Buying underconstruction property from investor is a multi party transaction

Q: When one buys property from an investor in an under construction project, he/she is entering into a multi party transaction.

Saran,

13th July 2015

Investment Advice in Mumbai

home loan

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buying property in mumbai

buying under construction property

multi party transaction

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Replies (3)

Hi Dwarkesh,
Is there any long-pending dues which might attract penalties during possession?

Abhishek,

13th July 2015

Comment

Hi Abhishek,
If the seller has been making delayed payments, there is high possibility that all those interest accrued by the builder will be charged on the new buyer during possession, which might be shocking. So, check on this too.

Dwarkesh,

13th July 2015

True Suresh,
And that becomes tough and sometimes plan need to be changed to suit the situation. specially when the mortgage is overlooked at the beginning.

Many new buyers (assignee) do not even know that there is another party to this transaction, if the assigner (seller) has a loan running. Generally, that question is completely forgotten at the time of making the deal. The formalities include closure of the assigner's loan and it further gets complicated if the assignee also plans to borrow. Then there comes involvement of 5 parties and it becomes more complicated.

Dwarkesh,

13th July 2015

Comment

Hi Dwarkesh,
At what price was the transaction done between the builder and the assigner at the time of beginning of the project? Is it necessary to get the price details from the sellers?

Kunal,

13th July 2015

@Kunal,
It is very-2 important for the buyer to know the price at the beginning and get documents like the sale agreement executed between the seller and the builder. This document will also need to be submitted for loan application.

Dwarkesh,

13th July 2015

It is also very important to know how much of the total property cost is already paid up and what are the dues?

Kunal,

13th July 2015

Well Kunal,
In that case, a statement of accounts from the builder showing the payments made with date and instrument numbers will be required for the lending too. Any unaccounted payment cannot be considered without proper receipt from the builder.

Dwarkesh,

13th July 2015

Most of the home buyers don't know when they plan to buy an under-construction property from an investor, the deal is not the same as they do when they are buying it from a builder. And it is not the same as if they are buying a property in the secondary market, from a home owner.

Veena K,

13th July 2015

Comment

Right Veena,
When an investor wants to sell his under-construction property to a new buyer for making profit on his investment, then he hand over the rights of the property completely to the new buyer in exchange.

This transaction requires the builder also to be a party as the first buyer has neither paid the full consideration, nor in possession of the property. This tripartite (Assigner, assignee and builder) is called an "Assignment Deal". Many are unaware of the skill involved in these transactions and during the process discovers them and overcomes with difficulty.

Suresh,

13th July 2015