In a country which is rapidly urbanizing and has a severe shortage of housing, owning a piece of real estate is often seen as a prized possession and as means to secure the livelihood of one’s family. Even among-st the more privileged classes, real estate ownership holds prominence as either a reflection of social status or as a key investment tool to park excess capital.
However, much in contrast to its importance, the decision to make a real estate purchase is often a consuming process for most individual investors. The problem is compounded in India because of lack of adequate regulation and unavailability of credible information. This has caused many buyers to get stuck in unfortunate situations like delays in project execution, questionable title records or mismatch in promised v/s actual property specifications. Moreover, the lack of adequate financial education means a majority are not aware of optimal financing and taxation benefits.
This is where a professional advisor or advisory firm can add value by assisting clients in making informed decisions. It is however important for a buyer to note the difference between the usual agents who are focused on making commissions and a professional who aims to educate clients by sharing transparent insights. An advisor ensures a hassle free property purchase by providing a differentiated service experience across a number of checkpoints.
1) Property Identification: the hallmark of a professional real estate advisory is to identify the right properties based on an personalized assessment of your requirements and purchase capacity. It may be noted, that often the best properties are usually sold out or difficult to spot. Here, a knowledgeable and mature advisor can help you navigate the situation by sharing professional knowledge and counseling you in making the relevant trade-offs between a good location, project specifications and budgetary discipline. Additionally a professional can also guide a buyer about the changing lifestyle parameters and other real estate trends and how it may affect their quality of life.
2) Due Diligence: the biggest pain point for property buyers in recent times has been getting stuck with the wrong projects resulting in delayed possession. Whatever may be the cause, any hold-ups in project completion imposes significant financial and emotional costs for property buyers.
These risks can however be mitigated by taking the services of a real estate advisor. A key trait of professional advisors is that they conduct a detailed due diligence on a number of factors for the properties that they are promoting. This ensures clear titles and encumbrance free ownership after purchase. In case of primary properties, a professional advisor’s diligence would include checking for all relevant approvals, knowledge of developers’ execution track record and reasonably good understanding of a builder’s financial position.
A thorough review of these factors not only improves the likelihood of timely possession but also increases the quality of your investment.
3) Pricing: with so much information asymmetry in the market, it is difficult for a buyer to know if he is paying the correct price for his purchase. In all realty markets- primary or resale, there is always a difference between the quoted price and the going price. This problem is augmented by the presence of unprofessional operators who make false promises and incorrect pricing quotations for personal benefit. In such a market structure, a professional can assist buyers to uncover the noise and transact at fair market prices.
A trusted advisor can thus help you save your hard-earned money by lowering upfront costs which may then be utilized for making the relevant add-ons to your property or parked in an alternative investment avenue.
4) Documentation Support: one of the challenges that investors face in executing real estate transactions is the cumbersome documentation. Given that establishing a clear legal title is the ultimate goal of any realty transaction, it is essential to ensure that this process is executed carefully. This is another area where an advisor can help buyers by bringing on board their experience and knowledge of document execution, thereby ensuring a comfortable purchase experience.
5) Financing Solutions: one of the most important decisions for any property buyer is to find optimum financing strategy. There are a number of parameters which need to be evaluated here like deciding on the right mix of self contribution v/s loan, engaging the best financial institutions, and negotiating for the most favourable terms on interest rates, processing fees, prepayment charges etc.
Since the size of real estate transactions is relatively large, spotting the right financing formula is an important determinant of investment success. Here again a property buyer can benefit by taking the services of a professional advisory which can help you understand banking contracts and assist in arranging low cost financing.
6) Taxation: understanding taxation is fundamental to successful investing. This is even more pronounced in case of real estate because of the multitude of taxes involved. There are a number of taxes and duties which are levied on buyers and seller during realty transactions at both central and state level. Additionally, real estate participants need to be aware of taxes on capital gains, income from house property as well as deductions and rebates allowed on property loans.
Here again an experienced professional can add significant value by helping you understand taxation related to real estate purchase and guiding you on strategies for obtaining maximum tax efficiency.
Conclusion
There are a number of factors which determine success in real estate and it may be difficult for an average buyer to understand and keep track of all variables. Thus, in the current structure of Indian Real Estate which is characterized by information asymmetry and trust deficit, it is beneficial to take the services of a trusted real estate advisory which can help you avoid the pitfalls and handhold you during the execution process and beyond.