Why Selling Your Vacant Home Is The Right Move

The housing crisis is painful not because there aren't enough roofs that can provide shelter to those looking for one but because the needy cannot afford the price point at which sellers are agreeable. What is worse? Such sellers do not mind holding back their units, much to the dismay of real estate trend watchers. Resultantly, parts of the National Capital Region (NCR) such as Greater Noida West, Nahar-par areas in Faridabad, Dwarka Expressway, Kundli, Raj Nagar Extension have dwindling occupancy rates somewhere between 10 to 40 per cent. This is not restricted to the NCR alone but is a pan-India phenomenon giving rise to ghost housing societies across the country, establishes the latest Census 2011.

Shocking numbers

Census 2011 pointed out that three of the most populated states in India still manage to have a shocking number of vacant homes. Uttar Pradesh has over 4.5 crore vacant homes while Maharashtra has 3.3 crore and West Bengal is pulled down by 2.5 crore ghost homes. In the entirety, India’s urban areas have a 10.10 per cent vacant homes. In rural areas, this number stands at 6.20 per cent.

Reasons may be many

Sellers who are not too optimistic about getting a great value for their home by selling usually lease their property in a bid to make some money without loss. However, when we talk about ghost housing, these are completely vacant homes, lying idle either because the property prices are not conducive or because the owners are abroad or away. It could also be a case of benami property or black money. Some others may even be stuck in litigation.

Where price isn’t the pain point, infrastructure becomes the issue. Due to lack of connectivity, social infrastructure such as good schools, hospitals and shopping complexes, homebuyers may have turned fence sitters too. Therefore, it becomes hard to sell or even lease these properties. Estimates suggest that about five per cent of homes in India are in dilapidated condition too. In the NCR region, the MU-I society in Greater Noida is a good example. Lack of connectivity and absence of a conducive social infrastructure has led to many areas falling victim to under-occupancy.

How much do sellers lose out on?

If your property is idle for long, chances are you may lose out in the long run. The cost at which you bought, down payments, loan, outstanding loans add to your woes. A Mint research suggested that suppose if you had bought a house in 2013 at a cost of Rs 40 lakh with a downpayment of Rs 8 lakh, a loan of Rs 32 lakh and an outstanding loan of Rs 27 lakh as on date, the current value of your house would be Rs 60 lakh.

Now, two scenarios may arise:

If you do not sell the house

You may have got five per cent appreciation on your property after five years. So, upon the current value of your house, that is, Rs 60 lakh, the appreciation makes the unit worth Rs 76.57 lakh. The interest paid during this period works out to Rs 10.39 lakh while the outstanding is Rs 21.44 lakh. Add to it the rent you receive from the property of Rs 8,000 per month with an annual appreciation of 5 per cent. All the numbers adjusted, your corpus by 2023 is Rs 50.03 lakh only.

If you sell

By not holding back your property and selling it off, you may not only be just helping ease the housing crisis but also making some money. Debt mutual funds and equity funds may help you earn much more.

Besides, you may also escape Vacant Land Tax (VLT). Similarly, for builders, unsold inventory is also taxed. The housing crisis can get a bit better if sellers trigger the momentum by setting the right price and provide the push.

Adding to the agony

Not just private sellers, while India is facing a crisis in terms of balancing the homeless while sitting on a humungous number of uninhabited homes, non-allotment of government-sanctioned homes is also a crisis point. An estimate points out that Delhi has the maximum number of unallotted low-cost housing units with almost 36, 623 units. The national capital is followed by Maharashtra, Telangana, Uttar Pradesh and Andhra Pradesh. Together, these account for about 70 per cent of the total vacant homes across the country.

These homes had been previously built under various schemes such as the Jawaharlal Nehru National Urban Renewal Mission or the Rajiv Awas Yojana, schemes that are now rolled into the Pradhan Mantri Awas Yojana. In 2014, there were 2.5 lakh vacant homes across India. One of the major reasons that led to high vacancy rates include unsupportive infrastructure because the homes were far away from where the target homebuyers may have wanted to live and work.

Speaking to Economic Times, Amrit Abhijat, the PMAY-Urban mission director has said that they have been pushing state governments to undertake up repairs or minor renovation to make these homes habitable and fit for possession. While attempts to allot has been going on, sources say that the government is also sitting on backlogs. Resultantly, there are 5.54 lakh units still missing out on occupancy, a number that may just grow in the face of poor social infrastructure that fails to impress prospective homebuyers despite the low cost.