In re­sale or new?

Buy­ing a house en­tails an im­por­tant de­ci­sion to opt ei­ther for the pri­mary or sec­ondary mar­ket

Hindustan Times (Chandigarh) - Estates - - HtEstates - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­

The lo­ca­tion may be the defin­ing re­frain of the realty sec­tor but for the home buyer when it comes to de­cid­ing to buy a house there are sev­eral pa­ram­e­ters to con­sider such as price and prod­uct seg­ments. An im­por­tant pa­ram­e­ter – pri­mary or sec­ondary mar­ket – is of­ten over­looked be­cause few buy­ers no­tice the sig­nif­i­cance of the dis­tinc­tions be­tween the two. In one, there are old prop­er­ties avail­able on re­sale (sec­ondary), while in an­other new prop­er­ties are on of­fer (pri­mary). The pri­mary mar­ket is dom­i­nated by the builder projects, while in the sec­ondary mar­ket, it is the in­di­vid­ual sell­ers who are ac­tive. Both op­tions can be weighed against sev­eral pa­ram­e­ters.

Test­ing builder per­for­mance

In the sec­ondary mar­ket, the buyer is in a bet­ter po­si­tion to check a de­vel­oper’s per­for­mance and his track record. A buyer can check the qual­ity of the in­fras­truc­ture, ameni­ties and ser­vices pro­vided; and the main­te­nance in the project. A buyer in the sec­ondary mar­ket knows or has the full op­portu- nity to know what he is get­ting into. He does not have to trust a seller’s word for it. He can visit the lo­ca­tion and in­ter­act with peo­ple al­ready liv­ing there about the liv­ing con­di­tions, etc. “In the pri­mary mar­ket, gen­er­ally, there is no such op­tion avail­able; un­less, the project or the prop­erty is an ex­ten­sion or new phase of an older de­vel­oped project. The buyer can check the track record of the de­vel­oper and make an in­formed as­sess­ment whether the de­vel­oper de­liv­ers on his prom­ises,” Ravi Singla, 43, a Panchkula-based real es­tate con­sul­tant.

Ready-to-move ad­van­tage

Pos­ses­sion de­lay is a con­cern for the buyer. The prob­lem has only in­creased since the slow­down hit the hous­ing sec­tor six years ago. From a buyer’s per­spec­tive, the non-de­liv­ery of pos­ses­sion or de­lays in pos-pos- ses­sion is mainly a prob­lem in the pri­mary mar­ket. “In the sec­ondary mar­ket, the prob­lem of pos­ses­sion is min­i­mal, and most prop­er­ties are ready-to-move. Most end-users don’t want to put their life’s sav­ings in a prop­erty with un­cer­tain pos­ses­sion date. Even in­vestors don’t want to get stuck in a project with lim­ited exit op­tions; in­com­plete projects have few tak­ers. In the sec­ondary mar­ket, houses are tan­gi­ble, and un­like the pri­mary mar­ket, aren’t con­fined to the pages of a project’s brochure,” says Mukesh Goel, 39, a Zi­rakpur­based real es­tate con­sul­tant. Realty ex­perts say this is one of the im­por­tant rea­sons for buy­ers avoid­ing the pri­mary mar­ket and projects un­der con­struc­tion.

Fi­nan­cial bur­den

For the buyer, avail­ing home loan, the dis­tinc­tion be­tween pri­mary and sec­ondary is of para­mount im­por­tance in terms of the fi­nan­cial bur­den it en­tails. While choos­ing be­tween the sec­ondary and the pri­mary mar­ket, a buyer should know that in the sec­ondary mar­ket (ready-to-move-in prop­erty) he does not need to pay the EMI (equated monthly in­stal­ment) and the monthly rental at the same time. He can shift to the newly bought house and save on pay­ing the monthly rent.

“In the pri­mary mar­ket, this is sel­dom the case, ex­cept when he opts for a project where sub-sub- ven­tion schemes are avail­able. There are few prop­er­ties in the pri­mary mar­ket that are readyto-move-in. Pri­mary mar­ket mainly has prop­er­ties un­der con­struc­tion or freshly launched projects where the con­struc­tion is yet to start. The buyer opt­ing for the pri­mary over the sec­ondary mar­ket has to bear the twin bur­dens of monthly rental and the EMI. This be­comes dif­fi­cult with de­vel­op­ers not stick­ing to de­liv­ery dead­lines,” says Hi­man­shu Vohra, 36, an IT pro­fes­sional and a prospec­tive buyer.

In the last cou­ple of years, de­vel­op­ers have tried to min­imise this dis­ad­van­tage of the pri­mary mar­ket by of­fer­ing sub­ven­tion schemes, where in, the buyer is not re­quired to pay EMI till the pos­ses­sion of the prop­erty is given. Sev­eral de­vel­op­ers are of­fer­ing this scheme in one form or an­other.

Con­trolled price

Home prices in the sec­ondary mar­ket are less im­mune to mar­ket dy­nam­ics than the pri­mary mar­ket. In the pri­mary mar­ket, the de­vel­oper acts as shield against the mar­ket forces that im­pact prices, par­tic­u­larly dur­ing a slow­down when the price de­creases in the sec­ondary mar­ket. The price dif­fer­ence be­tween two mar­kets for sim­i­lar prop­er­ties can be as high as 20% to 25%. It is less in the sec­ondary mar­ket than the pri­mary mar-mar­ket. “The de­vel­oper has lim­ited lever­age in the sec­ondary mar­ket but in the pri­mary mar­ket he de­cides at what price he sells. Sev­eral fac­tors like po­si­tion­ing his prop­erty as high in­vest­ment re­turn prospect for in­vestors, make de­vel­oper price a prop­erty or project higher than sec­ondary mar­ket price lev­els. Nat­u­rally, most buy­ers in such cases opt for the sec­ondary mar­ket,” says Singla. De­vel­op­ers make an ef­fort to even out the ef­fec­tive price dif­fer­ence be­tween the two mar­kets to at­tract both the en­duser and the in­vestor. While the de­clared price for a prop­erty in the pri­mary mar­ket is higher than the sec­ondary mar­ket, by of­fer­ing dis­counts, free­bies and in­cen­tives, the ef­fec­tive price be­tween two mar­kets is min­imised.

Per­sonal pref­er­ence

Like for any other prod­uct, in the hous­ing mar­ket also, the at­trac­tion of a new prod­uct over a used one al­ways re­mains. If a buyer has the pri­or­ity of buy­ing a new house rather than an older one, then his mar­ket search for it can be tai­lored around this fac­tor only. “Un­like other prod­ucts like FMCG (fast mov­ing con­sumer goods), in the hous­ing mar­ket, this pref­er­ence for the new over the old is lim­ited. A house is not only a prod­uct to be used for some time only but it is also an in­vest­ment as­set,” says Goel.

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