21 SEPTEMBER, 2022

After years of searching and arranging your accounts, when you find yourself capable of buying your own home, you need to choose from two options - a ready-to-move-in house or an under-construction house.

Many find a ready-to-move house convenient, while some want a new house construction unit with the freedom to design it in their way. Multiple advantages and disadvantages are linked to ready-to-move-in property and under-construction houses that make the individuals confused between the two. The cost is a major factor that ultimately comes into play to buy either. Other factors include the quality of construction, capital gains, and others. Let us discuss the advantages and disadvantages of both types of property.

Ready-to-move-in vs. Under-construction Property

When buyers invest in ready-to-move units, they know exactly what they are buying. They are also convinced that the property has the features and amenities the real estate developer gives in the sales brochure, like swimming pools, lifts, parking spaces, and walking areas.

On the other hand, developing projects for new construction homes are subject to change at delivery time. There is the risk that developers can provide compromised quality on amenities compared to the features mentioned in the project brochure. However, the real estate market has been more favourable since the government legislated the Real Estate (Regulation & Development) Act in 2016. Under-construction units depicting the real estate sector in the pre-RERA period are not considered highly risky bets.

What to Consider While Choosing One Option

As per the RERA Act, builders are bound by the act to complete the project's stage-wise construction and hand over the ready house within a fixed deadline. If they fail to do so, they are liable to be punished as per the law. Therefore, most homebuyers prefer under-construction housing units.

Here are the aspects that an individual can consider to decide on ready-to-move-in and under-construction property:

  • Legal Formalities

In the case of ready-to-move-in property, much legal work and documentation are involved because of the transfer of title. Under-construction property involves relatively lesser documentation.

  • Payment

The ready-move-in units have completed the construction stages, and the buyer needs to have ready finances. In the case of an under-construction property, the buyer has more time to make payments (registration charges, stamp duty, etc.) as the project has many construction stages of completion.

  • Level of Risk

Ready-to-move-in properties involve high chances of getting cheated as the developer may have sold it to more than one buyer. The buyer's due diligence is inevitable. Ensure all information about the parties handling the housing project (such as banks, advisories, etc.) are available to clear all doubts of the home buyers about the project's feasibility and quality. For under-construction, the legal framework is relatively simpler; still, due diligence is required.

  • Property Costs

The property prices will vary by location. Ready-to-move-in property is usually expensive because the physical infrastructure is already developed. In comparison, under-construction units are cheaper. Draft the budget in advance while buying property to ensure your finances are in place.

  • Financial Impact

A ready-to-move-in house frees you from paying rent. In the case of an under-construction property, there will be an additional burden of EMIs of home loans along with rent.

  • Ease of Selling

Few individuals invest in ready-to-move-in properties to make capital gains after some months or years. These are easy to sell. On the other hand, it is difficult to sell an under-construction property. Once you have paid for the possession and there is a delay in possession due to some issue, it will be a challenging task to sell such properties.

  • A Source of Income

Ready-to-move-in units can be a source of income with rent earnings that can be used to pay the home loans EMIs.   In the case of an under-construction property, the buyer needs to wait until the house completes the construction to earn the rent.

Thus, it is a great lifetime achievement to own your home built your way. You can design your home by investing in an under-construction property.

Considerations to Buy an Under-construction Property

It is crucial to be careful during a home purchase based on adequate research that includes:

  • Research adequately about the builder or developer. Go through their track record and check their customer reviews online. If possible, connect with their previous clients from their previous projects.
  • Inspect the housing site and keep track of the progress.
  • Check if the carpet area and designs are the same as the details provided to you.
  • Check if the property has all the necessary approvals and licences.
  • Evaluate the anticipated appreciation in the property value.
  • You can ask the developer for the verification documents of the project if a bank has approved it.

Home Loan on Under Construction Property

Property prices are rising daily, and today buying a home using savings is almost impossible for many. Under construction home loans are the most effective way to buy property for most individuals. Individuals can avail of a home loan for your property, whether it is an under-construction contractor hired by them or by a reputed developer. The home loan interest rate is usually affordable with a bank and disbursed in multiple tranches during different construction stages. These loans can be repaid in affordable EMIs over a long tenure of up to 15-25 years. The duration differs from bank to bank.

Following are the documents that a homebuyer needs to submit for a loan on under-construction property:

  • Identity Proof - PAN, Aadhaar number, voter's ID card, passport and Driving Licence, etc.
  • Address proof - Aadhaar number, Driving licence, Voter's ID, Rent agreement, Utility bills.
  • Income proof
  • Document for the latest progress of the construction and No Objection Certificate (NOC) from the developer.
  • Stamped and registered agreement
  • Sales agreement
  • Title deed
  • Khata certificate

Conclusion

Thus, an under-construction property is considered a better option to invest in properties. An under-construction housing unit can yield high monetary returns if booked at an elementary stage. You can apply for a loan on the under-construction property online. The cost of a loan on under-construction property escalates with the construction stages. Get ready to have your own home.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.