When buying a house, there's always an important decision in front of every homebuyer: whether to buy a resale home or to buy a new upcoming project. Now, if a home from a reputed builder is slightly cheaper than a new home, it opens up three different possibilities.
Firstly, one might choose to buy a resale home in a developed location because new projects are very rare in any developed location. And those that do come up are usually much more expensive compared to resale homes.
The second option is to buy a brand new flat on a budget, a little away from the city, or in a developing location.
The third option is, in the same developing location. To buy a resale home and do some renovation work, which might cost less. Today, in this article we'll discuss this topic and see what the difference is between a resale apartment and a new apartment from three different perspectives.
First, what is the process: the documentation part. Second, the cost of the apartment: in terms of the current market value, and the third, capital or value plus. We'll discuss what the property is and the impact of this cycle and what impact the decision has, that is, when is it advisable to buy a resale home? Plus, how old is the house, can you can still buy it, and others.
An important thing, when I talk about a new house, it means a ready-to-move-in house or a house whose possession will be available in the next 3, 4, 6 months. This means there won't be any construction inside because inside construction versus ready-to-move-in are totally different perspectives.
First, it's searching and visiting. Real Estate developers now markets so much that everyone knows where the new project is coming up and what inventory is available in it. You can visit directly there, but resale is a bit complicated because you have to meet some owners directly.
If you need more options of inventory, you'll have to find a real estate agent. Now, this broker should also have knowledge and trustworthiness. This in itself is a time-taking process and a separate discussion point on how to find a decent real estate broker. But even if you find a good broker, visiting properties is still very time-consuming.
To buy a resale property, you need a lot of patience because while you may have time during the day, the seller may not. They might have commitments at home or be too busy. Many times, you might reach the property, and the owner is absent, or you've arrived, and the broker tells you to wait because the key is with someone else. So, finding the right house overall and viewing it requires a lot of patience and time.
After that comes property inspection. Now, inspecting a new flat is fairly simple because what you see is what you get. If there's a small issue with tiles or paint, you inform the developer, and they rectify it. In fact, you might even stay there for a while. But with a resale home, property inspection is a bit trickier, and you need to be very attentive because you might not notice where there's a leakage or if wiring or piping issues are camouflaged.
You won't observe every minor detail, and once you've bought the house, any issues that arise, you'll have to rectify them yourself. Then comes ownership. Now, when you are buying a new flat, this is fairly simple; you know exactly who you're buying it from.
But with a resale, it becomes a bit tricky. You need to know what documents are involved in the entire process, and how to study the chain of documents. For example, who took the allotment, who took the possession, who got the freehold done, and all the sale deals that have been done, who they were transferred to, etc.
Checking all these things properly is very important. So, you can either study this yourself or take a lawyer along for the meeting who can check all these things for you. The next aspect of ownership is who you're dealing with. Now, this is a big new challenge. You'll see that you're dealing directly with the seller.
From the owner's perspective, the direct property market usually isn't very useful; there's always an investor involved. Now, in every location, we have encountered at least three investors who come in. They do whatever they want without consulting the owner. If an owner decides to sell their property, someone in the society informs an investor that this person wants to sell their house.
The investor then approaches the owner and offers a certain amount, saying that the full payment will be made to them within the next 4-6 months. Now, we'll sell this house, renovate it entirely, and sell it according to our calculations. So, you're set, and whatever profit we make above that, we'll pocket.
Now, many owners don't want to go through the hassle of showing the house repeatedly, negotiating, and dealing with all these processes. Many times, they need immediate cash on hand, so if someone else offers them a good deal, they'll take it. In fact, if you look at today's date, in the Delhi NCR area, this is very common.
In fact, most resale homes are always through investors; you rarely meet a direct owner. This poses two problems. Firstly, there's unnecessary inflation in the prices of houses because they're actually much more expensive than what they should be.
Secondly, there are many frauds at this stage. You might not even realize whether there's an actual register or not because until you pay, you won't even get to meet the actual owner. So, you have to be very, very careful about whom you're dealing with, meeting the owner, and thoroughly checking the property's title.
The next point is property valuation. Now, there are many different ways to evaluate property values, but this is not very applicable in resale. Resale properties are driven by two things: demand and sentiment. If it's a very good society with one or two sellers available who want to sell their house, and there's high demand, then the price will be determined according to their discretion.
So, you'll have to negotiate owner. He might say he bought it for this much, plus he has done this much renovation on it, so he should make this much profit and so on.
In this case, it comes down to how good your negotiation skills are and who your broker is. Whether they understand correct market valuation or not. So, if you want to go about a new home, then market valuation is fairly simple. Why? Because it's driven by competition and the current market situation.
Now, in any location, the pricing of similar projects will differ by only few margins. You won't see that one is demanding more and someone else is demanding less; it's almost similar because it's data-driven by competition.
Next point, over every negotiation, is how to negotiate. Negotiation is a skill, and whoever has more experience will play this game better. If you're unfortunate and have three to four investors sitting in front of you, negotiating with them becomes difficult because their margin is low. But if someone comes with a salary, with whom you have a personal connection or some organization backing them, or perhaps the seller is in dire need, then sometimes you can get very good deals.
But it’s fair, it totally dependent on your skill and the support team you have. Do you have a lawyer and a broker with you in the negotiations? Understand the objectives. Also, it's not about selling; it's about a little quality, a little presentation. When you find the best price easily for a new home, that's it.
Now, let’s discuss about the cost. The cost of renovation, which obviously comes in resale, is very significant. If someone has lived in the house for even a year, then you may have to repaint the entire modular kitchen, fix various problems, and if the house is older, the renovation cost will be higher because the flooring, fittings, piping, wiring, everything will be much older.
So, the older the house, the higher the renovation cost. The next cost involved is the cost of brokerage. Now, about how to buy a new home? You can either go directly or buy through them. If you go through a broker, you also have to pay the broker separately. You have to hire a lawyer; this way your expense increases your total cost of purchase.
Next is the cost of transfer. When buying a new home, there is nothing like that. Whatever cost you have is the cost. In resale homes, you have to take a share certificate and pay the society's entry fee. Even if you want to renovate your house in the society, the society charges you additional. So, all these expenses add up to your total cost of the house.
Then comes the cost of amenities. Now, usually in resale, if it's old, there won't be any amenities. Even if there is, it will be quite old. If you have to take amenities, then what if you don't use it? Will you join a gym from outside, join a swimming pool, or take a club membership from outside?
If you do a lot of things, then again, this additional cost will be added to your total cost of the house. And the final cost is the cost of a home loan. Now, if a seller has already taken a home loan, then either you will have to pay him more front payment so that he can settle the home loan, and if it's a big amount and you can't pay, then you'll have to transfer the home loan.
When you transfer it, it will be transferred within the bank itself. Maybe it won't be the bank where you want to take a home loan. But now you will have to transfer the balance within this bank, and you will have to stay with this bank for some time, and only then can you change your bank. That means, you have to pay the entire processing fee of the home loan twice.
If there is any difference in interest, then you will also have to bear it additionally. Means, if the cost of the house increases, then will everything be negative in the resale property? It's not like that; some very good positives are also there. Now a days you can check few details on Facebook page. Housing societies are maintaining social media accounts.
You can check if there are more children in the society or more senior citizens? By visiting the project, you can find out whether your family will adjust there or not. Now, you can tell by looking at the society's maintenance, what the mindset of the people living there will be like. This is a little blind spot in how a new home will look like.
Secondly, if your society is 5 to 10 years old, then its maintenance cost will definitely be quite low in front of a new home. Plus, if your society is 8-10 years old, then you don't need to be afraid of any legal issues or structural issues.
Because if they haven't been identified yet, hopefully they won't be in the future. What does the resale value mean? What does capital appreciation mean in resale homes or in buying a new home? Here we need to understand the concept of off-property.
Off-property means what is the cycle of property, what is the typical cycle of any concrete structure? The cycle that happens typically is between 75 years to 100 years. Now, in India, it is said that the average life of an apartment is between 50 to 60 years. Between 50 to 60 years is the average life of an apartment in India.
Last 20 years, the type of construction that has happened, according to me, any building built 40-50 years ago is a big thing, right? Today, the construction that used to happen 50-60 years ago, those buildings are comfortably living 70 to 100 years.
But the type of quality of construction that has happened in the last 20-25 years, the 40-50 years is more than sufficient. Now, when we talk about life span, a building is now on its latest basis and understands a capital appreciation.
How does capital appreciation happen? So, whenever you get the performance of a building, you have to read the maximum rates that increase from air one to air 34. Its best capital appreciation is when it becomes active and lasts for 10-15 years.
After that, the story does not go further, it becomes a bit stable, meaning it will go a little tangent between 15 to 20 years, and after 20 years, you will see that its capital appreciation is not even beating inflation. That means, in many cases, you will see that the nominal amount is increasing to last year in comparison.
Why is that? There is a very simple reason, you have to see a little history. Within the last 20 years, within the last 20-25 years, the construction technology in India has changed twice. From Redbrick construction, it went to Ash brick construction, and from Ash Brick, it went to A-class.
And once this change will happen in the next 10 years or within 20 years. Plus, 20 years old, you see and see today, there is quite a difference between them. Two small examples, first in India, the Indian washroom system is almost over, everywhere Western has come.
Secondly, 20-25 years ago, people were okay with buying a house in a building without a lift, so that we would walk two floors up and down. On today's date, they take it in compulsion, no one's first preference is to take a house in a building without a lift.
Similarly, think of one more thing, that the building you are buying today is 20 years old, and no one is late to buy a house for two-five years, then you are not late in it.
If you stay for at least 10, 15, 20 years, then what about today and 20 years later. Meaning when it's 40 years old, if the building is worn out, will anyone buy it? No, no one will buy it. So, date is a very important question to understand.
When should one buy a resale house? Is there any new project for you? There is inventory with the developer, but you are also getting some units on time in resale, so definitely check resale once.
Most probably, you will get a resale house cheaper with a little discount from the developer. It will be a better deal for you. Secondly, if there is any building that is less than 10-12 years old, then you can buy another house there if it is in a good location. Definitely buy a house because it is reasonable. You will see in its structure and layout that it is similar to the new structure.
So, any building that is 20 years old from today should be avoided for a simple reason. Just think from your perspective, will anyone buy it after 10 or 15 years from today? Will someone buy it or not? You might get stuck up in construction date, and then you might want to sell it back.
You may want to sell it at the right price, right? So today we discussed about should we buy resale flat versus buying a new flat. We hope you like the article. We will keep writing such informative article for you to know more about buying properties that will help you in decision-making to buy a house.
