Demand for resale property likely to go up in coming months

Published: August 4, 2017 3:55 PM

Considering the current market scenario, the resale market is likely to fare better than the primary market.

resale property, demand, rise, demonetisation, real estate, secondary market, While denizens prefer a new property, the benefits of investing in resale properties cannot be ruled out.

By Jaffer Ali

Not very long ago, there was a long-drawn-out debate on demonetisation and how it will impact the country’s real estate market. There was a close consensus among industry stalwarts and analysts that resale realty market will be the worst hit. And the story did unfold in a rather predicted way. Soon after a predominantly cash economy was substituted with a digital economy, property prices in the resale market depreciated by as high as 15-20 per cent in some cities. Why? Well, because since time immemorial, through the length and breadth of the country, the secondary market was traditionally driven by larger cash component.

The seriousness of the situation was clearly gauged by the constantly widening gap between primary and secondary residential markets. In an already tepid environment, the pressure on mounting unsold inventory increased drastically. Several investors wanted to exit the market but didn’t find many prospective buyers. Buyers, on the other hand, went into wait-and watch mode.

Budgetary Policies

In this backdrop, Union Budget 2017-18 came as a silver lining in the cloud. Investors who were waiting to qualify for the long-term capital gains got a reason to cheer. With the reduction of holding period to two years from earlier three years, many investors planned their exit. For those who had invested in the second property to save tax also started to plan their exit with the centre’s decision to consider second property as ‘let out’ even if it was vacant.

This resulted in an array of properties available in the secondary market. There were sellers who were luring buyers by quoting the ongoing market rate or even slightly lower. On the contrary, there were a few who had properties priced at a little higher rate but were willing to negotiate decently.

Is Anchoring an Option in Buyers’ Market?

While property values dropped in several cities, several investors just remained anchored to a higher price to fetch maximum returns. They just ignored the possibilities of making profit by exiting the market and investing that money in other asset classes.

Soon investors realised that with inventory piling up, Indian real estate is transforming into a buyers’ market. There were suddenly a lot of options to choose from. Thus, in such a scenario, anchoring to a higher price was nothing less than lunacy.

Meanwhile, project delays had plagued the Indian realty sector. Thus, a majority of buyers in the present scenario preferred ready-to-move-in properties over newly launched or under-construction ones. Besides averting financial risk, it also helped buyers to remain stress-free and be assured of timely possession and quality of the property they are buying.

Fortunately, it did not take long for the investors to realise this. And that’s how ‘acche din’ for prospective buyers began. While new properties came at a higher price, at times, resale properties were available at great deals.

Revolutionary Reforms

After a slowdown of about two to three years, the realty sector is now seeing the signs of light at the end of the tunnel. Government initiatives like the Real Estate (Regulation and Development) Bill is beginning to make the sector more transparent, professional and buyer-centric. Moreover, the repo rate has also reduced to a large extent, thereby reducing the interest burden. Modifications in the EPF scheme and CLSS have also encouraged many buyers to take the plunge in the market.

The most recent entry to the list of reforms, Goods and Services Tax (GST), is being hailed as a harbinger of change in the nation’s taxation system. However, we must understand that after any policy change, buyers take time to analyse its plausible impact on their investment decision. Thus, for some time buyers will largely focus on ready-to-move in properties as this segment does not fall under the ambit of GST.

In the coming months, the demand for resale properties is most likely to soar. As more and more investors plan to exit the market, the primary market will feel the heat of ample supply in the secondary market. Considering the current market scenario, the resale market undoubtedly is likely to fare better than the primary market.

Resale vs New

The debate of new vs resale properties is something that has never reached a solid conclusion. The topic clearly has several nuances attached to it. While denizens prefer a new property, the benefits of investing in resale properties cannot be ruled out.

First and foremost, due to rapid urbanisation in cities like Mumbai and Delhi, space crunch in key areas has always kept the demand for resale properties high. Second, resale properties have no execution risk, thus the chances of delay in project construction is eliminated. Additionally, there is no service tax that has to be paid. That’s not all! One doesn’t have to bear the interest cost paid on a home loan during construction. Apart from cost advantages, in resale properties, one gets what they see in terms of space and quality.

A word of advice

For Sellers

Those who bought a new property for investment sake and are looking to sell it immediately once it is ready for possession must refrain from getting it registered. One can directly make the sale and the new buyer can get it registered in his/her name.

For Buyers

# Find a reputed property agent to help you out, preferably RERA-licensed one. Since the Act is in force, it will be good for investors to invest safely. A good agent will help you evaluate the location, amenities and will tell you the pros and cons of the property.

# Enquire about the transfer charges and registration cost of the property.

# There are good percentage of chances that the property you want to buy had more than one owner. In that case, check all the legal documents diligently.

# Make sure to enquire about the owner.

# Do get all the documents verified by the lawyer before signing the dotted lines.

List of Document to be Checked

# Chain of Title or Sale Deed

# Agreement to Sell (ATS)

# NOC from society/ authority

# Title Search and Report

# Share Certificate

# Occupancy Certificate (OC)

# Encumbrance Certificate (EC)

(The author is Founder & CEO, PropUrban)

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