I want to invest in a property where the foundation work is going on.            
Will my investment in such a property, secure?

Bhoomi Pooja / starting of foundation work & setting up of site office normally forms the Stage II of a development also often known as the launch phase. This is the time when advertisements are released regarding the project

You can try to secure your investment in a launch phase project (Stage II) property by taking care of the following:

1. Make sure to book property in a reputed developer who has many years of experience & good reputation behind them. They have better expertise and will to better manage development and take adequate care to prevent delay of project. The progress of a project is influenced by several factors like availability / fluctuation in costs of Raw materials like cement / steel / sand and labour which are better managed by reputed builders.
2. Always seek legal advice on the property documents and the agreement before you sign.
3. Always visit the site and make note of all works going on at site. Whenever you visit a project site, look for signals of activity like:

• Inventories of raw materials like sand / cement / steel / tiles/ bathroom fittings etc
• No. of construction vehicles like excavators / trucks / road rollers etc.
• No. of Labour force working
• No. of staff in the site office
• Note any significant progress of the project compared to your previous visit.

1. Exit the property if you have even a little doubt about the intentions of the developer or the project progress at any stage. It is always better to exit and minimize the impact.

As I look at it, this is a good time for 2^nd property or more investor, as it may make good sense to maximise ROI’s by investing in properties which are in launch phase.

Conversely this may not be an ideal time for a 1^st time buyer and they may be better off investing in properties which are ready o move in within next 3 to 4 months. This way they will be able to save on rentals and also other avail other tax benefits.

The +ves of entering property development in this stage are:

1. High ROI
2. More  choices in selection
3. Flexibility to make subtle changes (acceptable to developer) in layout / choice

The -ves are of entering property development in this stage are:

1. Requires high Risk appetite
2. The project can get stalled for various reasons linked with project approvals, lack of investor enthusiasm, legal Issues relating to title deeds /ownership issues and or financial issues
3. You may be unable to visualise the finished product in terms of light / ventilation/view/ odours/ quality of air / project entry and exit points etc.
4. Developers mostly reserves the right to any changes in the master plan during the course of development

        7  Biggest Mistakes people make while Investing in Bangalore Real Estate:

1. Do not have finance Plan in place: Always start property shopping only after you are ready with your finance plan. If you are planning to take a bank loan make sure that you have your eligibility checked and ready to receive loan. It is quite likely that you may the property of your choice and you may not be ready to enter into an agreement or you may waste your time looking at properties that do not meet your investment plans.  
2. Do not look at at-least next 10years need while investing especially in first time property: Often investment is made taking into the consideration the present requirement. One must look at next 10 years need for one may feel comfortable with a 2 Bedroom however as years pass by one may feel that 3 bedrooms is a must.
3. Not contacting a consultant: There is always a tendency to invest in properties where our known people reside. It is necessary to expand the options in addition to those recommended by friends / relatives / colleagues/ property portals etc. It is likely that you land up selecting a more expensive property of lesser worth and facilities. A well informed consultant like Flatpundits can provide immense value in investment and also guide in negotiations and arriving at a most desirable cost
4. Do not study the background of the developer: preferably invest in people who are in business in same name for at-least 2 decades as they would have stood the test of time and learnt the skills of manoeuvring the up and down cycles more efficiently
5. Do not study the neighbourhood: There are many open storm water drains which often carry thrash and lead to issues relating to foul smell and health hazards – make sure that you checked on these before you invest
6.  Seek all title deeds and other related documents: Always seek legal opinion and understand the implications before investing
7. Do not understand the property in all respects: Study the details of Layout / View / type of surroundings / potential air, sound, water, sewage management & dust issues / light & Ventilation /entry and exit to the property very well.  There will be many small properties in and around which can cause a nuisance leading to delay and impacting the investment adversely. Also other facilities like malls / schools/ transportation can impact the investment.

One of my clients who has an apartment in Peenya wanted to know whether it would appreciate better now, as the metro is functional.
Solution: it is important for us to understand here the significance of “Relative Appreciation”. The more apt question in the above case would be what should I do? Remain invested in the property or switch to some other property? Obviously if same amount is invested in Peenya or in Sarjapur or Whitefield, going by the past few years of experience, it is clear that investment made in either Sarjapur road or whitefield would appreciate more than in Peenya. Hence it would be prudent to exit the property in Peenya and switch to an alternate in South or East Bangalore.

How to avoid getting stuck in a housing development project?
 

These are familiar sights to people who were unfortunate enough to invest in projects that got stuck midway.

How do we protect ourselves from such situations?

There are several steps one can take to make sure that things are going in the right direction:

1. Make sure to book property in a reputed developer who has many years of experience behind him: The progress of a project is influenced by several factors like availability / fluctuation in costs of Raw materials like cement / steel / sand and labour which are better managed by reputed builders.
2. Always seek legal advice on the property status and the agreement before you sign anything: Land disputes or disputes with civic bodies cause sleepless nights for investors and dream home seekers.
3. All activity comes to a halt when developers face a working capital crunch - either due to lack of adequate new investors or diversion of funds. Whenever you visit a project site, look for signals of activity like:
   1. Inventories of raw materials like sand / cement / steel / tiles/ bathroom fittings etc
   2. No. of construction vehicles like excavators / trucks / road rollers etc.
   3. No. of Labour force working
   4. No. of staff in the site office
   5. Note any significant progress of the project compared to your previous visit.
   6. Exit the property if you have even a little doubt about the intentions of the developer or the project progress at any stage. It is always better to exit and minimize the impact.

Our next post will be focussing on the various stages of property development and its impact on your investment. Please keep visiting us for more updates.