Why An Under-construction Property Is A Good Idea

By BankBazaar | January 6, 2016

Investing In An Under-construction Property

Investing in real estate is a big step these days. The potential for doubling your money in a few years through real-estate investments is also huge. The present trend in the real estate market is to invest in property for the long term.

The secret behind successful investments in property

A well-known secret behind an investment in property is to buy property at a low price and sell it a higher price.

If you are looking to invest in real estate, we can tell you what you should do.

Additional Reading: All you wanted to know about Home Loan Eligibility

Why an under-construction property is a good idea

For investors looking at real estate, an under-construction property is a good choice. We’ll tell you why.

  • A cheaper option. An under-construction property is much cheaper than a ready-to-occupy property. By how much, you ask? Well, sometimes up to 30%.
  • Lower EMI. More affordable. And since you’re paying lower costs for an under-construction property, the EMIs are also easier on your pocket.  
  • Potential for higher returns. An under-construction property has potential for higher returns. As the construction approaches completion, there will be a surge in the expected selling price of the property. The price appreciation rate on a ready-to-occupy property is lower. 
  • Are you investing in property to sell later? As the value of an under-construction property appreciates faster, if you decide to sell it later, you will earn better profits. 

If you’re thinking of applying for a Home Loan, stay informed about why your Loan may be rejected. Don’t make these mistakes. 

Factors to consider when investing in real estate

A few important factors you must consider when you calculate returns on your investment are loan tenure and home loan interest rates. But there’s more. Let’s tell you about a few lesser known factors that also play a big role in deciding returns from investment in an under-construction property.

  • Expected Possession Date. This is a very important factor. Although the builder may make promises that might sound unrealistic, you should be prepared for delays, even up to 1-2 years. A delay in possession can postpone your earnings if you plan to give your property on rent.
  • Rental rates. You need to evaluate the rentals you will charge and the annual increase in rents. You also need to think about whether your property will be occupied for the entire period between getting possession and selling, or whether your property will remain unused intermittently.
  • Fixed costs. Whether your property is continuously occupied or not, there will be fixed costs that need to be considered when you calculate returns from your investment. What fixed costs, you ask? There are annual maintenance expenses and property taxes, you know.

Now let’s get to the most important questions about your investment in property.

When will you sell your property and what is the expected annual price appreciation?

When you try to answer these two questions, it is better to be realistic and avoid making assumptions. If you think the prices will double in two or three years, don’t be too sure. If the price does increase, you’re set. In case it doesn’t, don’t beat yourself up about it.

Additional Reading: Home Loans: Why Your Application Might Be Rejected

Remember, you should make assumptions based on property trends in the local area.

Investments in real estate are not easy. If you invest smartly, you will surely reap big rewards.

If you think you’re ready to take the leap, check out our offers on Home Loans.

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Category: Home Loans

About Dheeraj Kapoor

BankBazaar is the world's first neutral online marketplace for instant customised rate quotes on Loans, Credit Cards, Insurance and Investment products. Shop for financial products just like you buy everything else now - online.

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