Many home-seekers are skeptical about buying under-construction flats as the transaction comes with an element of uncertainty. Ready-for-possession apartments, which do not pose such problems, always command premium. However, carrying out the requisite due diligence and taking some precautions could help you land in an attractive deal, mainly in terms of the discount in price and certain other benefits.
For those buying a property from an investment perspective, an under-construction flat could offer good returns. Such investors can consider investing their money in a project when it has just been launched. Many developers offer to take the soft launch route-where the project details are circulated among a select few prospective buyers, with a discount on offer-before making a public announcement.
The investor can sell the apartment to a third party and benefit from the appreciation. The only point to bear in mind in such transactions is that they are done on the basis of the allotment letter alone the agreement is not registered and the stamp duty is not paid. However, it is a perfectly legal transaction.
The other advantage of buying an under-construction property is, obviously, the discounted price per sqft. The price of the property increases in line with the stage of completion. If a developer has launched a project before excavation, the discount could be in the region of 25%. It could shrink to 20% once which the construction is completed.
Pre-construction phase is defined as the period starting from the date of borrowing and ending on March 31 immediately preceding the year in which construction is completed. For instance, if you have taken a loan in June 2008 and the construction is completed in May 2010, the period from June 2008 to March 31,2010 will be deemed to be the pre-construction period.
Now, let's assume the total loan amount is Rs. 40lakh, borrowed at the rate of 10% per annum. If the total interest payable for the pre- period is Rs. 5lakh, 20% of the amount - Rs. 1lakh can be added to the interest component of each of the five years, starting from the year in which the construction is completed.If your house is self-occupied, the deduction on interest payable would be restricted to Rs.1,50,000 per financial year.
Also, it needs to be noted that deduction of repayment of principal amount can be claimed under section 80C only from the financial year in which construction is completed. While taking the decision on the purchase of under construction flat, keep in mind the developments likely to take place in and around the area, in terms of infrastructure projects as well as other amenities like malls, schools and healthcare facilities expected to come up in and around the area. Most important is to verify the track record, previous performance of the promoter before entering into the agreement.
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