Property developers often use jargon that the buyers find hard to comprehend. In this feature, we will focus on the two most common terms used in the realty market: ‘Pre-launch’ and ‘Soft-launch’. Aman Nagar, director, Paras Buildtech, explains that “Both are meant to attract potential buyers’ attention on the new project being launched by a developer.”
Pre-launch: A builder makes an announcement about his project when the approval processes are not initiated or still in progress.
Soft-launch: The approval processes are underway, ensuring all the requisite clearances and approvals.
“Usually, both pre-launch and soft-launch of a project, starts with the invitation of bookings from old customers and local property agents,” continues Nagar.
According to experts, today’s investor has either institutionalised to underwrite inventory or smaller investor has slowed down on real estate investing; so pre and soft-launches are being extended to direct customers with an incentive of deep discounts.
Vikram Kotnis, MD, Amura Marketing Technologies, elucidates the legal aspects related to such launches.
- Pre-launches have almost no legal validity and the risks are very high
- Soft-launches fall into a grey area, but are legal as most of the permissions have been already obtained
“As there are no regulatory bills in place that can clearly define the norm on when a developer can start selling, the validity factor remains ambiguous. Whatever the case may be, seek legal opinions, and make sure you seek agreement and appropriate receipts in both the cases to protect your investments” he adds.
That said, the pre-launch involves the maximum amount of risk. Experts caution that home buyers should never invest in a property during the pre-launch phase because:
- There is no visibility about project completion, which can lead to funds getting locked in for an extended period
- There is no legal protection at this stage
- The buyer can lose all the money invested in the absence of legal recourse.
The promised returns during the pre-launch stage are often high: between the 20-25% range, or even more, to attract the potential buyers.
Potential home owners must be wary about the developers’ approvals as some might even pitch a pre-launch as a soft one to raise easy funds, which puts the buyers at a high risk again. Make sure that all the requisite permissions are in place and emphasise on documentary evidence. Ensure that you at least get an agreement to sell, done at this point, so that there is some legal recourse to get your money back in the event of a dispute.
Usually, it’s wealthy and large investors that conduct transactions at the pre-and soft-launch stages. If you are really looking to take advantage of a soft-launch, then opt for a reputed developer with a sound track record of delivery. Both, end-buyers and investors, can put in money during the soft launch, but with a certain amount of investigation and caution.