Are you looking to buy a house but don’t want to wait for three to four years that developers take to complete projects? Or do you want to live in an area where basic infrastructure is already in place? If yes,your best chance is buying a house in the resale market. This will reduce the waiting period for developing the property and the locality.
Though this will eliminate some risks, still there are many things you must remember while buying a property in the resale market.
Such houses are not necessarily old. The market has a large number of recently-built houses that are owned by investors who want to cash out.
Properties in the resale market can be put into two categories. First, ready houses owned independently. Second, units in projects which are in the construction phase. In such projects, the seller does not own the property yet, but has an agreement with the developer entitling him to ownership in the future.
One reason for buying a house in the resale market can be non-availability of new projects in the area where you want to settle. “In big cities, new residential properties tend to be scarce or non-existent in many central locations,” says Om Ahuja, chief executive officer, residential service, Jones Lang LaSalle India (JLL), a real estate advisory firm.
Or, in areas where new properties are coming up, they may have been sold out. This is particularly true in speculator-driven markets such as the Delhi-National Capital Region (NCR). With investors booking at launch so that they can sell out as the project gets going, anyone looking to buy later has no option but to approach them.
A property in resale is not cheaper than a new one-unless, of course, the structure is old. In urban locations, where land accounts for a very big part of the cost, the difference, if any, between a new and an old structure is small.
The situation is different for projects in which a lot of people have booked houses at discount at the time of launch with the intention of booking profit before the project is complete. In locations such as the Delhi-NCR, Mumbai and Bangalore, such properties are being sold at 5-20% less than the latest prices that developers are offering.
“In today’s scenario of oversupply and plateaued returns, resale properties are available at a lower price in many markets, especially where there is high investor participation. Investors usually sell when they get a reasonable profit and when they feel the valuation has peaked or started to stagnate. They attract buyers by offering a lower price compared to the fresh stock in the market,” says Ganesh Vasudevan, chief executive office, Indiaproperty.com, a real estate brokerage website. There may not be any price difference between ready-to-move houses and underconstruction houses close to the possession date.
“If the under-construction project is close to completion, the price difference will be minimal. The difference will be more in the initial stage, but in such a case the risk will also be higher,” says Ahuja of JLL.
Though under-construction houses may cost less in resale, you must factor in the transfer charges levied by developers to know the total cost of ownership. Many developers charge Rs 100-500 per square foot for such transfer. So, if the transfer fee is Rs 500 per sq ft, the buyer will pay Rs 5 for a 1,000 sq ft apartment. Builders levy this fee to safeguard their interest as otherwise they risk losing new customers when early birds who have booked at a lower price sell their houses for less than the price they are asking for the fresh stock.
“Typically, the launch price is Rs 500 -1,000 per sq ft less than the market price of ready-to-occupy flats in the vicinity. This period is used by investors and speculators to buy below market rates. The transfer fee is levied to deter speculators from selling at less than the developer’s price,” says Shreekant Shastry, vice president, business development and strategy, Ozone Group, a Bangalorebased developer.
Apart from discouraging sale by early investors until all the units have been sold, the fee also helps developers claim a share in investors’ gains.
Rs 100-500 per square foot is the fee that developers charge for transferring property from one party to another
“The transfer fee is the developers’ way to cash in on the price escalation in the market. They are aware of the enormous profits investors make by buying at a lower rate during the launch stage,” explains Vasudevan.
The fee also covers the cost and effort required to execute the ownership change, the reason cited by builders for the levy.
“Transfer fee is charged to meet administrative expenses as transfer of booking involves a lot of administrative and documentation work. It also involves legal issues, which the developer has to address,” says RK Arora, chairman and managing director, Supertech, a New Delhi-based developer.
Supertech does not charge anything for the first transfer, like a lot of developers. Some developers do not charge anything if the transfer is to a family member.
One more reason developers charge the fee is heavy churning of properties by speculators. The ownership of units in under-construction projects often changes multiple times before the end-user gets the possession. Such active trading pushes up prices.
“The fee is at times justified to control active investor participation. But in recent times, developers have increased the fee drastically,” says Vasudevan.
You don’t have to pay the fee at some locations. “The fee has been abolished in Maharashtra. It is hoped that the other states will follow suit. It is a regressive system with no logical basis,” says Ahuja.
You make big purchases only after necessary enquiries. You should conduct due diligence before buying an under-construction property in resale as well. The checks include verifying title records and ensuring that the property specifications conform to the claims.
“Some of the documents one should review before buying are the builder-buyer agreement and original payment receipts against the installments paid. One should also check if any dues are pending with the builder,” says Anshuman Magazine, chairman and managing director, CBRE South Asia, a property advisory.
Before buying a property one should review the builderbuyer agreement and original payment receipts against the instalments paid.
CMD, CBRE South Asia
You should also find out the reasons the owner is selling the property. “If the seller is an investor, there may be valid reasons. The property may have appreciated sufficiently to make a sale attractive,” says Ahuja of JLL.
“If the property is being sold by someone who had originally intended to live in it, there could be negative reasons. For instance, the developer may not have met the timelines. Even the completion of the project may be in question,” adds Ahuja.
A property in a housing society requires the buyer to check its rules. Housing societies control various aspects of services, charges and even sale of properties based on their bylaws. You should get a copy of the rules and regulations from the society and invest only if you are comfortable with all of the housing society’s rules.
“Society bylaws are drafted as a collective check to ensure that the society’s core values, stated during registration, are safeguarded. These can cover any and every aspect of the lifestyle experience offered by the society to its members,” says Vasudevan of IndiaProperty.com.
For additional safety, you can go for a loan as banks usually do due diligence on the property. Many home buyers get their homes part-funded for this additional check even when they have adequate funds.
I was searching the internet to find a topic for writing a blog and I landed upon the home loan types. To my surprise I was not aware that, there are these many home loans in India so I thought why not I share this information with the viewers as it might help them in anyway; I am sure about it
HOME LOAN TYPES
HOME PURCHASE LOAN:
This is most common loan that everyone is aware of. If you are planning to buy a new home or flat, then, this is the loan for you. Interest rate for this loan is either fixed or floating type. Going for fixed rate of interest is bit costly as the interest rate will be bit higher compared to floating rate of interest?
HOME EXPANSION LOAN:
You can get this loan, if you are planning to add a room to your house or if you want to build additional floor. That is good news isn’t? Maybe you are planning to rent your house in the first floor but you don’t have one, then you can go for this loan and in due course add an extra income. This loan will come in handy if your family expands and you need more space for living.
REFINANCE HOME LOANS:
When the rate of interest is higher for a home loan and you want to switch to another loan, then this is the best option. Another reason one can go for refinance is when one wants to reduce the risk from an adjustable-rate by switching to a fixed-rate loan. A mortgage refinance has the same costs as a mortgage, such as loan application fees, loan origination fees, and appraisal fees that must be taken into consideration. Though homeowners will have to pay these costs upfront, in the long run a refinance with a lower interest rate is likely to save more money. Overall, when refinancing for a lower interest rate, the main deciding factor is if savings on interest will be greater than the total refinance costs and prepayment penalties.
Many financial advisors suggest that homeowners look for at least a two-percentage point reduction in their mortgage prior to refinancing. Homeowners can also use online mortgage calculators to get a better estimate of how much they can save by refinancing. However, online mortgage calculators usually do not take into account all the costs incurred with a mortgage refinance.
HOME CONSTRUCTION LOAN:
If you have a land and planning to build a house then you need to apply for this loan. The repayment period and the processing fee and other charges are little different from home loans. If one wants to include the land cost in the total construction cost then the land has to be bought within a year. If the land is bought more than a year ago then his clause will not be applicable.
HOME CONVERSION LOAN:
One morning you wake up and decide that you need a better home with all the luxuries and you want to sell the existing home and move on, then this loan will help you to make the switch. You need not apply for new loan; your exiting loan will be transferred without the prepayment hassles. Decide on the new home you are planning to buy; analyse the extra amount you are going to pay for the new home, how much remains you have to payoff for the old home.
A scenario arises where you need cash to fulfill some commitment, and then you can mortgage residential or commercial property. But you have to sign a declaration that the fund will not be used for illegal activities and for other fraudulent purpose. The loan amount depends upon the income eligibility and bank norms, which change from time to time.
NRI HOME LOANS:
Extending the arm to the NRI the banks are providing home loans to them. The process is bit elaborate.
A bridge loan is availed to fill the short temporary financial gap. When you plan to buy a new house and need time to sell off the old house, this loan comes in handy. The interest rate is usually higher and time period is usually one year. Bridge loans are bit risky as you may not know when you may be able to sell the old house and in a blink you might start paying for two mortgage loans. It also has prepayment charges if closed earlier
So next time you think about loans take a good look at these home loans; pick up your mobile and call your favourite banks or browse the net to apply for this loan.
The Chennai Corporation is all out to tackle one of the city’s chronic irritants — traffic jams.
On Friday, the Corporation, at its council meeting, passed a resolution for a study to analyse various means through which clogging on the city’s roads can be reduced.
An array of traffic control solutions such as congestion pricing, a bus rapid transit system, public bicycle-sharing and inter-modal integration may soon be implemented, based on models in China and Singapore.
A team of seven Corporation engineers will visit Guangzhou, Shenzhen, Hong Kong and Singapore to study traffic solutions adopted in these cities.
The engineers are: R. Jayaraman, D. Rajasekhar, S. Rajendran, S. Sudhakar, A.S. Murugan, R. Manoharan and R. Srinivasan.
The study, which will cost Rs. 20 lakh, is expected to produce practical solutions, which will then be implemented to ensure traffic management in the city is on par with other international metropolises.
The engineers will be assisted by the Institute for Transportation and Development Policy as well as a few other non-governmental organisations.
Many of the 354 km of bus routes and 5,563 km of interior roads are likely to be covered under the new proposal, which will primarily involve congestion pricing.
Congestion pricing involves a surcharge for users of transport when the system is in excessive demand, such as during peak hours.
It could involve charges for those using private vehicles on crowded roads and is aimed at reducing the number of vehicles on such roads in order to ease congestion.
“Congestion pricing models have been successful in cities such as Singapore and London. While Singapore has electronic road pricing, Hong Kong has a very good inter-modal transport integration system. Every city has various options, and all of them are trying them in various degrees,” said Raj Cherubal of CitiConnect.
“In the 1960s, London started congestion pricing. Though it was opposed at first, one mayor finally managed to implement it,” said a senior traffic expert.
“In Chennai, such efforts require a lot of determination and political will by the government. Engineers were not able to implement the loop-buried vehicle activated signal on Arcot Road two decades ago, as the devices were damaged by road cuts,” he said.
He added, “Bus bays are a simple concept, but still, they have not been implemented properly. It is very difficult to implement anything here, but we have to try and experiment with various solutions for better traffic management. A lot of research has to be done before implementing any solution, including congestion pricing.”
Industries minister P Thangamani on Friday said six new industrial parks will be established across the state spread over 8,000 acres. He told the assembly that these parks would come up in Sriperumbudur, Cheyyar, Tuticorin, Madurai, Oragadam and Tindivanam.
The minister said the new park in Sriperumbudur will generate direct employment for 3,000 persons and indirect jobs to 20,000 persons. This park would be spread over 1,780 acres. “Many MNCs have evinced an interest to establish units in their park,” the minister said.
The Cheyyar industrial complex would entail an expansion on 2,300 acres of land while in the case of Tuticorin it would be 1,179 acres under Phase II for the Thoothukudi industrial complex. In case of the Madurai industrial park, the government is in the process of acquiring 1,478 acres and 720 acres of land in the Tindivanam industrial park. Land extending 616 acres will be added to the Oragadum industrial growth centre under Phase II of the project.
In addition, SIPCOT (State industries Promotion Corporation of Tamil Nadu) is also in the midst of preparing a comprehensive plan for Sriperumbudur with the help of consultants to upgrade basic social infrastructure and also housing facilities for employees in the region. “The government has issued orders for 100 acres of land each to be allotted by SIPCOT for setting up separate industrial parks for investors from countries like Japan, Korea, Finland, Germany and France to attract more foreign investment,” Thangamani said. The allotment would be made after acquisition of lands in the Sriperumbudur industrial park expansion (Vallam-Vadagal scheme).
In addition, SIPCOT has identified another 25,000 acres to develop the industrially backward southern districts. “It is proposed to create a land bank of 20,000 acres to fulfill the Tamil Nadu Vision 2023 document,” the minister said.
SIPCOT is exploring the possibility of establishing a water treatment plant to meet the present water requirements of 10 MGD (million gallons per day) for industrial park requirement either through a public private partnership model or with Chennai Metro Water.
TIDCO (Tamil Nadu Industrial Development Corporation) is also in the process of constructing bio park Phase II that will provide an additional lab space of 6.13 lakh square feet for bio technology, pharmaceuticals, nano technology and other research and development activities at a cost of Rs 150 crore at Taramani, Chennai and is also planning a LNG (liquefied natural gas) import terminal at an estimated cost of Rs 4,320 crore near Ennore.
However, the recent fall in the gold price has raised questions whether the returns given by these relatively safer investments are likely to sustain. While the gold price has fallen 20% from the peak, are the real estate prices also likely to correct is the question asked by the most.
Unfortunately the correlation cannot be verified as there is no long term real estate index data in India that will help with any reliable conclusion.
However, an analysis done by Karvy’s research team on 20 years data of the Hong Kong real estate index and gold price showed that the prices of both have 81% correlation. Similar holds true for the Indian data in 2012-13.
According to the experts the reason for this is that the correction in the gold price makes people sell their real estate investments and invest in the yellow metal.
Although this cannot be used as a certain conclusion, if you are looking to buy a house and were not able to do it earlier due to high real estate prices, you can hope this theory to hold true.