I have a friend who had a bitter experience with real estate. Over the past 10 years, he put money into two under-construction projects. Sadly, in both cases, the builder went down and there is almost no visibility of delivery. While this is the extreme side of the spectrum, it is a risk that many homebuyers want to sidestep as much as possible.
As a result, homebuyers face the dilemma of going for a ready-to-move-into property or taking their chances with one that’s under construction.
There is no one right answer. Both have their pros and cons and either could be suitable, depending on the buyer’s requirements and circumstances.
If you are stuck with this dilemma, here are a few points to clear your thoughts. Evaluating these factors will put you on better decision-making ground.
Cost factor
Generally, the cost of a ready apartment is 10-30 percent higher than one under construction in a similar project, of the same size, with similar amenities, and in the same location. This pricing difference is what makes under-construction projects attractive for most cost-conscious homebuyers.
You can get a ready-to-move-into apartment for Rs 75 lakh, but if you go for a similar one that’s under construction, it might be available at lower price, depending on the stage of construction: at Rs 50 lakh at launch, about Rs 60 lakh at 25 percent completion, Rs 68 lakh at 50 percent completion, and so on.
If you are running low on funds and can wait for some time, then you can opt for an under-construction project by a reliable builder.
Time factor
With a ready apartment, there are no delays – possession is immediate. If you go for an under-construction apartment, delays are something beyond your control.
While things have improved on the deliverability front after the implementation of the Real Estate (Regulation and Development) Act in 2016, delays in possession are still quite common. If you want peace of mind and want to avoid the risk of delay, then you should opt for a ready apartment.
No bad surprises
This is an obvious one. When you buy a house that’s ready to move into, you know what you’re getting: the interiors, amenities, construction quality, location, neighborhood and everything else. There are practically no surprises in store.
The situation reverses when you go for a project which will be delivered in a few years. There is scope for negative surprises. This is another factor.
Property age
An apartment that’s ready to move into could mean a new one that is available for possession right away or a flat that’s being resold. As far as the property’s age is concerned, there is no difference between a newly constructed flat available for possession and an under-construction property.
Unless, of course, the ready-for-possession flat has been lying vacant for a long time pending municipality clearances. In this case, check the flat’s condition.
When you buy an apartment in the resale market, it is generally a few years old.
If one needs to get into a new house no matter what, then an under-construction apartment might be preferred.
Rent, EMI implications
If you stay on rent and go for a loan-funded, ready-to-move-into apartment, you get immediate relief from rent and migrate to an EMI regime.
But if you go for an under-construction apartment, then you continue paying rent and also start paying EMIs, which keep increasing with the progressive stages of construction. If you go for the former, then you don’t burden yourself with both rent and EMIs.
Tax benefits
While real estate purchases should never be just about taxes, it nevertheless has a tax angle. Did you know that tax benefits available for home loans can be claimed only once you get possession of the house? Your tax benefits of Rs 1.5 lakh under Section 80C and Rs 2 lakh under Section 24B are subject to delivery. This is not a risk at all with a ready-to-move-into apartment.
The verdict?
For self-use: If not a big stretch money-wise, then it’s better to go for an apartment that’s ready for possession and skip the possible negative scenarios. More so if it’s for personal use and not an investment. This means you might have to shell out a bit more, but it has its benefits.
If you still want to go for an under-construction property, opt for one that has a high chance of getting completed in a year’s time. But not any longer.
For investment: If you are looking to buy an apartment as an investment, then you can still go for an under-construction apartment.
The prices of under-construction projects escalate with the stages of completion. So, this can work in your favour as an investment.
But before making the move, make sure the developer has the approvals in place and a good track record. You do not want to end up being penny wise and pound foolish and go for a cheap under-construction property which gets delayed.
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