Home buyers need to run many checks on the property that they plan to buy as buying a house is one of the biggest investments of their life
Most middle class people in the country dream of owning a house. Also, investing money in real estate is always rewarding.
In order to help homebuyers take necessary precautions before entering into a deal to buy a house, a buyer should look at various approvals and measures.
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.
You must insist on a written agreement with the developer. It should clearly mention the specifications of the apartment and all the terms and conditions. This will also take care of hidden costs, if any. While buying a house in a completed project, the buyer should physically check the occupation certificate, fire safety equipment and mechanism, water and electricity connections and property tax receipts for the project.
The occupation certificate from a government authority, in particular, is very important. It signifies that the building is complete and fit for living; and, that, it has not only got all the approvals in place but also that it has adhered to all the norms and building by laws. 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 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. A background check of the developer will help assess the execution capability of the developer on timeliness and quality. It will also help to compare the project with that of the developers’ competitors. The developer should have a traceable track record. It is also important to be aware of the developers’ involvement in any legal feud in the past so one can judiciously make the buying decision.
Price of the apartment
The total price of the apartment is a factor of the basic selling price (BSP) and the 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. The buyer should compare the prevailing rates and values with those of similar projects in the area or comparable locations.
This agreement has all the clauses, terms, conditions and legal implications for the buyer and developer should there be a de adult on either side. Also, the penalty in case of structural defects 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 s 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.
Titles and documentation
The risk of clear titles and documentation is significantly less if the property is purchased from the urban development authorities. However, if the flat is to be purchased from a private developer, one should seek legal assistance to check documents related to land ownership, licences and approvals, allotment letter and sanctioned plans.
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. Check NOC issued by the society in case of a resale.
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. 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.
Another document that needs to be checked is the purchase agreement between the developer and the authority or the agency from which the developer has bought the land. It ensures the seller (developer) is entitled to sell the property, states if there is a mortgage on the property, and shows if the mortgage money has been paid off.
If the property has been developed jointly by the owner and a builder, scrutinize the joint development agreement, which mentions the terms of development of the property.
List of approvals
Often a project faces delays in getting legal approvals from a number of authorities. Non-compliance may result in scrapping of the project and reduction in market value.
Source: Times Property, The Times of India, Chennai