Before investing in Pre-Launch Property

Sometimes loans from banks and housing finance companies to real estate sector have been on decline .This become sometime risky. Lenders are preferring to stay away from this sector even if the cost meets their margins. According to Jones Lang LaSelle, real estate consultancy firm in such situation real estate developers are looking to raise interest-free funds from the market by pre-launching their projects.

While demand for loans in the retail sector continues to be robust so the company is careful in its lending to the developer segment as it is impacting our net interest margins - V K Sharma, Director and Chief Executive, LIC Housing Finance

Pre-launch is a situation where developer informs broker and investor about availability of properties in a particular project that has not been officially put on the market yet. This is spread spreads by word of mouth, but does not mentioned on the developer's website or other marketing media.

Investing in property at pre-launch stage can be anything between 5-20%. It depends upon various marketing factors. However, investors must keep in mind that such project may not have received all required approvals or may not be cleared for home loan approvals by lenders. So, buyers of pre launch property need to check all approval and permission before investing.

Another risk in investing in pre-launch property is that project may be delayed or if developer is unable to raise sufficient funds.

Before investing in pre launched property investor must check following things –
•    Confirm that builder has free and clear ownership of the land on which the project s going built.
•    The pre-launched project must have an Intimation of Disapproval (IOD).It is a set of rules that a developer must obey with so that he can legally construct the building. The IOD is valid for one year and needs to be reissued if the project has not been completed in a year’s time.
•    The project must have a commencement certificate in place.