A property under construction is usually cheaper than a property which is ready for possession. But there is associated risk of delays and quality of construction with the property under construction. Since investing in a property is a long term financial commitment, one should be very well aware of the risks associated with an under construction property. Also, the investor should be aware of some of the tips to mitigate some of that risk.
First of all, we would recommend investing in a under construction property of a reputed builder. Check the track record of the developer. Go and visit some of the previous buildings that he had developed and ask few residents on the reputation of the builder. If the builder is not known, it is better to go for a ready property as you then know what you are getting into.
Secondly, we would recommend going for a construction linked plan rather than a down payment plan. Many investors get lured by the fact that the builder is offering 10% discount for a down payment. The investor takes that 10% advantage from the builder but eventually pays that amount to the bank as home loan interest. There may still be a couple of percentage profit but not worth considering the risk of delays or project cancellation. In any case, unfortunately, delay of 6 months to 1 year is the norm in Indian real estate. So, be prepared financially and mentally for this.
Lastly, make sure you get all the paperwork in order so you are prepared in case of any contention later on. Check the following:
- Approved building plans from the Municipal Corporation or Town Planning Authority.
- Commencement certificate for the work.
- Clear Titles.
- All permissions and permits in written records.
- Allotment letter and development agreement.
- Completion and Occupation Certificate.
- Construction in progress with a minimum two slabs completed.
- Work in full swing and no sign of stagnation.
- Property not under litigation or dispute.
- Property not a heritage property.
- Suitability of the area with respect to roads, safety, security, public transportation, hospital, school, shopping and future scope for development.
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