Deciding between a ready-to-move-in property and an under-construction property is a common dilemma faced by homebuyers. Each property type caters to different needs and objectives, and carries distinct tax implications. It is crucial to understand the pros and cons of both options before making a decision. This comprehensive guide aims to assist you in making an informed choice.

According to the latest report by ICRA, residential property sales have surged by 11% in seven prominent Indian cities, including Bangalore, Chennai, National Capital Region (NCR), Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), and Pune during the third quarter of FY2022-23. This boost in sales is primarily due to a rise in demand for residential properties nationwide. ICRA further added that the sales figure of 149 million square feet (msf) recorded in Q3 FY2022-23 in these seven cities marks the highest quarterly sales reported in more than a decade.

Steady demand results in robust sales volume:
According to the report, the residential real estate sector experienced robust demand during Q3 of FY2023, with an 11% year-on-year growth in the area sold. In the first nine months of FY23, the area sold increased from 307 msf to 412 msf year-on-year. Furthermore, a shift in the segment-wise composition has been observed post-pandemic, with an increase in the share of mid and luxury segments in the sales across the top seven cities.

Rise in the share of luxury and mid segments to overall sales:
ICRA observed that the proportion of luxury and mid-segment properties in sales increased from 14% and 36%, respectively, in FY20 to 16% and 42% during April-December of FY23. The trend towards acquiring more spacious/upgraded properties and a preference for home ownership is expected to persist. The report further predicts that the value of the area sold in the residential real estate sector is anticipated to increase by 8-12% in FY23, and a further 14-16% in FY24 based on data obtained from the top 12 listed real estate developers.

Despite the recent rate hikes by RBI, affordability levels remain robust:

Anupama Reddy, Vice President and Co-Group Head – Corporate Ratings at ICRA, states that despite the recent repo rate hikes by the RBI, home loan interest rates remain lower than the peak pre-COVID 19 levels, and affordability levels are still healthy. However, there are potential risks to affordability, such as a growth slowdown in the job market and further interest rate hikes.

ICRA reported that as of December 2022, unsold inventory levels decreased to 839 msf from 923 msf in December 2021. This led to a decade-low of 1.5 years for years-to-sell (YTS) for the unsold inventory. Additionally, in Q3 of FY23, average sales increased by 10 percent YoY, due to partial pass-on of increased input costs and a higher share of luxury homes in the product mix.