A dilemma every buyer has at the initial stage of planning to buy a home is whether they should opt for a ready-to-move-in or an under-construction project. Even though Each has its own set of pros and cons, the decision ultimately depends on the individual’s needs, requirements, preferences and feasibility. However, there are certain factors to focus on before making the final decision.
Before dwelling on all that, let’s clearly distinguish the difference between the two types (as if the titles aren’t revealing enough). A plot with an approved building plan gains the title of ‘under-construction’ but is not limited to that but expands to 25%, 50% done buildings aligning to various stages of construction and development such as not started, just started, ongoing whereas a ready-to-move-in home is missing only your furniture and appliances which in case of premium ready to move-in homes are partially done as well.
Now, coming to the factors that majorly distinguish the two types are
It should come as no shock that real estate is all about money. Speaking of which, you can notice a 10-30% higher cost for ready-to-move-in homes when compared to under-construction homes, given that all other variables remain the same.
Also, with ready-to-move-in homes, there is not much flexibility offered to spread out your payments as the construction is complete. But under-construction projects allow you to lay out your payments aligning with the stages of completion, allowing you time to plan your finances. Therefore, people who can’t opt for entire payments at once or need time to plan their money tend to take the under-construction route.
You buy real estate as an asset or an investment. And the requirements for these two might radically differ. Hence, parties looking for a place to live incline towards ready-to-move-in homes and under-construction projects lure in people who see it as a fruitful investment opportunity like buying an under-construction home at a relatively lesser cost and turning it up into a ready-to-move-in home to sell it at a much higher cost. Ready-to-move-in can also be seen as an investment if it is going to be utilized as a rental property by the owner, in which case you get immediate returns.
While under-construction projects require a lot of time and patience, ready-to-move-in homes are just missing your furniture to make it your own. Again, this is a very personal choice of the buyer. The buyer who has the money but not the time will inadvertently go for the ready-to-move-in homes because in an under-construction project, the average time to possession takes between 1 and 3 years. These projects also tend to face a lot of delays due to multiple unforeseen circumstances that can be as drastic as the builder never completing the project.
The majority of buyers acquire loans for homes, and in the case of under-construction projects, they will be heavily burdened with both EMI and rent simultaneously, resulting in a heavy financial strain. Therefore, the buyers instead opt for ready-to-move-in homes to eliminate rent. In this fast-moving world where the buyers are more millennials and zillenials hailing from the IT and the corporate sector, slightly lean towards the attractive ‘instant’ factor of the ready-to-move-in homes.
A very tricky factor when buying real estate. With under-construction projects, the major challenge buyers usually face with quality is the discrepancies between what was guaranteed vs what is delivered. And, in ready-to-move-in homes, the buyers cannot be aware of the property’s age or condition and often deal with problems like seepage after moving in. Also, buildings constructed before May 2016 do not come under the RERA act* enabling more such issues and problems in the future. Under-construction projects give you the time to inspect it thoroughly before moving in and have to strongly comply with the RERA act* thus providing access to the building’s information and assuring the builder’s accountability.
With ready-to-move-in homes, you get what you see in terms of not just your homes but your neighbours and other elements that impact your lifestyle. On the other hand, under-construction projects can be a bundle of surprises, with projects falling through or not meeting your promised expectations because of the builder’s inadequacy, resulting in the loss of time, energy, and money. In the case of under-construction homes, you need to research and check the quality of the builders thoroughly to avoid any unwanted surprises in the end.
Tax & Documentation
Ready-to-move-in homes require plenty of documentation that includes but is not limited to title change compared to under-construction projects. But on the brighter side of ready-to-move-in, they have a lot of tax benefits such as 1-5% GST exemption, which is applicable for under-construction homes. You also save an additional 1.50 lakhs as per section 80C of the Income Tax Act deducted from the home loan‘s principal amount, applicable only for finished ready-to-move-in homes. Further, if you are a first-time homeowner, you can also claim an interest deduction of up to 2,00,000 (for a self-occupied property) or entirely (for a let-out property) under section 24(b) of the IT Act. This deduction is applicable for both ready-to-move-in and under-construction homes. But in the case of under-construction homes, the entire construction should be completed within 5 years from the day of the loan, and the amount shall be paid only in 5 installments. Additional deductions can be claimed by first-time buyers under the 80EE Income Tax Act where a maximum of 50,000 can be deducted during a financial year.
If you are someone who has built their dream home all their childhood and adulthood and have specific details and ideas to add to it and also have a very distinctive aesthetics and taste, sorry to burst your bubble but ready-to-move-in may not be your cup of tea as everything is all set the opportunities to customize or personalize things are extremely slim. But you can make all your dreams come true with an under-construction project and pick the exact details you want to add to your home to make it your own. But if you are a type 2 person who struggles with decision-making, is impatient, and wants everything to be complete for you to move in, well, you guessed it right; ready-to-move-in should be your pick.
As told in the beginning, both have their pros and cons, and your choice will vary based on your needs and preferences. To make your decision a little easier, try answering these questions!
- Do I have the means to make a single payment or do I want to spread it?
- Do I need to move in as soon as possible or take some time to customize it and make it my own?
- Do I want to focus more on the lifestyle quality or the building quality?
- Do I want to live in the house or resale it?
- Do I want the tax benefits or have lesser documentation?
- The responses will help you understand where your mind and heart are at!
*The objective of The Real Estate Regulation and Development Act or the RERA Act 2016 is to encourage financial discipline, builder-buyer transparency, citizen centricity, and builder accountability to reform the real estate sector in India and protect the interest of consumers