What are the Difference Between Resale and Under Construction Property - Which One Should You Choose?

Choosing between buying a resale property or one still under construction is a significant decision for homebuyers. The fundamental difference between resale and under construction property lies in readiness and age. Resale properties are pre-owned and ready for immediate move-in, often in established areas. In contrast, under-construction properties are brand new, bought directly from the developer, require a waiting period for possession, but often come with modern amenities and flexible payment options. Understanding the nuances of each helps you align your choice with your budget, timeline, and preferences.

What is a Resale Property?

A resale property is essentially a pre-owned home. This means you are buying the property not from the original developer or builder but from the owner who previously purchased it. These properties have already been lived in, sometimes for many years. One of the biggest advantages of resale property is that it is 'ready-to-move-in'. Since it's an existing structure, there's no waiting period involved for construction completion. The entire payment process to move is shorter than that of an under-construction property. 

What is an Under Construction Property?

An under-construction property is not ready for occupancy. When you buy, you are essentially booking a flat or house for a project that will be completed on a date specified in the builder-buyer agreement. You usually buy these directly from the developer or builder. A key aspect of buying a flat under construction is the payment plan, which is typically linked to construction milestones (Construction Linked Plan - CLP). While there's a waiting period involved, buyers often benefit from lower initial prices compared to ready properties and the appeal of owning a brand-new home.

Key Differences Between Resale and Under Construction Property

Understanding the core distinctions is crucial when navigating the resale property vs under-construction property dilemma. Here’s a breakdown to help you compare:

Feature	Resale Property	Under Construction Property
Possession Time	Immediate or very short	Delayed by months or several years, depending on the stage
Cost	Generally higher upfront cost, but often negotiable	Often lower entry price, potential for appreciation
Condition & Age	Older structure may require repairs/renovation	Brand new, modern design and fittings
Customisation	Limited to renovation after purchase	Potential for some customisation during construction
Risk Level	Lower risk (what you see is what you get)	Higher risk (delays, quality issues, developer default)
Amenities	May have older or basic amenities	Usually modern, planned amenities (pool, gym, etc.)
Location Maturity	Often in established, well-developed areas	Often in developing or upcoming areas
Paperwork	Requires a thorough check of the past ownership chain	Requires scrutiny of the builder agreement & RERA
Home Loan	Standard loan process, property value assessed	Loans are disbursed in stages based on construction
GST	Generally Not Applicable	Applicable (Currently 5% for most housing)
Payment Structure	Usually requires a significant upfront payment	Flexible payment plans (e.g., Construction Linked)
Immediate Returns	Potential for immediate rental income	No returns until possession

What Are The Pros and Cons of Resale Property?

Choosing a resale property comes with its own set of benefits and drawbacks. Here’s a quick look at the advantages of resale property and its potential downsides:

Pros:

• Immediate Possession: You can move in almost immediately after completing the purchase formalities. No waiting!
• Established Location: Often in developed neighbourhoods with existing infrastructure like schools, hospitals, and markets.
• Known Estate: You inspect the actual property, so there are no surprises about the final product.
• No GST: Goods and Services Tax (GST) is generally not applicable on the purchase of resale properties.
• Known Neighbourhood: Before buying, you can assess the community, neighbours, and society's maintenance.
• Ready Infrastructure: Amenities (if any) and utilities are already functional.

Cons:

• Age and Condition: The property might be old and require immediate repairs or significant renovation costs.
• Higher Upfront Cost: Resale properties often command a price based on current market rates, potentially higher than launch prices.
• Limited Choice: Your choices are limited to what's available in the market at that specific time.
• Outdated Design: Architecture and fittings might be obsolete compared to modern constructions.
• Complex Paperwork: Verifying the chain of ownership and checking for liens can be cumbersome.
• Transfer Fees: May involve society transfer charges and other associated costs.

What Are The Pros and Cons of Under Construction Property?

Investing in a property still being built has unique appeal and risks. Consider these under construction property benefits and challenges:

Pros:

• Lower Initial Price: Often available at a lower price than ready-to-move-in properties in the same area.
• Brand New Property: You get a new house with modern architecture, fittings, and technology.
• Flexible Payment: Developers offer structured payment plans (like CLP), easing the financial burden initially.
• Modern Amenities: New projects usually include contemporary amenities like gyms, pools, clubs, and security.
• Potential for Appreciation: Buying early in a developing area can lead to a significant increase in property value upon possession.
• Customisation Options: Sometimes developers allow minor customisations in layout or finishes during the construction phase.
• RERA Protection: The Real Estate (Regulation and Development) Act, 2016, protects against delays and quality issues.

Cons:

• Waiting Period: You must often wait for years, before you can move in or rent out the property.
• Risk of Delays: Construction delays are common, which can disrupt your financial planning and moving timelines.
• Quality Concerns: The final product's quality might not match what was promised by the developer.
• Uncertainty: The final look, feel, and surrounding infrastructure might differ from initial plans.
• Price Escalation Risk: Sometimes, unforeseen circumstances can lead to increases in the final cost.
• GST Applicable: Under-construction properties attract GST (usually 5% without Input Tax Credit).
• Developer Risk: Risk of the developer going bankrupt or abandoning the project mid-way.

Legal Aspects Every Buyer Must Consider

Navigating the legalities is crucial regardless of your choice. Pay close attention to these aspects to ensure a smooth transaction:

For Resale Properties:

• Title Deed Verification: Ensure the seller has clear, undisputed property ownership. Check the chain of titles.
• Encumbrance Certificate: Verify that the property is free from loans, taxes, utility bills, liens, or legal dues.
• Occupancy Certificate (OC): Ensure the building was constructed per approved plans and is suitable for occupancy.
• Society No Objection Certificate (NOC): If buying in a cooperative housing society, obtain the necessary NOCs.

For Under Construction Properties:

• Developer's Reputation: Research the builder's track record for project completion and quality.
• RERA Registration: Ensure the project is registered with the state's Real Estate Regulatory Authority (RERA). Verify details on the RERA website.
• Approved Plans: Check if the builder has obtained approvals from local authorities (Commencement Certificate - CC, approved layout).
• Builder-Buyer Agreement: Scrutinise the agreement clauses related to payment schedule, possession date, penalties for delay, and specifications.
• Title Report of Land: Verify the developer has a clear title to the land on which the project is being built. Also ensure that the land for the project is not mortgaged or has any legal disputes attached.

Financial Considerations

Your budget and financial planning play a significant role in this decision. Here’s a breakdown of the financial angles in this property investment comparison:

• Initial Outlay: Resale usually requires a larger down payment (often 20%) at once. Under construction allows staggered payments.
• Home Loans: Loans are available for both. For resale, the loan is disbursed in one go. For under-construction, it's disbursed in tranches linked to construction stages. 
• GST Impact: Under-construction properties attract GST (typically 5%), increasing the overall cost. Resale properties are generally exempt.
• Property Tax: You start paying property tax immediately after buying a resale property. For under-construction, it begins after possession.
• Rental Income: Resale properties can generate rental income immediately. Under-construction properties only generate income after possession.
• Interior Costs: Resale might need immediate renovation/repair costs. Under construction is new but will need furnishing costs upon possession.
• Price Fluctuation: Resale prices reflect current market value. Under-construction prices might appreciate by completion, but also carry market risk.

Which One Should You Choose?

The choice between ready-to-move-in vs under construction ultimately depends on your personal circumstances, priorities, and risk tolerance. Consider these factors:

• Urgency: If you need a home immediately for self-use, a resale property is the practical choice.
• Budget Flexibility: If you prefer spreading payments over time, an under-construction property might be more manageable initially.
• Risk Appetite: If you are risk-averse, the certainty of a resale property (what you see is what you get) is safer.
• Desire for Modernity: Under-construction projects are often better equipped if you prioritise brand-new construction and modern amenities.
• Investment Goal: Resale works for immediate rental returns. Under construction can be better (if chosen wisely) for potential long-term capital appreciation from a lower entry price.
• Customisation Needs: Some under-construction projects offer this flexibility if you want input on certain finishes or layouts. Resale requires post-purchase renovation.
• Location Preference: Resale offers choices in established areas. Under-construction often means looking at developing peripheries.

Some Tips for New Home Buyers

Whether you lean towards resale or under-construction, thorough due diligence is key. Here are some essential tips:

• Define Your Budget Clearly: Account for all costs – base price, registration, stamp duty, GST (if applicable), interiors, brokerage, maintenance, etc.
• Assess Your Timeline: Be realistic about how soon you need the property. Factor in potential delays for under-construction projects.
• Research Thoroughly: Investigate the location's connectivity, infrastructure, safety, and future development prospects.
• Verify Developer/Seller Credentials: Check the builder's track record (for under-construction) or the seller's ownership documents (for resale).
• Legal Due Diligence: Always hire a competent lawyer to scrutinise all property documents before signing any agreement or paying a token amount.
• Physical Inspection: Mock the resale property meticulously for structural issues, plumbing, electrical issues, etc. For under-construction, visit the site regularly.
• Understand Loan Terms: Compare loan offers from different banks and learn about eligibility, interest rates, processing fees, and pre-payment clauses.
• Read the Fine Print: Carefully read every clause in the Sale Agreement (resale) or Builder-Buyer Agreement (under-construction).

How can NoBroker Help with Legal Services?

Whether you are looking for a resale or under-construction property, NoBroker is your go-to solution to connect with genuine sellers and the best builders to buy your dream home. With a vast network of over a million home-sellers pan-India, NoBroker can connect you with the perfect seller and house without paying a single penny of brokerage fees. You can explore the best builders and excellent under-construction properties with just one click. All that and more is possible with NoBroker without any hidden fees. 

Frequently Asked Questions