scorecardProject delays, risks and uncertainty are driving home buyers to choose Ready To Move In Homes
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Project delays, risks and uncertainty are driving home buyers to choose Ready To Move In Homes

Indians are changing the way they are looking at home purchases. Earlier, the choice between an under-construction home (UC) and a Ready To Move In- Home (RTMI) would be based on many factors like cost benefits, risk appetite and much more. None of the arguments applies to the current state of affairs in the realty sector.

Today, project delays are becoming common. The extent of time delay has also increased from the customary one or two years to up to five years, in part due to tighter availability of finance – both in terms of equity and debt. According to a report by Elara, close to half a million residential units across 1,665 projects are delayed by over five years.

The government has offered a ₹25,000 crore bailout package for stuck housing projects. On the ground, however, home buyers are suffering from a triple whammy of delayed projects, EMI payments and monthly rentals.

“As per a National Consumer Disputes Redressal Commission (NCDRC) order, a developer must pay a penalty at 6% per annum on the amount deposited by the buyer for a delayed period,” said a report by Anarock Consultants. However, this is close to half the interest charged by banks to buyers when they opt for home loans.

The rise of RTMI homes

All this is driving people towards Ready To Move In Homes. The fact is that the price difference between homes under construction and RTMIs are as low as 3-7%, according to property consultant Anarock. “The price disparity between the two categories is witnessing a year-on-year decline. In 2018, the difference was 5-9 per cent; in 2017, it was around 8-12 per cent across the top cities,” the report said.

Homebuyers prefer RTMI units for a very simple reason — the instant gratification of buying a home and moving in within a few months. Also, when homes are ready, it is easier for homeowners to assess neighbourhoods and their development, especially in cases where homes are being built in new and emerging areas. It also comes with absolutely no risk in terms of delays and home buyers will be able to inspect the unit prior to purchase.

Also, in the new GST regime, there are tax benefits to buying RTMI homes as well. RTMI units do not fall under Goods and Service Tax net, which results in an additional 5% tax that would have to pay if they purchased a home under construction. Moreover, buyers can immediately avail of Income Tax benefits on home loan payouts, making it an extremely attractive proposition.

All in all, the buyer preference for RTMI homes might provide an extra incentive for builders to hasten their projects — relieving some of the many pain points in the real estate sector.