Simplifying a Buyer's Dilemma - Prelaunch or Underconstruction Property?

Irrelevant of the market trends and sentiments, it's difficult for a builder to get the requisite capital for a new project from the funding institutions. Reasons could be numerous, from high interest rates to even his incapability to meet the stringent norms. Whatever the case might be; to churn a good profit from a real estate project, it is necessary that the developer generates some initial funds to get the project started to eventually complete it in time. To combat dearth or limited finance, many developers work on the prelaunch concept (or soft launch) where marketing is done through inner broker and trusted customer circles.

As the name suggests, prelaunch is not the official launch of a project and hence the requisite approvals might not be there. To substitute the lack of approvals, a decent discount on the market price of the proposed property is offered. The cut could vary between 5 to even 25 percent per square feet.

So the question remains the same, is it wise to go for a prelaunch property?

Prelaunch properties come with a good proportion of risks and people who have an appetite for such risks should go for them. The case applies for both end users and investors. If you have substantial funds in hand and could wait for a good period of time then it might be possible that you strike a considerable profit on your investment. But still, a fair degree of diligence is advised before putting the money down. A few things you can check in such deals apart from the reputation of the concerned builder, is to ensure whether a clear ownership of the land lies with the builder and not a mere agreement with the land owner.In addition to this, you should verify if IOD (intimation of disapproval) and commencement certificate is in place.

What happens next?

After the builder is able to get the necessary approvals, the project gets an official launch and is marketed profusely through commercial advertisements. As the construction grows, the property that started as a prelaunch initially takes the shape of an under-construction offering. Obviously, in this stage the price gets an upward shift and varies with the progress in constructional activities. So, here there are maximum chances for you to witness price fluctuations, both positive and negative. If you are an end user having limited cash and time but could foresee (reading through market trends) the project getting completed in time, then you should go for it. Otherwise, look for properties that are about to get completed.

Prelaunch Vs Underconstruction

The risks look more magnified with prelaunch options but it's same with an under-construction property too. It might be possible that the builder loses out on funds or there is some government ban or lack of approval and the project gets stalled for an indefinite period of time. Your money would get stuck in the case as well.

Our View:

It is all about market trends and how good the reputation of a builder is in getting approvals and project completion certificates to ascertain the future of your investment. So, talk to people who have invested in the previous projects of the concerned builder, join social circles and discussion forums or talk to agents about it. Such sources could help you in gaining the actual insight and future position of the project in agenda.

So, overall we can say whether it is an under construction or a prelaunch, both could turn out to be good decisions if done carefully.