Buyers’ Alert: It’s resale versus new flats in the property market

The Reserve Bank of India governor Raghuram Rajan brought cheer to the home buyers when he slashed the repo rate by 25 basis points- from 7.75% to 7.5%. However, does a slash in key policy rates aka lower interest rates make it any easier for a home buyer to decide what kind of investment should he make?

Should you buy a new flat or a resale?

“There appears to be no easy answer to this question. People prefer resale flats instead of new ones for various reasons. Sometimes, a certain location just does not offer suitable options on the primary market,” said Kishore Pate, chairman and managing director of Amit Enterprises Housing Ltd.

He further added that property buyers who want to invest in flats do not do enough research and often lose out on good projects. “Or they succumb to the pressure tactics of a persistent real estate broker and buy a resale flat when a new one was available in an excellent location, and within their financial reach. Or they believe that a serviceable flat available at a slightly lower price is always a good bargain.”

However, home buyers share a different view on the issue. They often prefer to buy resale flats as they guarantee possession of the property. “I have been planning to buy a flat in Delhi NCR but I am not sure if I should invest in an under construction flat as there have been too many cases of prolonged delay in deliveries or have been completely stalled. On the other hand, I have also checked out the flats on re-sale and they seem safer than the new ones,” said Abhishek Mehra, a senior official with the private sector bank.

Not in the same value chain?

According to the experts, while resale flats that up on sale are totally in perfect condition, however, that does not mean that they fall in the same value chain as that of new flats.

Industry players believed that every second hand flat in the market has some feel of its previous owner left in it. “It is very difficult, if not impossible, to paint a unique masterpiece on a used canvas. Previous owners of a resale flat always leave a certain indelible part of their personality or culture imprinted on the property. While it is possible to fill in and paint over nail holes in unwanted parts of the wall, undoing serious structural modifications is a challenge,” Pate noted.

Price factor

While it may come across as a surprise for many, builders highlighted that flats in new projects or ready-to-move-in flats often are cheaper than the resale flats up in the market.

“In the case of under-construction projects, the sale value of individual units rises only in tandem with the stages of completion. But resale flats often cost as much as (if not more than) new apartments because the relative cost of original acquisition was higher. This is often a function of obsolete construction methods, which are costlier and more wasteful than more evolved construction technologies,” elaborated Pate.

Also, a new flat can yield a higher value on being resold in the market as the shelf life of the building is relatively more than many other second hand flats that are up on sale.

Upgraded technology

Industry players also believed that a new flat has an edge over old flats, which are being resold, in terms of the technology. While old flats are in good condition, however, builders are using new concepts and technology to build new flats in their latest projects.

“Flats in new projects by good developers tend to be more energy efficient, environmentally compliant, user-friendly and space-optimized. Reputable developers are like : they are constantly upgrading their knowledge, techniques and equipment. They do this to remain relevant and competitive in a market which they know to be replete with other options for buyers. The benefits of this mind-set are directly passed on to the buyers,” he explained.

He elaborated that new flats come with new fixtures and fittings that ensure minimum problems after usage. On the other hand, key fittings in a resale flat generally tend to be old and used and hence can give problems to the new owner within few months of the possession, thus, levying additional costs on the new owners.

Hence, it is advised that while investments in a resale flat can guarantee a sure shot possession, it would be wiser to weigh both the pros and cons of a flat in a new project.