Gain more, be sure

Safety checks are a must for buy­ers go­ing in for an as­sured re­turns agree­ment with a de­vel­oper

HT Estates - - Front Page - Arati Bhar­gava

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.

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