Factors to be considered before Booking a PreLaunch Project
Indian real estate is thriving with a good number of projects launched every now and then. But the developers need fund for a flourishing launch and to complete their projects. To trounce this problem they have to rely on the financial institutions which charges a high rate of interest for funding and some developers even do not meet the obligation eligibility norms of funding at all. In such positions, developers seek to raise interest-free capital from the market by pre launching their projects.
What is a Pre-Launch?
Pre-launch, also called a soft launch is a state where a developer notifies an inner circle of agents and investors of the availability of property in a project that has not been formally announced or put up in market. Generally, pre-launch spreads by word of mouth and by emails but do not get displayed on the developer’s website or any other social or market media.
Pre-launches are for those who are opportunistic investors and who look for to get price advantage as typically the properties are given at 10-15% discount and can linger for few years before getting possession of the flats.
Here are a few of the factors to think while booking a pre-launch or a under- construction flat:
This is the most significant factor one should think before investing, the track record and reputation of the developer or builder. The risk is shortened if the developer is a reputed and a trusted one and has many successfully finished projects under his umbrella. The company should be financially sound. But, in the final few years, even the well-known builders were forced to divert money from pre-launch projects to projects almost completion.
It should be noted that the developer should be able to finish and deliver the project without depending too much on the cash flows generated from the sale of units in the project, or it can happen that the project gets fixed during an economic downturn when sales slowdown.
Generally, the reason of investing in a pre-launch project is the price. The developer gives 10-15% discount under pre-launch sale, but before investing, the customer should find out the price appreciation from the pre-launch offer price to the future. The cost appreciation can be analyzed by the market performance of the location, current and future market trends, and availability of infrastructures. Another thing which can be done is to evaluate the pre-launch price with the prices being quoted in projects in the same area, and if the prices are already more and have reached a saturation point then in such case there would not be much price advantage.
Approval of Banks
If the homebuyer is setting up to opt for a housing loan to buy a pre-launch property, then he or she ought to check that the project is being approved by foremost banks or finance companies. Instances where the project is not permitted for home loans or developer have not obtained all the required approvals for the project, then the homebuyers may be attractive trouble.
The homebuyers and investors should verify the agreement between the builder and the original property owner of the land on which the project is constructed. Apart from that, the venture should also have an allusion of disapproval (IoD), plan approvals from local authority, legal title of the land and a joint development agreement (in case the project is a collaboration venture).
Pre-launch offers are high-risk undertaking and are suggested for investors with high risk appetite. Before investing it is advised to go with the builder’s brand and track record.