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How to make the most of festive offers while buying a house

The festive season has begun and like every year there are plenty of discounts and freebies. From waiver of stamp duty and registration to doling out free modular kitchen and gold coins, builders are leaving no stone unturned to sell their wares. Should you bite the bait?

The festive season has begun and like every year there are plenty of discounts and freebies. From waiver of stamp duty and registration to doling out free modular kitchen and gold coins, builders are leaving no stone unturned to sell their wares. Should you bite the bait?

1. Make a budget 

First of all, check your affordability. Anything that’s in excess of 25 percent of your monthly household income - in terms of EMI payments - is a financial stretch. 

Consider all parameters including proximity to workplace, availability of good schools as well as transportation costs before short listing a location. Buy a house only if you have long-term plan to stay there. Under no circumstances, you should stretch your budget.

2. All in rate per square feet

Often, builders jack up prices before the festive season. So, do the due diligence of the offers. Calculate the carpet rate of the flat and compare it with the market rate in the locality to check if discounts are really being offered. If the offers are in the form of cash – registration waiver or flat cash discounts – subtract it from the flat value to arrive at the discounted rate. 

Some builders advertise ‘pay for 2BHK and get extra room free’. In such cases, add the overall carpet area to find its true rate per square feet. If it is in the form of freebies like free modular kitchen, gold coins or iPhone, arrive at its market value. 

As far as possible, negotiate with builders to give cash discount instead of freebies. The latter might not be useful always and selling it takes time and effort. 

3. Stay away from subvention schemes

National Housing Bank recently advised housing finance companies to desist from subvention schemes. Even in the past, such schemes had been in the bad books of RBI. 

How does a subvention scheme work? Under this scheme, you pay a low amount to book the flat and are usually applicable for under-construction properties. So in a 10:90 subvention scheme, you pay 10 percent of the cost of the flat on booking and the rest 90 percent at the time of possession. 

In one of its variants, builder pays the pre-EMI on your home loan for a fixed period of time (say 2 years). In the process, you end up saving on interest payments (which could be substantial), while also getting the flexibility to stay on rent till the house is ready for possession. 

However, be wary of such schemes. It can make you to overstretch your budget. Moreover, if the project is delayed, the onus falls on you to make EMI payments. Unless the schemes are offered by reputed builders and in a transparent manner, it is not worth subscribing. 

4. Don’t ignore resale property

You might actually find a good bargain next door from purchase of a resale property. Be open to buying existing properties, after doing thorough research on prices in the locality and the condition of the house. However don’t buy a very old flat that could flare up repair and maintenance costs. 

Buy properties only from well-known builders. It is of no use getting property for a bargain when the quality of construction remains poor. 

5. Stick to reputed builders

Buy properties only from well-known builders. It is of no use getting property for a bargain when the quality of construction remains poor. 

Check if the project under consideration has been approved by banks and if the title to the property is clear. Getting OC and other necessary approvals from the regulatory authorities gives further comfort to go ahead with the payments. 

Keep all important communication with the builder in paper (on their letterhead) and emails. 

Buying a house is a big financial decision.  Don’t let the offers drive your purchase decision. While making the most of the offers, don’t also be under any compulsion to sign the dotted line. 

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