I
am getting at least 2 sms every day for pre launch offer in real estate and
this prompted me to write this article. In India most of the people consider
the real estate investment particularly residential premises as safe investment
with potential of high reward. The reason why people bet more on this sector is
availability of easy loans in recent times and tax benefits available on home
loans. Another major reason is involvement of black money which makes this
sector more attractive for those who generate black money and avoid tax
payments. It is true that investment in residential premises has given good
returns across India in last decade barring the short period of 2008. But,
whether will it continue to move northward or not is a big question.
Every
investment avenue can be evaluated on the basis of risk and reward attached to
it. If there is high reward in any asset then there is inbuilt high risk
attached to it and if the reward is low then the asset can be considered as a
low risk investment. Investments in real estate undoubtedly come under
high-risk category and there is no guarantee of high reward. Expecting
high-return without looking at high-risks involved can spoil your entire
financial life. Nobody in this earth can defy this economic principle.
Compared
to buying ready to move in property buying under construction property has a
good market for the two reasons. One price quoted is lower compared to ready to
move in home and second you are required to pay the balance money slab wise.
There are two disadvantages also which most of the people ignore. One is timely
delivery of the home and second is the risk of regulation violations including
illegal constructions. We have seen number of defaulters across India and in
some cases the possession is not given even after completion of 7 to 8 years.
It’s not easy to fight with the powerful builder lobby which has strong backing
of politicians. Even if you are capable of fighting with them the cost of legal
battle and time delay in getting the justice can ruin your financial dream.
Very
few of us know that builders and developers have to take as many as 150
approvals from different local and state authorities before starting any
construction activity. There is no way that a common person can find out
whether builder has obtained all required permissions before starting
construction or not. There are many issues related to construction of buildings
on reserved plots, agricultural land and forest land. There are many cases that
same flat is sold to more than one buyer and you can’t do anything. Hardly 25%
projects are completed within reasonable time and rest projects get delayed for
years.
Even
you are lucky to get the timely possession there are issues related to
permission given before final possession known as occupancy certificate. A
common man is more concerned about the vacant possession of the flat and once
the key is handed over to him he feels that everything is in order. He feels
even more assured when the electric and water supply is given to the building
and after that he never bothers to enquire about whether the builder has got
Occupancy Certificate or not. Even today there are thousands of building in
city like Mumbai where the OC is not given for many years and still lakhs of
people stay in these buildings without realising the risk. There are many
incidents where the construction is done over and above the permission granted.
This cannot be easily found out by a lay investor and comes up only in major
incidence like Campa Cola (Worli-Mumbai) issue come up.
It
is important for investors to look into these issues before buying real estate.
Most of the people are also ignorant about the tax benefit also. If
construction is not completed within 3 years from the date of purchase the
deduction u/s 24 on interest payment is not Rs. 2lakhs but it is restricted to
Rs. 30,000 p.a. I always recommend buying a ready to move in property with the legal
help. Appointing an advocate to check the title is an important step in buying
real estate but for saving few thousands rupees most of the people ignore it. The
time has come to take informed decision to safe guard your own interest. It’s
also high time that both central and state government should regulate the entire
real estate market at earliest to protect the common man.
This article first appeared at indianotes.com
http://www.indianotes.com/Analysis/Under-construction-property-has-highest-risk/195480/2/T
