Under construction vs existing projects: Which one is better?

Are you someone who is looking for his next real estate investment?

If you want to safeguard your money, try investing in real estate projects because these projects come with multiple advantages. 

For example, you can use real estate projects in many ways. You can rent it out, you can use it to run businesses, you can rent out your property, you can lease out, you can even rent your spare rooms by listing them on sites like Airbnb. In short, real estate properties are a perfect investment opportunity in Pakistan and for all the right reasons.

However, now the main question arises.

Should you invest in an under-construction project or an existing project?

Both of these real estate projects come with their own set of pros and cons. 

In this blog, we take you through the strengths and weaknesses of both projects so that you can make a better and well-informed decision.

To know more about different kinds of projects and how they work, keep on reading.

Under construction projects:

Under construction, real estate projects are gaining popularity by leaps and bounds. These projects are perfect for people who are looking for a long-term investment opportunity in Pakistan.

Pros of under-construction projects:

Following are some of the most common advantages of investing in an under-construction project:

• Affordability:

Under construction projects are less expensive as compared to already established houses. For instance, many new housing societies in Pakistan are under construction. In new housing societies, apart from the house itself, the area where the under-construction projects are located also needs improvements in terms of their facilities and infrastructure. These factors lower the overall price of the project.

You can hire any construction company to convert the project into a masterpiece.

• Returns:

Under construction projects are more in demand as compared to already made projects. Old housing societies lose their popularity because they usually consist of old designs and fewer amenities. 

On the other hand, under-construction projects have high demand. Due to their increased demand, the returns are also high. Under construction projects come with a higher window period. There is a long time between buying time and delivery time. If you invest in a house that is closer to its possession period, the chances are that they will give you better returns. 

• Usage:

Under construction projects are usually purchased by people looking for avenues to invest their hard-earned money for the long term. Hence, it is safe to say that under-construction projects are ideal for people who want to invest in long-term investment opportunities in Pakistan.

Cons:

The under-construction projects have many benefits, but they have some disadvantages as well.

• Higher risk:

The risk ratio in the case of an under-construction process is higher than existing projects. There are many cases in Pakistan where the builders failed to deliver the product they promised their clients. There are many reasons for delayed delivery of projects, including funding crunch, frauds, scams, lack of raw material, labor strikes, legal complications, etc. All these factors delay the process, and in the end, the client has to suffer tremendously.

To keep yourself away from such instances, it is better to invest in properties approved by your area’s development authority. Verified projects will not only safeguard your hard-earned money but also generate good returns. 

• Discrepancy:

One of the major drawbacks of an under-construction project is a discrepancy between the final product and the planned product. Usually, builders in Pakistan do not deliver what they promised their clients. Only a handful of companies ensure timely completion and possession of the product they promised their clients.

• Tax issues:

Purchasing an under-construction property will attract a tax incidence of five percent of the property’s total cost. In addition, stamp duty and registration charges will have to be paid separately, resulting in heavy expenditure on taxes. Affordable homes priced under Rs 45 lakh attract one percent GST of the total cost of the property. 

These expenses and duties add up and increase the financial burden on a person.

• Existing projects:

Like under-construction projects, existing projects come with their pros and cons.

Pros:

Following are some of the most evident advantages of existing real estate projects in Pakistan.

• Availability:

Unlike under-construction projects, existing projects are readily available for moving in. There are no or minimal waiting hours associated with existing projects and the occupants can move in easily. In short, the developed projects have shorter window periods. 

For developed projects in Pakistan, you do not have to wait for months and years. It is all completed for you. Then, you have to pay its price, meet the legal requirements and move in. 

• Less risky:

With existing projects, you do not have to be risky. When you invest in such projects, you get what you paid for. You can visualize the final project and make a decision accordingly. 

For example, when you invest in a shop located in an already established mall, you have a choice of visiting the property and examining its layout, features, facilities, and amenities. In these cases, you can make more informed decisions because the product is right in front of your eyes. 

• Infrastructure:

The infrastructure of existing projects is usually well established. For instance, the existing projects are located in well-known housing societies in Pakistan. Therefore, they have good facilities, amenities, and features needed to live a good and peaceful life. These factors also increase the property value. 

• Usage:

Existing projects are usually used by people living for residential properties or places to start their business, such as business centers. Hence, it is safe to say that the intent behind getting an existing house is a personal need or preference.

Cons:

Existing projects also come with some limitations and drawbacks.

• Costly:

Ready-to-sell real estate projects in Pakistan are usually costly as compared to under-construction projects. The sellers typically charge a premium on the ready-made or existing real estate projects because of their demand. So, if you are someone who is on a budget, existing real estate projects might be costly for you.

• Return on investment:

Existing real estate projects come with moderate to low returns on investment. This is because the well-established houses or commercial buildings get old and depreciate over time. So, people prefer to invest in hot selling projects instead of investing their money into old projects that have matured over time. 

This factor reduces the return on investment, and hence, the investors get a lesser return on investment. 

• Additional costs:

There are additional costs associated with existing projects. For example, if you invest in an old property, you will have to pay for its renovation costs. Also, when you purchase an existing project, you have to pay for legal services that you will need to transfer the property under your name. All these costs add up and may cause you a financial burden.

So, these are some of the pros and cons associated with under-construction projects and existing projects. We hope this comparative blog will provide you with valuable insights and aid you in making well-informed decisions that will be fruitful for you in the future.

If you have any questions regarding the topic, please feel free to leave a message in the comment section below. Our team will get back to you as soon as possible.