By Susant Rout, INVESTO Consulting Group

Choosing between a ready-to-move-in house and an under-construction property is a critical decision for any homebuyer, with each option offering distinct advantages and challenges. While under-construction homes may seem appealing due to lower initial costs and flexible payment plans, they come with uncertainties like delays, quality risks, and hidden expenses. On the other hand, a ready-to-move-in house provides immediate occupancy, transparency in quality, and no waiting period, making it a more secure and hassle-free investment. In my opinion, opting for a completed property is often the wiser choice, especially for those seeking stability and convenience. Let’s explore the key reasons why a ready-to-move-in home makes more sense for most buyers.

1. Risk and Peace of Mind

The old saying “one in hand is better than two in the bush” fits perfectly when choosing between ready-to-move-in and under-construction properties. Investing in an under-construction property brings the inherent risk of delays or defaults from the builder when delivering possession. You’re essentially lending the developer money—often at an implicit high interest rate—while carrying the risk of things not going as promised. Many buyers have faced lengthy delays or even defaults, making the investment of your hard-earned (or borrowed) money quite risky.

In contrast, a ready-to-move-in property eliminates this uncertainty. You immediately get possession, so if you intend to live in the new home, you save on rent straight away. Alternatively, if you’re buying for investment, you can start earning rental income from day one.

2. Taxation Implications

a. Interest on Home Loans

Most buyers use housing loans to finance their homes, but the tax benefits on loan repayments are only available after possession is taken (i.e., after the property is completed). Any interest paid before possession can be claimed in five equal parts from the year you take possession. However, for self-occupied properties, the maximum annual deduction is limited to ₹2 lakhs. So, if your regular home loan interest already meets or exceeds this limit, the benefit of amortizing pre-possession interest is lost.

b. Completion Time and Reduced Tax Benefits

Tax benefits up to ₹2 lakhs on home loan interest for self-occupied property are only available if construction is finished within five years from the end of the financial year in which the loan was taken. If not, your interest deduction drops drastically to just ₹30,000 per year.

c. Capital Gains Tax Exemption

Tax law allows you to avoid paying capital gains if you buy a new house within two years (or construct one within three years) of selling another asset. If your under-construction property isn’t completed within the three-year window, exemption from capital gains tax could be denied, and you’d have to pay tax on the gain.

d. Home Loan Principal Repayment

You can claim a deduction of up to ₹1.50 lakhs every year on home loan principal repayments—but only after you’ve taken possession. Any payments made before possession don’t qualify for tax savings and can’t be claimed later.

Opting for a ready-to-move-in home not only removes construction risk but also ensures you receive maximum tax benefits from the start and enjoy financial peace of mind.

BULLET POINTS:

Advantages of a Ready-to-Move-In House

1. Immediate Occupancy – No waiting period; you can move in or rent it out right away.
2. No Construction Delays – Under-construction projects often face delays due to approvals, funding, or builder issues.
3. Transparency – You can inspect the actual property (quality, space, ventilation) before buying.
4. No Risk of Builder Default – Many under-construction projects get stuck or abandoned.
5. Lower Price Volatility – No risk of future price hikes (common in under-construction projects).
6. Home Loan Benefits – Banks offer loans based on the full property value (unlike under-construction, where disbursement is linked to construction stages).
7. Rental Income Potential – If buying for investment, you can start earning rent immediately.

When an Under-Construction Property Makes Sense

1. Lower Entry Cost – Prices are usually cheaper at early stages (but may increase later).
2. Customization Options – Some builders allow modifications during construction.
3. Newer Designs & Amenities – Under-construction projects may offer modern features.
4. Potential Appreciation – If the location is developing, prices may rise by possession time.

Why RTM is Usually Better

• Risk Avoidance – Real estate is prone to delays, frauds, and quality issues in under-construction projects.
• No GST on RTM (for non-under-construction properties, saving 5-12%).
• Peace of Mind – What you see is what you get.

Exceptions Where Under-Construction May Work

• If the builder is highly reputed (e.g., Tata, Godrej, Prestige) with a strong track record.
• If you’re getting a significant discount and can afford delays.
• If you don’t need the property immediately (long-term investment).

Final Verdict

Unless you’re getting a great deal from a trusted builder, a ready-to-move-in house is safer, more transparent, and hassle-free. It’s especially better for:

• End-users who need a home now.
• Risk-averse buyers who want certainty.
• Investors looking for quick rental yields.