Realtors Try to Woo Buyers Through Buy-Back Schemes
Developers come up with several schemes to attract buyers and sell their property. One such scheme is the assured buy-back scheme wherein the developer promises to buy back a property from the buyer after a certain period at the appreciated price. While this is an effective marketing tool, a buyer must also read the fine print before investing in these schemes.
Buy-back scheme
In a buy-back scheme, a developer assures a buyer of buying back the property sold to the customer after a lock-in period, after factoring in 30-70 per cent appreciation in the property value. The lock-in period is usually 3-5 years. After the lock-in period, the buyer can either choose to sell it back to the developer or retain it. The scheme not only attracts buyers, but also brings in funds at cheaper costs for the developers. This is because, borrowing from individuals involves less or no interest rates. The scheme also helps the developers to reduce their inventory and encourage buyers as their acquisition costs come down.
There are several developers across various cities offering these schemes. ATS has launched the scheme for its ATS Tourmaline project in Dwarka Expressway, Gurgaon. Buyers initially pay about Rs 21.6 lakh and pay Rs 14.4 in 18 months. The offer involves buying back the property at Rs 62.3 lakh after three years. Buyers also have the option to take possession after three years. Temple Rose Real Estate Pvt Ltd in Thane is offering to buy back plots for double the price at the end of 4-5 years.
There is a catch
While a lot of schemes offered by developers look attractive, there is a catch most of the times. Here are some of the things you should consider when it comes to guaranteed buy-backs.
1. The offer is attractive and definitely gives a buyer good returns. However, the buy-back prices may be lesser than the market prices. Hence, if a buyer wanted to sell the property within the lock-in period at a higher price, it is not possible as the project will be stuck with the developer.
2. The biggest question is the trustworthiness of the developer. There is no real central estate regulator yet in the country to watch over the developers. As such, a developer may offer a scheme and get away without fulfilling the promise and without being convicted.
3. There is also no guarantee that the money acquired by the developer by such a scheme will be used for the same project. There is no law to prohibit the developers from using it for other projects or misusing the funds.
4. The stakes can be high for a buyer who goes for such schemes. With such schemes, buyers are usually asked to pay 80-90 per cent of the money upfront. This means that a huge chunk of your budget is locked-in for a specific time. There is a risk if the developer defaults or delays projects. Delayed projects offer lower returns.
Hence, while a guaranteed buy-back scheme is attractive, experts warn buyers to read between the lines before going for such schemes.