Investing in Under-Construction Residential Projects in India: Opportunity, Trends, and Considerations

Under-construction residential projects have emerged as a popular investment avenue in India’s real estate sector, driven by the promise of modern amenities, flexible payment plans, and potential value appreciation. As buyer sentiment evolves, understanding the risks and benefits associated with these investments is crucial for informed decision-making.

Why Under-Construction Projects Attract Investors

1. Lower Entry Prices and Flexible Payment Options

• Under-construction properties typically come at prices lower than ready-to-move-in units, allowing buyers to enter the market with a smaller capital outlay.

• Staggered payment schedules tied to construction milestones reduce upfront financial pressure and support better cash flow management.

2. Customization and New-Age Amenities

• Buyers often get the opportunity to customize interiors and select preferred layouts or finishes during construction.

• New projects are more likely to offer contemporary amenities and smart home features, aligning with evolving lifestyle aspirations.

3. Potential for Higher Returns

• According to a recent survey of 1,629 homebuyers across India’s top eight cities, under-construction homes are the most preferred, with 67% favoring this segment. The preference is even higher in cities like Pune (81%), Ahmedabad (79%), and Hyderabad (78%), signaling robust demand for ongoing developments.

• Millennials and Gen Z, with their focus on modern living and investment-driven strategies, are among the most enthusiastic for under-construction properties, seeking customization, lifestyle amenities, and price benefits.

Key Influencers in Decision-Making

Factors Shaping Buyer Decisions

Factor	Percentage of Buyers Influenced
Location	50%
Property size/layout	45%
Affordability	45%
Builder reputation	43%
Workplace proximity	33%
Amenities	32%

• Builder credibility and track record have gained prominence, given past incidences of project delays and quality concerns.

• Location remains paramount, affecting long-term appreciation prospects and rental demand.

Benefits of Investing in Under-Construction Projects

• Early Bird Advantage: Lower launch prices allow entry before subsequent price hikes.

• Wider Choice: Investors can choose from a wide range of floors, views, and apartment configurations.

• Tax Benefits: Home loan interest and principal payments can offer tax rebates, even during the construction phase in many cases.

• Modern Specifications: New projects cater to current market demands—energy efficiency, green spaces, and integrated retail or health facilities.

Risks and Mitigation Strategies

1. Construction Delays

• Risk: Delays may lead to increased costs and postponed possession.

• Mitigation: Opt for projects registered under RERA (Real Estate Regulatory Authority), and favor established developers with proven delivery records.

2. Regulatory and Approval Risks

• Risk: Incomplete clearances can impede project progress.

• Mitigation: Buyers should verify all legal approvals and conduct due diligence before investing.

3. Invisible Costs

• Payment plans may sometimes mask the true cost, with additional charges applied for amenities, parking, or last-mile finishing.

• Transparent documentation and legal vetting are key to avoiding surprises.

4. Quality Assurance

• Specifications in brochures may differ from actual delivery; site visits and independent inspections are advised before final payments.

What to Consider Before Investing

• Check RERA Registration: Mandatory for all new projects, RERA registration ensures a degree of accountability and transparency.

• Builder Reputation: Research the promoter’s track record on delivery, financial stability, and previous project reviews.

• Understand Payment Schedules: Confirm the linkage to construction milestones and clarify any interest liabilities.

• Review Contract Clauses: Focus on penalty terms for delays, refund provisions, and force majeure events.

• Evaluate Location Infrastructure: Examine proximity to transport, schools, healthcare, and future infrastructure plans, as these influence both end-use convenience and resale value.

Investing in under-construction residential projects can offer significant rewards, ranging from lower entry costs to the potential for attractive appreciation. However, success in this space depends on diligent research, a careful assessment of the builder’s credibility, and a thorough understanding of market and regulatory realities.

For investors seeking value and flexibility, under-construction properties in India’s top cities remain a compelling proposition—but only with prudent risk management and an informed approach.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions. The content of the above article is based on references, learnings and interpretations. Invest Corners does not guarantee the accuracy of the information provided.