Friday, 24 October 2014

Trust , but verify ! A Golden rule in property investment !!

Sekar, a senior bank professional, met me recently in connection with a real estate issue. He has sold a vacant land property in the outskirts to a builder who as part consideration has given him an apartment in another on going project of his. The value, he was told, is Rs.75 lacs. This amount is to be offset from the total sale consideration. The apartment is good in terms of location and construction, he is told. It will be ready soon and he can occupy it in a matter of few months. Rest of the consideration for Sekar’s property is to be paid based on some terms. The builder insists and gets the flat registered in Sekar’s name. So far so good !

Soon Sekar has a change of mind ! He wants to live in another part of the city which is close to his work place; so he goes to the builder and tells him that he would rather hand over the apartment back to him and let him give Sekar equivalent amount as payment so that he would buy an apartment of his choice close to the work place. The builder informs him that he cannot take back the apartment as he does not have the money to recompense him. So if Sekar wants, he should sell it in the market and realize the money.

At this point of time Sekar came to the author of the blog. After perusing the documents like approved plans, details of UDS of land, actual working plans pertaining to the allotted apartment and based on a knowledge of the price trends in the locality, the author came to the conclusion that the builder has pulled a long one on Sekar by palming off an apartment which is very poor in terms of layout, compliances, car parking space and the like. Its real value if sold in the market (provided there are takers) will be atleast 20-25% lesser than the price fixed by the builder . Also given the extent of deviations from the approved plans, the ventilation, natural lighting and car park space is seriously compromised which would make getting a buyer very difficult for Sekar.

Things which appear so simple on paper , are, in reality, not so simple after all !

So always take a hard look at the property and get it investigated by a competent person before agreeing to sign on the dotted line. Now Sekar is poorer by at least Rs.20 lacs on a notional basis and in addition he is saddled with a property which will not give him a good quality living that he has paid for!!

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