Home Buying Guide – Part 03: Ready-to-move-in House
If you are an end-user and need a home for immediate use and have sufficient funds then it makes sense to consider a ready-to-move-in house. Otherwise, under-construction properties are good options when the budget is an issue as they are cheaper and also give good returns on your investment. An under-construction house is usually the first choice of investors as they want returns on their investment but end-users opt for a ready-to-move-in unit.
Buying a house is always a big task as it requires a lot of thorough checks and comparisons and you need to explore all your options before making the final buying decision. However, your choice of buying a house mainly depends on your budget, requirement, preference, availability, and it’s possession date. Nowadays, the customers are very smart and look for safe option to park their money. So, they make thorough checks before making investment in the housing projects that are safe and profitable.
If you are planning to buy a ready-to-move-in house, here is Home Buying Guide-Ready-to-move-in House: Part-3 which helps you in making your buying decision easy and simple. So, let’s check pros and cons of ready-to-move-in house:
Advantages of buying a ready-to-move-in property
Get immediate possession: One of the major advantages of owning a ready-to-move-in flat is that you do not have to wait to move to the new home. With the project already completed, all a buyer has to do is to complete the procedure of buying a home and move in with the baggage.
With an under-construction property, there have been incessant delays in project deliveries in the last few years. Developers normally take 2-3 years to complete their projects. But in some cases, you might have to wait for a longer period of time before getting the possession of your house even after making all the required payments on time.
So, those buyers who are looking to buy a house but don’t want to wait and averse to any kind of risk prefer to buy ready units. Besides, the ready-to-move-in house ensures that you get an instant return on your investment.
Good availability: Recently, there has been a substantial jump in inventory in the housing market. This pile-up has made purchasing a possession–ready house a more viable option now. Possession-ready houses in good locations are now available at reasonable prices. Excess inventory has helped check prices. Jump in cost for properties after completion of construction is no longer visible these days owing to the excess build-up of inventory.
Immediate relief from rent plus interest: Many people who are paying very high rent tend to buy the ready-to-move-in houses because they want immediate relief from the high rent. A ready-to-move-in house allows the buyer to move in immediately. In this case, you either save rental if you move in or start earning a rental income if you let it out.
Most of the home buyers take home loans and they not only pay EMIs but also the rent on their current accommodation until the completion of the project. However, delay in completion of an under-construction project leads to buyers paying double expenses in terms of EMIs plus additional rentals until they get the possession of their property.
When you buy an under-construction house, it costs less, but going for it means you end up paying more in totality. Paying a little extra to acquire a house right away is cheaper than paying rentals over long periods. This also saves you from the uncertainty of delays and dual burden of paying the rent and the interest on the home loan. Moreover, many home buyers prefer to buy a ready-to-move-in home with the objective of earning rental income as it helps them to immediately start earning out of it.
You get what you see: The big advantage of ready-to-move-in houses is that you actually get what you see, which is not possible in the case of an under-construction unit. In many cases, the under-construction project design gets altered from what you see in the booklet.
In the case of a ready-to-move-in property, you can visit and see every aspect of it. You can also check in all the detail about it, including its quality of construction, parking space available, interiors and all other amenities available there before buying a house. However, you cannot do this with sample flats and project layouts on paper as shown by the builders. As the unit is ready for you to inspect before you finalize the purchase, there is no risk of discrepancies with the promised layout, features, and amenities, among other important things.
Neighborhood: Since the property is ready, you can visit and see the location, area surrounding the property, occupants of the area, and the community before buying it. You can see your neighbors in that apartment or society, their community and get a fair idea about the locality, nearby shopping and utilities centers etc. You can also get feedback from the residents about the area, maintenance, shopping centers, and utility centers and learn about the residence.
Infrastructure: The decision of purchasing a home also depend on the availability of necessary infrastructure. In the case of a ready-to-move-in house, you can see the connectivity of the location and availability of necessary infrastructure such as water connections, electricity, roads, transport facilities, hospitals, shopping centers and educational institutes etc.
Many new under-construction projects which are developed on the peripheries of major cities do get these basic infrastructure only after the projects are completed. This naturally keeps the home buyers waiting indefinitely for them to be provided and thus hampers them from moving into their new homes and start living with decent facilities.
No GST: The recently implemented Goods and Services Tax (GST) levies a 12 percent tax on the purchase of under-construction houses. The developer will be bearing the burden of GST, which will certainly pass on to the buyers. However, the ready-to-move-in homes are left out of the ambit of GST. So, the implementation of GST has resulted in the reduced tax burden on buyers of the ready-to-move-in homes. There is no need to pay GST if you are investing in ready-to-move-in homes.
Tax benefits: Most home buyers avail of home loans for the purpose of purchasing homes. A home loan taken for the ready-to-move-in house gives you a plenty of tax benefits as you can avail tax exemption on it as well as capital gains.
According to the Income Tax Act , the home buyers are entitled to claim a deduction from their income of up to Rs.1.5 lac on the principal repayment under section 80C in the loan taken for the completed houses. Besides, they are also entitled to get an additional tax deduction of up to Rs. 2 lac per year on the interest paid for the home loan under section 24 B.
There is a huge capital tax gain in ready-to-move-in houses. Income tax rules allow tax exemption on capital gains under the sale of property held for more than 2-3 years only if the amount is reinvested in property within two years. However, if the possession of the house is delayed further, you will end up paying a high amount as capital gain tax. This is not the case when it comes to ready-to-move-in homes.
Disadvantages of buying a ready-to-move-in homes
Relatively Expensive: Ready-to-move-in homes are relatively more expensive than under-construction units. In some cases, they may cost you 25-40 percent more than that of an under-construction apartment. You will pay higher prices for these houses depending on the locality and market conditions. These houses are costlier as compared to the under-construction homes as they provide the basic, social and physical infrastructure since the area is already developed.
No flexible payment plans: If you go for a ready-to-move-in flat, you lose out on the option of attractive payment schemes unlike in an under-construction home. Ready-to-move-in apartments do not offer many flexible payments schemes and you need to make the payment upfront at one go, including down payment, registration charges, stamp duty, etc. This results in buyers of ready-to-move-in property start paying EMIs on their home loan immediately.
Few choice of locality and floor: In ready-to-move-in flats, the choice of properties is limited due to lesser availability of the units as compared to under-construction projects. You don’t have many choices in ready-to-move-in properties with regards to floor preference, view, and locality, wherein under-construction property, you get an array of options to choose from.
Low premium: The price appreciation in case of ready-to-move-in properties is generally lower than under-construction properties. Therefore, scope for capital appreciation is low in this case since the development around it has already taken place.
Low valuation of the property: In certain cases of home loan where a buyer has applied for it, the loan may be sanctioned for the amount to which bank agrees to if the market cost of the property as per bank differs.
In fact, you should choose between a ready-to-move-in house or under-construction house depending upon your budget and requirement. Nowadays, many home buyers prefer ready-to-move-in homes than under-construction units, due to delay in completion of housing projects and subsequently getting late possession of the house. Therefore, home buyers are willing to pay more for the completed projects as project delays lead to the additional financial burden.
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.