Homebuyers' Dilemma: Ready vs. Under-Construction? The Shocking Total Cost Revealed!

With home loan interest rates around 8.5-9.5% and property prices at record highs, homebuyers face a crucial decision between under-construction and ready-to-move (RTM) properties. Real estate experts emphasize evaluating the total cost of ownership (TCO), which goes beyond the listed price to include factors like pre-EMI interest, rent paid during construction, Goods and Services Tax (GST), maintenance, and registration fees. Although RTM homes require a higher initial payment, they can effectively be 6-10% cheaper when TCO components are considered. Under-construction properties offer staggered payments over 2-4 years, easing initial cash flow. However, buyers forfeit annual tax savings (Sections 80C and 24(b)), which only apply after possession, potentially losing ₹1-1.5 lakh annually. The dual payment of rent and pre-EMI can strain finances. RTM buyers start claiming tax benefits immediately and avoid rent, leading to cumulative savings of ₹5-7.5 lakh over five years. Under-construction projects carry execution and delay risks, with RERA not always preventing market volatility. RTM properties offer certainty in quality and livability. While under-construction homes might offer stronger appreciation (5-8% annually) under favorable conditions, RTM properties provide risk-adjusted, predictable returns, especially for end-users in the current moderate-growth environment. GST also impacts the decision: under-construction properties attract 5% GST (without input tax credit), whereas RTM homes are exempt, reducing the effective cost gap by another 5-7%. Tax benefits like Section 80C (₹1.5 lakh) and Section 24(b) (₹2 lakh) are available from Year 1 for RTM buyers, improving short-term liquidity. Despite risks, investors with long horizons and strong liquidity are still attracted to projects by reputed developers in emerging areas, with Tier-2 and Tier-3 cities seeing significant land acquisitions. Luxury real estate and early-stage developments also attract High Net Worth Individuals (HNIs) for diversification.

Impact: This news significantly impacts the decision-making process for millions of Indian homebuyers, influencing demand for new versus existing properties. It affects real estate developers, construction companies, and allied industries like banking (home loans), building materials, and home decor. The trend towards Tier-2/3 cities and luxury segments could also spur growth in those specific markets. Impact Rating: 8/10

Difficult Terms: Total Cost of Ownership (TCO): The sum of all costs associated with owning a property over its entire lifespan, including purchase price, maintenance, taxes, and financing costs. EMI (Equated Monthly Installment): A fixed amount paid by a borrower to a lender at a specified date each calendar month. Pre-EMI Interest: The interest paid on the home loan amount disbursed during the construction period, before the actual EMI payments begin. GST (Goods and Services Tax): A consumption tax levied on the supply of goods and services. In real estate, it applies to construction services and property sales. RERA (Real Estate (Regulation and Development) Act): A regulatory act in India designed to protect home buyers and boost investment in the real estate sector by ensuring transparency and accountability. HNIs (High Net Worth Individuals): Individuals who have assets exceeding a certain threshold, typically defined as $1 million or more in liquid financial assets. Section 80C: A section of the Indian Income Tax Act that allows deductions on certain investments and expenses, including home loan principal repayment, up to a limit. Section 24(b): A section of the Indian Income Tax Act that allows deductions on the interest paid on home loans for self-occupied or rented properties.