Home loan disbursements continue to be on the upswing. And with interest rates a far cry from the heady days of 12-13 per cent, borrowers too never had it so good.
But the one dilemma that new homebuyers still face is -- do they opt for resale property or do they buy a new home? Here, we have outlined some pros and cons of both resale as well as new property.
1. Home loan term/amount
Depending on how old the property is, the loan tenure could vary. Some housing finance companies (HFCs) do not give a home loan for property that is more than 50 years old.
This impacts the tenure of the home loan. For example, an individual, aged 30 years and drawing a salary of Rs 1,000,000 p.a. wants to buy a 40-year-old property.
Under normal circumstances, if the property were new, he would have been able to opt for a (maximum) 20-year tenure. But since the said property is 40 years old, and the HFC doesn't offer home loans on properties that are more than 50 years old, his tenure will be limited to a maximum of 10 years (i.e. 50 years-40 years).
This will have an adverse impact on the equated monthly instalments (EMIs), which will increase due to a reduction in the tenure. In such cases, buyers may consider changing their decision to buy very old properties. Buyers of new property do not have to face any such difficulties.
Another point worth mentioning is the location of the property. If the property is situated in a prime locality, then the amount of home loan, which may be given, can go up to 90% of the cost of property in case of resale property. Whereas, if the property is in a non-prime locality, then it will go down to say, 85%.
2. Property resale value
The resale value of an old property will be different from that of a new property. Obviously, older the property, lower will be the resale value.
Newer properties command a very good market value compared to properties, which were built, say, 20-30 years ago. The decision to go in for new or resale property will prove to be especially useful to buyers who are buying property as an investment or for those individuals who plan to utilise the tax benefits effectively.
This will also be useful to buyers who are currently staying in employer-provided accommodation and plan to buy a house soon.
3. Documents
In case of new property, there is relatively less documentation compared to resale property. In case of resale property, there are a lot of issues. For example, the previous agreement (also known as the 'link agreement') is required along with registration and stamp duty receipt, allotment letter (which the seller may not have if he has purchased the house on a loan).
If the buyer too opts to purchase the house on loan, then things might get difficult for him without even one of these documents, as his HFC will refuse to grant him a loan.
4. Maintenance
This too has to be an important criterion while zeroing in on a property. Usually, older properties have lower maintenance charges as compared to new properties. Part of the explanation lies in the fact that nowadays, new properties come along with a host of add-on benefits like, higher parking charges and higher overall society bills.
This is quite unlike many older residential properties. However, we also have to look at the fact that older properties have to spend more on the general maintenance of the building.
Recurring costs like painting the society, waterproofing and structural repairs have to be borne by the society (in effect, the society members) at regular intervals. This adds substantially to the financial burden of the individual. Newer properties do not have to incur such repairs in its initial 10-15 years.
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