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PRE LAUNCH Vs. SOFT LAUNCH

Pre-launch, a highly-debated issues in real estate, means raising money from the public for projects which are yet to get regulatory approval in the form of license and clearances. In short, it is like selling a house which has not even had its foundation stone laid. Soft launch is legally permissible, but it is different. When investing, an individual needs to understand between the two.

While both are meant to attract investments before a project is actually ready, in the case of pre-launch, a builder seeks investments even before seeking regulatory approvals are in place. In case of soft launch, the move follows after receiving all the necessary approvals.

How can an investor understand the difference?

One can make it out by the mode of payment asked for. Since pre-launch is an illegal practice, a builder will insist on cash payment. An investor should understand that only the amount one pays in cheque is the actual and official valuation of the property that he is investing in.

Why then are there takers for pre-launch?

Investors are often lured by the significantly low prices on offer. On an average, a property's pre-launch price is less than one-third the price after actual launch. But since the entire transaction is through a benami deal, the investor often does not have an enforceable right.

Source:http://articles.economictimes.indiatimes.com/2007-01-01/news/27682645_1_carpet-area-investor-approvals

REAL ESTATE - UNDERSTANDING PAYMENT PLANS

Down-payment plan: It is the most conventional scheme where you have to pay 10-15% upfront, called down payment, at the time of booking and thereafter 80-85% of the total cost within 30-90 days of booking. The remaining 5-10% balance amount, along with any additional charges, is paid at the time of possession. In case you are taking a home loan, the equated monthly installments, or EMIs, start immediately as soon as the bank makes the upfront payment. So, interest is charged on the entire amount from day one. Also, you'll not get any tax benefit on the principal value till the possession. However, if you can manage the cash flow, you can get hefty discounts, sometimes as high as 15-20%, depending on your bargaining skills. The caveat here is any delay in completion and delivery, which is common in this sector.

Construction-linked plans: As the name suggests, the payments under this plan are linked to the construction stages. You have to pay around 25-30% of the purchase price within 90 days from booking and the balance in installments on completing different construction milestones. It is usually 10% of the total cost on completion of every floor. Thought you are unlikely to get any discounts under this plan. Risks related to project delays are much less than a down payment plan. Also, you get full tax benefit under 80C from the beginning.

Time-linked plan: Under this plan your installments are time-bound. You have to make payments based on a pre-determined calendar set by the builder, irrespective of the progress that the project has made towards completion. So, even if there is a delay, you are contractually bound to make the payment as per the timetable. Any delay in installment means you will have to pay penalties-- interest on installments payable. It is therefore not a very popular plan.

However, since the risks are higher, some developers offer discount on time-linked plans as well. Also, like in a construction linked plan, you get full tax benefit from the beginning.

Flexi-payment plans: This plan is a combination of down-payment and construction-linked plans. Here, you are required to pay 10% on booking, another 30-40% of the property value within 30 days of booking. The rest 50-40% payment is done in tranches just like in a construction-linked plan. The last 10% along with one-time charges is paid at the time of possession. Since these installments are linked to the stages of construction, it is a safe option in case of any delay.

Source:http://articles.economictimes.indiatimes.com/2014-03-28/news/48662803_1_down-payment-plan-tax-benefit-instalments

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