Sunday, July 1, 2018

Buying a Home, Post RERA & GST!





“A little happy house is the strongest castle in this whole universe!”… Mehmet Murat Ildan.

Mehemet is a contemporary Turkish playwright, novelist and thinker Mehmet Murat ildan was born in Elazig on May 16, in the Eastern part of Turkey. Due to his father's occupation, he continued his studies in capital Ankara. And very few may know, he wrote a play Mohandas Karamchand Gandhi! Obvious a mind which can think about a Home in so simple words only can write about Gandhi which is another name for simplicity! Actually in present times when we search for home I always wonder have we understand really what we are searching for? How casually we use terms like home-buyers or home-hunt or home-expo, while we are describing real estate but what we buy is a concrete brick structure to which we make a home by our family & the moments we share in those walls! This is something we often forget & this is by both sides of the coin named real estate i.e. by builders as well by the customers! As if the role of customer is to convert the concrete brick structure in to a home then it’s the role of the builder to remind himself as well his team that this is not a general product, which customer will buy across the counter & carry it his home after payment. Rather this is the only product where customer is going to come towards the product & living in it, making it his or her home. And that’s why real estate is very special industry, here we need to build something more than the dead mass of brick & mortar, we need to add emotions in it while we build it as finely it’s going to become home of some family!

Well, that’s from the builders point of view but what about the buyer as with ever rising prices of homes (read everything related to the home) poor client’s first aspect while searching for home is budget! Emotions, service, quality, location rest all things follows later is the fact with real estate industry & this has been happening for years now! But no more, I am making this statement with lots of courage, yes home prices have been declined a lot & still no one can say they have hit the rock bottom but much closer to it! And this indeed is not effect of just RERA or GST or Demonetization on just real estate but there are many other factors are in play but the real estate prices have gone down is fact. Now here many will ask, where have been prices reduced actually? Well, in first place many developers are offering so many discounts direct or indirect way on their flats; when you have witnessed this happening last, please tell me! And other aspect is nearly for last more than three years home prices have not risen also directly per sq ft types; this in a way is huge reduction especially for an industry where selling prices of finished products used to get increased by average 30% to 40% per year, imagine in such industry the prices are steady for three years, what it means! The entire economics of real estate has changed as the developer who has invested money at interest rate more than 15% for buying land & then for construction, unless he gets 30% profit margin, he will go in loss is a simple math. And then if he was supposed to sale a flat at say X rupees three years back & still he is selling it at X today, what it indicates if not price reduction as consider the interest costs & then you will realize the prices have indirectly decreased by 30% in last three years! And this makes the present time perfect to buy the home & this I am not saying as builder but a common man who has seen both sides of the coin named real estate!

But then we Indian’s are crazy for the word “Sale” & buy something which is not even required when enters in to one! First understand a home is not a commodity which most people can buy across the counter. It’s one of the costliest products & for maximum clients its one time buy. Take example of luxurious cars like Audi or Mercedes, of which average price range is Rs 40 lacs & above, now how many people will choose these cars as option while buying a car? Only rich people with ample money, is the natural answer but then look at the average prices of a 2BHK flat in & around PMC or PCMC, can you get below Rs 40 lacs any such flat? Again, answer is no, you can’t get a 2 BHK in decent locality (read livable location) below Rs 40 lacs, so maximum people looking for a home has to spend that kind of money & this includes even middle class serving class which is actually back-bone of real estate. Now you only compare, when the person from this class will go for buying a car can he or she will look for Audi or BMW price range cars; but the same amount they are ready to pay for the home! This is why a home is very different commodity as one it’s costly & two, it gives you a secure feeling; it’s a place from where no one can ask you to move out & for that secured feeling you are ready to pay the price!

Though the problem is even after paying so much money it’s not easy to get the home which you really want because then many other factors, like size, location, infrastructure as well possession surety & many such comes in to picture. Many people asks me, what should be the criteria while finalizing a home & by me first & foremost criteria is assured delivery of what has been committed! I know many won’t agree with this as location, budget, can be the main criteria but what if the deal is not going to be completed ever, then what’s use if you have got the best location & in your budget, is what I will ask! As after RERA & GST, entire game of real estate has changed & there is tight cash crunch (not physical cash which we call black money but read working capitol) in the industry & many big names have been failed to deliver possession of the flats leading to huge financial losses to the clients! This doesn’t mean all is that bad, what I wanted to tell is choose the builder wisely & see that he will deliver the project in time. Check for his financial credibility & do it, not by going through the full page advertises in leading news papers but by scanning his balance sheet keenly. Agreed RERA has provisions to control the financial management of a project but what if there are no bookings, form where the builder is going to complete the project is such situation & what RERA authorities can do in such case? 

So, many people are opting choice of ready possession homes only & I won’t blame them & then the bonus there is, no GST on ready possession homes. Do mind, ready possession means having obtained occupancy or completion certificate from the competent authority & not just ready because your builder says so. This aspect of GST was the final blow for the dying real estate; yes dying I used the term as the industry is bleeding with all sorts of taxes from every govt dept, heavy interest rates for loans, increased land prices & ever changing polices of Urban Development Dept, making planning of building near impossible. And on the top of it there won’t be booking of flats during construction as or else the client has to pay GST & if as a builder you are offering to bear the GST burden then it’s a big dent in your already reduced profit margins. So, the builder has to either work on reduced margins which in a way is threat to project itself or build the project by own funding & then wait for the client just like any other shop keeper does at his counter!

Here even if the home is ready possession few issues about the homes are never spoken about & the main is infrastructure around the project. Let me warn you all the home seeking clients that to provide light, road, drainage, water, street lights, public transport & every such thing to your home is not responsibility of the builder! I repeat govt (read PMC, PCMC, PMRDA & all such sanctioning authorities) under the name of sanctioning may get anything written from the developer (sorry but read blackmailing) but in the court of law, it’s the civic body which takes money under the name of development charges for plan sanctioning is only responsible for providing all such infrastructure to the residents. So even if you see a ready possession project, the water flowing in to taps of your complex is not builder’s responsibility & one needs to assure all such details while finalizing even a ready possession home. Also while you book ready possession home then by law you are not required to pay GST but as the builder has spent from his pocket right from land cost to construction cost, there are chances the price you will end up paying can be higher as no one is Raja Harishchandra in this business, so the builder is going to recover his every single rupee incurred in the making of your home & nothing wrong about it! Also when you wait till the project gets ready then the choices of location of your flat within the project gets reduced, still in present scenario, ready possession makes sense if you are not sure about the builders capacity to complete the project is what I will advise, at-least for some time ahead!

I think that’s what Modi govt wanted i.e. make real estate industry like just any other industry where you display your goods across the counter & deliver against payment ready to use BUT… there is a big BUT in this as in the process somewhere the product line itself is getting hampered. Because if there won’t be any home makers due to the present policies about real estate then again only the few who will survive will hold all the homes supply& pricing, controlling the rates of the homes. Though with the current stock in hand i.e. homes available in the market this will take three /four more years as by then all the old stock of homes will be sold, so till then the clients of real estate should make hay when its sunshine!

-- 
Sanjay Deshpande 
Sanjeevani Dev.

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