Discounts shouldn’t be prime criterion in home purchase

Give priority to more crucial considerations, such as the right location, builder, and project

Developers have announced a slew of deals and discounts this festive season. Banks and housing finance companies (HFCS) have sweetened the deal further by offering special rates on home loans. Amid this all-round marketing hype, it is easy for the customer to lose sight of his priorities and allow deals and discounts to govern his purchase decision.

Experts say this is a good time to buy a house for selfuse. “Prices have bottomed out in most cities. Interest rates are also at a decadal low. And you have developers rolling out attractive deals and offers,” says Anuj Puri, chairman, ANAROCK Group.

Fix your budget

First, estimate how much you can afford to spend on a house. Don’t let your budget be determined by the down payment you can afford and the maximum loan amount you are eligible for. “You have other financial goals as well, like retirement planning, children’s education, etc. Don’t buy a house that is so expensive that you are left with insufficient funds for your other goals,” says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

Factor in all the other costs that inevitably arise, such as stamp duty and registration, brokerage, interior work, etc.

Buyers often settle on the longest possible loan tenure when deciding their budget. “A longer tenure will push your interest cost up and make the purchase more expensive,” says Dhawan. Also, maintain a cushion in case interest rates rise over the next two-three years.

Drawing a lesson from the job losses during the pandemic, make a provision for that eventuality, too. “Doubleincome and single-income families must have savings equal to six and 12 months’

EMIS respectively,” says Dhawan. Beware that childbearing can change your family’s status from double- to single-income.

Zero in on the right micro-market

Next, narrow down your search to one or two micromarkets. Decide if you would prefer a smaller house in the city or a larger one at the periphery. “The choice of micro-market should depend on where your and your spouse’s jobs are located, the location of your children’s educational institutes, and availability of social amenities and infrastructure, like connectivity,” says Subhankar Mitra, managing director, advisory services, Colliers India.

Ready-to-move or under-construction?

Depending on how quickly your family wants to move into the house, you should then decide whether to buy a readyto-move (RMV) or an underconstruction (UC) property.

Many people prefer an RMV property to avoid the risk of delays in possession. “If you go with this option, you will have to arrange the finances immediately,” says Vikas Wadhawan, group chief financial officer, Housing.com, Makaan.com and Proptiger.com. Have the down payment ready and get a loan sanctioned at the earliest.

If you invest in a UC property, you will have to continue paying rent for the house you live in (unless it is your own). But the UC option gives you time to arrange the finances. “Payment plans like 10:90 and 20:80 that builders offer require you to pay just 10 to 20 per cent out of your pocket while booking. The rest can be paid on possession, so you can delay taking a loan,” says Mitra.

A Rera-registered project

Look for developers in your chosen micro-market who have the kind of housing you are looking for. “If you have opted for a UC property, the developer should be reputed and reliable,” says Puri. He must have a track record of having completed a number of projects in the past. Buyers living in his older projects should attest to his timeliness and quality of construction.

“If you wish to buy a UC property, go for one that is Rera-registered. This indicates the builder is compliant with the regulations and all his approvals are in place,” says Wadhawan.

Next, narrow your search down to the right apartment. Look for one that suits your criteria — Vaastu-compliant (if you desire), lower or upper floor, the right carpet area to meet current and future needs, and the right specifications.

Evaluating deals

Once you have applied all these filters, you will be left with only a few developers. Now is the time to compare deals and discounts. The best deals, according to Puri, are the monetary discounts, statutory fee (like stamp duty and registration fee) waivers and payment plans. Offers like a free modular kitchen, free parking space, etc should also be welcomed since they reduce your cost of purchase. “Offers of gold coins, travel vouchers, cars, lucky draws, etc have nothing to do with the home. They don’t add to its liveability quotient or its future resale value,” says Puri.

Check the loan rate you will get

Banks and HFCS have announced special home loan rates for the festive season going as low as 6.45 per cent. Some like Tata Housing have announced a rate of just 0.99 per cent for the first year.

Check with your preferred lender the rate you are eligible for. “The best rates are available only to people who have a credit score of 750- or 800plus,” says Dhawan.

Go for a loan linked to an external benchmark. Such loans are more transparent. “Banks’ home loans are linked to the repo rate. NBFC loans are benchmarked differently,” says Adhil Shetty, chief executive officer, Bankbazaar.com.

Also check out costs like prepayment fee, pre-closure fee, etc. “Prefer a lender that makes it easier for you to prepay, instead of setting difficult conditions,” says Shetty.