Which house to buy, under-construction or ready-to-move?

Home buyers are always looking for the best deal they can find with the time and resources available with them. Real estate prices are now subdued more than ever and there's a good number of active buyers in the market.

Buying a home is the most exciting yet tedious task. While the excitement of owning your own house pushes you harder to expedite the process, the task of going through an enormous amount of details may be frustrating.

Going through the process is a must even though the process is tiring and quite demanding. Any negligence can cost you big in the future.

Let's take a look at a few options that home buyers have and how they can choose the one that suits them the best based on their requirements.

Buying an under-construction home

This is one of the most popular ways of buying a home. A builder announces a new housing complex through newspapers, TV, or other media. Agents start going around the market, companies, malls, as well as homes to spread a word about the same. The goal of the builder is to sell as many houses as possible before the housing complex is built. It is known for a fact that more than 75 per cent of flats built by known builders are booked even before a single brick is laid.

Pros

• Cheaper - Buying an under-construction home is cheaper compared with buying one that is already built. The cost difference here is significant. In Delhi and NCR, a ready to move flat with 2 bedrooms, costing about Rs 40-50 lakh, can be bought anywhere in the range of Rs 30 - 40 lakh while the same is under-construction, depending on the location though. On an average, this difference can be anywhere between 20 per cent and 40 per cent, which is quite a lot for most home buyers.
• Low EMIs - EMIs are paid as the work progresses. Therefore, initial EMIs are low in case of an under-construction home.
• Win-win situation for buyers and sellers - Buying an under-construction home is a win-win situation for both buyer and seller as the seller gets a ready set of customers even before laying the foundation while the buyer gets cost benefit.
• High returns - Since the price paid is less, you may get higher returns on going for an under-construction property. This kind of advantage is not possible in the case of a ready-to-move home. However, high returns come with high risks. For example, people who invested in Noida authority plots earned high returns while people who invested in Samshabaad in Hyderabad still waited for the prices to pick up.

Cons

• High risk - All is not so well in under-construction home buying though. There have been cases where builders could not complete the housing complex resulting in buyers losing their money. There have been many stories in the real estate sector with builders not being able to complete promised projects because of cash crunch, high interest rates, or high raw material costs.
• Market outlook may change over time - On the other hand, market outlook may also change like how it happened in Samshabaad, Hyderabad. Samshabaad was supposed to host the largest Infosys campus, a chip factory, a few engineering and medical colleges, banks and so on, but none of it happened due to the financial crisis of 2008.
• Sometimes you don't get what you are promised - This is another common complaint home buyers have. They usually do not get what is promised to them in the documents. What is distressing is the carpet area that buyers get once the home is constructed. The carpet area is usually 70 per cent of the super-built area. So, the illusory swimming pool shown to you may never come up!

A few important things to remember

Buyers should always check the history of the builder selected by them. If a builder has done great in the past, there is a good chance that he will be able to deliver the same. Hence, the track record of a builder is paramount.

Buyers should clarify loan tenure and how the money will be released to the builder.

Buying a ready-to-move home

A new trend is observed in home buying from the last couple of months. A number of home buyers are slowly heading towards ready-to-move homes than under-construction homes as going for the latter requires waiting for a couple of years' to get possession. The reason is not hard to guess.

Since the economic slowdown in 2008, there have been many cases where builders could not complete the promised housing projects and buyers had to wait helplessly.

Pros

• Immediately available - Investors do not have to wait to move to their new home as it is ready and all a buyer has to do is to make payment, sign necessary documents, and get their baggage transported to the new place.
• You get what you see - In a ready-to-move home, you get what you see. Since the housing complex is ready and there are people living there, getting feedback about the area, maintenance, locality, shopping centers, and utility centers become easy.

Cons

Well constructed? - The biggest negative that comes with a ready-to-move home is that you have no idea of how well it has been constructed- in terms of materials used, in terms of strength of its foundation and so on. Given a shabby maintenance, the house can start to look old in no time!

• Expensive - Also, the price of a ready-to-move home is about 25 per cent higher than that of an under-construction home.

Remember

Ready-to-move homes are generally more expensive but do not take this as it is. Do a thorough research. You can begin by speaking with a few people in the locality to get an idea of the desired property's fair value.

Group buying

From the last few months, many new companies have encouraged home buyers to form a group and increase their bargaining power. Once a group is fairly big, group buying companies negotiate with builders on their behalf and easily attract extra discounts. Essentially these companies act as mediators between builders and buyers. For builders, giving extra discounts is not a problem because they are saving big in advertisement and sales force.

Group buying empowers home buyers to negotiate better with the builder. Buyers can get better discounts in group buying than they can get individually. In group buying, an individual buyer doesn't make much difference and hence group interest takes priority over individual's choice.

A few points to remember

The buyer should study the documents carefully. Do not assume that someone else must be reading these documents.

Group buying takes time and hence you have to be patient about cracking a deal for yourself out of it. A group buying company has to build the group and negotiate the price with the builder for additional discounts. This is a long process.

Finally, what should you choose?

Your choice should depend upon your financial condition, timing, and your choice of location as location is the most important factor in real estate.

If you are ready to wait, can take medium to high risk, and do not care much for location, you can go for booking an under-construction home. You can even go for group booking if your requirement is to stay with people of your social standing.

If you cannot wait and cannot take high risks associated with under-construction homes and need to be near amenities of your choice, you may consider looking for a ready-to-move home or may even go for the group buying option.

Disclaimer: BankBazaar.com is an online loan marketplace. All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.