The secondary real estate market in India is attractive. It is advantageous. Many home buyers turn to the secondary market instead of buying directly from the builder. One can take advantage of a huge discount on such properties and get a house that is more than the budget. The main reason for the growth of the secondary real estate market in India is the increase in unsold inventories with owners and black money with buyers who want to get rid of.
The recent scrapping of INR 500 and INR 1000 banknotes by the Government. of India would deal with black money with the people and the slow phase of real estate is supposed to pick up speed in due time. The primary market is prominent, but now, the resale market is where many home seekers are turning. But it is not without its challenges. Let us see what are the benefits and drawbacks of investing in the secondary real estate market in India.
Why buy a resale property?
Many things lose meaning when hands are exchanged but ownership is not. Over time, property prices go up because, as they say, real estate is the best investment. But that ‘second hand’ label in India is unfortunate. As such, purchasing a resale property can be financially beneficial. Let us know in detail the benefits.
1. Prices Negotiable: Secondary market means the owner is trying to get rid of the property and recoup their investment. As such, it’s also set to give buyers some slack. It is estimated that the properties are available at around 10-20% less than the actual price. The vast difference between the two properties divides property seekers.
2. Benefit in the short duration of the investment: buying at lower prices means getting a fair return on investment in the short term. There is no need to wait any longer to liquidate your assets. It is said that 3 years is the minimum time in Indian real estate to achieve a significant ROI, but resale properties mature faster.
3. Fewer Possession Delays: Possession delays are the number one problem homebuyers experience. The project is rarely delivered on time. Big-name builders keep promises, but it’s not uncommon for novice builders to hand over the keys after a delay of a year or so. Second-hand property has less risk of this happening. Since the owner has already bought it from the developer, it is likely that until he sells the property to recoup the investment, the project will be completed. You can also explore the options on the resale market and choose a property that is ready to own.
Why not buy a resale property?
While many arguments are in favor of resale properties, there are complications associated with this. The secondary market in India is highly unregulated. The recent Real Estate Law and demonetization will give positive results but that remains to be seen. Let’s see why a resale property can be a bad idea.
1. No flexible payment options: Buying directly from the developers offers many payment options. Only those people who have the money in hand and do not depend on the mortgage loan can invest in the secondary market. Typically, the property owner asks for a huge lump sum as a first installment, and that installment may be equal to what you have already paid to the developer. One can easily expect it to be 70-80% of the property price. That’s a big commitment, and not every homebuyer can afford it.
2. Cash Transactions – This is a very disappointing market condition that most transactions occur in cash. Paying in cash saves some taxes for the owner and stamp duty for the buyer. Thus, despite being illegal, this is how the resale market works. One cannot avail a loan on cash payment and therefore this is not for the middle class people who cannot pay without a loan.
3. The Paper Trail: There is a lot of paperwork involved in the transfer of ownership. Since the developer is the first owner of the property, in addition to the current owner’s NOC, the buyer must also obtain one from the builder. In addition, now the loan must be transferred from the owner to the buyer, that is, to the new owner. The whole process requires time and a lot of patience.
If low price is on anyone’s mind, India’s secondary real estate market is for them. If you want a smooth transaction and are ready to wait until the property is ready for possession, one should go to the primary real estate market. In the end, it’s all about preferences.