Today, we will discuss with you how to negotiate with a builder when you are buying a new home.
Negotiation has two aspects: first, determining which value to negotiate on, and second, what your approach should be when negotiating with the builder. When negotiating with the builder, it's important to start with the value that's not on the sheet. We need to understand the cost sheet properly.
Now, what components are included in the cost sheet and how it is understood. You should read this article so that you can understand what components the builder has included in your cost sheet. What is the actual total cost of your home, and whether there are any hidden charges or surprises at the time of possession.
Today's article will focus on understanding two components, which are very important. One is the agreement value, and the other is the other charges. The agreement value is often referred to as construction value or stage construction, and it includes the base price first, then the PLC (Preferred Location Charge).
PLC can be like city park fencing, green fencing, or corner PLC, or floor PLC, depending on which floor you want to take, and finally, it includes car parking charges. Now some builders include parking in the agreement value.
Builders include it and some builders include it in other charges, so how is this structured? Therefore, you need to look at the cost sheet properly. Then come your other chances, other charges included club membership, famous power backup, IDC, DC, and many other charges.
Now ideally, you should look at these two components separately and not on the agreement value. Registration charges are calculated in the agreement, and if there is no role for it, now the goal. We discounted ₹1 lakh from the agreement volume, so the stamp duty registration's 6 to 7% automatic saving was done.
It means our total saving was ₹1 lakh 6000. Now, if we are buying an under-construction apartment, then a 5% GST is applied on the agreement value and 18% on other charges. So, our 5% additional saving was made.
Now, in this example, our actual saving has become ₹12,000. Now, it's clear which value you should negotiate on, which components you should negotiate on, but you should understand what approach you should have with the builder, what should be discussed.
We need to understand the builder's process. Now, whenever you talk to the builder about final price, the builder's sales manager will first tell you to finalize a unit. After finalizing the unit, he will tell you about the unit's offers and discounts, meaning some freebies or a free modular kitchen, wardrobe, gold coin, or a direct discount of two to three lakh rupees.
After giving you this discount, he will ask you if you are serious about buying the house. Then you should write a check and give it to him. Showing that check, we will try to get an additional discount from my seniors for you. If you give him the check, we will also try to get you an additional discount.
Now, typically they don't tell you bifurcation, whether the discount has been reduced from the agreement value or from the other charges. Now they will tell you the total final price after discounting from these prices.
Now, it's clear what the builder's process is. Now, within this process, what approach should you have? Now, when the sales manager tells you to finalize a unit, ideally, you should finalize a non-PLC unit at this stage. A unit that doesn't involve any additional charges, even if you like a PLC unit. But if you want to negotiate a better deal, you should tell the sales manager that you like this particular non-PLC unit and show him a check for it so that he can take approval from his seniors and get you the best deal.
Now, once you have a best final price at this stage, it's also very important to know the fair market value. Now you should know how to calculate the fair market value. Whenever you are negotiating, it's very important to know the fair market value.
Now, if you know the fair market value late, once the builder has given you the final price, then you should negotiate your price based on the fair market value. Now, why am we saying this? You should be aggressive but also logical.
If you quote a very high price known as illogical, the sales manager will think you're not serious, and he will become totally disinterested and won't discuss any big discounts with you. So, he should feel that you are serious, and the price you have quoted.
If he feels it's unachievable, he'll tell you that maybe this price isn't possible. If you have gone through any broker, you should ask the broker to put pressure on the builder and try to close the deal at your quoted price.
Now, which type of broker can help you with which type of property. Now, you need a strategy where you hand over a check to the sales manager with your quoted price and wait and play the waiting game. If you have logically priced it, the sales manager will have confidence that you are genuine, and he will make his best efforts to close the deal today itself.
After this process, whatever final price you get from him will be the best price. And there won't be any further negotiation because he knows very well that if you fly off today, maybe tomorrow this deal won't be there. So, the final price he gives you will be the best price, and there won't be any room for negotiation because he knows very well that if you go away today, maybe tomorrow this deal won't be there.
So, if you're buying a non-PLC unit, this will be your final price, but if you're considering a PLC unit, you have to forget about the fear of waiting at this stage. Having internally discussed the fear and feeling that we need this particular PLC unit, now you'll say why we didn't settle for a non-PLC unit with such fear.
Now, suddenly demanding a PLC unit, there's a logic behind it. Explain to the builder properly that PLC units are premium units and will easily be sold. People will pay digital money for this premium unit, so he can ask for more on the premium unit anytime.
They don't offer much discounting or negotiate heavily, but they know that non-PLC units are non-premium, meaning they might face some difficulty in selling them. That's why they are willing to offer maximum discounts on these units.
Now, we saw in the context that there are two parts to the agreement value: one is the base price, and the other is PLC. We have already negotiated the maximum on the base price. Now, let's talk about PLC. Again, you can ask the sales manager for some discount on PLC. Whether they agree or not, this is all happening. But you can certainly try to negotiate.
Finally, some negotiating tips: First, if the builder is offering you a free modular kitchen or wardrobe, don't adjust it in the price because the builder will reduce a very small amount from the total value. But if you decide to make it yourself, it will be much more expensive and time-consuming.
Second, this whole process starts when you want it to happen, when you're 100% sure that you want to buy the house today. If you're not assertive, the conversion won't show up in this process. And if there's no conviction in this process, the salesman won't understand that you're serious, and he won't make the best attempt for you. And finally, you need to know which builder you're dealing with because the bigger the developer, the less scope for negotiation, and the smaller the developer, the more negotiation scope.
So, be prepared. What deal are you dealing with? This article will help you negotiate a better deal. If you liked the article share it with friends and family. For more home buying tips, we will keep you updated with our new articles. Thank you.
