If you’re buying property purely for investment, go for an under-construction house but if you want to live in it, go for a completed project to avoid risk of delay.
Home buyers have the choice of buying either an under-construction property or one already built and ready to occupy. Which is better? It depends on your motive of buying the house, budget and the level of flexibility. Broadly speaking, a house under construction makes more sense if you are an investor. But if you are an end-user and plan to live in it, a ready to occupy property may be a safer choice. Here’s why.
WHERE THEY SCORE
You can choose and customise a house under construction based on your preferences. More importantly, an under-construction house is often cheaper than a similar house which is ready to occupy. The cost difference could be as much as 20 per cent.
But with properties ready for occupation, you move into your own house and start saving on rental costs immediately. What you see is also what you get – it removes any possibilities of a mismatch between what you imagined your house to be and how it actually turns out. There is no waiting period and no risk of delay.
THE RISKS
In fact, the last two points are big risks in under-construction property. In India, property possession being delayed by six months to a year is fairly common. But there have also been instances where the property has not been handed over for years on end.
For example, buyers in Unitech’s Uniworld Gardens 2 project in Gurgaon have not got possession of their homes even four and half years after booking. There have been many such cases of inordinate delays by builders, big and small, across the country. The ongoing economic slowdown could see more projects added to the list. Prolonged delays can create a lot of financial trouble for you.
Generally, builders are paid in instalments based on work completion. If after the chunk of the payment is made, work gets stuck and possession is delayed, the pain for the buyer gets accentuated.
But the loan taken to buy the house will have to be repaid, whether or not the builder hands over possession.
Even in pre-EMI schemes, also known as 80:20 schemes or 70:30 schemes offered by some builders, you run the risk of high financial strain if possession is delayed. After the specified period (say 2 years) during which the builder takes care of the interest component, the liability for loan servicing is on you, whether or not you get possession.
The risk to the buyer is reduced if the builder undertakes to pay interest until possession. But even in such cases, you will have to bear the liability if the builder defaults in payment to the lender.
Along with the liability towards loan servicing, you will also have to continue spending on rent, if you live in a leased accommodation. Some builders undertake to pay penalty if there is delay in handing over. But this amount is usually quite less (Rs 5 to 7 a sq ft for each month of delay), and the actual payment may happen only at the time of possession.
The other risk with under-construction property is that, what is finally delivered may not be what was originally promised.
There have been cases of change in project plan layout and floor plan layout, or a reduction in the share of undivided share of land due to additional floors constructed by the builder.
In ready-to-occupy properties, there may not be much scope to pick and choose, and customise your home. Your loan liability will be higher since the house usually costs more than an under-construction property, and the entire purchase amount needs to be paid to the seller upfront.
SUITABILITY
Which one should you go for? If you’re buying property purely for investment, an under-construction property makes more sense.
The cost differential is a big plus for an investor who seeks to sell the property for profit in the future. And if all goes well, the potential for returns is consequently better. Those with deeper pockets can also handle risks associated with under-construction property better.
But if you’re buying it to live in, the risks in delay become worse to bear. Meeting two big-ticket expenses — home loan repayment and rentals — at the same time could be a financial strain for an end-user for whom a house is usually the largest investment in a lifetime. So, if you do choose to buy an under-construction property, be sure about the track record of the builder and his ability to deliver on time and as promised.
Also whether you go for an under-construction or ready property, be sure that the documentation and title are in order.
No comments:
Post a Comment