Ready-to-move home or under-construction housing project: Which is better?

Ready-to-move-in Vs soon-to-be-delivered 

What are the options available? There are ready-to-move-in properties and units that are expected to be ready in three or six months’ time. Prices of RTM properties are almost at par with under-construction homes in many areas. This has never happened before, and since developers have curtailed new supply, it is unlikely to happen again.

Ask yourself whether you want to buy a property to live in right away or can wait for three years. Accordingly, take a decision on whether you would want to buy a ready-to-move-in property or a soon-to-be-completed one.

According to Pankaj Kapoor of Liases Foras, the real estate market continues to remain a buyers’ market. The ideal choice to go in for a ready property or one that is nearing completion. If your budget is slightly stretched, you can consider a soon-to-be-ready project that is at least 80 percent complete.

Is a ready-to-move-in property better than an under construction one? It certainly is, especially if you are planning to buy a home to live in. To begin with, you will not have to pay both rent and EMI. There will also be no risk of the project getting delayed, which is a critical factor. There are several financial implications of a project getting delayed. You would not only have to pay EMIs on the home loan but also pay rent for the apartment you reside in. You may also end up losing out on tax benefits on interest payment towards the housing loan if you do not receive possession within five years of having availed the loan.

Having said that, if you do not have adequate funds and can wait for some time, an under-construction property by a reputed builder is the way to go.

“Previously, buyers of under-construction homes had one major advantage,” says Anuj Puri, Chairman, ANAROCK Property Consultants. “Their patience and willingness to court construction risks were rewarded by notably lower prices. However, construction delays and stalled projects had a predictable outcome and risk-aversion set in, with demand tilted heavily towards ready properties. While the fact that RTM homes do not attract GST has been an added attraction, even the price gap between RTM and UC homes has eroded substantially.

The narrow price gap works well for end-users as well as investors. End-users can see what they buy and save rent by moving in immediately, while investors focused on steady rentals can start earning right away. In the past four years, developers have been reluctant to increase the prices of ready homes as they need to clear their inventory. Not surprisingly, ready homes are the ‘in’ thing, said Puri.

Also, ask yourself if you like the apartment you wish to buy. Does the unit tick all the boxes? Is it on the floor you prefer and does it receive adequate sunlight? Does it have a terrace or maybe a garden — pre-requisites in pandemic times?

Who should buy?

Salaried people who wish to buy their first house can consider purchasing a residence. Those who already own a home can consider upgrading to a more spacious apartment due to the compulsion of working from home on account of the pandemic.

Only end-users in the age group of around 40 years should seriously consider buying property, especially those who have 25-30 percent equity to invest. Remember that banks will only fund 80 percent of the cost of the apartment, advises Kapoor.

If you already own a house in Delhi and are considering the Noida market as an investment, check the rental yields. Ideally, don’t buy for quick profits or short-term gains, he says.

If you are looking at buying a unit to rent out, you are perhaps at the highest risk because rental yields are not more than 1.5-2 percent. Besides, you may have to borrow money at 7 percent, pay stamp duty and brokerage, as well as maintenance costs and tax on rent. Rent will cover a miniscule portion of your EMI. Simply put, do not buy for short-term profits — buy a property if you intend to live in it for at least a few years, until prices recover. Also, borrow what you can afford and repay, say experts.

If you are considering buying property, make the purchase only if it is for self-use. Real estate may not give the best returns yet as prices may not increase actively every year. “Those who can wait should consider plots and floors,” says Mudassir Zaidi, Executive Director – North, Knight Frank India.

Should you rent?

Who should rent? Those in the early stages of their career and who have decided that they would go back to their hometowns after their work life is over.

Look for options. Besides apartments, buyers could even consider buying into a plot by a Grade A developer. Top cities like Bengaluru, Hyderabad, Chennai, Pune and Gurugram are seeing high demand for plots in the wake of the new realities presented by Covid-19. Some of the leading developers with plotted developments now are DLF Ltd., Mahindra Lifespaces, Raheja Group, Godrej Properties, Century Real Estate, Puravankara’s Provident Housing, Shriram Properties, and Alpha Corp.

The minimum size of marketable plots is as low as 550 sq. ft., and goes up to 10,000 sq. ft. In select projects, larger plots are also available. Plot sizes ranging between 1,200-2,500 sq. ft. are seeing maximum demand. However, in the southern cities of Bengaluru and Chennai, smaller plots of average size 550-750 sq. ft. are also generating interest.

Things to keep in mind before buying a house

A buyer should make sure that the title of the seller is clear and free from encumbrances. In the case of a secondary purchase, all the documents related to the property for a period of 30 years should be examined, if not 30 years then documents for a period of 12 years should be examined.

In the case of a new project, the layout plan should have been approved by municipal authorities. An occupancy certificate from the competent authority should be obtained before handing over the property. If this has not been obtained, there is a risk of the property getting demolished. There may also be penalties under building bye-laws in that area.

Last, but not least, remember you are buying a property during the pandemic for self-use, so don’t expect property prices to appreciate for the next two years.

The project should also be registered under RERA and the buyer should verify if all its provisions have been complied with. And most important, even if the project is RERA-registered, do not purchase property from a builder who is sitting on debt.

“Do your due diligence, check if construction is ongoing at the site and if RERA compliances are in place,” says Kapoor.

Make sure you keep three to four options open and don’t fixate on a single property. The golden rule is to explore. Out of the four properties you select, at least one developer or seller in the resale market will get back to you. The buyer should be willing to negotiate hard or to walk away.

It’s advisable for buyers to choose the right location. See that there are proper roads leading up to the project, enough shops for daily needs, and that schools and hospitals are close by. Most importantly, check the distance to your workplace (offices will not remain shut forever) and the mode of transport available.

“If you are an end-user, don’t buy into futuristic no-man’s locations. Make sure you visit the project site not only during the day but also at night to see how many lights are on. This will give you a fair idea as to the number of people who inhabit a place,” says Kapoor.