Since a home buyer apportions the bulk of his savings and income to a single investment, he wants to save as much as possible. Property developers exploit this penny-pinching penchant by offering various innovative schemes that are laden with freebies. At face value, most of these options appear tempting, but when you scrub off the gloss, you'll discover that they are riddled with traps. ET Wealth takes a look at five of the most popular schemes, the truth behind them, and how you can still benefit from them.
1) Pre-EMI sharing schemes
What it means
When you take a home loan, it is usually disbursed according to the stages of construction, so you don't need to start paying the EMI till the construction is complete and you get the possession of the property. However, you do have to pay the interest on the loan from the first disbursement. This is called pre-EMI and a lot of builders agree to pay this amount for a specific period, usually 24 months.
What's the catch?
This scheme is helpful if you are renting a house since paying the pre-EMI and the rent can strain your finances. However, before opting for it, you should make sure that the builder hasn't padded up the cost. He may not offer any discounts or throw in any freebies in the deal. So, you should bargain first to lower the price of the house and then opt for the scheme. Another risk is that if the construction of the property is delayed, your pre-EMI payment period may stretch for more than two years, and you will have to make the balance payments yourself. This will negate any benefit that you may have derived on the payments made by the builder. "Try to bargain with the builder to extend the tenure of the scheme till possession and not restrict it to a specific time period. This keeps the pressure on the builder to hasten completion and give possession since he is paying the interest till then," says Samantak Das, director, research & advisory services, Knight Frank India. Another thing you need to check with the builder is if he will pay the interest at a pre-determined rate. If this is the case and the home loan is on a floating rate, the liability for any increase in rate would be on you. You should also enquire if the builder will pay a penalty for delay in construction/possession.
2) Freebies and gifts
What's on offer
Builders often offer free gifts when you book a house. These can include cars, gold coins, club membership, parking space, even a fully paid holiday for your family. Since a car park usually costs Rs 1-10 lakh, most customers are eager to take up this offer. Some property developers have begun offering to pay the stamp duty and registration charges, which range from 5-12.5% of the value of the property.
What's the catch?
According to a Supreme Court ruling of 2010, builders cannot charge for parking space, yet most of them continue to do so. To comply with the apex court's ruling, some developers offer parking lots for 'free', but actually add this to the cost of the house by increasing the price of the super built-up area. The same is true for the other freebies that they offer. So, in reality, you don't get any real benefit. "A good way to determine whether these freebies are added to the cost of the house is by comparing the price of the property to similar ones in the vicinity. If there isn't much of a difference, opting for the builder to pay the stamp duty and registration costs can be to your benefit. In case of other things, insist on a cash discount rather than the freebies," advises Pankaj Kapoor, managing director, Liases Foras.