What is a soft launch?
Who can benefit from such deals?
Despite all these risks, the lure of the discount is so high that investors willingly take a chance. "As the construction begins , the investor makes a decent appreciation in the property value. Most of the time, buyers just wait for all the approvals to fall into place and the construction to begin to offload their stakes," he adds. Once a developer comes out with an official launch, the rates go up dramatically , at par or on a premium to the ongoing market rate. So a person who invests at the soft launch stage can make a profit by selling his stake either to a new investor or the developer himself. His risk is only the upfront money paid to the builder. However, you would not want to try this stunt with unknown developers , or when you are buying a house to live in.
Is Discounting only reason ?
The best word when scouting around for a dream property has got to be 'discount' . When that discount is to the tune of 20-30 % over the prevailing market rate, only a fool would let go of the golden opportunity, right? So what if it is for a real estate project that is yet to begin construction? Actually , you need to be wary if the sales pitch contains the term 'soft launch' because such projects come with a plethora of risks that may not be worth the discount being dangled.
Tips to safeguard yourself
Before investing, check things like the clearance of the land title, the building FSI and project commencement dates. Take the help of a legal expert at the outset. Verify the reputation of the developer, especially in sluggish markets. If you must speculate, go with big developers because they have a reputation to safeguard. Pay the upfront money via cheque or demand draft as these are legal proof of payment. The agreement you sign must specify the penalty clause if the project is delayed. "You can have everything in life that you want if you just give enough other people what they want."
What Kind of Risk Involved in Soft Launch Projects ?
Risks Involved
Flying blind:
Developers are not in a position to showcase anything of the project during a soft launch, not even building plans. So, for any queries, say, regarding construction quality, you will be asked to check out the developer's earlier projects as an assurance of his current one. Such properties are generally sold directly or through a select group of brokers in a narrow time window, so the investor hardly gets any time for due diligence.
Incomplete paperwork:
The biggest risk is that most of the permissions or approvals are not in place at this early stage, nor is there any guarantee that the project will be able to get all the necessary approvals.
No bank loan option:
Banks take on customers only after conducting due diligence of the project in question. This is not possible at the soft launch stage due to the lack of official approvals and documentation. So customers have no option but to drum up the required cash themselves.
Project delays:
The possibility of the possession date getting pushed back is higher in such projects. This is because nobody can predict how long it will take the developer to get all the approvals from the various departments involved even before construction can commence.
Impromptu changes:
You may find that the proposed building plan has changed or that some promised amenities are missing, but there is no legal recourse available because there is no proof.
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