A few years ago, owning a home was a mere dream for many. But recently, a handful of benefits like tax sops and cheap loans have been a blessing for millions of Indians who are now seeing that dream turn to a reality. In fact more people are buying homes now than ever before and they are buying it very early on in life.
Pallavi and Kartik Iyer are a young couple in Pune who are planning to buy their first home. They've done their research on area and location but have no clue about what documents need to be looked at before signing the agreement. Says Iyer, "We did a lot of research, scanned many websites. They all give out a list of more than 25 documents that we need to look into. It would just be easier if we would know which documents are most vulnerable to tampering"
With real estate being far from transparent, with nothing in clear black and white, Moneycontrol tries to help Iyer and many more like him by handing out a check list of 'grey areas' to watch out for.
Get your papers right!
Who owns the land?
You must verify whether the land is freehold (land owned by the builder) or leasehold (land leased out to the builder from someone else). This becomes important because in case of leasehold land, the owner of the land prescribes his own set of terms and conditions so far as use of the land is concerned. For instance, in case the lease has to be renewed after some years, the owner may charge a premium, which may come as a cost you hadn't planned for.
Builders usually possess the land of construction under their names or hold development agreements with the owners of the land. Says Anuj Puri, MD, Chesterton Meghraj Property Consultants Pvt. Ltd, "In both the cases, the purchaser of the flat must enquire and find out whether the builder is legally permitted to carry out construction on the land on which he proposes to construct the building. In many cases it may be necessary to seek the assistance of a professional to find out whether the builder or developer has good title to the land."
Are all approvals in place?
In the recent past, buildings in several metros faced the threat of being razed to the ground - the reasons - authorities clamped down on them for not complying with approvals. The only other way out is to pay a large fine and get the approval. By then, the builder may already have got off the hook by transferring the property to the co-operative society and residents will have to bear the brunt.
Therefore, as a buyer, you should check whether the builders have all the necessary approvals.
Plan approval, Intimation of Disapproval (IOD) and commencement certificate - key issues
A person in Mumbai (name withheld) booked an apartment on the seventh floor of a building. He had asked the builder for the plan approval and commencement certificate but never got around to seeing it. In the meantime, he did not want to lose out on time and therefore enquired with other buyers about this approval. Most other buyers had seen this approval and hence, he went ahead and booked the apartment. It was only when his bank rejected his loan did he realise that the builder had approval to construct only a six storey building and the seventh floor was a modification, approval for which was still to be taken. His builder convinced him that he would pull strings with the necessary authorities and get the approval, but the entire situation seemed too risky and he pulled out from the deal.
Documents like these are vital to a chaos at a later stage. Likewise, the IOD specifies the conditions subject to which the building should be constructed by the builder. "IOD is issued for one year and if the construction is not completed within one year, it should be re-validated. The purchaser of the flat must verify whether the IOD is issued and if it is issued, the terms and conditions stipulated by the local authorities," says Puri.
The commencement certificate permits the builder to carry out construction of the building and is valid for a year, after which it has to be re-validated. Rajiv Sabharwal, Head, ICICI Home Loans, says, "The customer should ensure that builder has requisite FSI - he should have the commencement certificate issued by Municipal Council and approved plans up to the floor where he is buying a flat."
Agreement of Sale - The fine print
Once you have verified documents, as a buyer, you must enter in to an agreement with the builder or the developer. You have to ensure that the conditions are spelt out clearly, to a problems arising out of ambiguity, in future. Puri elaborates, "Such an agreement should specifically mention flat number, wing, and floor of the building, amenities provided in the flat, terms of payment, date on which the possession of the flat will be given etc."
"Check the carpet area (which is the actual area you get) in addition to built-up or super built-up area," advises Sabharwal. Once the agreement is finalized, stamp duty must be paid on the agreement. Insist on getting an Occupation Certificate (OC) before occupying the flat, to eliminate any problems.
Small but significant
Apart from these larger issues, there are certain areas that may seem minor but are really a must-do.
Hidden costs
Buying a house means talking in terms of lakhs of rupees. Of course, you need to pay attention to the big costs, but in the process do not ignore the smaller costs. Warns Sabharwal, "The buyer should look out for hidden costs - like water connection, electric meter, development charges, clubhouse charges, etc. These should be added to the agreement to sale."
Keep records
Talking of documents, of course, insist on getting all the original ones but equally important, retain photocopies of them as well. Cautions Puri, "Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate."
What details do you look out for in these? "Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared," says Puri.
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