For any Indian real estate investor or end user – the question always remain – buy ready to move or buy under construction property?
I have analyzed this question over past 2 decades.
Bought my first house around 21 years back. Bull market is Real Estate had begun. Builders used to launch project only to see the inventory fly away in few weeks(or days). And investors used to see their capital increase even before any delivery was made. Everyone was happy!!
But this party crashed as many builders were not able to deliver the flats. Others delivered – but delivered late or sub-standard flats.
Having been close to the ground for many years – as both investor as well as entrepreneur – I recommend purchasing ready to move property instead of under construction.
6 factors to consider
1. Delay in possession – Any under-construction property has a major risk of delivery. The possession can be delayed by the builder for reason within/outside his control. While RERA has reduced the risk, it hasn’t eliminated it. Any significant delay can lead to major cost escalation for the buyer.
2. Non-Delivery of flats/commercial property – Many buyer have seen their hard earner money evaporate when builders could not deliver the property at all. In few cases, they ran away, siphoned off the buyers money. In other cases, even with good intentions, the project went into litigation.
3. Cash Flow – Many buyers, especially NRIs are lured by under construction properties since it allows staggered payment schedule.
4. Management of a ready property – If one is in the market to purchase end use property, a ready possession property allows one to save on rent. You can buy, occupy and enjoy the property. If one if in the market to invest, ready possession property requires management of property. If thats playing on your mind, hire a property management company to help.
5. Cost of acquisition of property – While offering under construction property, the builders offer property at lower price point. One must be careful while considering such offer. In most cases, bulk of the total cost is taken by builder much before the actual possession.
6. Intangibles – Is the view from window blocked by a beam, is the river flowing close by nor a river but a nullah which creates mosquito menace? Only one way to find out – Take the possession.