Fineprint - Guarantor for loan

When a person or an entity takes a loan, then the bank giv- ing the loan builds various safeguards into the process. One of them is to have a margin limit by taking a security, so that there is a way in which they can recover the money if the borrower defaults on the loan. Another route adopted is that of asking for a guarantor so that in case the borrower does not pay, then the guarantor will be called upon to make the payment.
A good check is made of the guarantor and their financial position before completing the transaction. Many people do not know but their acting as a guarantor also shows up in their credit scores so that banks will take this factor into mind while lending to them. The situation is impacted in case the borrower defaults for which a person is a guarantor. One has to be careful while agreeing to act as a guarantor because this can have a double impact. First of all them might be asked to repay the loan and at the same time there will be an impact on their credit position also and care should be taken on both fronts.

Hot Deals, FLAT Offers - Are they real?

Developers have found a new way to beat slowing demand. They reduce the basic selling price but load a host of other charges later. Buyers need to read the fineprint before signing any deal

    WHEN Nalini Gupta bought a house in Manesar from the biggest developer group in the country, she was attracted by the affordable prices quoted for an apartment there. The Rs 39 lakh for a threebedroom apartment seemed extremely manageable on a construction-linked plan and new Gurgaon had the potential to grow, she was told. There were many brokers marketing the same property so she went to a carefully chosen broker who secured the deal for her.
    That was her first mistake. While her choice of the builder was based on his past projects, she did not know that to counter slowing demand, developers were evolving new formulas to lure the buyers. When she was asked if she wants a preferential location for which she would have to pay extra charges, she turned down the offer saying she was happy with any flat that came to her in the allotment. To her surprise the final bill she received was with Rs 5.5 lakh as preferential location charges (PLC). When she protested, she was told it must be at the instance of the broker and that the company would be pleased to take back her apartment and return the money. A thinly veiled threat that made her hastily back off as she was keen to purchase.

Take the case of an upcoming developer in Gurgaon Sector 37. The apartments were sold at a throw-away price of Rs 1,250 per sq ft. Except that it is a semi-completed apartment and the users have to pay an additional Rs 500/ sq ft as completion charges.
    It is the Wild West phenomenon operating in the property market today. India is in the unique situation where end users need to purchase apartments and are looking at buying the home at any cost. They are scouting for attractive deals and developers are not willing to come down on their profit margins. This means that the end users have to be lured with attractive price points. To make the price attractive without losing on profit margins, developers are now reducing basic selling price but loading a host of other charges on the property
    that the user will have to shell out
    when he buys.
    Another leading Noida developer has resorted to an even more innovative means of keeping brokers happy while selling in the slowing market. The plots along the Taj Expressway were sold at a certain price and were declared sold out very soon. However, the entire stock was underwritten by its own selected brokers. The company now claims it has no plots for sale directly. The price of the apartments have been raised to Rs 1,15,000 per sq yd but the company facilitates purchase from its underwriters in the name of the buyer as a first purchase and even secures commissions on the same.
    The lack of transparency in this market has both buyers and brokers gasping for breath. At a recent convention of accredited brokers, most complained that it was a risky market as they were often misled into selling the stock aggressively by the developers and buyers would then be slapped with many additional charges. This leaves the brokers in the frontline of firing.
    Banks too are making a killing out of this situation. Buyers are offered loans. The buyer pays 15-20% out of his own resources and the bank finances the retail unit by paying the down payment to the developer. However, they allow the buyer to start paying only after the possession is received. The banks are thus able to keep its money moving in a slowing market. The developer gets his full money upfront for development. However, the consumer who begins paying the EMIs only after the construction is complete, does not get the down payment discount.
All these clearly point to the need for a regulator. Brokers are all in favour of an Act that lays down the ground rules and provides a redressal mechanism. Explains one broker who does not want to be named, "We are slapped with a double whammy. The consumer shouts at us and the developer could not care less as there are any number of people offering broking services. Today you don't need to register to become a broker." The consumer is now floundering as he tries to negotiate a host of charges that constitute the fineprint of any property deal. Consider the following:

• Preferential location charges range from Rs 300-500 in the NCR region

• Finishing charges range from Rs 300-500/sq ft in the NCR region

• Car parks are mandatory — the norm in the NCR region is Rs 3,300-4,000/sq ft per car park. A 2 BHK house of up to 2,500 sq ft has to purchase a car park at these rates. A 3,000-3,300 sq ft apartment buyer has to purchase two car parks while a 4,000-5,000 sq ft apartment owner has to purchase three car parks.
    Not that all developers are happy with the existing situation. Explains GP Savlani, resident director of Confederation of Real Estate Developer's Associations of India (CREDAI), the association believes that the developers should be transparent and
    tell the customer all about the charges at the time of sale. Any charges added subsequently are not according to the code of conduct drawn up by CREDAI. In many places, explains one member, where the local CREDAI branches are powerful, peer pressure is a powerful deterrent to malpractices. This is true of Maharashtra, Gujarat, Kerala etc. That is one form of self regulation that the developers have evolved.
However, the biggest deterrent to such malpractices would be increased supply, which is only possible if development authorities start releasing land not in small parcels but sufficiently to meet demand. That can only happen when development authorities themselves stop speculating on increased land value. Will the real regulator please stand up?