Established or small-scale builders: Which is better when buying a house?

When buying a property, especially a house, it is crucial to select the right developer, as this will directly impact the quality, timeline and several aspects of owning your dream home. Given the instances where buyers face long-drawn legal issues with builders over delayed possession or poor construction, conducting due diligence when choosing a developer is of utmost importance. Since property purchase is a major financial decision, you must go with a reliable developer. However, many potential buyers are confused about whether they should select a small-scale local builder or an established player. In this guide, we will discuss the pros and cons of established and small-scale builders.

Factors to consider when choosing a developer

• Credibility: Whether or not you choose a reputed builder is a significant decision during your property purchase journey. One should verify a developer in terms of their construction quality, experience in the industry, timely delivery, etc. Check their brand presence. You can look for reviews about the developer on online forums or social media.
• Experience: During the due diligence, it is important to check the developer’s experience–whether they specialise in premium projects, the kind of architecture designs they produce, etc. and the number of projects they have delivered in the past.
• Budget: Developers specialise in specific segments, such as premium or affordable housing projects. When finalising a developer, make sure to check if they fit your budget needs.
• RERA registration: The Real Estate Regulatory Authority has been established in all states to protect the interests of homebuyers and set guidelines for the developers and agents to follow. According to the RERA Act, all developers must register themselves and all projects under RERA. This helps establish that the developer is reliable and adheres to the construction standards.

Established or small-scale builders

Benefits of choosing an established developer

Grade A real estate builders are highly preferred by many homebuyers owing to their impeccable track record of ensuring quality and reliability. Here are some of the benefits of choosing an established developer:

• Superior construction quality: With established developers, buyers can be assured of the construction quality as the projects are built to the highest standards. These builders ensure the selection of premium materials and adhere to the construction regulations. Some developers have LEED certifications that specialise in energy-efficient, green buildings.
• Price: Purchasing a property from a recognised brand may be more expensive than that of a small-scale or lesser-known builder. However, it is worth the money as quality is guaranteed.
• Timely project completion: Reputed developers have a track record of adhering to construction timelines, ensuring timely possession of property to the buyers. Strategic planning allows these developers to complete the projects on time without any challenges.
• Transparency: One noticeable aspect of choosing a reputed developer is the open communication they ensure with their customers.
• Legal compliance: Reputed developers are known to adhere strictly to legal regulations, including RERA registration, thus safeguarding buyers from potential legal complications.
• Financial stability: With established players, buyers need not worry about delays or stalled projects due to financial or legal issues. These risks are lesser with reputed developers as they focus on establishing their brand image. There is ample availability of resources and financing options. Additionally, they effectively negotiate prices with their suppliers and subcontractors, giving them an edge over other players in the industry.
• Amenities: Most reputed developers come up with gated community projects equipped with a host of lifestyle amenities catering to the evolving needs of modern homebuyers. These include a clubhouse, recreational facilities like a swimming pool and gymnasium, advanced security systems, etc. Such projects focus on creating a sense of community.
• Better maintenance: Established developers are known for effectively maintaining their projects, given their extensive experience. From the start of construction till the handover to the society, the builder is responsible for maintaining the amenities. Some developers even work with the Residents Welfare Associations (RWAs) to manage amenities such as clubhouse, swimming pool, kids’ play area, golf course, etc.
• Efficient customer services: Reputed players work towards building long-lasting relationships with their customers, fulfilling their needs throughout their home-buying process, from pre-sales assistance to after-sales support.
• High resale value and appreciation: Investing in a property from a reputed developer can guarantee high resale or rental value for potential investors. Due to their market standing, experienced developers may manage to conduct business even when there is a downturn. Such properties are mostly sought-after owing to their high investment potential.
• Online presence: Most developers have a prominent presence online. They regularly post details of their projects, including brochures and virtual tour, giving their customers a peek into their project, and ensuring transparency.

Should you choose a small-scale developer?

Potential property buyers may occasionally find some small-scale developers who are excellent in their business. Usually, these builders have a smaller set-up with a small number of employees. Unlike a big company, where a buyer may have to deal with a new person at every stage of their journey, small builders ensure a personalised experience from sales to construction and after-sales. Some medium-sized companies do adhere to the highest standards of construction and have all the processes in place, focusing on building their brand. A key advantage of opting for a small-scale builder is the affordability of the project.

Disadvantages of choosing a small-scale builder

• Financing: Lenders may see projects developed by small-scale builders as a risk. Thus, these builders may face difficulties in securing loans or investments.
• Limited investment: Small-scale developers may lack the expertise of established players. Moreover, they operate at a smaller scale, and their projects may lack certain amenities.
• Resale value: Properties developed in these projects may have lower resale value compared to properties developed by large developers.
• Maintenance: The builder is likely to hand over the project completely and does not have any responsibility for maintaining the property post-delivery.
• Less credible: Unlike established players, some small-scale builders may not be seen as credible in terms of construction quality and timely project completion. It is the responsibility of the builder to verify the track record of such developers.

Challenges faced by small-scale developers

There are several small and medium-scale builders that are operating in the real estate industry, and they form a significant portion of the developer’s community. For many builders, it has become challenging to comply with stringent guidelines and compliance after the introduction of RERA which is aimed at regulating the industry. Many players are looking for ways to overcome such challenges and survive in the competitive market. There are many small-scale builders who are going for joint ventures, merges and collaborations with established players. Other popular strategy is the forward funding model adopted by many market players. In this model, a builder can buy a land parcel and fund the development of properties with a third-party lender who makes payments for each stage of construction.

Housing.com News Viewpoint

Established real estate players are known for having a strong reputation in the industry, with a strict focus on maintaining high construction standards, ensuring timely project completion and meeting the legal requirements, and gaining the trust of their potential customers. On the other hand, small-scale builders lack the advantage that bug players have in the market. To minimise the risks, it is safer to go with an established developer.

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