The real estate industry in India is pre-dominantly a seller’s market. It is largely an unregulated industry with lack of transparency and property agreements heavily favoring the builders. People do not read the fine print as there is a general lack of awareness and become vulnerable, falling prey to unscrupulous builders. Here are some common traps that you as a prospective property buyer need to be wary of:
The illusion called Sample Flat: Sample flat is one of the most potent marketing tool used by any builder. To start with, there are usually no doors in the sample flat and the ceiling height is high. The walls are thin and in some cases instead of brick walls, plywood partitions or gypsum boards are used. Further, the furniture design is carefully thought out so as to look small in dimensions. All these give a very spacious feel to the entire flat. Further, the flooring and the painting is of high end quality. The expensive modular kitchen and the superior tiling offer a luxurious feel. But the popular saying, “What you see is what you get” doesn’t really hold true when it comes to sample flats. The reality is quite different and there is usually a gap between the specifications of the sample flat and the actual flat sold. Do not hesitate to ask the builder questions about facilities offered in the sample flat vis-a-vis the actual flat. For example, seek clarification whether the flooring, tiling and electrical fitting used in the sample flat will be a part of the actual flat. Also, be on the same page with the builder on the layout of the flat. Further, ensure that that the carpet area is clearly mentioned in the agreement between you and the builder.
Do not get tempted by pre-launch advertisements: Pre-launch offers of builders come with a good 20-30 per cent discount to the market rate and can be very tempting for prospective buyers. At times, the discounts are also accompanied by offer of a free car or foreign vacation in a lucky draw for the first few bookings. However, there are various risks associated with such offers. Many builders launch such projects and accumulate money from investors even before securing the requisite clearances. Without the approvals, it is illegal for a developer to publicise the property, allot flats and collect money from buyers. Such pre-launch offers thus face the risk of total cancellation due to lack of clearances. They may also face inordinate delays in construction due to approvals not coming on time. This in turn could push up the total cost of the project which the builder may pass on to buyers even if it is not mentioned in the agreement. Further, if the buyer is not financially strong, he would be unable to pump in timely capital to continue the project in case of delay in getting clearances. It is thus prudent to enquire about all clearances beforehand and also about buyer solvency.
Beware of dummy investors: Usually in newly constructed ready-to-move in properties, you will observe that majority of the flats are vacant. But your broker will tell you that barring few, all the flats are sold out, i.e., they are investor flats. While every property investor is a buyer first, it may so happen that you may be dealing with a dummy investor. And these are mostly brokers. It is also possible that many middlemen are involved and you never know who the real owner is till you close the deal. The main objective of these dummy investors is to artificially keep prices high in the property market. These properties are quoted at 10-15 per cent discounted price than what is offered by the builder. This is a smart marketing strategy to entice buyers and make them perceive that they are buying at a cheaper rate. But in reality they are buying higher than the market price. It is thus better to remain cautious when buying ready-to-move in properties. Such properties if not rented out or not sold for a very long time should ring a warning bell in your mind. While it is difficult to identify whether the investor is genuine or not in the beginning of the transaction, insist on having a meeting with the builder and investor together. Also, check the difference between the prices quoted by the builder and the investor. If there is a huge discount offered by the investor, then do not be in a hurry to close the deal but introspect further. You can also enquire about prices from recent dealings done by newly moved-in residents with the builder.
Do not give in to the pressure tactics of builders, agents: The typical marketing gimmick of selling any product or service is to create an urgency, a rush in the minds of customers for buying. Any sales team of the builder or the broker would show you how majority flats of a project are being sold out and only few are left in the pipeline. Further, they almost make you believe on the potential development of infrastructure in the vicinity of the property and hence the probable rise in prices in the near future. Such sales tricks try to put psychological pressure on buyers of monetary loss or fear of being left out or missing out on a valuable buy. Avoid being trapped into such pressure tactics and making buying decisions in a rush. Contemplate and then make big the property buying decision in your life.
To conclude, you may come across these usual traps while buying property from a builder. Exercise caution and do not rush into taking the big property decision. We have already talked in our previous article about preparing a basic checklist on builder goodwill and past history, property location, flat specifications, amenities offered, documentation, etc. So do some due-diligence before buying a property to avoid such traps.