Under-construction real estate now attractive. 9 things home buyers should check

Under-construction flats cost you much less than ready ones, but they are also riskier and more complicated.

 

 

Checklist for buyers
Since under-construction flats are more complicated and riskier, here’s a checklist for buyers. Use this to know if you are doing the right thing by booking in a new project.


Is project RERA registered?
Go only for projects registered with RERA, because it is the first stamp of approval. RERA approves a project only if it has all approvals (from municipal corporation, electricity and water department) in place. However, these approvals are only for starting construction.
Are all details available?

Another advantage of a RERA registered project is that all relevant information will be available on the RERA website. Since housing is a state subject, implementation quality of RERA varies across states. Maharashtra has implemented RERA in letter and spirit, but many other states have not. In many cases, the data on the RERA website is not updated because builders are not urnishing details. “It is better to avoid projects if full data is not available on the RERA website,” says Abhinav Joshi, Head of Research, CBRE India.

 

Is builder financially strong?
Don’t be under the impression that the house will be delivered smoothly just because it is a RERA registered project. As mentioned earlier, RERA approval is only to start a project. The builder must be financially sound too. “In addition to checking financial situation of the situation of the builder, buyers should also check about other ongoing projects,” says Prasad. “Completed projects give an idea about the track record of the builder. Check whether they have delivered other projects on time,” says Joshi. Avoid builders that got into trouble with other projects. “Also, avoid builders embroiled in NCLT cases, if their borrowing is high and if there are a large number of consumer complaints,” says Kapoor.

 

Have you seen the locality?

Facilities available inside the projects (swimming pool, gym, etc) are mentioned by builders. However, buyers must do their own legwork. “Visit the site to make sure that the physical infrastructure matches your need. Don’t just sign in the agreement after visiting the builder’s office,” says Joshi. In addition to this, buyers must also see the social infrastructure surrounding the project. Irrespective of whether you buy the property for self-use or investment, find out about upcoming projects and hospitals, malls, educational institutes and entertainment options in the vicinity.

 

Is the timeline reasonable?
The approved completion date is mentioned on the RERA website. RERA imposes a stiff penalty for violating the deadline. To be on the safe side, many builders give a very long completion deadline and tell buyers that the project will be completed ahead of the deadline. Don’t take this bait. Go only by the deadlines given on the RERA website. “If you don’t find the official timeline feasible, don’t go for that deal. The long duration timelines given by builders is one reason why people are going for ready possession apartments now,” says Baijal.

 

Have you seen any progress?
Buyers also need to check the progress on the project before buying. “Check the construction speed of the project for 2-3 months before committing,” says Das. You can do this by asking the builder about the progress plan for the next few months and then check whether they have met the timeline. This should not be for one flat alone, but for the entire complex.

 

Is the price reasonable?
Make sure that the price you pay in the area is reasonable. Only a few metrics are available here. The most commonly used ones are the rental yield and EMI to rent ratio. “The rental yield is down now, but the price can be treated as reasonable if rental yield is around 3.5%,” says Kapoor. Similarly, the EMI to rent ratio is placed above four times (EMI is more than four times the rent in same place) compared to its value close to two during 2002-4 when the market was roaring. An EMI to rent ratio of close to two may not happen in the near future but it makes sense to insist that it should be close to three.

 

Have you asked for discounts?
The above-mentioned ratios (rental yield and EMI to rent ratio) are to check whether the rates are reasonable for ready possession flats in an area. It is reasonable to expect a discount because you are taking higher risk when buying an under-construction flat. “We are in a buyer’s market now and developers are ready to sell unsold inventory at a discount. So, bargain hard for a good deal,” says Das. Though it is difficult to fix how much should be this discount, experts advise you expect around 10% from leading developers and around 20% from middle level developers. This discount range is for projects that are nearing completion (more than 75% work has been completed). You can get a higher discount if the project has a lower completion rate.

 

Is your adviser independent?
Since the investment involved is very high (homes in some cities can cost upwards of Rs 1 crore), it always better to engage an independent property adviser and a legal expert. “In addition to checking documents with a good lawyer, it also makes sense to check the structure of the project with the help of a structural engineer,” says Das.

 

Do you see the future plans?
“Irrespective of whether you are going to buy the property for self-use or for investment, you should look out for future developments coming up in your area because that will increase your property’s prospects,” says Thakkur. These future developments may be a metro connection, a new airport or an upcoming IT park or shopping mall. Builders may highlight all the positive future development plans, but what about the negative ones like a land fill near the location. “To get a full picture about future development plans, home buyers should check with development authorities like DDA in Delhi,” says Joshi.

 

Source: https://economictimes.indiatimes.com/

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