It is a no-brainer that ready-to-move-in houses are the best bet, especially for homebuyers who are averse to taking risks considering the scores of projects that are currently under litigation. Also, in the present economic scenario, the market is favourable and there are abundant options available across cities. Prices too have come down drastically as there is plentiful of unsold inventory that may take several months to get exhausted. Another positive is that ready-to-move properties unlike the under construction units are exempt from the Goods and Services Tax (GST).
As per ANAROCK data, out of the total 6.73 lakh units of unsold housing inventory, nearly 85,000 units are currently ready-to-move-in across the top 7 cities. Interestingly, out of these total unsold ready-to-move options, nearly 60 percent units are in the affordable and mid segments priced below Rs 80 lakh. In terms of budget segmentation, MMR and NCR have the maximum available ready-to-move stock in the affordable and mid segments (below Rs 80 lakh) – together accounting for 55 percent of the stock in the main seven cities. Pune has an equal mix of ready-to-move properties priced below Rs 80 lakh and properties priced above this budget range.
NCR and MMR are the cities with maximum unsold ready-to-move stock. Together, they account for nearly 54 percent of such stock in the top seven cities. Hyderabad has the least amount of ready-to-move stock with just over 4,400 units.
|Cities||Total Unsold Units Approx. ||RTM Units Approx.||RTM % of Total Unsold Units|
The RTM advantage
While RTM units are considered relatively 'safe', there are still a few mandatory checks that homebuyers should conduct before signing on the dotted line. Buyers should try and shortlist the best five options basis the location, quality of construction, legal sanctity of the documents and the structure, the best price offered and most important whether the project has a RERA registration number or not.
"The current preference for ready-to-move options is understandable. Despite many customer-favouring court rulings on this front, the unwholesome aura of delayed, stalled and even shelved projects which had beset many cities markets continues. In fact, the recent and ongoing NBFC crisis has made the situation even worse. Another pain-point for under-construction properties has been GST. Ready-to-move properties were cumulatively assumed to be and marketed as exempt from GST. However, a recent clarification confirmed that only ready projects with completion certificates in place enjoy this benefit," said Anuj Puri, Chairman – ANAROCK Property Consultants.
Despite the property being ready-to-move-in, a buyer should not blindly invest in it. The project should be is in a well-connected location and have a decent saturation of amenities and facilities. An optimal ‘entry point’ in terms of ticket size is critical for good ROI - it should be attractive to begin with and, if possible, negotiated further. Investors must also verify historic capital values and rental rates trends, he says.
Besides the physical structure of the building, homebuyers should also check if the infrastructure in the vicinity and facilities such as clubs, power back up, parking, basement etc are also up and running. Not only the apartment, but all shared amenities and facilities should have been completed by the developer.
The project should have legal sanctity
All legal processes associated with the project should be complete. This means that all documents – occupation certificates and the completion certificates should be in place. Potential buyers should check if all land dues have been paid to the authorities, there are no multiple financing issues and no-objection certificates have been received from lenders. This is important to ensure that the property you are buying into can be registered.
Always negotiate for an all-in price
If you have made up your mind regarding the unit you wish to buy, make sure the seller quotes an all-encompassing price. There should not be separate water charges, power charges, parking fees, external development charges and internal development charges. Ask for the price of the entire package.
Start negotiations with 5% to 7% lower than the benchmark price
Choose a price point that is lower than what the builder is quoting or what the local broker has proposed. For example, if the price of the inventory held by the builder in a project is Rs 6000 per sq ft and the broker has quoted Rs 5200 per sq ft for a secondary sale, you should try and start negotiations with anything 5 per cent to 7 percent lower than what is supposed to be the lowest price in the market, say real estate experts.
"Do your homework well before entering the negotiation table. Always negotiate for an all in number – there should be no additional EDC, IDC, PLC as an all in price will compete with the re-sellers’ price in the market, especially if the investors are stuck with properties for over five years. Also remember that it is this investor who decides the resale price in the market. Make the investor price the benchmark and negotiate for a price below that. There is every possibility that the investor may have a better located unit compared to what the builder is left with," said Anckur Srivasttava of GenReal Advisers.
Puri also has a word of advice here.
"While even credible developers will negotiate with serious buyers to some extent, only weak players in deep financial pain (and probably wanting to exit the market altogether) will opt to sell at an outright loss. A reduction of 5-7 percent should be considered an acceptable knockdown on the overall ticket size. To push beyond this is inadvisable, and can be counter-productive," he added.
Check for the chain of title
If you have decided to buy from an investor through a local broker, make sure that there are no dues pending. Also, if it concerns a property that has not been registered with the authorities and you are buying an ‘investor invested’ property, make sure there are no issues with. Of late, some authorities have come down heavily on such properties which have relied on the builder transfer mode.
Experts say that often developers are expected to submit a list of owners in a project as on the date on which an occupation certificate has been received by the developer. And if a ‘builder transfer mode buyer’ gets the unit registered under his name post the OC, he may get a notice saying that the authority list had another ‘owner’ and may even have to pay penalty.
“The current owner may receive a notice saying that he has transferred the property in his name post the project receiving an OC and therefore he should pay penalty. In this case, the previous owner may also have to pay penalty with interest. Technically the property should have been registered by the previous buyer. This can become problematic for people who have relied on builder transfers. It can create a bit of a hurdle in clean ownership despite you having the unit registered in your name," said legal experts, adding the authorities may see this evasion of duty as loss to the exchequer.
Visit the property and speak to residents
In case of an established project, make sure you meet members of the RWA. While some price appreciation is definitely attributed to the location and quality of the project, it is the quality of the community or the residents that ensures the long term value of any residential development.
Try and find out the ratio of self-occupied flats to units that are on rent. If more than half of the flats are leased out, the maintenance of the complex may not be very good and the complex may turn into a ghost town. Also check for the ratio of large sized apartments to smaller units. If there are 400 apartments whose size is over 2000 sq ft and 200 units whose size is around 1000 sq ft, the upkeep and maintenance of the society is bound to be better. The resale value of the unit in such societies will also be much better.