I had started a a following thread in November last year, sharing few Do's and Dont's for the first time buyers in Gurgaon.
These were based on my first hand experience of going through the same ordeal which most of you would have gone or would be going through right now.
As they say in gurgaon 6 months is a long time. Today by chance I visited this thread after a long time and realized that there are few more important learning's I must add. Since I cant edit it (Being Old Post), I am editing it a little bit and restarting it again to help many new buyers to profit from it (if they feel so).
Besides, it makes it easier to have a dedicated thread where many of you can also add and share your leanings for the benefit of others.
So here it goes once again - - - - >>>> Vs 2.0.
There was a time in Gurgaon (Probably 7 years back) when there were few builders, few projects and few locations to choose from . Those were the good days as buying a new property in Gurgaon didnt lead to any change in your mental state and also to some extent to one's health. I guess this was the state across all the leading RE market in India.
7 years hence the landscape had changed dramatically. So much so that today , making a RE decision can cause extreme anxiety, sleepless nights and in some cases extreme fluctuation in blood pressure level.
I have read quite a few threads over past one year in or so and have seen many buyers getting guided through the discussion on the forum and many times they got misguided also.
According to me in the current market scenario following are the few factors leading to very high stress levels while making a decision :-
1. Too many Choices
. Gcx Vs SPR Vs NH8 Vs Manesar Vs DeW Vs etc etc.
2. To many crooks spoil the broth
- Any body and every body with the faintest of knowledge or experience about the RE has jumped the bandwagon of Me2 expert on RE knowledge.
3. Too many builders -
There were old stalwarts who had an impeccable reputation on timely delivery. It was easier to take decision then. Now they have taken a backseat due to their over exposure to land grabbing phenomenon. This had eventually led them to investor's loss of confidence on timely delivery from them. Buying property from their new projects also is not an easy decision today
Then there is new brigade of zillions of new builders with no background of any sort of confidence inspiring credentials. If you have to choose a new projects in Gurgaon today you may find more than 50 builders to choose from.
4. Too Many Projects -
This is the most difficult hurdle to clear off today. With more than 100 projects to choose from in today's gurgaon, problem of plenty is the order of the day. Extremely difficult to take a decision.
5. Too Many Brokers -
I guess there are more than 5k brokers operating in gurgaon RE market today. I dont think it to be a big problem considering the size of today''s RE market. This is a fair number required to service all the clients.
Problem is in their intent,knowledge level,approach and greed. For a big RE market to flourish its pertinent to have a good base of advisors who have a practical and ground level knowledge of the market, understands clients requirement properly and offer a suitable option within a budget to the client.
Coupled with this, investors or end users greed to buy more, over leveraging and further influencing their peer set to invest in RE, a deadly cocktail of bleak future is brewing today. So how does one take a right call and how can one take a calculated risk without getting into trouble in future.
Below are few pence of advise according to my learning and will leave this forum open to add the valuable inputs for every one's benefit .
1. Budgeting :-
Before even making the first visit to any RE market one should work out thoroughly one's futures cash flows, finances, futures short term, mid term and long term liability. Work out your disposable income after factoring the rent component etc before arriving at the final figure. According to me this exercise is the most important exercise while planning your RE investment. This can make or break your future.
2. Purpose :-
There are two distinct approach to making RE investment. On one hand there is a pure investor class who enter early and exit at an opportune time and there is a end usage buyer whose decision is primarily to stay. Both these approach need to be very clear before making a decision. To avoid future conflict of interest in one's future plans its better to have clarity before making a decision. Decide the purpose of investment very diligently.
3. ROI :-
Again a very important assessment which most of us do not really calculate in totality. For calculating true Return on Investment take a realistic view on cost of capital, interest cost, pre emi cost, incremental interest cost due to delay by the builder (these days delays can easily go from 2-5 years) and most important dont forget to take into account the brokerage, transfer charges, Tax implications etc.
One must take a holistic view of RE returns in future vs other asset class, liquidity concerns and the cost of Inflation. Currently the inflation is in double digits and I dont think it softening below 8-9 % in next 2-3 years. With both inflation and interest rates at such high level please calculate the return required to beat the inflation.
4. Advise :
With so many property gurus's around you , even choosing a guru is a problem. I have seen many people coming on this forum and asking for help and I have seen them asking for help for the entire year and not taking a decision. This is a result of seeking too much advise.
One must not completely believe in advise of the forum members point blank. Rather take the information from their learning and use it to help taking your own decision. No one knows your pocket and your future cash flow better than you. So take a very diligent and rationale decision as per your investment strategy.
5. Choose your broker wisely :-
Do not go for fly by night brokers. Check out the ones who have a good experience in RE market. Established names will always be better than the ones who just try to sell you anything. You might have to pay a higher brokerage but don't worry about it. When your are committing your life long saving plus future savings in RE then its better to pay more for sound advise. One must also check the ability of the broker to sell your property in future. Treat him like your financial advisor and if you think that the broker is giving a good advise then go ahead with it.
Consulting too many brokers will not only lead you no where and loosing precious time but also it artificially jacks up the resale price in the market. In the case of resale purchase most of the brokers will start calling the sellers and this leads to the confusion in the market. Suddenly the seller feels that there is a demand in the market and that leads him to either defer the sale or increase the size.
6. Time Value of RE investing :-
With so many choices, so much of information and so many growth corridors to choose from, its easier to get lost in this maze and not being able to decide on the project. Secondly due to the prices going up every week, the moment you come back to the project that you had shortlisted, price goes up couple of notches above. At the end of the search one becomes very learned about various projects, its pros and cons (thanks to IREF), knows the prices on the back of its hand, knows distance from all vantage points but is not able to take a decision. This is how it goes :-
a. Noida Vs Gurgaon.
This is the starting point of the crystal maze .If you are lucky you will come out of this discussion in a months time or else you could waste 6 months to a year (I wasted one precious year in it)
b. Boom Vs Bust :-
If you thought that your just resolved the biggest mystery of the world then welcome to the second stage. Today whether you are a teacher, businessman,student, Sales man, finance expert, marketing guy, IT guy, one thing one knows like abc is the correlation of Global financial crisis, Re depreciation, inflation, consumption, europe election, Greek tragedy, white money, black money, corruption, end of civilization in 2012 etc etc to the Real Estate market of gurgaon or of India at large. Once your enter into this spiral, even God wont be able to tell you when you will come out of it.
c. Dew Vs NPR Vs SPR Vs NH-8 Vs Gcx :-
If your know where you are entering now, you would have wished to stay back in stage 2. No one wants to enter this zone. This has unarguably become the mother of all debates in the world. I have seen many NRI's, Veterans, Senior,New bies getting "Shaheed" in this debate. Even after so much of blood bath there are no signs of this loosing steam.
d. Pre Launch,Just Launched,Original resale/Broker sale/Distress Sale :-
You must thank your old karma's if you have reached this stage. Look around you, your peer, friends, relatives, you will find examples in dime and dozen where people haven't crossed the first two stage till now. Give a pack on your back Champion and move ahead in this "Takeshi's Castle"... You will get inundated with choices from pre pre launch, pre launch, just launched, price revising tomorrow, insider news, underwriters stock, broker stock, cheque submitted but not banked (hence name can change) etc.... Then you will get value buys with examples like "This property hasnt got premium now due to xyz reason, but now falan falan project has come 500 rs above this, so this should also move. Or this project was stuck for a year or two due to clearences pending, not the internal news is that all the clearences have come and they would be launching it at 1000 to 1500 Rs above the previous rate... Stories and options will go on and on and on and...
But your deicsion will be no where in sight. Saturday and Sundays come and go and one day even you stop going to gurgaon/noida for recce. You finally give up... The very objective for which this excersize started remains unfullfilled. And when you look back your realize the amount of time that you have invested and now dont feel the energy to take it further. You now resort to IREF and keep tracking it on daily then hourly and then minute by minute basis. We argue, debate, attack, defend, feel good or feel bad but dont take a decision.
Finally the most imp value of RE is lost and that is time. So after all this gyan what is the way to skip all these stages fast and arrive at a decision.
To answer the above, I would like to draw your attention to the fact that owning your home still remains the single largest dream of our life time. It was there 100 year ago and it will be there 100 year from now.
Whats the difference in the past and today. In the past our parents use to work and live with this dream for their entire working life and then at the time of retirement after marrying the daughter, they would then construct their own house with the retirement money.
Today we have cut that time by 25-30 years depending on what stage of your career we are in. Underlying requirement is still the same. However, our parents never invested in a house but made a home for the entire family to live together. Hence they were never worried about the price, rates etc. What ever was the prevailing price at retirement was accepted and the decision take.
Today with so many options and reasons as mentioned above this underlying need as lost its imp and this is where the entire confusion starts. Once the clarity is there (as mentioned at the beginning of the post), time taken for a decision will substantially come down.
So I recommend following steps for effective decision making :-
Choose the location purely on basis of proximity to your work area.
Select a good broker. Spend more time in searching a good broker. If he is good, he will find the best suitable option for you.
. Choose a project based on your budget. Even if the project in your budget is on the outskirts, go for it. If you cant buy it today you wont be able to buy it tomorrow.
d. Regarding Bubble Burst without entering into any debate, just ask one question to yourself " Do you remember the last recession that came and went away when you were staying with your parents?? Did we stop staying in houses that we loved staying due to prices went down by those percentage points??? What difference has the appreciation in the property prices has made to your lifestyle.
A loss and a profit is notional but the feeling of owning and living in your home is priceless.
With these thoughts, I would like to appeal to all the new and existing buyers to tread cautiously while making investment decision and I hope these thoughts might be of some help for you.
Would expect more contribution from veterans and from those also who haven't started writing in this wonderful forum.
Happy Investing !!