Busted: 12 Biggest Home Buying Myths in India

Buying a home is, most often, the single biggest purchase you make in your life. There’s immense pressure to get it right. Even a small careless or uninformed decision could end up costing you heavily in the long run.

Here, in today’s guide, you can find the list of top 12 home buying myths in India that you need to stay wary of when searching for your dream property.

Myth 1: RERA is here so, home buyers can opt for any project without much research

The Real Estate Regulation Act (RERA) came into force in 2016, offering huge relief to home buyers. RERA was hailed as the saviour of homebuyers, as it regulated real estate sales and protected their rights.

With the implementation of RERA, several homebuyers falsely assume that all properties are protected under it. However, RERA applies only to projects that are larger than 500 square meters, and with over eight or more housing units. Additionally, to be RERA compliant, a builder has to be registered with the RERA board.

What We Recommend:

Before taking the plunge, make sure to check if your builder is registered with the state’s RERA board, to enjoy the protection offered by the RERA.

Myth 2: Renting is more affordable compared to buying a Home

This is one of the biggest myths out there. You would probably have come across an article or two that states that renting a home is a far better choice than buying it. But, the truth is far from that. Let’s break down the numbers.

Let’s assume that you are buying a house costing one crore in Gurgaon and you take a house loan for 80 lakhs. The interest rate is fixed at 9.4%. The EMI you will have to pay for a house loan of 30 years is around Rs. 67,000.

If you were to rent out this property instead of buying it, then your average rent is likely to range from Rs. 30,000 to Rs. 40,000 depending on your landlord. That’s without factoring the increasing rental prices year-on-year.

This infographic from Economic Times shows that rental prices are increasing in all cities across the country, and sometimes the increase in rental prices can go as high as 26.2%. Unlike rental prices, the EMI remains constant for the entire tenure of the loan. So, while you may feel burdened initially, with annual salary hikes, the EMI burden will be significantly reduced after a few years.

Also, your property is likely to appreciate over the years. Even if the rate of appreciation is pegged at a moderate 9% every year, your home will be worth over 15 crores at the end of your home loan tenure.

Finally, remember that when you purchase a home, at the end of the tenure, you are the owner of a property that’s yours for life. This is an immense benefit, especially in your retirement, when there are no paycheques to pay the rent.

What We Recommend:

Buying a home is a smarter choice from all angles – tax exemptions, property price appreciation, and the incredible freedom of owning a home – all make purchasing a better choice than renting.

Myth 3: Investing in Tier-I cities offers higher/guaranteed returns

Earlier homebuyers invested in properties in metros because of assured rental incomes and higher capital appreciation. Real-estate experts today believe that emerging Tier-II and Tier-III cities offer better options compared to metros.

Sky-high land price, overpopulation and no space for expansion and development, has made capital price growth in metros stagnant over the last few years. Contrastingly, Tier-II and Tier-III cities have seen huge growth due to innovative projects like the Smart City Mission, PMAY, etc.

As per data provided by Anarock Research, by 2030, it’s predicted that India will have 104 Tier-II cities, 334 Tier-III and Tier-IV cities, with only 155 Tier-I cities. This research estimates that major infrastructure growth will happen in India’s small towns in the next decade.

What We Recommend:

If you are looking to invest in a property that offers huge capital appreciation, then look for emerging micro-markets beyond the metros.

Myth 4: The builder doesn’t matter while choosing Homes

Choosing a builder who is not customer centric, can lead to a lot of frustration for home buyers.

Such builders, to cut costs, often fit homes with low-quality fittings. So, it’s crucial that you choose a trusted builder, who has a solid reputation for delivering high-quality projects within the promised timelines.

What We Recommend:

Connect with other home buyers of the same builder, to get a clear and accurate picture of what to expect from a builder.

Myth 5: If a project has glamorous ads, then it’s a Reliable and Trusted Project

It’s quite common to come across glitzy full front-page ads of upcoming projects. You have to remember the age-old saying, “All that glitters is not gold.” Don’t be led astray by the colourful newspaper ads or celebrity-endorsed commercials.

Instead, make sure to do your research. And, never skip on-site visits to know what the actual status of a project is. During site visits, don’t just stop with the showcase flat. Evaluate and inspect all areas of the project, including the common floors, amenities offered, etc. Its prudent to visit the past projects of the builder and talk to some of the residents to get a better understanding of the builder’s credibility.

What We Recommend:

Connect with other buyers to know the true condition of a project. Check if they are satisfied with the quality of fittings, amenities provided, and the overall approach of the builder. If possible, opt for a trial stay to get a clear idea of the project.

Myth 6: Under Construction Homes are cheaper than Ready-to-Move-In Projects

While under construction projects may appear cheaper at the outset, ready-to-move-in properties offer you a better value for your money for end-users of the property.

Under construction projects are still not completely safe. There is an element of risk attached to such projects. One would never know how a project may turn out. The builder may promise a list of amenities now only to offer just one or two, later on, leaving you feeling disappointed.

With ready-to-move-in properties, what you see is what you get. Additionally, ready-to-move-in properties don’t attract any GST, making them affordable.

What We Recommend:

Choose ready-to-move-in projects for instant gratification and peace of mind; knowing what you see is what you get. If you are choosing a particular under construction project, then choose ones offered by trusted builders, who have an impeccable track record.

Myth 7: You Need a Big down-payment to buy a House

Depending on the price of your property you can avail a home loan for 80-90% of the spend. While paying around 10-20% as down-payment for your home is considered ideal, it’s not realistically possible at all times. Gone are the times when you had to put down a large sum of money as down-payment to purchase your dream home.

Today, the banking industry has become far more flexible, thanks to the Fintech revolution and several initiatives by the government. While you still need a down-payment to pay for your home, it isn’t the end of your property dreams if you don’t have sufficient capital for it.

You can submit another property you own – a plot of land, or another home – as collateral to raise the required down-payment funds. Alternatively, you can apply and avail a personal loan to raise the amount for the down-payment. But this way, you will be making payments to clear off both debts – your home loan as well as the personal loan, during repayment.

Another alternative to raising fund for down payment include using your credit card.. You can convert the amount spent on the credit card into an EMI. Also, you can borrow funds against certain life insurance policies that you hold. This option often comes with high interest rates and a short repayment period.

If your finances allow you, and you have sufficient savings, then paying the down-payment out of pocket, makes the most sense. If not, you can consider a personal loan to pay for this sum, or negotiate with your lender to reduce the down-payment sum.

Myth 8: Every Property offers the same amenities like piped gas line, garbage chutes, etc.

At first glance, it may seem like that all properties offer the same amenities like 24-hours back-up generator/inverter, lifts, common lighting, piped gas line, garbage chutes, swimming pool, etc. However, on closer inspection, you can find that some properties excel others when it comes to the quality and variety of amenities offered.

Several new and upcoming properties offer the most value for your hard-earned money. These properties offer you a wide range of extra amenities that help you enjoy your home like never before.

For instance, senior-friendly homes have several features that make the place comfortable, convenient and safe for seniors like handrails in bathrooms, wide, amply illuminated passageways, hygienic and nutritious meals served for residents in common dining rooms, entertainment and hobby classes specially catering to seniors, and plenty more.

Some popular kids-centric homes offer child-friendly amenities like the Learning hub. These centres often offer access to thousands of books and other learning activities under the supervision of child development experts.

What We Recommend:

When buying a house, make sure that you compare the amenities offered and other features provided by the builder when evaluating potential projects.

Myth 9: Subvention Schemes help cut the Overall Cost

There’s no such thing as a free lunch. To tempt buyers to invest in under construction projects, property developers come up with innovative schemes. One such strategy is the subvention scheme. Here, the buyer doesn’t have to pay EMI till he/she takes possession of the flat.

While this may seem like a great way to cut down costs, there’s more to it, than what you see. Subvention schemes tie you to the project for a longer time. There is NO reduction in the overall EMI you pay to your lender. If you are not careful, the overall amount you pay the lender may be higher.

What We Recommend:

Avoid such complicated strategies and stick to regular home loan pricing. Better still, instead of investing in under construction projects, opt for ready-to-move-in properties, so your EMI starts as soon as you take possession.

Myth 10: Buying Property with Offers is a Smart Decision

All that glitters is not gold. Today, several builders tempt buyers with attractive offers like getting a free hatchback when you purchase a luxury home, free sovereign gold coins for every property you book and so on. Most buyers believe that these offers and discounts are good value, as they are getting something over and beyond their money’s worth.

However, what buyers aren’t aware of is that the builder bundles the cost of the offer or discount along with the total cost of purchase. Look carefully, as some builders offer you attractive offers but later make you pay extra for certain amenities and other facilities.

What We Recommend:

Make sure to do extra research when you are considering a property with an attractive offer from the builder. Check whether you will have to pay extra for other amenities, down the line. Compare similar properties to see if the builder has included the cost of the offer indirectly in the home. If yes, you can give this property a skip or ask your builder to purchase it without the offer.

However, if you are getting an offer where the cost of difference is evident and is worth it, you can choose the property along with the offer.

Myth 11: Buy the Biggest Property you can afford

This is basic human nature – to buy as much as we can afford. However, this may not be the best choice. In Indian society, a big house is seen as a status symbol, something to show off to others that you have attained success.

But, what’s not discussed or debated is that a big house has several drawbacks like – more maintenance, higher initial costs, bigger loan burden, more housework (which requires hiring extra help), difficulties running the home as you grow older, etc.

So always choose a property size based on your needs. Keep in mind the cost of maintaining a bigger house viz-a-viz a smaller one.

What We Recommend:

Don’t let other external factors sway the biggest purchase of your life. Instead, consult with your family members and separate your needs from wants. Consider your lifestyle (present and future) and then choose the right property that meets your specific needs.

Myth 12: Real-estate Investments are Risky

This is the biggest of all real estate investments. All investments – be it stocks, mutual funds, gold are risky. However, when compared to other investments, real estate investments are less risky. This is simply because of the economics of supply and demand.

Developed land is a scarce commodity and with the rising population of India, its demand is also ever-increasing. Since investment in property is backed by a tangible commodity that has an ever-increasing demand, this asset is known to have lesser volatility when compared with other investments like equities, bonds, and gold.

Furthermore, when you invest in real estate, you get the sense of security, that you have a place to live for life, irrespective of fluctuating market conditions.

What We Recommend:

To reduce the inherent risks of real estate, be smart, and invest in trusted and reliable projects offered by reputed builders.

Wrapping Up

The good news here is that – home buying is simpler than ever before. By avoiding the myths listed here, you can purchase your dream property at the right price, without any regrets. Cheers on finding your dream home!

Also Read: THE COMPLETE GUIDE FOR FIRST-TIME HOME BUYERS IN INDIA – AN EXTENSIVE CHECKLIST