With real estate in the spotlight due to the market scenario and political focus, public often feels confused about the industry. Unable to sift myths from facts, people often fall prey to several misconceptions. 99acres tries demystifying the baffling concepts of the sector.
Real estate is often looked upon with suspicion and distrust. Doubts and half-baked truths have propagated some misconceptions about this sector in the minds of the common public. 99acres takes a look at the top seven misconceptions about the real estate industry.
Myth: Developers delay projects deliberately
Fact: One of the most common complaints people have with the real estate industry is about delayed projects. More often than not distressed buyers go about saying that developers deliberately delay projects to make higher profits. Rohit Gera, MD, Gera Developments says, “Developers never delay projects out of choice. A professional developer will do everything to ensure timely completion and delivery of projects. Delayed projects mean added costs for materials, crew and other overhead expenses which is not good for developers too.”
The process of real estate development in India is particularly affected by the efficiency of urban local and civic bodies, which regulate controls on project development through approvals. Development projects in Indian cities undergo a lengthy approval process, usually taking 24-36 months prior to construction and 6 months to a year post construction. Some of the important approvals required include land approval, environmental clearance, construction plan sanction and the occupancy certificate at last, among others.
Myth: Your buying decision should be guided by the market condition
Fact: Though the statement is partially correct, a lot of first-time investors don't take into account their individual affordability before making the buying decision. People should enter the market when they can afford it. If you get a home loan early on in life, you can own your home sooner than those who keep on waiting. However, the decision has to be a well-informed one. You will have to define the goal behind buying a property - is it for end use or investment? Once you have ascertained this, assess how much monthly installment can you afford. For this, it is recommended that you take the help of a financial planner. Taking assistance from one can help you assess your current financial health by examining your current income, existing assets, liabilities like other loans, insurance, investments, working years left and home buying plans.
Myth: Investing in Real Estate is extremely risky
Fact: Real estate market is often considered an extremely risky market. The present condition of the market with delayed projects, stagnant demand and rising prices does not help to condone this myth either. But the fact remains that any investment involves some kind of risk. However, compared to volatile investment avenues such as the stock market, real estate market is extremely stable. Real estate investments achieve their potential when they are held for a long time. There is a greater chance of incurring losses in short-term realty investments. “The smart thing to do is take calculated risks and hold on to investments for a longer period of time,” adds Rohit Gera. A calculated decision involves buying a property in a location that is expected to witness numerous infra overhauls and thus, one which is likely to yield returns on your investment. Apart from this, factors like type of property - apartment, house, villa or plot; locality - suburban or in city center, budget category - affordable, mid-segment, or luxury housing and market trends like sales volume, buyer base and recent trends in the real estate sector also need to be considered.
Myth: Real Estate will always reap you profits
Fact: The other side of the coin is that some people believe that property values always increase and hence, real estate investments should give huge profits all the time. While property does not lose its value in the long term, unlimited profit is not a realistic outlook. Price appreciation is not an unending process. Once the market is saturated, property prices will stop rising. Prices and profits in real estate fluctuate too and there have been instances where prices have fallen due to low demand.
Myth: Big names always deliver the best
Fact: According to Dinesh Jain, MD, Exotica Housing, this has emerged as the biggest misconception in the real estate industry as big players have failed to fulfill their commitments of quality and timely delivery. On the other hand, there are many mid and small scale developers who are committed to deliver the best in terms of quality and amenities, and keep a regular check on construction of their projects to ensure adherence to proposed delivery timelines.
Myth: Developers want prices to keep on rising
Fact: Continuously rising prices are not beneficial to developer community either. “Price rise is appreciated only as long as they are in conformity with inflation,” says Rohit Gera. Professional developers committed to quality projects do not approve of unrealistic and speculative price hikes. He explains that if a developer sells a project at a very high rate, acquiring land for the next project will become expensive for him too. He asserts that only the new entrants in the real estate market and fly-by-night operators wanting to earn quick profits who look forward to extreme price rise and might even contribute to it.
Myth: The action is only in metro cities
Fact: According to Deep Kantawala, Group Chief Financial Officer, ICS Group, metro cities are getting saturated and becoming ill-affordable for the working class population. The middle-income group (MIG) is the largest driver of residential demand and consequently the action is shifting to extended suburbs and tier II and III markets such as Ahmedabad, Indore, Ludhiana, Coimbatore and Lucknow. With the stagnant demand and rocketing prices in metropolitan markets, smaller cities have emerged as better investment options in the real estate sector.