Prime Concerns of Second Hand Deals
If you are considering buying a property from the secondary market you can steal a great deal, but be wary of sales hounds.
Buying a resale property has its benefits, but there are certain challenges that a buyer may face at the secondary market. For example, while you can steal a great deal in areas where there is excess supply of new residential units, in areas where supply is scarce one should not expect a discount. But in both cases, you would get the benefit of a ready-to-move-in apartment, where you get to buy what you see, and not worry about delivery delays. However, if it is an old construction, challenges, such as cost of repairs - masonry, plumbing, electrical wiring and fittings - and proper documentation, more so, if the property has changed hands more than once, could be a damper. Besides, it is also difficult to get a loan for constructions of over 20 years. Also, if the property was not registered in the first place, the onus of paying the stamp duty in arrears also rests on the buyer at the current rates.
That said, resale properties are sold either by primary owners or investors. Therefore, the chances of a good deal, if you can negotiate well, especially in distressed markets, are ample. But, due diligence and proper research is key to buying your dream house in the secondary market. Says R. Vaithianathan, MD, Tata Capital Housing Finance: "While a choice between new and old property is fairly subjective, in the current market, resale flats have proven to be an affordable solution for the accommodation needs of home buyers. However, buyers need to be cautious while purchasing such a property."
The most important aspect of buying a second-hand property is to verify the documents, including the sale deed, encumbrance certificate, no objection certificate, possession certificate, latest property tax receipt and occupancy certificate. Along with these, it would be prudent to check the property title and confirm that no other individuals have claim to the property. Says Ashwinder Raj Singh, CEO, Residential Services, JLL India: "It is important to check that all documents are in order. It is also advisable to check for the property title that will tell you how old the property is, and how many owners it has had since it was constructed."
So, take legal help to verify the documents. "Always insist on the 'chain of documents', which includes partition deeds for the land as well as agreements for buying and selling of the property till date. In addition, make sure all permissions, such as a conversion order issued by a concerned authority, are in order," says Navin Chandani, Chief Business Development Officer, Bankbazaar.com.
Valuation and Inspection
Once you zero in on a location, talk to brokers and residents of the area, and visit property portals to get a correct approximation of the price before you start negotiating. Besides, visit the property in person and inspect it in detail to look for any discrepancy.
Resale property buyers must check whether the property has an existing loan against it, because it is the responsibility of the buyer to ensure that the property is not mortgaged. "Ensure you collect necessary documents from the seller and involve the concerned bank that will authorise the sale after an existing loan is paid off so that you receive the required original documents." adds Raj Singh. Chandani agrees: "The owner also needs to procure a document from the bank affirming that it agrees to give the documents to the buyer after the full repayment of the loan, along with a no-dues certificate."
You must also check your loan eligibility and whether banks are ready to finance the purchase. "Buyers should be aware of the age of the property as most financial institutions tend to shy away from financing homes older than 20 years. On the positive side, if the apartment is 25 years old, or more, you can redevelop it, which would result in a higher FSI allocation and, a larger home," says Vaithianathan.
It is also important to understand the requirements of the seller because everyone is not selling the property to make profits. Based on that, negotiate to the maximum, taking into account the current market rates. Whether it is a new or resale property, take time out to find out about the location and the amenities available. "Conduct basic checks of the building structure and plumbing and wiring before buying an old property. It is a good idea to go for societies that are less than 10 years old. They will cost lesser than new apartments in the area. At the same time, as they are not very old, you will need to spend less on renovations. Also, check if it has car parking facility and security services. Power-back up facilities, especially in cities where electricity problems exist, are an additional plus," adds Chandani.
Maintenance charge is levied for maintaining the common areas, including car parking, lobbies, staircase, lifts, gardens and security rooms. Says Surabhi Arora, Senior Associate Director, Research, Colliers India: "Maintenance charges generally depend on the amenities in the society and range between `2 and `5 per sq ft per month in mid-range societies. Besides, one has to pay for power back up - the charges are between `13-15 per unit." Maintenance is calculated on day-to-day expenses incurred by the apartment association as well as to develop a corpus to undertake planned development or long-term maintenance. The common heads are service charges for housekeeping, security, common area electricity, repairs and maintenance of the lift and generator; repairs and maintenance of the building(s); water charges; interest on defaults; and sinking fund. In addition, the association may also charge parking charges, non-occupancy charges, and insurance charges. Some associations may also collect property taxes and pay them directly.
"Do remember that new projects offer a host of facilities like swimming pools and gyms that increase the overall maintenance charges even if you don't use those facilities. Older properties with no such facilities can reduce your maintenance bill, but old structures come with their own set of issues like required water proofing or structural issues," says Singh.
All said done, it would be prudent not to opt for a property that is very old, given the cost of repairs and limited facilities that it would provide, but even when you buy a second-hand flat in a new project, go around to find out if there are better units available in the same project. Have a great deal.