Buying real estate is often considered a cakewalk, but selling a property is a Herculean task. When you’ve decided to purchase real estate, you’ve more or less made up your mind on the location, the project specifications, and of course, the amount that you wish to spend as per your budget. However, if you decide to sell your property after five years, perhaps to move into a bigger apartment, the price quoted by the broker is often much lower than your expectations.
So, what is the ease-of-exit quotient of your property?
Before buying property, homebuyers should check how easy it would be for them to sell it if the need arises. It could be for buying a bigger house, sending your children abroad for studies, or it could have to do with a genuine financial crisis that you may have to deal with.
Location is definitely the most important factor. Is the upcoming / ready-to-move-in project located close to the central business district? How long does it take to reach the main road? What exists in and around the area? Are there enough schools, hospitals, markets, theatres, restaurants, malls in the vicinity?
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An investor who bought an apartment in an upmarket project in Mumbai two years ago for Rs 58 crore, sold it for Rs 82 crore recently. This could be due to the location of the project and the amenities available. It could also have to do with the type of people residing in that project.
If a project has film stars, CEOs, NRIs as investors or residents, it is bound to appreciate much faster than an affordable offering in a peripheral location where maintaining even a swimming pool may be a challenge.
The ease or difficulty of exit also depends on the track record of the developer. How many projects has the developer delivered on time?
Selling an apartment in a gated community also depends on the amenities, and how well they are maintained — first by the developer and later by the residents’ welfare association.
“An apartment is an emotional asset. An end-user generally holds on to it till the time he wishes to upgrade, or there is an emergency. An investor, on the other hand, looks at an asset from the point of view of capital appreciation,” said Ritesh Mehta, Senior Director and Head, West and North, Residential Services & Developer Initiatives, JLL.
The price of a property generally increases once the project receives an occupancy certificate. It also depends on the new supply that comes up in the area. “If the new supply is less than demand in a micro market, prices are bound to increase. Usually, investors tend to stay invested for six to seven years until the social fabric of an area develops,” he said.
“Homebuyers should avoid first-time builders. For investors, it may be a good idea to invest in a project in the initial stages and exit after two years of possession. That’s when a project by a reputed developer becomes profitable,” said Nitin Jain, a developer active in NCR’s Noida area.
Pankaj Kapoor of Liases Foras said the ease of exit depends on the demography and maintenance of the housing society.
“There is a premium attached to maintenance. Exit is also dependent on the demographic quality — who resides in those apartments. And it also depends on the distance from the central business district,” he said.
For instance, in Mumbai, areas such as Bandra may command a premium on account of how close they are to the office district and the facilities on offer, but the situation may be different in areas such as Vasai and Virar, where it’s more an affordable housing market.
This is perhaps one of the reasons why in certain peripheral locations, forget the frills, maintaining basic facilities in a society becomes a challenge, which has a direct bearing on the price of the property, making it difficult for the buyer to get his expected rate.
Finally, property sellers should have reasonable expectations.
“If you bought a property for Rs 1.5 crore six years ago and if a new project in the vicinity has been launched at Rs 3 crore, don’t expect your property to fetch that amount. Have reasonable expectations when it comes to selling property, otherwise you will find it challenging to unload it,” said Suresh Sadgopan, a financial planner.
”A brand new project comes with new amenities, contemporary design, and certainly should not be compared with a property which is six years old,” he adds.
An exit also depends on the legal documents. “Make sure that the property has a clear title and the legal paperwork is in order,” Sadgopan advises.