Perhaps one of the most risky decisions that one has to take in buying real estate is to buy an under construction property.
1) Check if all approvals are in place
It's extremely important to check if the legal papers are in place. For this, you would need to consult a legal expert which is a must, especially with regards to the land on which the property is constructed. Also, look for sanctions from the requisite authorities. For example, in the city of Bengaluru, the BBMP grants approvals for projects.
2) Project has the approval of the banks
Look to see if banks are providing loans to the project. This would give some amount of safety with regards to the project, as banks will once again check if all documents of the builder are in place.
3) Delay in possession clause
Check the extent of delay that is permissible and the compensation that the builder would provide for delayed in possession. Most builders provide some compensation per square feet per month for delay in possession. Of course, in most cases this amount is really miniscule.
4) Check for the total costs and the break-up of costs
Many builders quote the basic cost and then add various charges like maintenance, value added tax, one year advance maintenance. There are some others who give you the total cost. Understand each and every break-up clearly, so there is no question of ambiguity.
Remember, all builders may not be transparent and most might just want to sell their projects.
5) Reputation of the builder
Most of the reputed builders charge a premium in terms of cost per square feet. But, there are also hopes that they would deliver the project on time. This is one of the biggest worry for investors given the fact that delays could be as long as one and two years. It's extremely important therefore to check the reputation of the builder.
One of the riskiest things to invest in is an under construction property simply because scores of investors in this country have faced delays and many have been duped. In the absence of a regulator investors have had to bear the brunt. It is therefore imperative to be cautious when buying.