How to choose between an under-construction and a ready-to-move-in property?

Aparna Jain is planning to buy a house. She feels this is a good time for property purchase, as home loan interest rates are low and property prices are also affordable. She has zeroed in on two properties: One is an under-construction property that will be ready for possession in nine months, and the other one is a ready-to-move-in property.

She likes the under-construction property better but isn’t sure if she should go for it because she has heard horror stories about delays in project execution and buyers having to wait for years. What should Aparna do?

Aparna's decision to buy a property depends on her needs. Is she buying a home to live in, or is she buying it as an investment? If she is buying it as an investment, an under-construction property could probably be a better choice. However, if she is buying a home to live in, she should opt for a ready to move-in home.

What are some likely problems Aparna could face in the case of an under-construction property?

Non-completion or execution delays is a significant risk in real estate. Aparna should check the background of the builder, the other projects he has worked on, their status-whether they have been completed on time and so on. She could also hire a lawyer to ensure that the property's paperwork and the history of the builder are clean. She should ensure she buys a property registered under the Real Estate Regulation and Development Act (RERA).

Advantages of an under-construction property

• It is cheaper and you can make the payment in a staggered manner, which gives you ample get time to apply for a loan and arrange for finances 
• There's lesser documentation as there are no previous owners
• Possibility of a good return on investment
• You can negotiate with the builder for possible discounts.
• Tax benefits on home loan taken for under-construction homes are applicable from day one

What are the disadvantages of an under-construction property?

• The most significant risk is project delay. This can be contained to some extent by the steps outlined earlier
• You have to pay 5% GST on under-construction flats
  
  Now, let's take a look at ready homes. They should be the preferred option if you want to buy a home for self-use.

Advantages of a ready-to-move-in property

• There's no risk of delayed construction or possession in ready property. You can move into your house immediately after buying it
• You can check with the other residents before to figure out if the environment is a good fit for you
• You can avail of immediate tax benefits of a home loan
• No GST payment on ready properties
• If you are buying a home for an investment purpose, you can immediately rent out the property and earn income

Disadvantages of a ready-to-move-in property

• A ready property tends to be more expensive, compared to an under-construction property
• Documentation for ready homes may be cumbersome w.r.t. transfer of the property title if it has changed hands multiple times
• You should also ensure due diligence to rule out the possibility that the same property is not sold to multiple buyers
• Customisation of the property as per your needs is difficult

Aparna should consider all these factors before making her choice. When it comes to financing her purchase, she could look at Axis Bank Home Loan.

Axis Bank offers a range of home loan products suited to the needs of all its customers. Click here to find out more about Axis Bank Home Loans and choose one that suits you best.

Disclaimer: The Source, a Mumbai-based content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.