Gain more, be sure
Safety checks are a must for buyers going in for an assured returns agreement with a developer
Who doesn’t want quick and assured returns on investments in real estate?
Assured return property purchases are done through a memorandum of understanding (MoU) between the builder and the buyer, which is then registered with the area sub registrar. Buyers must ensure the MoU is registered.
Payments for such deals are made in lump sum to the developer, who has to then give back a certain percentage (10% to 14%) of this sum annually to the buyer till the project is delivered.
For commercial properties, a developer can retain the right to rent out the property and then hand over the (rented) property to the buyer.
Both the developer and buyers gain from such agreements. The former virtually sells the property even before completion of work and gets the capital to meet construction costs. The latter starts getting returns from the moment he makes the investment. Secondly, even as he earns interest the value of his investment increases as property prices appreciate.
Most developers accept payments partly by cash and the rest by cheques (the general norm being 40% to 50% by cheque) while others insist on just cheques. Interestingly, the percentage return given by the builder to the buyer is only through cheques. So, what are the safety checks recommended for buyers? Sumit Gupta of Pitampura-based Wolga Properties says the background and track record of the builder must be checked out first as “this will let you know if the developer has done successful projects in the past and if he can be trusted.” Do not blindly trust a developer who has just entered the market, advises Mahider Jaggi of the Naresh Aggarwal property developer group. Buyers should also check if the land on which the building is to be constructed is not disputed and examine the sanctioned plans for the project.
Then again the MoU clauses ought to be clearly understood to avoid future problems like delays in project delivery without adequate compensation.
The most important thing of course in such deals is trust, so buyers should bank on reputed builders with impeccable track records.