Should You Invest In Pre-launch Properties?

Purchasing a house that is 20-30 per cent cheaper than the market rate is tempting. This is primarily the reason why many buyers book houses in pre-launch projects. However, most of the times, buyers end up waiting for long before they get the possession of the property, as clearances issues delay projects.

Buyers must note that a project requires umpteen number of approvals and sanctions --- this adds uo to as many as 50 clearances -- from various civic agencies and government departments before it can take off. The law states that a developer can't take any amount from a prospective buyer before getting all the clearances for the project.

However, developers try to raise funds through pre-booking because the cost of funds works out much lesser than bank loans. If a developer has begun construction without obtaining clearances, the authorities may stall the project in question, leading to a delay in completion.

What should buyers do?

The past record and reputation of the developer should guide you. A developer with goodwill in the market will try to deliver the project in time. But, before booking any flat, a buyer should ask for intimation of disapproval (IOD) papers and the commencement certificate (CC) .

An IOD document lists the approvals your developer has received from various authorities while a CC is the proof that the developer has the go ahead to start construction. Sometimes, these approvals come in a phased manner. For instance, for a 16-storey building, a developer may get approval for only eight floors first. Anticipating approvals at a later stage, developers often offer flats for higher floors. However, there is no guarantee that he would be given an approval by the authorities. It is prudent to book only up to the level for which the project has received the IOD and CC.

If you are buying the property using a bank loan, the due diligence done by the lender may come handy.