Resale flat or under construction flat

"It is a comfortable feeling to know that you stand on your own ground" - Anthony Trollope

Whenever we want to buy a property we always have two options with us, whether to buy a resale property from a previous customer or an under construction property directly from the builder.

Let us look at the advantages of a ready property. One gets immediate possession. As a result, the buyer either moves in into the new flat and escapes paying rent or else he earns rental yield on the property if he prefers to stay in his previous location. The buyer also avoids the risk of fraud from the developer’s side which is prevalent in the Indian market. This can be either in the form of specifications not being according to what was promised or else there is a delay in completion of the project. The buyer also enjoys tax deduction on the home loan from the beginning.

If a property on resale is old, considering other parameters of the house being same, it should sell at a lower rate than an under construction house. Wherever the land price is high and accounts for major cost of the property, the difference in the resale price and an under construction price is less. But in cases where builder launches at a discount to offload major part of his inventory, such properties will sell cheaper than the builder’s price. Reason being that the investors have already made a profit that they intended to in the first place. Moreover, taking possession would require extra cash outflow in form of registration and stamp duty. These are the people whose intention is just to earn profits and sell it and move to other launch which will give them higher returns. These sellers attract buyers by quoting a lower price than the builders.

When construction is at the stage of completion, generally the prices of builder’s inventory and those in the resale market tend to merge. The difference is more in the initial stage but in this case even the risk is higher.   

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But there are circumstances when the price of ready possession will be higher than under construction. This generally happens in mature markets. The builder has sold all his property during launch. Now if a buyer wants to buy a flat in this locality, maybe because his office is nearby from this location or his kids study in a nearby school, he has no option but to buy from the resale market. This increases the price in the resale market.

Due-diligence

Whatever be the case, whenever you buy a property in the resale market or from the builder directly, one should always do his side of due diligence. One should verify the title records and ensuring that the property specifications confirm to the buyers.

Also when buying a resale property, one should always look for builder-buyer agreement and the payment receipt of the seller for the installment paid against the house. In addition, one should always look at the society bye-laws which all residents of the society are expected to follow. If you are uncomfortable with these bye-laws, it makes more sense to look for other properties.