The home stretch, they say, is never easy. It is the same when it comes to wading through the property market. More than money, it takes determination, discipline and an awful lot of legwork before you get to sign on the dotted line to buy your dream house. With new builders entering the fray every day with enticing schemes, and with commission-hungry brokers acting as self-appointed consultants, it is essential you take the plunge only after you are fully prepared. Remember, you are on your own out there in the absence of a central body to regulate the builders or define a standard set of guidelines.
Mint guides you through this maze with 10 questions you need to consider before signing up for your dream house.
1) Why are you buying the property?
Do you plan to live in it, rent it out or gift it to your children? It is important that you know why you are buying the house as the registration of a property can take anywhere between two and three months. If you decide well in time in whose name you want to buy the house, you can save a lot of time and money. “If you want to gift the property to your daughter or want it for your wife, get it registered in her name to avoid future hassles,” says Subhash Lakhotia, a New Delhi-based lawyer.
2) What documents do you need to ensure a clean title?
The list of legal documents you require is long enough to discourage any prospective buyer. The situation gets even worse when you don’t know how to filter out the unnecessary ones.
“Risks are low when you buy a property directly from the primary market. This includes urban development authorities such as Delhi Development Authority, Haryana Urban Development Authority or Punjab Urban Development Authority. When it comes to the secondary market, where you buy property from cooperative societies or colonizers, you need to take extra care,” says Hemant Batra, senior partner at Kaden Boriss, a Gurgaon-based law firm.
The government will soon upload land title records on the Internet. However, depending on who you are buying the house from, ensure that you get the following documents from the seller.
a) If you are buying the house directly from the builder, you need to get:
It contains details of the agreed price, payment and construction schedule, house plans, delivery date and the builder’s liability in case of late completion or problems after possession.
Original sale deed:
If you are buying the property from a private developer, you need the original sale deed between the developer and the first buyer.
This is the proof of the payment deposited in the account of a seller by the buyer in the bank.
It records handing over of possession of the property by the urban development authority or the seller to the present owner.
Lease deed in original:
It must be a registered document.
It confirms adherence to municipal requirementa and eliminates chances of demolition of the building.
b) If you are buying the house in a second sale (as in not directly from the builder), then you need to get all the documents which were exchanged between the first buyer and the developer. These include:
Of the cooperative group housing society.
Just like a company, societies also give you a share certificate in the society.
A similar document, this talks about the details of the price, the timeline of the completion of the project, etc.
These are previous receipts which show that the full amount has been paid to the society at the time of getting allotment.
The local authorizing body gives this certificate of completion of the property.
Issued by the society, this shows that no amount is due to it. This ensures that no hidden charges will be imposed on you later.
Letter of transfer of shares:
Issued by the society, this letter shows that shares from the previous owner have been transferred to you.
Sanctioned map of the society:
Many builders only give a letter of intent (LOI) and no clear land use certificate. This can be risky because many projects get cancelled at the LOI stage after buyers have paid the money.
In addition to these documents, other papers you require depend on whether the land is freehold or leasehold.
In the case of freehold land, the right of ownership is transferable. Power of attorney (POA) is one of the most common ways of transferring the ownership. Your property includes all your assets and finances unless you specifically exclude certain things. So, if the property is not freehold, you first need to get the general POA. After this, you need to get the agreement to sell attested by the notary agency, receipt of consideration duly signed and the possession slip. However, sale through the POA can run into legal trouble, as it may not be recognized as a valid instrument later on.
If you are buying a freehold property, you need to have the conveyance deed, which authorizes the transfer of power, and the sale deed of the property, in addition to the above-mentioned documents. Also, you need to ensure that the POA is registered because if the POA dies without registration of the attorney, his legal heirs will automatically become the owners of the property and turn your possession into an illegal occupation.
3) Have you thought about tax planning?
Buying a residential property can have a number of implications on your tax planning. If you are buying a house for the second time, it is advisable to buy it for rental purpose as under wealth tax, only one property is exempted from house tax. Also, if you have already crossed the deduction limit of Rs1 lakh under Section 80C of the Income tax (I-T) Act, with public provident fund or other investments, you can still claim deduction on your home loan. In this case, by buying a property in your spouse’s name, even if he or she is not working, you can avail the full deduction amount from your spouse’s salary income.
A home loan, irrespective of rented or self-occupied house, qualifies for tax benefits of Rs1 lakh on the principal amount repaid. But for the interest component, the rented house gets tax benefit on the basis of actual interest. For self-occupied property, this limit is up to Rs1.5 lakh.
And, if you buy the property in the name of your wife, you get a 1% discount on the rate of stamp duty paid. The amount of this duty differs from state to state.
4) Have you met the property’s seller?
If you are buying the property through a mediator such as a real estate agent or a broker, it is imperative that you meet the seller. Agents usually avoid or postpone this meeting if it’s not an encumbrance-free property. Meeting the seller gives you a chance to crosscheck the photograph on the registration documents with the real person. If you are buying a property that has already been sold on POA, you need to meet the POA to ensure he is alive. Otherwise, you can run into trouble later.
5) Is it an encumbrance-free property?
If the vendor does not have a good and marketable title, you may find yourself involved in unnecessary court cases. You must ensure that you have chosen a clean title.
To avoid any confusion, you need to make a couple of unexpected visits to the site to ensure that it is an encumbrance-free property. Besides, you also need to check at the registrar’s office that the sale deed is not in someone else’s name.
6) How good is the location?
Before you finally decide on the property, find out some basic things such as if the builder will put in place civic amenities such as roads, power and water supply, and if he will provide adequate security.
7) Is the money you are paying worth the cost?
The worth of what you buy is what matters the most. Before signing any document, you must make a comparative study of similar properties in the area. Ask your neighbours and local shopkeepers about the prevailing rates in the society. You also need to calculate the percentage by which the property may appreciate in the future.
8) Have you done a proper background check on the developer and agent?
Nitin Saxena, a 30-year-old consumer activist, had a rough time just because he didn’t do a proper background check of the developer. He had booked a farmhouse in Gurgaon from Ansal Housing and Construction Ltd in 1995, but came to know that the property was situated on disputed land. This, after he had paid an advance amount of Rs3 lakh. “I kept demanding my money back from the company, but my complaints were always ignored,” says Saxena. Though he won the case in the National and State Commission eventually, Saxena still regrets his carelessness.
9) Do you like the structure and basic design?
Once the location and the title are ensured, you need to properly check the basic and structural design of the property. Ensure that there are no seepages or cracks in the building. Also, the structure should be such that you can carry out renovations inside the house whenever you want to. “Conceptual living style by renovating residential premises has become popular these days. It is an affordable way of turning your house into a luxury apartment. The range for renovation starts from Rs600 per sq. ft to Rs900 per sq. ft,” says Deepak K. Kohli, managing director, Deep Realtors Pvt. Ltd, a New Delhi-based real estate solution providers.
10) Have you kept aside some extra money?
Buying a house is an expensive expenditure. If you have set aside a budget for your investment, it is advisable to keep some money handy to meet last-minute problems. “There are many expenses you cannot avoid after you have met all the requirements. It always helps to have some ready cash with you,” says Bhawani Shankar Tripathy, general secretary of joint action forum of residents associations in Gurgaon. Experts also suggest that you should never make any transaction in cash. Sometimes, the brokers or the builder may ask you for some cash payment, but you should always insist on issuing a cheque for every deal. This should be clarified right at the beginning of the deal to avoid any last-minute confusion.
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