I‘s the biggest investment of your life and usually requires immense sacrifices. But staking your savings and signing on for a bank loan do not guarantee that your dream home will materialize. As a home buyer, you need to run many checks on the property you are eyeing. Here’s how…
Most middle class people in the country dream of owning a house. Also, investing money in real estate is always rewarding . But since the government is yet to prepare an ownership registry of all the properties in the country, in many cases, the title of a property is not clear. Besides, as there is no clear land acquisition policy, a real estate project can run into trouble and the dream sour quickly. Besides, multiple agencies are required to give approvals before a project can take off and be completed. Unless buyers are diligent and ensure that the property they are purchasing has no encumbrances , they can easily land in trouble.
Checking Credentials :
- Before finding out whether a builder has secured all the approvals to start construction, you must check the ownership of the land on which the project is to be developed. For this, you can ask the developer to show the Allotment Letter of the land, if it has been purchased from a government agency.
- If the land has been acquired from farmers, check the Title Paper which mentions the owner. This will also help you determine whether the title of the property is clear or not. The next step should be to find out whether the developer has secured all the approvals or not.
- The major set of approvals that must be obtained by a builder are Building plans and floor plans, Structural safety certificates, no-objection certificates from the civic authorities, Environment clearances, Urban land ceiling certificates , Commencement certificates and Title deed. They will also have to secure an NOC from the water authority to use water for construction.
Using Bank for Checking :
- If you are planning to buy a flat, the best course of action is to buy it through a bank loan. A senior official of HDFC Ltd says that since the bank accepts the apartment – which is yet to be constructed in a new project – as collateral when they give a home loan, they do all the checks, including that of the credentials of the builder, to ensure that the market value of the collateral does not diminish.
- So, even if you have adequate money, take a small loan from a bank so that it too is involved in the whole process. Later, if you want, you can prepay the loan as this does not attract any penalty.
It pays to be Cautious :
When buying a property, no amount of scrutiny is enough. It always pays to be cautious. We tell you how to figure out the value and track record of a developer and get the best deal when you have made your choice.
The buyer should monitor structural and finishing specifications which are slept out when the project is launched and marketed. However , one should supervise the progress through frequent visits to the site and ensure the specifications, as shown in the sample flats, are adhered to. In case of any difference, one can write a formal complaint to the developer and also approach the consumer court.
Price of the Apartment:
The Total Price of the Apartment is a factor of :
- Basic Selling Price (BSP)
- Cost incurred for external and internal Development
- Power back-up
- Preferential location charges
- Club membership
- Maintenance and parking.
The costs that are not generally accounted for by the buyer are stamp duty and registration charges and maintenance cost per square foot. Most builders may also take the society maintenance charges for up to two years in advance. Typically, the developer markets the projects on BSP and mentions additional costs separately .
In certain projects, pricing may vary depending on the amenities and specifications. Brokers may offer discounts and pay back commissions to the buyer. The buyer should compare the prevailing rates and values with those of similar projects in the area or comparable locations.
Buyer-seller agreement :
This agreement has all the clauses, terms, conditions and legal implications for the buyer and developer should there be a default on either side. Important points are interest, penalty and default charges for a buyer and clauses of refund of payment in case the project is not completed or is scrapped. Also, the penalty in case of structural defects and delay in construction should be included. The agreement should also include a clause to transfer the undivided and common land to the society and owners which will ensure no further development or construction by the developer after the project is completed and handed over. The agreement should be registered.
Area of flat :
The buyer should check the area of the apartment as usually the area marketed and sold is the super built-up area which is then used to work out the cost of the apartment. The developer charges for the built-up area, which includes the area enclosed by the walls and the area occupied by the walls, while the actual usable area is the carpet area which is the area within the walls
Design and layout :
Buyer should find out about contractor, architect and structural engineer in order to assess quality of work as this is critical if flat is for own use. Cross-ventilation and ample sunlight should be there.
- Certificate from society :One should check the share certificate issued by a society. This establishes the identity of the seller. The share needs to be transferred in your name as the purchaser. This certificate forms a part of your ownership deed.
- NOC from society :Check NOC issued by the society in case of a resale. This NOC states there are no dues payable by the seller to the society and that the seller has complied with the conditions laid down by the society.Ownership titles for group housing cooperatives.It is essential to have the shares or the ownership documents allotted or transferred to ascertain the legal rights.
- Title papers :If you are buying the property directly from a builder, you should check the title papers showing who the owner is. This will tell you whether the title is clear or the property is under litigation, whether the land is freehold or leasehold, whether the seller has the authority to develop and sell the property, and if the property is free of encumbrances. A clear title can be ensured when there’s a conveyance deed in favour of the seller.
- Checking by bank :For those availing a loan, the bank normally appoints its own lawyer to check the title deeds. Or, you hire a lawyer and ask for originals, don’t accept photocopies.
- Municipal clearances :Another important document is the completion certificate issued by the municipal authorities. It shows whether a building complies with the rules in respect of height and distance from road, besides other things, and whether it is built according to the approved plan. You should also check the occupation certificate . It certifies that water, sewage and electrical connections are in place.