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Your smart guide to buying a second home...

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Your smart guide to buying a second home...

Last updated: February 7 2014
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  • Your smart guide to buying a second home...

    Investment in real estate involves the purchase, ownership, management, rental and/ or sale of real estate for profit. Here, profit is the key word. If you are going to reside in the house, other factors such as proximity to the work place, school, family and friends come into play. For instance, you will not mind spending a few lakh of rupees if the house were close to your child's school or your office. But when it comes to an investment, all you have to look at is the current price and the potential value of the particular city or the suburb.

    Choosing the location

    There should be some huge infrastructure or economic activity in the offing, which should drive the choice of the suburb/ city. "An investor should first check if the location is doing well. Secondly, the location should witness some big infrastructure development such as the launch of new commercial spaces, airport, IT parks etc. Such developments should trigger the purchase of the property from an investment perspective," says Abhishek Kiran Gupta , head-research and real estate intelligence service, Jones Lang LaSalle .

    Choosing the developer

    The quality of the construction, sticking to deadlines and the commitment of the developer are some crucial factors. If you invest in a property in another city, then it becomes difficult to monitor the progress and track every minute detail of the project. In such a situation, the credibility of the developer assumes higher importance. "Typically, real estate investors look at under-construction projects from an investment perspective. You make gains faster in an under-construction project than a readyfor-possession property. And for such under-construction projects, you should opt for a trustworthy builder," Gupta adds.

    Evaluating the property

    The value of a property depends upon several factors, such as the location, size of the house other amenities offered by the housing society and the overall market trends in terms of appreciation and depreciation. But before putting finalising the property, you have to get the right quote from a third party. "If an investor is keen on buying a property, he should ideally get a surveyor or a couple of brokers to evaluate the property. Apart from checking out with the local residents, get the property evaluated by 2-3 brokers to get an accurate quote," Gulam Zia , director, national advisory services, Knight Frank India .

    The actual cost

    Owning a flat at Rs 8,000 per sq ft for a 1,000 sq ft area at a posh suburb may sound irresistible. Forget the obvious expenses on stamp duty and maintenance. Look up the cost of registering the property with the local electricity board, the one-time expense of an electric meter, the cost of furnishing, fittings and all other expenses involved in customising the property to your needs and tastes. Also, most townships insist on compulsory car park charges, clubhouse membership charge and an advance payment of maintenance charges for 1-2 years. The other amenities such as landscaped garden, gymnasium, swimming pool come at additional charges. All these will add a few more lakhs to the overall cost of the property. Hence, don't make a decision based on just the base cost of the flat.

    Document check

    You may not insist on all the documents but if you are going for a home loan to finance your purchase, the bank will ask for every small document. Hence, it is always better to do a document check before you start negotiating with potential sellers. The most important documents required to sell a residential property are the housing society share certificate and the sale/ purchase deed. The sale deed will confirm the land is on the seller's name who alone has the right to sell the land.
  • #2

    #2

    Re : Your smart guide to buying a second home...

    Cost of Buying a house

    Hi,

    I am from Malad, Mumbai and am working towards selling off my 1BHK and buying a 2BHK.

    However, would like to work out the total cost involved in this process.

    Can somebody help me out with the cost of selling the flat (brokerage/any other contribution) and cost of buying the 2BHK (registration/stamp duty/any other contribution).

    I understand each property might have its own additions (like club house facility, parking charges etc.) but what I am looking for over here is more of a percentage decrease of the value earned from the sale of the flat and the percentage increase in the acquisition of the new property.

    The agenda is to come up with a spread sheet which can be guide to decide on the feasibility of this endeavor.

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    • #3

      #3

      Re : Your smart guide to buying a second home...

      Weekend home: Know the costs

      Dinesh Oberoi owned a flat each in Mumbai and Noida and dreamt of owning a sprawling bungalow closer to nature. After a brief survey, he zeroed in on a plot located at Alibaug near Mumbai. The developer promised that his weekend home will be ready within six months. It’s going to be two years since he paid his final instalment, but the house is yet to be built. He now plans to take legal action against the builder.

      “The developer started the work after I paid the initial amount, but he employed only a couple of labourers and the pace was extremely slow. After some time, the work stopped and since then the developer has come up with a series of excuses on why he has not been able to complete the construction. The fault partially lies with me as I chose the plot considering its location and not the reputation of the developer,” says Oberoi.

      With the trend of weekend holiday homes picking up, a number of developers are advertising projects that seem attractive to the young buyers who are stressed out by the fast-paced city life and want a getaway that can be an investment option too. This segment of buyers also have the wherewithal stretch budgets to finance their purchase.

      However, a home away from home is not without problems. As lawyer Ravi Jotwani says, “Prior to buying a second home that is not located in the city where you are currently staying, you should find out whether or not the land acquisition has been done as per rules, if there are any hidden charges for the fancy amenities promised by the developer, and the builder’s reputation.”

      Take the case of Pratima Chatterjee. A teacher by profession, she had bought her second home at Neemrana in Rajasthan. Within two years, she decided to sell the property. “The developer had promised amenities like club house, swimming pool - most of which we were unable to use but ended up paying for. Besides, the maintenance charges were being hiked every year. It was getting expensive to maintain the house,” says Chatterjee. However, as the price of the property had appreciated, Pratima managed to recover her cost.

      Maintaining a second home outside the city can be expensive in terms of both money and time. Media professional Akanksha Mittal says that given her work schedule, she ends up visiting her house in Mathura district only once in a while. “Every time we drive from Delhi, we find the highway toll tax and fuel charges have gone up. Besides, my hectic work does not permit me to stay there during weekends. I end up paying for power backup and amenities that we are not using,” says Mittal.

      Her advice to those buying a second home: “While buying a property, negotiate with the developer so that you pay only when you use a certain amenity. It is important to assess the size, maintenance and time you need or can invest in your second home before deciding to buy it.”

      For a retired professor couple who bought a drive-in cottage inside a resort on the National Highway 2, the dream of owning a retirement home close to Delhi has turned sour.

      “Initially, it seemed all hunky-dory. However, in the five years since we bought the house, we have had setbacks in terms of our health and have been unable to regularly visit the place. The result has been general misuse. There has been power theft and we got an inflated bill of Rs 26,000 for a period when the house was vacant. When we visited the place after a gap of two months, we found that a neighbour had intruded into our property. The developer, who charges a hefty amount for maintenance and security, did nothing to stop the theft and the intrusion,” says A Dasgupta.

      As their demand grows, weekend homes are growing in scale too. But before one buys a second home, it is important to keep in mind the security, safety and maintenance of a property that will not be utilised frequently. Checking on the developer’s past records and calculating recurring cost to maintain the property should top the priority list. To ensure security, the owner needs to visit the house at regular intervals or employ a caretaker.









      Weekend home: Know the costs - Indian Express
      Please read IREF rules | FAQ's

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      • #4

        #4

        Re : Your smart guide to buying a second home...

        Second home as an investment: Buying a Land vs Flat

        The second home buyer or investor normally falls into the dilemma when it comes to investing in land or an apartment. Both the investments have some merits and demerits, but there are a few important points that can help an investor arrive at a definite stand.

        Buying an independent land/floor means sovereign choice to build a house depending on one’s own requirement and constraints. On the other hand, a flat apartment is a redesigned, multi-floored construction. The apartment buyer has lack of freedom to change the shape and size of the construction area. However, it benefits in matters related to security, accessibility and location advantages.

        No doubt a land has an advantage of assured returns, but it usually needs investment in full and there is no choice of taking leverage on the fund hence overall return is limited up to some level. Flats are very easy to buy and an investor can take leverage on its fund, in conclusion the return is also very good. The possession delay by the builder is a major concern in case of flat investment. Another big problem could be strengthening interest burden while one invests in multiple flats on a leveraged financial position at a time of slow-down in economy, however, the land investor doesn’t need to worry in such a situation.

        Conclusion


        To judge the best investment avenue between a land and flat, one should first focus on one’s own requirements. If the investor wants to use the property for the his personal use, then land could offer an advantage of usage flexibility and handsome value appreciation in long term. However, if the investor wants to resell the property after a short period then it is more profitable to take a position in flats. As an investor is not required to hold the flat for a long term, it also eliminates the depreciation factor. If the investor is a senior citizen or someone who cannot devote much time to maintain the property then again it is advisable to take the choice of a flat over land.









        Second home as an investment: Buying a Land vs Flat - Financial Express
        Please read IREF rules | FAQ's

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