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.