Property Price: Is my dream property priced too High? A Customer walks into my office and greets me humbly. I look up surprised, to find a typical upper-middle-class person, maybe in his 40s. I respond with a warm greeting, ask him to take a seat, and make him comfortable.
I ask him: “Please tell me, sir, what I can do?”
“I am Looking for a house,” he said.
“Flat or independent?” I enquire. Quickly I add another question “And what’s the budget?”
He got upset with my question about the budget, and goes on to add “show me what all you have”.
I give him all details of our current projects, features, locations, and price.
He interrupts with his questions and also downplays the features with comparisons to competitors and exclaims :
Your price is too high! For that location.
With my 25+ years of experience, I am sure about one thing. Any business house will be careful in pricing its products and services. They want to be competitive. They want to complete the project sooner. They want to build their brand, launch their next project, and so on.
Then how come the price is very high?
It’s one’s difficulty to arrange the required funds to buy the product (House / flat in this case), which makes him exclaim – “Oh so high a price!”
I deal with this mismatch every day!
Customers looking for “the Best product” for the least price. It is wise to have that attitude, but many times searching the best property for our perceived price either ends up in the wrong deal or we lose all prevailing opportunities and keep on searching for years.
Every time we set a price, the market is much higher. By the time we realize this is the price to pay, our budget can not be stretched to that level at all. Hence prudent decision is to tune our attitude to prevalent condition, either enhance budget or prune the desire! So What is the practical solution for this?
Everyone wishes to have the best house in the best locality! Nobody is an exception, the definition may differ. But the means to achieve this end are one’s ability to organize resources! Prime being finance.
Calculate critically how much money is available with you right now. It could liquid cash, FDs, guaranteed receivables from reliable sources. Let us call it Money In Hand – MiH.
What is your take-home salary/income, and how much you can spare for housing loan EMI? Be practical and realistic in allocating for EMI as this is long term commitment. Though you have an advantage – your income may be incremental and EMI may remain the same.
Do not calculate loans you can raise on your insurance, gold, shares n stocks or personal loans at this stage, because you may require this at a later stage for emergencies and contingencies.
Arrive at a figure i.e. MiH. This should be 25% of the property cost! Only then should you be planning to go to a builder or developer. If you are ready to proceed to approach a builder-developer, your EMI figure should fetch in balance 75% from a bank loan.
While calculating costs, keep in mind different variants –
For constructed properties:
All types of properties have GST and Registration costs. Under present circumstances, urban area people need a minimum Rs 5 lakhs in hand and an EMI provision of Rs 10,000/=per month to buy a 2 Bedroom, Hall, Kitchen flat. The contingency provision is 2 – 3 lakhs. This is for a small flat at the extensions / outskirts of city.
If loan eligibility is lesser than 75% property cost, and if you can’t organize more money from your sources, better to find an open plot on the outskirts, to build a house in the future.
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