The future of pre launch of properties in India
Jul 25, 2017 Home Trading Steps
Pre launch of the projects in real estate was never legal. But they helped the developers in gauging the future of the project and create a buzz for it. It helped the buyers to book the property at a comparatively low price and get some extra funds for the developers. The thing to be noted here is that the pre launch projects did not have any approval from the government.
Pre launch was the way to save money:
Buyers who were ready to take the risk of investing in the pre launch projects to save around 15- 20 percent of the overall cost of the property, booked the property with the reputed developers. But since there have been some concerns over the delay of the projects and so buyers are more inclined towards investing in the ready to move in apartments, even if it would cost them a little higher. The demand for the ready to move in properties has gone higher in last two years. Those who still took the side of pre launch projects did save a little amount in the overall cost of the property but ran into the risk of delay and the project getting stalled in future.
Pre launch of the projects to be a thing of past:
The Real Estate (Regulation and Development) Act, 2016 makes sure that the developers cannot launch the projects without registering it with the state government. For registering, the developer will have to get all the approvals from the authorities. Previously, developers used to use the pre launch funds to fund the project, now they will have to buy the land, get the approvals, from their own pocket. This may raise the overall cost of the property for the buyer since the developer will now have to take more loans from the bank and financial institutes.
Things to remember:
Pre launch was the way to save money:
Buyers who were ready to take the risk of investing in the pre launch projects to save around 15- 20 percent of the overall cost of the property, booked the property with the reputed developers. But since there have been some concerns over the delay of the projects and so buyers are more inclined towards investing in the ready to move in apartments, even if it would cost them a little higher. The demand for the ready to move in properties has gone higher in last two years. Those who still took the side of pre launch projects did save a little amount in the overall cost of the property but ran into the risk of delay and the project getting stalled in future.
Pre launch of the projects to be a thing of past:
The Real Estate (Regulation and Development) Act, 2016 makes sure that the developers cannot launch the projects without registering it with the state government. For registering, the developer will have to get all the approvals from the authorities. Previously, developers used to use the pre launch funds to fund the project, now they will have to buy the land, get the approvals, from their own pocket. This may raise the overall cost of the property for the buyer since the developer will now have to take more loans from the bank and financial institutes.
Things to remember:
- The price escalation between the pre launch and official launch was available for the developer before, not anymore. This means that the holding cost of the of the project for the developers will go up, which they will pass on to the buyer who will end up paying more for the properties.
- The input cost and purchasing of the land will have to be done through legal channels. After demonetization, the involvement of the liquid cash in the real estate will go down. This means, that the developers will now have to take more loan from the banks to buy the land.
- The new law has facilitated the marketing of the unlisted constructions till Jul 31, 2017. However, the new projects cannot be launched till they have registered.
- The developers are not allowed to raise the funds more than 10% without signing the sale agreement.
- Some states like MP have allowed the provisional registration. The developer will be allowed to promote the project before registering, to weigh the market demand, only bound by the fact that they deliver what they promise.
The state governments are required to appoint a regulator or an appellate tribunal before July 31, 2017, who will overlook that no un registered projects are promoted.
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