily is a popular indoor plant that NASA found to be one of the most effective in removing benzene, formaldehyde, trichloroethylene, ammonia, xylene, toluene and several other known pollutants from the air.

The Money Plant (Epipremnum aureum)

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This ubiquitous plant is one of the hardiest plants which do well in most of the indoor environmental conditions. It is effective in cleaning benzene, formaldehyde, trichloroethylene, xylene and toluene from the air.

Boston Fern (Nephrolepis exalta)

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NASA Purifying Score: 7.5

This cool and relaxing fern has been called the “most effective filtering plant”
It is effective in removing formaldehyde, xylene, toluene and airborne germs, moulds, and bacteria from the indoor air. Those with asthma and allergies will benefit from its presence.

Aloe Vera

Image result for aloe vera in home

This popular succulent has been known for its many medical benefits since ancient times. NASA has found it effective in removing benzene and formaldehyde from the air.

Using these plants in our homes will make it possible for us to Breathe Green & Breathe Clean!

Decoding Real Estate Terms – Carpet Area, Built Up Area, And Super Built Up Area

Venturing into the fascinating process of property purchase, it’s not unusual to come across jargon that means next to nothing to us. As the builder goes on and on about Carpet Area and Built Up Area, we scratch our heads trying to understand how it’s going to impact our needs and finances. Not being able to differentiate these could mean a big difference in the amount you pay per sq. ft. of space. Here’s a quick guide to what they mean.

Every property has three different measures of available space or square footage – the carpet area, the built up area, and the super built up area.

What Is Carpet Area?

As the term indicates, Carpet Area refers to the space that can actually be covered by a carpet in a home – if you discount the thickness of the inner walls. The total measure of the floor area available for your use (eliminating the walls or any utility ducts) as rooms including kitchen, drawing room, bathrooms, and bedrooms is your carpet area. Carpet area does not comprise of the space swallowed by common areas such as the lobby, elevator, staircase, play area or parking area.

It’s good to check with the builder about the balcony in some cases because some builders tend to add it as carpet area while others do not. Usually, Carpet area forms about 70% of the built-up area.

What Is Built Up Area?

A built up area is simply the square footage that comes after adding carpet area and wall area (thickness of the walls). Built up area or the plinth area is the entire size of your apartment unit inclusive of – walls, the sit-out, balcony, terrace and any utility.

As an estimate, it is usually 30% more than the carpet area. So if you are picking up an apartment with 2000 sq. ft. of built up area, the usable space is only 1400 sq. ft. That is a big difference!

What is Super Built-up area?

The Super Built-up area is the one most commonly cited by the builders when attempting a sale. It is the area calculated by adding the built up area and common area inclusive of the corridor, elevator, lobby, playing area and so on. In case of apartments with different built up areas the super built up area is calculated according to the size ration.

Prior to the implementation of RERA, a developer used to charge the buyer on the basis of the super built-up area, which is the reason why it is also known as ‘saleable’ area.

<<Create an infographic>>

Carpet area Built up area Super built up area
Actual usable area of the apartment excluding the thickness of inner walls Carpet area + thickness of walls + any utility + balcony Built up area + common area inclusive of the corridor, elevator, lobby, clubhouse etc.

 How will it affect homebuyers and prices?

  • Regardless of the built up or carpet area, there wouldn’t be much of a difference as far as price of a property is concerned.  As the builder won’t be paying for the common area by themselves, it’s easier for them to adjust the price per sq. ft. But knowing the difference will ensure exactly what you are paying for and help you make an informed decision. It will also help you compare different properties on a similar scale.
  • With the implementation of the RERA Act, the real estate industry is now more regulated. In addition to bringing transparency in all transactions, RERA mandates that builders have to follow the carpet area-based pricing module for both residential and commercial properties. Prior to this, the pricing was based on super built up area.

While it’s impossible to know all the terms in real estate like a pro, it’s vital that we at least know the important ones affecting our property purchase decision. It will always be an added advantage as you deep-dive into the project.

Decoding home loan interest rates

Decoding home loan interest rates: 4 key questions to ask

 On April 1, 2016, a novel method of bank lending titled ‘marginal cost of funds based lending rate’ (MCLR) was introduced for all loans, inclusive of home loans. Loans were connected to the bank’s base rate initially but with MCLR, new borrowers could only opt for MCLR-linked loans and the borrowers already on base could choose and switch to MCLR. Today, the variations in MCLR poses various questions to the public on the parameters used by housing finance companies to calculate the basis of home loan interest. Amidst all the apprehension, what are the deciding factors?

  1. What is BPLR?

The National Housing Bank Limited, a subsidiary of the RBI is the governing and regulating body of all the Housing finance companies (HFCs). Therefore, the cash source for all the housing finance companies is different from that of the banks. Therein lies the reason why banks and housing finance companies differ in the interest charged on the home loans. So what is the distinguisher?

Housing companies places their actual lending rates against a benchmark rate, which is named, ‘Benchmark Prime Lending Rate’ (BPLR). Any interest rates for all the loans are calculated using this rate as the base. In general, this is highest rate that the housing finance company levies. You can safely say that a large share of the home loans, are provided at a rate that is below this PLR.

  1. Is PLR method ideal for borrowers?

How exactly does PLR affect the borrowers? This method guarantees no transparency to the borrowers because there’s no way a borrower can figure out the base rate, at which the HFC gives home loans to their best customers.

In addition, it’s usual for companies to give heavy discounts on PLR to the new customers. While this will increase their business, it might not appeal to the old users because they are forced to pay to the higher rates. The existing borrower can only benefit of lower rates when the lender reduces its PLR. However, this is not common.

  1. How are banks different in computing home loan interest rates?

Even though PLR was the go-to-method for banks till 2010, the RBI then introduced a ‘base rate’, for calculating the lending rates. This rate acted as the bottom line – below which the banks were restricted from lending to even the premium borrowers. This practice was introduced to ensure transparency in transactions. Also, the objective was to speed up how banks pass on the reduction in repo rate to the customers, faster the PLR regime.

  1. Should borrowers opt for a housing finance company or a bank?

It’s always recommended to choose a bank over housing finance companies. If you were wondering why, the transparency and better rates would be the strong advantages compared to the latter.

With a housing company, you might always incur extra charges. For example, if you are looking at opting for the new customer rates (lower rates), you are supposed to pay a ‘shifting fee’.

A lot of the borrowers go to companies only when they don’t have adequate documents or if there are singular problems. They are willing to pay a higher interest rate so that the purpose can be served in the long run.

Vastu tips for choosing your home

When people bought their first homes more than two decades ago, Vastu Shastra was an emerging trend in the real-estate market along with Feng Shui. Now it has become an important tool in the decision-making process for many couples choosing their new homes, and because of the demand, for real estate developers.

Most of us are now familiar with the science of “Vastu Shastra”, or simply Vastu as it’s commonly known, which translated literally means “Science of Architecture”. Even though this is an ancient system, it has gained immense popularity in modern times among prospective home and business owners, who have tremendous faith in its ability to bring in positivity in every field of their life! Vastu Shastra is used as guide not only while buying and/or building new homes, but also while renovating old ones. It serves as a guide in all matters connected to building a new home from choosing a building site at the construction stage to furniture placement & interior decoration in the finished home. It has rules regarding design and layout that help integrate your home with Nature and bring in positivity and balance based on directional placements, geometric patterns, and symmetry.

A Vastu-compliant home is believed to bring happiness, health, and prosperity to its family. We could all do with more of this positive energy!

Here is a Vastu Chart to help you with the basics of choosing and laying out your new home.

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Although most prospective home-buyers are aware of Vastu and many believe in it, the rules can get confusing and overwhelming at times. Here are some basic, important guidelines which can help you get started on making your home Vastu-friendly!

Top ten Vastu tips to get you started

  1. While buying a plot of land, direction is most important. North-facing plots are considered auspicious while East and West facing plots are also good. South-facing plots should be avoided.
  2. Corner plots in a square/rectangular shape are considered ideal for residential property as they are believed to bring happiness and prosperity.
  3. Flat land is best for construction but if there are slopes and are unavoidable, then North-East or South-West slopes are best.
  4. A plot situated between two large plots of land should be avoided as it symbolises poverty. Plots close to cemeteries and hospitals should ideally be avoided for residential homes as they are considered storehouses of negative energy according to Vastu.
  5. An entrance situated in the North-East corner of your home is most ideal. However entrances can be shifted to suit certain professions.
  • Professional businessmen can benefit from a North-facing entrance
  • Politicians from an East-facing entrance
  • People engaged in the Creative Arts from a South-facing entrance
  • Management professionals from a West-facing entrance.
  1. The kitchen should be ideally situated in the South-East corner of the home, which represents the Fire element. It may also be situated in the West but not in the North which represents the Water element.
  2. The master-bedroom should ideally be situated in the South-West Corner of the house and should be bigger than the other bedrooms.
  3. The bed should be placed in such a way that its head faces East or South. Avoid a master-bedroom situated in the North-East corner as this is believed to cause sleep disturbances, bad health, financial difficulties and career stagnation.
  4. Image result for vastu chart childs roomA child’s room should also be ideally located in the West Corner of the home, with the entry door in the East or North. The bed should be placed in the South-West corner of the room and they should sleep with their heads facing East or South. The study table should be placed facing East, North or North-East, while computers may be placed in the North and a TV in the South-East. Cupboards and storage units should be located in the South or West of the room.
  5. Image result for vastu chart  bathroomBathrooms should ideally be located in the East of the home with drainage in the North-East. If there is a WC within the bathroom, it should be on the West or North-West side and a few inches above the ground. If the toilets are separately constructed, they should ideally be in the West or North-West side of the home. The Northern wall of the bathroom is suitable for a shower, taps and a mirror.

Whether you are a first-time home buyer or are in the market for a second holiday home or a businessman looking to invest in the real estate market, consider following Vastu principles to enrich your home and living experience.

Ready to move in or under construction property?

 

3 questions to ask yourself before choosing a ready to move in or under construction property

If you are reading this, you are perhaps ready to make the most important investment of your life.

No, we aren’t talking about getting married!!

Humour aside, if you are considering buying a house, you’ve come to the right place. It’s an important decision – one that requires a lot of research and consideration. One of the questions you should be asking yourself – in a market that’s spoilt for choice, is it a better option to pickup a ready to move in property, or opt for something that’s still under construction?

Before we dive in to that, let’s take a look at 3 questions you must ask yourself before you buy any property:

  1. Is it a good financial investment?

Factors to consider here would be the investment and the payment plans as well as the future value of the property. 

  1. Can I trust the seller/ builder?

Here you must evaluate the quality of construction, clarity in documentation and also the likelihood of delays in possession.

  1. How convenient is it for me to buy?

Can you choose the materials/walls/tiles to personalize the home? What is the estimated time in which you’ll be able to move in? How soon will the paperwork be done? Etc. are some things to consider.

How do ready to move in vs. under construction properties weigh in on these parameters?

Under construction properties

For under construction houses, the initial investment is considerably lower – a great plus point when it comes to taking a major financial step. While opting for under construction properties you also get more choice in terms of location, floor, design etc. This freedom to customise can be a plus, giving you more flexibility to exercise personal choices. Even in the long term the under construction option gives you a win since you can expect higher returns if you are planning to sell the property in a few years’ time.

The disadvantage of this option is the chance of default or delays in projects at the builder’s end. Delays and even abandoned projects have seen an alarming rise in recent years – mainly due to financial or legal issues a builder may face. Nonetheless, getting stuck with a delayed project can have massive financial implications for a buyer. Delayed possession means a financial outflow in terms of EMIs, and rent – if you are a first time house buyer. Apart from the monetary concerns, in case you have had the misfortune of picking a non-established builder, your finished house may look nothing like what was promised.

Ready to move in properties

The name says it all; being ready to move into is what ticks the biggest box. There is no waiting, no delays, and no defaults. This means you save on rental expense as well as interest. Also, even if you yourself do not move in, there is always the rental income that you can bank on. And guess what – no surprises! You get exactly what you paid for.

If you are choosing a ready to move in home, you may be able to save a bundle on taxes. The benefit of Income Tax redemption on EMI is applicable only after possession of property. Service Tax and VAT are also imposed in the case of under construction houses which is not so in the case of ready to move in houses. In fact, these properties are even exempt from the 12% GST that would otherwise increase the tax burden.

The primary downside of ready to move-in properties would be the down payments that make it the more expensive proposition. And you may have to spend more if you are looking to personalize it.

Parameter Under construction Ready to move in
Is it a good financial investment? Down payment Lower Higher
Tax benefit Lower Higher
Overall financial outflow Higher Lower
Can I trust the seller/ builder? Risk of delay Higher None
Documentation Could be in process and needs more vigilance Ready and less scrutiny needed
How convenient is it for me to buy? Personalisation Possible Not possible without additional investment
Time to possession Higher Immediate

Finally, it’s your choice

You do need to keep in mind that the comparison between the two options has to be done at par, basic factors being the same, like neighbourhood, location, size etc. At the end of the day it really boils down to your situation and needs. The availability of funds, possession timeline and your individual risk appetite are what will play a major role in your decision-making.

Whatever property you choose to pick up, evaluate it carefully on parameters that matter the most to you. If you want immediate possession, and are okay with paying a substantial down payment, ready to move in properties would suit you just fine. If you can wait for possession, but don’t want to shell out a lot of money in one go, then choose under construction properties. But make sure you choose a good builder – that will reduce the risks of delays and abandonment. And before buying do the necessary due diligence. Or just simplify your buying decision with Zaasna. Click here to start the search for your dream home.

Buying Property – At what age to start?

Everyone wants a home of their own! It is a basic human need and although many
Indians still cannot afford to own their own homes, for those that can, it is a matter of
great pride and accomplishment.

People buy property for many reasons. First and foremost, for self-use. Secondly for
investment purposes and thirdly to leave a legacy for their children. For most people,
finances are the main consideration when buying property. They may find their
dream home, but that is just the beginning. Property investment involves intensive
financial planning and risk assessment.

Buyers must consider their earning capacity, savings, their liabilities (dependent
parents etc.) & their financial credibility with their bank since loans are now how most homes are financed.

While property investment has always been an important asset creation tool, in the
past it was mostly older, wealthy individuals and businessmen who dominated the
real estate markets. With the rise in incomes over the years however, the
increasingly affluent Indian middle-class population is also keen to invest in property
which they see as a lucrative, lasting asset. As buyers become younger, it is
important to consider whether age matters in property investment and how. What
age is ideal to begin investing? Should people near retirement consider buying a
property? Do the young have an advantage over the old in property investment?
These are some the questions we will consider.

Buying Young (Before 40)

As the average salaries in India have increased, so has the buying power of its
people. Even young professionals in their 20’s can now seriously consider investing
in property if they have good solid saving and investment plans. Double-Income-No-
Kids couples have an advantage in this regard as they can save more before they
have to take on children’s expenses. They are also the most favourably viewed
demographic by banks for home-loans, since their youth makes them relatively low
risk customers with long careers and an assured income ahead of them.
If your financial status allows, the earlier you start investing in property, the better
returns you will get, as profits from property will compound with time. You may not be
able to invest in your dream home right away, but you can always upgrade as your
financial status improves.

However, here are some important guidelines from the experts to keep in mind if you are planning to invest or buy a property at a young age.

  • Plan to save an emergency fund that will meet your monthly expenses and EMIs for at least a year before you go ahead. This will be a safeguard against unexpected job loss and other emergencies.
  • Keep in mind that EMI should NOT be more than 30% of your monthly income.
  • Try to save an amount equal to expected EMI from your monthly income. This can be invested in a longterm financial asset (e.g. mutual funds) so that a corpus is built up that can be used to pre-pay your loan if you wish.
  • Life Insurance is a good safety net to have in case of unforeseen emergencies. If you are unmarried you should have a Term plan for at least 125% of your loan amount. If you are married the plan should be at least 200% of the loan amount. In case of a tragedy, this amount will ensure repayment of the home loan and take care of future family expenses for a while.
  • Most home loans come with tax benefits. If you are keen on pre-payment check the pros and cons with your bank at the time of taking the loan. Sometimes banks levy penalties on pre-payment to make up for their loss in interest.

Buying Later (After 40)

Older buyers often have a financial advantage over younger ones in the form of
savings and investments which can finance a down payment on property.
Experts opine that having 30-40% for the down payment of property is ideal.

However, although banks today are more open to granting home loans to older
customers, the repayment tenures are often shorter, 15-20 years instead of the
average 25-30 years. This leads to higher EMIs and can put a strain on day-to-day
finances especially since these families often have to budget for children’s
educations and marriages. Also, post-50 most people start planning for their
retirement and property-investment may not be their first priority. However, if they
are staying in rented accommodation, it would be beneficial to own their own home
and pay EMIs instead of rent so as to build an asset that can then be passed on to
their children.

Ideal Age for Buying (30-35 years)

Experts opine that individuals in their early to mid-30’s are in the ideal situation to
invest in property given their average incomes, career length and loan-repayment
capability. Buying a home in their 30’s means most people can aim to be free from
mortgage by the time they are ready to retire. Double-income families and individuals
in Metros have the added advantage of earning high incomes.

Although buying property for investment purposes might be easier for younger
customers, age is by no means the only factor that affects investment decisions.
Buying property for self-use is by no means age-dependent – old and young buyers
who have lived in rented properties might prefer to invest in their own homes and save on rent while creating an invaluable asset for their future. Property can be used
to raise funds in emergencies and is a valuable asset that can be passed through
generations.

Given the premium on space in India, property will always remain a valuable & safe investment that will yield good returns at every age!

5 steps to buying a home without obsessing about it

Our home is our happy place because we architect our lives there. Owning a home evokes a sense of pride and belonging in our hearts and therefore, it’s amongst one of the most emotional dreams we chase. No wonder then that some of us tend to get a bit obsessed about it.

5 ways to check if you are obsessed about home buying

1. You spend all your time looking for properties.
2. You have more realtor contacts on your phone than friends and family.
3. Your only dinner table discussion is home buying.
4. You want to pick up every house that appeals to you without considering
financial impact.
5. You are willing to compromise on anything to buy a house.

A worthwhile investment for a lifetime, home buying can sometimes be a slow and taxing process, but mix a little bit of strategy into it and you can have a smooth journey onward. Keep in mind these 5P’s of home buying without being obsessed about it.

1. Pinpoint the purpose
The first and foremost step to create your own home buying strategy is to
underline the purpose of purchasing the house. Preferences vary from person
to person and it’s impossible to have similar requirements and needs.

For example, you might want to buy a home because your current place is not
spacious enough for the entire family. In another case, you want to buy a
home as an investment or it can be even a decision driven by proximity to
your workspace.

Tip: While looking for a house, see if it fits your purpose. Create a checklist of
what’s important to you and what you can let go if needed.

2. Pool in insights from family and friends
Communication is an integral part to your planning. In the initial stages,
encourage the discussion with your friends and family so that you can get an
idea about diverse thoughts on the topic.

A few examples, insights, opinions and data from your circle will make it much
easier to form a collective decision and be certain about how you reached
there. However, restrict the circle to your handpicked lot and don’t change
your preference based on random comments.

Tip: A team huddle ensures you get insights from important stakeholders and
helps you choose a home that meets most of everyone’s expectations.

3. Plan your finances
It’s an expensive decision to buy a house and hence financial planning
becomes a critical aspect of buying a property/home. It’s extremely important
that you map out the monetary part in the beginning and also see how this
decision is going to impact your other financial goals. Keep a plan B in place
in case of emergencies.

It’s quite possible that sometimes, the numbers change here and there, but as
long as there’s a solid structure to it – you will save a lot of your time and
stress.

Tip: Choose a home that fits your budget, don’t get lured by options that seem
better but may hurt you in the long run.

4. Perform detailed due-diligence
While there is no need to obsessively check every property you come across,
it’s advisable to conduct a proper due diligence of few homes that you have
shortlisted. A diligence check should mandatorily include – mapping the exact
location, researching on the builders/brands track record (emphasise on
previous buyers) and reviewing the project quality personally.

If feasible, it’s the best to communicate with the various stakeholders (through
phone, e-mail or face-to-face) of the builder to have an honest perspective.

Tip: A diligence check in the beginning will save you trouble later.

5. Prepare a project roadmap
Once you finish these four steps, you are all set to prepare a project roadmap
to get started on this journey. Combine your findings and ascertain the entire
sequence of the project to build your strategy.

If you feel you are getting obsessed with the thought of home buying, try
these simple ways to get over it.

Tip: How can you avoid the home buying obsession?

  • Be confident and have a strong understanding about your strategy.
  • Maintain a finance tracker to feed in your expenses and have a bi-
    weekly tally with your initial monetary strategy.
  • Have a weekly conversation with your family to share the latest
    developments.
  • Refrain from checking out loan plans and bank offers online, on a daily
    basis.
  • If necessary, you can always consult an expert on home buying if you
    feel that the process is stressful.

Decoding the impact of GST on real estate industry

As an industry that locks between 6-8% to India’s Gross Domestic Product (GDP), standing at par with the IT industry in terms of creating job opportunities, real estate is one of the strongest pillars of Indian economy. Recently, the industry has seen a spate of regulations that are making the sector more transparent and accountable. First RERA, and now GST coming into the picture, indirect taxation in this business is entirely revamped.

Pre GST Post GST
Multiple duties for developers (customs duty, central excise duty, VAT, entry taxes, etc. on construction material costs) A single tax rate of 12% is applicable on properties under construction
A large percentage unrecorded expenditure All the expenditure is recorded in the books
No concept of Input Service Distributor (ISD) The concept of Input Service Distributor (ISD) is strong and mandatory, reducing a lot of additional costs borne by the buyer.

Let’s take a look at how GST impacts various stakeholders of real estate.

Impact on Buyers

Prior to the implementation of GST in real estate, buyers had to pay VAT, service tax, registration charges and stamp duty on buying properties under construction. It’s important to note that since VAT came into being, registration charges and stamp duty were state levies and the cost of properties differed in accordance with the state. In addition, the developers had to pay myriad duties like sales tax (CST), custom duty, and few other taxes for which credit was not available.

However, after GST – a single tax rate of 12% is applicable on properties under construction – reducing the price for the buyer. GST is not applicable on finished or ready to sale properties.

Impact on Developers

From the perspective of a developer, before GST – there were a number of duties to bear such as the excise duty, VAT, customs duty, entry taxes and so on for raw materials and service tax on myriad services like approval charges, architect professional fees, labour charges, legal charges etc. Input Tax Credit (ITC) was unavailable for duties like CST, customs duty, entry tax etc. This practice was driving up the pricing and led to the developer passing the burden to the buyer.

GST has significantly reduced the developers’ construction costs. Due to the availability of input tax credit(ITC), multiple taxes and costs came down in addition to the fact that there is fall in the expenditure logistics leading to higher margins.

However, on the other side of the coin, getting Input Tax Credit (ITC) to pass on to the buyer is a tedious process. In most of the cases, it’s only in the final stages that ITC is transferred to the buyer. The less than clear process is also a hindrance, making buyers cautious about buying decisions impacted by new policy.

Impact on other industry partners

The impact on services like labour, material suppliers, service suppliers and so on is completely dependent on the rise or fall in the tax charged on these goods and services.

On the whole, the subsequent effect will seep down to the industry in the long run. Even though in the initial phase there are downsides, GST certainly is a step forward for real estate.

RERA: Is it a game changer for homebuyers?

Real estate has always been a lucrative market, and now with the RERA act throngs of people are rushing to make investments in the sector. With a special focus on under-construction properties, let us look at why this is a golden era to buy them.

Home buying is an exciting journey, and a matter of utmost importance for most of us. Buying a place to live in, we harbour high expectations from the place we will call home for a lifetime. Given a spate of project delays, builder defaults, and endless wait for possession, under construction properties were not really a dream for homebuyers.

But with the implementation of the RERA act, it’s an opportunity to rethink!

What is RERA?

 The Real Estate (Regulation and Development) Act, 2016 (RERA), an Act passed by the Indian Parliament intends to safeguard the interests of homebuyers and encourage investments in the real estate sector. Enacted by The Government of India on 26th March 2016, the Real Estate (Regulation and Development) Act 2016 and all its provisions came into effect from May 1, 2017. RERA is expected to make real estate purchase more transparent by bringing in more accountability and standardisation and also simplifying the entire process. The RERA Act is India’s first strong enforcement to regulate an industry infamous for its business practices.

Key aspects of the Act

  • In accordance with the new law, the developer can’t make any changes to the project plan without the written permission of the buyer.
  • The registration is compulsory for all commercial and residential real estate projects, in which the land is above 500 square metres or comprises eight apartments and which are under-construction.
  • A failure to register a property will invite a penalty up to 10% of the project cost in addition to a repeated violation, which could put the builder in prison.
  • It’s mandatory that when the property will be sold to the buyers, it’s based on carpet area and not on super built-up area which falls illegal under the new law.
  • The law includes a provision of a maximum prison term of three years with or without penalty, for a developer who crosses the order of the appellate tribunal of the RERA.
  • The law ensures that a state has to institute a State Real Estate Regulatory Authority as per the new act. Buyers could go to this body for redressal of their issues.

How is RERA positively impacting under construction properties?

  • Reliability – RERA brings in a lot of accountability into the picture. From timeliness of project delivery to builders being held for defects/problems in the property, there is a backing for the buyer to rely on and be confident about the entire project.
  • Communication – All forms of core communication between the buyer and builder has to be in writing, according to RERA. There is a clear track record for all demands from the buyer. Any alterations or changes in the property have to be with a prior permission from buyer for builder to move ahead.
  • Quick Redressal: Under RERA, regulatory bodies and appellate tribunals will be put up in each state to resolve builder-buyer concerns. Any person facing a crisis, can anticipate a solution from the appellate within 120 days.
  • Trust – The stringent regulations backed by law makes it mandatory for builders to conform their projects with comprehensive information under RERA, filtering out fraud builders from the picture. Standardised processes, regulatory authority, and compliance needs ensuring well thought out launches means buyers can place more trust in the system.
  • Reserve account: Usually, the delay of projects happens due to diversion of collected funds for fresh projects rather than the existing one. The roadblock RERA has brought to this practice is that promoters are now required to transfer 70% of the funds into a separate reserve account.

Even though the benefits are manifold, since the implementation of RERA there has been an evident slowdown in the industry. The delivery of projects has been delayed because real estate companies are restructuring their working styles to comply with the strictness of the fresh law. Even though it looks like a setback now, RERA in the long run will play a large role in regulating the real estate industry.