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

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
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