Februay 2020

 

Unsure whether you should buy an under-construction, or ready-to-move-in, or resale property? We analyse the pros and cons of each option, to help you get clarity

The purpose for which a residential property is purchased, is crucial when it comes to deciding between an under-construction, ready to move (new property), or a resale property. You may buy it for occupancy as an end-user, or for investment purposes, or to keep it as a second home.

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What factors to consider when choosing between Under-construction vs ready-to-move-in vs resale property?

Experts suggest that for under-construction properties, the buyer should ensure that the developer has taken all the approvals, that the project should be RERA-registered and that it is being developed as per the development plan. There should be no financial stress on the project and the developer should have a good track record and the capability to deliver the project.

In case of ready-to-move-in projects, the buyer should ensure that all the property papers and approvals are in place and there is no financial liability on the project. The amenities and utilities promised by the developer should be in place and functional.

While buying a resale property, the buyer should check the age of the property, repair costs (if any) and encumbrances related to electricity, water, society bills, etc.

	Resale	Under-construction	Ready-to-move-in
Price	At market price, or lower if the seller is needy.	Discount over market rate	At a premium over the market rate
Risk level	Secure	Risky	Secure
Possession delay	No	Possible	No
Social infrastructure	Present in most cases	May not be present	Present in most cases
Physical infrastructure	Present in most cases	May not be present	Present in most cases
Return on investment	Low	High	Moderate
Suitability	End-use	Investment	End-use/investment
Loan facility	Available	Depends on papers and legal clearances	Available
Possession time	Immediate	Depends on project completion	Immediate

​​Who should buy under-construction properties?

An investor would always invest in an under-priced project with upside potential. During construction, the developers start with competitive pricing to attract buyers. As the project matures in construction and occupancy, the demand rises, leading to an increase in prices.

“An investor will always find it attractive, to invest during the early stages of project development. Under the guidelines of the Real Estate (Regulation and Development) Act (RERA), a developer cannot launch a project without obtaining the requisite permissions. Therefore, there is no pre-launch stage now. It is always advisable to invest, after thoroughly understanding the project, including the permissions obtained, government dues, project plan, etc.

All these details are better known upon official launch,” says Amit Chawla, director, valuation and advisory services, at Colliers International India.

Investing in resale property could be a costly affair because the existing buyer would have already paid stamp duty on it, and the investor has to again pay the stamp duty for such property. So, the cost of the ownership escalates by the value of stamp duty. The existing property owner may also add some premium on the price of the property, increasing purchase cost.

For example, if the stamp duty and the registration cost at a particular location is 8%. So, each time a property changes hands from one owner to another, the price will increase by at least 8% due to the stamp duty and registration thereof.

Who should buy ready-to-move-in properties?

People who are living on rent, may find it challenging to manage the EMI and rental outgo at the same time. The situation may become more complicated, if the possession of the property possession is delayed. Hence, such buyers should prefer ready-to-move-in properties over under-construction properties.

“First-time buyers are usually end-users, who need a place to live and therefore, prefer ready-to-move-in flats, as they generally do not plan to sell the property for a long time,” opines Rituraj Verma, partner at Nisus Finance.

A ready-to-move-in property allows the buyer to understand the quality of construction, infrastructure support and locality. Moreover, the end-user can immediately leave the rental home, to save on the rental money. With a ready-to-move-in property, a buyer can also have a look and feel of the property and can compare it with other projects more effectively.

Also read: How to buy a home that delivers long-term ROI

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Source: www.housing.com