Buying a house is a tricky business. Most of us want to buy a house at some point of time in our lives and we aspire for it from a very early age. In fact, a lot of us keep accumulating our savings for many years for the same. It is true that buying a house is expensive but that is the least of the problems. There are several other aspects linked to how to find the right house for you and most importantly, why/when you should buy it.
To start with, a house is not always bought to stay in it. In fact many people invest in in-development projects just for returns in the future through rent or resale. Real-estate prices change (mostly increase) very rapidly over the years and such an investment is not a bad idea if you have some money you want to put in a low risk asset which appreciates over time. In some cases, it could give you very significant returns in a span of 10 years through resale. But that is not what we are discussing here. We are here to describe the process of finding the house that you want to live in.
Why buy a house?
As you grow, you develop a lot of habits, a lot of routines and you schedule/adjust them according to where you live. A rented place, even though you get very comfortable in it, is still not yours and you can’t make too many changes in it as per your liking to suit a change in lifestyle or hobbies you want to take up. In your own house, you have all this freedom.
Also if you are going to stay in the same city for a long duration, it makes little sense to stay on rent forever. Here is some maths to help explain:
Typically, a 1200 sqft 2BHK apartment will roughly cost you around 25-35k per month in rent in good areas around Bangalore. That makes your annual rental cost to be around 3-4 lacs. If you stay on rent for around 10 years with rent appreciation of around 10% each year, you could end up spending to the tune of 50-60 Lacs over that duration without really owning the house also. This is also when you have kept the same lifestyle for the entire span of years. If you want to upgrade to a bigger house, this cost goes higher as well.
How expensive is a house?
Houses are sold on a sqft basis. For any residential property, there are two measurements:
Carpet area - The area which is actually within the walls of your house
Super built up area - The area which is actually usable by you (includes the common area in the residential project you are buying in, normalised with the number of units in it)
You are supposed to look into both these points. The cost of the house is calculated with the per sqft cost multiplied with the super built up area. Usually the carpet area is around 70% of the super built up area. Hence, the higher it is the better it is in terms of actual house size you are getting against the money you are paying.
These rates vary on a locality basis, mostly they are similar for all properties in the same locality. However some builders can alter the rate and charge higher than the rate in the locality since there is no real regulation around these prices from the government. It is a pure supply-demand driven price.
Here is a link for sqft prices in different localities in Bangalore - https://www.99acres.com/property-rates-and-price-trends-in-bangalore
How to identify your budget?
A lot of people think they need to accumulate enough wealth to buy a house completely or a large percentage of it. While that is not necessary, it is also not recommended. Typically, you can take a home loan of up to 75-80% of your property registration cost based on your credit rating, take home income and size of the loan. The rates are also negotiable with the bank and are currently near 7%. If you think you can accumulate more return from your wealth than this number, it would be advisable to take the home loan to the fullest limit allowed by the bank and keep your money and invest it in a portfolio which returns more than this.
Here is a link for calculating your home loan EMIs based on the size and interest rate you cut - https://www.hdfc.com/home-loan-emi-calculator.
However if you have the cash lying around to pay upfront for the entire house, nothing like it.
The government charges roughly 6.5% of the house cost as a registration fee and home loans don't cover it, so do plan for that.
How to find the right house?
This is the toughest problem in the whole house finding mission. There are just so many criteria over which you need to ponder upon while you make this call. The more the number of people who are part of the decision making, the harder it gets. The fun and gratification also becomes higher though.
One of the first things to solve is identifying the right localities. First make a list of areas where you feel comfortable, you are familiar with those areas and can live in that locality for a long duration. This creation of this list must be the first thing you do.
Now coming to the cost aspect, the per sqft prices vary based on the area as mentioned above. And there is also a certain desire to have a minimum size for the house for you and your family to live in. Based on that combination, you need to see what areas work for you. For example, if you wish to stay in a 3BHK house whose carpet area wise should be at least 1400 sqft, that would mean the super built up area would be around 2000 sqft (assuming a 70% ratio). Suppose, based on the budget calculation you think you want to spend to the tune of 1.5 cr in terms of the overall cost, the localities you can buy the house in will be limited to those where the per sqft rate is around 7500. Combine this with a wishlist of areas you want to live in and come up with areas coming in the intersection set. If there is no intersection, you need to start loosening up your choices in terms of wishlist areas, your budget, the size you are looking for to find some localities which fit.
Once some localities are identified, you can find leads in those areas on different websites to find options. Most popular websites are commonfloor, magicbricks & 99acreas. Also check websites from all the builders who are developing in your city for identifying projects which are in progress or about to complete. You can drop your leads to the chatbots in these builder websites and you get a callback from them.
On the aggregating websites, typically you can filter on a lot of criteria like the following:
Number of rooms
Sqft area (both carpet and super built up)
Budget
Parking count
Age of the property
Typically these searches give you a variety of options. Some of these listings are by agents (who will take some fee from you in case you purchase the property they showed) or by the owner/builder.
However, this is just the tip of the iceberg. Given so many options, it becomes extremely difficult to decide which ones to visit (you can choose to visit them all but that will take some effort) and even after you visit, you can’t just decide and make up your mind. You need to consider other parameters which are relevant in your decision making. Some of these parameters could be absolutely important for you and can help you filter out the properties directly even before seeing them. Some of them will be more on a gradient and you can relax a few of them for others as long as overall your criteria are being met. Some of them could be:
Apartment/Villa - This is completely a personal choice. Villas are obviously more expensive (due to undivided land share).
Floor number (in case of apartment) - I wanted a higher floor to prevent traffic noises or playground noises from reaching me but some people have fear of height so it's a personal call again. This is also linked into what type of view you want from your balcony and windows. If you are looking for sunrise/sunset views, look for the directions of your views.
Locality hygiene - Mostly linked to infrastructure around the property w.r.t roads, parks, cleanliness etc. In Bangalore there are some open storm drains which carry sewage and have a foul smell. Also there is a lot of construction going around so need to evaluate if those things bother you or not. Also, the place could be preferred to be peaceful and in a residential area rather than in the middle of a market area or right at the end of a busy street.
Residential complex quality - Mostly the bigger the complex is and the higher the number of apartments in it, the better the society is. That is because it has higher maintenance budgets, larger management teams and better facilities for the residents.
Hipness of the locality - If you are a party goer or like to dine outside a lot or order food from outside a lot, you would not want to stay in areas which are far away from places which provide such opportunities.
Closeness of places you visit a lot - Mostly people try to take their house in areas which are closer to their offices or their families/friends.
Water Type - Typically you would want to get water connection from a river, but not all cities are able to provide that in terms of water connections to all complexes. Hence, these complexes start relying on underground water sources or water tankers. Complexes who are dependent on water tankers have higher maintenance costs and also the water quality is poorer and harmful to eyes and hair in the long term.
Single floor or Duplex - If you are looking for a 3 or 4 BHK, you will get some options in the market which are duplex. Entirely your call what type of house works for you.
Construction quality - Typically reputed and bigger real-estate developers create higher quality apartments than the ones who are looking to make more affordable, budget friendly apartments by cutting costs in the construction quality. Not that this in any case endangers the apartment in terms of stability, using more premium materials definitely adds more appeal and hence is heavier on your pockets.
Floor plan - Some folks are looking for good spacious balconies, some want big kitchens, some want a good dining area, some want a large foyer. It's a very personal call.
Price - The prices may also vary between different properties in the same locality since they may not always be of same sizes and the seller may ask for a different price than just a fixed sqft rate. This obviously is an important data point before making the final call.
How to manage your visits to the properties?
We typically visited only on weekends. If you are looking to buy in an under-development project, you will have very little idea on how it will look once it finishes. Typically the builders finish a model apartment first for all prospective buyers to come and take a look at. If it is a resale from an existing owner, their convenience in choosing the time is also to be considered. We used to maintain a sheet for all the places we visited and based on the parameters mentioned above, we added scores between 1-10 for all these for each property we visited. To allow bias towards certain parameters over others, we would add a multiplier against the score of a few parameters. That allows each property to have a score against them, and it typically helps in the decision making process. Here is a link of a sample excel file that can help you.
It would be helpful to take your own vehicle for the visit of the properties and always try to combine your visits in the same area for the same day to save your time. If your vehicle can’t work out, take a rental cab/auto since hailing/booking the cab/auto from each place won’t be convenient and will take a lot of time.
What is the right price for the property you see and how to negotiate?
Typically, new apartments which are being sold by the builder are at the locality per sqft rates. Some of the builders may add some premium by claiming that they are using better materials than the rest or they are more reputed, but all this is negotiable. They also try to charge higher price per sqft over a certain floor number and that increases per floor number and can alter the locality per sqft rate by almost 200-250 per floor. This is also negotiable mostly.
However, for a resale property from an existing owner, the cost will be different than the sqft price. Typically if a house has already gone through interior work, there is some additional cost the existing owner will charge for that as it does not come cheap and can sometimes go up to 15-20% of the house original purchase cost itself. However, as the house gets old, its price also starts depreciating a little even though the land price will have appreciated. So, this is a very subjective area for negotiation. Mostly, take a second opinion from someone not included in this transaction for a fair idea of the cost.
What next?
It took us 6 months to find the house we loved and wanted to make our home. it has took longer for others. So make no compromises in your choice for your future home. If you have found your future home, congratulations.
We'll get back soon with details and our experience on what to do after you have chosen the house. WATCH THIS SPACE for further details. Do subscribe to the short story dot in for getting the next entry into your inbox.
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