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5 WAYS TO GET A GOOD DEAL - TOI article 18th april 2011




Realty is no longer the asset that always gives good returns. The ground reality has changed. So have the investing norms. Rakesh Rai explains the new tenets and ways to exploit these for maximum gains.

Don’t go by the MRP Most developers desperately need cash to complete delayed projects and start new ones. You can wrangle discounts if you know how to drive a hard bargain. There was a time when developers used to quote a fixed rate and offer up to 3% discount if you paid the entire sum within 60 days of booking an apartment. Things are different now. The 3% discount is just the starting point to begin your negotiations as most developers desperately need cash. Also, in some parts of the country, sales didn’t pick up last year between October and January, the period that accounts for approximately 40% of the annual sales of residential projects. This is why it may be the best time to wrangle a good price. 
    Seen from another angle, since there is no sanctity of an MRP, developers try to load charges surreptitiously and not in the quoted price which they want to seem affordable. So, always keep some extra money at hand. 
The discounts will continue, so don’t be in a hurry Builders are more desperate to sell than customers are eager to buy. They will 
continue to offer discounts even if it 
means taking a hit on margins. 
Ask any builder and he is bound to tell you that his project is almost sold out and that prices will be revised upwards very soon. The fact is that builders today are more desperate to sell than buyers are eager to buy. Overheated markets, sliding share prices and rising interest rates have made matters worse. While the IPO window is now closed, at least for the short to medium term, listed real estate stocks have taken a beating and tighter lending norms by banks have made capital scarce. 
    Debt is a big worry, too. The 25,000-crore debt—which the RBI allowed to be restructured following the slowdown—is due for repayment. While private equity investments have thrown open an opportunity, investors are driving hard bargains and looking for higher safety and returns. Another comparatively cheaper opportunity for listed developers is to borrow against shares held by the promoters. But with most companies already highly leveraged and stock prices continuing to be low, there isn’t much scope on this front. 
    The only cheap source of money available to realtors is through the sale of their projects. Given that the situation is unlikely to get better any time soon, the moment a builder realises that you are a serious buyer, he will be ready to negotiate the rates. 
The best deals may not be 
available with the builder 
Brokers usually book multiple flats and can offer you the choicest properties. Real estate brokers have always made news for the wrong reasons—fleecing both buyers and sellers, selling one property to more than one buyer, and conniving with builders to create a hype. While much of this is true, in some cases brokers may also get you the most attractive individual discounts. Some large ones command the best deals from builders because they book multiple properties and then sell them to individuals; it is their way of benefiting from buying in bulk. So once you have zeroed in on a property, check with the broker in the locality about the best rate he can offer. A broker could also help you identify properties that are distress sales and so available at a lower rate. 
    Another fast emerging layer between the builder and buyer is the underwriter. These underwriters buy a major chunk of the project from the builder and sell it in the market at a premium. In these cases, the developer cannot offer you a lower rate than the underwriter, but the underwriter may be willing to cut his margin if the sales are low. 

Nothing comes for ‘free’ The cost of freebies is usually factored into the price of the property. Try getting a cash discount instead. From registration fee to modular kitchens, even cars, all are being offered free when you book an apartment in a project. Don’t fall for these lures. The catch is that all freebies are already factored into the price of the apartment. The same goes for schemes on offer. The latest to catch investors’ fancy is the ‘attractive’ 10:90 scheme being offered—you pay just 10% of the cost now and the rest on possession. The truth is that developers urgently need the cash and many of the projects have not even got approvals. As HDFC Chairman Deepak Parekh puts it, “Within days of buying a plot, builders are putting out advertisements accepting booking at 10% upfront payment”. 
    Another such lure is the ‘attractive’ financing schemes that builders offer by tying up with banks. In most cases, you will get a better deal by approaching the bank directly. ‘Guaranteed returns’ is another bait being used by builders to trap investors. It is only after you make the down payment that you are 
told about the fine print—you get the returns only if you share the property with two others or the advertised returns are only for an investment above a certain amount. 
Grouping to get best deals Teaming up with other customers can not only get you a good discount but 
also helps in making your voice heard. 
It’s common knowledge that builders are desperate to clear their inventories, but they can offer discounts to individuals only to an extent. “For developers, bringing down the prices may work like a downward spiral; every new customer starts quoting the previous base price and asks for a better deal,” says real estate consultant Mahesh Raghupati. However, this hurdle can be overcome if the builder realises that he can clear a certain percentage of his project at one go by selling it to a buyers’ group. 
    Today, most builders are willing to offer a decent discount if they can sell more than five units at a time. “The smaller the project and developer, the higher the discount a group can get,” says Raghupati. Some builders are even willing to construct a separate tower if the 
numbers are big enough, he adds. “We get a lot of corporate bookings where 50-100 flats are bought. Usually, the discounts are given based on the location. If it is a good location and it’s boom time, then discounts could be as low as 4-5%. But in times of recession, corporates can get good discounts,” says Niranjan Hiranandani, MD, Hiranandani Group. 
    If you think you do not have enough friends to team up with, log on to group buying websites like, which get potential buyers for a project together for group discounts. “In the first deal that we made, we sold about 35 flats in one day for Oberoi Splendor in Andheri (East), Mumbai, at a discount of 32.5%. The market rate for these apartments was 10,000 per sq ft and we sold these at 6,500 per sq ft,” says Sandeep Reddy, founder, has now forayed into the home loan segment, enabling potential borrowers to get home loans at rates 0.25-0.75% lower than the market rate, with zero processing fee. This will be a much-needed relief for the borrowers who are already feeling the pinch of high property prices as well as the rising interest rates. 
    —With Amit Shanbaug 

Online advantage Group discount websites offer rebates on property too. 
• Register on a group buying website like

• Join an existing active group or form a new group. 

• After the group reaches a critical number, the website announces a closing date. 

• If the group doesn’t get enough people, it becomes dormant. 

• The website negotiates a deal and presents it to the group. 

• If most group members accept it, the deal goes through.