Should I purchase a resale property or under-construction property? Confused about selection of a right property? Read on.
Entry and exit in real estate, is always a challenge. Selection of resale property or under-construction property is also depends on need, budget and investment type. However many investor face challenging to choose a right property. It’s an individual choice to select resale or ready to move in property. Considering current scenario of real estate, market trend and your need, you have to take a wise decision.
Let’s understand, Pros and Cons of resale / ready possession property
Pros of Ready Possession / Resale Property
Saving of rental income / rental earning: In ready to move in property, buyer can move in to a property once sale deed completed. If buyer is moving from rented home to own home, for sure resale property buyer can save money instead of paying rent as well as EMI at the same time. In resale property (home / commercial) investor can start earning from newly purchase property by renting it out. This is the biggest advantage of buying a ready possession / resale property.
No guess / estimation of carpet area: In ready possession property, you need not to guess or estimate carpet area. You can measure an actual carpet area.Loading in older buildings / flat is close to 20% to 25%, whereas loading in newly constructed buildings / flat is more than 30%.So if resale property salable area is 1200 sq.ft, with roughly 25% loading, so carpet area will be around 900 sq.ft carpet area.
Feel and see the real picture of a property: It’s always appealing to view brochure of under-construction property, whereas in reality the picture will be different. In resale property you can a see a real picture of property / apartment, locality and surrounding area.It’s very appealing to see amenities and society facilities in brochure, whereas in reality these amenities may not appealing as it was shown in brochure / real estate advertisement.Real and actual condition of amenities / society facilities can be a strong negotiation point for both seller and buyer. Eg. If amenities are well maintained by society, it’s a strong negotiation point for a seller, if not it’s a strong negotiation topic for a buyer.
Property Maintenance Cost Evaluation: In resale property society / condominium decides maintenance cost considering number of flat and amenities, so before you buy a resale property you need to demand outstanding maintenance statement from society / condominium. This outstanding maintenance cost will give a clear idea about monthly maintenance cost of the society / condominium. If society / condominium not yet formed, NOC from builder required to proceed with registration of property and housing loan sanction. Builder never issues NOC if maintenance or other payment to be paid by seller. Due to additional amenities like podium garden, gym, swimming pool in new properties maintenance will be higher as compared to 5 to 10 years old society.
No GST on resale property: If completion certificate is issued, such real estate properties considered as ready-to-move-in property. Hence no GST applicable on ready to move in property.
No worry about property completion and possession: In big township under-construction projects buyer must wait for a longer tenure, this waiting period quite longer i.e. it may take 3 to 4 years time to get possession of dream home. In resale property deal; you need not to worry about long waiting time for construction completion. Once property sale deed and payment completed, buyer can move in to dream home or rent it out. In resale property deal, you need to worry about delayed possession, litigation on under-construction property.
No difficulties in verification of legal document and litigation status of resale property: If you approach bank for housing loan, bank will demand legal documents like completion certificate, possession letter form builder, parking allotment letter, property tax receipt, NOC from society / condominium, all previous sale deed and project legal documents. Bank advocates cross check all legal details of property including litigation details. If there is any issue in legal status of property, bank advocate do specify the same in legal search report. Without clear title bank never process loan application, so it’s easy to cross check legal status of resale property. If you are planning to buy resale property without bank funding, it’s better to cross-check legal status of resale property with legal expert.
Get acquainted to locality, connectivity: It’s easy to check locality and connectivity in resale property, whereas in new construction property it bit challenging if the property located in outskirt of city.
Know your neighbors & society members: In resale property deal it’s easy to know your neighbors. In under-construction property deal, it’s challenging to know your neighbors as most of builders never disclose name of other buyers. Till you get possession of your property you will be clueless about what kind of neighbors you would have.Once you complete sale deed and move in to resale property, it’s easy to connect with society / condominium flat owners group via social media like Whatsapp or Telegram.
Cons of Ready Possession / Resale Property
Advance & Cash Payment: In resale property deal, probability of cash payment demand is very high. Seller may demand cash payment from 5% to 15% of property cost in order to save TDS.Legally cash payment transaction is not allowed. If you are opting for housing loan, cash payment will not be considered as a legal transaction. In most of the cases, such cash transaction demands turn in to deal breaker.Remember property & life insurance linked with your total agreement cost. If you pay 5% to 10% of agreement cost in cash, this cash transaction will not be reflected in total agreement cost and insurance sum assured value would be equivalent to agreement cost only. Incase if the deal is cancelled due to conflict between seller and buyer, it will be challenging situation for a buyer to claim cash transaction. So, it’s better to avoid cash transaction.Another challenge with resale property deal is, no choice of part payment / installment. In primary market deal, you will have freedom to pay installments. In resale property deal, you have to pay 20% first before registration and 80% on or before sale deed. Majority of the seller in resale property deal expect a quick sale deed transaction. If you are opting for bank funding and in case funding process delayed, you have to deal with seller’s follow-up for deal closure.
Litigation of Property: It’s always a wise decision to get all property documents (photocopies) from seller and proceed for legal search report by advocate before you go for agreement to sale. Once you done with agreement to sale and bank observe any litigation on property, it will impact loan disbursement process. If litigation on property is a considered as a critical litigation, bank may reject loan application. In such cases, it’s not only a deal breaker but also a financial loss to buyer. Buyer must pay stamp-duty and registration charges to a government before agreement to sale. Once deal cancelled, it’s tedious and time consuming activity to claim stamp-duty reimbursement. Both seller and buyer must visit registration office to cancel agreement to sale. Seller have to pay to lawyer for agreement to sale cancellation.
Payment for NOC / ownership transfer fee: NOC is mandatory to proceed with sale deed and bank funding. NOC from society will be issued only if buyer clears all outstanding due. It’s both parties responsibility to cross check outstanding maintenance amount and clear it before proceeding with sale deed. If society / condominium is not formed, builder / developer may demand transfer fee in order to issue NOC.
Non-refundable / non-transferable one time maintenance: In some lease hold property transaction, one time maintenance payment by first owner will not transferred to second owner. In such cases, buyer has to pay one time maintenance fee and it could be an additional financial burden as most of the banks do not provide funding for one time maintenance.
Brokerage: If you are approaching seller through a broker, it’s an additional financial burden to pay 1% to 2% brokerage on total agreement cost. Eg. If property agreement cost is 60 lac INR & deal is to pay 1% brokerage, you have to 60,000 INR brokerage to a broker. This is an additional financial burden and you may not a get a good service from broker. Bank never provide funding for brokerage fee.
Deteriorating Construction Quality and society facilities: If you planning to buy 15 to 20 year older property, make sure you are not paying for deteriorating construction quality and deteriorating society facilities. In old construction property you will not get a modern amenities like swimming pool, gym, amphitheater and modern elevator. It’s very common to find compact and manual elevator in old apartment. Non Availability of parking space: Shortage of parking space / non-availability of covered parking space and non-availability of visitors parking space, these phenomenon are very common in older apartment. If a car parking was not allotted to a resale property, you will not get car parking space in agreement to sale / sale deed. It’s a wise decision to cross-check car parking allotment letter and visit car parking space physically before you proceed with agreement to sale.
Repainting / Renovation Cost: If property internal / external painting is not appealing or in good condition, buyer has to fix it before moving in to resale property. Repainting cost depends on property area and type of paint finish you want.
Furniture condition / Renovation: Design / pattern of floor & wall tiles is always keep changing in market. It’s a very tough job to find similar texture wall / floor tiles. If you want to extend exiting kitchen in L-shape, either you have to change entire kitchen tiles or you have to drop a plan to extend kitchen. Furniture life and it’s appearance is subjected to time, if you want to replace exiting furniture with a new furniture, remember you have to consider furniture de-installation cost as well. In new / under-construction property, you need to pay for furniture de-installation, whereas in resale property you have to.
Thus, before you decide to get in to resale property deal please consider pros and cons of a resale property.