Under Construction vs Ready to Move in Properties: Know What Works For You

"Am I looking to buy an under-construction property or a ready-to-move-in flat?"

This is one of the first questions prospective home buyers ask themselves. Like most home-buying decisions, there is no one-size-fits-all solution to this question.

However, these are some of the factors that you should consider in order to make an informed decision that best suits your needs.

The right decision for you and your family is the one that brings joy, comfort, and financial growth.

• Possession and occupation - If you are looking for a property you can take possession of immediately and occupy, a ready-to-move-in flat or apartment fits the bill perfectly. An under-construction property may take 2-5 years to be delivered, depending on the stage of construction. This also means that a ready-to-move-in apartment offers immediate relief from rent or lease on the flat you are currently occupying. At the same time, in an under-construction property, you may have to continue paying rent on your residence till your property is ready for occupation.

• Cost considerations – One of the greatest advantages of opting for an under-construction property vis-à-vis a ready-to-move-in apartment is an appreciation in cost during construction. If you have chosen an upcoming neighbourhood and a reliable developer, the property value in the neighbourhood and, more specifically, your flat or apartment may appreciate even by the time you take possession. In most cases, ready-to-move-in properties can cost up to 25-30% more than under-construction properties. This difference can be considerable if you are looking to buy luxury flats in Andheri or similar neighbourhoods. Developers are also more inclined to offer discounts and waivers during the construction process as a sale at this point helps maintain their liquidity.

• Payment options - Booking an under-construction property allows you the flexibility of paying in stages as the construction process evolves. If you have opted for a flexible home loan, this could decrease the interest burden during the early years, when you receive only the amount needed from the bank. Buying a ready-to-move-in property requires complete payment before registration, which means seeking complete disbursement of the home loan. Your principal and interest repayment starts immediately and is not variable, as in the case of flexi loans.

• Tax implications - Under-construction properties attract a GST of 5% on the total cost. For affordable housing projects, the GST is pegged at 1%. On the other hand, ready-to-move-in flats do not attract any additional tax at the time of purchase. In the case of home loan tax benefits, buying a ready-to-move property can make you eligible for tax relief under sections 80 C and 24 of the IT Act as soon as the purchase is complete. For under-construction projects, however, you may avail of a tax deduction on the principal repayment under Section 80C, but the deduction of tax paid on interest repayment under Section 24 can be claimed only after the construction is complete. The interest paid during the construction period can be claimed in 5 equal installments after the construction, along with interest paid in the post-construction period, subject to a maximum threshold of INR 2 lakhs.

• Risk appetite - When you buy a ready-to-move-in flat, you can inspect the property for dimensions and amenities before purchasing. In the case of under-construction projects, there may be some discrepancies in how the project ultimately turns out. With the implementation of RERA, the risk of excessive delays and escalating costs is low, and buyers' interests are more secure than ever before.

• Customisation and other factors – One of the main advantages of buying an under-construction flat is being able to negotiate the room dimensions and customised designs with the developer. This is not possible in a ready flat, more so in an apartment which may have been completed but not sold for a few years.

Homebuying is a complex process that requires making a number of decisions. Ready-to-move-in apartment or under-construction flat? Should you opt for a flat in Andheri or Goregaon? Should you buy into a gated community or a standalone building? Should you pick a ready-made or modular interior or find personalised services? Should you occupy or rent the property? Doing some research and considering the long-term benefits are the best ways to get you through this perplexing maze of choices.