1. Home
  2. Business
  3. Pre-launch schemes by residential developers may

Pre-launch schemes by residential developers may soon vanish

New Delhi: Pre-sales of residential units is a widely followed practice universally. However, in India, developers go a step further, offering units for sale at a pre-launch stage. During pre-launch, developers offer investors an opportunity
India TV News Desk January 14, 2014 17:29 IST
India TV News Desk
New Delhi: Pre-sales of residential units is a widely followed practice universally. However, in India, developers go a step further, offering units for sale at a pre-launch stage. During pre-launch, developers offer investors an opportunity to purchase residential units ahead of even procuring all necessary approvals.

At times, land title due diligence or product-mix (retail, residential, commercial) considerations may still be underway. During pre-launch, developers apprise an inner circle of brokers/investors that a property not officially launched in the market is available for sale. While one imagines the news spreads through word-of-mouth or email, recently we have seen pre-launch announcements made on public hoardings and in newspapers.

For developers, pre-launch provides funds, which could be used for part-payment of land (or to acquire another piece of land) or meeting approvals related costs (which in India are usually higher). Also, developers benefit through test-marketing a project before spending time, effort and resources on approvals, due diligence and construction. Developers expect to sell 15-20 per cent of units during pre-launch.

For investors, pre-launch provides an upper hand in terms of apartment choice as well as price discount. Market observation suggests pre-launch investors could earn a discount of about 15 per cent over the base price at the start of construction. In recent years, investors enjoyed healthy returns by holding from pre-launch until completion (usually 3-4 years) considering that over the past four years, the price of residential units pan-India increased by over 50 per cent on average. The risk involved is related to approval delays, product-mix changes or project cancellation at worst.