Hi, I'm confused about this.

When a builder starts an apartment project, he launches it at say Rs.40 lacs.

After 2 years, on project completion he charges Rs.60 lacs for the same (as the apartments are ready to move in).

If an apartment owner (who bought the apartment during launch Rs.40 lacs), wants to sell it in the 2nd year - he sells at Rs.50 lacs (because the builder is selling at Rs.60 lacs).

Now, the price quoted by the seller is Rs.10 lacs lower than that of the Builder. What are the pros & cons of buying from the owner vs builder? Can someone help me understand this ?
Read more
10 Replies
Sort by :Filter by :
  • Its ok to buy from owner. Its a win - win for both you and the owner. He would have made some returns and you are also getting at sub - market rate
  • Originally Posted by ariyurga
    Its ok to buy from owner. Its a win - win for both you and the owner. He would have made some returns and you are also getting at sub - market rate

    Hi, thanks for the reply. Yes, on paper it looks quite profitable.

    But, the reason I'm thinking multiple times is - why would the owner sell for 50 lacs, and not 57 lacs (where the buyer still saves 3 lacs). He can be more profitable right?

    Is such large price difference normal in the industry, or is this something I need to investigate more on?
  • Yes , the difference is quite big in this case .
    Some thoughts
    1. Resales are difficult in reality so quoting less than builder is the norm
    2. Financial situation of the seller , may he just want to get rid of the prop as he is in need of money
    3. Although builder is selling at 60 . what is the diff b/w the builder flat and seller flat ? Floor rise , Premium facing , Is builder price negotiable ?
    4. Seller wanting cash ?
    5. RTM property still available , something wrong with property ?
    etc etc
  • registration cost is more when u buy from owner, isn't it? that could be a reason ..owner is giving it for less...ofcourse those who have made it for investment..will be most probably selling only..
  • There are a number of reasons why Resale Prices are always lower than Builder Price, some of them are as below:

    1. Transfer Charges: Since u have to pay them, the cost should be lower by this much to match the Builder Price.
    2. Broker Commission: Since u have to pay them, the cost should be lower by this much to match the Builder Price.
    3. White Value: In your example if the Seller is able to sell at 60 lacs, his Capital Gain would be 20 lacs which would attract Income Tax. To save this, he would be willing to adjust the amount of Tax saved by taking Premium in Cash.
    4. Sentiment Value: Since anyone will feel more comfortable buying it from Builder, there has to be some discount offered by Owner.

    There was a similar discussion on this topic some time back. U may refer link below to go through it.
  • Sharks

    First of all you need to like the apartment which the reseller is trying to sell. That is location, access, view etc. Second- why are you being nice to guy. Ask the apartment for 40 lakhs. or even less. The fact today is these so called "investors" are caught in a pincer attack. On one hand, the RBI is cracked down on the 80:20 schemes and on the other hand, there are no buyers in the market.

    If I were you, I would ask for 40 lakhs. The man seems to be bleeding already. There is no need to feel any mercy for him. Infact you are doing him a favour by stopping his bleeding. This is business. Dont attach emotions to it.

    Most of the other points have been highlighted in the thread mentioned above. Basic point is the reseller will ask for the difference amount in black. For salaried people, that is tough.
  • Few days back i have bought RTM one flat in ecity phase 2 from first owner for almost the price builder is selling for under construction blocks which take 1-2 years in same apartment.
    It was really a deal for me :)
  • There are a few points to be considered when buying from resale from first owner
    1. The first owner may not have registered the flat. So he is saving on registration and stamp duty
    2. You need to get a NOC from builder, which may cost anything from 25K to 2lacs. This isusally shared 50:50 between buyer and seller.
    3. Make sure the first owner has paid all other overheads.(like Club house, 1 time maintenance, sinking fund etc)
    4. make sure that car parking if any has been alloted and it transferrable to you. Need to have the allotment letter for same.
    5. If its a ready possession make sure the first owner has paid property tax for all previous years. (same for builder owned also)

    Having said this, the cost may still work out cheaper when buying from first owner than the builder
  • Thanks for the replies. Also the link above was quite informative. So, I guess it boils down to a combination of

    1. Black Money
    2. Risk element for the early investor
    3. Risk element for the buyer
    4. Hyped "jacked-up" prices of the Builder
    5. Not easy for resellers to market as effectively as the builders
  • i never heared 10 lacs diff between the builder and the flat owners price its a huge difference
    is 50L just the basic price he is quoting excluding other charges and parking or all inclusive. and not to forget THE HUGE SERVICE TAX and VAT.
    may be he is selling out of desperation the reasons for this desperation has been mentioned above... to add a few more, check if there are any disadvantages of this particular flat like vastu, and where is the balconies facing