Have you ever thought about investing in a prelaunch project? Are you aware that you can invest in a prelaunch project? Did you come across ads saying “Exclusive pre launch offer” or “Attractive pre launch benefits”?
So what is pre launch in real estate? What are the benefits of investing in a prelaunch project, or what are the risks, pros, cons, advantages and disadvantages of investing in pre launch projects? Read on further to get clarity on these aspects, so that you can make better informed decisions about investing in a pre launch project.
What Is Pre Launch in Real Estate?
Sometimes, builders have a plan drawn up, but no approvals yet from regulatory authorities. They announce the project at this stage, and some buyers may be willing to invest in what is called a “pre launch project”. It is just a proposal against a plot.
Basically, in a pre launch project, the sales process is started early on even as the builder is waiting for the necessary approvals for the project. When buyers start booking, and paying the booking amounts, the builder already has some funds on hand to start the construction of the project as soon the approvals are in. This way the builder may not need to depend heavily on market loans, or delay the actual project launch due to unavailability of funds.
What Are the Benefits of Investing In a Pre Launch Residential Project
Now that we know what is pre launch in real estate, let us try to understand why a buyer should invest in a pre launch project. What are pre launch benefits you can get? What are the advantages of investing in a pre launch project?
Pre Launch Project Are Offered at Reduced Prices
Well, one major benefit of investing in a pre launch property is that, pre launch rates in general, are reasonably and attractively lower than post launch rates. To put things in perspective, they may be 10 to 40% lower than post launch rates. When a builder is able to raise interest-free capital, by way of pre launch booking amounts, they are able to pass on pre launch benefits to pre launch investors by offering them attractive discounts.
Make a Profit On It Later On
If you invest in a pre launch project, you can get the property at reduced rates, and that is enough profit. But the story does not end here. You can make further profit out of it. If you wish, you can sell it off at the current market rate, after the project is completed,and pocket the profit.
Choose Your Preferred Unit
The early bird catches the worm. The early buyer is able to choose the better unit in the project. Based on Vastu and other preferences, you will have more options to choose from if you book a unit in the pre launch stage.
Quicker Launch and Project Completion
Apart from getting the property at discounted rates, and having an opportunity to make profit out of it, there is yet another attractive benefit of investing in pre launch projects. Since the units are sold in the pre launch phase, and the capital is available through pre launch booking amounts paid by investors, we can expect the projects to be launched quickly once the approvals are in, and also completed quickly.
What Are the Risks or Disadvantages of Investing in Pre Launch Projects
Okay, so lesser cost, quicker project completion and handover. Sounds really good. So, is it all this hunky dory? You might be wondering what is the catch. You are right. Such massive benefits will definitely be associated with a certain amount of risk. In the pre launch stage, the builder does not have the approvals from the necessary authorities. This poses certain risks for the investor.
Plan May Get Modified
The plan that was shown to you at pre launch booking may not necessarily remain the same during the approval process. It may get modified if necessary. So what you paid for may not be the same as what you actually get. Of course, the modifications may be negligible or substantial, as the case may be.
Project May Get Delayed
Approval process for projects can take an indefinite amount of time, as there are plenty of approvals needed from various authorities.
Project May Get Cancelled
If the builder is not able to get approval, the project can get cancelled. This may also happen if the builder is not able to raise sufficient funds for the project.
Project May Get Not Approval for Bank Loans
It can also happen that the project is not cleared by financial institutions for home loans. If that happens,it will cause you the inconvenience of not having the assistance of taking a home loan. Apart from that, the project may also get cancelled as it would be hard to find buyers if they are not able to avail bank loans for buying the property.
Who Should Invest in a Pre Launch Project
As there are both pros and cons of investing in a pre launch property, not everyone may be able to invest and avail the benefits of investing in pre launch residential projects.
- It depends on your risk appetite. It is advisable to play safe in case you are not sure about your financial security and you are not in a position to take risks.
- Investing in a pre launch project is more suitable if you are looking to buy a second home, with the security of already having a first home.
- You can also look to invest in a pre launch property if you have some extra funds and you would like to play a bit in the real estate market.
Care to Be Taken for Investing in a Pre Launch Property
There are both advantages and disadvantages of investing in pre launch projects, so it is important to exercise some caution.
- Check the credibility and trustworthiness of the builder. Look at their track record and experience to understand if you can trust them.
- Examine the viability of the location and other aspects that you would take care to check when you buy any property.
- Check if all the pre launch documents are in place, including the title deed for the plot.
- Make sure to get a copy of the Commencement Certificate (CC).
- Make sure to get a copy of Intimation of Disapproval (IOD) which is a document that contains instructions that a developer must follow for constructing the building in a legal manner.
To conclude, there are pros and cons of investing in a pre launch project. You have to make a decision based on your risk appetite, the potential of the project to be successful and the trustworthiness of the builder.