Spend, Save and Invest Smartly
There is a famous saying “Home is where the heart belongs”. After a hard day’s work you need a place to put your head down and rest. What better place than your own home?
Your next concern is whether to buy an under-construction apartment vs readymade apartment. So what kind of apartment do you buy?
You get it at a cheaper price:
You can buy an under-construction apartment, at a much cheaper price than a readymade apartment. You can purchase a readymade 2 bedroom apartment in Delhi for INR 50 Lakhs, depending on the location you choose. An under-construction apartment in the same location could cost INR 40 Lakhs. You could save 20-30%, if you purchase an under-construction apartment.
Remember: An under-construction apartment in a posh location might not cost you much lesser than a ready-to-occupy apartment. If you sell your apartment after construction, you will get a massive profit. Apartment prices in most places increase after a few years. You purchased your under-construction apartment at a much lower price, than a ready-to-occupy apartment and can sell it for a very huge profit.
You pay a lesser EMI:
If you avail a home loan to purchase an under-construction apartment, you have to pay only the interest portion on your home loan. This is called Pre-EMI. Your home loan gets disbursed by the bank, as each stage of construction is complete. The bank charges you only interest on the loan amount which is disbursed, until the construction of your apartment is complete. After the construction of your apartment is complete you have to repay the actual EMI’s on your home loan. You get ample time to set your finances in order to help you repay your home loan EMI’s, until the construction of your apartment is complete. If you purchase a ready-made apartment, you will have to pay the home loan EMI’s (Principal + Interest), immediately on availing the home loan.
You can choose your apartment:
You have shortlisted a ready-to-occupy apartment in a location which you like. You have all the amenities at a short walking distance. There is only one problem? The apartment is on the 8th floor of the building. You find using the staircase difficult, if the lift is not working. You may not be able to purchase a ready-to-occupy apartment on the floor you want. If you purchase an under-construction apartment, you can choose the floor in the building. You can purchase your apartment even on the first floor. This is a benefit you enjoy over a ready-to-occupy apartment.
Most under-constructed apartments are completed, at least after a couple of years of delay. Many a time you get possession of your apartment after 3 years of construction.
If the economy is sluggish (slowdown in the real estate sector), there is not much demand for projects of the developer. He faces a cash crunch…He has no money and a large amount of unsold inventory (There are no buyers for his apartments). The developers might shift money from your project (Building where your under apartment is being constructed), to another of his projects which is running behind schedule. He may also use this money to retire costly debt. Think… The builders owes money to his lenders. The developer has no money to complete the construction of your apartment. He deliberately delays the construction of your apartment, as many other apartments in this building may be unsold. The developer hopes to delay the construction of your apartment till the time the economy improves.
The developer requires the construction to be approved by the Municipal Corporation .For this the building needs to adhere to certain norms of construction.
Once you buy an under-construction property, you would not be able to exit it easily. You would incur a heavy loss. The developer would restrict you from selling this apartment for a certain time frame. You might even have to pay the developer a high transfer charge (INR 200-250 per square foot). The developer might also force you to sell the under-construction apartment only to him, at a price much lower than its market price. You might also face another problem. You will find no buyers for your apartment, as no one is willing to purchase an under construction apartment. Remember: You make the final decision while purchasing an apartment whether Ready-to-occupy vs Under-Construction. Weigh your options carefully before making a decision.