What Drives The Demand For Ready-Possession Homes?

It is no secret that ready-possession projects or projects nearing completion are costlier than under-construction projects. Nevertheless, many buyers are eager to acquire property on an immediate basis rather than waiting. There are sound reasons behind such a decision:

  • Cost Differences: The real estate sector has gone through a serious down phase over the past couple of years, resulting in lower new launches, price reductions and higher unsold inventories. This has encouraged developers to offer attractive deals, discounts and various freebies to attract buyers of ready-to-move properties. Therefore, it makes sense for buyers to invest in a ready-possession project rather than wait for a new project to come up over a period of time. Also, prices are beginning to rise again, and the market is looking up steadily – this is the best time to invest in property, and a property that’s ready to be moved in obviously has great appeal.
  • Cost of Rentals: Most people buy their homes with bank loans, and it becomes costly for them to keep paying EMIs as well as the rentals till the builders complete their project and hand over the house keys. Paying a little bit extra to acquire a house right away is cheaper than paying rentals over a period of time, which is an additional cost for the buyer.
  • Rental Income Potential:A lot of investors buy houses with the objective of earning rental income or re-selling them to earn profits. Purchasing a property in a completed project helps them to start earning immediately out of it through rentals rather than waiting a few years and locking their money away in a non-income generating project.
  •  Security: The real estate sector is still fragmented, and there are a lot of fly-by-night operators who dupe unwary buyers and investors by collecting the initial sums and then vanishing. In these uncertain times, people want security and assured returns, and finished projects offer them this stability and guaranteed safety of a project.
  • Uncertain Delivery Timelines: Unfortunately, the cases of delayed delivery of projects have been on a consistent rise owing to various factors plaguing the real estate sector. This directly impacts the financial burden on a buyer, for whom the uncertainty costs a lot of money. Also, the extended periods of EMIs and other expenses take a toll. Therefore, it makes more sense for buyers to invest in a completed projects rather than ones that is mid-way or about to begin.
  • Uncertain Support Infrastructure: A lot of new projects are coming up in the vicinity of major cities where the supporting infrastructure like roads, electricity, water connections etc. are not developed. These are promised only when the projects are completed, but under-construction projects have to wait for long periods of time. This puts off the buyers who want to move in their new homes and also derive the benefit of ready infrastructure instead of waiting for basic amenities to be provided to them.

These are valid concerns for buyers; and the demand for ready-to-move-in homes works equally well for developers, who can offload their unsold inventory and get much-required liquidity.

Authored By: Ashwinder Raj Singh, CEO – Residential Services, JLL India

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