The Downside of Undervaluing your Property
Jun 25, 2019 Home Trading Steps
The stamp duty and registration fee that you pay to the government is used to benefit society. But if one is caught up in a financial situation and arranging all that money in a short time is a difficult task. One can easily fall for the option of undervaluing your property in such a case. Most people resort to this means to lessen the burden not realising that undervaluing your property has downsides.
If You are registering your property for the lower price than it defiantly saves you money in stamp duty and registration, some people will vouch for this method. But this method only benefits you in the short term. In the long term, it might not turn out to be such a good idea.
Undervaluing your property is not such a good idea
When you invest in real estate, you think about the money it will fetch you in future. If you are thinking of selling the property after 5 or 10 years, then you are aiming to fetch double the price you paid to buy it. Now, if you purchased the property for 45 lacs and are trying to sell it for one crore, the buyer will try to bargain hard to lower the price, and it will take you a lot of effort to convince them that the actual price of the property was more than 45 lacs when you bought it. Also, the buyer will not be ready to undervalue the property on papers the way you did.
When it comes to capital gains, it can be difficult as well. If the buyer wants the deal to be all white and upfront, then paying the long term capital gains will not be easy. In this case, you might also have to pay almost 20 percent of the gains to the government, if the capital gains are not invested in another property in the specified time.
When you think of undervaluing your property, one has to think about everything to make sure the entire base is covered, and nothing will blow off your cover. On the other hand, when you are doing the paperwork right without having anything to hide or alter, you are making it easier for yourself in future.
Also, your social standing is affected in case you have undervalued your property. If they find out that you have underestimated the property to save money, then it will not look good on your behalf.
It is advised that if you are facing financial crunch, then it is better to pull out from the deal and invest in property after you have made considerable savings.
If You are registering your property for the lower price than it defiantly saves you money in stamp duty and registration, some people will vouch for this method. But this method only benefits you in the short term. In the long term, it might not turn out to be such a good idea.
Undervaluing your property is not such a good idea
When you invest in real estate, you think about the money it will fetch you in future. If you are thinking of selling the property after 5 or 10 years, then you are aiming to fetch double the price you paid to buy it. Now, if you purchased the property for 45 lacs and are trying to sell it for one crore, the buyer will try to bargain hard to lower the price, and it will take you a lot of effort to convince them that the actual price of the property was more than 45 lacs when you bought it. Also, the buyer will not be ready to undervalue the property on papers the way you did.
When it comes to capital gains, it can be difficult as well. If the buyer wants the deal to be all white and upfront, then paying the long term capital gains will not be easy. In this case, you might also have to pay almost 20 percent of the gains to the government, if the capital gains are not invested in another property in the specified time.
When you think of undervaluing your property, one has to think about everything to make sure the entire base is covered, and nothing will blow off your cover. On the other hand, when you are doing the paperwork right without having anything to hide or alter, you are making it easier for yourself in future.
Also, your social standing is affected in case you have undervalued your property. If they find out that you have underestimated the property to save money, then it will not look good on your behalf.
It is advised that if you are facing financial crunch, then it is better to pull out from the deal and invest in property after you have made considerable savings.
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