Food, clothing and shelter are the basic needs of a human being. While the first two come relatively easy for the majority, for a resident in metro, owning a house is a dream and in a way the ultimate luxury. The way real estate prices have shot up, buying a house in a metro or tier 2 city is a big decision. And naturally, involves a lot of analysis.
Now one of the dilemmas buyers often face is whether to buy an under construction property or to choose a resale property. As per an article in Financial Express, the recent trend suggests that home buyers are opting for the latter, i.e. buying older houses in resale transactions. And reasons for this inclination are not hard to fathom.
The reason why under construction properties are being avoided are because they have failed to meet the expectations set by developers in buyers' mind in the initial phase of the transaction. Delays in construction and possession that can stretch over years, a lower carpet area than promised etc have become quite common these days. The buyer hardly gets what he is promised and pays for. And once an initial investment is done, buyers have little choice but to compromise and live with what is offered to them. This often leads to a sense of being cheated.
In contrast, in case of older properties in resale transactions, the chances of unpleasant surprise are minimized. The home buyers know well in advance what they are paying for. Also, unlike in case of under construction properties, the buyer can verify things such as compliance with regulations, clear titles etc in a better way . But it does come with a pitfall. One has to pay for the property upfront. This is unlike in the case of under construction property where payment occurs in phases. But in resale transactions, one also gets an immediate possession, and hence saves or earns rent. On the other hand, in case of an under construction property, if the delay stretches for years, it can be a huge financial burden for home buyer since he has to pay rent as well as repay loan and interest. Further, in case of an under construction property, a buyer may have to pay for facilities that are of no use such as gym, swimming pool etc. This is less likely in case of resale transactions.
Hence, unlike buying an under construction property which is fraught with risks, buying an older house is more of an informed decision and offers more transparency with regards to kind of investment one makes. No wonder big cities are witnessing a shift in the favour of the latter.
The shift does not bode well for real estate developers. But they cannot be solely held responsible for the current trends. The main issue, which is the delay in construction, is not just due to credit crunch for buyers. The construction projects need Government clearances which itself is a long drawn process. The shifting trend is also an outcome of lack of necessary regulations in the real estate sector. Until things improve, in case of buying an under construction property, buyers should exercise due diligence and go for a builder with good credibility and track record.