Planning to buy a house? Find out which is more beneficial -- ready or under-construction property

For those living in rented houses, the COVID-19 pandemic has made one realise the value of having a own house.  Also, the government has reduced interest rates on home loans, to encourage people who are looking to take home loans. Even developers are offering discounts to sell their inventory.

Therefore, this is the best time to buy a property. The decision to invest in an under-construction project or a ready flat definitely arises in the mind of a buyer as developers often leave projects incomplete. The ready flats are usually more expensive than the ones which are under construction. For more clarity on the subject, read on.

Possession: For under-construction property, you may have to wait 3-5 years depending on the project schedule. While you can move in immediately in a ready-to-move-in property after completing buying procedures.

EMI & rent: If you have taken a loan to buy the property, then in case of under-construction property, you have to pay EMI as well as rent while in ready-to-move-in property you just have to pay your home loan EMI.

Payment: Under-construction property prices are typically 20-30% less than ready-to-move-in properties. Under-construction properties require a down payment of 10-30% of the purchase price and you can pay the rest in installments over the course of 2 to 3 years, as per the construction schedule. With a ready-to-move-in property, there is no flexibility and the full payment has to be made within 2-3 months of sale agreement.

Return on investment: Under-construction properties are most likely to produce a higher return on investment (ROI). If the buyer sells the property close to the possession timeline, he gets better ROI as compared to ready-to-move-in. Also, the probability of price appreciation with under-construction projects far better than the ready ones due to development opportunities in the region.

Risk involved: During the construction stage, there are huge chances of delay in possession because of land disputes, lack of funds, new regulatory policies, incomplete permissions from authorities, builders filing for bankruptcy, etc in an under-construction property. A ready-to-move-in property does not have these problems since it is already built and the buyer simply needs to complete the required payments and paperwork to take possession.

Various choices: Under-construction properties have a variety of options available to their buyers, including unit size, floor rise, apartment orientation, etc. In a ready-to-move-in property, you have limited choices.

Modification: Some developers offer customisation options in under-construction properties, such as the choice of finishes. However, with a reday-to-move-in property, one cannot make major alterations since the structure may be affected.

Disparity in final product: The biggest problem with under-construction properties is that there may be some discrepancies between the final product and the sample flat. In the ready flats, you can inspect the unit before purchasing and there are no risks of discrepancies regarding its layout, features, and amenities, among others.

Maintenance Charges: In an under-construction property there is no clarity on maintenance charges until the flat is occupied or until the residents’ association is formed, but in a ready-to-move-in property this can be easily calculated as the society has already been formed. The costs of maintaining a complex are recurring expenses, and a high maintenance charges may inflate the value of a complex unless it is being projected as a high-end property.

GST Implication: Ready to move properties that have been issued the completion certificate are exempted from GST. While in an under-construction property you have to pay 1% and 5 % GST on the total cost of property for a property below Rs 45 lakh and above Rs 45 lakh after removing input tax credit.

Tax benefit: “Tax benefit on the under-construction properties will begin only after possession. Under section 24, all interest deducted during construction can be claimed after possession for five consecutive years. For self-occupied property, you get a Rs 2 lakh tax benefit. In the case of properties owned for rental purposes, the total interest amount can be claimed as well as Rs 1.5 lakh under 80C on the principal amount,” explained tax expert Gauri Chadha.  In the case of ready-to-move-in property, you can claim Rs 1.5 lakh under sec 80C against principal repayment and up to Rs 2 lakh for payment of interest under section 24b for a self-acquired house.

RERA Compliance: Any property with Occupation Certificate as on May 1, 2017, is mandated to be registered under their state’s  RERA. Under-construction properties, come under RERA and thus builders are liable to comply with fair trade practices. While ready-to-move-in properties with occupancy certificate are kept away from RERA.