Call it Reaction or call it Correction or Consolidation. Data speaks a lot about unsold properties available in the market and expect the prices to drop by upto 20%. Most prospective buyers of real estate are waiting eagerly for the D Day to come. Quite a few of them have been waiting since a year or more and they have seen the prices rising 10% and above without taking a plunge. Interest rates on home loans have also increased and benefits of teaser home loan rates or fixed interest rates are a thing of Past. These buyers have already lost a substantial amount of money waiting for the right moment to buy. Such buyers have paid a price of their indecisiveness.

A recap of possible reasons of property prices rising in Mumbai over last couple of years:
All payments to the builders in an under construction building are subject to service tax @ 2.575%. This tax straightaway increases your cost of procurement and most of the banks and financial institutions are still not considering service tax for funding.

VAT @ 1% of agreement value is to be paid at the time of registration. Most of the banks and financial institutions are still not funding this amount, though stamp duty and registration charges are taken as a part of the cost of the property.

During the said period getting sand for construction was a problem for some of the smaller projects. Larger groups like Nirmal Lifestyle, HDIL, Runwal etc. had to procure sand from Gujarat and even Rajasthan, which increased the cost of raw material exponentially.

Some of the projects that were held up due to forest issues in areas like Mulund, Bhandup, Borivali etc. have increased the risk for the builders.
Due to the proposed changes in norms by BMC and clearances were not being provided to under construction projects, some projects were forced to stop work that resulted in cost escalations for the builders.

Now with the prices rising in realty sector and Mumbai set to expand upto Virar on western line, Dombivali – Kalyan on Central Line. Some buyers are looking at their future apartments northwards in areas like Borivali, Mira Road, Virar or Ghatkopar, Mulund, Dombivali, Kalyan that fits in their budget.
Some buyers are also opting for buying their dream flats at very initial stages of the upcoming project, but for this they need to have own liquid capital, since Home Loans or any other type of secured funding will not be available on these projects for some time. A person needs to decide on such project very cautiously. We will discuss in detail how we can reduce the risk of investing in such projects.

Information of Upcoming Projects: Since these projects are in a nascent stage and developers are not marketing such project, you have to search for such projects. One source of such projects are Property consultants who specialize in soft launches. However, you have to meet a number of consultants before finalizing one and move forward. Some group buying websites are also engaged in this.

Information about the Developer: Your Broker will be able to give you detailed information regarding developer’s experience, profile etc. and you should counter - check the same in the market. You can also get the builder’s office address and request for a meeting with the builder either at the builder’s office or at the site of the project. During the meeting, check with probable date of starting construction, launching the project and completion and possession of the project. You should also check the conditions of exiting the project in case required and lock in period, if any. Lock in period is usually 6 to 12 months and you are not allowed to exit the property during this period. Also confirm if the developer will buy the flat at then applicable market rate or there is a rate guarantee or if you need to find a buyer for your property yourself or through a broker.
Information about the Project: By now you are aware if you would like to trust the builder with your money and what type of investment is expected from you for your purchase. See and understand the various documents and approvals of the said project.

IOD and CC. : No builder should initiate a sale unless he has an approval in place and IOD (Intimation of Disapproval) is a communication by BMC to the builder giving a disapproval of the project until he meets certain requirements and criterion. CC (Commencement Certificate) is issued by BMC to the builder in acknowledgement of meeting the terms of IOD and states the stage till which builder is allowed to construct. It is okay if CC states excavation, because once that work is done, BMC inspects and issues further CC till plinth which is inspected and then further CCs are provided in parts. Must confirm the documents are for the project in which you are investing. This can be achieved by checking CTS No. , CSN No., Survey no. etc. whatever available.
Approved Plans: Developer submits plans of the proposed building to BMC and these plans are approved by the Exec. Engineer of BMC under his stamp and signature. You should have a look at these plans.

Title of the Property: The builder should provide you a title report of the project on which the proposed building will be coming up.
Pricing: You should evaluate the price at which the property is being offered at this stage with equivalent ready for occupation projects or new projects in the same area. Consider a reasonable rate of return and then take a call on your purchase decision.

Closing the deal: It is strongly recommended that all payments are solely made by way of account payee cheques in favour of the developer / builder against a receipt from payee. This name needs to be verified with the documents that you have seen earlier. Understand how will the builder acknowledge your purchase. Builder’s usually issue an allotment letter after a few days / weeks after your cheque/s are cleared.
Note: Since the plans are subject to change at this initial stage, it is strongly recommended you understand the treatment of difference in area, rates etc. in case applicable.

Finally, keep an eye on the project from time to time and keep yourself updated of the same. You should be able to buy your dream home at a discount of around 50% from the anticipated price of the project by the time it is ready for possession. You need to take abundant caution while entering such deal but if it goes well, then you will save a considerable amount of money.