Work in progress

Work in progress


Work in progress

“I took one of the best decisions of my life to book this project as soon as it was launched. The rates have now gone up by almost 25 per cent after the approvals were received, so even if I want to return it now, I net a cool profit.” When a friend said this to me describing a new property he had invested in, it got me thinking. Surely there must be something in investing early.

Making the choice
‘Buyer beware’ may sound like a cliché, but it is absolutely essential that a home buyer protect his/her own interests.  The decision to buy any property requires a long-time financial commitment and this is especially true in the case of under-construction property, as the buyer is required to make the payment in installments linked to the progress of construction. Therefore, depending on the age and financial capabilities of an individual, such properties can definitely be regarded as a good investment option, especially in the case of those buyers who are looking to spread out their cash outflow over a period of time.

“Under-construction properties are also viable for those home buyers who do not have the financial resources to make an upfront payment on a ‘ready-to-move-in’ accommodation and are actually willing to wait for the duration of the construction period to occupy their home. Therefore, the urgency factor of moving into one’s home, in addition to the financial resources continue to play an integral part in the decision to invest in an under-construction property.

However, prior to making these decisions, it is always wise for the buyer to consider the associated risks involved in buying such property and evaluate the same, before making a financial commitment,” says Sachin Sandhir, MD & Country Head, RICS India.

“This is a buyer’s decision and cannot be generalised. It also depends on individual risk appetite.

“However as a rule, one would be best advised to invest in an under-construction property, only after feeling satisfied about the pedigree of the developer and the developer’s track record in delivering on time,” says Shreenath Shastry, Regional Director – South, Knight Frank India.

According to Ashwani Prakash, Executive Director, Paramount Group of Companies,

“While buying an under-construction property, a person should be careful in evaluating the property in question. He should be able to assess the quality of construction and also the finances required to complete such under-construction property, the same should then be compared with the prices of the finished product available in the area.”

Weighing pros & cons
When you invest in a property in the earlier stages, there are chances of getting a discount. This is because very often the project is pending approvals or is still not in a form that people can visualise how it will eventually turn out to be. Another aspect is that you can modify the interiors in line with your taste with prior approval from the builder.
Says Ravi Saund, COO, CHD Developers Ltd, “The biggest advantage of buying an under-construction property is the price that you pay today is likely to be much lower than the price you will pay some time down the line as the property appreciates substantially during the construction phase. Also, the customer pays in installments (construction-linked plan) which spreads the financial burden over a period of two-four years depending upon the size of the project.  

“Earlier, prices were known to escalate with the delay in construction which is not the case any more. The customer can also review the project from time to time.”

On the flip side, however, there is a risk of the project not getting completed on time and finances getting locked in for the duration of the project. Any delay in completion whether due to unavailability of construction material or rise in their prices and government approvals can cause pressure on the buyer’s finances.

Bangalore-based architect Asif Iqbal explains, “The builder’s reputation will be at stake as the news of non-commitment from the builders’ side is reflected, which in turn, affects the saleability of the project. But there are good deals available in the market. One should be careful about the quality of construction and land titles. Many a time, the seller does not disclose the land titles clearly and therefore sells the under-constructed property. The property may look cheap but it is going to be expensive when it comes to legal clearances.”

Opines Lalit Kumar Jain National President CREDAI, “A major drawback is that owners need to bear the dual burden of EMIs as well as rent till the time of possession of property. Moreover they cannot avail tax benefit for an under-constructed property. Therefore a number of builders have now come up with the EMI sharing scheme till the time of possession of property to offset some of the burden and this has lured a number of prospective property owners to buy under-constructed properties.”

For prospective buyers
Before opting for an under-construction property, ensure that you check both the reputation and the track record of developer. It is also advisable that you consult with a renowned property consultant and a property lawyer.

As a buyer, it is a must to review the initial clearances from the government and licenses. It will hold you in good stead if you find out the foundation details, get working drawings and check the quality control during digging and other construction processes.

A thorough due diligence to check the ownership and development rights of the project is a must. As a buyer, make sure you have a copy of all construction approvals and statutory sanctions for the project.

Remember also that you should get the property registered at the earliest after entering into a buying arrangement.

“These days’ people do lot of research on the Internet about the property and its availability which is definitely a good sign to create awareness. But, while you search properties online, compare prices between similar properties and ask for construction details like flooring, kitchen, fittings and other amenities.

Verify the specifications given by the builder regarding including quality of construction and availability of drinking and potable water, assess the natural lighting, ventilation, water connection and sanitary connection status of your prospective property and check on common service area charged and their reasonability. Very importantly, check for fire safety, earthquake resistance, parking facility, lifts, alternative conduits, staircases, roof accessibility and safety,” says Deepak Mishra, Head-Sales & Marketing, Omkar Realtors & Developers Pvt. Ltd.

Mayur Shah, Managing Director, Marathon Group advises, “Completion of necessary regulatory documents like CC (Commencement Certificate) & IOD (Intimation of Disapproval) certificates will definitely benefit home buyers to make a right decision for buying an under-construction property.”

Adds Chandrashekar Hariharan, Chairman & Co-founder BCIL Zed Homes, “It is a prudent decision if you are looking to buy low and keep the investment cost reasonable. Usually, as the progress on construction gets to an advanced stage, the price rises.

However, exercise precaution on the reliability of schedules that the builder offers, be prepared mentally prepared for a delay of at least 30 per cent on dates the builder offers, and ensure that you have appointed a lawyer for a small fee to do due diligence on the legalities, clearances and such.

This will prepare you for any ‘shocks’ on completion and handover of your house.”
You can also check if the developer is a CREDAI member and has signed code of conduct with CREDAI.

Mohit Arora, Director, Supertech Limited says, “Customers must also see the master plan of the area, which would also include the availability of transport, electricity, school, hospitals, shopping area etc. in that particular region.” Make an informed decision and it should pay off in the long run.

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