Money Saver India
How to protect your property investments

How to protect your property investments

Keep in mind these simple things before and after you make a property purchase in the current environment to safeguard your purchase.

With property rates skyrocketing and the frequent news of builders and promoters duping buyers or not delivering on their promises, it can be difficult to narrow down a house, whether to live in or as an immediate investment.

Home buyers generally feel their investment is safe when builders and real estate developers tell them that the project has been approved by all the authorities and that it has also received approval from banks and housing finance companies.

To the average home buyer the latter is the litmus test. It is fair to assume that the approving banks would have carried out the necessary due diligence work before approving a project for a loan and therefore the project is a safe investment. However, banks don’t normally follow up after the initial due diligence.

Prospective home owners need to do a couple of things regardless of what the builder or the bank tells them in order to be absolutely sure that their property investment is safe.

One of the most important things to do is to insist on getting the copy of the plan of the project from the builder every 2-3 years. Under the law, the builder is obligated to show the plans that have been approved and also any changes he proposes to make in the future. In most states, this project plan is valid for about 2-3 years. Therefore prospective home owners should periodically demand the latest maps. In some states, the law prohibits the builder from making any changes to the original plans without an approval from all home buyers.

This is an extremely important step as there have been numerous cases wherein the builder has promised an open space such as a garden or an amenity such as a club house in the original plan, but has built another building in that space. They even revise the plans without informing home owners or consulting them.

Buyers should also follow up with the lending institutions and other project stakeholders asking them to conduct due diligence every few years. This will keep the pressure on the builders to complete the project in the allotted time and not endlessly prolong a project. Moreover, financial institutions will also periodically know how the money is being utilized.

If, for some reason, the builder is not able to provide you with the flat you have invested money in, it is not enough to just get the money back with the standard norm of 14% interest. With soaring land prices, builders often use this loophole to deprive people from getting homes for which they have paid money. If the value of an area has risen 3-4 times the builders have no issues paying back whatever amount they have taken with 14%. Owners should always demand a compensation that is equal to the prevalent market rate as the builder has not only deprived them of their home but also wasted their time.

In the absence of a regulator, prospective buyers need to take these steps in order to make sure they are not conned. They should ideally come together to form a Resident’s Welfare Association to tackle all these problems.

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