A couple of days ago while I am preparing to leave for the office, my neighbour comes up to me asking, “Hey, seems like I am finally getting my 2bhk at a price I want – at a 30% discount.” “Send me the sweets,” I reply. As he reveals further details, it turns out it was a pre-launch housing project.
I am getting late for work. I promise him I will give my opinion on the project through an article.
Then it dawns on me…there are so many people like Mehta ji… unfamiliar with and exposed to the real estate terms and jargon like pre-launch, soft launch, etc. And like they say “Little knowledge is a dangerous thing.” Especially if it involves savings of a lifetime.
Let’s find out what are Pre-launch and Soft launch in the real estate market. Their differences, advantages, and above all disadvantages.
The rationale behind pre-launch and soft-launch projects
Putting up a real estate project is a long and complex process. It goes through several stages from ideation and planning to completion and transfer of the property to the buyer. Then there is the most critical element to take care of – the funding. Garnering capital from the market involves hefty interest. Another and more popular strategy is to let the homebuyers invest in the project. That way the developer can save on the hefty interest he’d otherwise cough out to financiers. Both the pre-launch and soft launch are part of this second strategy.
What is a pre-launch project in real estate?
A real estate project is said to be at the pre-launch stage when there is nothing on the ground and no regulatory approvals on the files. The project has only reached the stage of ideation, planning, drawings, and strategy.
The developer announces the pre-launch to generate funds from interested buyers. Attractive pricing, enticing discounts, and awesome offers are floated to garner bookings. Sometimes the discount can be as steep as 40% of the real price making it especially alluring for first-time home buyers or those with a cash crunch.
For example, a pre-launch 2bhk can sell at 25 lac when the ready-to-move-in price for the same home comes to 40 lac. And this was the reason Mehta ji was so happy.
What is a soft launch project in real estate?
A real estate project is said to be at the soft launch stage if the developer has applied for, and probably got a few, regulatory approvals.
Pre-launch investments are riskier than soft launch
Investing in pre-launch property is very risky as you never know if it will get the required approvals or not. Chances are it might never see the daylight. Just so you know there are close to 40-50 regulatory approvals are required – from different government agencies – for a real estate project to go ahead. What will happen to your money then? Such investment lacks legal protection as robust as a regular one. Even soft launch investments are better protected than this one. But more on that later.
Even if the project gets all approvals, attaining all permits, and that too within the deadline is a task only a few developers manage. And that means a painful delay in construction and subsequent possession.
But all is not gloom and doom here. You can go with reputed builders with a good track record. After all, getting 3BHK at the price of 2BHK is worth it if the risk is manageable.
Soft launch investments are less risky and a better bet
Such deals are less risky as the project is more likely to see completion than the pre-launch ones. With less risk comes less profit as the most discount you can expect here is between 20%-30% – much less than pre-launch ones.
How to minimize the risk associated with Pre-launch and Soft launch projects:
Whichever of the two options you opt to invest in, please follow the guidelines below to be on the safe side and get the maximum out of the deal.
Always keeps the receipts of the investment.
Only Invest with developers with a good track record and market reputation.
If possible, consult a property lawyer before signing on the dotted lines and giving your money.
In case it is a Soft launch you are investing in, there are additional guidelines to follow
Ask for approvals that have been claimed as received by developers.
Demand the Commencement Certificate (CC) and Intimation of Disapproval (IOD) letter of the project from the developer or marketer – whoever you are dealing with.
Important points to know about pre and soft-launch real estate deals
It targets 2 sorts of customers: investors with cash crunch…and speculators with large budgets and risk tolerance
Apart from the monetary benefits, another advantage is that as an early buyer, you get the liberty to choose your preferred unit in the project.
It’s difficult to get loans for such projects as most banks and financial institutions don’t back such premature projects.
Conclusion: Nothing excites the Indian public more than Deals and offers. The heavier the discount, the more the chances of taking the bait. Such offers are great if you are well-informed about the fine print and associated risks. The problem arises when you jump the gun in the excitement of a discount bonanza. At all costs, do go through all the ins and outs of the such deal before parting with your money.