Selling An Under-Construction Property? Read This
Mahesh Chabbria who booked a 3BHK unit in Noida is planning to sell this unit even before he has taken possession. However, a few questions bother him. Is it legal to sell before possession? Does it mean additional expenses? How should he go about it? Read on to know.
Is it legal?
Yes, it is. In fact, a lot of investors try a hand at what is usually understood as “flipping the property”. To enter the property market and exit it in order to make some profit on it is what skilled investors usually do. However, if you haven’t taken possession yet, there are some factors you (assigner) need to mind.
The builder is party to your agreement: Given that you haven’t taken possession of the flat, the builder will be a party to your agreement and transaction with the buyer of your unit. This tripartite agreement between the assigner, assignee and the builder is called the Assignment Deal. This is important because as the first homebuyer and now the seller, you haven't yet fulfilled the commitment of paying the full consideration to the developer nor do you have the complete rights over the property because you do not have the possession of the unit.
Be mindful of the cost: You may be a seller (Assigner) but you are a buyer in the first place. Make sure that the assignee to whom you are selling your new unit is in a position to pay you. If he/she has simply given you some token money and taken an unduly long time to pay you the rest of the amount, you may be in trouble later especially if he cancels the deal with you.
Is the assignee eligible to take a loan?: Do not fall for a word-of-mouth assurance from the assignee that he/she will buy your unit. Does the buyer have a sanction letter that can claim his/her eligibility? Note that there may be a host of reasons why a loan may get rejected, one of them being a previous loan that isn’t closed yet.
Will the assignee close your loan for you?: It is advisable that you seek help from your financial adviser. In most cases, an assignee may want to take over and close the loan that the seller is paying but usually, banks are not comfortable with this arrangement. Documents regarding payment of seller’s bank loan are not enough proof for the lending banks.
How do lenders work?: Suppose that an assignee is willing to close your loan with his own funds but your loan is way too large. What do you do? Will the assignee’s lending bank be willing to take over from the assigner’s lending bank? Remember that the title of the property is still with the builder and a conditional no-objection certificate is therefore necessary. Experts say that two loans taken on one property by the assigner and the assignee is a tricky situation and make sure your financial adviser helps you out with this one.
Mind the joint owners: Remember that all co-owners are necessarily co-borrowers, therefore, it is better you avoid distant relatives or even friends. Similarly, it is unwise to make a married sister or aged parents, brother-in-law or those geographically far from you as a joint owner. Bank loans may get rejected on this basis as well.
What if the deal fails?: If the new buyer backs out, the builder may or may not choose to return the transfer fee paid by the assigner to the builder. The best recourse would be to request the builder to hold on to the fee till you find a new buyer.