Are serious buyers in realty market keen on ready to occupy flats or are they OK with projects where they have to wait for months or years to get their dream homes?
"Generally , end users hoping to buy their first house look for ready-to-occupy apartments, as this will save them from the rental payments of their current accommodation. However , from an investor's point of view, ready-to-occupy flats would fetch lower returns on investment vis-a-vis flats under construction, even though there are far lesser risks associated with the first option," says Samir Jasuja, the Chief Executive Officer of PropEquity.
"On the other hand, there are several risks associated with a new project that is under construction like delays , price escalations, variance from the planned layout, etc. But these risks come with higher probability of returns on their investments, and in several cases investors or second-home buyers look for properties under construction for higher returns," Jasuja says.
Devinder Gupta of DGS Realtors says that unlike in the past, the current crop of customers is very smart and they ensure that their investments are safe and productive. Thus, they make thorough checks on the realty firms before taking the final call. They even inspect past projects of builders. While they prefer ready-to-occupy houses, they may settle even for those projects where work is on, if they are satisfied about the antecedents of the builder and the promised quality and amenities of the project, Gupta says.
A realty-broking firm says they get most of the inquiries from those keen to move into ready-to-occupy flats. "We have noticed that a majority of the potential customers are locals, which underlines the changing mindset in the NCR to reside in flats which was a no-go area in the past," an officer of the firm says.
Ravi Saund, the Chief Operating Officer of CHD Developers Ltd, however , says that the demand for property under construction is far higher than that for ready-to-occupy apartments. Depending on the stage of construction and also the response that a project has elicited from other buyers and investors, the rates can be lower by as much as 15-30%.
The ready-to-occupy apartments are exorbitantly priced, taking into consideration the budgets of the average middle-class segment - and this is the segment which continues to be Indian real estate's primary driver. The middle-class segment of the emerging market cities is burgeoning. If figures talk, approximately 460 million people in the emerging market cities will enter the middle class between 2012 and 2015. It's a buoyant situation.
The buyer has more choices and can opt for construction-linked plan, which has a gestation period of 2-3 years. Today, developers are offering subvention schemes where the buyer enjoys a pre-EMI holiday. This scheme is beneficial for customers who stay on rent. They pay rent and no EMI and later EMI and no rent.
"I feel that the buyer in a property under construction can comfortably make some minor alterations to the interiors. Therefore, it can make a lot of sense to invest in a property under construction by a credible and reputed developer," says Sanjay Khanna, the Director of Kailash Nath Projects Pvt Ltd.
Sunil Jindal, the Chief Executive Officer of SVP Group, however, says: "I can tell you from my own experience that more often than not, customers invest in properties where they find some kind of activity. If they see that work is on, then they invest. I have observed this tendency among customers in many of our projects. Selling flats, floors or a plot on barren land is not at all easy. Selling a dream is not possible nowadays, as the media keeps exposing realty firms that corner huge sums from people by promising the moon."
Anuj Goel, the Executive Director of KDP Infrastructure Ltd, also believes that customers prefer ready-to-occupy flats. Goel says: "If it is an investor , the flat yields an immediate income of rent from the new flat. If it is an end user, he does not have to pay rent as he gets immediate possession of the new flat and only pays EMI on his loan. Further, investors and end users see a developed and completed project without any confusion on the final outcome of the project."
Housing sector watchers say that construction activity is always unpredictable as the schedule always gets adversely affected because of scarcity of labourers, raw materials and government procedural delays, which a builder has to suffer all through the construction period. Once a building is complete, it is time for the customers to enjoy. Thus there is a perceived additional value for a customer to invest in ready-to-occupy flats.
Harinder Dhillon, the Vice-President of Raheja Developers Ltd, says: "The primary market for new launches is extremely vibrant at the moment and transaction volumes are significant . Projects under construction are generating as good a response, if not better, than ready-to-occupy apartments."
So, the real question is what is the purpose of purchasing a property? "If it is for investment then property under construction is generally preferred, first-home or self-use buyers go for ready-to-occupy flats," Sanjay Khanna says.
Source - The Economic Times, April, 2012
Last changed: Apr 27 2012 at 10:04 AM