Are under-construction homes still popular among investors?

7 Mar 2022 , 09:25 AM

We often read and hear advertisements promoting newly-launched real-estate developments in and around our city. A long testimonial in the newspaper or a dramatic voice on the radio endorses the developer’s work and how their dream of owning an affordable property in the city came true.    

But with the completion of such successful projects, one often contemplates if it is a wise idea to invest in an under-construction property. Living through a deadly global pandemic has furthermore seeped in uncertainties in the buyers’ mindset. Owing to a long history of stuck and incomplete projects causing buyers to lose money, investors have become cautious of investing in under-construction projects.

However, the fact that investors can save as much as up to 10 — 30 percent of the cost price of a property by investing in a project at its pre-launch stage is a strong enough reason to consider an under-construction home over ready-to-move-in units. Though this is seen as a risky step towards real estate investment, since a buyer is investing in a ‘product’ that is still ‘in the making’, the bet is placed on the developer. It is the confidence and trust a developer offers to his buyers that proves to be his greatest asset. On the buyers’ part, it is the credibility and reputation of the developer in the market that matters, which they need to be wary of. And irrespective of the developer’s standing in the industry, investors need to be aware of certain facts. For instance, the size and layout of the flat, the project completion and delivery timelines, and the amenities and facilities that will be offered.

Another factor that contributes to the very many benefits of an under-construction property is the facility of being able to perform due diligence on a project. And although in the past many home buyers have faced the challenge of receiving a property that differed from what was showcased in the sales brochure, the stringent compliance policies that the government has lately introduced safeguard the investor in more ways than one. Not to mention the multiple online information sources emerging frequently offer an added layer of protection to verify all that’s being committed. Under-construction homes are thus no longer exposed to the high risks that defined the real estate industry in the pre-RERA era.

The biggest advantage other than the ones mentioned above is the high return on investment. This is because an under-construction property offers an extended window period between the purchasing phase and the handover timeline. If the investor sells the property in and around the time of possession, one stands a good chance of earning a significant appreciation on the capital investment.    
 
Additionally, there are a few more perks, compelling enough to influence a buyer’s decision to invest in an under-construction home:

• New construction: When the project of the property completes, the buyers get the opportunity to move into a brand-new house that demands very little or almost no maintenance and delivers a long life.
• Payment flexibility: Under-construction properties allow investors to pay a token amount at the time of booking and the balance over a stipulated period of time. This is unlike ready properties where the buyer has to pay the entire amount at once or in a short interval.
• Discounts and offers: Being able to instantly move in is the main differentiator for ready properties. This is why developers hardly ever provide any offers on them. On the contrary, under-construction properties are always available in a variety of schemes and plans.

Ultimately, the decision of whether or not to invest in an under-construction home depends a lot on the buyer’s financial condition, preferred location, and timing. If the investor can wait, has a higher risk appetite; an under-construction property can be the best option!

The author of this article is Mr. Harish Sharma, Founder & CEO, Plinthstone REMA, a multi-specialty real estate Advisory Firm.
The views and opinions expressed are not of IIFL Capital Services, indiainfoline.com