Should You Invest Under Construction To Get High ROI In 2022-23?

There is no denying that the realities of the past few years have created a sense of insecurity in the minds of investors. However, that reluctance was short-lived and the industry is looking at a full recovery. Even so, owning one is still beyond the reach of the average person.

Ready-to-move-in or under construction? Since 2022 will be a pivotal year for the sustainable recovery of the housing sector, investing in a property under construction will bring some excellent returns in the long run. Let’s analyze why?

Low input cost

As the real estate sector struggles to stand on its own two feet, real estate developers are rolling out lucrative offers and large amounts to attract home buyers. Since projects under construction take time to complete, an investor can book a property with only 5-10 percent of the actual cost and the rest can be paid in phases or according to the developer’s deferred payment plan.

Thus, the input cost is a fraction of the amount used in the acquisition of a ready-to-move-in housing unit. In 2022, developers are much more willing than ever to invite investors. Therefore, investors must consider the ownership of the property under construction.

Affordable interest rates

The economy is recovering from an unprecedented epidemic, the pace of credit disbursements is accelerating and interest rates on housing loans are at an all-time low. Nationalized banks are offering home loans at 6.50-10 per cent, while non-banking finance companies (NBFCs) are offering home loans at 6.90 to 12 per cent.

This makes it a good time for investors to take advantage of lower interest rates and invest in properties under construction. In addition, the home loan can be synced with the developers’ payment plan so that the installment is released once the construction stages are completed.

High return potential

As the economy recovers from a difficult challenge, the pace of growth over the next decade will be remarkable. According to Moody’s, the Indian economy is expected to grow at 9.1 percent next year. This forecast shows the potential of the Indian economy. When real estate investors consider a property under construction, the rate of return on a 7-10 year time scale would be excellent.

In addition to the residential segment, commercial real estate investment is also on the rise. If renting is the sole purpose of the investment, you may want to consider a commercial property under construction.

Attractive offer

To attract potential home buyers, reputable real estate developers are offering attractive discounts, free furniture, low booking amounts, stamp duty rebates, late payment plans (often construction links), group discounts and free clubs for a fixed period of time. Developers are doing this to attract serious buyers and encourage them to consider the project from a long-term investment perspective. Investors who want to make a rental income after a few years can start with an initial investment and once completed, the investment can be a workhorse.

Ultimately, 2022 provides a unique opportunity for real estate investors to invest in a property under construction because the initial investment costs are low, and there are many options to choose from. However, factors such as location, developer reputation, RERA registration and connectivity must be kept in mind before investing in a property under construction.

(By Suren Goyal, Partner, RPS Group)

Disclaimer: This is the personal opinion of the author. Readers are advised to consult their financial planner before making any investment.