Friday, February 13, 2009

Do you fear your builder?

Santosh Kumar is afraid to talk to his builder.

He fears that builder will get angry with him if he asks the builder to reconsider the booking rate of his flat.

Santosh Kumar prefers to cancel his booking and loose around 2 lakh rupees than "annoying builder" by asking for reducing the property price.

Or he may take a risk of paying installments for 2 more years, get the possession of his flat, sell it off and sit down to calculate how much he has lost because of his wrong decision to book a flat at Ambegaon!

"You are not going to lose because of the wrong decision. You are going to lose because not talking to your builder. So talk!" I told Santosh Kumar.

"No. I do not want to annoy the builder till the possession." said Santosh Kumar.

We all are afraid of builders!

I admire Rohan Builders' "Price Protection Scheme" for this particular reason. They have taken care of this "fear factor".

You can criticize it as a marketing gimmick. You can prove how property rates of Rohan Mithila and Rohan Leher are still on the higher side.

But you have to give credit to Rohan Builders for taking the step which property buyer would not have dared to take.

Right? We all are afraid of builders!

Real Estate is all about imagination, expectation and speculation!

I tried to remind Santosh Kumar that when he booked his flat at the launching stage, he believed in the builder's imagination. He paid for that imaginary picture because he felt it's worth would be that much after the construction is complete.

Santosh Kumar expected that his builder, trusted by thousands of families for more than a decade, will develop the project as per the picture he had painted and full fill his dream.

After the project is complete the price of his flat will increase more than the imaginative value Santosh Kumar has paid for. And over the years, the value of his flat will keep on increasing because appreciation is the fundamental feature of the property.

The construction of Santosh Kumar's project is going on exactly as per schedule and as per plan. At this point of time, nothing has changed, except one change. Santosh Kumar has not only second thoughts and doubts but he has completely stopped believing in the imaginary picture he had paid for!

Truth is, though the builders try to relate the property rate to the location (cost of land), specification, amenities and the construction quality while convincing you to believe in their imagination and pay the price as per their expectations, builders know that property rate is not just land cost + construction cost + profit. There is one more factor. Which you add to the equation. Your perceived value!

For a builder property rate = land cost + construction cost + profit + perceived value!

When there is a boom in the market property buyers add more perceived value to the equation and property rates keep on increasing. When the property buyer realizes that property rate is increasing, he perceives more value and takes fast action - 1st phase booked on the day of launch - which fuels the boom in the market.

Point is builders are well aware about your contribution and it's effect on their profits. When there is a change in your perceived value, they treat is as "correction" and builders are ready to deal with it. Some builders, like Rohan Builders, take initiative. Some reduce property rate by 100 - 200 rupees and see how you respond. But every builder is ready to talk!

What is your take on the cancellation and correction?

Builders know that it is better to avoid cancellations in this market because getting new bookings who will be ready to pay as much as the old ones is difficult. Delay in the construction means loss in the profit. But builders face one problem!

Builders not only in Pune but all over the country, do not know how to talk! When it comes to talking they appoint someone like an advocate, smart land broker or a dynamic salesperson. For a fact in Pune, except few big names, builders do not have trained and experienced staff to talk to the intelligent and educated property buyers like you!

So, you have to remove the fear out of your mind and take an initiative to talk about price reduction. But how to remove the fear of your builder? By doing exactly what you fear most. By starting the conversation!

What is your take on the reducing the property rate by talking to your builder? Can you do it? Or will you prefer to cancel your booking and blame the bloody greedy builder?

Yesterday, property buyers were not booking because builders were not reducing the price and builders were avoiding reducing the property rates because they were not sure about the booking.

Today, this has turned into builders are stalling projects because there are no buyers. Buyers are not booking because they fear about the completion of project.

This is not only happening in real estate but in all sectors of the economy. To come out of this deflation or the recession as early as we can, don't you think that RBI and finance minister can only make changes in the policy but the action has to be taken by us, by the buyers and the manufactures? Please, share your views in the comments. (Comments Policy)

Fear not. No need to be 'Mr. Anonymous.' Let the world know "SezWho"!

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Related Stories:

1) Buy now, but be wary - some safety guidelines

2) You can demand to reduce your property rate even after signing the agreement and paying loan installments!

3) Convince the builder to waive off the floor rise, get free parking & amenities - Ramesh Jogani, MD, Indiareit Fund Advisors of Blue Ridge Hinjewadi

2 comments:

  1. Here is what I fee. Speak to the builder and see if he will reconsider a price break. Mostly it will not work with builders who have some ethics as they will not go behind other customers' back to give you a break and it may not be possible for them to give a similar break to all.
    Secondly would you ask for a refund or readjustment in price of a car that got cheaper 2 months after you bought it. I am just playing a devil's advocate here.
    Do the math, what is your total loss in cancelling the flat. Stamp, Reg, Etc. Most builders may not be in position to give you back the money even 4 lacs if you cancel soe they have already put your money in the work they started.
    So it is a catch 22 situation.

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  2. In case of cars, the amount is paid in full, and you start using the car from day 1. If the property you buy is ready possession, then there is no way you can get further discount, as bank has already paid the builder in full. However, for under construction properties, the usage is yet to start. If you can get similar accomodation at cheaper rate at around the same time as your existing one, there is no reason not to sitdown with the builder and negotiate. Afterall, 1L Rs saved is around 6 months work saved :)

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