What is Pre-Launching, and how does it work?

This is when a builder announces that he will start/launch a project at a new location. He does not have an approved map nor any official permission at this stage. The developer informs his clients, brokers, investors and friends of the availability of properties in a project not yet officially launched on the market at this stage.

The builder will request that the buyer deposit a post-dated cheque and issue a receipt for the cheque. This is an oral agreement, and no requirement for any documentation. Although the news about the new project spreads via word-of-mouth and email, it does not appear on the developer’s website or any other marketing media.

End-users and investors are the most likely buyers for prelaunch projects. They want to take advantage of the price advantage and will be willing to wait for a few years before getting possession.

A notice on the project site says “XYZ Project by ABC company ltd” Buyers should contact the Real Estate Company or builder to reserve the villa/flat.

Pre-launching serves the basic purpose of allowing the developer to gauge the public’s reaction regarding his new/upcoming projects. This helps him understand the viability and feasibility of the project. He can decide whether to continue the project or not if there are many bookings. Pre-launching projects may allow them to obtain interest-free capital on the market. If they need a loan for a project, this capital can is useful as margin money.

Is it technically correct?

It is not! Technically it is incorrect. Developers cannot take bookings in projects until they have received all technical and legal approvals/permissions from the competent authorities.

Benefits for the Buyer

Prelaunch property sales can offer a price advantage of 5-10%, depending on market conditions.
The buyer can contact the builder directly during the prelaunch phase to save brokerage.
This is ideal for investors who book flats to make profits and then sell them after taking advantage of price appreciation.

Drawbacks:

Technically, it is incorrect.
It is unclear what flat number you would be allocated and which floor.
Sometimes, the builder has difficulty starting a project because of poor prelaunch responses. He may have spent the booking money on other projects in the meantime, so it may be not easy to refund the money. Your booking money could be at risk if the developer has a poor reputation.

Pre-launched projects are high-risk investments that can yield great returns if you take into account all variables. This investment is best for investors with a high-risk appetite who can weather any eventual setback. End-users should not invest in pre-launches unless they have high confidence in the builder’s track record and brand. The reputation of the developer is key to the overall picture. Buyers should remember that lenders will approve the project for home loans only when the buyer receives all approvals. If the developer cannot raise sufficient funds, the project might be delayed or cancelled.

Are there any precautions to be taken before booking Prelaunch Bookings?

Prelaunch bookings are a cheaper option, but they carry a lot of risks. Before you make a prelaunch booking, be sure to review the following.
1. Choose a well-respected and established builder.
2. It is important to know if the builder owns the land where the project occurs.
3. To avoid any disputes, always pay via demand draft or post-dated cheque.
4. Ask about the location where the project will commence. It is important to find out whether there are any real estate transactions in the area or if it has only new government projects.

5. Location of the project should be defined..it should not be near any airport or army zone.
6. Verify that all title papers and approvals are in order.
7. You should investigate the builder’s track record regarding transparency and compliance with legal formalities and his overall record for project completion on time, and the amount of experience he has.
8. A certificate of commencement must be issued to the project.
Book only in the prelaunch phase once you have reviewed all the pros and cons.
Notice: Prelaunch Booing in RERA is strictly prohibited