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Top 7 mistakes of a first time home buyer

Magicbricks.com 12-01-2015 Sneha Sharon Mammen
Top 7 mistakes of a first time home buyer © Sneha Sharon Mammen Top 7 mistakes of a first time home buyer

Dhanraj Kalia is a first time home buyer with the usual inhibitions that a buyer may have - “I spent on the right amount of money on the right house, should I have continued on rent, is my neighbourhood good?” and so on… .

What are some of the things you should keep in mind?

Ignoring trends

Have you read the market right? Research is an important factor. It helps you keep abreast with how the property market has been faring and judge on the basis of facts and not speculations. Word-of-mouth recommendations, advice by seniors in your family, etc. may help you too but to make sure that your investment is not a risky one, formal indices such as PropIndex will help you remain in sync with the market.  

What do indices tell you?

Data positions you to better understand a locality. It explains the movement of values. If the capital values are low, it could be due to lack of infrastructure, absence of transport corridors or unavailability of basic amenities. On the other hand, if capital values are high the reasons would be just the opposite.

Confused between investment/end-use

Are you investing to earn or for end-use with your family? What should be your priorities in either case?

a)      Is the house close to market spaces, educational institutions, hangouts, your office, transport corridors?  Not only is this important for end-use, even potential tenants would be willing to pay higher rents if the location is good.

b)     Is the neighbourhood liveable or is it still early on in development? You may have to pay less for a house in an upcoming area but this would also mean you may have to give up on some conveniences. For example, infrastructure may just be evolving and in case you are planning on end-use, you may have to bank on your personal conveyance.

c)      Does the house have enough space to accommodate your (growing) family? If you are a bachelor today and investing for end-use, do be mindful of the fact that in future you may get married, have children and thus need for larger living spaces.

d)     Does the house suit your budget/lifestyle? If you are given to a particular kind of lifestyle be watchful of what you are buying into.

Although buying for yourself or buying for rental returns, keep in mind that in the long run your preferences may change and so may be that of the tenants. Look for what will work for you.

Choosing the wrong location

Ravi Taneja from Pune wonders whether Moshi, Undri or Wakad would be the right bet as an investment.  As a buyer you surely would be confused between the best and the next-best. Property market is a tricky area especially because speculation levels are way too high. 

With the help of personal research find out areas that suit your budget and preference. While it is good to learn from somebody else’s research, your lifestyle and choice may be very different from theirs.  Hence, you should rely on information gathered by your personal research.

Unaware of home loans, payment plans

All of 28, Aryan Vaidya was not aware of construction linked plans. Being a first time buyer, all he heard was about how developers were launching projects and announcing great discounts and how each projected their own project as the right buy.

Besides, there are legal checks that you should look into. Asha Nayar Basu, senior partner, S Jalan & Company, Solicitors & Advocates gives the following advice-

a)      Check the title deed of the property, this will tell you in whose name is the property. It should be in the name of the seller, the person selling you the property

b)     It is always better to get hold of the original papers as in most cases people show copies of the originals. Besides this will help you ascertain the sort of usage allowed from the property i.e. is it commercial, residential, mixed etc

c)       It is better to find out if the property is freehold, leasehold or a government accommodation

d)     It is wise to measure the land before registering the property in your name. Then there are property taxes which are paid to our government, hence ensure that all taxes have been paid and the seller has all receipts of the paid taxes.

e)      Ensure that the owner has the encumbrance certificate

f)       For ownership to pass validly, a registered sale will need to be executed. In the absence of that, you will not get valid title to the property

Underestimating costs initially

After purchasing a resale property in Mayur Vihar, Cicily James and family realised that they would need to go in for renovation that would cost up to Rs 6 lakh.

Always ensure you have a rough budget in mind which you have documented properly. Estimates tend to shoot up when you are actually buying.  For example, if you are eying a Rs 40 lakh property, the advertised price may not be all inclusive.  Stamp duty, circle rates, registration costs, TDS on property, brokerage, preferential location charges, insurance, pipeline transport of goods, site formation or demolition, club memberships, legal consultancy services, electricity exchange and related internal or external developments  are just a few other extra costs.

Dismissing rental as an option

Do you think spending money as rent is a waste? Many others think so too. However, in the Buy vs Rent debate, you should be mindful of what is at stake. Sometimes, renting may be profitable too.

Magicbricks has come up with a smart calculator that helps you take decision on whether you should buy or rent. 

Not checking out the neighbourhood

When Vikram and Sonali Bhatia moved into their new property, little did they know that very soon they would have to deal with a noisy neighbourhood, poor flat maintenance and incidents of constant thefts in the locality.

When it comes to property, it is neither a one day’s decision to invest nor a month’s salary nor a year’s stay that you consider. When you talk property, you mean years of hard earned savings, months of contemplation. 

If you are a first time buyer, know what kind of neighbourhood to expect. In the long run, neighbourhood would matter a lot in terms of capital appreciation. 

Sneha Sharon is a part of the Magicbricks- Content & Research team and is a market research enthusiast. Follow Sneha on Twitter at https://twitter.com/snehasharon  

You can reach us at editor@magicbricks.com for further queries, feedback and comment.

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