Profits of patience

MONEY WISE

Yash and Vibhuti Thakur's home buying process was an exciting venture. They share their experience.

'Perfect' is what we call our one bedroom house that we bought a year back. Both of us grew up, married and had our child in the same locality in Andheri. Also, we have our large extended families living nearby.

After our marriage, we were staying in our home. About three years later (in 2006), we started looking for another house as an investment. After doing a study of various investment options, I decided that real estate was the best. It is because the other forms of investment like the equity markets are more lucrative no doubt, but need more personal attention. This is something I cannot give because of my business commitments.

Initially, we had not expected to get a place in the same area as we live in. Every available space in the colony had been sold out in the last few years. Finally, we found a flat in my area. However, the owner was unsure about the final price. Finally, he settled on a price of Rs 22 lakh. This was significantly higher than the rate of Rs 18 lakh in that area. Despite this high price, I pursued the matter as I was optimistic that eventually we would be able to work out some deal.

Soon, I was privy to another bit of information that impacted this deal greatly. That is, the owner was deep in debt and the house was mortgaged to the bank. Also, the bank was threatening to take over his property forcing him to look for a buyer. He was hoping to clear his debts and purchase a smaller house through this deal.

Initially, I paid the owner a token fee of Rs 50,000. But as soon as the token was paid, the owner started delaying the process. I also learnt that he was talking to other potential buyers, as well. It seemed that the financial pressure on him had come down substantially and he was in no hurry to close the deal any more. I kept chasing him for almost eight months. Even my family advised me to call off the deal. I, however, continued pursuing since I was getting a flat in the same locality.

Finally, he called me to say that he needed to close the deal in a week's time. He also demanded a cash component of Rs 8 lakh. But I did not have so much cash at that moment.

Then he confessed that the bank was likely to take over the property and were unwilling to wait any longer. Having experienced the earlier delay, I knew that another small instalment would delay things further. But the fact that even my regular bank was not keen on giving me a home loan of Rs 10 lakh put me in further quandary.

As a last ditch attempt, I asked the owner to take me to his bank. I was hoping that the bank would delay its takeover plans, till I could secure the home loan. There, I learnt that that the owner's total dues were to the tune of Rs 14 lakh.

Fortunately, the branch manager of this nationalised bank was more than glad to solve the issue. He readily offered me a home loan (equal to the amount of the debt). I took up the offer and then things began to move. Within a week, my loan documents were processed. Meanwhile, even the owner was cleared off the bank's defaulters' list. This bank manager also convinced me to move my old accounts to his bank and even sold me some insurance policies.

Although we did not plan to live there, we spent on the interiors expecting family members to live there. But when family members could not move in, we decided to rent out the place. This turned out to be a very good idea.

Whereas, my EMI at 8.5 per cent is close to Rs 9,000 each month, I get Rs 12,000 as rent. As a result, in spite of the rising interest rates, my rent more than covers the EMI.

Looking back, I am happy with the deal. Of course, I had to pay more than the market rate but the subsequent appreciation in property prices have balanced it.

As told to Dipta joshi