Prelaunches - Risks & Opportunities
 

Prelaunch Concept  :    Prelaunch is a kind of advance registration that a developer accepts against any of its proposed and future project. The moment a developer identifies a land or a project, the project has to undergo following stages:-

  1. Land, Sale agreements.

  2. License application.

  3. Land sale deeds and registration.

  4. Issuing of LOI/NOC etc.

  5. Depositing of license fees.

  6. Issuing of license.

  7. Building plans filing.

  8. Building approval.

  9. Allotment.

  10. Development.

  11. Possession.

A developer normally announces a prelaunch, if he is between stage 1-3.

Legal status : As far as government stand is concerned, prelaunches of any manner without receiving permission from government is illegal. Developers normally accept money as advance registration and no city, project or size of plot, flat etc. is mentioned on the receipt issued.

Time period:

LOI             -    3-6 months

License       -    another 2-3 months

Allotment    -    another 2-3 months

Possession  -    another 2-3 years

Reasons to Prelaunch:

After developer buys land for this unity period of 8-10 months, they need to raise money for pursuing licenses and even to receive part of land cost. So he comes out with advance registration.

Opportunities :

  1. Normally a developer ensures a lower rate than the market price at the time of allotment.

  2. Developers also ensures an interest of 9-10 percent (higher than bank interest) if project does not get allotted within a year. So if dealing with credible developers, money is safe and give some assured returns also.

  3. Normally dealers also offer some discounts from their proposed commission so that itself translates into premier components.

  4. Even from end users point of view, those investing through advanced registration are given priority in allotment, have bought at lowest price, save transfer fees etc. In short nobody has bought at lower price than them.

 Threats :

  1. Lots of pre launches have created confusion.
  2. Riskiest are those where land procurement is not complete particularly where sale agreements are there but not actual sale deeds .Those where licenses have been filed are the one’s which are safer.
  3. Builders overrate. They could sell  much more than capacity, just to raise money from market.
  4. Builders should be credible to that refund in a once case such a scenario.
  5. Builders should have got license some where or the other. That he may understands the licensing process formalities-ins and out.

  6. Worst case scenario. Builders fail and become bankrupt and like plantation scam the money goes waste . Normally prelaunches are suggested to people who have made big money in real estate over the years. And in that worst case scenario they can take this loss.

  7. Dealer must not be very new to business. Just emerged and fly by market who is suggesting only to make a quick buck.

Do’s & Donts :

  1. Do check license application status.

  2. Do deal with a broker of developers, who has been in projects people sometime for a petty discount of few thousands more stake their investments of lacks & corers.

  3. Do not buy a resale of prelaunch by paying cash premium without LOI/licence. It gets lost, if premium is not refunded.

  4. Do not put to many changes with same builders.

  5. Check the infrastructure & financial standing, repayment capacity of builder. A lot of property dealers have emerged as small builders.

  6. Try paying maximum money by change, so that the proof remains.
  7. Always ensure that change has been banked or not and then you can follow up for receipts. It normally takes anywhere between 15-60 days to get a receipt.
  8. When buying in resale always check the banking firm as to what were the no. of co-applications.
  9. Try not buying in resale where price have been discounted, it will involve cash premium.

  10. Be prepared for self funding  of at least 25-30% in case of flats and around 50% in plots, without bank finance. In some cases banks sanctioned letters  may help.

  11. Try to get a photo copy of your form submitted to developers along with acknowledgement if possible. 

  12. No harm in calling once in a while to developers directly to ensure your booking exists or not at his end.