BackThe 3 Ps of a good resale deal
Ensure that the physique, price and papers of the property are in place
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Second-hand" is always a frowned upon phrase, but not when it comes to buying a house. For house-hunters battling rising prices and delayed projects, a resale flat may just be the right deal. Quicker possession and a lower maintenance bill may attract anyone, but even a resale purchase has its own checks. The key is to ensure that the 3 Ps—physique, price and papers—are in place. Enlisting the services of real estate agents, lawyers and availing a bank loan will greatly ease the process. Here’s what you need to check.
Physique: age and structure
Ensure that your flat is structurally fit. It is unwise to choose old properties only for the benefit of lower maintenance charges and quicker possession. Ideally, a resale flat should not be more than 5-7 years of age. While maintenance charges may be slightly higher for recently constructed resale flats, getting a bank loan for these is easier. Also, fewer owners means such properties usually have clear titles. Moreover, maintenance charges of a resale flat will be lower than that of a new under-construction flat.
There may, however, be exceptions, depending on where the property is situated. For instance, old buildings in prime areas such as South Mumbai still command higher prices and are structurally fit as they are well maintained.
Another differentiator when it comes to a resale flat is amenities. Older apartments may not have, say, sports facilities. The positive side of this is that not having too many amenities may also reduce your maintenance bill. The one amenity that you must be careful about is parking area—ensure that the parking space allotted to the previous owner is passed on to you.
Watch out for illegal extensions. If you spot any additional construction in the flat that deviates from the original building plan, it is better to notify the society’s managing committee, who will examine the issue.
While redevelopment is a good bet for investors who want to cash out (provided additional floor space index is available), end-users may land in a fix if the society decides to redevelop the building after you occupy (and worse, renovate) the house.
This is usually the case if you are eyeing a flat in a property that is more than 20 years old.
Price: bank loans help
There are two ways to look for a resale house. While word-of-mouth may make you aware of the prevalent rates in the locality, enlisting a real estate agent’s services will help you clinch a better deal: from locating the flat, to negotiating with the seller (for a fee, of course). Once you have found a suitable resale property, you will have to pay for it in big lump sum payments, unlike for a new apartment. A bank loan would ease some of the funding concerns. Approaching a lender also reveals possible loopholes in the documentation. For instance, if the flat has had multiple owners, then the bank asks for all the respective registration and stamp duty papers, without which the loan would not be disbursed.
Essentially, if all the requirements are met, banks finance 70-80% of a resale flat’s cost. However, it is important to note that some banks do not finance older resale flats, or, they lend a lower amount. Therefore, if the lender tightens his purse-strings, you will have to loosen yours.
Apart from the cost of the house, there are other sundry expenses. Maintaining a separate kitty of funds will help to pay for expenses later such as on renovation.
Also, ensure that the old owner hasn’t left any unpaid dues: society fees, utility bills, parking charges, and others, that you may have to pay later.
Papers: reveal many loopholes
As mentioned above, any resale deal is accompanied by a long list of mandatory documents. The most important of these are the sale deed and the mother deed (title document). Obtain all documents in original from the seller, while also verifying that she is the actual owner and has rights to sell the property. A check will also reveal whether other parties (such as heirs) have rights to the property, or whether it is mortgaged. If the flat is mortgaged, your bank will pay the unpaid dues of the previous owner (if any) to the previous bank from your loan amount and transfer the balance to the seller.
Registration is another key issue, irrespective of the age of the property. While you will re-register the flat when you buy it, the same applies to each of the previous owners to ensure a clear chain of documents. If registration or stamp duty documents for even one of the previous owners are missing, then ensure that the current seller pays the dues. A late realization means you will have to pay.
Future claimants are another bother, if the registration papers are missing. To prevent any such eventuality, you will have to first place an advertisement in two dailies (an English and a regional language) through one of the lender’s empanelled lawyers. If no claim is raised within a fortnight, the lawyer will issue an affidavit clearing the papers and paving the way for the disbursal.
The other necessary documents include:
No-objection certificate from the co-operative housing society stating that all dues have been paid as on date
Encumbrance certificate
Tax receipts stating that taxes to authorities have been paid
Occupancy certificate
Original building approval plan
Possession certificate
Conversion certificate: Verify whether the property has been built on non-agricultural and non-forest land
To bring matters to a close, verification is the keyword while purchasing a resale flat.
Binaifer Jehani is director, Crisil Research.
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