Tuesday, September 13, 2005

Buying a house on loan - New or Second sale house ?

Something that I learnt yesterday was an eye opener for me. A home loan agent was talking to me about how there is a great deal of difference in the registration charges when one goes to buy a new house that is being constructed by a builder and a house on resale. Let me walk you through this with an example.

Lets say you are interested in buying a house that costs about Rs. 22 lakhs and you plan to take a home loan of Rs. 20 lakhs.

In the case of the new house the Rs. 20 lakhs is shown to you in the form of a sale agreement for just the shell and a construction agreement for completing the house. and this is usually done in the ratio of 30 - 40 % for the sale agreement and 60-70 % for the construction agreement (in our case it works out to 7 lakhs for the sale and 13 lakhs for the construction). Now the registration is done on the value of the sale agreement and hence the cost of registration drastically drops.

On the other hand when you buy a house on resale there is only one loan agreement for the whole Rs. 20 lakhs and hence the house needs to be registered on that amount and that works out to a phenomenally high registration fee.

So what is the advise...? I was told that in case one is going to buy a house on resale one has to have a lot of cash in hand and the amount of money taken on loan should be on the lower side. And in case one wants to buy a house with a high loan amount then you should go in for a new house.

I am not sure if this is the right advice so if there is anyone out there that can substantiate if this is correct that would be nice.


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