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What should first time home buyers look for before choosing their dream homes?

Saturday, December 22, 2018

By Ashok Naidu – Director, Kumari Builders and Developers

Owning a home is greater than anything else in one’s life. Often, it becomes the biggest motivation for first-time home buyers, which comes through their own hard work and hard-earned money. For them, a home is more than just a piece of property. It brings internal pride and makes them feel like they have achieved significant growth in their life. In recent days, more Indians are looking to invest in residential property instead of living in rental houses as tenants.

The economic survey 2017-18 reports that only 28% of urban Indians live in the rented house as compared to 1961 when as many as 54% lived in the rental house. It’s also well complemented by the recent new policies in the real estate industry like, RERA – which brings the transparency in the sector and protects homes buyers, and GST - eliminates the complex tax structure in the industry. These reforms bring an enormous level of trust among the first-time home buyers to buy a property for themselves and the market also gives guaranteed rent assurance to the property if they decide to rent out.

But the decision making becomes a gigantic problem for first time home buyers since they have very limited knowledge about the industry. Even though there are  various resources, they are still confused about taking the decision.

Following elements need to consider before you jump the gun and invest in property.

Draw up a hard budget and stick to it:
Once you decided to buy a property, the fundamental element that you need to do is to decide your budget. Before you embark on surfing through the internet, it’s very important that you iron out important questions such as; what is the maximum budget that you pull out of your pocket? what is your ideal budget range including mortgage? Will you able to handle your monthly expenses after the loan amount? etc.Once you have the answersto the questions and then draw upthe budget for your home.

Eye on your credit score :
If you’re applying for the home loans, then the CIBIL credits score becomes a make or break factor. Having a good score is one of the key factors taken into account by the banks when the bank issue loans. A score between 700 and 750 is excellent and if it is below 550, then it gives a reason for the bank to baulk before approving the loans. And there is a way for obtaining your credit score. Credit bureaus like CIBIL (Credit Information Bureau of India Limited), Experian, TransUnion, and Equifax will give you a credit report if you apply online.

Heed to your home loans and Down payments
Generally, the banks give loan upto 80% and the rest 20 % need to be paid fromthe pocket. Although the down payments are the norm, it’s possible to get a loan with zero down payment if the credit score is above par (700 to 750). But, it comes with a risk that monthly premiums will shoot up. It’s also one of the critical elements to decide whether to opt for down payment. It needs to be decided upon one’s own monthly income whether they are able tomeet their expenses after paying the monthly premium.

Be smart to choose the location/ Seek supports from experience relators.
The location of the property plays a very crucial role both on a personal level and from an investment perspective. Before choosing the location, a few questions need to be asked. a) Does it have conveniences likes chool, supermarket, banks and ATMs, hospital, and colleges nearby? b) Is it closer to the working place? c) does the location havea fair amount ofcommutation for intercity & interacity travel? d) does this location attract investments fromthe large corporates which will increase either property value or rent?.

Cross check builder’s credibility
It’s always better to look out for the credibility of the builders and cross-check their previous projects. Do research on the selected builders that whether they have delivered the project on a stipulated time or not, did they meet the promises they made during either the project launch or promotions ? It is wise to visit their previous projects and have a general talk to the buyers, who will be able to give a clear picture about the builders and their experience.

Evaluate the property options / Tax benefits
Primarily, the first time home buyers need to identify their requirements and the purpose of buying their dream property. If it is for an investment purpose they need to think about what type of properties would give a better rental return. For dwelling purpose, decide upon the family’s requirement. Generally, the residential realty industry comprises of three types of properties such as Villa, Villaments, and apartments. The types of properties also play a vital role to secure loans.

It should also be considered, if it is safe to invest in under construction or ready to move in properties. The ready to move in properties  have an advantage in form of rental saving and income tax deduction up to 2.o lac on interest paid on the home loan.

According to the makaan research 43% of people prefer to buy ready tomove in properties in comparison to the 35 % willing to go for under construction properties. As a first time home buyer, it is necessary to be more precarious before investing in your new home, though there is a plethora of options available.

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