A few pointers to what buyers could do before investing in an under-construction house, says ARVIND JAIN
Buying a home is a costly process at the best of times. Making the down payment alone can consume a normal middle class family’s entire savings. A home loan sets the stage for anything between 10-20 years of debt, and paying the EMIs on a home loan can take up a significant part of the monthly income. It is therefore natural for home buyers to look for every possible means to reduce the financial burden of buying a home.
It is no secret that home buyers can save up to 30% of the cost price of a property by investing at the pre-launch stage of a project. This is, in fact, the most popular mode of property investment among property buyers. Essentially, this is seen as a riskier method of property investment, as one is investing in a ‘product’ that has yet to be ‘manufactured’.
Those who are averse to any kind of risk prefer to invest only in ready-to-move flats. However, in this day and age of illegally constructed buildings being identified and demolished by the authorities, even the supposedly ‘risk free’ route is turning into a nightmare for buyers. Evidently, the risk factor lies less in the stage of construction than in who is constructing.
If you speak to people who had invested in their homes at the pre-launch stage in the past and are happy inhabitants of completed homes today, the secret of their success is easily seen. Though they technically exposed themselves to risk, they were confident of their developer. It is this confidence that he gives his buyers – not his land banks or bank balance – that is a developer’s greatest asset. Buyers feel safe to invest in an under-construction project by a reputed developer, because they know that they will get the home that they paid for – on time, and with no unpleasant surprises.
So the first thing to keep in mind while considering a pre-launch project is the developer’s reputation and market standing. Many names infuse confidence without buyers having to delve further – these are the developers who have a clean track record. If the name does not ring a bell, this does not means that the developer cannot be trusted – but greater due diligence is definitely called for. And if the developer has not delivered a single project before this one, one needs to be extremely alert and look for other options.
Buyers should establish whether the developer has been able to deliver his projects on schedule in the past, and also whether there have been instances of project designs and specifications changing in the interim. This is not a desirable scenario, as buyers should be able to expect to get what they had originally signed up for. Even if the developer’s reputation is not in question, one still needs to be aware of certain facts. For instance, it is important to know the actual completion and handover timelines. An acceptable window would be 1.5-2 years from the time of investment. One should also be clear about the actual size and layout of the flat one is buying, and the facilities and amenities that will be included.
If the developer is completely new, buyers must establish the legal bonafides of the project at every level. This includes asking to see the sanction plan, commencement certificate, draft agreement and the title search report which proves the developer’s free and legal ownership of the plot on this the project will be built.
The author is managing director, Pride Group