Ready-to-move or under-construction: which home should you buy?

A ready-to-move home suits you if you need to move soon, want to see exactly what you are buying and would rather not pay rent and loan interest at the same time. An under-construction home can suit you if you have somewhere stable to live meanwhile, can absorb a delay, and are buying from a builder whose RERA-registered project you have checked thoroughly. This guide compares the two on cost, tax, risk and timing, explains what the Real Estate (Regulation and Development) Act, 2016 (RERA) protects and lists the checks for each. It supports our guide to buying your first home in Bengaluru. It is general information; take legal advice for your own purchase, and a chartered accountant's view on tax.

The decision at a glance

Two points in the table need a closer look. For GST, an affordable home means one in a project that started on or after 1 April 2019 with a carpet area of up to 60 square metres in Bengaluru and a price of up to ₹45 lakh. For stamp duty, Karnataka charges a builder's sale deed for a flat on the value of the flat as if fully built, whatever the stage of construction when the deed is signed, and the first sale of a flat valued up to ₹45 lakh carries lower rates. Stamp duty and registration in Karnataka sets out the rates.

What RERA protects, and what it does not

RERA is the main protection for anyone buying from a builder. In Karnataka it is administered by the Karnataka Real Estate Regulatory Authority.

• Registration. A builder may not advertise, book or sell homes in a project without registering it. Under the Act, small projects are exempt: land of no more than 500 square metres, or no more than eight apartments across all phases, although a state may set lower limits. Each phase of a phased project is registered separately.
• Disclosure. The project's page on the authority's website carries the approvals, the sanctioned plans, the number, type and carpet area of the apartments, the promised completion date and quarterly updates on bookings, approvals and construction.
• Your money. Seventy per cent of the amounts collected from buyers must go into a separate account at a scheduled bank, to be used only for the project's construction and land cost, and withdrawn in proportion to the work completed, as certified by an engineer, an architect and a chartered accountant.
• Advances. A builder may not take more than 10 per cent of the cost before a written agreement for sale is registered.
• The plans. Once the plans and specifications have been disclosed to you, they cannot be changed without your consent, apart from minor changes the Act allows.
• Delay. If the builder fails to give possession as the agreement promises, you may withdraw and claim a refund with interest and compensation, or stay and claim interest for every month of delay until handover. In Karnataka the prescribed interest rate is the State Bank of India's highest marginal cost of lending rate plus two per cent.
• Defects. Structural or workmanship defects reported within five years of possession must be fixed by the builder without charge within thirty days.
• Complaints. You can complain to the authority about any breach of the Act.

What RERA cannot do is make a builder finish on time. A remedy depends on a complaint and a decision, and that takes time. An exempt project gives you none of these protections, and a project that should be registered but is not is a warning sign in itself. RERA makes your own checks more productive; it does not replace them.

Checks before you book a new or under-construction flat

1. Find the registration. Search the project on the Karnataka RERA project search. Advertisements must show the registration number and the authority's website address, so check that the number matches, and note the declared completion date and any extension.
2. Read the builder's record. A registration application must describe the builder's projects of the past five years: whether each is completed or still being built, any delay, cases pending and payments due. Read that section, look at the authority's orders and complaint reports for the builder, and visit a completed project to talk to the people who live there.
3. Check the approvals. The sanctioned building plan and the commencement certificate should be on the project page, with the list of approvals still pending.
4. Have the land title checked. The builder files a sworn declaration on its title to the land and any encumbrances on it. Your lawyer should verify both.
5. Compare on carpet area. RERA defines carpet area as the net usable floor area of the flat, including internal partition walls but excluding the external walls, service shafts, and exclusive balcony or open terrace areas. Those areas are disclosed separately, so compare projects on carpet area rather than any larger measure.
6. Look at the payment plan. The agreement for sale must state when and how each payment falls due. A plan that asks for money well ahead of construction deserves questions, because the builder's own withdrawals from the separate account have to follow progress on site.
7. Read the agreement for sale. It must include the possession date, the specifications and the interest each side pays if it defaults. Check what is included: parking, the clubhouse, power backup and the maintenance terms.

Checks before you buy a ready-to-move flat

• The occupancy certificate. RERA makes the builder responsible for obtaining the completion or occupancy certificate and giving it to buyers. Ask to see it. On Bengaluru's e-Khata system, a flat in a building with a valid plan approval and an occupancy certificate is considered for an A-khata; without them, at most a B-khata is possible.
• The e-Khata. It should be final, in the seller's name and transactable, because a sale cannot be registered in the Greater Bengaluru Area without it.
• The finish. Inspect in daylight and, if you can, after rain. Run the taps, try the lifts, check the water supply and look at the common areas.
• The association. Ask how maintenance is run, whether there are arrears or special levies, and how the building handles water and power.

If the seller is an existing owner rather than the builder, the resale documents checklist covers the title chain, the encumbrance certificate and the seller's loan.

The cost of waiting: an illustrative example

The figures here are illustrative only; use your own rent and your lender's rate.

Suppose you pay rent of ₹30,000 a month while you wait two years for possession. That is ₹7.2 lakh in rent before you move in. Suppose also that, by the second year, the lender has released ₹40 lakh of your loan at an interest rate of 8.5 per cent a year. Interest on that amount alone is about ₹28,300 a month (₹40 lakh × 8.5 ÷ 100 ÷ 12), so rent and interest together come to about ₹58,300 a month. A ready flat at a somewhat higher price can cost less overall once that is counted. Ask your lender exactly how it charges interest before full EMIs begin, and see how an EMI is calculated for what follows.

Who each one suits

A ready-to-move home suits you if:

• you need to move within months, or you are paying rent you would like to stop;
• you want to inspect the actual flat, the building and the neighbours before paying;
• you would rather keep the paperwork and the loan simple.

An under-construction home suits you if:

• you have somewhere stable to live and can afford rent and loan interest together;
• your plans could absorb a delay to possession;
• you prefer to pay in stages and have checked the builder's record and the project's RERA page thoroughly.

If you are buying to let, the date you can let the flat matters as much as the date you could live in it. How Nest Partners manages a rental home explains what happens after possession.

Common questions

Is GST charged on a ready-to-move flat?

Not on a resale, and not on a builder's flat when the whole price is paid after the completion certificate is issued or the building is first occupied. If any part is paid before then, GST applies to the purchase.

What can I do if the builder delays possession?

Under RERA you can withdraw and claim a refund with interest, or stay and claim interest for each month of delay until handover. Complaints go to the Karnataka Real Estate Regulatory Authority; a lawyer can advise which route suits your case.

Whichever you choose, put every promise into the agreement and check each document against the original before you pay.