With the implementation of Goods & Services Tax (GST) and Real Estate (Regulation & Development) Act, 2016 (RERA) and delays in delivery becoming commonplace, homebuyers are shying away from under-construction projects. They are showing more inclination towards buying ready-to-move in projects that have already got the Occupation Certificates (OC).
“With the implementation of RERA, the residential real estate industry is witnessing significant changes on the ground. The Act strictly prohibits builders from advertising their under-construction projects while allowing the freedom to attract buyers for projects that have Occupation Certificates (OC ready). With the new rules, buyers are naturally showing increasing interest in such properties, which are essentially ready to move in,” said Ashwinder Raj Singh, CEO, Anarock Property Consultants.
Singh says that GST implementation has brought down the tax burden on buyers going for ready-to-move-in apartments. The tax on the entire cost of the project, including the land, is to be levied at 12% – this should be enough for the builder to claim input credit, thus making OC-ready projects more economical for buyers.
Projects with ready-to-move-in flats are usually dearer than under-construction projects as they enable a homebuyer avoid several risks related to the project’s execution, financing and most importantly permissions. Nevertheless, buyers are now more than ready to purchase properties on an immediate basis rather than wait for construction to be completed.
According to a property broker operating in western suburbs of Mumbai, homebuyers who are financing their transactions with a home loan are looking for ready projects as the loans results in financial burden for them. If they buy an under-construction apartment, apart from paying installments for home loan they also have to pay the rent on their current homes while awaiting completion of the project. Thereforethey do not mind paying a little extra to buy a house on immediate basis because it works out to be cheaper than paying rentals over long periods.
Under-construction projects may involve delays in completion, and that leads to buyers paying double the cost, EMIs as well as higher rentals while awaiting possession of their property, so the decision to invest in ready-to-move-in or OC-ready projects makes a lot of sense to them.
Rental income and diminished incidence of developers with dubious credentials are also other key reasons for such preference towards ready-to-move in apartments.