December 2016 | Back to all Real Estate Articles
Homebuyers are preferring to buy houses that are ready for possession, or very close to completion, as this option saves them from the dual burden of rentals on their current homes and EMI outgo on their booked flats.
Gone are the days when projects under construction particularly in metro and big cities used to be the first choice of homebuyers. These days, ready-for-possession or close-to-possession houses seem to be more in demand, not without reason.
Industry experts say that a majority of buyers, till some time ago, were opting for houses under construction, mostly those scheduled to be delivered 2-3 years down the line, for a variety of reasons.
First, flats under construction used to be at least 20-30% cheaper than ready-to-move-in houses, and, second, they had more potential for capital appreciation in the future. Today, with the builders' inability to give possession of flats on time, as well as uncertainties looming over a number of current projects, the dice is loaded in favour of ready-for-possession houses.
Project delays have become an industry norm these days, while in case of ready-to-move-in homes a quick and hassle-free possession is guaranteed. Such homes have also reduced the chances of fraudulent practices and are available at competitive rates."
"Moreover, developers are currently offering attractive deals, discounts and various freebies to the buyers on such houses. This explains why they are more in demand these days," Rahul Singla, director of MAPSKO Group, said.
Industry observers also say that while there is a possibility of last-minute changes in projects under construction, ready-for-possession flats do not have this drawback.
"The main reason for the surge in demand for ready-to-move in homes is that the 'uncertainty factor' is ruled out in their case. It means that there is no uncertainty in terms of waiting time for the project to get completed, project delay, price escalation, and unforeseen problems, among others, as seen in recent times. Also, everything remains crystal clear in front of buyers in terms of the exact price to be paid, existing amenities, location, accessibility, existing infrastructure, services available, etc. And the buyers go for such projects only after being completely satisfied,"
Parveen Jain, CMD of Tulip Infratech, said. The other reason is that a pile up of inventory has kept the prices of all types of property in check. "With absorption having been slow until this point and serious price rationalizing in all markets, even in ready-to-move projects or those almost complete, buyers have the distinct advantage of buying into such projects without having to break the bank. It is indeed a unique point in time for the Indian residential market," Santhosh Kumar, CEO (operations and international director) of JLL India, said.
The cost of rentals is another factor forcing buyers to opt for ready-for-possession homes. It is a fact that most people buy their homes by taking bank loans, and it becomes costly for them to keep paying EMIs as well as the rentals till the builders complete their project and possession is given to the buyers.
"The burden only increases if the project gets further delayed. Therefore, being able to move in right away or in the near future implies corresponding savings on rental costs as well as a much lower risk factor. This saves the buyer from the uncertainty of delays and the dual burden of paying the rent and EMIs at the same time," Gaurav Jain, MD and CEO of Jindal Realty Pvt Ltd, said.
Apart from ensuring corresponding savings on rental costs, ready-for-possession homes also have the potential of giving good rental returns. A JLL report says that a lot of investors buy houses with the objective of earning rental income or re-selling them for profit. Purchasing a property in a completed project helps them to start earning immediately out of it through rentals, rather than waiting a few years and locking their money away in a non-income generating project.
In the current scenario, "Ready-to-move-in homes seem to be the best bet for end users who can be benefitted by the possibility of quick possession at competitive rates. They hold good value even for investors, as the real estate scenario is bound to change drastically with the arrival of RERA," Sumit Berry, managing director of the BDI Group, said. On the flip side, however, apart from being a tad costly compared to flats under construction, ready-for-possession homes offer limited scope for capital appreciation and may be less profitable for investors as the incubation period is very less.
So far as projects under construction are concerned, it is true that they will always come cheaper, but the risk factor is higher and first-time buyers have to contend with rental costs until delivery.
Therefore, "If one is considering investment into a project under construction, it may make sense to wait until RERA is implemented on the ground. This can ensure that the risk of delayed delivery is reduced drastically," Kumar of JLL India says.