Investment Tips: Should You Buy A New Or A Resale Home?

Investment Tips: Should You Buy A New Or A Resale Home?

Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Should you buy a new flat or a resale? There appears to be no easy answer to this question. People buy resale flats instead of new ones for various reasons. Sometimes, a certain location just does not offer suitable options on the primary market.

At other times, buyers do not to enough research and are unaware of the availability of very good new projects. Or they succumb to the pressure tactics of a persistent real estate broker and buy a resale flat when a new one was available in an excellent location, and within their financial reach. Or they believe that a serviceable flat available at a slightly lower price is always a good bargain.

Most often, people buy resale flats because they are in a hurry and want immediate possession. This renders them unwilling to opt for a flat in a project which is under construction, even if completion and possession are only a few months in the future.

Because real estate is an eminently re-sellable asset, many people put perfectly acceptable flats on the market after a few years of use because they want to upgrade. This fact makes the market for resale flats almost as big as the primary market. However, this does not mean that resale flats and new apartments fall in the same value chain.

Assuming that a buyer learns of both new and resale options in the location of choice, it is important to understand the benefits of opting for the former:

  • A home, both as an asset and a possession, is very much like a car – neither offers the same value or experience when it is second-hand. The feel of a used home or car cannot match that of a brand-new version, simply because it has already passed through the hands of one or more owners. It is true that this is something of an intangible psychological factor – but it is nevertheless very real.
  • Assuming that one has bought it from a reputable developer, a first-sale flat has newer fixtures and fittings that come with a minimum guarantee of problem-free performance. Nor is wear and tear the only problem with older fixtures and fittings – like in the case of most other products, there is also a question of product generation. To illustrate – a first-generation iPhone cannot perform with the same speed, efficiency and reliability as a first-generation one.
  • Flats in new projects by good developers tend to be more energy efficient, environmentally compliant, user-friendly and space optimized. Reputable developers are like doctors – they are constantly upgrading their knowledge, techniques and equipment. They do this to remain relevant and competitive in a market which they know to be replete with other options for buyers. The benefits of this mind-set are directly passed on to the buyers.
  • It is very difficult – if not impossible – to paint a unique masterpiece on a used canvas. Previous owners of a resale flat always leave a certain indelible part of their personality or culture imprinted on the property. While it is possible to fill in and paint over nail holes in unwanted parts of the wall, undoing serious structural modifications is a challenge.
  • New flats in under-construction and sometimes even ready-to-move-in projects can, in fact, be cheaper than resale flats. In the case of under-construction projects, the sale value of individual units rises only in tandem with the stages of completion. But resale flats often cost as much as (if not more than) new apartments because the relative cost of original acquisition was higher. This is often a function of obsolete construction methods, which are costlier and more wasteful than more evolved construction technologies.
  • New flats have higher resale value and also longer shelf-life on the resale market because of the lower age of the building.

Home purchase is never a decision one should make in a hurry. Also, regardless of whether a new flat is slightly cheaper or marginally costlier than a resale apartment, it should not be made solely on the consideration of budget. Few investment decisions have as many long-term financial implications and appreciation potential as property purchase.

It is therefore important to understand the pros and cons of old versus new flats, and to always take an informed call when it comes to buying a home.

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