Investing in Under-Construction Projects Can Be Beneficial

Investors have several property investment options such as investing in an empty plot, rental properties and under-construction properties. Of these options, most investors opt for under-construction properties due to several advantages it offers. While there are some risks involved in investing in such projects, with due diligence you can make property investment a profitable option.

Advantages of under-construction projects

1. The first biggest advantage is that under-construction projects offer good price discount per sq. ft. A ready-to-occupy property attracts only registration charges as way of taxes while an under-construction property attracts several taxes such as service tax, VAT, sales tax etc. Despite this, under construction properties score over ready-to-move-in properties because the former has a higher price advantage over the latter.

2. An under-construction project offers higher returns. Most people who buy under-construction properties are investors since end-users prefer ready-to-occupy homes. Hence, from the perspective of good returns, an under-construction property is far better. The pre-launch or soft launch (before the public launch) projects come at substantially lower prices. Hence, you can buy a property at a lower cost. Once complete, the owner can sell the apartment at higher price.

3. Under-construction properties offer ease of payment. While you tend to pay the money upfront for a ready property, for an under-construction property you can make payments in parts. You pay up only 10-20% of the entire amount during booking and pay the remaining amount either construction basis or time-line basis. There are also several tax benefits available for people who take a home loan for under-construction projects.

4. There are some builders who also offer a choice of customization during the construction phase. Hence, though the building plan remains the same, there are options for certain modifications within the property. Going for these modifications in a ready-to-occupy property becomes expensive. However, certain builders do not allow you to make many changes in a ready property.

Points to consider while buying under-construction property

1. While there are a number of benefits that under-construction property offers, one must do a thorough research before going for one. Delay in project delivery is the biggest problem affecting such projects. Some delays are under the control of the builder while some are not. For example, getting the right construction team is under the developer’s control. However, approval of necessary plans and certificates are not under the developer’s control. Though most under-construction buildings get delayed, reputed builders try to reduce these delays. Hence, a thorough background check of the builder is necessary.

2. Apart from delays, the quality of construction is also another point of concern. A reputed builder uses higher quality construction material, though it may be a bit expensive. Hence, it is better to do a good background check of the builder’s reputation about quality.

3. Since a project gets delayed, the cost of the project too goes up. Hence, one must make sure that there are sufficient funds to cover these costs due to delays.

4. Check for any deviations in the sanctioned plan. Most municipal corporations allow for a small deviation in construction from the originally sanctioned plan. However, if the construction has violated building norms or has too many deviations from the original plan, the municipal corporation will withhold the necessary certificates such as the Occupation Certificate (OC). While the developer will have received his full payment, the buyer will be the one who will face legal issues due to the non-availability of this certificate.

5. One must also consider the developments that may come up around the project. While an under-construction property can give you good returns on completion, the development in amenities and infrastructure in the area determine the kind of return the property will yield upon completion.

Overall, under-construction properties provide several advantages ranging from tax benefits to good returns. However, make sure that you have done a good background check of the locality’s growth prospects as well as the credibility of the builder for on-time and quality completion of the project.