Investing in project at early stage of construction can fetch you cheaper deal

Mint, 09-Feb-12


Usually a project is launched in two phases. The first phase is the soft launch stage, when the developer opens the booking for brokers and some investors at a discounted price

If you are planning to buy an apartment in an under-construction project, investing at an early stage of the project can get you reasonably lower rates.

The soft launch stage

Usually a project is launched in two phases. The first phase is the soft launch stage, when the developer opens the booking for brokers and some investors at a discounted price. During this stage, the developer ties to sell up to 50% or slightly more number of proposed units in the upcoming project through brokers and investors.

Inaugural discounts: Usually when a company launches a project, it offers lower rates to attract buyers to the project. More buyers in the initial stage would mean more advances coming in, which in turn facilitates the builder to start the construction of the project. Therefore, launch rates usually come with inaugural discounts. Often it is seen that the company first invites its existing customers in other projects and investors and brokers in the region. The inaugural discount phase is open for a very short period of 10-30 days or it may be limited to the first 100 bookings.

The launch stage

The second phase is the formal announcement of the project, perhaps two-three months from the pre-launch stage, when the developer opens the booking for the general public. The units are sold through general booking from the company's sales offices.

Discounts: At this stage, too, you can get discounts since the construction just starts or is in very initial stages. Company officials, too, offer some discounts to increase sales. But this discount may not be as big as the inaugural discount.

Apart from the company, you can also buy the flat from a broker/consultant in the region. Real estate brokers, who buy the units at the time of soft launch, do not wish to hold the stock of a developer for more than three-six months. For making profits, they sell the apartment at a rate, which is often lower than the company rates.

Subsequent stages

After the initial hike after two-three months of the pre-launch stage, the rates are usually revised only after a year, when the project reaches a certain construction stage. Usually, a project takes two-three years to finish the construction. It has been observed that developers revise the rates with the passage of each year coinciding with some events such as festivals or a change in the policy.

Pricing: Investing at later stages would mean you have to forego the construction-linked mode of payment, partly or fully. You would have to opt for the downpayment mode, where you would be asked to pay a higher amount at the time of booking.

When the project reaches the completion stage in the last year, flats come at a premium both in the primary and the secondary market since they are ready to use. Also, the two-three years of construction time may allow development of infrastructure around the area.