Tuesday, March 27, 2012

Thinking of owning a home in India ? You may consider these too !

There are basically two kinds of people who consider owning a residential property in India. The first types want to have a house of their own to live in happily ever after. The second types are those who consider houses as real estate assets that can be acquired and accumulated as means of wealth whose value rises with time. The first types would not dispose their houses come whatever may. On the other hand, the latter types might dispose off their houses at the most opportunistic moment of time. The former have sentiments attached to the house while the latter may not have such a soft thought.

The first types might be willing to spend a good fortune in building or furnishing their dream homes. For them home means many things such as a symbol of status, power, sentiment, pride, comfort, luxury, security, peace, showpiece, etc, etc., in addition to being a mere shelter for a living.

Whatever be the case, owning a magnificent home, unique in many ways is the dream of any human being. Whenever man gets enough money he looks towards making a house. For most people, whenever their incomes exceed the levels that are required for sustaining their lives with regard to food and clothing spending on home starts. The only thing that may precede this activity would be perhaps spending on jewelry.

In my home state, Kerala, a good number of people for the last two three generations have got opportunities to earn a few times more by working in foreign countries than their local cousins who toil similarly at their motherland. This excess incomes have translated into palatial homes in the nook and corner of Kerala for the last few decades. Those who could afford it made such huge brick and concrete buildings of all possible shapes and looks in just about fifty years time that consumed all the river sand this coastal state had accumulated ever since it came into being as a geographical entity! House building is such a craze with the Keralites now that all the natural raw materials for making a house such as sand, brick and timber are expensive materials for which the Malayalee would perhaps die or kill !

Taking a cue from the Malayalees and seeing their affluence as reflected in their palatial houses built from monies earned from hostile countries and regions abroad, the rest of India too got into action. Others from Bihar, Bengal, Punjab and Gujarat too began to venture out of India in search of incomes that their home country administrators would not allow them to make at home.

India is the only country in the world which has two types of citizens. Those toiling at home with lower incomes and higher taxes and those doing the same outside with higher incomes and lower taxes with the latter spending their excess in building homes as show pieces to show off their affluence to their less privileged country cousins.

Of late some of the foreign employers of Indians have realised this and began to set up their shops in Indian metros where they could employ them spending lesser than their own countries which have stringent laws in favour of the workforce than India. This has resulted in a spurt of demand for more comfortable shelters of international standards in the Indian metros.

Real estate business that used to be a phenomena of the Mumbai metro culture is now a booming industry all over India. The biggest gainer from this industry is the Indian governments and the colonisers (official name given to the private real estate business men)

Whatever be the case, there are more and more Indians who have excess incomes to divert to their dream homes. Some have more than enough to fulfil their dreams, while a greater number are with a comfortable earning more than that they need for their life routines.

Now the big question for the latter group is whether to venture into owning a residential property by committing their future excess income potentials to bank loan equitable monthly instalments (EMI) or not.

This blog is for this group of people.

My advice for them would be this.

If you have a house any where else such as a likely share from your parents and your income excess is just enough to meet you EMIs, I would advice you not to go for a house. It would be better for you to live comfortably in a rented accommodation and save you excess incomes to accumulate in other safe manner. Never ever make an EMI commitment which is just matching your excess income or higher even marginally.

If your excess income cannot afford a home in your place of work, for example in a metro city near to your work place,  but can comfortably afford one located in some other location, you may think of owning that as an asset. In this case, you should be prepared to dispose it when you are in need of cash or when you find a reasonable appreciation of your savings.

Once you have decided to buy a property, check the reliability of the seller and the details of the property thoroughly. In India, property related litigation and troubles are many. Just because the property is cleared by some authority does not mean that it is a safe investment. In India there are too many authorities who could cut each other at your costs !

Never buy a property which you cannot look after. You should establish your credentials in the locality where you are proposing to own the property and do all such things to physically take possession of it by making your ownership known to a few of your neighbours.

Ensure that all the property documents are properly made  with regard to the identities of the seller and the buyer. Ensure also that your property is well defined in the documents. Checking the details of the property with some legal practitioner experienced in this field is a wise idea.

If you are thinking of buying a new flat or apartment in a multi storied apartment building from a builder, you should know that there are certain things for which you are responsible. There are many things which are common facilities which need to be managed and maintained well for all the years later if the property need to be a good dwelling place. This includes the regular cleaning, garbage collection, lift operation and maintenance, management of security, water supply system operation and maintenance, parking space management, etc. As per the prevailing Indian laws as applicable in different states, these are responsibilities that are to be handled by the association of the owners themselves. These are not the responsibility of the builder of the real estate developer.

In India many buyers of apartments are pretty unaware of this fact. They are made to believe that the real estate company which sold the flat would take care of this always. The real estate company would not tell the buyers about this and they keep telling and advertising these in such a clever manner that the buyer would know about these only by hard experience later.

It is a wise idea to know the details of the other buyers of flats in the same apartment building. If the majority of the owners have just bought it as an investment, the place many not be a good one for a comfortable living, unless there is a responsible society which is in place to manage it.

The apartment owners societies are a type of local government and are formed by democratic principles. For the same reason, there is all possibility of vested interests or incompetent persons managing the affairs from time to time later making things not so palatable to the individual owners or residents.

But awareness of these things by the owners and their tenants would make things much easier for all.

The multi storey apartment management is not an easy thing. There should be a dedicated team of employees and a responsible management who knows fundamentals of good management. If not there will be hardships for the residents.

Future value of an apartment in a multi storied apartment building depends much on the way it is managed and maintained in the future years after the builder has sold the individual units. Much of this depends on the mutual understanding among the owners who form the management association of the apartment building. Mutual distrust and infighting between the owners can cause great damage to the individual owners. It is in the interest of the owners to encourage the few among them who volunteer to take the responsibility of forming their association. If no one comes forward they should be prepared to take up this responsibility themselves. If you are not willing to do this, you should not consider buying a flat.

If you are thinking of making a house of your own in a piece of land, then you should check the details of the land. All lands in India are not suitable for residential purposes. It is better that you check all these matters carefully.

My purpose of writing this blog is not to give all the details concerning property matters here. It is only to remind those thinking of owning a residential property regarding some of the important aspects that they should keep in mind before actually venturing in to it.

Buy or build homes that are of a size that you actually need. Huge sized homes are a liability even for those who have surplus incomes and wealth.

But if those of this kind want to indulge in showing off their riches, let them do it. After all what would such people do with the accumulation of money with them. If they spend those huge sums of money in making palatial buildings that would benefit the architects, artisans, contractors and the governments besides beings eyecatching delights to the commons. In one or two generations time those buildings would either become museums or ghost bungalows or hotels or government offices, if we take the cue from the past !

But ideally a family comprising of less than four members does not need a house which is more than 1500 square feet of carpet area. Any thing half that size I would say just a necessity and any thing double or more I would say an extravaganza.

I am a common man and I cannot think like aristocrats. But I do pity those neorich fellows who do everything in life to live like aristocrats of the past by building palatial buildings, some of them much bigger and stylish than the palaces of the royals of the past. Pitying because of their desparate dependency on servants and household staff on whom they have sold off their self esteem, privacy and personal hygiene. Real big houses are indeed prisons, may be even worse than prisons !

In one way you should be happy if you are not of the vulgar rich type who can afford a palace !


  1. Indian banks should learn how to do business in an honest manner. PSU banks have a higher responsibility in this. At least they should not cheat hapless individuals who take home loans. The floating interest regime as practised in India is simply cheating. The banks trap individuals by offering a low interest rate initially and then within a couple of months they raise the rate to the highest (of course with the help of the RBI). They raise the rates whenever there is a rate increase as quickly as possible. When there is a rate cut they do it as late as possible or even do not act. For example, I had taken a home loan from SBI at 8.75 %. They kept raising it to as high as 12.5 % . Even now they take 12% while they keep advertising the rates at 9.5 or 10. This is ridiculous. If the RBI wants to use the bank interest rate as the lever for controlling the economy, they should not do it with individuals who have already availed the loans at a particular rate. The whole household finances of a middle class family go to hell when they do this kind of business. No where in any business, this kind of a violation of agreement is done. One sided power to do something in violation of a previously made agreement or contract is a pure bullying and cannot be considered as a fair practice even when one side has agreed to it initially. It is simply cheating, cheating and nothing else. Officialized cheating !

    1. I agree with you, friend.

      The floating interest home loan in India has proved to be a big cheating business !

      Ofcourse, this is not the Indian public thought initially when they introduced it.

      This is one reason why people should not avail to have home loans if their incomes do not support their EMI payments comfortably.

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