Everybody is looking for a dream home. But very few actually do market research before signing on the dotted line. Shalini Saksena speaks with some real estate developers who say that one must read every document carefully and buy property where there is plenty of transparency
When 38-year-old Rishi Kumar bought a house, little did he know that the apartment that he was buying on resale will create problems for him. His mistake — he didn’t do the much needed homework before buying the property. He went with what the property dealer and the seller told him. The end result — Kumar ended up paying Rs45,000 more. Industry experts tell you that most people blindly go with what property dealers say and they personally don’t do market research.
According to JC Sharma, vice-chairman and MD, Sobha Developers limited in Bengaluru, one of the most frequent question that his clients ask in case of resale of property is the kind of documents one should look at. “It’s always safe to get all the documents verified by a legal expert. One should check many legal documents while buying a resale property. To begin with, check if the seller is actually the owner of the property and is authorised to sell it. This can be checked by referring to the original copy of the sale deed of the property. Also check the certificate from the bank saying there is no pending loan or mortgage on the property. Also an encumbrance certificate to ensure that property is not encumbered by way of prior mortgage and the present ownership gets established. Other documents to check include the documents given by the Government sanctioning authorities like the plan sanction, occupancy certificates, sanctions from electricity board and water board,” Sharma says adding that apart from this, it is important to know the age of the property and get a property valuation done in order to ensure the correct valuation for the property.
He also tells you that it is important to consult a professional tax consultant before buying the property. It is a trend that is prevalent abroad and is picking up in India now. “It’s a good idea to hire the services of a professional tax consultant. A property purchased through loans are allowed as deductions from the income and varies from time to time. Similarly, properties purchased from capital gains derived also enjoy certain tax benefits. They help the customer understand the advantages and disadvantages of buying a particular property while taking into consideration various factors, like income of the customer, type of property, disposable income, expenditure and expected rate of interest. They analyse the property deal from all aspects and give a sound advice to the customers, which in turn helps the customer to invest wisely and get many tax benefits,” Sharma explains.
So, what are the points one should keep in mind before initiating any property dealIJ Since, the common man understands the property only at its macro level and goes by the hearsay, it’s a good idea for the customer to engage a legal counsel in any property dealing. This will ensure that all the documents are carefully studied and analysed. The legal counsel will also help the customer understand the finer points in the agreement and bring out any clause that may not be in the favour of the customer. It’s also important to ensure and follow the proper procedure of payment of stamp duty and registration so that in case of any fraud, misrepresentation, a legal action can be initiated.
“Therefore, it’s important to read the the clauses and agreements carefully. One should read each and every clause in the booking form. The allotment letter and agreements have to be read and analysed carefully. The most important being the ones about small business administration area, amenities, cancellation, delivery, payments and its schedule, reserved parking, delayed possession and maintenance,” Sharma tells you.
Seconds Sunny Katyal, director, Investors Clinic Infratech Pvt ltd in the Capital. “Some of the documents that need to be seen are whether the lease deed is registered in the name of the company that you are buying from. Second, whether various statutory approvals like environment, fire and aviation are done. Third, whether map/layouts have been sanctioned and are available for perusal. Finally, if the project is being financed by a bank, how many of these cheques have already been made,” Katyal says.
Builder buyer agreement, especially escalation clauses, penalty clauses and terms of penalty payout, loan documents, including clauses related to interest rate resets and early termination are a few documents that need to be read in detail. Apart from reading these papers, there are some costs and taxes that aren’t included in the price of the apartment. “Apart from basic sales price and other charges by the builder (parking, clubhouse, firefighting), others costs will include sub-lease or registry costs service tax. Also, depending on the type of house one has purchased, the cost of fittings, interiors et al may also be extra,” Katyal says.
And why is it that buying property on resale is cheaperIJ “In an original sale, one is able to speak to the builder directly and the full price can be presented for a loan. However, in resale, this may not be always available. One may also lose benefits of payments plans that the builder may extent. Keeping the above in mind, one should opt accordingly. Keep in mind that some builders charge a fee on transfer of property while still under construction. First transfers are free (not always), so this may impact the yield, if one are looking to sell before the construction is complete,” Katyal states.
Remember this
· The first thing to do is to check the reputation of the builder. Also, ensure that one does a thorough background check on the builder and the other properties constructed by him
· One should look at the track record of the developer and consider the location of the property
· It is important to verify all documents like the approvals and land papers to ensure the authenticity before buying the property
· Only sign documents after getting convinced about the builder, the property’s legal aspects, amenities, sanctions and approvals
· Another important thing is to get a home loan to purchase the flat as opposed to cash down. This will ensure to some extent that the bank does its due diligence and verifies everything thoroughly
· Don’t hesitate to pay a little more for a quality product from a reputable builder