Last night, while surfing Reddit, I came across this thread – “4.3 Lakh Indians Are Paying EMIs for Homes They May Never Get”. It just grabbed me by the collar and pulled me in. Why? Well, some of the replies in the thread hit close to home.
Hundreds and thousands of young Indians are crumbling under the weight of a home loan; worse, they are not even sure they will get possession of their homes. One of the replies on the thread read, “Never ever book homes in under construction projects. Take this from someone whose family has had nearly 50 crore worth of property stuck in under construction and abandoned projects.”
And this got me thinking, that having over Rs 50 cr stuck in undelivered properties comes from a place of privilege, but what about the average young Indian, who under pure FOMO fell for purchasing an under-construction home, funded via a home loan, at a young age? In all honesty, it isn’t difficult to fall for traps when it’s about buying real estate.
Deception – “No EMI Till Possession” and More…
I remember when I bought my first home at 25. It was constructed by one of the leading builders in India. It was in the central suburbs of Mumbai, and a complete township with all amenities like a clubhouse, children’s play area et cetera. A Two Bedroom Hall Kitchen (2-BHK), on the 25th floor, with a view to die for. The icing on the cake was that it was within my planned budget. Lucky, right?
Here’s more…
A quick purchase could have saved me lacs of rupees as it was still an under-construction property, and I was probably getting a good deal. Moreover, I would not have paid any EMI till possession as promised by the builder.
So, not just lucky. Super lucky?
Well, kind of. But in a totally different way.
You see, the biggest unknown with an under-construction property is just this – you may never get possession.
Now, I had people around me who were informed enough to tell me the dos and don’ts of buying a home. First things first, I was told to stay away from one thing – An under-construction Property!
But I was young. And determined.
So, I got a flat which was in real estate terms “Ready Possession.” Thank God for that.
What I have since heard, and more recently read on Reddit, only underscores the grave issue people were trying to warn me against.
You see, a delayed delivery of an under-construction property purchase is a source of grief at many levels.
One of these is related to the builder’s claim – “No EMIs till possession.” The super attractive offer just makes the decision making far easier.
Not surprisingly, it’s a deception most young Indians fall for. I was lucky not to fall for it, but many young Indians are not that lucky. They are in the race to get a home as soon as possible. And in the eagerness to do so, they unknowingly fall for this. Developers advertise the “No EMI till possession” as a USP, which in theory is one. But reality in most cases is far from it.
I did get the possession of my “ready possession” flat in a couple of months post the formalities and paperwork. But I do remember many people in the sales office, around my age that time or even younger, instantly booking an under-construction flat thinking they would not have to pay an EMI till possession. And of course there were spot discounts for booking right there and then. It was a whole circus, but we will talk about these aspects some other day. Today, let’s just focus on the deception of no EMI till possession.
As per a report by PropEquity in 2024, about 5 lac residential flats were in the stalled state, a data point backed by SWAMIH Investment Fund, a central government-backed program under the Ministry of Finance to revive such stalled projects.
So, if you are in your early 20s and planning to buy a home because “All my friends are buying one”, the first thing you must check is the credibility of the builder and his record in his past projects. Do not blindly fall for the discounts and mouth-watering deals the sales team has to offer.
Because if at all you fall for one or more of these deceptions, then comes the second and most excruciating part of this journey.
Destroying Your Cash Cushion One EMI at a Time
The beginning is simple, pay just 10% upfront from savings and the bank covers 90%, and the builder pays the EMIs until the house is ready in 12 months. I remember seeing many of these people who fell for this deception later on. They were struggling to get a clear response from the developer on when they could expect possession, which was already delayed by over a year. All they got were excuses like supply issues, monsoon delay and government formalities.
You see, what really happens is that come the 13th month from the purchase, the happy “NO EMI” period is now over as per the agreement. So, the owner now must pay the full EMI. To make matters worse, in case of delayed completion of a project, those who are living in a rented apartment, effectively now need to pay for their current accommodation, and for their new one as well. And this goes on, sometimes for years.
Why? Because your home loan is your responsibility, not the developers!
So, one keeps paying the EMI, for a home, they are not sure when they will get possession for, or if at all they will get it. A few years later, add the litigation and legal costs to these already bulked up burdens.
With a potentially large EMI now eating into your earnings along with probably a current rent and other outward expenses, the only option is to start digging into your Cash Cushion. The Rainy-day funds or savings you have. That is if at all you have any left after paying the initial amount to the developer a year ago. You run out of savings as well soon enough and then resort to asking friends or another bank for a personal loan. This creates a debt spiral: taking one loan to pay another, a cycle that rarely ends.
Soon enough, you start cutting out on your basic expenses to make ends meet. You stop hanging out with friends, you avoid family functions, you forget about the new phone or laptop. I have seen people who had a tough time getting groceries! Some of them fell for the high interest instant loan pits by unregulated NBFCs. Once again, a story for another day.
I remember seeing a big project, let’s call it A-Land, almost a decade ago in the western suburbs of Mumbai by one of the top developers. It was under development for over 5 years, beyond its original delivery date. Owners were fighting a legal battle against the battery of lawyers employed by the developer. In the FOMO of ‘All my friends are buying their homes,’ most young Indians forget to have the basic checks in place, making them vulnerable for most of these deceptive tactics.
So, before you buy your dream home, have a lawyer read the agreement. Do this even if someone tells you that under new laws you are protected. Ultimately, it’s your money, and you, as an individual, need to be realistic about your ability to claim damages from a builder.
The reality is, in India, almost all sales agreements are leaning to help the developer and not the buyer.
Often you overlook this critical point in the excitement of making the purchase. So, be sure to get everything vetted. And then vetted again.
Now, I am not trying to scare you away from the idea of buying your dream home. And of course, one cannot paint all builders with the same brush. But given the data staring us in the face, it just makes sense to approach this with caution.
Buy Your Dream Home, But…
Before you sign on the dotted line for that dream home, take a step back and do your homework.
Check #1 Investigate the builder’s history
Have they delivered projects on time in the past? A clever idea would be to talk to some of the current owners who have got possession of their homes.
Check #2 Check the financial health of the builder
A builder with weak finances spell trouble most of the times. Ensure they use escrow accounts to safeguard your money, as mandated by RERA. Also look for any existing legal cases against them, and how they ended or are progressing. Remember, the developers have one lethal combo, deep pockets, and a battery of lawyers to safeguard their interests.
Check #3 Get everything signed off by a legal counsel
And most importantly, have your legal counsel approve the agreement before you sign it.
These steps could act as your shield against losing years of savings to stalled projects or shady developers.
A Must Do Before You Buy…
Also, don’t forget to do a Buy vs Rent analysis, because renting isn’t always throwing money away.
In metros like Mumbai or Delhi, renting a flat might cost you 2-5% of its value annually. For a Rs 1 crore apartment, that’s about Rs 40,000 a month to start. If rent rises 10% each year, you’d pay roughly Rs 2.75 crore over 20 years. Sounds a lot, right?
But here’s the other side: buying that same Rs 1 crore flat often means a Rs 20 lakh down payment, a Rs 80 lakh loan at 8.5% interest, and monthly EMIs of around Rs 70,000. Over 20 years, you’d pay Rs 86 lakh in interest alone, making your total cost Rs 1.86 crore. The upside? You own the flat, which could grow to Rs 3.2 crore at a modest 6% annual appreciation.
Looks like a win for buying, doesn’t it? Not so fast.
Home ownership isn’t just EMIs. You’ve got maintenance fees. Say, Rs 5,000 a month, or Rs 12 lakh over 20 years. Add property taxes, repairs, and the risk of construction delays or market dips. If your project stalls (like the 5 lakh+ units stuck across India), you’re stuck paying EMIs and rent with nothing to show for it. Suddenly, that “asset” feels like a trap.
Renting, meanwhile, keeps you free in a sense. You can move for a better job, get rid of maintenance headaches, and invest your savings elsewhere, like mutual funds or stocks that might grow faster than real estate’s 6-7% average return.
Having said that, the math isn’t everything. Buying a home is emotional, a life milestone for most. Which is exactly why you must weigh the risks like delays, hidden costs, and market volatility against renting’s freedom. Choose what fits your life and try to not stick to society’s script. No one will pay your EMIs. It’s just you! Act wisely, seek help, look for experts and no matter what happens, do not act in a situation where your FOMO is dictating terms.
All the best for your dream home.
Disclaimer
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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