Real Estate Sector- One of the most Globally Recognized sectors and the 2nd Largest Employer in India after Agriculture- normally considered to be one of the most Safest Investment avenue & one of the Most Burgeoning markets of the Indian economy during the ‘BOOM’ time- had been facing a downtime the past few years due to the slurpy economy and the Low Investor Sentiment- leading to an average 15% downfall in prices over the vast majority of the Real Estate sector.
However, come 2016 and things have been witnessing a change- especially with the BUDGET 2016 which has had Growth Accretive Measures announced for the Real Estate Sector in India- which is a welcome step for all of us who are interested in INVESTING a small portion in this market or for those who are looking to FULFILL THEIR DREAM of their OWN HOUSE.
With such a positive approach and with the developers also learning from their Yester-Year mistakes- now focusing on Project Execution & Delivery- 2016 definitely seems towards heading for improvement and will also the sector moving from an INVESTOR-DRIVEN to an END-USER DRIVEN CYCLE. With all these improvements and forward movements in Real Estate- I agree with the view that when the turnaround comes, it will be much sharper than what anyone is expecting- And thus, the question for the END-USER seems to be just one- ORIGINAL BOOKING/ UNDER CONSTRUCTION OR RESALE PROPERTY- WHICH IS THE BETTER BUY..?
The Biggest dilemma while purchasing a flat being faced by the END-USER is one- whether to buy a RESALE FLAT or to buy an under construction unit directly from the Builder under ORIGINAL BOOKING..?
The general understanding revolving around this phenomenon is that buying a Resale property is cheaper than buying an Under-construction unit directly from the Builder. This is based on the normalized perception that the Price of the Property cannot fall below the Pre-Launch price of the property- which is actually a false understanding. This is so because the prices in the Real Estate Market are governed by the market forces of demand and supply. So, for example, if the demand for a project in a particular area is low, say due to an abundant supply of similar projects, then the investor base which has invested in that project at Pre-launch prices will try to exit the project at their original cost or may be even lesser than that, in order to minimize the loss suffered. Such a situation proves to be extremely cost effective/ profitable from the END-BUYER perspective.
Such an argument should not deter anyone from considering a Resale property. This is so because the Resale value of the property indicates the final value of the property inclusive of the Base rates, PLC’s (Preferred Location Charges- floor based or location based), EDC/ IDC (in case of projects based in the NCR region), Parking charges, Service Tax, VAT, etc. which has been paid by the Original buyer to the Builder. The only charges not included above are the Registration and Stamp Charges which is to be paid at the time of execution of the FINAL SALE. The COST of the FLAT in case of an UNDER-CONSTRUCTION/ ORIGINAL BOOKING unit is quite subjective, however, and can be ascertained only once the final amount has been paid in full.
There is an altogether different level of Research work that goes in to place while looking for a Under-construction unit as against a Resale property. It’s the biggest investment of your life and thus, requires a lot of research, sacrifices, effective utilization of savings and in most cases- Signing on for a BANK LOAN.
While buying an Under- construction unit, you need to zero-in on a LOCATION(s) of your choice, look at the options available from various builders in the area in line with your BUDGET, DEVELOPED nature of the area (in terms of accessibility to the schools, hospitals, market areas, etc.), TRANSPORTATION, QUALITY OF CONSTRUCTION, REPUTATION of the BUILDER, etc. After doing all this detailed research, you would then need to go through the detailed clauses and T&C’s of the agreement that you would be entering into with the builder and once finalized you would be finally making the booking for your dream house/ flat, as the case may be.
Well your work DOES NOT END HERE. In most cases, the END-BUYER would then also be looking to opt for a BANK LOAN with a preferred bank and would be going through a whole lot of paperwork and then, depending upon one’s credit rating and loan taking capacity, a loan would be sanctioned by the bank. While in other cases, the END-BUYER’s with a slightly better financial background would just pay out of own savings/ earnings.
The main problem area starts when all the payments/ installments being paid on time to the builder (either by own or through Bank Loan), the builder will keep on asking for the next one at specified intervals but due to some or the other reason, your possession for the project ends up getting delayed by anywhere between 6 months to an Year- even 2 years at times, as is normally the case with all the builders.
Now, towards the end of completion of the FLAT, and depending upon the Reputation of the builder with regards to the Quality of the Material/ the timeliness of POSSESSION being offered – you would either be satisfied with the Quality of everything provided to you in your dream home or you would start noticing problems such as:
- Incomplete paint work
- Drainage/ Sewage problems
- No club house or similar such promised amenities
- Poor quality of construction
- Leakage in the Bathroom/ Washroom area
Apart from this, for the majority buyers with a Bank Loan in place, their HOME LOAN EMI’s would have already started before the actually possession of the flat upon the payment of the installments. You always need to ensure that while going in for an Under-construction/ Original booking property from a Builder, alongside the on-going construction, you would also need to check regularly for all clearance certificates, challan’s and other such important paperwork, whilst ensuring that all the installments being demanded by the builder are in actual alignment with the on-going construction at the project site- in order to ensure you’re not falling prey to any unscrupulous activities from any builder.
Nowadays with the Legal framework strengthening around the Real Estate market, Builders ensure that all their Paperwork is in order to avoid any unnecessary legal downfall on them which may lead to defamation for the builder and its projects.
The RESALE part of the REAL ESTATE sector, on the other hand aligns a different set of activities to be put into place before jotting down on a House/ Flat of one’s choice as the Resale Market not only offers ‘Under-construction’ properties, but it actually includes everything available within the Real Estate market- ranging from Flats, Independent Houses, Villas, Shops, Commercial Properties, etc. which have already been sold at least once (with a transfer of ownership on papers) and are now available for Sale by the current owner.
It is always good to contact a Real Estate agent/ Property Dealers who work within the area of your choice and deal in the kind of property that you’re willing to buy- as these agents/ dealers have knowledge of majorly everything that is available for sale within the area in question. While looking for a Resale unit, there are a couple of items that you need to look at and inspect for completeness once you finalize on your choice, before actually concluding the deal on this property.
- BASIC DOCUMENTS should be complete- Check all documents such as Sale Deed (Deed declaring transfer of ownership to the current Owner of the property), Mother Deed (Parent Deed which includes the details of the sale of the property from the beginning), Approval plans as approved by the Municipal Authority, Possession certificate, Conversion certificate (in cases of conversion of property from Agricultural to Residential/ Commercial as the case may be), Conveyance Deed, Perpetual Lease Deed, Last paid Electricity & Water Bills, Mutation Documents, etc.
- EXISTING LOAN on the Property, if any
LOAN ELIGIBILITY– As stated earlier, majority End-buyers would require a Bank Loan for buying a New/Resale unit. The Loan eligibility needs to be checked for the property in question, as sometimes Bank’s do not provide loans to properties in certain areas or may be due to the age of the property, depending upon the regulations of the Bank in question.
- PROPERTY VALUATION– It is absolutely IMPERATIVE for THE BUYER to check for the value’s of similar properties locally within the area as sometimes, the dealers tend to inflate the value of the property in question in order to make additional profits/ commissions, etc.
- TRANSFER CHARGES, if any- These charges are required in order to meet the administration and documentation expenses of the Builder, at the time of ownership change, in case of Flat/ Society.
- BUILDING APPROVAL PLANS– for CONSTRUCTED/ UNDER-CONSTRUCTION properties
- Latest HOUSE TAX Paid Receipt- in cases of CONSTRUCTED properties
- OCCUPANCY CERTIFICATE for a constructed property
While the list of documents to be checked and the amount of time taken in executing the SALE is faster when buying a RESALE PROPERTY as compared to buying an UNDER-CONSTRUCTION UNIT IN ORIGINAL BOOKING from the builder- what you need to go in for is totally an Individual decision and depends majorly on 2 major facts:
- The Amount of time the Buyer has in mind before which he is ready to move in to the Dream House of his choice- if looking for a CONSTRUCTED property.
- The amount of Budget available with the Buyer which is a major factor in helping to decide if there is availability of a suitable property in the area of choice or if the buyer needs to look for an UNDER-CONSTRUCTION property- post which he/ she would need to evaluate on the options available from the Builders and in the Resale market and which suits him/ her the most in terms of the Final price in accordance with the BUDGET.
THE REAL ESTATE MARKET IS RAPIDLY IMPROVING ALBEIT AT A SLOW & STEADY PACE, BUT IT DOES SEEM LIKE THE RIGHT TIME FOR THE END-BUYER TO FOCUS ON BUYING HIS/ HER LONG AWAITED DREAM HOME- ORIGINAL BOOKING OR RESALE- WELL I GUESS THE ABOVE DETAIL WOULD DEFINITELY ANSWER THAT QUESTION FOR YOU..!!