Due to the options of staggered payments and lower rates, many people opt for an under-construction property without realising its financial risks. Here are some of the benefits of a ready-to-move property as compared to an under-construction house.
The adage, ‘One bird in hand is better two in a bush’ very aptly sums up the decision of choosing to invest in a ready-to-move-in house. The news frequently reports the instances of delay and default in construction and possession of the property as per schedule.
Data from all over the country has pegged delays in projects between 12 months, going up to 24 months. A look at the real estate in the redevelopment sector too will show that unprofessional builders, who have taken on projects without adequate financial resources, have also been responsible for project delays. Largely, this is the cause of delay in projects.
However, sometimes the delay may not be caused due to the lack of financial resources but by litigation related with the property though in the case of an under-construction property, the disbursements are generally linked to the stage of completion of the construction. Also, the EMI payments generally start after completion of the construction. However, in case of delay for any reason, your EMIs will start once the entire home loan has been disbursed. In case you are staying in a rented house, your expenses on rentals continue while you have to pay your EMI. In some situations, the home buyer has to cancel the property booking of the under-construction house due to severe financial strain of a monthly rent and the EMI simultaneously.
In the case of a ready-to-move-in property, you either save rental if you move in or earn rental if you let it out and thus, save/earn money to supplement your EMI payments. People who opt for an under-construction house, should be aware that they are going to pay higher rates of interest and bear higher risks of delay and default. In the case of reputed builders, even if there is no risk of default in giving possession, you always carry the risk of delay due to reasons beyond the control of the developer.
The present situation of the real estate sector being what it is, the prospects are risky, with higher a probability of default in the future than what we have witnessed so far. There have also been reported instances where the developers have allotted the same property to more than one buyer.
Also, an under-construction property is not as liquid as a ready flat. So, it is not easy to sell this as soon as you want and at the price you want. This property cannot be sold without the consent of the builder, along with his own commission deducted from the sale. Both cases will result in you getting a lower net price. Finally and most importantly, the ready property ensures that you get instant gratification for the money you pay.
(The author is a taxation and home finance expert, with 30 years’ experience)