Skip to main content

A checklist for buyers of resale property

FEARS of projects getting delayed or stuck due to developers being cash-strapped or regulatory issues make property buyers jittery. Many may, therefore, prefer the safety of ready properties to the uncertainty invariably associated with under-construction ones. However, there could be several issues with buying ready properties, too.

Starting with price

Despite their age, ready property prices are rarely discounted. Due to the prevalent high real estate prices, generally, the cost of a ready property and an under-construction one are almost par. In fact, sometimes, ready properties may even be available at a premium.

Verification of title:

In case of under-construction properties, buyers are advised to check whether the developer has a clear land title. In case of re-sale properties, though, the property ownership title must be checked carefully to ensure there are no other claimants to the property. For instance, check if the property is jointly held and if so, all the co-owners have authorised the sale. Similarly, if the property was inherited by the seller, check if there are any other legal heirs involved and whether they authorise the sale. (In such cases) if the sale has been carried out without the consent of all owners, it is an invalid transaction. There can be legal disputes in future. The buyer can lose his claim over the property entirely despite paying the entire price.

Finance:

The entire amount must be paid at one go for ready properties. Unlike, under construction ones, where the payments are typically linked with the construction stage and can be staggered over a period. This could be a problem especially if the lender has approved a lower loan-to-value (LTV). That is, say the property is priced at 1crore. The maximum financiers can lend is 80 per cent of the cost or `80 lakh here.

However, the bank or housing finance company can lend well below this level based on their assessment of the merits of the case, leaving you to cough up lump sum amounts.

Lenders undertake their own valuation studies of the properties. There could be a difference in the valuation of the bank and the cost agreed upon by the buyer. This could raise questions about the genuineness of the transaction, leading to lenders lowering the LTV or in extreme cases even rejecting the application. Re-sale property transactions within families (for example one sibling selling a property to another sibling) can be especially tricky and are viewed warily by bankers. Reason: there could be a possibility of kickbacks.

Another common barrier to getting finance for re-sale properties can be its age. In case of properties that are 15 - 20 years old, banks carry out technical studies to confirm the quality of construction. These are mandatory processes. But, they can prolong the process of loan approval. Despite these issues, bankers say financing a ready property purchase is the ideal scenario for them, provided all the above checks yield positive results.

Miscellaneous:

There are also some micro checks involved, peculiar to re-sale transactions. The previous owner may have outstanding dues on the property like utility bills or society maintenance charges. Prior to finalising the sale, ensure you collect a copy of the latest payment receipts. You could even verify with the society secretary if there are any dues you havent been informed about or any major building repairs being planned in the near future to avoid unpleasant financial surprises.

With many old buildings, a common grouse is the unavailability of sufficient parking space. You can use this for negotiating the property price (if parking is unavailable).

Bottom line:

The amount of homework and due diligence to be carried out in case of ready property purchases is at par (if not more) with that of under construction properties.

Despite age, prices of ready property are rarely discounted. In fact, sometimes these may even be available at a premium
 

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

Mutual Fund Review: Reliance Regular Savings Equity

    Despite high churn, Reliance Regular Savings Equity has managed to fetch good returns   In its short history, this one has made its mark. Though its annual and trailing returns are amazing, the fund started off on a lousy note (last two quarters of 2005). It managed to impress in 2006 and was turning out to be pretty average in 2007, till Omprakash Kuckian took over in November 2007 and wasted no time in changing the complexion of the portfolio. Exposure to Construction shot up to 28 per cent with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects . Exposure to Engineering was yanked up (18.50%) while Financial Services lost its prime slot (dropped to 6.69%) and Auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average: 25.70%).   When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But even its high cash allocations could not cushion the fall which hovered around the category average. ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now