Home / Money / Personal-finance /  8 reasons why you should buy a ready-to-move-in house

There is no dearth of supply in the residential real estate market across India, both in the ready-to-move-in and under-construction categories, thanks to low sales in the last few years. According to a report by LiasesForas, a Mumbai-based real estate rating and research firm, at the end of first quarter of financial year 2018-19, there were 945,964 unsold units in 8 tier-I cities including Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan region (MMR), National Capital region (NCR) and Pune. Moreover, considering the sales volume during the quarter, it will take 41 months to clear these inventories, said the report.

If you are looking to buy a property now, you would get plenty of options. But there is merit in choosing a ready-to-move-in property. We list eight of the benefits.

When you buy a ready-to-move-in house, the biggest risk that you eliminate is project delay. You are not required to wait for the completion of the apartment and other amenities in the project.

While the Real Estate (Regulation and Development) Act (RERA), 2016 has been implemented and developers are expected to adhere to timelines, most developers have listed a deadline of 5-6 years from now on the website for their projects. Typically, the deadline that developers gave earlier was for three years.

In other words, most developers have already made provision for project delay. Any penalty or compensation under RERA will get implemented only when the developer does not meet the mentioned deadlines.

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Uncertainty about space, size of rooms, view from the apartment, and quality of construction, available amenities and fixtures can be eliminated when you buy a ready to-move-in apartment. “It is important to consider the quality of the project; a ready-to-move in project allows one to closely inspect the structure and quality of finish," said Anshul Jain, country head and managing director, Cushman & Wakefield India.

While buying an under-construction property, you make a decision based on sample flats, which may be misleading.

“The major benefit (of buying a completed apartment) is that buyers are completely aware and know exactly what they are buying while inspecting the apartment. The decision of purchasing a ready-to-move-in property is not based on what is shown in a sample flat or on mere layouts," said Ramesh Nair, chief executive officer and country head, JLL India.

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It is essential to know your neighbourhood and the available infrastructure around the area such as nearby markets, common public areas and parks, connectivity issues, among others. “A building offering amenities, security, a good neighbourhood and social infrastructure in the vicinity tends to work better for buyers," said Nair.

You can start living in a ready-to-move-in house as soon as you buy it. “For those with an immediate requirement who are unable to afford both rent and EMIs, a ready-to-move-in home works well," said Jain.

Even those who can delay moving to their own house by a few months or years can never be sure about the timeline as the possession will be dependent on whether the developer is able to execute the project on time—or worse—at all. For instance, homebuyers in projects of Jaypee Group, Unitech Group and Amrapali Group, builders that are facing insolvency proceedings, have been left in the lurch.

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If you do not want to move into the house your are buying and are planning to buy it for investment purposes, you can start earning rentals as soon as you buy a ready-to-move-in property.

Rentals can help you pay some part of the EMI if you have taken a loan and enhance your returns. “It is also advisable to study the pricing and rental yield trends in the location and check for any upcoming infrastructure in the vicinity to gauge possible capital appreciation in the future," said Nair.

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Goods and services tax (GST) of 12% is applicable on an under-construction property. It is charged over and above the property value. So if you are buying an under-construction property valuing 60 lakh, you will have to pay 7.2 lakh as GST.

“Currently, no GST is applicable (on ready-to-move-in property) which reduces the overall financial outflow," said Jain.

According to the Income tax Act, 1961, a borrower can claim deduction under Section 80C against principal repayment of a home loan, which has an overall limit of 1.5 lakh and up to 2 lakh for payment of interest under Section 24(b) for a self-acquired house.

However, there is a catch; these tax benefits can only be claimed after the construction of the property is complete and you get the registration and ownership documents. So, no possession means no tax benefit against home loan repayment.

You are allowed to claim deduction on the interest paid on a home loan during the construction phase in five equal instalments post possession. But if the construction gets delayed and takes more than five years, the maximum deduction allowed on interest payment reduces to 30,000 instead of 2 lakh per annum. Moreover, the principal amount repaid during construction is not allowed for deduction at all.

It is difficult to sell an under-construction property, especially if its delivery is delayed or it’s locked in a legal battle. In many cases, developers do not allow the transfer of apartments until the project is complete. Even if they do, you may have to pay hefty transfer charges in the range of 200-500 per sq.ft or more, which can dent your gain.

Though there are benefits of buying a ready-to-move-in apartment, “they (home buyers) might have to shell out a little more on such purchases compared to under-construction ones," said Jain. However, whether you buy an under-construction or ready-to-move-in property, be sure to do your due diligence regarding the quality of construction, location and surrounding infrastructure.

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