Under Construction vs Ready Property

Price:

• Typically, an under construction property is less expensive than a ready property by up to 20%. This means that you can opt for a larger property in the same budget.
• On the other hand, if you’re currently staying on rent, you will need to factor in the additional cost of rent till possession of the property. This is a factor that is often overlooked during the property purchase decision.

Budget:

• Since under construction properties command a lower per square foot rate, the same budget buys you a larger home or a better locality.
• Slowly increasing EMI’s or zero EMI outgo (in case of subvention plans) allows more flexibility and better planning in case of under construction homes.

Risk:

• There are chances of a under construction home being delayed, or in extreme circumstances, not delivered at all. There are several unforeseen circumstances like government approvals, changes in tax regimes, cash flow issues, litigation etc that can cause a delay in the delivery of your home.
• In the case of a ready home, what you see is what you get. You can make an informed decision after looking at the construction quality, amenities etc.

GST:

• A ready possession home is not subject to GST. However, the increased base price of a ready home means that more often than not, it is still more expensive than an under construction property

Payment plans:

• If you opt for a construction linked plan, an under construction home allows you some time till the full EMI starts i.e. The EMI will gradually increase as construction progresses. This means that you can factor in an increase in your income while buying the home.
• Generally, for a ready to move in home, 100% payment is expected at the time of booking. This means that the full EMI starts immediately. In some cases, subvention schemes are also available for ready apartments and might be worth considering provided the price differential is not very high.

Tax benefits:

• The government provides several tax incentives for buying a home – chief of which are the provisions under Section 80C and 24B for the principal and interest component of the home loan respectively. However, these benefits are only available after you have taken possession of your home.
• In addition to this, stamp duty paid on the purchase of a home is also exempt from tax under Section 80C, provided possession for the property is in the same financial year in which the stamp duty has been paid.
• One major tax benefit for under construction homes is that the interest paid during the construction of the home is tax deductible in 5 equal installments in the 5 years after property completion.