Today’s investors are falling in the trap of lucrative offers by the builders, especially through new launches at under-developed locations on futuristic pricing. Investors feel comfortable while extending their budget due to a comfortable payment plan. I call that EMIs, because it blocks your future money, it doesn’t have a direct interest component as such but the prices are already inflated. It is calculated optimistically keeping the possession year in mind. If it doesn’t meet the best case market growth, the investor will have to bear the losses. We have seen this in most of the cases where the individual investors didn’t have scope for good returns. In the past few years, the market has experienced a bullish trend, enabling investors to profit. However, during periods of market stagnation, individuals will incur losses.I have already written about bull run real estate in a recent blog.
Another major point I would like to highlight here is the redevelopment rights. These days builders are not transferring re-development rights to RWA. What is the problem associated with it?
While it’s not the current subject, let me provide a brief explanation. When the property is demolished and reconstructed once it is declared unsafe, residents will not have the option for choosing the best developer who offers a bigger carpet area and better compensation.
The common argument against it is “Hardly few companies will be surviving for 70 years(until the age of the property). So it will be automatically transferred to RWA”.
No. Even if any real estate company files bankruptcy, these rights will be considered as Assets and will be sold to another company to pay off their debts. I will talk about it in some other blog. Let’s focus on CGHS apartments today.
Living close to the city center gives us an upper hand to facilitate better schooling, connectivity and medical requirements. In my opinion everyone should have a house in the city center before they look to invest in real estate at an under -developed location in a fresh launch.
The problem with the middle class it, they don’t get proper options under their budget. It’s a well known fact that Builder floors start depreciating after 5 years and there are no re-development benefits offered due to FAR limitations. The last nail in the coffin is the involvement of B part in such transactions.
CGHS apartments offer better affordability, redevelopment benefits at higher rental yield and lower lump sum investments. The only drawback is they are old, may be 10-15 years or even higher and offer conventional design.
If the family is a priority, better medical facilities, good schools and connectivity then a middle class family should look forward to investing in such apartments because it’s the only value for money option available, after half a decade or so, these will be out of budget and after re-development, affording a rental apartment will be financially challenging.
Now, what are the points which you should look for in a CGHS Society. Let’s talk about it:
Housing Loans :
Any nationalized bank should offer a housing loan of around 20 years for the property/society you have chosen. This will ensure that the bank evaluates the structure to last at least for 15 years. For unsafe structures, they offer loans for shorter duration or in some cases they don’t offer a loan at all.
The Plants, Boards and Common Area :
Look for the condition of plants in that society, are they dusty? If yes, RWA is not maintaining the society. The common area, barricading, boards, road signs must be painted and well maintained. We can extrapolate it for heavier maintenance requirements, like paints, plasters etc. If minor things are getting addressed then we can conclude that they will be putting efforts and finances to overcome the more significant challenges. If the society is recently painted, cool go for it.
Bigger the Society Better:
There are multiple CGHS apartments which build on smaller land parcels; you can straight forward avoid those. There would be less space for car parking, open area, garden and children’s play area. On top of that there would be re-development challenges due to less availability of FAR. The smallest land parcel which should be considered is 5 acers.
Lift and DG :
If the heavy equipment like lifts or DG has not been upgraded as per the current standards, it’s fine. If the society doesn’t have DG, it’s fine. A good structure and open area which you should look forward to.
The RWA :
The RWA must be active in maintaining the society, dusting and cleaning of common areas including roads. This you can conclude easily in 2-3 visits.
Connectivity and Locality:
As you are already compromising with Age and conventional design of the society, the connectivity and locality must be solid. Schools, Hospitals, Playgrounds, Railway Station, Metro Station, City Centre, Malls etc must be in close proximity along with a lot of greenery. If the temple is within the society, it’s icing on the cake.
Carpet Area and Layouts :
Bigger the carpet area, the better. The bigger carpet will offer you the luxurious unit after re-development. As these societies are conventionally designed you might need to compromise with the layouts like smaller balconies, not so luxurious entry, facing etc. These layouts don’t follow the maximum usable area approach.
Condition of the Flat:
Raw flat should be the first choice as you can refresh it according to your preference. This will be offered to you at a lower price. If the flat is vacant better, the second choice should be a rented flat and third if the seller is upgrading the house. If it is not painted better, if yes, double or triple check for the seepage on walls specially washroom, kitchen sharing walls. It’s a red flag. Run away.
The Broker :
Choose a broker who is operating heavily in society, be it rental or resale. Such brokers will be able to give you better unit options and good rates. Choosing a good broker always helps.
Renting Before Purchase:
It’s always a good idea to try it before opting. If you have such leverage, use it. Otherwise following the instructions above, make it as a checklist for your next housing purchase.
I have a list of such properties across the indian cities be it Delhi NCR, Mumbai, Bangalore or Pune etc. which I have personally visited to evaluate but mentioning it here might inflate their values. Considering the points mentioned above, you’ll be equipped to make a more informed decision when purchasing a house in any city in India. Its a formula, just put your values.
Best of luck for your next home purchase. Please put your thoughts in comments.