Ready-to-move or under-construction? Weighing the risks

Neither option is automatically safer. An under-construction flat carries delivery risk. A ready flat carries the risk that 'ready' is not quite what it seems. The useful question is which risks you can check, and which you can live with.

Under-construction: what can go wrong

• Delay. Possession dates can slip, and you may end up paying rent and a home-loan instalment at the same time.
• Change. What gets built can differ from what you saw if plans are revised.
• Developer finances. Completion depends on the promoter's ability to keep funding construction.
• The unknown finished product. You are buying from plans, a sample flat and a specification sheet.

Under-construction: the protections RERA gives you

• Registration first. A promoter cannot advertise, market, book or sell units in a project that needs registration until it is registered with the state authority (section 3).
• A cap on advances. A promoter cannot take more than 10% of the cost as an advance or application fee before entering into a registered agreement for sale (section 13).
• Ring-fenced money. Seventy per cent of the amounts collected from buyers must be kept in a separate account with a scheduled bank to cover construction and land cost. Withdrawals must be in proportion to the percentage of completion and certified by an engineer, an architect and a chartered accountant (section 4).
• Disclosure. The promoter must keep the project's page on the RERA website up to date every quarter, including bookings, approvals and the status of the project (section 11).
• No one-sided changes. Once the sanctioned plans and specifications have been disclosed to you, the promoter cannot alter your apartment without your consent, beyond minor changes the Act allows. Other changes to the building or common areas need the written consent of at least two-thirds of allottees (section 14).
• Remedies for delay. If the promoter fails to give possession as agreed, you can withdraw and claim a refund with interest and compensation, or stay in the project and receive interest for every month of delay (section 18). Punjab's rules set that interest at the State Bank of India's highest marginal cost of lending rate plus two per cent.

These protections are real, but they are enforced through complaints and orders, which take time. They reduce the risk; they do not remove it.

Ready-to-move: what to check

'Ready' should mean the building has been certified by the competent authority. Under RERA, the promoter is responsible for obtaining the completion certificate or occupancy certificate, or both, as applicable, and making it available to buyers or their association.

• Ask for the completion or occupancy certificate that covers your tower, not just another phase of the project.
• Inspect the actual unit, not a show flat: finishing, damp, fittings, water pressure and electrical work.
• Ask whether conveyance deeds are being executed and whether common areas have been, or will be, handed over to the residents' association. Where no local law sets the timeline, the Act requires the conveyance deed within three months of the occupancy certificate.
• Find out who maintains the project now, what it costs, and whether any maintenance deposits or dues are outstanding.
• For a resale unit, verify the chain of title and confirm that the seller has cleared all dues with the developer and the association.

For a recently completed building, note that the Act requires the promoter to fix structural defects, or defects in workmanship, quality or services under the agreement, that an allottee reports within five years of possession being handed over, free of charge and within 30 days. Ask your lawyer how this applies if you are buying resale.

Cost and cash flow

An under-construction flat is normally paid for in instalments linked to a payment plan in the agreement, while a ready flat needs most of the money within a much shorter period. Taxes and charges can also differ between the two. Compare all-inclusive cost sheets, and confirm the tax position with a chartered accountant.

Questions that help you decide

• When do you actually need to move in, and what happens to your plans if possession is a year late?
• Could you carry rent and a loan instalment at the same time?
• Have you checked the developer's delivery record on past projects?
• For the ready option, is the paperwork complete: certificates, conveyance and handover of common areas?

This article is general information, not legal or tax advice. Have the agreement and title reviewed by an independent lawyer, and confirm taxes with a chartered accountant.