Why Buying an Under-Construction Property is a Smart Move in Real Estate?

“When is the Best Time to Invest in Real Estate?” – A question that arises time and again.

The right moment to invest in real estate is often seen as a matter of perfect timing. But here’s the reality: there’s rarely a perfect time. Whether you’re a seasoned investor or a first-time homebuyer, the best time to invest is when you’re prepared — both financially and mentally. However, buying real estate is one of the most important financial decisions, and timing is critical in maximizing value. While ready-to-move-in houses provide immediate possession, an under-construction property offers compelling benefits that are difficult to overlook.

Among the possibilities available, purchasing properties have specific benefits, making it an intriguing decision for many homebuyers and investors. From cost savings to customization opportunities, these properties are great for people looking for affordability, flexibility, and long-term rewards.

Let’s take a closer look at why a property under-construction is the best investment for you.

Stages of Property Construction

Understanding the stages of property construction helps you anticipate the timeline of your investment. First, there’s the pre-construction phase, where permits are obtained, designs are finalized, and groundwork is prepared. On average, this phase can take 3-6 months, depending on regulatory approvals and project complexity.

Next is the under-construction phase. As the term implies, it refers to properties that are presently being built but have yet to be finished. These projects are frequently marketed during development, allowing customers to purchase the home before it is entirely completed. This gives consumers the advantage of owning a property with financial incentives and other perks.

It also consists of three key stages:

1. Foundation phase: This begins with the excavation and laying of the base structure. Typically, this phase takes 4-6 months but can get extended depending on the size, needed extensive excavation, and complexity of the project.
2. Superstructure phase: During this phase, the building begins to rise with the construction of walls, floors, and roofing. On average, this phase takes around 8-12 months, with construction speed often influenced by the type of structure (e.g., high-rise buildings versus low-rise) and material availability.
3. Finishing phase: The final touches are added, including plumbing, electrical work, and interior detailing. This phase generally takes 6-9 months, with delays typically caused by material shortages or supply chain issues.

Finally, the handover phase is when you receive your property and are ready for occupation. On average, this phase takes 1-2 months to finalize legal paperwork and ensure everything is in place for move-in.

Out of all these phases, the under-construction phase is the most crucial, as it accounts for 60-70% of the overall construction timeline and directly impacts the project’s completion date and quality.

Key Benefits of Buying Under Construction Property

1. Lower Entry Costs

Investing in under-construction properties often means a lower upfront cost than completed properties. Developers offer these properties at discounted rates, allowing buyers to enter the market more cheaply. Once the property is ready, its market value may have appreciated substantially, leading to higher rental yields. This makes under-construction properties an excellent option for long-term investors seeking solid returns.

For example: The price per square foot for an under-construction property is sometimes far lower than that of a completed property in the same neighborhood. This cost-saving benefit is a major reason why many purchasers prefer such residences. The Indian real estate market has experienced a vast growth in the number of residences under-construction, especially in the first half of 2024. From April to June, the supply of under-construction homes climbed by 11.7%, while prices jumped by 15.2% quarter on quarter (QoQ) in 13 major cities. In fact, in metropolises such as Delhi, Mumbai, and Bengaluru, under-construction residential property prices increased rapidly, indicating a significant trend of price rises even in the under-construction category.

2. Capital Appreciation

Under-construction properties offer the potential for high returns as their value increases over time, especially in fast-developing neighborhoods. As demand increases, the price of the property can rise significantly by the time it’s completed. Investing in an under-construction property benefits you from price increases over time. As the project approaches completion, its market value often rises owing to increased demand and additional facilities. If investors decide to sell the home later, they might expect to make significant profits. Furthermore, homes in emerging locations generally see quick appreciation, which increases their investment potential.

For instance: Premium under-construction homes in places such as Gurugram and Bengaluru, have seen price increase of up to 53% year on year (YOY), indicating the market’s tremendous development potential.

3. Flexible Payment Plans

Right from the initial promotion, developers provide financing assistance, and banks are more likely to approve loans for under-construction properties due to their lower cost and solid investment potential. Early bird discounts and introductory offers may make these packages more appealing. One such significant advantage is the availability of flexible payment plans. Developers often allow buyers to pay in installments linked to construction milestones, reducing the financial burden.

For example: You might pay 10% at the time of booking, 30% during construction, and the remaining amount upon possession. This phased approach makes managing finances easier than a lump-sum payment for ready-to-move-in properties. The introduction of such flexible plans has further fueled the demand for under-construction properties, contributing to a growing market in India’s residential sector, which is projected to reach USD 189.80 billion in 2024 with a CAGR of 7.51% until 2029.

4. Personalization and Modern Amenities in Under Construction Properties

Investing in an under-construction property provides an exclusive opportunity to make your new home truly yours. Many developers allow customization of layouts, interior finishes, and features depending on the stage of construction. You could select everything from flooring to cabinetry, ensuring the space fits your taste and lifestyle. This ability to personalize adds significant emotional value, making your home one-of-a-kind.

Moreover, under-construction properties often come with cutting-edge amenities that enhance your living experience. From modern gyms and swimming pools to smart home features, these amenities are designed with the future in mind, ensuring you enjoy a high-tech and convenient lifestyle.

5. Sustainable and Efficient Designs

Many new developments incorporate eco-friendly practices, including energy-efficient systems, water conservation, and sustainable construction methods. This forward-thinking approach helps reduce your ecological footprint.

6. Long-Term Investment Security

Purchasing an under-construction property offers a chance to secure a home at today’s prices, even though the market may appreciate over time. It ensures you lock in a favorable deal for long-term stability.

Key Takeaway – When is the Best Time to Invest in Real Estate?

Real estate investment is a substantial financial choice that must be carefully considered, particularly in time. With so many alternatives available, deciding whether to buy ready-to-move-in or under-construction residences is heavily influenced by your aspirations and financial condition. Under-construction properties, while not providing immediate ownership, provide particular advantages. These houses are frequently less expensive than ready-to-move-in choices, offering the chance for cost savings. They also provide customization options, allowing consumers to tailor their rooms to their requirements.

FAQs

1. What are the main benefits of investing in an under-construction property?

Investing in an under-construction property offers several key benefits:

• Affordability: These properties are generally priced lower than ready-to-move-in homes, allowing buyers to enter the market at a lower cost.
• Potential for Capital Appreciation: As the property nears completion, its value typically rises, offering the potential for significant returns.
• Customization Options: Developers often offer customization opportunities, allowing you to personalize layouts, finishes, and features to suit your tastes.
• Modern Amenities: Many under-construction properties include state-of-the-art amenities like gyms, swimming pools, and smart home features.
• Flexible Payment Plans: Developers often provide payment plans tied to construction milestones, making it easier to manage finances.

2. What is the typical construction timeline for under construction properties?

The timeline for under construction properties can be broken down into four key stages:

• Pre-construction: 3-6 months (design finalization, permits, groundwork).
• Foundation phase: 4-6 months (excavation and base structure).
• Superstructure phase: 8-12 months (construction of walls, floors, and roofing).
• Finishing phase: 6-9 months (plumbing, electrical work, interior detailing).
• Handover phase: 1-2 months (legal paperwork and final inspection).

The under-construction phase is crucial, as it accounts for about 60-70% of the total construction time.

3. Can I customize an under-construction property?

Yes, many developers offer customization options for under-construction properties. Depending on the stage of construction, you can modify layouts, choose flooring, cabinetry, and wall colors, ensuring the space fits your personal style and needs.

4. How does the market value of under-construction properties increase over time?

The market value of under-construction properties typically increases as the project nears completion. As demand rises and additional amenities are added, the property’s market value generally appreciates. Moreover, properties in developing areas often see rapid price increases, making them attractive for investors looking for long-term gains.

5. Are there any risks associated with buying under-construction property?

While under-construction properties offer great potential, there are some risks to consider:

• Delays: Construction delays can impact the timeline for possession.
• Changing market conditions: The market may fluctuate during the construction period, which could affect the final price.
• Regulatory changes: Shifting laws or approvals might cause delays or changes in project details.

6. What is the cost advantage of buying an under-construction property?

Under-construction properties are typically priced lower than completed properties, allowing buyers to save money upfront. In many cases, the price per square foot is significantly lower, especially in emerging neighborhoods. This affordability combined with the potential for value appreciation over time makes them an attractive investment.

7. How do flexible payment plans work for under-construction properties?

Developers often provide payment plans linked to the construction milestones. For example, a common plan may involve:

• 10% payment at the time of booking.
• 30% payment during construction.
• The remaining amount due upon possession.

This structure allows buyers to manage their finances more easily and avoid large lump-sum payments.

8. What are the modern amenities typically found in under-construction properties?

Under-construction properties often come with modern amenities such as:

• Smart home features: Automated systems for security, lighting, and climate control.
• Fitness centers and gyms.
• Swimming pools and recreational areas.

Clubhouses and open spaces. These amenities are designed to provide a contemporary and luxurious living experience.

9. What should I consider when buying an under-construction property?

Before buying an under-construction property, consider the following:

• Developer’s reputation: Ensure the developer has a strong track record of delivering projects on time and with quality.
• Location: Choose a property in a well-connected and emerging area for better returns.
• Timeline and payment plans: Understand the construction timeline and the payment schedule.
• Customization options: Check what level of personalization is allowed.

10. Is it a good time to invest in under-construction property now?

As of the latest market trends, the demand for under-construction properties is on the rise, with a significant increase in supply (up by 11.7% between April and June 2024). With price increases in major cities and flexible payment options available, now may be an ideal time to invest, especially for long-term investors looking for potential value appreciation.