The ten step buyer’s guide

Have you in­ves­ti­gated the ti­tle? Have all elec­tric­ity and water dues been paid up? There are nu­mer­ous checks you need to do be­fore buy­ing a house. Keep this list handy to avoid headaches later on

HT Estates - - Property Classifieds - Su­nil Tyagi

Ev­ery prop­erty trans­ac­tion is unique. Nev­er­the­less, this guide can serve as added help. Keep the fol­low­ing steps in mind be­fore buy­ing a prop­erty, ir­re­spec­tive of whether it is be­ing pur­chased from a de­vel­oper or an independent seller. Also, cer­tain additional doc­u­ments/ pro­ce­dures that vary from state to state may be re­quired at some stages.

The lo­ca­tion

The choice starts with ze­ro­ing in the prop­erty on broad pa­ram­e­ters. At this stage, key con­sid­er­a­tions must in­clude size and type of the prop­erty (flat, bun­ga­low, pent­house, etc.), dis­tance of the prop­erty from hos­pi­tals, schools, malls. The state of pub­lic in­fra­struc­ture in and around the area, green cover and avail­abil­ity of open spa­ces, clubs, golf cour­ses, etc are also be­ing fac­tored in now dur­ing the fi­nal­i­sa­tion of pur­chase deals.

The prop­erty

Buy­ers should de­cide whether they want a lease­hold prop­erty or free­hold prop­erty, as their rights and na­ture of own­er­ship shall dif­fer for the two. Lease­hold prop­er­ties come un­der the purview of pub­lic land own­ing agen­cies. Here, the par­ties ex­e­cute a per­pet­ual lease deed where the land own­ing au­thor­ity takes on the role of a lessor and the per­son who is al­lot­ted the prop­erty takes on the role of a lessee. To trans­fer a lease­hold prop­erty, the lessee re­quires prior per­mis­sion of the land own­ing au­thor­ity, upon ful­fil­ment of cer­tain con­di­tions by the lessee. Free­hold prop­er­ties, on the other hand, re­quire no such prior per­mis­sion to be taken be­fore trans­fer. Such free­dom ob­vi­ously comes at a price as free­hold prop­er­ties are usu­ally more ex­pen­sive. At this stage, iden­ti­fy­ing your fi­nan­cial as­sets and li­a­bil­i­ties

is key to de­ci­sion-mak­ing.

The de­vel­oper

With com­pe­ti­tion at an all­time high, de­vel­op­ers are com­pet­ing by dif­fer­en­ti­at­ing them­selves in terms of price and value-added ameni­ties such as concierge fa­cil­i­ties, spa, gym, tennis courts, etc. In ad­di­tion to com­par­ing these, con­duct a back­ground check of the de­vel­oper’s project track record with re­spect to pre­vi­ous hous­ing projects un­der­taken by it. This is usu­ally a good in­di­ca­tor of the re­li­a­bil­ity and mar­ket stand­ing of the de­vel­oper.

In­ves­ti­ga­tion of ti­tle

The im­por­tance of check­ing the his­tory of change of own­er­ship of the prop­erty be­ing pur­chased, ide­ally for the past 30 years at least, can­not be stressed enough. Such in­ves­ti­ga­tion of ti­tle can safe­guard against pos­si­ble de­fects in the buyer’s ti­tle of own­er­ship.

As due dili­gence is a time con­sum­ing and com­plex process, pro­fes­sional le­gal help may be sought at this stage.

De­mand ti­tle doc­u­ments

As the ex­act na­ture of own­er­ship is known only by the seller (owner), it is his duty to ac­knowl­edge the buyer’s right to de­mand and get de­tails of seller’s own­er­ship in the prop­erty. More­over, hav­ing orig­i­nal ti­tle deeds in hand rules out the pos­si­bil­ity of an eq­ui­table mort­gage (by pre­vi­ous own­ers) ex­ist­ing on the prop­erty. In a wel­come step to bring about trans­parency, de­vel­op­ers now keep orig­i­nals of ti­tle deeds at their of­fice, for the prior in­spec­tion by prospec­tive pur­chasers.

Ti­tle doc­u­ments in­clude sale deed, de­vel­op­ment agree­ment, power of at­tor­ney, per­pet­ual lease deed, etc. In all these doc­u­ments, the de­scrip­tion of the prop­erty must match the de­scrip­tion of the prop­erty be­ing pur­chased. The prop­erty should be clearly de­mar­cated by metes and bounds and iden­tify all own­ers, if more than one. If the prop­erty is in­deed jointly owned, check the quan­tum of share that each joint owner holds. To be valid, ti­tle deeds that re­quire manda­tory stamp­ing and sub­se­quent reg­is­tra­tion by law should also have been duly stamped and reg­is­tered by the seller and pre­vi­ous own­ers. In a per­pet­ual lease deed, note the re­main­ing du­ra­tion of lease and clar­ify whether the rent payable by the seller to the land own­ing au­thor­ity is an an­nual/ re­cur­ring pay­ment or a one-time pay­ment has been made. If the seller has in­her­ited the prop­erty as a sole le­gal heir, in case of in­tes­tate death of pre­vi­ous owner of the prop­erty, the seller can validly sell such prop­erty. If the seller has in­her­ited prop­erty along with other heirs, en­sure that all le­gal heirs give their con­sent to sale.

En­cum­brances and dues

Reg­is­tered debts and mort­gages can be as­cer­tained by vis­it­ing the rel­e­vant sub-reg­is­trar’s of­fice (where ti­tle deeds of the prop­erty have been reg­is­tered). If the seller had pre­vi­ously taken a mort­gage on the prop­erty be­ing pur­chased, he must be able to prove the same by show­ing the re­lease cer­tifi­cate from the con­cerned bank. If the prop­erty is still un­der mort­gage, the par­ties would re­quire a no ob­jec­tion cer­tifi­cate from the bank be­fore any sale/ pur­chase. If the bank grants such per­mis­sion, the buyer usu­ally be­comes li­able for pay­ing the out­stand­ing loan. Buy­ers should also visit lo­cal mu­nic­i­pal de­part­ments and ser­vice providers to check if there are any out­stand­ing charges (eg prop­erty tax, water/elec­tric­ity/tele­phone/gas con­nec­tion charges) on the prop­erty in the name of the seller.

Per­mit­ted us­age

En­sure that the prop­erty does not fall within any un-au­tho­rised set­tle­ment/colony. More­over, it should also have been per­mit­ted for res­i­den­tial use. In case the pre­vi­ous per­mit­ted us­age of land was non­res­i­den­tial, check whether the seller has the req­ui­site con­ver­sion li­cence/deed per­mit­ting the land to be used for res­i­den­tial pur­poses. Some buy­ers are also keen to pur­chase a res­i­den­tial prop­erty for the pur­pose of car­ry­ing out a com­mer­cial ac­tiv­ity in it, such as run­ning a crèche, doc­tor’s clinic, etc. Be­fore do­ing so, en­sure that the prop­erty is ac­tu­ally sit­u­ated in a “mixed use” area ac­cord­ing to the city’s mas­ter plan. Buy­ers must check whether a con­ver­sion li­cense for the prop­erty has been ob­tained. Other fea­tures of the prop­erty (eg park­ing space, width of road sur­round­ing the prop­erty) should also be in com­pli­ance with the rules and reg­u­la­tions con­tained in the rel­e­vant mas­ter plan.

Con­struc­tion

It is not un­usual for buy­ers to re­pent their de­ci­sion when they dis­cover the poor qual­ity of the prop­erty’s con­struc­tion. When pur­chas­ing a fully con­structed prop­erty, the seller should pro­vide sanc­tioned build­ing plans, com­ple­tion cer­tifi­cate and oc­cu­pa­tion cer­tifi­cate for the prop­erty. Also check whether the prop­erty has in­deed been con­structed ac­cord­ing to such sanc­tioned build­ing plans and whether the con­struc­tion is within per­mis­si­ble FAR. If it has been con­structed over and above the per­mis­si­ble limit in the sanc- tioned build­ing plans, the seller should have paid the req­ui­site com­pound­ing charges to rel­e­vant lo­cal au­thor­i­ties in or­der to reg­u­larise such con­struc­tion. If not, the prop­erty would be in dan­ger of de­mo­li­tion and seal­ing as it would amount to an il­le­gal con­struc­tion.

Ex­e­cu­tion

Once the buyer has com­pleted en­tire due dili­gence of the prop­erty and is sat­is­fied with his de­ci­sion to pur­chase the prop­erty, he must con­tinue ex­er­cis­ing sim­i­lar cau­tion at the time of ex­e­cut­ing the sale/pur­chase doc­u­ments. For prop­er­ties in a hous­ing com­plex in the process of be­ing de­vel­oped, an allotment let­ter fol­lowed by a buyer’s agree­ment is ex­e­cuted be­tween a de­vel­oper and buyer. How­ever, the buyer’s agree­ment by it­self does not con­fer ti­tle of the prop­erty in favour of the buyer, un­less it is fol­lowed by the ex­e­cu­tion of a sale deed in favour of the buyer at a later stage. Buy­ers should thor­oughly ex­am­ine terms and con­di­tions in the buyer’s agree­ment and sale deed.

Stamp­ing and reg­is­tra­tion

The In­dian Stamp Act, 1899 and Reg­is­tra­tion Act, 1908, make pay­ment of stamp duty and reg­is­tra­tion fee manda­tory for “con­veyance” deeds. Stamp duty and reg­is­tra­tion fee levied vary from state to state. Ad­e­quate stamp­ing and sub­se­quent reg­is­tra­tion, wher­ever re­quired, grants le­gal doc­u­ments the sta­tus of be­ing ad­mis­si­ble as ev­i­dence in courts. In­ad­e­quate/non­pay­ment of stamp duty can lead to com­pe­tent au­thor­i­ties im­pound­ing such doc­u­ment and charg­ing a hefty penalty of up to ten times the ap­pli­ca­ble stamp duty. The buyer must pay com­plete stamp duty and reg­is­tra­tion fee on time to fully se­cure own­er­ship over the pur­chased prop­erty.

THINKSTOCK

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