Which Apartment Should I Opt for?
Pre-Launch/Under Construction/Ready to Move/Resale – Which should I choose?
Today, buyers have options to buy homes that are in various phases of construction. Their options range from pre-launch phase, to under-construction phase, to ready to move apartments to resale apartments. This article highlights the pros and cons of these options.
Pre- Launch Phase
In pre-launch phase, developers start marketing projects even before basic approvals are in place. This is a soft launch and to attract investors, developers normally offer an “early bird discount” of up to 20%. Developers use these soft launches to start generating cash flow. This kind of investment has the highest risk as not all approvals may be in place and no date has been set for commencement of construction. In many of these projects, financial institutions may not be keen on extending loans to buyers. The buyers however, have to pay an initial payment and have ample time to garner funds for the project. In many cases, during a soft launch sale, the builder signs an agreement with the buyer to sell at a later date, as the final terms and conditions of sale may not be clear at this stage.
Investing at the soft-launch stage is more risky than at the advanced stages of construction. It is not advisable for a person with a low risk-taking ability unless the project is by a reputed builder and has all the necessary approvals. In addition, it is advisable to pursue projects that have been approved by reputed banks.
Under Construction Projects.
This option is one of the most popular practices exercised by prospective homebuyers. In this case, the builder has received the necessary approvals and has been legally allowed to commence construction. It gives the buyer time to acquire funds as the payment is made in instalments based on the construction phases. The buyer can choose the location and orientation of his apartment and there is some scope for customization of the apartment. This type of investment also has risks, as there can be a delay in construction. There can also be some structural changes, which can result in deviation from the approved plans. If the project is delayed further, many of the buyers can be faced with having to pay the monthly EMIs along with their rents, which can prove expensive. Such type of under construction projects are also subject to service tax and VAT.
This option provides instant ownership. There is minimum risk involved as the builder has completed all the legal formalities. The buyer purchases “what he sees” and therefore there is no guesswork on the materials used for construction. A ready to move apartment does not attract service tax or VAT. However, in the case of ready-to-move apartments, homebuyers may need to make the entire payment in a short period. The buyer has limited options in terms of the floor choices and pays more than buyers who had opted to buy during the under-construction phase. The buyer has limited scope for customization, as the apartments are already finished and ready to move in.
Buying from the resale market, is yet another option for home buyers. Apartments in this category will cost 15 – 20% lesser than the ready to move homes. These are older homes, and this kind of deal is only beneficial if it is developed by a reputed builder and if the construction quality is good. This is a good option if buyers want to purchase an apartment in an established neighbourhood. In the case of resale properties, one must examine all the documents including hidden encumbrances, legal clearances, before investing.
A buyer should invest in a property whether it is pre-launch, under-construction, ready-to-move-in, or resale depending on one’s individual needs and financial capabilities. In all the options, it is important for the buyer to evaluate the risks involved and ensure that all the relevant documents and legal clearances are in place. To have a better understanding on the documents that are required for each of the above options, it is prudent to consult an expert before investing.