Developers to ensure the return on initial payments on houses

Article Written By: propertynice

In an attempt to convince buyers to make advance payments, property developers are increasingly offering assured returns to these customers for a specified period or until the buyer obtains possession of the apartment, but the experts, such systems could have significant risk.

Previously, developers of such programs available for commercial properties, but now it is spreading to the house.

AMR Infrastructures Ltd and Supertech Ltd Wegmans Industries Pvt. Ltd are among the developers providing buyers with guaranteed returns for furnished studio apartments.

A typical system works like this: The customer signs an agreement with the developer to pay 95% of the original cost of the apartment and once payment is made, the developer agrees to pay the buyer a guarantee of return to rate of 12% per year Supertech, for example, each month until possession.

The second option is that the buyer can enter into an agreement for sharing profits with the developer. Here, the developer must pay the customer a guarantee of lower back (6% for Supertech) in the construction phase. In the end, the promoter rents the apartment on behalf of the buyer and from a percentage of profits earned with the buyer. Supertech Wegmans, for example, offer buyers 60% of the profits of the rental.

Consultants said these systems help developers get credit at an interest rate. andquot;This is the update of interest costs by the developer,andquot; said Aditi Vijayakar, executive director of housing in real estate consultancy firm Cushman and Wakefield. andquot;Developers are offering an interest for buyers to pay the total price of the apartment instead of paying in installments in advance ... If developers have to borrow the same amount from a bank, banks charge 16-18% while the rate of interest here, they are only paying 12%. andquot;

Amit Handa, Supertech vice president, sales and marketing, explains: andquot;Instead of taking a bank loan, we are with customers in advance of payment and giving them an interest rate for payment.andquot;

At Supertech, in a system called andquot;100% cash-back schemeandquot;, customers earn 12% annually, provided the return on investment for eight years and four months.

andquot;If you buy a flat of 475 square feet for Rs21 lakh, you will receive Rs21, 000 per month paid annually through postdated checks for a warranty period of 100 months,andquot; the company says on its website.

The program is offered for the company Ceyanne Tour Project, which was launched three months ago and should be completed in three years on the highway connecting Greater Noida to Noida, which has 324 studios. The apartments cost between Rs22.74 lakh and Rs27.82. AMR Infrastructure also offers a guaranteed return of 12% to buyers at the time of possession of his apartments in Kessel I-Valley project on the Taj in the area of Noida Expressway.

andquot;If a buyer pays us 100% of the price of the apartment from the outset, we must pay the buyer 1% assured return on their investment every month until the date of possession,andquot; says Vikas Gupta, director of the company.

Wegmans has also provided 12% back in the time of possession for the studios to luxury furnished that the company is developing its project in Knowledge Park-III in the area of Noida. The project has 200 studios.

Regimes such as those directed at the buyer investor community, says Gupta AMR Infrastructure. These buyers have become cautious about investing in residential projects. andquot;We want to attract small investors,andquot; he says. andquot;... All the developers talk about affordable housing and studios ... The banks prefer to lend to small ticket size of houses.andquot;

These regimes May not be a significant source of revenue for developers, said Mona Chhabra, associate director of infrastructure, real estate and government services at Ernst andamp; Young Pvt. Ltd andquot;Risk perception among buyers has increased and given the blind messages you receive from developers on these plans, they seem to face a challenge in selling these plans.andquot;

Cushman and Wakefield Vijayakar warned against the risk inherent in such schemes. andquot;This is a risky thing for buyers to pay the full initial amount, as there is no guarantee of projects being completed on time or that the promoter must pay back every month.andquot;

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