Top 5 Myths you need to debunk about buying real estate in India

Top 5 Myths you need to debunk about buying real estate in India

Buying real estate should always be an informed decision as stated by experts from time immemorial. However, unfortunately, many prospective buyers end up possessing a firm belief in some of the commonest real estate myths out there at the moment. These only prevent clear decision making and should be debunked immediately by all means. While some of these myths may be applicable or truthful for certain homebuyers, when taken in a general context, they can be grossly misleading and should be avoided without a doubt.

First Myth- All residential projects come under RERA

One of the biggest myths that homebuyers often end up believing in is that the Real Estate (Regulation and Development) Act of 2016 or RERA covers each and every real estate project. While RERA has definitely increased builder accountability and safeguarded interests of buyers, it is not so that every project is covered by it. RERA only covers projects which are 500 sq. metres or more in terms of area or 8 or more units.

For projects to adhere to RERA guidelines, developers have to register the same with the authorities accordingly. As a result, do not assume that every project will be RERA registered. Before buying any property, make sure that you check whether the project has RERA registration.

Second Myth- Subvention plans are good options for greater savings

Another huge myth that potential homebuyers also fall for is that no EMI till flat possession or subvention plans help them save hugely on costs. Developers usually seek around 10-30% of the payable amount upfront from buyers and the balance will be paid to the developer by the bank as the loan in a tripartite agreement between the buyer, bank and developer. While the project is being constructed, the real estate developer will be paying interest on the loan to the bank. The bank will be disbursing loan amounts to the developer with requisite progress of construction.

The EMI of the buyer will only commence post possession. This could well seem like an amazing deal by all means. However, it may not always lead to greater savings. According to experts, real estate developers often come up with several enticing schemes and plans for drawing homebuyers. Plans tied to possession usually ensure that investors are tied to the under construction project for a longer duration.

In these plans, the discounts provided are usually lower as compared to down payment or construction linked payment plans. Buyers usually pay the whole EMI amount as the loan amount since the principal amount does not go down until actual EMIs start. Pre-EMIs are only interest payments for the amount that has been disbursed which the realty company pays on the buyer’s behalf. There is no price reduction on account of subvention plans as per experts. In some cases, ticket sizes may actually be more. These plans only benefit those who have to pay their EMIs and rentals simultaneously till the flat is ready to move in. Additionally, if the EMI is paid late by the developer, the buyer’s credit score will also be affected.

Third Myth- You should always invest in metro cities

Most people think that real estate investments are best made in metro cities or Tier 1 cities. However, nothing could be farther from the truth in recent times. Of course, rental incomes from property investments may be higher on paper in metro cities even though appreciation of capital values could be on the lower side. Yet, prices are substantially more for property in metro or Tier 1 cities as compared to Tier 2 and 3 cities.

There are more attractive and reasonably priced property options in Tier 2 and Tier 3 options which are easier to invest in and there is scope of ample future appreciation with more infrastructure development and connectivity improvements, something that is mostly saturated in metro cities. Buying real estate in a metro city may only burden your pocket due to the high price. As a result, it may be a wiser decision in many cases to invest in Tier-2 or Tier-3 cities or micro markets on the outskirts of major cities which have high potential for growth in the future and hugely affordable property prices at present.

Fourth Myth- Skipping all brokers/agents is the best thing to do

You’d be surprised at what people often end up doing to avoid real estate brokers and agents while purchasing property in the country. However, this is not a myth that you should universally believe in. In fact, opting for a reputed online property brokerage could be a wise thing to do. You could get help in negotiating prices and other special discounts since these realty portals/companies have tie-ups with developers. You will get all necessary project information, help with site visits, financing and guidance from industry experts before buying.

As a result, choosing online property portals for deals could be a wise thing to do. From pre and after sales support to sheer knowledge of the market and projects, paying a little by way of commissions/fees will help you take better decisions for the long haul.

Fifth Myth- Rentals are better options as compared to buying real estate

See, most people buy into such myths, i.e. renting a property is better than buying. It all depends on the situation. For instance, if you are a frequent mover between cities on account of your profession, you are better off renting for the moment instead of buying a property in your chosen location. However, if you have planned to live in a city/location for the majority of your life and have a settled existence in the city/location in question, you should naturally opt to buy a property.

This applies even if you are planning to stay in a city/location for at least 10-15 years. This is because purchasing property means that the amount of money that you’re forking out every month goes towards building an asset for the next generation, i.e. your home and this will only appreciate in value over the long term while giving you something that you can call your own. It is always better to build an asset early in life so that you can focus on other goals later on. Paying monthly rent is not building you any future asset or putting that money to constructive use in reality, unless you don’t know what the future holds.

As you can see, there are some common myths linked to buying real estate that you are better off avoiding. Always take decisions based on your own circumstances, situation and needs above all else.