Guide for First-Time Home Buyers in India

Buying the first home is a significant milestone in an individual’s life and is very close to any person’s heart. It is a truly emotional moment that brings with it the joy of fulfillment of a lifetime dream.

At the same time, it is a large sized investment. Caution and careful analysis are essential in order to make the right choice and enjoy long-term benefits. After all, most people buy a home only once in their lifetime and then that same property is passed on generation after generation.

If you are at that stage in your life when you are ready to or are planning to buy your first home, this article is specially crafted to help you make a choice that you will never regret. Making a well-rounded home purchase decision presupposes consideration of a multitude of factors. Check them out below –

I. Assess Your Own Requirements Thoroughly

When you’re out on the hunt for your first home purchase, it is completely natural to have your mind wandering to everything that looks and feels attractive. There is almost no shortage of good real estate options today. Most of the good builders have compelling offerings and brochures with captivating messaging and imagery that can immediately excite anyone.

However, when you’re actually sitting down and exploring the probable options, it is wise for you to focus only on those properties that make perfect sense for your present and expected future requirements. After all, this one investment is most probably for your lifetime and hence it must be well thought out.

Your decision to purchase the home could be motivated by either of the two causes – self-use or investment. While some considerations remain common across both these goals, what you require may be slightly different depending on that distinction. Typically, factors that you should consider to assess your needs include –

Size Of The Home

If you’re buying the home for your own use, you must take into account your family size and opt for the correct home size with the right number of rooms.

If you’re relatively young or recently married, you must consider the space requirements for the future when you have children. On the other hand, if you’re living separately from your parents, or you tend to host outstation guests often, you might want to opt for a house that has an extra room for the time they visit you. It’s good to think these factors through now, in order to avoid space problems a few years down the line.

If you’re buying the house purely from an investment viewpoint, you may opt for a size that is optimal for renting out. A house that is too small or too big could get a little more difficult to let out easily.

Choice Of Meaningful Amenities

Buying a property that is bundled with amenities is obviously attractive to anyone. It’s always nice to own a home that is equipped with all the modern conveniences and luxury in addition. However, homes with additional amenities come with a higher cost and not all of the extra facilities may be of use to you. It’s good to thoughtfully contemplate what are the must-have facilities for your family’s comfortable living and look for one that is most suited to those needs.

If you have small children, a playground or games room is a must, whereas it may not be the case if you’re middle aged with older children. Similarly, if you or your grown up children care about fitness and exercise, it’s always better to opt for a home that has those facilities. If you are going to live with your aging parents in the new home, it’s advisable to go for a property with nice socializing areas within the property premises so that they can interact with other seniors in their age group.

On the other hand, if you are purchasing the home for renting out purpose, you may want to more carefully consider the cost of amenities and the annual maintenance charges for them. Having said that, you must make sure to at least look for one with basic amenities as that can give your apartment a competitive edge against those properties that don’t have any facilities.

Location Preference

The location of the house is also a very important consideration that you must delve carefully into. Any home that you buy either for yourself or another family that you’ll rent it out to must be around a good neighborhood that is safe for family living. Additionally, it should also be easily accessible by all common means of transport.

If you plan to live yourself, you might want to consider the locational proximity to your work place and the type of facilities you’d want or need around. For instance – entertainment options, good educational institutes for your children, the marketplace, health care facilities and so on.

One more thing that is worthwhile to understand here is that land is a scarce and immovable resource, and demand is what drives up its price. If you feel that living in an area that’s slightly distant from the main areas of the city won’t be very inconvenient as such for you, you may consider altering your locational preference for getting bigger properties at a more meaningful price. If you recall, the Delhi suburb developed very rapidly. What was considered outskirts at one time, in almost no time now found itself in the middle of a bustling city, connected with all kinds of transport and dotted with amenities. So, from a long term outskirts sometimes make more sense.

If you’re buying the property from an investment angle, you could make some additional considerations. You could try to consider areas that have a record of good price appreciation patterns to give you the maximum investment benefits over the long term. You could also try to find out the expected appreciation timeline by checking the inventory overhang of that location. If there are a large number of unsold houses in an area, price appreciation is likely to be at a slower pace due to simple demand-supply economics. If you choose to buy a property on the outskirts, you are more likely to benefit with a higher return on investment in the long term, as these homes will be much more sought after when the city grows on account of their affordability.

Time To Possession

When you’re determining yours needs, another factor that you need to assess is how long can you afford to wait before getting possession. As a home buyer, you have the option to go for ready to move in homes or buy homes in their construction phase. While the former is in more demand usually, the latter comes with its own set of benefits.

If you’re buying the home for your end use and have the option to wait for a few years for possession, you could buy one in its construction phase and enjoy a spread out payment schedule, and possibly get a better deal.

On the other hand, if you’re buying from an investment viewpoint, it might make better sense for you to buy one in its construction phase, as you will benefit with significant price appreciation by the time you will be handed over its possession.

However, in this case, one thing you must check out is that the builder has all the legitimate approvals, certificates and the licenses needed to avoid delays in project completion times or unnecessary complications and hassles.

II. Figure Out The Costs And Determine Your Budget

Buying a home is an expensive affair, and financial considerations largely determine the right and affordable choice among the probable options. Hence, once you have an understanding of your requirements, the next step is to plan out the budget to buy the type of home that suits your needs. While budgeting you should –

Find Out The Average Property Costs

It’s good to begin budgeting by finding out the average costs of homes in the locality and size that is right for you. A point to note is that home prices mainly vary depending on the area, amenities included in the property, open area and the promoter of the property.

If you opt for a reputed builder, you might have to pay a slightly higher charge in the same location for their brand value and reliability. For instance, you may find two similar sized properties in the same area, but notice a price difference of say 5-7 lakhs INR. This price difference will most likely be due to the extra amenities available such as green area, sports and fitness facilities, presence of club house and so on. Reputed builders typically tend to build properties that are well equipped with all modern facilities as the existence of these largely improve a family’s lifestyle and helps them enjoy throughout their lifetime. So it’s good to factor in these costs and benefits when you’re averaging for your budget estimate.

Once you have a rough idea about the cost, you need to next budget and determine whether you can afford it or not. Getting emotional about your desire, and trying to buy something way out of your reach might land you into very long-term debt, so it is essential to budget carefully. If the property you’re eyeing at feels out of reach, you may want to reconsider the location, amenities or flat size to arrive at a choice that is closest to your budget.

Familiarize Yourself with Additional Costs

While working through the financial considerations, it’s also important for you to make note that buying a house has additional charges in addition to the property costs that need to be incurred. These include charges such as mutation and registration costs at the time of purchase. You must factor these charges into your budget.

Moreover, once you have bought the home, you’ll be required to pay property taxes and spend on home maintenance on an ongoing basis. You must understand here that the home maintenance charges should be looked at from a long-term perspective, as you will not want to live in a house that is poorly maintained. Even if you are looking at the home as an investment, you need to note that well-maintained property prices appreciate better as compared to poorly maintained ones. When you decide to rent or sell it out, it will always be easier to find a tenant or a buyer for a property that is well maintained. Hence, you must make the effort to pay attention to the maintenance aspect, look at it as an investment and visit the past projects of the builder to evaluate their maintenance and general upkeep of the property.

III. Make A Well Rounded Choice

Once you have a basic idea of your requirements and have planned your budget, the next step is to make a choice from the options available. You must visit the site of each of the properties in your shortlist to get an actual feel of what you will get, and observe shortcomings for yourself, if any.

As a rule of thumb, it is always wise to opt for a property that is sold by a well-reputed builder as a home is a long-term investment and it is better to be safe with your choice. You should ideally give more priority to a well-reputed lender with a caring DNA as this small step will help you save a lot of hassle in the long run.

Popular builders mainly earn their repute for on time handover, good quality construction, following a customer centric approach and ensuring that the property is well maintained. Before deciding on any one, you may check online reviews of that builder, visit their past projects and talk to their existing buyers to gain an accurate understanding of the kind of service you can expect. You can also scan through their social media handles to see how well they respond to customer complaints, and if they have a well rounded mechanism to address complaints.

With all these considerations in place, you can make your pick and then start planning on how to make the payments.

IV. Plan Out Your Payment Method

If you are planning to purchase a new property that is in its construction phase, you need not make the entire payment at one go. You can book the property with a down payment and pay installments as per the payment schedule suggested by the builder. If your looking at purchasing ready to move in properties, you’ll be required to make the entire payment at the time of purchase to transfer it in your name.

If you have the support of a strong bank balance, and comfortable monthly savings, you may consider buying the property with your own funds. The other option is availing a home loan.

Typically, most first time owners opt for home loans. Getting a house on credit implies making a down payment of usually 15-20 percent of the home value, and paying the remaining sum over the tenor of the loan along with the interest. Interest rates again can be fixed or floating, and you must discuss and assess the viability of these in detail with your financer.

Sometimes, financers may be ready to fund your loan without any down payment. While that might look attractive to you at the onset, it also implies an increased interest servicing cost, which you must take into account.

Additionally, it’s also good to check your credit score or CIBIL score. This score is basically a reflection of your financial credit history, and a good one implies that you’ll get better interests rates on the home loan. If your score is not too good, you may consider working towards organically improving it to benefit with lower loan servicing charges.

V. Learn About The Government Benefits

There are several government benefits available and you must find out which ones you are eligible for. The Credit Linked Subsidy Scheme and the Pradhan Mantri Waas Yojana (PMAY) under it can offer you savings up to INR 2.6 lakhs with its special interest subsidies. In addition, you also stand the chance to save up to INR 2 lakhs on the interest paid and 1 lack under section 80C, Income Tax Act.

If you are married, getting the property registered in your wife or jointly can offer you lower charges on the registry and also additional expense deduction benefits.

It’s good to discuss these options with your financial planners so that you can benefit with the policies that are present in your favor.

Conclusion

Buying the first home is a very emotional and significant milestone in any person’s life. Most people make this purchase only once in their lifetime, and generations enjoy the benefits.

If you’re about to buy a home and are at the cusp of making your life’s most significant investment, you must exercise caution to make the correct choice. A correct choice is one that is well aligned to your needs, falls within a budget you can afford and enables you and your family to enjoy a good living experience. Make sure that your considerations at each step are well rounded, and you’re sure to make a choice that will benefit you throughout your lifetime.