Advantages and pitfalls of resale flats

Adhil Shetty Updated on July 26, 2013
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Tax benefits and immediate possession are draws but watch out for ownership complications

Rahul was tired moving from one flat to another every time his landlord raised the rent. The Delhiite decided to invest in a resale flat. In addition to a hefty discount, the flat came readymade with an instant-shift tag. Rahul can now spend the money saved on interior décor and flaunt his cheap yet elegant home to colleagues.

Rather than waiting endlessly for the real estate prices to fall , a money-conscious person looks for options that offer a good solution. The resale flats might be as good as new and available at a discount of at least 10 per cent of the price of a new construction. However, does the cost saving alone make the resale flats an economical alternative to the new?

The prices vary depending upon a number of factors like city, locality, brand name of the construction company, age of the flat and many others.

Typical Issues

The resale flats are an affordable solution to the accommodation needs of salaried individuals. However, care has to be taken in choosing a suitable unit.

Purchasing a resale flat often requires making a 20 per cent down payment that may be in cash, which is higher than that asked for by construction companies.

Resale might require dealing with mandatory expenses such as registration fees, stamp charges, transfer fees, utility transfer fees and real estate agent fees, among many others.

Sometimes, the previous owner may not have cleared the dues with the society or building management, and these would need to be doled out by the new owners.

The other corollaries might include minor expenses allotted towards home make-over, parking/security charges, society membership fees and a couple of other overheads.

Direct Benefits

Getting your hands on a resale property is beneficial in several ways. Whether it is a newly constructed, ready-to-move-in flat, an older flat or an under construction one, every kind of resale apartments has its unique benefits.

When snowballing property prices evade the reach of an income-conscious individual, the resale market provides a ray of hope.

You save a good amount of money that would otherwise have been expended in paying rent or EMI and rent both.

Grey Areas

Everything that is in front of your eyes is yours once you own the property.

Immediate possession can provide tax benefit from the first EMI itself. There are some areas that need attention when purchasing a flat from the resale market.

Checking the documentation carefully is the foremost thing. It is essential to check whether the seller is the true owner of the property.

It is also vital to ensure that the seller doesn’t have any dues to the society, building or against the house.

It is imperative to check the physical condition of the flat before investing your hard-earned money into it.

If the flat is mortgaged with a bank, the owner needs to procure a document from the bank affirming that it agrees to give the documents to the buyer upon full payment of the loan. As soon as you transfer the money to the seller’s account, whether in cash or through home loan, the bank will release the original documents immediately, along with a no-dues certificate.

How to Choose

There are certain essentials that make the selection process an easy and productive one.

The age of the property should ideally range between 1 to 5 years to a maximum of 10 years.

Know about the reputation of the builder and the quality factor associated with his past developments.

Understanding the reason behind the sale will help in uncovering the problems and issues with the property, if any.

Considering the environment, proximity to important areas and amenities available in the vicinity also affects the final decision.

Nothing can be more profitable than purchasing a flat at a price much lower than the market rate. One of the biggest benefits that resale apartments provide is tax benefit after gaining possession. A deduction of Rs 1 lakh on the principal of EMI under 80C and a tax exemption of not more than Rs 1.5 lakh of home loan interest under 24B make the resale all the more profitable.

Hence, if all the other factors work in your favour, it might be a good idea to invest in a resale flat.

Published on July 26, 2013
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