While choosing a flat for purchase is no easy task, what further adds to the dilemma of homebuyers is multiple advantages and disadvantages that are inherently linked to under-construction homes and ready-to-move-in units. Cost of the housing unit is one of the major factors that ultimately comes into play when a homebuyer zeroes in on a flat. However, other factors, for example, quality of construction, capital gain returns, and so on, in many cases, offset the all-important factor of cost.

An under-construction home anywhere in the real estate market across the country is invariably lower in price as compared to that of a ready-to-move unit in any other project similar in size, scope, location and amenities.

The biggest advantage of a ready-to-move unit is that you know what you buy. The quality of construction can be verified by the homebuyer before investing money in a ready-to-move unit. The homebuyer is also convinced that the housing unit matches exactly the features and amenities that are provided by the real estate developer in the sales brochure. In comparison, under-construction homes in developing projects are often subject to change at the time of delivery. Amenities like swimming pools, green spaces, lifts, parking space or quality of construction material are often compromised at the time a homebuyer takes possession of the flat as compared to the features highlighted in the sales brochure.

An under-construction home is always a better option for those who are not end-users but invest in properties for returns. The cost of an under-construction home escalates with stages of completion. The difference in price of an under-construction unit at the time of booking and at the time of taking possession is huge. The highest quantum leap in terms of price takes place as soon as the flat is handed over to the buyer. Thus, a housing unit falling under this category can yield very high monetary returns for property investors if booked at a rudimentary stage and then sold off just before taking possession.

There are simultaneously various risks involved in an under-construction home if the purpose of booking is for end use. There is no fixed timeline of delivery with projects often getting mired in court cases over land, environment or funding issues. It weighs heavily on the pocket of the homebuyer when EMIs and rent have to be shelled out every month simultaneously for an indefinite period of time. In comparison, a ready-to-move unit offers the luxury of zero encumbrances and hassle-free living with immediate effect. There have been instances when under-construction projects have also been cancelled altogether with courts directing homebuyers for full refund of investments.

However, the real estate market has changed its characteristics ever since the government of India enacted the Real Estate (Regulation & Development) Act in the year 2016. Under-construction homes are not subject to the high risks that characterised the real estate sector in the pre-RERA period.

Most real estate projects that were under-construction before the RERA Act came into effect in May 2017 had occupancy certificates allotted to them by the local development authority. Thereby, these projects are fit for occupancy with required civic infrastructure in place like water supply, electricity supply, sanitation facilities, fire-fighting systems or lifts, for instance. It further implies that a homebuyer can easily settle in the booked housing unit, without any hindrances faced in living conditions, as soon as the developer hands over possession of the flat. Prior to RERA, under-construction units invariably took a long time in getting an occupancy certificate from a local development authority.

The delayed delivery risk which went with all under-construction projects before May 2017 has also been mitigated to a large extent after the implementation of the RERA Act. Builders are now bound by the Act to complete stage-wise construction of the project and handover the final housing unit to the homebuyer within a fixed deadline, failing which he or she is liable to be punished as per the law.

The difference in cost of a ready-to-move unit and an under-construction home propels buyers to move towards the latter. However, there are other costs involved in under-construction homes, including goods and services tax (GST) and cost of stamp duties at the time of registration. The Central government has with effect from April 2019 been charging GST at the rate of 5 per cent for all under-construction residential units that do not fall under the ambit of affordable housing. The ready-to-move housing units are free from any GST charges.

Moreover, ready-to-move flats are sold at bulk rates inclusive of all charges. A homebuyer often has to shell in extra money for stamp duty in order to register a flat after taking over its possession from the builder.

Surroundings including physical and social infrastructure are always better developed near ready-to-move-in units as compared to under-construction flats that are mostly located in developing housing hubs. There are better schools, colleges, hospitals, shopping complexes, malls, institutions and road infrastructure for ready-to-move-in flats. In comparison, similar physical and social infrastructure takes a long time to develop in areas where there is an abundance of cheap under-construction housing units.

Choice of a flat is again, however, restricted when it comes to a ready-to-move-in unit. The inventory of under-construction flats being larger, homebuyers are always free to choose from a range of options including the floor, location or proximity to lift of any housing unit. These factors though may be subject to change at the time of delivery of actual units.

(By Vikas Bhasin, CMD, Saya Homes)