New and upcoming projects attract many first-time buyers. You get a brand-new home, often with flexible payment plans and a choice of floor and unit. The trade-off is time: you pay over months or years before you get the keys. Here is how to do it with your eyes open.
This guide covers how the process works, the protections the law gives you, a worked monthly budget, a checklist and the mistakes first-time buyers make most often.
How buying under construction works
You book a unit, sign an agreement for sale, and pay in stages as construction progresses. Your bank releases loan money in instalments too, so you may pay only interest (called pre-EMI) until the loan is fully disbursed.
A typical journey looks like this:
- Shortlist and verify. Check the RERA registration, approvals and builder record.
- Book. Pay a booking amount and receive an allotment letter.
- Sign and register the agreement for sale. This fixes the home, the carpet area, the price, the payment plan and the possession date.
- Take the loan. The bank sanctions the loan and often signs a tripartite agreement with you and the builder.
- Pay in stages. Each time a stage is done, the builder sends a demand letter. You pay your share and the bank pays its part.
- Possession. After the occupancy certificate, you inspect the home, take the keys and register the sale deed.
How RERA protects you
- Registration. A project must be registered with RERA before it is advertised or sold (Section 3). Check the number on the Karnataka RERA website.
- Booking cap. The builder cannot take more than 10% of the price before signing a registered agreement for sale (Section 13).
- Escrow. 70% of buyers' money must go into a separate account used only for that project's construction and land (Section 4).
- Delays. If possession is late, you can claim interest for every month of delay or withdraw and get a refund with interest (Section 18).
- Carpet area. Section 2(k) defines carpet area as the usable floor inside your walls. Price must be stated on this basis, so compare homes on carpet area only.
- Taking possession. Section 19(10) asks you to take possession within two months of the occupancy certificate. Plan your move with that in mind.
The cost side
An under-construction flat attracts 5% GST for most homes (2.5% CGST + 2.5% SGST), or 1% for homes that meet the government's "affordable" definition. If you rent while you wait, remember you are paying rent and pre-EMI at the same time. Add both to your monthly plan.
A ready home with an occupancy certificate does not attract GST at all, because it is no longer a supply of construction service. That is one real cost difference to weigh against the flexibility of an under-construction purchase.
A worked budget (illustrative only)
These numbers are for practice and are not a Reeva price. Say the agreed price is ₹70 lakh and you take a loan of ₹56 lakh, which is 80% of the value, the RBI ceiling for homes between ₹30 lakh and ₹75 lakh.
- Your own money: ₹70 lakh minus ₹56 lakh is ₹14 lakh, paid in stages.
- GST at 5%: ₹3.5 lakh over the build period, also paid in stages.
- Pre-EMI: if ₹28 lakh of the loan has been released and the rate is an illustrative 8.5% a year, the monthly interest is ₹28,00,000 × 8.5% ÷ 12, which is about ₹19,833.
- Rent: say you pay ₹22,000 a month for your current flat.
In that month you pay about ₹41,833 for housing. As more of the loan is released, the pre-EMI rises. When the full ₹56 lakh is out, interest alone is about ₹39,667 a month. A full 20-year EMI on ₹56 lakh at the same rate is about ₹48,600. Test whether your salary can carry rent plus the higher figure for a few months before you book.
Five checks before you book
- RERA number, approved plans and promised completion date.
- The builder's record of finishing earlier projects on time.
- Which banks have approved the project for loans. Bank approval means they have checked the title.
- The payment schedule, linked to construction stages, not dates.
- Site progress. Visit, take photos and compare with the RERA quarterly updates.
Questions to ask the sales team
- Is the payment plan linked to stages, and what are the stages?
- What does the price include: parking, club, power backup, legal fees?
- What exactly is the carpet area of this unit, as written in the agreement?
- What are the cancellation terms, and how much is forfeited?
- Which bank holds the project's separate account?
Common mistakes first-time buyers make
- Budgeting for EMI only. Rent, GST, stamp duty, registration, interiors and moving costs come too. List all of them.
- Comparing "super built-up" numbers. These include shared areas and differ between builders. Carpet area is the fair comparison.
- Paying ahead of the schedule. Some buyers pay early for a discount. If the project slows, your money is locked in. Pay as per stage unless you understand the risk.
- Skipping the agreement draft. Ask for it in advance. Read the possession, delay and cancellation clauses slowly.
- Not visiting during construction. A short visit every few months, with photos, keeps you informed and gives you a record.
Papers to keep in one folder
- RERA page screenshot with the date you checked it
- Allotment letter and registered agreement for sale
- Loan sanction letter and tripartite agreement
- Every demand letter, receipt and TDS challan
- Your site-visit photos, with dates
Is it right for you?
It suits you if you have a stable place to live for the next couple of years and can carry rent plus pre-EMI. If you need to move in soon, a ready home may suit you better.
Ask yourself three plain questions. Is my job stable enough for the next few years? Do I have an emergency fund of a few months' expenses beyond the down payment? Am I fine waiting for the keys? If all three answers are yes, an under-construction home can work well.
Reeva's The Shalott Marque is an ongoing, RERA-registered project (PRM/KA/RERA/1251/308/PR/180826/008871) on Sarjapur–Attibele Road. You can look it up on the Karnataka RERA site before you even call us.