There are many builders who, after successfully launching a project, begin subsequent phases of the project. That is the reason we are witnessing multiple ventures which now offer properties in their recent launches under stage 2, 3 or 4. The global financial crisis of 2008 significantly impacted the Indian real estate market. A significant slowdown was observed in the launches and sales, and a general downward trend of the realty market was seen. Though the sector somewhat recovered in 2014, economic dilemma continues. Investing in the second stage of an existing project in a scenario like this would have its merits and demerits.
Time of Delivery: The track record of a builder is estimated by the thriving completion & distribution of the first phase of a sizeable multi-phase project. Timely completion of the first phase acts as an assurance factor that delays in delivery would not be an issue in the following stages. A developers’ capability is displayed in multiple ways through his completed projects. They also act as a benchmark for the quality of construction. A good track record is likely to generate the interest of buyers in subsequent phases of the project in similar regions.
Informed decision-making: Completed projects present the investors with an opportunity to check the initial stages of a previously completed project and carefully evaluate the specifications & amenities that are a part of the project. Feedback from the current occupants helps in the final decision-making process.
Ease of getting loans: Banks are more susceptible to granting home loans for projects where the first phase has been executed and delivered. It is likely that projects like these have been cleared by the banks in the prior stage already. This makes the borrowing process faster and easier for the investors.
Lower maintenance expenses: It is not unusual for newer projects do not have full occupancy. The maintenance cost in such a situation is divided among fewer residents. In cases where subsequent phases are launched, it is most likely that the previous stage is fully occupied. This results in lower maintenance cost as it’s divided over a larger group.
The downside of investing in projects like these is that these are usually offered at a premium. An apartment with the same specifications would be available at a higher price to a new investor in comparison to a buyer who would have purchased in an earlier phase. The higher rate also limits the chances of capital appreciation in the initial years of ownership.
It is advised to do thorough due diligence before making an investment decision. Studying the initial phase will give a fair idea of how the next stage will progress. The developer’s professionalism and adherence to timelines would be similar to that in the previous phases. It will be beneficial to determine the transactional process, disclosures by the developer, hidden charges and possession details. A project with an incomplete initial phase and delays may have problems at a later stage of the project too.