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Do the monetary benefits of buying an under-construction property outweigh the risks? We take a look at the pros and cons you should be aware of before investing
While it is true that under-construction properties are cheaper than comparable finished homes, the difference in price is less than it was, say, 10 years ago.
The main reason for this is the huge increase in demand, but it certainly isn’t the only one. Starting in April last year, the government imposed a service tax of 10.3% on under-construction properties, greatly reducing the incentive to buy one. While the tax is calculated on only a third of the selling price, this is still a substantial amount (see ‘Service tax’, p38).
Champalal Jogani, a Mumbai-based realtor, says, ‘With demand soaring, getting a no-strings-attached discount from a developer is becoming increasingly difficult. It is possible, but most often, it’s only the smaller developers that will be willing to do so. Bigger players may also offer discounts, but with conditions attached – for example, they may ask you for a larger down-payment, or give you a poorly-located flat.’
However, the huge demand for property means that there is good incentive to buy early and wait out the construction period (especially if you’re planning to buy it as an investment), as realtors agree that property prices generally appreciate once the project is completed.
So what are the downsides of buying an unfinished property, and how can you minimise these?
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