PROPERTY DISCOUNTS - FOR REAL?

With the most festive part of the year around the corner, the first word which comes to our minds is ‘discounts’! From groceries to cars … from clothes to homes… no matter what the commodity, it is smartly discounted to lure buyers!

“Pay 50% now and nothing up to completion of property”; “Pay full payment now for the plasma TV and get 10% off on total price!”

From buy one get one free trousers to buy home get office free at “Ummat” – the first ever property show exclusively for Muslims at Ahmedabad, no one is wasting time in offering the heaviest discounts and weirdest schemes to hit sales.

Even real estate companies and brokers have started raising their sales pitch. But are these deals for real or a ploy that developers use to raise money and to prop up sales? Read on to find out …

The real estate market in general has been struggling to keep up with falling demands since the last couple of years…and now with the festive season round the corner, everyone who had held back their grand plans of purchase during the slowdown are now looking to grab the lowest rates offered.

While banks are less likely to provide funding to developers, left with no other option, developers have to raise funds by offering existing or prospective customers discounts and interest subsidies.

According to Business Today, “burdened by debt, between 2007-08 and 2011-12, the net profit of 12 listed realty firms has declined 67 per cent, mainly due to rising interest costs.”

On one hand, developers are on a roll if they get 10 – 12% of the payment for a project… but, buyers benefit only if the project gets completed!

Read more about his here – RISKY REFUNDS.

Moreover, as the interest earned is shown as a “discount” against the property price, there is no tax liability on the buyer's part. If the money is invested in a bank fixed deposit, the interest earned is taxable.

Whether you are giving 6 installments at one shot or a ‘token booking amount’ of 10%, the more money you give to your builder, the more you are taking a risk.

There is also a phenomenon called the ‘one payment – no installment scheme’ where you are required to pay an x amount at one shot as a ‘pre-launch’ discounted offer! 

Newspapers and hoardings shout out these ‘unbelievable prices’ and ‘limited discounts’ to make you run and book your home even before the project takes off!

Read more about this on - BUYING A HOME? DON'T LET SAMPLES FOOL YOU!

What we fail to see is the huge risk in investing at this stage as several approvals are yet to be taken, the project may be delayed or even scrapped. 

So what does one do? Well, stay vigilant of course! Discounts do not generally indicate traps, but the real estate industry itself is full of ‘un-licensed’, ‘un- authorized’ developers who are there just to take people for a ride!

Keep your eyes open, try to find out details about the developer and his past projects… and you might find, discounts are really not so bad after all!