What are property swap/ house swap schemes in Indian real estate market, how do they work?

Red and green house symbol with arrow on white background

Ever since COVID-19 has taken over our lives, we have been adapting to it and coming up with new and improved methods of doing absolutely anything in our lives.

“Necessity is the mother of invention”

As time passes by, COVID-19 pandemic continues to push businesses to innovate & appreciate technology and reconsider regulations. The real estate sector and brokerage firms have started to adopt terms like barter, exchange, and swap!

As incomplete real estate projects pile up, brokerage firms and developers have come up with an array of property swap schemes. It has allowed home buyers and investors cemented with incomplete projects to swap their residential or commercial properties with ready-to-move-in units by restructuring original contracts.

How does house/ property swap work?

Say there’s a buyer Raj who invested in a piece of property worth ₹1.5cr ($204,000) of a developer (X) and paid ₹50L ($68,000) as the booking charge many years ago. However, the builder was unable to meet the construction deadlines due to a variety of reasons and then the project became indefinitely stalled due to the pandemic-induced lockdowns.

Now, the buyer has the option of restructuring his contract with the developer (Y). He can absolve himself from the above property (by giving it to another developer Z) and instead opt to purchase a ready-to-move-in house/commercial space worth say ₹2cr ($272,131) that he buys from Z. The ₹50L is adjusted in this process –Raj pays ₹2cr minus ₹50L he has already paid to developer X.

Usually, the property swap can occur as long as the buyer is ready to pay at least 70% of the price of the new property.

Is this beneficial to both the parties?

According to real estate experts, yes!

Raj is now no longer chained to a stalled project. Z records a new sale and new liquidity. And X can buy back his property unit, restructure it while dealing with a Z rather than an individual (perhaps a better prospect when in financial distress) and revamp the construction process, and sell it at a later date for a higher price.

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