look news india
The real estate market of Gurugram, the country’s leading tech and corporate hub, is going through an unprecedented boom these days and a phase of ‘Pre-Possession Flipping’. Early investors who have booked flats in under-construction premium and luxury residential projects launched in the last two to three years have found a silver lining. Even before the construction is completed and possession is obtained, investors are pocketing windfall profits of 40 to 80 percent and in many prime locations, more than 100 percent, by selling these flats in the resale (assignment transfer) market. On the other hand, end-users (home buyers) looking for ready-to-move-in or soon-to-be-delivered homes are willing to pay a premium for these resale properties due to lack of fresh inventory with developers.
Dwarka Expressway and Golf Course Extension Road become the biggest profit centers
The micro-markets of Gurugram which are witnessing the highest price appreciation and resale demand include Dwarka Expressway, Golf Course Extension Road, Southern Peripheral Road (SPR) and major sectors of New Gurugram. According to the data of real estate consultants and market analysts, the luxury projects which were launched in the prime sectors of Dwarka Expressway in the year 2021-2022 at the rate of ₹ 8,000 to ₹ 10,000 per square feet, currently their prices have crossed ₹ 16,000 to ₹ 22,000 per square feet in the resale market. Investors who had deposited only 30 to 40 percent of the capital with the builder under the Construction Linked Plan (CLP) are earning double to three times the return (RoI) on their actual equity invested on the basis of capital appreciation on the total project cost.
Shortage of inventory in new projects and increasing demand from end-users
The main reason for such a surge in resale of under-construction flats is the acute shortage of properties in the market from good and reliable developers. New projects from the country’s top listed and A-grade builders like DLF, Godrej Properties, Shobha, Signature Global and M3M are being completely sold-out within hours or days of launch. In such a situation, genuine home buyers (end-users) who are unable to find a unit or floor of their choice in new launches turn to under-construction projects which are close to delivery within 1 to 2 years. To avoid the risk of long wait of 4 to 5 years for the builder, buyers are getting the allotment transferred to their names by paying additional premium to the existing allottee (initial investor).
Assignment Transfer: How is property sold before possession?
Under real estate laws and procedures, when a project does not have a registry (conveyance deed), the resale of the property is done through ‘Assignment Transfer / Nomination Sale’. In this, a tripartite agreement or endorsement letter is executed between the original buyer, the new buyer and the builder. The new buyer pays the fixed premium (profit) along with the total installment amount paid by the original buyer to the builder. After this the name of the buyer is officially changed in the books of the builder and the remaining installments are paid by the new buyer as per the progress of construction.
It is important to take care of transfer fees and income tax rules
Along with the huge profits that can be made by selling an under-construction flat before possession, investors also have to take special care of the legal and tax liabilities. Most developers charge ‘administrative/transfer charges’ ranging from ₹100 to ₹350 per sq ft for transferring units. Additionally, under the Income Tax Act, if a property or right to acquire is sold within 24 months (2 years) of purchase, the profit is subject to Short-Term Capital Gains Tax (STCG), which is taxable as per the income tax slab of the investor. At the same time, if sold after 24 months, it comes under the purview of Long-Term Capital Gain (LTCG), on which tax is payable at the rate of 12.5%.
New buyers should take these important precautions while buying resale property
MoneyTree Realty
New buyers purchasing under-construction flats in resale before possession should avoid making the deal in a hurry or FOMO (fear of missing out). Before finalizing any unit, ensure that the project is registered with the Haryana Real Estate Regulatory Authority (HRERA) and that the construction work is going on as per the schedule. Along with this, getting ‘No Dues Certificate’ (NOC) from the builder, original allotment letter, builder-buyer agreement and bank loan status thoroughly examined by a legal expert or property lawyer is very essential for a secure future.