N
nkhurana2003
New Member
We Indians love to bargain, and always want to get the best return on the money we spend. This is especially true when it comes to making long-term investments, such as buying our dream home. With the current prevailing slowdown in the real estate sector, the market is offering some great bargaining opportunities to potential buyers to get their dream homes at the best price. Developers today are experiencing liquidity crunch and serious slowdown in demand, a situation that has made them more open to bargaining on price. By following certain tips and tricks while hunting a house you can significantly improve your financial returns whether you are purchasing a property for self-occupancy, or short-term or long-term investment.
DIFFERENT STAGES OF PROPERTY PURCHASE, AND WHAT DOES IT MEAN FOR THE DISCOUNT YOU GET?
It is important to know different phases of real estate project development and marketing, as the timing of your decision has a direct impact on your ability to get the best bargain on your new property. By making yourself more knowledgeable about different stages of real estate development, you can time your investment decision to get the best price from the developer while being informed about the risks involved. The below mentioned details will help you screen available investment opportunities by their construction phase, and accordingly approach developers to get the best bargain on the property that you want.
Going for an under-construction property is always a good idea if getting the best price is your main motive, and you are willing to wait for few years to get possession. This is because the price tends to be lower in the initial stages of construction, and generally moves-up as the property is constructed. In cities, such as Mumbai and Pune the rate of under construction project is 25-30% lower than ready-to –move-in property.
While the best time to make an offer to purchase a property is during the soft-launch phase; when the developer is willing to offer flats to investors at discounted prices. The price at this phase is much lower since it is seen as sharing of risk as the developer at this stage is generally awaiting some of the regulatory approvals, and no construction is taking place. This is also the most risky phase, as a project could get stuck if approvals and clearances are not received. You will be safest to invest with more reputed developers at this stage as they are better equipped to manage challenges involved with getting required approvals.
You may also wait for the inaugural discount, which is normally given when the developer formally inaugurates the project. It is crucial to move fast during this phase as it is only open for a short period of time, usually 10-30 days, or for the first 100 buyers. By tracking the market or your preferred developers you can stay on top of news related to inaugural discounts being offered to investors. However, developers generally open only certain towers in this phase, and more well-located units or towers are generally held back for later launches, at higher rates.
If you manage to miss the opportunities to buy during soft-launch or inaugural discount phases, do not lose your heart, as you still can avail a good discount on your dream home by buying during the launch stage. This is a stage when the developer opens the complete project to the public, and the units are sold directly by the company’s sales team. At the launch stage, brokers and investors who had initially bought units in the property at a lower price often put their units up for sale, usually at a lesser rate than what the developer is offering. This is because they had purchased the properties at a reduced price during the soft launch phase, and thus can still exit with smart profit. By buying a property at launch phase, although the buyer enters at a higher price point, he/she also undertakes reduced risks, as at this stage the developer has all required approvals to build the project.
The developers tend to follow a construction-based price revisions, increasing per square feet rates with progress in construction. However, there is still some likelihood of obtaining a discount compared to the rate being offered by the developer by buying resale properties. This often happens when an initial investor decides to sell the unit they had purchased, or when the company puts up any unsold units for sale. You can keep a track of sales by such investors through different property listing sites (such as BrokerGayab<DOT>com),classified ads in newspapers and Craigslist (for NRI investors).
You can also get a good discount if you have ready funds, and are willing to make advance full payment for the property, either by cash or cheque, to show commitment of purchasing the property. With builders facing liquidity crunch, paying complete amount can help in availing good discounts. However, one needs to take into account that one would lose interest income on money invested if project is delayed significantly. The strategy is generally used by buyers, who finance purchases through black money.
HOW TO PREPARE FOR NEGOTIATIONS FOR GETTING THE BEST DISCOUNT IN THE MARKET?
In addition to planning for the timing of investment in a project, a buyer needs to know the art of proper negotiation so as to obtain the highest possible discount. By preparing yourself for the negotiation discussion, you can significantly improve your chances of getting the best discount on your dream home. Some easy steps that you need to follow include:
Research to Beef-up Your Knowledge: The first thing to do before negotiating is to carry out a detailed research on the property that you wish to buy. Find out the prices of similar properties in the area, and try to get an understanding of the demand in the target area. You should compare current and launch prices to assess how much premium you are paying for the property. By connecting with other buyers in the same project, you can make yourself aware of any issues pertaining to the project. Social media sites, such as Facebook and real estate forums have owner groups for different projects. You can ask questions and learn about issues (if any) in the projects by contacting group members. There is no short-cut to getting discounts, you will have to invest time to verify that you are going for the best possible project and deal in your budget
Assess Financial Position of the Builder: Another significant factor to consider is the financial position of the developer. If a developer needs to sell units through quick sales, he might be more willing to bargain compared to a developer who does not need to make quick sales, and is well-funded. Some builders are reluctant to give cash discount to prevent themselves from confrontation with buyers who bought at higher rate; however, may give offers, such as free car, furnishings, gold coins, etc. to attract buyers. You should remember that although not cash, these offers have a monetary value, and thus should be a part of your calculations while evaluating other property offers.
HOW TO MAKE AN OFFER TO A BUILDER?
After conducting a detailed research, you should decide on the discount you want and the total amount that you are ready to give for the identified property. This will give you a stand and ensure that you do not seem too eager, as it reduces your bargaining power. By making it clear to the developer that you intend to close the deal quickly if you get the right price, you can make it clear to the developer that you are a serious buyer. You should meet with multiple developers in the shortlisted area, and should tell them that you are evaluating all projects for the best offer, and would take a decision after speaking with everyone. This will push developers to give you the best possible offer as they would like to win your business.
During the negotiations stage you should make use of the research, and point out issues such as low occupancy, comparison of amenities and land parcel rates with broker. This would make them see that you are well prepared, and would take you as a knowledgeable and serious buyer.
Also, keeping the finances ready before walking into pricing negotiations is important. You will be required to pay at least 10% of the total property value as booking amount. By arranging for pre-approved banking loans, you can also close the purchase process faster. Again, a pre-approved loan will help you in getting some serious attention of the developer, helping you get more negotiating power.
You need to be unyielding and willing to walk away in case the developer does not meet your price. When you begin to negotiate, just make your offer and stick to it. The developer will either agree to it or not, and since you had done a thorough research you can make offers to other developers until you get the deal that seems appropriate. You should wait few weeks after discussion, as at times builders tend to agree on your demand.
WARNINGS AND PRECAUTIONS
Always conduct Detailed Research: When going out to buy a property, ensure that you have done a thorough research. Do not rush to buy a property because you feel you need to have it. Consider factors such as the prices of similar projects, the resale value, and the best discount that you can get.
Check for Property Approvals before Investing: If you decide to buy during the soft launch, ensure that at least 90% of the approvals needed to begin construction have been acquired by the developer.
Do not Stretch beyond Your Means: You should also get a loan that will not strain your resources and leave you struggling to repay. Make sure that even as you invest, your current lifestyle is not adversely affected.
The decision to buy a property, especially a dream home, is a very big and an important decision that should never be taken in haste. By carefully planning and following steps listed above one can systematically get the best bargain from a developer, and fulfill ones goal of buying a dream home at the best price.
DIFFERENT STAGES OF PROPERTY PURCHASE, AND WHAT DOES IT MEAN FOR THE DISCOUNT YOU GET?
It is important to know different phases of real estate project development and marketing, as the timing of your decision has a direct impact on your ability to get the best bargain on your new property. By making yourself more knowledgeable about different stages of real estate development, you can time your investment decision to get the best price from the developer while being informed about the risks involved. The below mentioned details will help you screen available investment opportunities by their construction phase, and accordingly approach developers to get the best bargain on the property that you want.
Going for an under-construction property is always a good idea if getting the best price is your main motive, and you are willing to wait for few years to get possession. This is because the price tends to be lower in the initial stages of construction, and generally moves-up as the property is constructed. In cities, such as Mumbai and Pune the rate of under construction project is 25-30% lower than ready-to –move-in property.
While the best time to make an offer to purchase a property is during the soft-launch phase; when the developer is willing to offer flats to investors at discounted prices. The price at this phase is much lower since it is seen as sharing of risk as the developer at this stage is generally awaiting some of the regulatory approvals, and no construction is taking place. This is also the most risky phase, as a project could get stuck if approvals and clearances are not received. You will be safest to invest with more reputed developers at this stage as they are better equipped to manage challenges involved with getting required approvals.
You may also wait for the inaugural discount, which is normally given when the developer formally inaugurates the project. It is crucial to move fast during this phase as it is only open for a short period of time, usually 10-30 days, or for the first 100 buyers. By tracking the market or your preferred developers you can stay on top of news related to inaugural discounts being offered to investors. However, developers generally open only certain towers in this phase, and more well-located units or towers are generally held back for later launches, at higher rates.
If you manage to miss the opportunities to buy during soft-launch or inaugural discount phases, do not lose your heart, as you still can avail a good discount on your dream home by buying during the launch stage. This is a stage when the developer opens the complete project to the public, and the units are sold directly by the company’s sales team. At the launch stage, brokers and investors who had initially bought units in the property at a lower price often put their units up for sale, usually at a lesser rate than what the developer is offering. This is because they had purchased the properties at a reduced price during the soft launch phase, and thus can still exit with smart profit. By buying a property at launch phase, although the buyer enters at a higher price point, he/she also undertakes reduced risks, as at this stage the developer has all required approvals to build the project.
The developers tend to follow a construction-based price revisions, increasing per square feet rates with progress in construction. However, there is still some likelihood of obtaining a discount compared to the rate being offered by the developer by buying resale properties. This often happens when an initial investor decides to sell the unit they had purchased, or when the company puts up any unsold units for sale. You can keep a track of sales by such investors through different property listing sites (such as BrokerGayab<DOT>com),classified ads in newspapers and Craigslist (for NRI investors).
You can also get a good discount if you have ready funds, and are willing to make advance full payment for the property, either by cash or cheque, to show commitment of purchasing the property. With builders facing liquidity crunch, paying complete amount can help in availing good discounts. However, one needs to take into account that one would lose interest income on money invested if project is delayed significantly. The strategy is generally used by buyers, who finance purchases through black money.
HOW TO PREPARE FOR NEGOTIATIONS FOR GETTING THE BEST DISCOUNT IN THE MARKET?
In addition to planning for the timing of investment in a project, a buyer needs to know the art of proper negotiation so as to obtain the highest possible discount. By preparing yourself for the negotiation discussion, you can significantly improve your chances of getting the best discount on your dream home. Some easy steps that you need to follow include:
Research to Beef-up Your Knowledge: The first thing to do before negotiating is to carry out a detailed research on the property that you wish to buy. Find out the prices of similar properties in the area, and try to get an understanding of the demand in the target area. You should compare current and launch prices to assess how much premium you are paying for the property. By connecting with other buyers in the same project, you can make yourself aware of any issues pertaining to the project. Social media sites, such as Facebook and real estate forums have owner groups for different projects. You can ask questions and learn about issues (if any) in the projects by contacting group members. There is no short-cut to getting discounts, you will have to invest time to verify that you are going for the best possible project and deal in your budget
Assess Financial Position of the Builder: Another significant factor to consider is the financial position of the developer. If a developer needs to sell units through quick sales, he might be more willing to bargain compared to a developer who does not need to make quick sales, and is well-funded. Some builders are reluctant to give cash discount to prevent themselves from confrontation with buyers who bought at higher rate; however, may give offers, such as free car, furnishings, gold coins, etc. to attract buyers. You should remember that although not cash, these offers have a monetary value, and thus should be a part of your calculations while evaluating other property offers.
HOW TO MAKE AN OFFER TO A BUILDER?
After conducting a detailed research, you should decide on the discount you want and the total amount that you are ready to give for the identified property. This will give you a stand and ensure that you do not seem too eager, as it reduces your bargaining power. By making it clear to the developer that you intend to close the deal quickly if you get the right price, you can make it clear to the developer that you are a serious buyer. You should meet with multiple developers in the shortlisted area, and should tell them that you are evaluating all projects for the best offer, and would take a decision after speaking with everyone. This will push developers to give you the best possible offer as they would like to win your business.
During the negotiations stage you should make use of the research, and point out issues such as low occupancy, comparison of amenities and land parcel rates with broker. This would make them see that you are well prepared, and would take you as a knowledgeable and serious buyer.
Also, keeping the finances ready before walking into pricing negotiations is important. You will be required to pay at least 10% of the total property value as booking amount. By arranging for pre-approved banking loans, you can also close the purchase process faster. Again, a pre-approved loan will help you in getting some serious attention of the developer, helping you get more negotiating power.
You need to be unyielding and willing to walk away in case the developer does not meet your price. When you begin to negotiate, just make your offer and stick to it. The developer will either agree to it or not, and since you had done a thorough research you can make offers to other developers until you get the deal that seems appropriate. You should wait few weeks after discussion, as at times builders tend to agree on your demand.
WARNINGS AND PRECAUTIONS
Always conduct Detailed Research: When going out to buy a property, ensure that you have done a thorough research. Do not rush to buy a property because you feel you need to have it. Consider factors such as the prices of similar projects, the resale value, and the best discount that you can get.
Check for Property Approvals before Investing: If you decide to buy during the soft launch, ensure that at least 90% of the approvals needed to begin construction have been acquired by the developer.
Do not Stretch beyond Your Means: You should also get a loan that will not strain your resources and leave you struggling to repay. Make sure that even as you invest, your current lifestyle is not adversely affected.
The decision to buy a property, especially a dream home, is a very big and an important decision that should never be taken in haste. By carefully planning and following steps listed above one can systematically get the best bargain from a developer, and fulfill ones goal of buying a dream home at the best price.
