In India, it is an age-old question: What is preferable, ready-to-move-in (RTM) homes or under-construction properties? As is the case with most things in life, both have advantages and disadvantages. Nowadays, many homebuyers prefer to buy RTM flats in Pune and other major cities, mainly because they worry about whether under-construction projects will get completed.
One of the main reasons RERA (Real Estate Regulatory Authority) was enacted in 2016 was to protect homebuyers who have bought under-construction homes. In cities like Delhi-NCR and some parts of Mumbai, thousands of buyers had not got possession of their homes even after several years. Today, all developers have to register their projects with the state’s respective RERA authority, committing to completing projects on time and per specifications.
Among all the States, one can say that Maharashtra’s MahaRERA has been the leader in protecting homebuyers. According to a leading real estate consultancy, MahaRERA has consistently seen the highest number of projects and broker registrations.
This means that buying under-construction homes is now completely safe and protected by law. Still, many homebuyers choose RTM homes even though this is a loss in many ways.
Bitter past
Though MahaRERA now gives them complete protection in Maharashtra, many buyers in Pune and Mumbai still remember earlier reports about delayed and stuck projects.
This cannot happen anymore, but they still feel safer buying homes that are already completed. In marketing, this is called WYSIWYG — what you see is what you get.
But apart from being able to move into their new homes immediately, these buyers are giving up the many essential advantages of under-construction flats.
Added costs
RTM homes involve a hefty ‘convenience premium’ and are any day much costlier than expected. Also, there are always more properties under construction than ready-to-move-in supply, so buyers of RTM homes have a much smaller number of flats from which to choose.
The price for RTM homes is also higher in other ways. Purchasing it involves a substantial up-front payment, where the personal contribution towards an under-construction home is significantly lower. Also, when you buy a ready property, the home loan’s equated monthly instalments (EMIs) begin right away.
These negatives can seriously challenge the financial capacity of young homebuyers. Most people who buy RTM flats are either 45+ years of age, and already well ahead in their careers with better purchasing power, or couples with double income. Under-construction homes are ideal for young people with more constrained budgets who want to own a home.
Price appreciation
Yet another way buyers of RTM flats lose out is appreciation. One of the primary purposes of investing in residential real estate is price appreciation. In an under-construction house, the buyer can afford to strike the deal at a lower price.
Ready properties have the highest prices, so as the project nears completion, the value of an under-construction home goes up by 15-20% or more. Forfeiting this appreciation benefit is a significant loss for homebuyers.
As long as one is buying from a reputed developer with an excellent track record, under-construction properties are not just safe but by far the most logical and beneficial option.
The writer is Managing Director, Pharande Spaces.
