A cousin of mine was trying to decide between the two for two years! He went to see a completed flat in Dwarka, fell in love with the flat and the location, but then saw a brochure of a newer project which was 15% cheaper. He was on the fence even 3 months later! Do you feel this scenario is familiar?
This is one of the most common dilemmas a Delhi buyer faces, and neither of the options is wrong. Let’s see how the two compare.
(These are approximate figures and rules, actual terms may vary. Please do your due diligence before finalizing any deal.)
The difference between the two terms:
A ready-to-move flat is a completed flat. You can step into it, open the taps and have it all ready in a few weeks. A resale flat also falls in this category.
An under-construction flat is a flat in building. You base your decision on the project completion date, the brochure and the layout. Possession is handed over in 1, 2, sometimes 4 years.
The difference in price
An under-construction flat usually is priced lower than a ready flat by 10-20 percent or sometimes even more if the two are similar. Builders also provide flexible payment options which ease the financial burden as you pay the amount according to the construction phase.
But there’s more to consider.
The GST consideration
On an under-construction flat anGST of around 5% is applicable for regular flats and 1% for affordable flat without any credit of tax paid on construction material. On a ready flat with occupancy certificate, no GST is applicable.
That means on a ₹1 crore flat, ₹5 lakh is extra which is a lot. The “cheaper” under-construction flat may not be cheaper after all. Always ask the builder for the cost breakup including everything, parking, club membership, maintenance deposit etc. The entire lot.
What you see is what you get
This is the most important consideration that makes ready flats way more attractive. You can see the construction quality and check for seepage, ventilation, view, (neighbors) and noise. You can stand on the balcony and enjoy the view. A park or a wall!
While in case of under-construction flats you’re seeing a picture that may or may not match reality. Sometimes the building looks exactly like the image, sometimes it does not. Sometimes the “green view” turns out to be a tower.
The delay consideration
This is one of the reasons why many Delhi-NCR buyers have lost a lot of money. Projects get stuck, and in the meantime you’re paying rent on the current flat and also the EMI on your new flat. It’s a huge burden.
But RERA has changed things. Now projects that are delayed can be penalized and buyers get some legal backing. However, a RERA number is no substitute for the builder’s track record. Please do your homework, see if possible an older project of this builder and talk to the residents. They will have much more to say than the builder.
The loan and tax considerations
For under-construction flats, the bank releases the loan in tranches (installments) as the flat construction reaches certain milestones. You pay only the interest on the portion of loan that has been disbursed. This is called the pre-EMI. Sounds good? Yes, but you are paying rent and the EMI at the same time. It’s not a cakewalk.
Under the old regime, the interest deduction rules are different for under-construction house. The interest paid before possession can be claimed in 5 equal instalments commencing from the year of possession, as per the stipulated limits. Under the new regime, most deductions aren’t available. The rules can be a bit convoluted. Consult a chartered accountant.
The flexibility and customization consideration:
Under-construction flats can win this segment. In an early project you have a choice of floor, direction and unit. Some builders allow renovation of the flat according to your choice. In a ready flat, you have to live with what is there and renovate later.
Also, a new flat has new wiring, new plumbing and modern fittings. A resale ready flat can be 10 years old and will require renovation earlier than you are expecting.
The appreciation potential consideration
The earlier you buy, the more chances of appreciation there are when the building is completed, assuming of course that a metro has come up nearby or a new road has been commissioned. But it’s a gamble. Prices can increase, stagnate or even dip. Don’t rely on appreciation to make the deal work.