Home Loan: Home Buys Get Safer

From May 1, many states across India will begin rolling out the recommended change in the real estate regulatory system (RERA) prescribed by the Central Government. Other states will soon follow. There will be some tweaks to the recommended template by each state (as real estate is a state subject), but it is expected that by-and-large the recommended prescription will be followed.

This will do more than a few things. It will usher in greater assurance for buyers as developers will need to secure various regulatory clearances before tapping public for money, and clearly disclose all important details about the project. In a word, transparency. What this will also do, is to provide organised financiers (read banks and NBFCs) greater confidence to extend credit to the sector, which till recently was infamous for its opacity, links to the black money circuits and usurious financing rates. This will reduce the cost of funds for developers and get them to start introducing professional practices in their businesses, focused on timely delivery and customer satisfaction.

Some of this is already being witnessed as the sector preps-up for the new regime. Today, you have more developers advertising ready-to-move-in or near completion projects for sale. They are also flaunting “all approvals received”. Such developments will cut the risk for home buyers. Endless waits for possession of homes booked in projects floated by unscrupulous developers or cash-strapped builders could become a thing of the past.

Developers may also opt for organized funding through the formal channels—lenders, REITs etc—to secure financing to lower costs and defer sales in projects, leading to better realisations per unit on sales near completion. They will also likely benefit from the to-be-introduced Goods & Services Tax regime, as they will be able to easily account for and set-off all levies, many of which presently slip through the cracks and lead to double tax incidence to be borne by the developer. Some industry leaders have also spoken of a possibility of these factors translating into lower cost of homes, but not all subscribe to this view.

For a home buyer, though, the key benefits are greater predictability, lower risk of non-delivery and years of litigation, transparency and the ability to choose from a larger-stock of nearcompletion inventory. With home loan rates at very affordable levels and the expectation that there won’t be too much of an uptick, this is a good time to go home shopping.

For those looking to buy “affordable homes”, there are tax breaks available to the segment that shall make buying such homes even cheaper. An added benefit for real estate buyers, is that the government has reduced the period for classifying real estate investments as “long term” to 2 years, from the 3 years earlier. So, if you buy a house today and sell it after 2 years, you will only be liable to pay long-term capital gains tax and not short-term capital gains tax.

All-in-all, good tidings for home buyers. So, go forth, get that dream home, only, do your homework (See: Checklist for Home Buyers) before you close the deal.

Checklist for Home Buyers

Location, Location, Location: When buying a house, you need to get the location right, for your peace of mind and happiness. For this, you need to ask yourself some critical questions, like these: Is it close to your workplace and/or child’s school? Is it easily accessible? Is it a safe locality? Are basic amenities easily accessible? Does the house get enough direct sunlight?

Credentials of Builder: This is of utmost important. The track record of the developer in terms of timely delivery, providing what’s promised and post-delivery maintenance and upkeep of the property (where relevant), are important factors. All you need to do is to visit a few existing developments and speak with friends residing in properties developed by the builder to get a sense.

Regulatory Compliance: Don’t buy promises of clearances in the works. Always look for and assure yourself of complete regulatory compliance. If you can’t ascertain this yourself, turn to help from your home loan financier or a lawyer.

Financier Endorsement: It always pays to opt for projects that are approved for financing by all / most of the A grade financiers. This assures you that they have done some due diligence before according such approval. Also, more the number of financiers interested, better the chances of your securing a good home loan deal— through loan shopping.

(A marketing initiative by Open Avenues)

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