Points to be Considered Before Deciding Between Purchasing Under-Construction Properties and Ready-to-Move-In Flats

Timing and Urgency: Assess your immediate housing needs. Are you in a hurry to move in, or can you wait for the construction to be completed?

Financial Planning: Consider your financial situation and how it aligns with the payment schedules of both options. Under-construction properties typically involve staggered payments, while ready-to-move-in flats require immediate payment.

Risk Tolerance: Evaluate your tolerance for potential delays and uncertainties associated with under-construction properties. Delays in construction can impact your timeline and budget.

Customization: Determine the extent to which you want to customize your living space. Ready-to-move-in flats may offer limited customization options compared to under-construction properties where you can have more input in the design and layout.

Quality Assurance: Research the reputation and track record of the developers/builders involved. Ensure that quality standards are met in both under-construction and ready-to-move-in properties.

Legal and Regulatory Compliance: Verify all legal documentation and regulatory approvals for both options. Ensure that the property adheres to local building codes and regulations.

Location and Amenities: Consider the location, neighborhood amenities, and infrastructure development associated with both under-construction properties and ready-to-move-in flats. Choose a location that suits your lifestyle and future plans.

Resale Value and Appreciation: Evaluate the potential resale value and appreciation prospects of both types of properties. Factors such as location, demand-supply dynamics, and market trends can influence the future value of your investment.

Project Completion Timeline: Obtain clarity on the expected completion timeline for under-construction properties. Factor in potential delays and assess whether the timeline aligns with your needs and expectations.

Professional Advice: Seek advice from real estate experts, financial advisors, and legal professionals before making a decision. They can provide valuable insights and guidance tailored to your specific circumstances.

Buying a home stands as one of the most important financial decisions one makes in their lifetime. Numerous elements demand meticulous attention to guarantee a rewarding investment, regardless of whether it involves an under-construction property or a ready-to-move-in flat.

For under-construction properties, the developer’s credibility emerges as paramount. Extensive research into their track record, delivery punctuality, financial robustness, and standing in the market is advisable. It’s essential to scrutinize the builder-buyer agreement meticulously, ensuring it prominently features penalty clauses in case of project delays.

Insist on a construction-linked payment plan, where payments are made following the construction stage to protect against financial loss if the project stalls. Also, remember to check the Real Estate Regulatory Authority (RERA) project registration.

Avoid Subvention Scheme Loan

A subvention scheme loan is a type of financing arrangement often used in real estate transactions, particularly in property development projects. Here’s a detailed breakdown of why it’s considered risky:

High Interest Rates: Subvention scheme loans typically come with higher interest rates compared to traditional loans. This is because they involve greater risks for the lender, as we’ll explore further.

Builder Receives Upfront Payment: In a subvention scheme, the builder or developer receives a substantial portion of the loan amount upfront, usually around 90% to 95%, before any construction work begins. This means that the builder has access to most of the funds without having made significant progress on the project.

Minimal Risk for the Builder: Since the builder gets the majority of the loan upfront, they have less financial risk associated with the project. Even if the construction does not progress as planned or encounters difficulties, the builder has already received a substantial portion of the funds.

Potential for Non-Completion: If the builder fails to complete the construction for any reason—such as financial mismanagement, legal issues, or project delays—the borrower (usually the property buyer) bears the brunt of the consequences. The borrower is still obligated to repay the loan amount, even though the property may not have been built as promised.

Impact on Credit Score: Defaulting on a subvention scheme loan can have severe consequences for the borrower’s creditworthiness. A default can negatively affect the borrower’s credit score, making it more challenging to secure future loans or financial products.

In summary, while subvention scheme loans may seem attractive due to their initial benefits, such as deferred payments or low initial costs for the buyer, they carry significant risks. These risks include high interest rates, the potential for non-completion of the project, and adverse effects on the borrower’s credit score if the builder fails to deliver on their promises. It’s crucial for borrowers to thoroughly evaluate the risks and carefully consider their financial options before entering into such arrangements

Before committing to any real estate investment, particularly in an under-construction property, it’s essential to consider certain factors to prevent potential regrets down the line. The builder’s history and standing are pivotal. This necessitates comprehensive investigation into the construction firm’s track record, financial stability, and adherence to project timelines. Reputable builders are renowned for their punctuality in project completion, utilization of top-notch materials, and fulfillment of promised deliverables. Conversely, investing in a property from an unreliable builder can lead to project delays, legal complications, and subpar construction quality.

It’s crucial to conduct thorough legal due diligence when considering the purchase of a shell property. This involves verifying the property title, checking for any legal disputes, ensuring all necessary approvals and permits are in place, and confirming compliance with local building regulations. Legal professionals can help navigate these complexities to ensure a smooth transaction.

“To ensure the quality of construction for under-construction units, it’s advisable to visit the site frequently and verify that the construction meets the promised standards. Additionally, ensure the sales agreement is clear, comprehensive, and meets all legal documentation standards.”

If you’re planning to buy an off-plan property or one that’s yet to be constructed, it’s essential to assess your finances thoroughly and make necessary plans. This includes considering the purchase price and other expenses such as stamp duty, registration charges, repair costs, property tax, and a 12% GST.

Purchasing a ready-to-move-in flat offers several advantages. It eliminates the uncertainty of construction delays and allows you to avoid rental costs during the waiting period. However, it’s essential not to overlook certain key factors.

Firstly, ensure to check the occupancy certificate (OC) BCC to confirm that the building complies with all construction norms. Additionally, examine the registry of papers for completeness and accuracy.

It’s also crucial to assess the quality of construction. Compare the plan layout with the actual structure of the sample flat and inspect for any structural deformities or damp spots.

“Before finalizing the purchase of a move-in ready flat, conduct a thorough inspection of the property. This should include checking for any defects in the structure, plumbing, or electrical systems, as well as evaluating the overall condition of the interior and exterior of the building.”

When considering either an under-construction property or a ready-to-move-in flat, several other aspects warrant attention.

Location and Infrastructure: The project’s location and the surrounding infrastructure are pivotal. Proximity to schools, hospitals, shopping centers, and transportation facilities can significantly enhance the property’s resale value. Ensure municipal authorities have approved the building plans and verify the clarity of the land title.

Value Determining factor: Emphasize that a property’s value and suitability are largely influenced by its location. Evaluate both the building and its surroundings for ready-to-move-in apartments. Properties situated in well-developed regions with easy accessibility typically retain their value better over time.

Financial Considerations: Before exploring various financial options, it’s crucial to understand your budget. Investigate the property’s resale and rental potential. Even if your intention is to reside in the property, life’s unpredictability suggests it’s prudent to have an investment that can generate rental income or appreciate in value over time.

Rental Demand and Yield: Assess the demand for rental properties or resale in the area and evaluate the property’s potential yield on rent. This analysis provides insights into the property’s long-term financial viability.

By considering these factors alongside the property’s construction status and quality, you can make a well-informed decision that aligns with your financial goals and lifestyle preferences.

Posted and reproduced in Public Interest by 

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

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