Nothing is for Free; think twice before you accept rent on home buy
Mar 19, 2014
Source : The Economic Times


MUMBAI: Two Mumbai-based builders — wo Mumbai-based builders — Nirmal Lifestyle and Rustomjee — are promoting some of their under-construction residential properties with the promise of paying rent. Nirmal Lifestyle promises to pay the rent if the construction of its project is delayed beyond December 2017, while Rustomjee will pay the rent during the construction period.

According to real estate experts, such promises were so far limited to commercial properties, but builders are likely to extend the offer to residential properties in the coming weeks as Gudi Padwa, considered auspicious for buying properties, is just a few weeks away.

"Schemes that promise assured returns or assured first leases are offered by many developers in the commercial space. However, in the residential segment, it is a relatively new development," says Muddasir Zaidi, national director, residential agency, with real estate consultancy firm Knight Frank.

Joy Sanyal, national director-development initiatives, Jones Lang LaSalle (JLL) India, a property consultancy firm, says similar schemes are offered in Goa and other parts of the country, too.

What's On Offer?

"We pay a fixed amount per month for two years from the agreement date. We pay Rs 21,000 for a 2-BHK and Rs 28,000 for a 3-BHK," says Kaizad Hateria, general manager, corporate customer relations and sales-residential, Rustomjee. According to him, the idea is to ease the financial crunch buyers face when they pay equated monthly instalments (EMIs) and rent during the period of construction.

According to Zaidi, such schemes do offer some utility value to home-buyers, as payment of rent linked to delay in execution can help bring down their concerns on timely completion Experts also feel that schemes that offer rent as compensation for delay can help people manage their cash flow issues if there is a delay.

"When buyers book an underconstruction flat, they plan their cash flows in line with the date of completion. If the schedule gets disrupted, their entire financial planning goes for a toss," says Harsh Roongta, chief executive officer, Roongta Securities.

The only issue, he points out, is the enforceability. "In the past, there have been instances where builders have offered to compensate any delay, but have not kept their word. Buyers are forced to take legal recourse, which can be time-consuming and an expensive affair," he says. That is why Sanyal asks home buyers to take up such offers only if they are part of the agreement with the developer.

Tread With Caution

Experts believe that such assurances come with a cost, but the builder is unlikely to disclose two sets of rate cards to potential customers — one that includes the rental offer and the other without it. You will have to make queries and work out the difference to see if the offer is really worth taking. Some experts believe that even then it won't be easy for most people to analyse such schemes, and they should be better-off if they negotiate directly the price per-sq-ft.

"Direct discount is far better as it is simpler to understand. Then, there is the time value of money you are committing over the period of construction," says Zaidi. If the developer is offering to pay rent during the period of construction, you must ask for rates without the facility.


Latest Realty News

Investors must be prepared for delayed payments; premature exits could be difficult
Mar 19, 2014
MUMBAI: Since March 3, the BSE realty index has gained 14.2 per cent, compared with the Sensex's 3.95 per cent rise. Though real estate developers are reporting a slowdown in sales, in most centres, returns by real estate-linked non-convertible debentures (NCDs) are 18-22 per cent a year.
Concern on Ukraine hits pharma stocks
Mar 19, 2014
MUMBAI: Tension between Russia and Ukraine over the Crimean region is weighing on the shares of select Indian health care companies with business interests in that region
G L Raheja, real estate tycoon, passes away in Mumbai
Mar 19, 2014
MUMBAI: Real estate developer G L Raheja who created a Rs 11,000 crore construction firm run by him and his son passed away on Tuesday leaving behind an unfinished legal family battle over control.
Real estate dealer kills wife with friend's help
Mar 19, 2014
NAGPUR: The remains of body of 35-year-old Ragini Raghtate, who had gone missing on February 25, were found on Sunday in Kachhimet forests near Umrer following confession of her husband Devanand and his friend Satish Joshi.
Viman Nagar, Nagar Road: Pioneers of Pune’s realty
Mar 19, 2014
PUNE: Few real estate micro-markets in Pune have been able to match the outstanding success of Viman Nagar and Nagar Road in the Eastern part of the city. Nor is this success limited to this region alone. As a direct result of the relentless demand for properties in this belt, nearby locations such as Dhanori, Charoli and Wagholi have become the new watchwords on the city’s real estate market. Their proximity of the Pune Airport adds a decisive ingredient to the overall growth recipe that drives
City planning: The Mumbaikars’ way
Mar 19, 2014
MUMBAI: “When I see the city from my window, I don’t feel how small I am but I feel that if a war came to threaten this, I would throw myself into space, over the city, and protect these buildings with my body.” This Ayn Rand quote would possibly cross our mind, when we look at the skyline of Mumbai. If we dig deep into the history of this metropolis, we will be amazed to know how two distinctly different cities, co-exist here. One Mumbai exists which is rhetoric, expressive, tangible and can be
More transparency and accountability in the system
Mar 19, 2014
PUNE: Lack of transparency in thereal estate sector, has been talked about for long, and the creation of a housing regulatory body has been discussed, at the central and the state level. The Maharashtra government has taken the first step in this direction by paving the way for the implementation of the Maharashtra Housing Regulation and Development Act, 2012, which would establish the country’s first regulator for the housing sector. The state act aims to regulate and promote the construction,
‘Real estate prices will rise 5-15% over six months after elections’
Mar 18, 2014
MUMBAI:Probably the only real estate developer in Mumbai offering office space from 1,500 sq ft to 80,000 sq ft (on a single floor plate), the Marathon Group has managed to ride the slowdown in commercial real estate by pioneering the concept of small office spaces for start-ups and large floor plates for multi-national companies in the city.
Property prices cool, but home rents heat up
Mar 18, 2014
MUMBAI: Property prices have cooled down significantly in the last one year. So, has this led to a lower rental bill for tenants? No, rents in most cities have increased in the last 12 months, with some localities even witnessing hikes of up to 20 per cent.
Builders flout rules, sell flats in projects sans clearances
Mar 18, 2014
MUMBAI: Without any construction permissions in place and sometimes even when land titles are not clear, builders in the city have been enticing clients to book flats early at discounted rates although it is illegal under the law.

Latest Realty News Of State

Realty Talk's