Selling the property before possessing it
The real estate market in India has undergone a good positive growth cycle since last decade. The number of people buying property has also increased manifold. While earlier people used to buy property for personal use, during the last decade a growing number of investors have been buying lucrative properties to uncap the tremendous potential of short to medium terms gains.
Timing is the Key: Many people book properties during pre launch and soft launch periods to get the maximum monetary benefits and discounts. Not only do they get to book a property at a subsidized rate, they are also likely to gain good money once the construction gets underway and builder starts to give out possessions. By the time the project is completed, the property price also might have appreciated. So they who look out for short term monetary benefits try it out to re-sell the property before actual possession.
Benefits:
Tax Gains: Selling one’s property after receiving possession from the builder can attract tax obligations in terms of short term capital gain or long term capital gain depending on the time taken by the builder to give final possession, selling at the same property before actually getting possession offers lesser tax and equally lucrative return on investment.
Capital Appreciation: The real estate prices are at their lowest at pre launch of the construction project. The builder sometimes offer even rates lower than the bare minimums to increase the initial sale figures which can then act as a catalyst for future sales. Many buyers are also influenced by various brokers to park their money during such soft launches. Once the project is launched, these buyers make a quick buck by selling their rights to new buyers. Since these buyers had helped the builder initially by providing adequate cash flow, the builder usually allows such buyers to sell their apartments at a premium.
How it works: As per the industry norms a builder charges a token bucking amount at the time of booking the property as per the builder’s terms. This can be anywhere from soft launch to pre launch time period and as per the builder’s schedule. Once the builder finalizes the layout of the property, an agreement between the builder and the buyer is executed and registered.
For people willing to sell their property before receiving the possession from the builder, both the buyer and seller need to approach the builder along with all the documents to get it transferred to the new buyer. Most builders charge a transfer fee in order to allow clients to sell of the property before receiving the possession. The transfer fee is decided mutually between the builder and the original buyer. Once the fee is settled, a tripartite agreement between the original buyer, the new buyer and the builder is inked. Usually the builder changes the name of the original buyer to the new buyer in all documents related to the property. The new buyer would still need to carry all original documents as while buying a new property. In case the initial buyer has a home loan obligation, he or she would be required to clear off the loan and get a no objection certificate from the concerned bank or financial institution before inking the agreement.
