Which House to Buy: Under-Construction or Ready-to-move in?

Mar 07, 2017

So you want to buy your first house? But don't know whether to go in for a ready-to-move-in or for one that is under-construction. Let's evaluate both the choices in detail here.

If you are looking to buy a property for personal use and need to move in on an immediate basis, then you don't have much of an option. You need to go in for a ready-to-move in property.

The best part about these properties is that there are no uncertainty of construction delays and you don't need to pay rent (for existing house) and housing loan EMIs (for under-construction one) simultaneously. The construction of the building is complete and builders tend to quote higher price compare to price during under-construction stage. Also, there is no benefit of any flexibility in payment. All the payment has to be made upfront,home loanor not.

Now compared to above, buying an under-construction property is cheaper - at times by upto 40%. Since payments are generally linked to construction, there is no need to pay all the money upfront. Buyers can pay in tranches as and when the construction milestones are achieved. Also, going for under-construction projects allow you to buy a property that gives better value for your existing home loan eligibility.

For people who are not in a hurry to move in or for those who are investing in real estate as an investment, going for an under-construction property makes a lot of sense. The potential for decent price appreciation is higher in these properties. But that doesn't mean that there are no risks here. Project delays can create problems if you are basing all your home settlement decisions on delivery dates committed by the developer. There have been stories of construction being abandoned due to legal problems. That is one very big risk and this is the reason why one should verify the whereabouts and credentials of developer as well as all permits.

On the tax front, the home loan deduction benefits are only available once the buyer gets possession of the property.

Now there is no formula to decide which type of property is better for whom. But most people end up buying an under construction house when there is no urgency to move in or they are making an investment. For others who need to move in quickly or don't want to take the risks associated with under construction properties, going for a ready to move in houses makes a lot more sense. But at the end of the day, final decision will be more about individual needs and not broad generalizations.