Metros in India Witness a Slew of Pre-Launches
The last six months have seen a major boost in the number of properties being pre-launched in various cities such as Bangalore, Mumbai and Delhi. While lower property prices during the pre-launch period can be considered as an important factor driving up these numbers, the anticipated regulatory bill is also expected to be a cause for the increase in the number of properties being pre-launched now.
Pre-launched projects in Metros
Pre-launch is a stage where a select few people are made known of an upcoming project even before the plans are approved by the municipal authorities and, thus, before the project is officially launched to the public. There are no binding documents executed by the builder during this stage. About 20-30% of the bookings take place during the pre-launch stage. Buyers usually pay a percentage of the total property price as an advance for booking their property. In a cash-strapped market, pre-launches are a popular way of raising funds for developers.
Mumbai witnessed nearly 25 pre-launches in the last six months including projects by both big and small developers alike. Some of these developers include the well-known Lodha Group, Runwal Group and the Kalpataru Group. Bangalore too has been witnessing a slew of pre-launches by developers such as the Brigade Group, Prestige Group, Mantri Developers and Puravankara amongst many others. Several parts of Delhi and NCR region saw pre-launch offers by developers such as DLF, Ansal and Unitech Group.
Causes for growth in number
Attractive pricing is one of the most commonly cited drivers of pre-launches. The price of a property sold during a pre-launch could be as less as 20 % or more than that during the launch period. A buyer can also negotiate good deals during the pre-launch period. For example, a 2-BHK property during launch time may cost about Rs. 4,400 per sq. ft. while the same property may cost as less as Rs 3900 per sq. ft. during the pre-launch. Hence, more potential buyers are attracted to pre-launched projects.
While attractive deals are considered the major reason for the increasing number of pre-launches in the metros, concerns by developers over the anticipated real estate regulatory bill is cited as another major reason for the current rush in pre-launches. Several rogue developers are found guilty of unethical and illegal practice of property pre-launches. A nexus of these builders, investors and brokers are known to lure innocent customers for making quick money and exit the scene. There is currently no legal protection for customers that have been cheated through this process.
The Real Estate Regulatory Bill, which is expected to become a law this year, will prohibit developers from making sales before all the approvals are obtained. This bill, if passed as a law, will essentially eliminate the practice of pre-launches. In the current economically tight situation in the country where banks prohibit funding developers for land purchases in order to avoid land hoarding, pre-launches are the alternative way of funding developers. With pre-launches gone, genuine developers along with unscrupulous builders too will be affected. The affordability factor for several potential buyers will also be gone.
Hence, developers are in the race of making most of the opportunity to raise funds before the law is brought into effect. This has led to the sudden rise in the number of pre-launches across the country.
However, while one may look at a property at a pre-launch stage as a potential option, it should also be known that there can be several hassles in obtaining the necessary documents in place. Obtaining permissions and documents may sometimes get delayed for a long time. Another thing is that the time taken for obtaining the complete possession of the property can be about 3-4 years. Hence, even if you buy a property at a cheap price, it doesn’t necessarily yield a great return at the end of completion. People should be careful about the reputation of a developer who comes up with a pre-launch offer as there could be fly-by-night developers mixed with genuine developers.
