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Is It Safe to Invest in Prelaunch Projects in Hyderabad
Before you plant to invest in pre-launch projects, read this article completely. It helps you take the right decision based on your risk profile.
High Risk. High Profit is the investment strategy everyone should consider before start investing. Same thing applies to pre-launch projects also.
What is Pre-launch projects:
Developers and builders sometimes announce projects in the name of pre-launch. By buying these, you can get a flat at a low price. These prelaunch projects are offered to buyers at low cost as an investor, before they get the required approvals from the government like RERA, and HMDA approvals.
So many people try to buy as they can get it up to 50% discount. But are investments in such pre-launch projects worth it?
What is the benefit? What are the problems?
Builders announce these pre-launch projects before construction begins. However, the necessary permissions and approvals are not taken before the project is announced for the start of construction. Projects are pre-announced only to raise funds.
Sales and bookings at this stage are called pre-launch transactions. Builders choose this route to raise the capital required for the construction of the project without interest. Buyers also tend to buy with the intention of getting less.
The price of the plot at the time of completion of construction may vary by 30-50% from the pre-launch price.
Can you invest in pre-launch projects in Hyderabad?
Such pre-launch projects have both pros and cons. We invest our hard-earned money over the years with the aim of fulfilling our dream of owning a home.
You can consider investing in pre-launch projects based on your risk profiles. If something goes wrong, all these years of hard work will be wasted. So, buyers should decide knowing full details.
Let us first know the pros and cons of pre-launch projects.
Benefits of investing in pre-launch projects
Low Cost:
Builders need more funds at the initial stage of the project. For this, real estate developers try to raise money by selling flats before taking loans from banks.
Part of this is to attract buyers.. good deals are coming at low prices. Those who are planning to buy a dream home can book a flat in such projects.
More Choice:
If the Flat/House is purchased at the initial stage there are more changes of getting desired floor, flat and facing and view without extra charges.
Smart Investment:
Buying a property in the pre-launch stage can give you a better return on investment. Chances of getting a property at a lower price are higher before the building is constructed, i.e. in the pre-launch phase.
From the beginning of the construction to the completion of the building and possession of the plot, the prices keep increasing. If you plan to buy in prelaunch while investing in real estate, you will get more returns.
Registration and Interior Design:
Booking the plot at the very beginning of the project. the price may go up significantly after the RERA consolidation. Rising demand for housing properties, growth in infrastructure, labor costs, raw material costs, revised laws and other factors contribute to the rise in property prices.
So by choosing a new start project you can get a plot at a low price and save a lot of money. This amount can be used for future expenses like flat registration, interior design etc.
Disadvantages of investing in pre-launch projects
Risk is high:
Approvals may not be available at the pre-launch stage of the project. There may be hurdles in getting permits in future. This may delay the construction of the project.
There are cases it took more the 3 years of time to start the project after the buyer investment.
If there are any land disputes, the project may stop altogether. Also, if the developers fail to raise funds in time, the construction may be stopped midway due to other reasons.
Project Delay:
Pre-launch projects cannot be said to be completed on time. 40-50 permissions are required from various government departments to start the project. This may delay the construction of the project.
No loan available:
Offers are made for fundraising in pre-launch projects. So, most of the money must be paid upfront. Also, banks will not come forward to give loans as there will be no project permits and other approvals.
With this, the chances of getting a loan are less. You may have to raise the funds yourself. If the funds are taken for interest through other means, when the project is completed, there may be situations where the interest increases and the debt sinks.
Build quality:
Pre-launch projects are paid up front. However, builders may or may not care about quality. If the funds are low, there is a possibility of using poor quality raw material. As the construction has not started.. Pre-launch buyers will not be able to know these things in advance and be careful.
No tax benefits:
Home buyers with loans get tax benefits in terms of income tax payments. Loan is not available if house is purchased in pre-launch stage. So there are no tax benefits either.
Even if the loan is availed, tax benefits are not available while the building is under construction. Only interest should be paid until the construction of the building is completed. Interest paid on completion of construction can be claimed equally (20% *5 years) within 5 years. So it is not very useful.
You may get scammed on:
Some builders delay in starting projects after taking the full amount. Also, they are selling illegally, disregarding RERA norms. Chances of getting cheated are high in case of such builders.
What precautions should be taken?
- Buying a pre-launch property is known to be risky but the reason why buyers are showing interest is the low price. Buyers who invest in such projects need a Project Commencement Certificate (CC), which the developer must follow to legally construct the building.
- RERA approvals are mandatory for any project with an area of 500 sq.m. Without this, sales of houses should not be started with pre-launch offers. So, it is better to check if RERA approval is taken while investing in such.
- A builder should be a reliable person while investing in pre-launch projects. There should be a transparent transaction record. Should be a person who follows legal rules. His experience and reputation in the industry should be seen. Investment decision should be taken only after considering all these aspects.
