Under Construction Property or Ready-to-Move-in Property | Which is Better?
Mahadev Desai is the Founder and CEO of gharpedia.com and SDCPL a leading design consultancy firm having strong national presence. He has a degree in Civil Engineering (BE) and Law (LLB) and has rich experience of 45 years. Besides being the Editor in Chief, he also mentors team at GharPedia. He is associated with many professional bodies. He is also co-founder of 1mnt.in the first in Industry software for contractors’ billing. He is a voracious reader, edited 4 books, and pioneer of book reading movement in Gujarat, India.
If you are planning to buy a property, you have two premium options in your hand. One is either buying an under-construction property or the second option is going for a ready to move property.
Home buyers like you must spare time & and consult authentic resources to find out the best deal for buying a property. There is a good number of active buyers in the market and the real estate prices are quite subdued now than ever before.
But all together it is not an easy task. Along with the excitement of buying a home, it may turn frustrating to collect all necessary details before buying a house. Suppose you have accumulated all the papers now the next level of question is what kind of property will be the best suitable?
Now the trillion dollars question is which one is profitable between an under-construction property and a ready to move property? Both have their merits and demerits and you need to decide based on your circumstance with the help of following tips:
Let’s take a closer view on this matter.
Pros of Under-Construction Property
The pros of under-Construction property are listed below:
01. Lower Initial Payment:
- In most of the cases an under-construction property is quite affordable by price when the price is compared to a ready-to-move-in property.
- Buyer pays a down payment which may be around 10 to 30 percent of the principal amount and the remaining amount is to be paid in the form of easy monthly installments (EMI) as per the schedule of construction.
- Only down payment is to be made as the work starts rolling in progress, which involves lesser investment budget initially.
Also Read: What is Standard Rent?
02. Suitability for Investment:
- You may get higher returns for under-construction property since the prices may increase in future which is not the similar in case of a ready-to-move-in property.
- The scope of price appreciation or the scope of increasing price due to a well-developed peripheral area is higher in case of under construction property. It is mostly seen that new constructions are done mostly in developing peripheral zones.
- In order to have the benefits of price appreciation or increasing in the price, you should do a basic study about the proposed and ongoing development in the surrounding neighborhood and their status before finally buying a property.
- For example, the buyers who invested in the authority plots of Indian City like Noida will be receiving higher returns while those who had invested in Samshabaad region in Hyderabad may have to wait for the price hike in that area to be picked up or increase.
03. Choice in Locality and Floor:
- In case of Under-construction property, you will get to check a variety of options to choose from while it is not the similar case if is the only option. Here you may have to choose between the upper floor and corner flat, etc. and similar limited choices
04. Payment Options:
- In case of Under-construction property usually there are several payment plans for buyer such as Construction linked plan, down-payment plan, 30:70 plan, 20: 80 scheme and many more. You may choose according to your personal convenience.
05. Option to Customize:
- As per the needs and requirements of an individual few developers allow the customization to some extent during the construction stage including choice of finishes. Of course this option may vary from project to project and developer to developer.
06. Registration of Property with RERA:
- From 1st May 2017, it has become mandatory for any property with Occupancy Certificate to be registered under the respective States’ RERA.
- This will lead to under-construction properties fall under RERA regulations which will help to implement fair trade practices.
- If any buyer wants to know whether the property falls under the RERA or not, they can get the information from the RERA website of respective state.
- If speedy grievance redressal is needed, then it can be gained by contacting the Appellate Tribunal, which is formed under RERA.
Cons of Under-Construction Property
Listed below are the various cons related to buying of a Under-Construction property:
- Over the past few years the incidents of delay in the completion of the projects have increased beyond limits.
- There may be various reasons for this dispute such as liquidity crisis, legal issues related to land or No. or incomplete permission from the statutory authorities.
- In some cases, before getting all the required approvals from the concerned authorities the developer starts the construction.
- Also, there are various cases where the developers invest money collected from a newly launched project to complete an older project. This disbursement anomaly may create delay in getting possession.
- Thus, it is necessary to ensure that the developer from whom you are buying the property is really committed to complete the project as declared by him otherwise it may land you in a problem of paying extra expenditure on EMIs, interest on EMI and the current rent.
02. Neighborhood and Community:
- Developers generally share the list of amenities accessible with the people residing in a residential complex as these apartments are not meant for private type of housing. So, it is necessary to check out how the community is maintained within the residential complex or township to ensure good quality of life.
- A good neighborhood contributes in good resale value of your property.
03. Clauses for Exiting or Leaving the Property:
- In most of the cases, the developers and builders mention a clause regarding leaving the property and handing it again to the developer.
- Clauses such as exit options will keep option open after a specific period of time.
- So before signing an agreement and finalizing a deal, it is necessary to read all the clauses mentioned by the developer or builder.
- There is an additional cost of GST in case of under-construction properties for the services which are provided by the builder or developer for the construction of the building.
- At present, there is 12% of Goods and Service Tax (GST) laid on purchase of under-construction properties. The payment of GST is a an added financial liability for you.
05. Less or No Clarity on Maintenance Charges:
- Initially the developer or builder takes some amount or money from the buyer as the maintenance charge and the builder creates a corpus fund for maintenance of the project for a stipulated time frame, which may vary from one project to another.
- At this stage, there compromised clarity on maintenance charges.
- After the possession of the property, a society is formed in order to take care of the maintenance which decides the actual maintenance charges that a property owner (buyer) has to pay to them.
06. No Tax Benefits:
- The tax reclamation on EMI is only available when the buyer gets the possession of the property and generally people invest in the second house in order to get tax benefits.
- If you are buying the Under-construction property as your first house and if there is delay in getting the possession due to any reason there, you should be ready to pay the EMIs without getting tax redemption along with the rent which can be quite frustrating and hectic on your wallet.
07. Model of the Flats:
- Many a times you don’t get what is promised in case of buying a under construction property.
- Sometimes no adequate storage space is provided or the layout gets changed without your approval.
- Breach of promise may place the buyer in a situation where the buyer is left with no other option than buying that property the said developer or builder.
- If the buyer has a written proof of everything which was decided between him and the builder, he can approach consumer courts. But generally, the promises are made orally by the developers.
08. Interest Cost:
- Paying the amount in EMI or installments may lead to paying interest on the home loan plus rent for your current residential accommodation.
Pros of Ready-to-Move-in Property
On the other hand, there is an increase in the market regarding the demand buying ready-to-Move-in properties. The advantages are listed below.
01. Immediate Possession:
- One of the best advantages of buying a readymade property is immediate possession.
- As soon as the payment formality is done, you can occupy it and start living there.
- You can save pre-possession expenses.
02. You Get What You See:
- The main advantage of buying a Ready-to-Move-in property is you get what you see as you can see the quality of work on which you will be investing.
- There is a possibility to examine the fixtures and accessories in the property premise and there is open scope to modify or improve the needed points, if any, within the property.
- You may get to see and evaluate if the specifications and amenities mentioned by the builder/developer actually matches the reality or not. This will also offer you a clear idea about the honesty and integrity of the builder.
- You can get to acquire a confidence of about the quality of construction which you cannot check at its root.
- There is the lesser possibility of getting cheated by the builder/developer’s delay in handing over the possession.
03. Clarity on Legal Issues:
- In many cases the builder/developer tries to pass off disputed property as a fresh property, and this fraudulent deal put the potential buyers in the web of legal disputes and cases.
- Ready-to-Move-in properties are already completed and generally have all papers and documents handy with the builder/developer; so, it is easy to check them prior the sale.
- If you are buying Ready-to-Move-in property by taking a loan from bank, the loan issuing bank will always help the buyer to carry out the initial legal checks required to secure the funding.
- It is wise to hire an experienced lawyer to verify the land title and various other documents related to properties in order to save yourself from any further legal disputes and hassles: it is easier with a Ready-to-Move-in property only.
04. Get to Check the Neighborhood:
- It allows you to know the type of neighbors will be living around. It will be easier to take a decision whether to book the property or not.
- There might be some residents with whom you can check about the builder and quality of construction: it will help you to assess your locality.
05. Savings on Rent:
- Ready-to-Move-in property provides relief to those who lives in rental accommodations as you get to move to your house right away once you purchase it.
- The facility of immediate possession leads to savings of the income which otherwise is used for rent of the house.
06. Investment in a Permanent Residence:
- For the buyers who want to make an asset for themselves, Ready-to-Move-in property is a safe investment option.
- As soon as possible you get the possession of the purchased property, you have an option to put it on rent or you may move there.
07. No Inflation Cost:
As the house is ready and one can move immediately, the time for negotiation, and execution of the sale takes lesser time and hence the effect of inflation hardly effects.
Cons of Ready-to-Move-in Property
As there are multiple pros of buying a Ready-to-move-in property there are various cons related to it, which are listed below:
01. No Flexibility in Payment:
- There is no flexibility in payment when you buy a readymade property.
- Generally, the payment needs to be done in one go which includes down payment, stamp duty, registration charges, etc. You cannot shop for bank loan unless it is approved prior.
02. Restriction to Modifications:
- There is a little or hardly any scope of structure modifications within the executed layout / design.
- If you want to refurbish the entire home then it may take higher expense: in many cases it becomes mostly impossible.
03. More Legal Paperwork & Documentation:
- Purchasing of a ready to move property involves lot of paperwork which needs to be resolved before the final deal, which may turn hectic.
- It is extremely necessary to know the rules and regulations involved in the sale and purchase of ready-to-move-in property: it will help you to get the best deal and prevent yourself from any future hassles and disputes particularly for the existing fixtures and furniture.
- There can be lots of hassles in terms of relocation which are not legal but important for staying healthy. You need to be sure about these hidden issues if any in a Ready-to-Move-in property.
04. Limitations in the Choice:
- When you have decided you move into a house where you have furniture and fixtures ready, this may save your time for buying new furniture. But what is you have own set of furniture already? In these cases, you need to adjust, resale, and arrange your home décor, which can be tiring and not always at par.
- There may be little scope or provision of making the rooms and house as per your preferences: It will take time to get the inside décor according to your personal choice.
- Buyers also need to decide quickly if there is hurry in part of the seller.
Listed above are the pros and cons of buying a Ready-to-Move-in property. The decision whether to buy it or not all depends upon your needs, preferences and budget.
Finally, What to Do?
Now it’s time to take action. You have gone through the list of pros and cons of both the type of properties, i.e., Under-construction and Ready-to-Move-in type. If you are to take the final call, which kind of property will you chose for your own?
Let’s take it realistically. The choice generally should depend on your financial condition, living needs and the location. Location of the building is one of the most important factors while safety, scope of development, and resale values are the allied important issues you must count.
If you can wait and take some risks and are not concerned much regarding the current location of your property you may go for buying a property from Under-Construction property category. You may try to avail the option of group booking if your planning is to stay with people of your preferences for making a customized neighborhood.
Similarly, if you cannot wait and don’t want to take higher risks associated with the Under-construction property, your choice is left for Ready-to-Move-in property. The option of group booking is also available in readymade property option subject to availability. .
Want to have any other property purchase in mind? Please share your views in the comment box given below.
Wish you a happy and hassle-free property shopping!!!