There is really no lack of supply in real estate in markets across India both in the ready to move homes as well as in the under construction properties. If one is looking for a home, there are definitely a number of options to choose from. However, there are certain advantages that one can make use of if one is looking for a ready to move home.
One of the biggest risks associated with real estate is project delay and that is completely eliminated in a ready to move property. One does not have to wait for the completion of the properties or the amenities to be installed. Since RERA was implemented, developers are now forced to adhere to a deadline but whereas the deadline was about 3 years previously, it has extended to about 5 to 6 years for most developers. In other words, they are already making provision for the project delay by extending the deadline in the first place and the penalties would be implemented only when the said deadlines are not met.
Other things worth knowing
There is also a huge uncertainty about the space, size and the view of the apartment and the quality of construction. The developers often promise one thing and by the time your property is handed over, the home buyers are in for some very unpleasant surprises. A ready to move property will give ample scope to ascertain the quality of finish and inspect the structure. Under construction homes are often purchased on the basis of sample flats and they are misleading. In case of completed homes, the buyers know what they are buying and the purchase is not merely based on layouts.
It is also important to know about one’s neighborhood and the available infrastructure like the nearby markets, common public areas, parks and of course, the connectivity of the region. Moreover, a building where the lifts have started operating and the CCTVs are installed and the other amenities are also in place will no doubt give complete peace of mind to the buyers. Likewise, one can start living in the house as soon as one buys it and one just has to move in the furniture.
What do you have to do?
On the other hand, one also has to pay the EMI of the apartment that is under construction and also pay the rent of the flat that one is staying in till they get possession of one’s own apartment and maintaining both these costs can be quite a burden. Moving into a ready to move home will require any one payment. One is never sure when the property is going to be finally handed over and the timeline can often go haywire. There are many projects that have a promising start but insolvency issues prevent them from going forward and it is the home buyers who suffer from the indecisiveness and it is their money that is put on the line.
Even for those who are only buying a property for investment, even they can start earning rentals from it immediately. That will, in turn, help you to pay off your EMIs with ease and there would be no waiting period. You will also be able to charge better rent because you will be offering your tenant all kinds of amenities without any doubt. However, it is better to check the locational benefits and upcoming infrastructure of the region before you buy a property just for investment as capital appreciation will play a vital role in the return on investments.
As per the new tax rules, a 12% GST is applicable on under construction properties and it is 5% on affordable homes. This amount is charged over and above the home price and so if one is buying a home worth Rs 60 lakhs, then the GST payable will be Rs 7.2 lakhs. However, no GST is applicable on ready to move homes and this considerably reduces the overall cash outflow.
On the other hand, another tax benefit that can be availed is that under Section 80C, a borrower can claim an overall limit of Rs 1.5 lakhs in case of principal repayment of a home loan and another Rs 2 lakhs for the payment of interest under Section 24b for a self use home. However, these benefits can only be availed once the registration and ownership documents are in place and that is not possible unless the property is ready and in possession, which is not possible in an under construction home. The deduction can be claimed on interest paid on a home loan during the construction phase in five equal installments but all of this will be thrown out of schedule if the construction is delayed in any way.
A few more pointers
On the other hand, it is also very difficult to sell under construction property. This is especially true if the delivery is delayed or if the property gets into dispute and a legal battle ensues. The developers also do not allow the transfer of apartments until the project is complete and in case of doing so, one might have to incur charges of up to Rs 200 to Rs 250 per sq feet, which will either way put a dent into your profit margin.
Moreover, due to the recent NBFC crisis, many homes that have been financed by them are in the lurch and you never know what crisis the bank or the lending institute will get into during the period of construction. It is better to be done with the proceedings as soon as possible and then all you have to do is pay the EMIs on time in case of a ready to move home
It is true that one probably has to pay a bit more while buying a ready to move home as compared to an under construction apartment because a project complete will all amenities will definitely have a higher price per sq feet. But compared to the peace of mind it offers and the tax benefits one avails, that increase in price is either way balanced out and one in fact, stands a chance to gain a lot more in the process. One just needs to be a little diligent while making the purchase and calculate the costs in the long run.