How To Identify The Right Reason Before Buying a House

photo by: Kavanjin Croatia Apartments

Imposition of service tax (from the next fiscal year) on under-developed housing complexes, as proposed in the Budget 2010-11, will lead to increase in property prices, according to real estate companies. Having said that, I’ve particularly noticed, after the budget, articles in newspapers / magazines refer to a similar line that reads — THE TIME IS RIGHT, BUY IT NOW..!

It is quite understandable that in the current scenario where property prices have risen drastically as much as 25 ~ 30% one of the main reasons of buying a house in an under-construction project was better rates, but with these extra add ons like Service Tax and VAT proposed to be levied — will only increase the cost of the property even further. Also, buying your first house has an emotional connection as well hence it is essential to be absolutely clear about why you are buying a home before starting the process.

Before starting any aspect of the process, ensure that you first get together with your family members and seriously consider this basic question — Why are you contemplating a property purchase?

Typically, there could be 5 reasons for wanting to buy a house:

1. Self Use

This is a need based decision and therefore requires a greater focus and clarity on aspects such as:

a. Budget [refer Are you Eligible for that Home Loan?]

b. Preferred locations

c. Total space and number of rooms required

d. Layout Specifications (e.g.  enclosed balcony, open kitchen and dining area)

e. Connectivity (by road, rail, air and over water)

f. Project Amenities (garden, clubhouse, security, swimming pool)

g. Daily commuting to work

h. Proximity to educational institutions, shopping facilities, grocery stores)

i. Availability of leisure and entertainment options

j. Is the project approved by major financial institutions [Refer Document Checklist for loans]

Scheduled possession is another key factor that comes into play here, as does the scope for appreciation in value.

2. Investment

Given the very nature of real estate, it is considered one of the best investment avenues. With builders wooing buyers with lucrative options and interest rates already trimmed down realty is a smart investment decision. The factors your need to consider in this case are:

a. Project location (proximity to an office hub really helps)

b. Existing demand for lease rental options and rates prevailing

c. Apartment size and dimensions (2BHK and above are preferred)

d. Proximity to your home (gives you the ability to visit and monitor)

e. Scope for returns on capital invested, value appreciation.

The basic difference between real estate and the stock market — a home is a real tangible asset that will always have a practical utility, regardless of its market value at any given point in time. Moreover, a decent home in a good project at a great location will always find takers.

3. Inflation Hedge

Property always appreciates at a higher rate than bank fixed deposits or savings accounts. It is an ideal inflation hedge. Just keep in mind the following aspects:

a. Project rates vis-a-vis existing rates in the vicinity

b. Quantum of transactions happening in that area.

c. Pricing levels — realistic / above normal

4. Post Retirement Home

Here you can take a look at locations that are far from the maddening crown. You can consider under-construction projects with a length possession date. Factors to be considered are:

a. Peace and tranquility in the location

b. Availability of medical facilities

c. Gardens, Jogging tracks, Meditation Centre

5. Weekend Getaway

The concept of second homes has undergone a complete transformation in India. After working 24X7 there is a desire to get away from the hustle-bustle of the city and spend the weekend amidst tranquility and greenery. Since work pressures make it difficult to take a long break, most people have begun to prefer a second home that is a short distance away from the city, involving a drive or just a few hours. The basic criteria are:

a. A project with options having large spaces

b. Surrounded by lush foliage

c. A peaceful ambiance

d. Facilities to de-stress and unwind

e. Space to bond and spend some quality time together

6. Marital Home for children once they grow up.

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