Homebuyers Leverage Resale Market

BY Realty Plus

Weak economic scenario, perceived high price level and lack of consumer confidence in the developers with respect to project completion has led homebuyers looking towards investing in the secondary market

By: Leandra Monteiro

Among the many realisations that have dawned on us in the current crisis is the security offered by own home – physical, emotional as well as financial. The intent to buy homes is greater than ever but, the gap between the customer’s purchasing power and affordability is rising due to job losses and pay cuts.

Moreover, with construction coming to a standstill throughout the strict lockdown, project delays have become inevitable. With the fear of delayed or incomplete homes, interested homebuyers have sought respite in ready-to-move-in homes and the resale properties. According to Amit Wadhwani, MD & Co-Founder SAI SECCPL and Co-founder SEMSI, there has been a cautious wait and watch approach in the industry. “We feel both the primary market and secondary market will witness a revival of sorts but it's hard to say when the pre-covid levels will be seen. With interest rates at record lows and the market expecting a slew of Government measures to revive demand, we see a V shaped recovery in the short term. But the real estate sector as a whole is set to underperform for a couple of years.”

As per an industry survey report, 60 per cent of the home buyers across major cities of Delhi (NCR), Mumbai region, Kolkata, Hyderabad, Bengaluru, Pune, Chennai, Chandigarh, Ahmedabad, and Lucknow. are still planning to buy their homes within a year. Almost 85 per cent home buyers believed ready to move in properties were safer than an under construction property .In fact, the share of ready-to-move-in residential properties in the overall housing sales may rise to 30 per cent during the current fiscal, driven by nil GST and no risk of any delays.

“Over the last few years, we have seen an increase in the sales of ready-to-move inventory which now accounts for over 20% of total residential Tier 1 cities sales  compared to around 10% a couple of years ago.  Readyto-move units are also advantageous since buyers do not have to pay GST on such inventory. Given that buyers seem to prefer ready-to-move inventory, this trend will extend to the secondary resale market as well. We also anticipate that sellers of resale units will lower their prices in many markets and buyers can negotiate the prices for these units," said Mani Rangarajan, Group COO, housing.com, makaan. com, Proptiger.com 

WHAT’S DRIVING THE GROWTH?  Considering the current market scenario, the resale market is likely to fare better than the primary market. In the economic downturn, many investors are now releasing their properties for sale at deep discounts. On one end there are now many property options available in secondary market, secondly they are available at great deals. Prices of resale properties across the country are down 10% to 25% as cash strapped owners, most of whom had picked up their second apartment as an investment, are now trying to liquidate. Resale properties have no execution risk, there is no service tax and one doesn’t have to bear the interest cost paid on a home loan during construction. Apart from cost advantages, the main driver of the growth that the secondary market is experiencing is affordability. While  there is not much of a fall in primary sales as developers are waiting to see how the post moratorium period is emerge, there is a definite decline in resale prices, in some cases by as much as 25%. According to 360 Realtor, fall in prices are a bit sharper in the western suburbs of Mumbai that have fallen by 5.5%, in Thane by 3.6% and central suburbs by 10.1%. The project delays by multiple builders have shaken buyers’ confidence in the primary property market, thus homebuyers are inclining towards resale properties. In the last few years the secondary real estate market in India has started showing signs of growth. As cities and states begin the slow process of reopening, we’re going to see a see-saw recovery with ups and downs that will favour the nation’s secondary market in the shortterm. After experiencing life under quarantine, many buyers are searching for affordability and greater space, which is driving demand out of the nation’s largest metros and into surrounding smaller towns. SIGNIFICANCE OF SECONDARY MARKET In metro cities like Mumbai and Delhi, the demand for resale properties has always been high in key areas. Also, people generally prefer buying in their existing neighbourhood. Also, one gets what they see in terms of space and quality. Both, affordability and search for familiar area explains why secondary housing markets will see more than normal demand in 2020. As a matter of fact, secondary real estate is both heating up and experiencing growing demand due to the pandemic. The secondary market has become significant as it provides the liquidity which is needed in order to further strengthen the functioning of the primary market. A strong, formal, dynamic and robust secondary market is critical towards ensuring greater liquidity, predictability and asset valuation transparency which could further augment the demand for real estate assets in India. The biggest concern till few years back was that of transparency in secondary or resale real estate transactions. With Demonetization and implementation of RERA, cash transactions, which formed almost 30-50 percent of the total payments earlier, have been seriously curtailed and investors no longer see any point in hoarding properties to use up their black money. The Property agents now being governed by RERA mandates has been another visible positive impact. TIP FOR SECONDARY MARKET 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. A WORD OF ADVICE FOR BUYERS Engage a RERA-licensed property agent A good agent will help evaluate the location, amenities and will explain the pros and cons of the property. Enquire about the transfer charges and registration cost of the property. The property may have more than one owner. In that case, check all the legal documents diligently. Do get all the documents verified by the lawyer before signing the dotted lines. list of documents to be checked include, Chain of Title or Sale Deed, Agreement to Sell (ATS), NOC from society/ authority, Title Search and Report, Share Certificate, Occupancy Certificate (OC) and Encumbrance Certificate (EC).

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