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. In short,
Since Indian housing prices are so dynamic, property prices can, should, and invariably are negotiated, and good bargaining skills make a big difference in securing the best deal. However, not everyone has such skills, especially in the case of high-ticket purchases like housing. Most Indians only buy one or at the most two homes in their lifetime, so there is little scope for honing negotiation skills through experience.
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.
Such knowledge is your primary advantage at the negotiation table. It empowers you to make informed arguments and counter-offers.
Establish Good 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. Nobody likes to negotiate with abrasive people.
Show your genuine interest in the property. Listen, ask questions, and show understanding. Make it clear that you are well-versed with the pricing trends for such properties in this location without being unduly aggressive. This creates a foundation of trust and goodwill, increasing the likelihood of reaching a mutually beneficial agreement.
Show Sincere Interest & Intent: Developers’ sales teams know the difference between window shoppers and genuinely interested parties. An offer to make an immediate down payment if the price is right will make a big difference.
One of the most effective strategies 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.
Know the Limits: Do not counter-offer a ridiculously lower price. You can start the 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 criticizing the property, which never works well. Instead, ask the developer how the property compares to a similar, cheaper one by a competitor and why his asking price is higher.
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.
Again, your knowledge of current market trends, research into the developer’s reputation, and the sales velocity in his project come into play.
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 much easier.
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.
Also Read: Indian millennials on a homebuying spree
Whatever your counter-offer is, ensure it is reasonable and backed by sound arguments. You must present a compelling case for why your offer should be considered. Keep the entire process friendly and professional.
Negotiation is expected in the real estate business, and developers respect good bargaining skills. It is not considered cheap to bargain, but the rules of good negotiation will always apply. All the best with getting the best deal on the home of your dreams!