Recent disputes over land acquisition and legitimate demands by farmers for adequate compensation for parting with their source of livelihood have added a new dimension to purchases of homes. The plight of 30,000-odd property buyers in Noida Extension, a suburb of New Delhi, who have been left in no man's land after the Supreme Court struck down the acquisition of land on which their apartments were being built, has sent shock waves all around and created uncertainty among prospective buyers.
The fact that hapless farmers have been at the receiving end of the builder-politician nexus is not a secret. Powerful land sharks and builder mafias have routinely dispossessed the defenceless farmers by paying a pittance.
With the courts now stepping in, the demand for market-linked compensation is likely to get stronger. More cases praying for the striking down of land acquisitions are being filed. That is one side of the home-buying story. The other is the dual blow of rising home loan rates along with the incessant rise in prices of dwelling units.
Money Today October 2010 cover
The Reserve Bank of India's attempt to make money dearer by signalling a rise in interest rates nearly a dozen times over the past 18 months with the hope of slowing down demand for assets, has not transmitted into softening of home prices. In fact, we should not forget that even during the worst of the downturn in 2008 and 2009, builders refused to bring down prices to increase offtake despite pleas by the government and banks.
It was eventually the lenders who joined hands to stimulate demand by offering special schemes with lower rates to attract buyers. Unfortunately, the real estate sector remains one of the least regulated and, thus, the most opaque sectors of the economy despite huge investor interest and a direct bearing on the common man. Neither real estate prices nor loan rates look like they will come down in a hurry. Against this backdrop, buying property will remain a tricky proposition.
In our cover story, we set out for you in great detail how you should approach the purchase of property to minimise your risks. We also give you the lowdown on how the tussle over land acquisition processes is likely to impact you as a property buyer. For most of us, buying a home is a one-off decision and also the largest single-ticket investment in our lifetime.
Even slight carelessness can lead to great pain as those trapped in Noida Extension deals will tell you. Read on. As our cover story tells you, knowledge is power!Sarbajeet K. Sen