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Resale Flat or Under Construction Flat – Which is better?

Biggest dilemma while purchasing a flat is whether to buy a Resale Flat or Under Construction Flat. These days a new trend has started, wherein most of the buyers prefer purchasing under construction flats…The reason for this shift is, Perception of buying under construction flat for cheap (Which is actually not the case)…Customer think that price of the property will not fall below Pre-Launch price but fact of the matter is Price is decided by Market Forces based on Supply & Demand…It does not make sense at all if the buyer is purchasing under construction flat by availing Home Loan…Reason being, the buyer never takes into account the interest component/Pre EMI he is going to pay…The total cost of under construction flat, purchased on Home Loan works out to be much higher compared to cost of resale flat…I would like to quote e.g. of one of the very Big Apartment Complex in Electronic City, the builder is finding it very difficult to clear the inventory but on papers he is increasing the rates by 75 psf every month becoz he can’t annoy the buyers who bought it directly from the builder. But the reality is, if u search on property sites, u will find sellers who are willing to sell at much lower rate then the rate quoted by builder…The difference is as high as 15 Lac for a 80 Lac Flat (As per Rate Quoted by Builder)…Besides this another big catch is that for under construction flats, rates quoted are base rates i.e. excluding Service Tax, VAT, Parking, Sinking Fund, other deposits etc. You can easily assume these overhead expenses @ 10 Lac for 1500 Sqft 3 BHK flat whereas in resale flat price quoted is all inclusive…I have not included Registration and Stamp Duty for both the case.  Also in case of resale flat all the deposits paid can be transferred in ur name…The advantage of this that in resale flat, u have fair idea on final cost of flat whereas in under construction flat, it is quite subjective.

Besides this many of under construction units are also purchased for Investment purpose so holding period is less…As the project near completion i.e. towards registration, these investors try to offload the inventory…Basically it’s the Black Money, which is being invested…. The supply increase when project is nearing completion thus pulling down the price…Therefore perception of buying at cheap rate is just another Marketing gimmick from builders….

I am listing down the Pros & Cons of both under construction flat & Resale Flat..You can decide which one u would like to purchase

Under Construction:

Pros:

  1. Staggered Payment: The payment in under construction flat is linked to progress of construction therefore buyer need not to pay upfront amount
  2. Wide Choice available in terms of preferred Floor, House Direction etc
  3. Profitable if money is paid from own pocket for investment
  4. Slight Modifications possible during construction as per buyers requirement
  5. You can get the interiors done as per ur choice and requirement

Cons:

  1. The biggest disadvantage is Legal status i.e. Builder start development immediately after receiving commencement certificate from Development Authority but do u know builder also need 19 more permissions from various departments like Pollution Control Board, Water Supply, Electricity etc…I know 1 of complex where complete power is supplied through generators as builder failed to get permission from Electricity department thus huge monthly maintenance bills for residents in long run or U might face problem in getting Khata or Occupancy certificate
  2. No Clarity on Maintenance Charges till u occupy the flat or association being formed. In under construction flats It is unclear how much maintenance charges needs to be paid…It might come as shock to u at later stages..Since Maintenance charges are lifelong affair so high maintenance charges may dent future valuation of complex until & unless it is being projected as premium complex..Maintenance charges may vary depending on facilities being provided by builder
  3. No clarity on neighbors/occupants…It might happen that most of flats are rented to Bachelors by owners, who purchased for investment purpose then u can’t stay with family in such complex
  4. You have purchased a flat based on Construction plan on paper…May be after construction, the flat will not look as u visualized i.e. You may not like the flat or u may find some practical problems which u have not thought of while having a look at flat construction plan or u might find bad construction quality. Anther major problem these days is of water seepage being reported from almost 90% of new flats
  5. Unexpected delay in projects
  6. Very High Interest cost if flat is purchased on Home Loan
  7. Hidden costs cannot be ruled if the builder is not reputed one.
  8. Most of under construction flats are being built in upcoming areas so might need to compromise on locality & accessibility of Malls, schools etc

Resale Flat:

Pros:

  1. The biggest advantage is, You will get what u will see…No future shocks
  2. You can verify Legal Titles and can be assured of Legal Status
  3. Clarity on residents composition of complex and Maintenance Charges
  4. No waiting period,  Immediately you can move into ur new flat until & unless u r planning for some re-furnishing
  5. Cost including Home Loan interest is low compared to under construction
  6. Clarity on final amount to be paid
  7. You can check out the facilities like Malls, Schools available in Locality and in all probability it will be developed one, as people are already staying
  8. You can check out construction quality with the help of structural engineer
  9. You can pay right price becoz you can get fair idea on real estate trends of complex and Locality

Cons:

  1. Acceptance in Society: Normally the ppl who are staying from day 1 are more close to each other rather ppl who move in after 3-4 years
  2. Society rules might not suit u & you cannot get it changed whereas in under construction complex u r part of discussions while rules are being framed
  3. Check out for wear and tear or any other visible damage
  4. No major changes possible in House Structure or layout
  5. Not much choice available for selection in terms of floor rise, view etc as not many units are up for SALE
  6. If house is already furnished & if u don’t like the same then its huge cost to re-furbish the entire house…Minor re-furbishing is OK but complete makeover is costly affair

For many people buying a house is once in a lifetime opportunity so take xtra care while finalizing your dream house…You should feel HAPPY in your house rather regret your decision though out life….

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

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Abhishek
Abhishek
11 years ago

Good information. Only thing, i can add is, for most of the reslae properties, you need much amount of down payment whereas, in undercontruction property as you said above, payment plan is very much attarcative for loan takers.

Mukhtar21
Mukhtar21
11 years ago

how to find out under constrcuction building is legal in nalsopra west area

Nitin Bhatia
Nitin Bhatia
11 years ago
Reply to  Mukhtar21

Pls consult your local property lawyer regarding the same.

Nelson Dsouza
Nelson Dsouza
11 years ago

Service Tax and Vat of almost 3 to 4% is applicable in case of under-construction properties which is not the case with resale properties.

Nitin Bhatia
Nitin Bhatia
11 years ago
Reply to  Nelson Dsouza

I agree

Anand
Anand
10 years ago

I have purchase under construction flat and made registration. If final agreement is required after completion of construction or at the time of taking possession?

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Anand

you need 2 agreements for under construction property (a) Agreement to Build & (b) Agreement to Sell…When the flat is ready for possession the Sale Deed (Property Registration) is registered in the name of buyer by builder. Sale Deed is final agreement.

turtle rock
turtle rock
10 years ago

Great article. So ideally In a resale flat the only thing you pay over n above quoted price is the registration n stamp duty. Any VAT to be paid?? Can you help? Or any other costs??

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  turtle rock

VAT and Service Tax are not applicable in Resale provided 1st owner has already taken possession from the builder & paid VAT + ST to builder. No other costs involved during sale except Registration & Stamp Duty.

Girish
Girish
10 years ago

Nice article Nitin, I have come across following problems while buying resale flats. The only reason why I opted to buy from builder directly.

1) Sellers become greedy before deal closure. Even after sale agreement being executed, the sellers became greedy and increase the price to a large extent.

2) Most sellers wanted large portion of money in black. A salaried employee like me can do certain amount down payment and rest I can avail home loan.

3) Some sellers wanted money in black before the property registration.

4) One seller who was working in a reputed company as head of engineering, asked for significant amount during sale agreement, which I paid through cheque and then before deal completion increased the price. Then this guy disappeared, changed his company, left the town etc. I had nail down this guy by first finding his new company. Then by sending an email to the CEO of the new company. I got my money back after this.

5) Banks require documents from sellers as well. Sellers were not willing to co-operate. I used to get dumb responses like, this is what we got from builder, this is all we can give you.

6) Property brokers are big nonsense. Property brokers can tell any number of lies in order to convince the buyer to buy a certain property. Property brokers will disappear if anything goes bad in the deal. I bring this point up because most re sale properties are dealt by property brokers.

7) And yes, I am NOT entirely backing the fact that buying property from builder alone is the best thing to do. Infact I had invested in a pre launch project from a known builder, which went so bad that the builder did not start the project at all. I had to get my money back after 2 years.

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Girish

Thanks for sharing your experience.

Krishna Kishore
Krishna Kishore
10 years ago

I m going to purchase a resale property (flat) of 2005 construction in a well developed colony and nearest to all proximities.
My home loan period will be of 10 Yrs.
If I want to plan for an independent house after 5 years can i sell it by asking bank NOC ??
Will i get the price without any loss after 5 or more years ??
will a bank give Loan on a property which is more than 10 yrs old??
Pl help me in taking the right decision.

Nitin Bhatia
Nitin Bhatia
10 years ago

1. You can sell after 5 years and you will get bank NOC after clearing all dues. Your buyer can either overtake your loan or pay the outstanding amount from his funds or home loan.
2. Property prices cannot be predicted
3. Yes, you can get loan on 10 year old property. Difficulty is for properties 20-25 year old.

Krishna Kishore
Krishna Kishore
10 years ago
Reply to  Nitin Bhatia

Mr Nitin,Thank you very much for your advice.
Your articles are very helpful and excellent

Now, I m planning for a Home Loan

First I will make a survey and then decide which bank is best suits me as you suggested.

But few things i would like to know from you ?

1 . How to take a pre-approval of home loan ? Bcoz I must know the Loan eligiibilty before finaiizing the property

2 . What doc it needs for just a pre-approval ??

4 how many days normally a bank will take for pre-approval home loan ??

5 whether a bank will give a written confirmation of same ??

6 . Which bank is best in interacting with customers now-a-days ?

Pl reply as soon as possible

Nitin Bhatia
Nitin Bhatia
10 years ago

1. You may approach bank of your choice for pre approval. You need to provide set of documents & bank will issue letter containing your loan eligibility. Post this you can search for property
2. For salaried employee following documents are required
Identity Proof
Residence Proof
Last 3 salary slips
Last 3 years Form 16/Tax Returns
Last 6 months bank statement

3.. It takes 10-14 days to pre approve loan if everything is in order.

4. Yes, you will get written communication

5. All are same still you can try Axis Bank or ICICI.

Aniruddha
Aniruddha
10 years ago

Hello Nitinji
Your articles gives us a real picture of what should be in the mind of buyer.However
resale flats attracts huge premium mostly in the form of black cash.The buyer is sometimes left at the mercy of real estate agents who demand prices as they feel. Is there any system in India where the basis of premium can be finalised ofcourse i realise it depends on the demand and condition of market.

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Aniruddha

Unfortunately there is no organized system to monitor/control the same. In India, Land Mafia / Real Estate Mafia call the shots. Internationally the premium is decided by Rental Yield. I wrote an article on same, you may check at following link
https://www.nitinbhatia.in/real-estate/fair-value-of-property/

Vivek
Vivek
10 years ago

Hi Nitin,

I am in the exact same dilemma with respect to property purchase. I am currently renting a 7 yr old flat in one of the top notch builder apartment complex which is located at a good location in south Bangalore. Given the advantages I have realized staying in the apartment, I am inclined to buy a resale flat in the same apartment complex. The immediate intent of purchase is for self-use – however, I am concerned about the value of apartment depreciating. Also, in most big builder apartments, the Undivided Share of land is very trivial (I am yet to check this for my apartment complex. But when I inquired about this at one of the DLF apartments in Bangalore, it was less than 100 sq ft for a 1410 sq ft apartment and may be comparable to other large builders). Since building structure is bound to depreciate over time, the real and stable “Return on Investment” will be the appreciating land cost. Although I agree that this UDS issue exists both for under construction and resale apartments, I am unsure whether to look for a resale apartment or an under-construction property. I can shell about 60-70% of my budget from my pocket and planning to take bank loan for the rest of the amount. Appreciate your advise on this!

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Vivek

Its not right fact that resale flats are depreciating. If you compare prices over a period of time, you might observe that appreciation in resale flat beats under construction property because of demand supply gap and occupancy level i.e. builder take time to offload inventory

If UDS (Undivided Share) is less than it implies builder has utilized common areas pretty well and you will get more carpet area. Loading of upto 25% is acceptable. High UDS means less Carpet Area

Lastly, in Bangalore most of the properties are disputed & many don’t have Khata A. For under construction property, risk factor is high. Resale property is free from all such apprehensions.

Final call is yours but i am personally more inclined towards Resale Property.

Vivek
Vivek
10 years ago
Reply to  Nitin Bhatia

Thank you for the valuable insights Nitin! I will factor in your inputs to my new home search.

kirankk
kirankk
9 years ago

Hi Nitin, I’m planning to purchase a resale flat from the first owner in an one year old apartment in Kundalahalli area. The owner has the loan from SBI but I’m not able to get the loan for my purchase from any PSU since the apartment is not A-khata. What are the banks that I can get home loan up to 25 Lakhs even when the property is not A-khata. Also it will be appreciated if you can share what document I should check out clearly while buying a second hand flat.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  kirankk

Firstly, i will not suggest you to buy property for which Khata A is not available. Not only PSU banks but all banks are insisting on Khata A for Home Loan. You may request seller to obtain Khata A before sale transaction. HFC’s like Indiabulls, PNBHFL, LICHFL, HDFC etc may approve Home Loan on non-Khata A property.

For list of documents, pls check following link
https://www.nitinbhatia.in/real-estate/list-of-documents-required-for-property-purchase-or-home-loan/

Abhinav Siddharth
Abhinav Siddharth
9 years ago

Hi Nitin, firstly my heartfelt thanks to you for writing such an informative blog.

I am considering buying a resale flat in Noida Sec-78. The property is in construction phase which will finish in the coming 6 months. The cost of the property will be between 95 L – 1 CR. I have my own flat which i am looking to sell and according to market will be sold anywhere between 75 L – 80 L. The rest of the amount (20-25 L) I will take in Loan. My wife works with NICL and has gross salary of 39,000 , I work in an MNC with salary of 30,000. My father works in a Gov firm with his gross being 88,000. So, anyone of us could be co -applicant for loans. Can you please suggest how to go on about the procedure. Should I be looking to sell first, buy first, go for loan after selling or any other way. Also if you can please specify the Important documents and points that I should keep in mind. As for buying and selling, there would be dealers involved in both the processes.

Thanks & Regards,

Abhinav Siddharth

Nitin Bhatia
Nitin Bhatia
9 years ago

In my opinion, you should sell first, apply for pre-approved Home Loan and then buy. It will help you to find out exact capital requirement and eligibility. For list of documents, pls check following link

https://www.nitinbhatia.in/real-estate/list-of-documents-required-for-property-purchase-or-home-loan/

Raj
Raj
9 years ago

Hi! Stumbled upon your blog while searching for answers on Service Tax and Vat for flats. You have given some very important information about under constuction and resale. Thank you. Need some advice please.
We came across a pre-launch offer in kanjur marg(E), Mumbai. The rate offered now is about 7250 per sqft. Current value for resale around that area is anywhere between 10-13k. A reputed builder is charging 13k per sqft for a property close by. Of course we are getting the rate benifit as we are willing to pay 50% as down payment. This builder might not be amongst the top names, but they have a lot of projects going on and completed in Mumbai and we did check out a flat in one of their completed projects.
Now the problem/concern is that they have still not got the IOD and CC which they expect to get anytime between 18-24 months.
As per their plan it is a 9 building complex over a 9 acre plot and construction would take 2-3 yrs. So about 5 yrs(with buffer) for possession.
We asked of the possible unforseen event of work not starting between the said time period and they said that they would give us a signed agreement of returning the down payment with interest.
We would be paying 30L down payment and the remaining 30L would be home loan. Don’t know if we could exclude the ‘other charges’ for the amenities and 2 yrs advance maintainance, as it is to be paid at possession, so that would reduce the home loan to say 25L.
We considered this deal becauce we have been living in central Mumbai and would not want to move far from the city. Unfortunately the only other places we would get a decent deal would be Navi Mumbai or Thane which is far.
Please give your feedback on this deal.
Thanks and Regards

Raj

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Raj

In my opinion without IOD & CC you should not enter into a deal. Obviously rates will be low as there are no approvals in place and entire risk rests with the buyer.

Manoj
Manoj
9 years ago

Hi Nithin
I am planning to buy a flat which is a resale one in the South Bangalore, other than the facility commuting, legal docuemnts etc which I verified and everything is in my favour(clean), i am only concerned about the appreciation of this flat since its already 2.5 yrs old which is build by a reputed builder, please advice

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Manoj

For appreciation you need to check the locality and connectivity with Hosur Main Road. Also you can check existing rentals in this apartment which will give fair idea of future appreciation.

Manoj
Manoj
9 years ago
Reply to  Nitin Bhatia

In terms of connectivity its 2 kms away from the Bannergetta road meenakshi mall and close by to NICE road, current rent is around Rs.13.5 K for 2 BHK

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Manoj

Fair price of this property should be between 44 lakhs to 47 lakhs including premium.

Krishnan
Krishnan
9 years ago

Hi Nitin, Thanks for your nice blog. I am planning to buy a 2 BHK in Whitefield area (Bangalore). I have the option of buying one in a project that is almost complete with possession in 4-5 months, Alternatively I could buy one in a 10 year old project in a better location with shops, restaurants, malls and many amenities around. The first project is in an location that is still upcoming but has limited amenities within walking distance. The resale flat is about 5 lakhs lower in price. Can you share your thoughts and advise on which would be a better option?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Krishnan

You have not mentioned whether you are buying for self-occupation or for investment purpose.

Narayanan
Narayanan
9 years ago

Hi Nithin,
Many thanks for the insightful blog.
I am an NRI. I am looking to buying a resale 2bhk apartment in kerala and have zeroed in on the property. The owner wants to register it the government guidance value which is about 50% of the actual asking price (say the price is 50 lakhs and the price at which it will be registered is 25 lakhs). I have to avail a homeloan for the purchase and need to have at least 70%-80% of the asking price as loan amount. Can you suggest some appropriate banks for such kind of loan?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Narayanan

Govt Banks will approve Home Loan based on sale deed value i.e. 25 lakhs. You may approach private banks like ICICI Bank or Axis bank. These banks will approve Home Loan based on Sale Agreement value i.e. 50 Lakhs.

Mayur Shetye
Mayur Shetye
9 years ago

Hi Nitin,
I purchased a resale furnished flat in dombivli , currently my loan disbursal process going on ,
I am taking possession in next 10-15 days, Can you please list out some basic points that I need to verify before or at the time taking possession .

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Mayur Shetye

I request you to check my blog posts. I have covered all the imp points on my blog through different posts.

prasad
prasad
9 years ago

is service tax and vat applicable for a 14 year old flat.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  prasad

No. VAT and Service Tax is applicable only for under construction property.

vaibhav pandere
vaibhav pandere
9 years ago

Hello Sir
While buying flat in resale, how many years old building is OK?

Nitin Bhatia
Nitin Bhatia
9 years ago

It depends on city, location and condition of property. Normally you can buy a property upto 25 year old. If it is more than 15 year old then you should hire a structural / civil engineer who can tell you the life of property depending on current condition of structure and maintenance level.

vaibhav
vaibhav
9 years ago
Reply to  Nitin Bhatia

Thank you very much sir for ur reply. One more query, there’s this flat I’m interested in. Building is 4-5 old. Oc is clear. Broker is saying society is done but conveyance is in process. Generally how much time it takes to society get conveyance?Is it OK to buy flat in society without conveyance?

vaibhav
vaibhav
9 years ago
Reply to  vaibhav

* building is 4-5 yrs old

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  vaibhav

We cannot predict timeline for conveyance. Rather you should check, why it not done till now. I am assuming by conveyance, you mean property is not registered by builder in the name of buyers. In this case, i will not suggest you to buy this property.

Nitin Bhatia
Nitin Bhatia
9 years ago

1. Currently, i am not rating the builders but i suggest you to take feedback from local market. Also check how many flats are actually sold in each of the project. In my opinion, opt for project which has sold max % of flats, approved by SBI for Home Loan and date of completion is within 6-9 months. As far as delay is concerned, you can include clause related to delay and builder will happily include also. Unfortunately, such clause has so many ifs and buts that it is next to impossible to enforce the same.

2. Builder may demand additional charge. As i have not seen your property documents therefore cannot comment, if anything missed out.

3. In your case, i suggest resale property. Please go though my following post for comparison between resale and under construction
https://www.nitinbhatia.in/real-estate/resale-flat-or-under-construction-flat-which-is-better/

Kapil Bhatia
Kapil Bhatia
9 years ago

Hi Nitin, I am planning to buy a flat in G. Noida Sec-omega 1. The property is in construction phase which will finish in the coming 9 months. I wanted to know whether I should go for a resale one or directly from a builder. Resale would cost me around 38-40 lacs and direct would be 42-43 lacs. I am currently on rent and cannot afford a double ding if I go with the resale option as I’ll have to pay the owner in full and complete EMI will start from day 1. For me, the better option would be to buy directly from a builder. The payment plan they are offering me is 50:50. Please share your opinion to this. Thanks

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Kapil Bhatia

I will prefer resale provided transfer charges is borne by the seller.

Kapil Bhatia
Kapil Bhatia
9 years ago

Hi Nitin, I am planning to buy a flat in G. Noida Sec-omega 1. The property is in construction phase which will finish in the coming 9 months. I wanted to know whether I should go for a resale one or directly from a builder. Resale would cost me around 38-40 lacs and direct would be 42-43 lacs. I am currently on rent and cannot afford a double ding if I go with the resale option as I’ll have to pay the owner in full and complete EMI will start from day 1. For me, the better option would be to buy directly from a builder. The payment plan they are offering me is 50:50. Please share your opinion to this. Thanks

swapnil chouhan
swapnil chouhan
9 years ago

Hi Nitin,
i want to know if the registration charges, stamp duty and service tax is to be paid on base price of the flat or Base price + development charges, maintenance deposit, parking charges etc.
Thank you.

Nitin Bhatia
Nitin Bhatia
9 years ago

There is no hard and fast rule on registration. There are multiple values at which the property can be registered. Normally it is Agreement to sale value.

Rahul
Rahul
9 years ago

Hi Nitin,
I am planning to buy flat in resale of range 40-50 lakhs in Noida this year. Could you please guide me minimum how much cash i have to keep in my account to buy flat in resale.
Thanks

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Rahul

For 50 lakh property, you should have atleast 16 lakhs in your hand.

subha
subha
9 years ago

Hi,
We are planning to resale our 2bhk semi furnished Flat in Hosa road junction.
Reason for sale: moving out of Bangalore. landmark: skylark zenith, concord midway, dream paradise layout.
One of fastest growing residential areas close to electronics city hub, Bangalore city corporation area.
Age of flat: 2 years
Sorry to have posted here, it’s an urgent requirement. If anyone interested please contact on 09894497347/7829000766
Thanks,
Subha

Ravi Kumar
Ravi Kumar
9 years ago

Hi Nitin,
Buying a property is the most difficult decision to take, more so with the salaried individuals like me. I was browsing through the internet trying to ascertain the pros and cons of buying a RESALE Vs DIRECT FROM THE BUILDER. Your blogs truly are very helpful and have answered lot of my questions. However, there still remains a few doubts in my mind………

In case of a resale – Am i liable to pay transfer charges and Sales Tax?
1. After the seller has taken possession but is yet to do the registration.

2. If the seller has not taken possession yet.

Your inputs will be very helpful for me to decide on the final purchase of the flat. I have shortlisted a few projects in Zirakpur near Chandigarh.
Regards, Ravi Kumar

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ravi Kumar

1. No, As the possession is received which implies it is ready to move-in. In this case, i suggest you to buy only after registration as possession is already taken
2. Transfer charges will be applicable and you need to sign tri-party agreement.

ubangera
ubangera
9 years ago

Hi Nitin,
Your site seems to be very useful for people like me and the response you are providing is upto the mark . I am planning to sell my Flat in thane through a dealer below are the details would like to know what would be the best %of Black amount that I can take to save Tax also is there any way I can save tax as after the sale I am planning to invest a small amount around 25lakh in buying a flat
Deal Amount : 89,50,000
Black Amount :16,00,000
Total white amount for agreement : 73,50,000
I had bought the flat for : 48,00,000
also I have a housing loan of 27,00,000 pending which needs to be cleared after the sale
pls suggest how best can I benefit from this deal
Regards
umesh

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  ubangera

My sincere apologies but i don’t encourage cash dealings in property transaction. Dealing in black money is criminal offence.

There are other ways to save capital gain tax within existing legal framework.

Ajay
Ajay
9 years ago

Dear Nitin, First of all thank you for such detailed blogs about real estate which is very useful for a newbie like me.

I have finalized to buy a 2bhk resale flat 5 yrs old in kamothe. Society is formed, conveyance is done but share certificate will received by seller in few months as per seller. Its cost is a 65lacs. I am not sure now how to go ahead from this moment.

The seller is telling me that he is having a home loan pending on that flat for 27 lacs. And there is no broker in between.

1. If i book the flat by paying a token amount(by cheque), should i ask for a receipt for the token(as he is an individual seller and not a builer)? if yes, how should the receipt be, on plain paper or some format or something? If no, can it all depend on account payee cheque with his name in my passbook?

2. Seller is telling me to pay some amount in black (to save his tax) as he has made agreement in 35 lacs and as i am looking for a loan of 40 lacs, so i have to register the flat at 50 lacs. Should i ask to seller to clear his loan before going ahead with any kind of payments?

3. Seller is telling me to pay some amount, then he will clear his loan and then hand me over the documents for my loan processing for rest of the processing.

Also, he is having loan in axis bank, and i don’t want to take over that loan. i want to apply for a fresh loan.

i am actually a bit confused. can you please guide me how to safely approach this situation. or how people generally go about the procedure.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ajay

1. You sign sale agreement and pay token money at the time of executing sale agreement.

2. I don’t suggest cash payments.

3. That is OK but should be documented properly in sale agreement with timelines.

You may check my post on how to close home loan of seller through following link
https://www.nitinbhatia.in/home-loan/close-home-loan/

For any personalized consultation on chargeable basis, you can call me at +91 94800 21000.

Sharath Nair
Sharath Nair
9 years ago

Hi Nitin.

My brother is planning to purchase a 16 year old flat (2 storied, 5 flats builder floor) in Bangalore East (@ 2952 INR / sqft against guideline value of 2700 INR) in A Katha. Flat is good & strong since I owe a flat in the same apartments. No lift is the only seen drawback. Is the decision good or any back-draws which I missed in it?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Sharath Nair

Just from the information shared, i cannot comment on drawbacks or its a good decision or not. I suggest you to check my posts on general guidelines for buying a property.

AK
AK
9 years ago

Hi Nitin,
I am negotiating for resale unit which is under construction by the builder. Current owner has paid 60% of the cost and i have to pay balance 40% to builder and 60% plus premium to the seller. Can you confirm what will be VAT and Service tax applicable on the same..thx

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  AK

VAT and ST will be applicable as property is under construction but cannot be charged twice. If current owner has already paid then you need not to pay again to builder.

MK
MK
9 years ago

Hi Nitin,
I had purchased a flat in Mira Road near Mumbai, where posession was delayed by almost 1.5 years. Now the builder has sent the notification for the final payment and availability to move in.
However they have stated that the OC has still not been received and that they have been follwing up since the last many months on it ( adding that most ready societeies in the region are facing the same situation). They state that they are allowing needy customers to move in under fixture and Fittings agreement with the builder while they continuie chasing the OC.
My confusion is whether to take posession without the OC or wait for that to come in. Is it even advisable to delay to take posession of your property when the buildr states its ready. I would also want to know whether the flat can be rented to someone if OC is not present as i most probably would not move in myself in the near future.
Can you please share your thoughts.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  MK

Most of the properties on Mira Road are without OC. Reason being builder deviated from approved layout plan. Probability of getting an OC is low if there is a deviation of more than 5%. As per govt regulation you cannot occupy the property till you receive OC. You may ask builder to provide a certificate from architect mentioning / certifying the % deviation from approved layout plan. You may take a final call in this regard.

gn
gn
9 years ago

Hi Nitin,
I am planing to buy a flat in Bangalore, all flats have been sold out except one, tawhich i am planning to buy.history behind this as per builder is that this flat was booked by one person X, Bank load by LIC was approved but it was underconstruction hence property was not resister in his name..after one year builder got notice from bank that X has not paid single emi…then bank and builder tried to contact that person but he did not turned up…final builder paid all interest plus complete loan to bank and flat taken by builderin his name,now they are offering for sale to me…whether i should go ahead?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  gn

You can buy
(a) If builder has NOC from LICHFL
(b) There is “no” mention of this transaction in any of your agreement and other documents.

Jay Raut
Jay Raut
9 years ago

Hi Nitin
I am planning to buy a flat in Vasai from investor I will be the first owner of the flat and builder has got the OC for the said building. Now could you please advise as property is not under construction but as I am first owner do I have to pay VAT on the property value or NO VAT applicable to me?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Jay Raut

VAT and ST is not applicable as OC is issued.

chetan parmar
chetan parmar
9 years ago

Hi Nitin.
M plannaning to buy a resale property in Bhayander,Thane.
The value of this property is 40lacs.and age is 20yrs.
The society has taken conveyance certificate last year, but does not have an Occupancy Certificate.
So should I go for it , or not.
Kindly suggest.
Chetan Parmar.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  chetan parmar

You need to check why occupancy certificate is not available. If it is due to deviation from approved layout plan then i will not suggest.

Surya
Surya
9 years ago

HI Nitin,
NIce to see your blog..lot of usefull information..
I purchased a flat in Hyderabad and agreement made with builderin 2013. I have already paid ~90% payment though bank loan and some self. but my flat is still not registered. IT was triparty agreement between builder, bank and individual. I have been asking builder abou registration he says that registration is not started yet for that apartment in that complex. I wondered that this compex is almost finishing stage with lot of pendin finishing work.
Now they are asking to pay service tax as i brought a underconstruction building. I have one query that do we need to pay service tax without registering this apartment as this is going for givernment.I dont understand why htey are delaying registration!
please clarify these questions
Thanks n advance
Regards
Surya

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Surya

You check your agreement with the builder. Normally service tax is paid by the buyer only for under construction project. Reg delay, one possibility is some pending gov approvals. You may check with the builder on reasons for delay.

Vijay Sawant
Vijay Sawant
9 years ago

Hi Nitin,
First of all thank to you for such valuable information. It is of great help for people like us and help us in making the right decision.
There is a shop in Mumbai , in a building which is 47 yrs old. The building has part OC and shop is part of it. The shop owner has not done any registration /stamp duty as during the old days they used to do the agreement on 5 Rs stamp paper. The building conveyance deed is also not done. But it has a registered Society. There are chances of re-development of this building in next 5 yrs and they are working on getting the conveyance deed done.
Do you suggest to purchase this property ? it would be also great if you could highlight the risk factors ?
Regards,
Vijay

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Vijay Sawant

I can highlight risk only after going through the documents. I suggest you to check property tax receipt, electricity bill, encumbrance certificate and Certificate under The Bombay Shops and Establishments Act, 1948.

Richa
Richa
9 years ago

Hi..Nitin I have purchased a commercial property in Ranchi in 1300000 through cheque. Registry has to be done. In Jharkhand it is 4% stamp duty and 3% registry charges. I would like to know that whether service tax of 3.09% is applicable or not during registry.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Richa

I am assuming, this property is already constructed. Service Tax is not applicable in your case.

Vijay Sodhi
Vijay Sodhi
9 years ago

I have purchased under construction flat for 3935000 in vadodara gujarat,i wnt to knw about rate of service tax,vat ,registration and stamp duty charges.and wether maintenance expenses are cumplosry to be included in total value of flat or not? And what benefit it would have to builder if expenses are not included in total value of flat.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Vijay Sodhi

You may check with local sub registrar regarding stamp duty and service tax. Regarding registration value, as i have not seen your property documents therefore cannot comment. You may discuss with builder and take a mutual decision.

Kapil Bhatia
Kapil Bhatia
9 years ago

Hi Nitin, I have purchased under construction flat for 43 lac (including 3.09% service tax) in Jan’15. I opted for Time linked pay plan (25:10:15 and rest 50% at possession) and already paid 35% at 3.09% service tax. Now, post April’15 when the service tax has increased from 12.36% to 14%, would that impact my amount or would remain same ?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Kapil Bhatia

It depends when builder deposit the same. Secondly, service tax is deposited in single installment. In all probability, you have to pay 3.5% of the total value as service tax is normally deposited when the apartment is nearing completion.

Nitin Bhatia
Nitin Bhatia
9 years ago

It depends on your current financial situation. You also need to include capital gain tax for final calculations. Currently, market is down and not a right time to sell…Pls don’t go by price quoted by builders as they have their own compulsion to increase rates. Actual price is up to 30% lower than builder rate.

sandeep
sandeep
9 years ago

Hi Nitin, Thanks for the wonderful article.
Recently I tried to book a flat in Hyderabad that was under construction. In the end builder refused to add the clause (in the agreement) of any penalty to him if the flat is not delivered in time, because of which i canceled the deal. He told that he will mention the delivery time and that”s enough for legal purposes in case the property is not handed over in time.
Did I made the right decision? Whats your take on for these types of properties where builder doesn’t want to promise the delivery time in agreement.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  sandeep

Hyderabad market is in bad shape. I think, its a good decision. You may check ready to move in property.

Kamal
Kamal
9 years ago

Hi Nitin,

Thanks for the valuable info.

I have bought a flat in hyderabad for 4050000, under construction. Possession date is september.

Builder has given two options. Either to register on full value 4050000 and pay (6+1.25+3.09) % registeration charges = 424000 approx….

Else I can register for circle rate of 2043000 and pay rest amount 2007000
as work order. Now on work order part builder is asking VAT (5%) and service Tax (4.944%) additional even if I dont register it.

My question is, IS it mandatory to register work order part. If I dont register, then why is the builder asking for VAT and SERVICE tax.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Kamal

As i have not seen your cost break up and agreement copy therefore can’t comment. Prima facie, it seems that it is beneficial to register at full value.

niraj panchal
niraj panchal
9 years ago

Hi Nitin,

I am a young IT professional with 4 years of experience. I am confused about how much expenses will I need to bear for a resale flat? Suppose if the resale flat costs Rs. 25,00,000, how much amount will I need to arrange after subtracting 80% amount sourced from bank as home loan and what expenses out of stamp duty, registration, VAT, ST, any other are applicable in case buying a resale flat?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  niraj panchal

You need atleast 4 lakh more.

Yatin Rane
Yatin Rane
9 years ago

Dear Nitin, I brought a under construction flat , at the time of buying builder told me society formation & electric meter charges as 51,000 . Construction started after 3 yrs , now builder has revised these charges to 1,25,000. can I go anything about it?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Yatin Rane

Please check break up of charges in your agreement with the builder. Normally, a clause is included that builder can revise the charges in future.

Yatin Rane
Yatin Rane
9 years ago
Reply to  Nitin Bhatia

Thanx.

niraj panchal
niraj panchal
9 years ago

Hi Nitin,

I am interested in buying a 1bhk flat in any project in Global City township, Virar (W), either under construction/ready possession, new or resale, but dont have much amount for down payment as of now. Suppose if I wait till next year to gather down payment of around 4.5 lacs out of my salary of 46,000 p.m. in hand, how much increase in rate per sq. ft. can be observed till May 2016? Eg. How much should a flat of 27 lacs as of today cost in May 2016 in Global City, Virar?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  niraj panchal

I have not studied this project. You may check with local dealers. Overall in Virar, the prices are stagnant / declining in some pockets. Current average property rate is Rs 4400 psf which was Rs 4500 a year back.

niraj panchal
niraj panchal
9 years ago
Reply to  Nitin Bhatia

Ok, thanx for the reply, I am trying to assess areas with best ROI after 5-7 years and from where IT companies are located within 10-15 kms, like Airoli is the upcoming IT hub, any suggestions for the top five areas in Navi Mumbai/Thane for best returns?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  niraj panchal

Airoli is good choice. You may check upcoming areas like Ulwe or Taloje.

Vinay
Vinay
9 years ago

Hi Nitin,

I have purchased flat 3 years ago in Kalyan and as per agreement it was mentioned 1700 as maintenance charges but now the builder is charging 2500+, is there i can do anything?

Also, when can we form a society, the complex have 11 building and 2 buildings are still under construction, can we form a society now?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Vinay

You cannot form the association/society till the project is completed. For maintenance charges you can check your agreement whether builder can revise maintenance charges or not.

Ajay
Ajay
9 years ago

Dear Nitin,
I am looking for a 3 BHK flat on resale in Aundh, Pune. Please tell me if the prevailing prices in that area are around Rs 9000/- sft for flats; then how much should be the difference in prices if the property is less than 5 years old, 5-10 years old, or above 15 years old. What precuations should I take take if the property is around 10 years old

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ajay

In my opinion, price range should be between Rs 8500 psf – Rs 8700 psf.

You can check my posts on Real Estate for guidelines on how to buy property.

Nihaal
Nihaal
9 years ago

Dear Nitin,

I would like to purchase a resale flat in south Bangalore for self occupy. Current market price is 3500 per SFT for new flats. How much I can pay per Sq. Ft. if the flat is 6 years old. Quality of the construction looks good for one of the resale flat I visited.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Nihaal

Please let me know the exact area. South Bangalore covers vast area i.e. Electronic City, Bannerghatta Road, JP Nagar etc.

Nihaal
Nihaal
9 years ago
Reply to  Nitin Bhatia

Its Singasandra, Flat is on Manipal county Road (FYI – New flats of similar construction are at price of 3300 per SFT + CarParking+BWSSB&BESCOM+Amenities – ~ 45L for 1230SFT)

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Nihaal

Property rates have dropped by 10% in this area. I think Rs 3100 psf will be good price to enter. I don’t suggest to buy for investment. If you are buying for self-occupation then you can buy.

Abhi the soulzhappy
Abhi the soulzhappy
9 years ago

Hi Nitin, I am planning to buy a resale flat at BTM Stage 1, Bangalore which is 7-8 years old. Construction quality looks good currently and semi furnished. What should be the per sq ft price?

Nitin Bhatia
Nitin Bhatia
9 years ago

It is very subjective & depend on the location and facilities. Average rate in this area is around Rs 4600 psf.

Priyesh
Priyesh
9 years ago

Hello Nitin,
I have purchased a flat in Umbergoan (Umargoan), Gujarat. The flat area is 670 sq. ft. @1403 per sq. ft. The building is under construction.
The builder is asking me to pay the Service Tax & Registration amount right away.
Could you please calculate for me how much Service Tax I have to pay for an under construction property and also what is the Registration amount. Do I need to pay both before the flat key is handed over to me or I can wait until its ready for possession?
Please do reply me ASAP as its very urgent.
Thanks & Regards,

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Priyesh
Gitika
Gitika
9 years ago

Hi Nitin,

I am planning to buy an under-construction property in C V Raman nagar, Bangalore. This project is from a reputed builder but its delayed due to their dispute with DRDO. The project is almost 80% complete. The builder claim that all the legal issues are cleared and hence construction has been restarted and expected to be complete by June 2016.

I am getting a 2BHK flat (SBA – 1392 sft, CA – around 940 sft) from builder as well as land owner. The total cost of the flat including VAT is coming around 1.05 – 1.1 cr with price quoting in the range of 5,850 – 5,960 /sft. Do you think it is a good deal for future investment yields?

Thanks & Regards,

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Gitika

Though the price vary from project to project depending on amenities, location and other factors. In my opinion, C V Raman Nagar is good area to invest but you are entering at higher rate. The rates in this area have dropped by 10% in last 6 months. Deal at around Rs 5000 psf will be good deal.

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