Personal Finance

A home on a shoestring budget

Meera Siva | Updated on November 22, 2014

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Pay attention to the carpet area you will get, as budget homes are meant to have higher useable floor space

Many builders are launching projects in the ‘affordable’ segment, thanks to the large demand for such low ticket-size homes in many cities and limited supply. Here’s what you can expect in such buys.

Low construction costs

In budget homes, construction costs are reduced by using pre-cast technology instead of bricks. The initial investment on the ‘frame’ — into which concrete is poured to form the walls — is sizeable, but when many units are built, the cost per unit is reduced, says Vivin S Mathew, CEO, Western Regional Business of VBHC, a Bangalore-based affordable housing developer.

The other advantage is that the construction time is shorter and projects are handed over in under 18 months. On-time delivery helps reduce your cost as a buyer, as you can save on rent by moving into your home sooner. Before you take the plunge, though, enquire about the construction method and independently verify the builder’s delivery record.

Better floor plan

Budget homes are usually small, 1-2 BHK units, but the design ensures that the space is well utilised. For instance, most floor plans tend to avoid corridors, says Rajesh Krishnan, CEO, Sheltrex, a Mumbai-based affordable housing developer.

For a given area sold, the carpet area is also typically higher than similar mid-income or premium homes. This is because the “loading”, which is the ratio of unusable to saleable area, is around 20 per cent, compared to over 30 per cent in high-end offerings.

So, when you pay for a 600 sq ft home with 20 per cent loading, you get 480 sq ft of carpet area, while 120 sq ft is used up for walls and common areas and facilities.

This ratio has a direct bearing on costs, but builders use various terms and have differing ways to calculate area. So when choosing a budget home, pay attention to what you are paying for and the useable floor space you will get. It also helps to visit a model home to see if the house feels cramped, the storage area you would get and judge if it will suit your needs.

Standard features

Even with a smaller share taken for common area, builders promise many standard features such as parks, play area and car parking. This is because the number of units developed is typically large and the common area share per home is therefore reduced. But while you may get power back-up and water purification, a swimming pool is typically not in the features list. This is because of the high monthly maintenance costs, say developers.

Also, fittings such as tiles, windows, taps and toilets that are used in the home are branded.

The idea of a budget home is not that you pay less and end up with a money pit that requires constant repairs. Be sure to ask what material your developer plans to use and ensure that it is standard.

Another point is that budget homes are usually in peripheral locations where land is inexpensive. Hence, it is imperative that you see how liveable the area is. Ask if the developer plans to provide space for grocery stores or a clinic, as these facilities may be few and far between in that area.

Low ongoing costs

Given that maintenance costs in apartments are upwards of 10 per cent of rent and are increasing every year, be sure to check this aspect. Conscious trade-offs by builders can reduce ongoing upkeep expenses.

For example, a lift is a convenience that is heavily used in a complex. But if the builder cuts costs and buys a lower quality lift, your power bill and repair charges may go up.

Instead, paying higher upfront costs may save you a lot of hassles and periodic expenses, says Kalpana Murthy, Associate Director, Residential Services, Cushman & Wakefield, a real estate advisory. Likewise, adding rooftop solar equipment and a system to recycle water for use in toilets are all options that can lower your power and water bills, although they may involve some upfront costs.

Builders also make use of technology to reduce operating expenses, says Krishnan. Using electronic access control and automated monthly maintenance billing are some of the methods explored by developers to lower the cost of service.

Published on June 29, 2014

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