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Economy Sep 7, 2012

Should you buy a ready or under-construction flat?

By Kishor Pate

Buying a ready possession home is the most obvious choice for most buyers as it allows the owner to move in immediately, arrange and modify things according to personal taste and get on with the business of living. However, there is also a negative aspect to instantly preferring a ready flat:

Increased Cost: Because of the high demand for ready flats, such units are also priced much higher than under-construction projects. This means that the overall investment benefit of a ready property is lower since it has been bought at a higher price.

Higher EMIs - Buyers who are purchasing with a home loan lose out on the benefit of lower EMIs which are applicable during the construction process. This is because financial institutions release payments on the basis of phase-wise completion.

The e overall investment benefit of a ready property is lower since it has been bought at a higher price.Reuters

Limits On Modification - A finished flat offers very little scope for personal touches. For instance, one may have certain desired specification for the kitchen. Modifications in a finished flat are expensive and disrupt day-to-day functioning.

Lack Of Choice - Buyers lose out on choice. Because of the high demand for ready flats, there is pressure on buyers to make fast decisions, which they may regret later on. Many areas have projects under construction which are superior to available ready ones.

No Payment Flexibility - Builders have no reason to offer flexible payment terms to buyers who are only considering ready flats.

The fact is, investing in an under-construction flat often makes a lot of sense. Apart from the cost savings and higher investment benefits, buyers of such flats are also at greater liberty to ask for certain design specifications such as improved Vaastu compliance and more customized internal layouts. Since the building is still at the developmental stage, the builder will be willing to incorporate certain changes in the original layout as long as they do not compromise the overall structural integrity or unreasonably increase his costs.

The new trend of 'group buying' also provides another advantage to those who are considering under construction properties. In this system, a group of serious buyers make a consolidated offer to the developer to buy a certain number of units in his project in one go at a discounted rate. This can result in considerable savings.

Of course, buying a property which is still under construction has certain elements of risk. For instance, there could be problems if the developer does not have a rock-solid reputation for completing his projects on time. Such builders may:

Not have the professionalism to obtain all necessary permits and clearances for the project before beginning construction

Not be financially sound enough to fund the project through to the point of completion

The best way to avoid such problems is to deal only with an established developer with a number of successful projects in the same city.

by Kishor Pate

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