Investing in a project at its pre-launch stage can be frugally rewarding since the property is about 20-30 per cent more inexpensive than the ready-to-move developments. However, there are intrinsic risks involved.
Occasionally, the developers have a plan drawn up but are yet to benefit from the necessary sanctions and support from numerous regulatory authorities. They, however, broadcast the project at this stage to increase funds. The sales and bookings that take place during this phase are known as pre-launch transactions. Pre-launching a project is a way that allows a developer to raise interest-free capital from the market. Many investors and end users favour buying a pre-launch property because it costs around 30 per cent lesser than its finished version. But naturally, such properties include many risks.
How does a developer pre launch a project?
A developer notifies the investors and brokers about the obtainability of properties in a project that has not been launched yet. Attractive pricing and offers are confirmed to garner bookings. Remember that all of this happens at a time when the project has not been launched formally, and, therefore, not promoted to the general public.
Risks associated with a pre-launched property
Purchasing a property during the pre-launch phase involves a number of risks. Here are a few of these:
• The project might not have the essential approvals from civic authorities and government departments at this stage. There are as many as 40-50 consents required, including those from the city development authority, the Airports Authority of India, the National Monuments Authority and the defence ministry, among others.
• Getting the essential approvals may take a long and, therefore, can cause an interruption in project completion.
• The project may not have been cleared for home loan endorsements by banks and financial institutions.
• In an extreme case, the project may get negated if the developer cannot raise adequate funds.
The pre-launch is, therefore, more appropriate for investors who have a high-risk appetite, suggest experts.
Investors must undertake due conscientiousness and launch if the builder has a clear and sought-after title of the land on which the project is being built. An agreement between the builder and the original owner of the land is not enough. End users should invest in a pre-launch only when a high degree of certainty is oblique in the builder’s brand and track record.”
What should buyers do?
Although buying a pre-launch property is a risky scheme, the price advantage continues to be a major attraction for investors as well as end users, mainly those not seeking early possession.
However, before investing, buyers must confirm that the project has a Commencement Certificate (CC) and Intimation of Disapproval (IOD). The IOD has advises that a developer must track in order to legally construct the building.
"Before selecting a pre-launch option, it is important to determine the builder's consistency. This entails looking into his history of ethical business practises, compliance with legal requirements, and the breadth of his professional experience, adds Chanda. The developer's standing in the market ultimately determines everything. Buyers can be sure they are making a secure investment if a reputable developer pre-launches a property, according to experts. Buyers can be confident that their apartments will finally be delivered, even if the project is delayed.
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