Nothing is for Free; Think Twice Before You Accept Rent on Home Buy
With the promise of paying rent, two Mumbai-based builders are promoting some of their under-construction residential properties named as Nirmal Lifestyle and Rustomjee.If the construction of its project is delayed beyond December 2017, Nirmal Lifestyle promises to pay the rent while Rustomjee will pay the rent during the construction period.
Such promises were so far limited to commercial properties, as per the real estate experts, but these builders are probable to extend the offer to residential properties in the coming weeks as an auspicious day of Gudi Padwa is approaching in just a few weeks.
Muddasir Zaidi, national director, residential agency, with real estate consultancy firm Knight Frank says, “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.” A property consultancy firm Joy Sanyal, national director-development initiatives, Jones Lang LaSalle (JLL) India said parallel schemes are accessible in Goa and other parts of the country, too.
What’s On Offer?
Kaizad Hateria, general manager, corporate customer relations and sales-residential, Rustomjee alleged that we need to pay a fixed sum per month for two years from the agreement date.For a 2-BHK and a 3-BHK we need to pay 21,000 and 28,000 respectively. He added the whole scene is to relieve the financial crunch buyer’s face when they pay equated monthly instalments (EMIs) and rent during the period of construction.
Such schemes are significant for the home-buyers as payment of rent linked to delay in completing can help bring down their concerns on timely completion, according to Zaidi.
Experts also believe that schemes that propose rent as compensation for postponement can help people control their cash flow issues if there is a delay.
Harsh Roongta, chief executive officer, Roongta Securities said, while booking an under construction flat buyers plan their cash flows in line with the date of completion. If the schedule gets disrupted, their entire financial planning goes for a toss.
The merely issue, he points out, is the enforceability. He added, “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.”That is the reason why Sanyal requests the home buyers to invest in such offers only if they are part of the agreement with the developer.
Tread With Caution
As per the analysis of experts such offers always come with a cost which are hidden by the builders, as they are unlikely to disclose two sets of rate cards to potential customers, one that includes the rental offer and the other without it. Queries have to make to work out the difference and to see if the offer is really worth taking. Even then some of the people won’t be able to analyse such schemes and they should be better-off if they negotiate directly the price per-sq-ft, according to some experts.
Zaidi added, as direct discount is simple to understand it is far better. Then, there is the time value of money you are committing over the period of construction. You must ask for rates without the facility, if the developer is offering to pay rent during the period of construction.
Source: The Times of India
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