Here’s what you should look for before finalizing your dream house

If you are planning to buy your dream house and the specifics of agreement seem scary, this is a must read for you. The very attractive opportunities, in fact, may turn out to be risky as even the most lucrative deals also come with hidden clauses which the buyer is unaware of.

An Economic Times report talks about the pros and cons of buying a home, possibly your biggest investment. A number of people in the NCR region are hunting for a home, but they’re unable to understand the nitty-gritty details of schemes such as 20:80 or 8:92, or offer of lower interest rate of 7.99% for three years, guaranteed rentals for three years or a 100% buyback scheme, etc.

Harendra Singh, a buyer who is looking for a home from past eight months, told ET that he had already approached a number of dealers and each of them is offering a new scheme. "I understand this is the best time to buy as prices are relatively low but just how do we trust these schemes?" asked Singh. After all, he has been hearing far too many horror stories of abandoned projects, much delayed homes and builders not honoring their commitments.

Not just the buyers but the brokers too understand the complexity of the deals. Sunil Kapur of Delhi-based property brokerage firm KK Real Estate told ET, "They want to buy but find it difficult to understand these schemes. Once they realise the risks, many back out."

Another homebuyer, who is currently fighting a legal battle with a builder for delaying his apartment by three years, asserted, "You are taking a financial risk based on a builder's guarantee. But who guarantees the guarantor?”

Referring to the EMIs taken by the buyers, Amit Kukreja, founder of financial planning firm WealthBeing Advisors, told the financial daily, "Since the EMIs are on account of the buyer, it is his credit history that is at stake if for some reasons the project is delayed way beyond scheduled date and additional cash outflow, due to EMIs, cause financial stress."

Speaking about the reduced interest rates, Kukreja said, "Buyers need to carefully examine the interest rates applicable after the low interest rate period. The catch here is that the banks can move the buyer to prevailing market rates or even higher after the agreed period. The new EMI may hurt the buyer's financial goals and planning."

The ET report also highlighted that another major concern for homebuyers could be the very striking deals which may fail for any unidentified reason.

Ashwin Chawwla, chief executive officer of Gurgaon-based online property portal BigDeals.in, explained, “To increase sales, builders offer 30:70 scheme. Under that, the buyer can make 30% down payment and is allowed to pay the rest at time of possession. The deal seems beneficial as the buyer does not even have to take a loan at the outset.”

The risk in such a deal could be of builder ditching the buyers. "What if for some reason the builder does not construct? He probably needed funding for some other project and got it from buyers in this project,” concluded Chawwla.

image: indiatimes