While investing in housing in Patna one always ponders where pre launch residential projects are a better bet? The answer is both YES and NO. It depends on investors’ objective and risk appetite. Pre launch investment in housing in Patna would always exist because regardless of the state of the economy, associated market sentiments and on-going funding trends, developers need to generate initial capital to successfully launch and complete their residential projects in Patna. Only by doing so can they maintain the kind of churn that makes the real estate development business in Patna a profitable venture.
However, lending to the real estate sector in Patna is currently in a low-sentiment phase. Interest rates are high for funding that is still available, and in Patna some developers do not meet the required eligibility norms for funding at all. Patna has a number of small and first time developers who have turned builders because they had a piece of land as inheritance. In such circumstances, they may seek to raise interest-free capital from the market by pre-launching their projects in Patna.
A pre-launch (or ‘soft’ launch) is a situation where a developer in Patna apprises an inner circle of brokers and investors of the availability of apartments for sale in Patna in a project that has not been officially put on the market yet. Word of such an arrangement spreads by word of mouth and via email and social media, but does not figure on the developer’s website in Patna or in other marketing media the developer in Patna is using. The kind of buyers who show interest for pre launch residential projects in Patna are usually opportunistic investors and end-users who seek to benefit from the price advantage and can wait for a couple of years before getting possession of their flats in Patna.
Investing in pre-launched projects in Patna is a high-risk undertaking which can pay off as long as one has factored in all possible variables. It makes most sense to investors who have a high risk appetite and the ability to weather an eventual setback, especially by delay in delivery of apartment in Patna. Investing in pre-launches is, generally speaking, not a route that end users are advised to take unless there is a high degree of certainty implied in the builder’s brand and track record in Patna.
The price advantage of buying into a pre-launch project in Patna can be anything between 5-20%, depending on various market factors prevailing in Patna. However, the high risk factor must not be ignored. The pre launch project in Patna may not have been cleared for home loan approvals, or the developer in Patna may not have obtained all the required permissions for the project. Also, the funds generated by pre-launching the project may not cover the total cost of construction and the project may be delayed or even shelved.
Investors into pre-launched projects in Patna need to do a fair degree of due diligence before deciding to go ahead:
They must establish whether the builder in Patna has free and clear ownership of the land on which the pre launch project is being offered. An agreement between builder and the original owner of the land is not sufficient.
The project needs to have a IOD (intimation of disapproval). This is a set of instructions that a developer in Patna needs to comply with so that he can legally construct the project. The IOD is valid for one year and needs to be reissued if the project has not been completed in a year’s time.
The project also needs to have a commencement certificate in place.
While considering a pre-launch option in Patna, it is certainly necessary to establish the trustworthiness of the builder in Patna. This includes investigating his track record for transparent dealings and compliance with legal formalities, his overall track record for timely project completions and the magnitude of experience he has had in the real estate industry in Patna.
Established residential property builders in Patna with good reputations in the local market are generally safer bets, since they are able to bring in the necessary approvals and attract a healthier response from the real estate market in Patna. The latter fact is important because the developer’s ability to complete the project depends at least partially on bringing in a certain critical mass of sales when he pre-launches a project in Patna.
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