Looking to invest in a house that is still under construction? Bindu Gopal Rao offers tips on what to look out for when you make such a decision.


“I took one of the best decisions of my life to book this project as soon as it was launched. The rates have now gone up by almost 25 per cent after the approvals were received, so even if I want to return it now, I net a cool profit.” When a friend said this to me describing a new property he had invested in, it got me thinking. Surely there must be something in investing early.


Making the choice


‘Buyer beware’ may sound like a cliché, but it is absolutely essential that a home buyer protect his/her own interests. The decision to buy any property requires a long-time financial commitment and this is especially true in the case of under-construction property, as the buyer is required to make the payment in installments linked to the progress of construction. Therefore, depending on the age and financial capabilities of an individual, such properties can definitely be regarded as a good investment option, especially in the case of those buyers who are looking to spread out their cash outflow over a period of time.


“Under-construction properties are also viable for those home buyers who do not have the financial resources to make an upfront payment on a ‘ready-to-move-in’ accommodation and are actually willing to wait for the duration of the construction period to occupy their home. Therefore, the urgency factor of moving into one’s home, in addition to the financial resources continue to play an integral part in the decision to invest in an under-construction property.


However, prior to making these decisions, it is always wise for the buyer to consider the associated risks involved in buying such property and evaluate the same, before making a financial commitment,” says Sachin Sandhir, MD & Country Head, RICS India.


“This is a buyer’s decision and cannot be generalised. It also depends on individual risk appetite.


“However as a rule, one would be best advised to invest in an under-construction property, only after feeling satisfied about the pedigree of the developer and the developer’s track record in delivering on time,” says Shreenath Shastry, Regional Director – South, Knight Frank India.


According to Ashwani Prakash, Executive Director, Paramount Group of Companies,


“While buying an under-construction property, a person should be careful in evaluating the property in question. He should be able to assess the quality of construction and also the finances required to complete such under-construction property, the same should then be compared with the prices of the finished product available in the area.”


Weighing pros & cons


When you invest in a property in the earlier stages, there are chances of getting a discount. This is because very often the project is pending approvals or is still not in a form that people can visualise how it will eventually turn out to be. Another aspect is that you can modify the interiors in line with your taste with prior approval from the builder.


Says Ravi Saund, COO, CHD Developers Ltd, “The biggest advantage of buying an under-construction property is the price that you pay today is likely to be much lower than the price you will pay some time down the line as the property appreciates substantially during the construction phase. Also, the customer pays in installments (construction-linked plan) which spreads the financial burden over a period of two-four years depending upon the size of the project.


“Earlier, prices were known to escalate with the delay in construction which is not the case any more. The customer can also review the project from time to time.”


On the flip side, however, there is a risk of the project not getting completed on time and finances getting locked in for the duration of the project. Any delay in completion whether due to unavailability of construction material or rise in their prices and government approvals can cause pressure on the buyer’s finances.


Bangalore-based architect Asif Iqbal explains, “The builder’s reputation will be at stake as the news of non-commitment from the builders’ side is reflected, which in turn, affects the saleability of the project. But there are good deals available in the market. One should be careful about the quality of construction and land titles. Many a time, the seller does not disclose the land titles clearly and therefore sells the under-constructed property. The property may look cheap but it is going to be expensive when it comes to legal clearances.”


Opines Lalit Kumar Jain National President CREDAI, “A major drawback is that owners need to bear the dual burden of EMIs as well as rent till the time of possession of property. Moreover they cannot avail tax benefit for an under-constructed property. Therefore a number of builders have now come up with the EMI sharing scheme till the time of possession of property to offset some of the burden and this has lured a number of prospective property owners to buy under-constructed properties.”


For prospective buyers


Before opting for an under-construction property, ensure that you check both the reputation and the track record of developer. It is also advisable that you consult with a renowned property consultant and a property lawyer.


As a buyer, it is a must to review the initial clearances from the government and licenses. It will hold you in good stead if you find out the foundation details, get working drawings and check the quality control during digging and other construction processes.


A thorough due diligence to check the ownership and development rights of the project is a must. As a buyer, make sure you have a copy of all construction approvals and statutory sanctions for the project.


Remember also that you should get the property registered at the earliest after entering into a buying arrangement.


“These days’ people do lot of research on the Internet about the property and its availability which is definitely a good sign to create awareness. But, while you search properties online, compare prices between similar properties and ask for construction details like flooring, kitchen, fittings and other amenities.


Verify the specifications given by the builder regarding including quality of construction and availability of drinking and potable water, assess the natural lighting, ventilation, water connection and sanitary connection status of your prospective property and check on common service area charged and their reasonability. Very importantly, check for fire safety, earthquake resistance, parking facility, lifts, alternative conduits, staircases, roof accessibility and safety,” says Deepak Mishra, Head-Sales & Marketing, Omkar Realtors & Developers Pvt. Ltd.


Mayur Shah, Managing Director, Marathon Group advises, “Completion of necessary regulatory documents like CC (Commencement Certificate) & IOD (Intimation of Disapproval) certificates will definitely benefit home buyers to make a right decision for buying an under-construction property.”


Adds Chandrashekar Hariharan, Chairman & Co-founder BCIL Zed Homes, “It is a prudent decision if you are looking to buy low and keep the investment cost reasonable. Usually, as the progress on construction gets to an advanced stage, the price rises.


However, exercise precaution on the reliability of schedules that the builder offers, be prepared mentally prepared for a delay of at least 30 per cent on dates the builder offers, and ensure that you have appointed a lawyer for a small fee to do due diligence on the legalities, clearances and such.


This will prepare you for any ‘shocks’ on completion and handover of your house.”

- Deccan Herald
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  • Balance the risks and benefits

    Basic tips for home seekers buying into a project that is under-construction


    The primary advantage would be that an under-construction property will invariably come cheaper than a ready-for-possession property. Depending on the stage of construction and also the response that the project has already elicited from other buyers/investors, the rates can be from anywhere between 15-30% lower.


    Also, its value often appreciates even if it is not completed. It is incorrect to assume that property value may not appreciate while it is being developed. It has been observed in a number of cases that property prices usually appreciate once they are nearing the phase of completion.


    This aspect is usually inherent to the property, and is attributed to the stage in its life-cycle. The market is likely to read a lesser risk in a project nearing completion. Consequently, it may be willing to pay a slight premium on account of this aspect. Therefore, it can make a lot of sense to invest in a under-construction property by a credible and reputed developer.


    The primary disadvantages would be that the property cannot be immediately used for occupancy or renting out, that one's money is locked into a non-performing asset and that there may be delivery delays or sometimes even defaults. That can have serious financial repercussions.


    Things to check before buying an under-construction property


    To begin with, if one is buying into an under-construction project, the developer's bona fides and market standing should be carefully researched and verified• A buyer is entitled to ask for a copy of the project's drawings, duly stamped by the municipal authorities• Locations should be chosen for future appreciation potential• Check on option to choose a construction linked payment plans, which are usually structured on a project-to-project basis


    Changes in the original development plan


    Certain necessary changes are usually permitted and also mentioned in the agreement. Once actual construction begins, there may be grey areas on the blueprints that come to light only later. Sometimes, this may involve new regulations with regards to parking space or other aspects beyond the developer's control.


    Failure to hand over the property on time


    There are certainly such incidences, as can be expected in a largely disorganized market. Generally, reputed builders deliver on time and as per promised specifications. Small developers, however, often default by stretching their projects beyond the promised delivery date - sometimes by as much as a year or more.


    Often, this is caused by funding issues. They may also skimp on construction costs, banking on the buyer's ignorance of quality parameters. Sometimes, the drawings they submit to the municipal authorities are not sufficiently detailed, leading to non-approval of their projects. There are also fly-by-night operators who pocket their clients' up-front payment and then disappear altogether.


    Most developers operating in city centres are well-established and experienced players with reputations to protect. The incidence of gross defaulting on promises there is less than 10%. It can, however, be as high as 15-20% in emerging suburban areas because there is a fairly large incidence of small developers.


    Many developers who respond to sudden property booms in suburban areas are simply traders who are putting up the only project they ever will in their entire lifetimes. They have no experience or technical knowledge and often do not have banks backing them. Most emerging suburbs are also defined by unclear land titles.• A prospective buyer should check into the developer's credibility, past projects and performance and delivery record• The buyer is perfectly entitled to ask for copies of all necessary permissions prior to making a financial commitment• He should also ensure that the project is funded by a known bank and that the project has all the correct approvals.


    If there is any reason for initial doubt, conducting a property purchase through an attorney qualified and experienced in handling real estate-related issues is certainly advisable.

    -Daily News and Analysis (DNA)

    CommentQuote
  • Originally Posted by fritolay_ps
    Balance the risks and benefits

    Basic tips for home seekers buying into a project that is under-construction


    The primary advantage would be that an under-construction property will invariably come cheaper than a ready-for-possession property. Depending on the stage of construction and also the response that the project has already elicited from other buyers/investors, the rates can be from anywhere between 15-30% lower.


    Also, its value often appreciates even if it is not completed. It is incorrect to assume that property value may not appreciate while it is being developed. It has been observed in a number of cases that property prices usually appreciate once they are nearing the phase of completion.


    This aspect is usually inherent to the property, and is attributed to the stage in its life-cycle. The market is likely to read a lesser risk in a project nearing completion. Consequently, it may be willing to pay a slight premium on account of this aspect. Therefore, it can make a lot of sense to invest in a under-construction property by a credible and reputed developer.


    The primary disadvantages would be that the property cannot be immediately used for occupancy or renting out, that one's money is locked into a non-performing asset and that there may be delivery delays or sometimes even defaults. That can have serious financial repercussions.


    Things to check before buying an under-construction property


    To begin with, if one is buying into an under-construction project, the developer's bona fides and market standing should be carefully researched and verified• A buyer is entitled to ask for a copy of the project's drawings, duly stamped by the municipal authorities• Locations should be chosen for future appreciation potential• Check on option to choose a construction linked payment plans, which are usually structured on a project-to-project basis


    Changes in the original development plan


    Certain necessary changes are usually permitted and also mentioned in the agreement. Once actual construction begins, there may be grey areas on the blueprints that come to light only later. Sometimes, this may involve new regulations with regards to parking space or other aspects beyond the developer's control.


    Failure to hand over the property on time


    There are certainly such incidences, as can be expected in a largely disorganized market. Generally, reputed builders deliver on time and as per promised specifications. Small developers, however, often default by stretching their projects beyond the promised delivery date - sometimes by as much as a year or more.


    Often, this is caused by funding issues. They may also skimp on construction costs, banking on the buyer's ignorance of quality parameters. Sometimes, the drawings they submit to the municipal authorities are not sufficiently detailed, leading to non-approval of their projects. There are also fly-by-night operators who pocket their clients' up-front payment and then disappear altogether.


    Most developers operating in city centres are well-established and experienced players with reputations to protect. The incidence of gross defaulting on promises there is less than 10%. It can, however, be as high as 15-20% in emerging suburban areas because there is a fairly large incidence of small developers.


    Many developers who respond to sudden property booms in suburban areas are simply traders who are putting up the only project they ever will in their entire lifetimes. They have no experience or technical knowledge and often do not have banks backing them. Most emerging suburbs are also defined by unclear land titles.• A prospective buyer should check into the developer's credibility, past projects and performance and delivery record• The buyer is perfectly entitled to ask for copies of all necessary permissions prior to making a financial commitment• He should also ensure that the project is funded by a known bank and that the project has all the correct approvals.


    If there is any reason for initial doubt, conducting a property purchase through an attorney qualified and experienced in handling real estate-related issues is certainly advisable.

    -Daily News and Analysis (DNA)




    copy and paste crap
    CommentQuote
  • Investing in under-construction projects risky: Experts




    Should an investor buy under-construction property?


    Real estate experts believe that consumers in India should follow the international practice of not putting their money in an under-construction property.


    “Consumers who invest in under-construction projects are buying a distant dream. In other countries, a developer cannot sell such properties. There will not find any buyers. However, In India, about 55 to 60 per cent home loans are towards under-construction properties. This is an enormous risk”, said Harsh Roongta, CEO, Apnapaisa.com.


    He added, home loan borrowers do not have any leeway once they sign the required document and it is incumbent upon the borrower to ensure that the paperwork and other related issues are clear.


    For those investors who feel that they are in any kind of problem, Adhil Shetty, CEO, Bankbazaar’s suggestion is: “Approach the lender and request for a moratorium, another option is to go to the credit counselling centres like ‘Disha’ and ‘Abhay’ and take their help in getting the home loan re-structured, which may involve moratorium period or increase in the tenure to bring down the EMI.”



    However, there is no set precedent to deal with the problems investors are facing in Noida Extension area.


    Santosh Kumar from Jones LangLasalle, India says “Buyers would be extra cautious now. The sales would further slow down in such areas.”


    “Land bought from the government is considered cleanest. If there is an issue with even that, we need to rethink the way we purchase land,” says Getamber Anand, VP, CREDAI.


    Investing in under-construction projects risky: Experts - Indian Express
    CommentQuote
  • Originally Posted by msdhoni
    copy and paste crap


    Your line is for this article or on my efforts:bab (38):
    CommentQuote
  • Originally Posted by fritolay_ps
    Your line is for this article or on my efforts:bab (38):



    BOTH THE ARTICLE AND WASTE OF EFFORT TO PASTE IT HERE
    CommentQuote
  • so why dont you try and put some article OR news which is benificial for group instead of putting finger on someone efforts
    CommentQuote
  • Originally Posted by msdhoni
    BOTH THE ARTICLE AND WASTE OF EFFORT TO PASTE IT HERE


    Hello Mr. Dhoni,

    If you do not like it, do not read the thread.. This post may be useful for other readers.

    Frito has been doing a tremendous job for providing us selected news in appropriate thread.

    Keep it up Frito.

    Thanks,
    CommentQuote
  • Originally Posted by new_indian
    Hello Mr. Dhoni,

    If you do not like it, do not read the thread.. This post may be useful for other readers.

    Frito has been doing a tremendous job for providing us selected news in appropriate thread.

    Keep it up Frito.

    Thanks,

    i have the right to express my view on worthlessness of the post
    CommentQuote
  • You do have right to express your view on any post BUT you do not have right to express your view on someones effort by just writting "WASTE OF EFFORT"
    CommentQuote
  • Originally Posted by fritolay_ps
    You do have right to express your view on any post BUT you do not have right to express your view on someones effort by just writting "WASTE OF EFFORT"


    dont be sentimental about it...its just that the information in the article is commonly known by most educated people
    CommentQuote
  • I am aware of this but this is beneficiary for new guys...
    CommentQuote
  • Originally Posted by msdhoni
    i have the right to express my view on worthlessness of the post


    What may be wrong for you can be right for someone else. Why always look from your point of view
    CommentQuote
  • Originally Posted by fritolay_ps
    You do have right to express your view on any post BUT you do not have right to express your view on someones effort by just writting "WASTE OF EFFORT"


    fritolay_ps Ji, Do not care for them who do not like your great efforts of copying one of the best real states news every day in IRFM, you are one of the most important member of this forum and keep it up your great work as always. Thanks..
    CommentQuote
  • Originally Posted by msdhoni
    i have the right to express my view on worthlessness of the post


    You do have right to express your views provided you given better value through your post, which is not there.

    Therefore first give us better insights rather than just criticizing.

    Thanks.
    CommentQuote
  • Originally Posted by new_indian
    You do have right to express your views provided you given better value through your post, which is not there.

    Therefore first give us better insights rather than just criticizing.

    Thanks.

    which law states this...is it written in the constitution????
    CommentQuote