Buying a home is often the most expensive purchase anyone makes in their lifetime, and everyone wants to get the best possible price. But getting the best price for the home of your dreams calls for negotiation skills.
There is no maximum retail price (MRP) concept for housing in India, as there is for packaged goods and other retail items. While ready reckoner/circle rates specify the minimum price at which residential property can be sold in a given location, market values — the prices at which properties actually sell — tend to be much higher.
The pricing of properties in India is determined by various factors such as location, size, amenities, demand and supply dynamics, and prevailing market conditions — not to mention the developer’s brand value. Flats in well-known developers’ projects see a much higher sales velocity than those in projects by obscure players and therefore cost more.
Negotiating the price of a home is an art that requires preparation, strategy, and effective communication. Let’s break it down step by step:
Do your research
Having as much knowledge as possible is critical. This involves researching and comparing prices in the desired area, consulting with real estate agents, and evaluating different properties based on location, features, quality, legal status, and potential for capital appreciation. It would be best if you also understood what offers and discounts are being offered for similar properties in the same area.
Establish a rapport
Building a positive relationship with the developer/seller can significantly impact your negotiation success. Ensure all discussions are friendly, open, and respectful from the outset. Show your genuine interest in the property. This creates a foundation of trust and goodwill, increasing the likelihood of reaching a mutually beneficial agreement.
Know the limits
Do not counter-offer a ridiculously lower price. You can start negotiation at 15%, but do not expect this to stick. During the negotiation process, you can highlight your doubts and concerns about the property, but understand that the seller knows you are interested in it (otherwise you wouldn’t be negotiating). Avoid criticising the property. Instead, ask the developer how the property compares to a similar, cheaper one by a competitor and why his asking price is higher.
An effective strategy for getting a good price is to have a pre-approved home loan for a property in your budget. This shows the developer that you are on the market, mean business and can close the deal quickly if the price is right.
If it is a seller’s market where lots of properties are being sold and sellers are not desperate, there is a limit to how far you can bargain the price. This is especially true in the case of highly reputed developers. In a seller’s market, you are ahead of the game if you have managed to bring the price down by 3-5%. In a buyer’s market, or if the developer’s project is competing with one from a much more well-known builder in the same area, you can try for a slightly higher discount.
Leverage project completion stage
Prices quoted for properties in recently launched projects tend to be lower than those for projects that are either fully developed or nearing completion. This is because the demand for fully-constructed properties is higher, and the developer will be able to sell them easily. The stage of completion is one of your most important negotiation powers. Your willingness to wait for a year or so is a strong argument in your favour, and it will usually be considered.
Factor in other potential savings
The price of a property is one part of the final price you pay. You will incur other expenses — for instance, paying the statutory fees, furnishing the flat, and necessary appliances. If the developer is unwilling to bring the base price down further or negotiate at all (which could happen if his project is selling very well) ask if he will waive GST (in the case of under-construction flats) and/or stamp duty and registration charges. If these charges are already offically absorbed by the developer, ask him what he will offer additionally to sweeten the deal for you. For instance, the inclusion of a gratis modular kitchen makes a considerable difference.
The writer is Managing Director, Pharande Spaces.