Every year, real estate schemes and offers start appearing during the festive season, which starts from October and goes on till about March. Usually, the last two quarters can account for as much as 70% of the total disbursement in the whole year.
This year, too, developers have plans ready for the festive season. Mudassir Zaidi, national director, residential agency, Knight Frank (India), said: “Sentiments have improved and it’s likely that homebuyers will come into the market in the next six months.”
With the central government making some homebuyer-friendly announcements, developers are hopeful that fence sitters will make a buy decision and if you are one of them, here’s how to go about it.
Get the basics right
The first thing that you need to be sure of is your budget. Do not overshoot it. Also, be very clear about the sources from where you will raise the mandatory 20% of the cost for the downpayment. If you plan to withdraw from various investments such as mutual funds, insurance plans, Public Provident Fund, and others, make sure that your bank details and communication address are updated.
If they are not, do get them updated at the earliest because it usually takes around 15 days to change such information. If you also plan to withdraw from your provident fund (PF) account, you should apply as early as possible. It is, however, advisable to not break any investment made for a long-term goal, especially retirement. These would include PF, PPF, pension plans, among others.
Credit score, loan approval
The next step would be to check your credit worthiness and try to get a pre-approval loan letter from a lending institution. This will give you an idea of the amount of loan that you are eligible for. To know your credit worthiness, you have to apply for a credit report from a credit agency. Most commonly used system has scores in the 300-900 range; the higher the better.
A high credit score could give you some bargaining power when it’s time to apply for a home loan.
Once you have your credit report, look for home loan offers and schemes. Lenders often advertise lower or nil processing fees. This year, the interest rates are also expected to be lower—State Bank of India and Punjab National Bank already reduced rates.
Interest rate remains the most important point as it significantly influences the total cost of your loan. For example, for a home loan with tenor of 20 years and interest rate around of 11%, you would be paying 1.25-1.40 times the loan amount as interest alone. On the other hand, processing fee is only 0.5-1% of the loan amount.
While shopping for a home loan, beware of other products such as an insurance policy or bank deposit being forcefully sold to you. Zero in on a loan provider and obtain a pre-approval loan letter, which is typically valid for six months.
Do the groundwork
Once you have a precise idea about the available downpayment and the amount of home loan likely to be available, you can fix a budget in mind and scout properties in preferred locations accordingly. Ideally, you should go and check the projects yourself. Among the important things that you need to check is the progress of construction at the site.
Choose projects that are scheduled to be completed in less than a year’s time. Then enquire about any offers and discounts that may be available for your shortlisted projects. Some developers use the festive season, and other occasions, to offer cash discounts. Others offer discounts in kind, in the form of freebies such as cars, gadgets, foreign trips, and so on.
Although cash discounts are welcome, don’t allow your decision to be influenced by them or by the freebies on offer as most of these are insignificant compared with the price of the house that you are buying. Another reason is that their cost is bundled with the cost of the house. So, it’s not “free” after all.
The importance of doing the necessary homework, understanding the details even if they are cumbersome, and having a game plan can’t be highlighted enough. Though this is true for any market condition, it is especially important in the current situation, when the real estate market is expected to recover from the poor sales that it has been facing for the past 2-3 years.
If the market recovers, advertisements for offers and discounts will flood the consumer. And that’s precisely when extra caution has to be taken.