Ready-to-move-in Vs Under-construction home: Which is a better bet for you?

February 06, 2020 4:00 PM

Housing is a basic need, and the growing demand for housing has kept the focus of investors, stakeholders and developers on residential properties.

real estate, real estate investment, ready to move in homes, Under-construction homes, housing property, NRIIn the post-RERA regime, developers are expected to strictly adhere to the timelines.

The housing market is one of the most stable and important elements of any modern economy. One of the chief drivers of GDP, it is capable of transforming economic development of the country. As stated by “India Brand Equity Foundation,” a trust established by the Department of Commerce, Indian Ministry of Commerce and Industry, the real estate sector in India is expected to reach a market size of $1 trillion by 2030 from $120 billion in 2017 and contribute 13 per cent of the country’s GDP by 2025.

Increasing incomes, urbanisation and economic growth are all currently driving realty demand in India. Concurrently, the growth of the corporate environment, retail, hospitality and commercial real estate is providing the push for much-needed infrastructure for India’s burgeoning needs. No wonder then that it is expected that this sector will incur more and more Non-Resident Indian (NRI) investments in both the short term and the long term.

Housing is a basic need, and the growing demand for housing has kept the focus of investors, stakeholders and developers on residential properties. However, while planning on investment in real estate, the most common dilemma is whether you should buy an under-construction property or a ready-to-move-in one. A ready-to-move-in home is one that is ready for immediate occupancy. This means the buyer saves himself from the risk of delays. He also does not have to bear the dual burden of paying the rent and EMIs at the same time.

Investing in ready-to-move-in property is a win-win decision, regardless of whether you actually move in or not. If you are an NRI investor planning to buy a home with the intention of earning rental income, then purchasing a completed project helps you start renting the property immediately.

One tangible benefit of a ready-to-move-in home is that investors don’t have to pay GST. Goods and Services Tax (GST) of 5% is applicable on an under-construction property for new projects started after April 1, 2019, charged over and above the property value. So if you are buying an under-construction property valuing Rs 60 lakh, you will have to pay Rs 3 lakh as GST. No GST is applicable on ready-to-move-in property, which reduces the overall financial outflow. However, there is a caveat. A recent clarification confirmed that only ready projects with Occupancy Certificate in place enjoy this benefit. Therefore, make sure you check for this important document when planning to buy a ready-to-move-in property.

In the post-RERA regime, developers are expected to strictly adhere to the timelines. Developers, making a provision for project delay, have listed completion dates of 4-5 years for projects. Waiting for such a long period can eventually turn out to be a costly decision for the buyer. The risk-averse investor with finances in place wants to steer clear off project delays and escalating costs. This makes ready-to-move-in properties the ideal choice for the NRI investor, looking for zero-risk investment and immediate access to a home that he can rent.

An unmistakeable advantage to investing in ready-to-move-in homes is that what you see is what you get. You can always check out the neighbourhood, available infrastructure and amenities around the area, connectivity to other parts of the city, and even seek reliable feedback from the people around. For NRIs thus buying a ready-to-move-in home is also hassle-free. NRIs typically prefer a week long travel to India for family visits / business trips. With ready-to-move-in homes, the entire process from selecting to buying a home can easily fit into the trip schedule.

It is no secret that ready-to-move-in homes or those nearing completion are costlier than under-construction projects. On the flipside, this difference is very easily offset. Many developers are offering incentives such as waiving of stamp duty and registration, payment schemes, freebies, such as modular kitchens, essential fittings and reserved parking space, etc, on ready-to-move-in properties. Besides this, the fact is, if you choose wisely and opt for a well-connected location in one of the growth corridors, you can expect a great rental income, which will justify the premium you pay for a ready-to-occupy home.

(By Prashant Bindal, Chief Sales Officer, Lodha Developers)

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