What to consider before you sell your property in Delhi

Banker Neeraj Mahajan was in tears recently when he visited East Patel Nagar to attend a social function. He could not resist himself to

Banker Neeraj Mahajan was in tears recently when he visited East Patel Nagar to attend a social function. He could not resist himself tovisit the lane where his family had a house which they sold around ten years ago. When he saw the name of his late father still inscribed onthe gate on his house,tears started rolling from his eyes. The crowd of memories of yesteryears started coming to his mind when his jointfamily used to live there. Sudden financial crisis forced the family to sell the house. However,Neeraj’s family could still live there happily and even corner enough money for comfortable living for rest of their life ifthey face the same position now. The family could easily join hands with some builder who would build flats/floors there and also pay themhandsome sum. This is what going on in a big way in capital. “ I feel that unlike property owners of other metros, all those whohave landed properties in capital are very lucky. They are in aposition to unlock their properties in a huge way. They just join handwith some Realtor who is in to developing residential properties,”says Samir Jasuja,CMD of prop equity, adding, “ There are large numberof people who do not have regular income but living in propertiesworth several crores are fast started collaborating with builders forbetter life”. This dilemma of a house owner who owns a priceless asset that isn’tgetting him returns is a classic one in Delhi, where value of realestate has quadrupled in the last few years. Till recently, you had toen cash the entire property if you needed funds since laws onlypermitted two and a half storeys. Now, that the law allows fourstoreys, plus basement and a stilt level parking, you can unlock thehuge value of your asset without displacing yourself: by going into acollaboration with a builder. He undertakes construction of thebuilding, keeps one floor, and the house-owner continues to own 75 %of the property – which consists of the basement, stilt level parkingand three floors. The builder also pays a substantial cash  amount. Atthe end of it, the home owner has the luxury of continuing in his ownhome in familiar surroundings, on three brand new floors and abasement plus car parking space for 6-8 cars within the property.
According to Sanjay Khanna of Kailashnath projects Pvt Ltd, “ When  imeet somebody who is planning to sell his/her house, I alwaysdiscourage him. I tell them that if they sell the property they wouldface lot of issues to settle. Hence, it is better to unlock theirproperty. It would serve their cause in  every possible manner,”adding “ I recently met an old doctor couple living in a sprawling1000 yard bungalow in Greater Kailash 1 for the last 30 years. Theestimated value of their property in today’s market is Rs 45 crores.They’ve been contemplating selling it for some time, since they needto clear a Rs 6 crore bank loan. The idea was to find a 500 sq yardplot in GK1 itself (Rs 20-25 crore), pay off the loan, spend part ofthe money on setting up their two children (3-4 crore) and live offthe remainder, still a substantial amount at Rs 10 crore. They found abuyer, took a bayana of Rs 30 lakh, and ironically enough, deeplyregretted it, almost immediately. They were wracked with doubt andbegan questioning their decision to sell within 24 hours itself.” Realty experts say that sellers should keep in mind that when theysell their property and buy another, they have to pay a broker’scommission twice, for both transactions. The commission you pay variesbetween 1and 2 % of  the cost of the property. Then there’s a 6 %stamp duty for every property transaction, so, when you sell the buyerpays stamp duty, but when you buy you pay the entire stamp duty. Bythe time you wrap up the deal, you could have lost as much as 10 % ofyour gain in money.  And, in case you are wanting to buy anotherproperty with the proceeds of the sale you could end up losing as muchas 20% of the value as transaction costs in the entire process.Apart from this financial setback, there’s the ephemeral but very realemotional loss that comes with selling a house that’s been home fordecades.      “I find many times, that people are even overwhelmed atdealing with the huge cash component in property transactions and theyhave also grossly overestimated the amount they need to live,” Khannasaid, whose firm is among the pioneer in developing residentialproperties.Narrating his own experience of  unlocking his huge Rajouri Gardenproperty,noted Hindi and Punjabi poet Prof. Pratap Sehgal said thatthere close to 300 sq.yard house was built in early 60s. He was not ina position to redevelop it due to paucity of funds. “ Then i talked tovarious realty firms who are in to developing residential properties.After lot of ground work, we zeroed on one developer who has a proventrack record. He built some floors on our house,kept two for himselfand gave everything to us along with good money as well. We are happywith this arrangement,” Prof. Sehgal concludes. Jasuja says as the value of real estate has doubled in the last 15months and continues to shoot up  year on year,  bungalow living isbound to become a thing of the past in Delhi. People are questioningwhether they should be living on property worth so much. Now thatproperty is easily divisible, the older generations are keen to buildit out to prevent property disputes that could arise amongst theirlegal heirs in the future. The property, once developed, is much morevaluable, and far more liquid, if you still eventually want to sell.