Tips to Better Negotiation

Experts from the finance side always tell you to negotiate for a lower price on everything from buying an expensive car to purchasing your home. But this requires you to do two things that are kind of uncomfortable in any situation – talk about money, and try to get someone to do you a favor. But we are presenting some tips that are sure to help you make the whole thing less painful.

1. Homework always helps

Most important is the fact that having good information beforehand is one of the key principles of negotiation. How to Convince, Collaborate, & Create Your Way to Agreement says that if you have done your research and understand the reasonable value of the item in the market and understand what you are willing to pay, you will be in a much better position to support the reason you are negotiating for a better price.

Well, doing your homework isn’t just about finding out what the typical going rate is for something, although that’s just a small part of the process. It is also about knowing when you’ll walk away.

It important to note that before you negotiate on anything, you need to ask yourself how important it is for you to get it, and at what point you’ll be willing to walk away.

And the way you negotiate for something you absolutely need, that day will be different than the way you discuss something you could buy at any point in the next six months. And if you know beforehand what constitutes a good deal to you, you won’t get dampened by anything.

2. Make your thoughts clear

Clear thinking always helps in making the right decisions and people often shortchange themselves by assuming certain items are non-negotiable, or by assuming negotiation is “greedy.”

It becomes important for you to express your concern respectfully, keep your feedback as objective as possible, and you will be surprised how often people will understand your feelings and give in positively for you.

And if you’re worried about seeming greedy or getting denied, think about what you bring to the table. Also, think about why someone might want to say yes to you, not just why they would want to say no.

3. Always Aim High

You should always looking for the higher plane and anchor your thoughts accordingly – “ask” as aggressively as you possibly can, while being able to back it up with black and white.

And yes, one big mistake many people make is to assume that when someone says “no,” the matter is closed for discussion. This is true that, often the timing just was not right the first time so a second ask might do the trick for you on the positive note.

4. Always Anticipate counter-arguments

You need to look for counter arguments while you negotiate. This is one of the basics of the art of negotiation. You also need to prepare yourself to present interesting facts to pre-empt counterarguments: Once you ask and give a rationale, surface the objections you think you will hear. This will always help you to negotiate in a better manner and create wining situations for yourself.

Assured Returns, but at Your Own Risk

Real estate experts do agree that consumers should invest in assured returns projects at their own risk

Designed, exactly to match your vision and deliver wealth for you and your family, there are full-page advertisements, billboards at prominent locations, and even TV commercials offering you a juicy 12% per annum “assured” return on an upcoming residential or a commercial project.

This is a tricky situation, especially at a time when we are going through a topsy-turvy equity situation and high inflation is reducing the real return on even bank deposits, in such a situation, offer of a 12% return on a long-term appreciating asset like real estate sounds too good to be true, actually.

So how does assured returns schemes work?

If you buy in too such an assured return scheme, you buy a property outright – even when the completion of the construction is two or three years down the line – with either your own funds or a loan from a bank. For instance, is you pay Rs 1 crore for the flat. During the construction period, you get Rs1 lakh a month that is equivalent to 12% per annum of Rs1 crore – through post-dated cheques the builder gives you.

Most interestingly such schemes also provide with an option that once you get the possession of the flat, you can either exit the project or continue with the agreement, but the terms could change as the property will be leased out to a tenant and the developer may share the rent with you.

This looks fabulous but there are some unanswered questions

So the big question is from where is the developer giving a 12% return to his customers?

According to experts, in such a situation, the yield from residential housing is usually in the band of 2-6%. That means the annual rent as a percentage of the capital value is about 4%. And in such a scenario, a Rs1 crore property should get a customer an annual rental of about Rs 4 lakh a year or Rs 33,000 per month.

And hence the big question of how is it that the builder is offering you a return that is three times the rental? There is obviously some other story at play.

Well, here is the inside story, experts in the real estate business opine that when the absorption levels in real estate projects have deteriorated, there is an increase in inventory across prime real estate markets. Hitting them hard, the excess supply is making some developers less creditworthy in the eyes of the banks and private equity (PE) that traditionally funds their business. This is prompting these developers to look for other funding options, such as getting hold of bank finance but routing it through you, the buyer, because you get the loan at much lower rates.

As expressed by most of the business insiders, this is surely a measure taken in desperation to raise economical money from investors and buyers. On the other hand, if the same developer looks for a financing option from banks, the developer would get the money at a high cost (at a rate of 14-15%). Thus for him, getting money for 10-12% means cheaper financing.