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Lessons: How to Buy the same house for less!

 

 

 

THREE things are so essential to the fabric of life that they ought to be free: food, shelter, water.

Personally, I would add an iPod to this list also. But let's leave that aside for now.

Of these, one and three, if not free, are available at reasonable rates everywhere. Unless, of course, your daily food requirement constitutes a five-course gourmet meal and you drink only Evian!

The killer is Number 2 -- shelter.

That seven-letter word is not as simple as having a roof over your head. It comes with a multi million industry that is unscrupulous, unorganised and highly volatile. Colleagues of mine, corporate sharks in the boardroom, have been reduced to tears while buying a house.

People charge what they feel like. It is maddening.

How do you identify the right price for a property? What are the checks to ensure the property is not overpriced? We spoke to Ramesh Nair, Local Director, Jones Lang LaSalle Meghraj, Chennai, to put some method to the madness.

1. The two-hour rule
"I plan to buy a flat in Mulund West (northcentral Mumbai), near Nirmal Lifestyle (a mall). The builder is quoting around Rs 5,000 per square foot. Is this rate realistic?" asks Ram.

Ram can identify the right price by following the two-hour rule. Nair suggests that you spend at least two hours a week on research. Drive around the neighbourhood, learn market value, check competing projects and make appropriate offers, review relevant articles and gather information on deals in the market at regular intervals.

2. The formula for the right price
If you thought the time to learn equations and formulae is behind you, think again. While buying a house at the right price, look for an annual investment yield of 5 per cent to 7 per cent for residential properties in India.

The formula to calculate investment yield is:

Investment yield = Expected net annual rent x 100
Total purchase price

(Deduct property tax from the annual rent to arrive at the net annual rent. Add stamp duty and registration charges to the purchase price to arrive at the total purchase price.)

Photograph: Associated Press/Elaine Thompson

3. Exceptions
You can be a little lax on the investment yield for the following
~ Swimming Pool
~ Fire fighting and detection
~ Unique view
~ Air-conditioned lobbies
~ Clubhouses
~ Gymnasium
~ Intercom services
~ Back up generators
~ Videophone
~ The quality of tiles

4. Bargain, bargain, bargain
"I want to buy an apartment in and around New Delhi. The Tulip Group is offering apartments in Kundli, Sonepat, at Rs 1,800 per square foot. Can I bargain?" another reader wants to know.

Yes, yes, yes! In most property transactions, prices are negotiable.

Feel free to make an offer on the property, especially if you have spent enough time pre-qualifying the property and have arrived at the right price systematically.

Don't worry, the seller won't be offended if you state your reasons -- highlight the fact that the property needs refurbishment, prices of competing projects or that it is located in a bad area.

5. The secondhand flat
Be careful. You must factor in the repair/ refurbishment cost into the price of a secondhand flat.

In this case, take an architect to analyse the costs, including the structural aspect of the building, interior fit-outs, electrical fittings, plumbing and woodwork.

The buyer should then make an offer to the seller after keeping in mind the refurbishment costs.

Do not let terms like carpet area and super built-up area confuse you. Carpet area is simply 75 per cent to 85 per cent of super built-up area.

That means if the super built-up area is 1,000 square feet, the carpet area would be around 750 square feet to 850 square feet.

Buying property need not necessarily be maddening. The next time a builder quotes unreasonably, whip out your research, formulae and methods and make them mad for a change!

 

Source: Money Control

By vayaM CS