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When it comes to buying a home, the decision between choosing a property under construction and a ready to move in property can be a pivotal one. This choice affects not just your immediate living situation but also your financial landscape in the years to come. Whether you’re a first-time homebuyer or looking to invest in another property, understanding the nuances of both options is key to aligning your purchase with your long-term objectives.
This blog guide aims to equip buyers with the necessary information about under construction or ready to move property to make an informed decision that aligns with their long-term goals and financial strategies, highlighting the importance of a well-chosen home in one’s personal and financial well-being.
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Purchasing a house under construction or an under-construction flat involves committing to a property that is being built. This option is typically chosen by buyers who are planning for the future, looking for a lower initial price, or interested in customizing their home before moving in.
Opting for an under-construction property offers financial advantages, such as lower initial costs and the potential for significant savings compared to ready-to-move properties. It appeals particularly to first-time buyers and those on a budget, providing an affordable entry into homeownership. Let’s understand both the advantages and disadvantages of buying under-construction property.
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Opting for a ready to move in property means you’re purchasing a home that is complete and ready for immediate occupancy. This choice is ideal for buyers who need a quick move or prefer to see and experience the exact space they’re investing in. The ready-to-move property also eliminates the need for renovations, which can be time-consuming and expensive. Additionally, it eliminates the need for a builders’ warranty, which can be risky.
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Conclusion
In conclusion, the decision between purchasing an under construction property and opting for a ready to move property involves a careful evaluation of several key factors, including financial implications, timing, and personal preferences. Each choice offers distinct advantages and challenges that cater to different buyer needs and situations.
For those leaning towards an under construction property, the potential for a lower purchase price, customization options, and the under construction property tax benefit are compelling advantages. These benefits can make it an attractive option for buyers willing to navigate the uncertainties and delays that can accompany the construction process. On the other hand, buyers looking for immediate occupancy, certainty in what they are purchasing, and a straightforward transaction may find a ready-to-move property more appealing. While these properties might come at a higher cost, the absence of the GST rate on ready to move property and the ability to immediately see and experience the home as it will be lived in are significant advantages.
The total tax on an under construction property primarily includes the Goods and Services Tax (GST). The applicable GST rate can vary depending on the property’s value and sometimes the type of property (affordable housing vs. luxury projects). As of my last update, the standard GST rate for under-construction properties was set at 5% for non-affordable housing without the benefit of input tax credit (ITC), and 1% for affordable housing. However, these rates are subject to change based on government policies, so it’s advisable to consult the latest tax guidelines or a tax professional for the most current rates
The price difference between under construction and ready to move properties can vary widely based on the location, developer, and specifications of the property. Typically, under-construction properties are priced lower than ready-to-move properties due to the wait time for completion and the risks associated with the construction process. The difference can range from 10% to 30% or more, depending on market conditions and the stage of construction at the time of purchase. Buyers are encouraged to research specific markets and developments to understand the price dynamics better.
Yes, you can sell a house that is under construction. However, the process may involve certain complexities, such as transferring the ownership rights to the new buyer and ensuring that all dues are cleared with the developer. Additionally, the original buyer’s agreement with the developer will dictate the terms under which the property can be transferred, and in some cases, the developer may charge a transfer fee. It’s important to communicate with the developer and possibly seek legal advice to ensure a smooth transfer process.
Yes, buyers can save tax on an under-construction property. Under the Income Tax Act, buyers are allowed to claim tax deductions on the interest paid on the loan taken to purchase an under-construction property. These deductions can be claimed in five equal installments starting from the year in which the construction is completed. However, there are limits to the amount that can be claimed, and the property must be completed within five years from the end of the financial year in which the loan was taken. Consulting a tax advisor for detailed guidance and to maximize tax benefits is recommended.
Transferring an under-construction property is possible, but the process and the possibility depend on the terms set by the developer and the agreement made at the time of purchase. Most developers allow the transfer of property rights to another buyer, although they may charge a transfer fee for the process. It is crucial to check the specific terms of your purchase agreement and communicate with the developer to understand the procedure and any associated costs.
No, there is no GST on ready-to-move flats that have received their Completion Certificate (CC) before the sale. The GST applies only to properties that are under construction. Since ready-to-move-in properties are considered completed projects, they are exempt from GST, making them financially appealing to buyers who wish to avoid the additional tax burden associated with new constructions. Buyers should ensure that the property they are interested in has the necessary completion and occupancy certifications to avoid any GST liabilities.
Published on 28th February 2024
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