Which House to Buy? Pre-Launch vs Ready-To-Occupy vs Under-Construction

Last week, we spoke about the pros and cons of investing in under-construction properties.

Today, we will elaborate more on the different stages of construction that you can invest in.

The budget is one of the most crucial aspects of home buying, it is important to understand the cost implications of different construction stages as it can impact your finances significantly.

The cost factor

Pre-launch: In terms of cost, pre-launch properties usually offer the lowest entry-point. This is the time when developers want to sell maximum units to collect funds for the construction.

Thus, in addition to the low selling price, you can also get some freebies and discounts at this stage.

Under-construction: If the construction work has already started, the price slightly increases. However, at this stage, you have the option of selecting the preferred unit with the best view.

Ready-to-occupy: This costs more for obvious reasons. However, since you can move in immediately, you can save on rentals.

From the cost perspective, while pre-launch and under-construction properties come at a lower cost (at least 25-30%), the waiting period is long. This can affect your finances when you consider the double burden of EMIs and rentals.

Property taxes

For ready properties, there is no Goods and Services Tax (GST). However, 12% GST is levied on under-construction properties.

Tax benefits

Opting for a home loan offers several tax benefits. As per the income tax law, the principal paid towards your home loan is deducted from the income under Section 80 C while the interest paid is deducted under Section 24 (b).

Now, you can claim these deductions only if the property is ready-to-occupy.

One cannot claim the Rs 1 Lakh deduction on the principal for under-construction properties. The interest paid can be deducted in five equal instalments once the construction is complete.

However, this must be claimed within three years of the end of the financial year in which the loan has been disbursed. Considering that project delays have become the norm more than the exception, you may lose out on the tax benefits on interest payment.

You can always avail the benefits of house rent allowance for the period you are staying on rent.

To sum it up, this is one aspect that is largely ruled by your financial situation and requirements.
It is highly recommended that you weigh the pros and cons of all the construction stages and then determine the option that best suits your needs and financial situation.