Buy­ing a house? Do some sleuthing

The na­ture of prop­erty de­ter­mines the spe­cific type of due dil­li­gence that you re­quire to un­der­take

HT Estates - - HTESTATES - San­thosh Ku­mar

Prop­erty buy­ers are of­ten warned that they must con­duct thor­ough due dili­gence be­fore in­vest­ing in any prop­erty, and that they should not rely solely on the ver­i­fi­ca­tion process done by banks while they are pro­cess­ing a home loan re­quest. This is sound ad­vice, es­pe­cially in the cur­rent times when many buy­ers have found them­selves in trou­bled wa­ters af­ter mak­ing prop­erty pur­chase de­ci­sions with­out do­ing their home­work.

What does due dili­gence mean with re­gard to prop­erty pur­chase? Ba­si­cally, it is a thor­ough in­ves­tiga­tive process, the ob­jec­tive of which is to de­ter­mine whether or not a cer­tain real es­tate op­tion is safe to in­vest in. The process re­quires a fo­cus on dif­fer­ent el­e­ments, de­pend­ing on whether one is pur­chas­ing a ready-to-oc­cupy prop­erty or one which is un­der con­struc­tion. A due dili­gence for re­de­vel­oped prop­er­ties also has spe­cific ar­eas to be fo­cused on.

Due dili­gence for readyto-oc­cupy prop­er­ties

Get all de­tails per­tain­ing to the de­vel­oper’s cred­i­bil­ity. Make sure you check the de­vel­oper’s de­liv­ery track record of past projects. There are many as­pects that di­rectly af­fect the level of risk, but are never re­vealed to buy­ers. The re­quired in­for­ma­tion needs to be as­sim­i­lated at a lo­cal level, prefer­ably by some­one who has been re­sid­ing in the lo­cal­ity for a while.

Ask the de­vel­oper for the ap­proved draw­ings of the project, a copy of the IOD (in­ti­ma­tion of dis­ap­proval) and com­ple­tion cer­tifi­cate and a clear land ti­tle. En­sure that the prop­erty is free of lit­i­ga­tion and any kind of associated debt. Also, es­tab­lish the ex­is­tence of a proper so­ci­ety. If one is buy­ing a sec­ond-hand prop­erty, proper trans­fer and re-reg­is­tra­tion should be done be­fore hand over. The doc­u­ments re­quired for reg­is­tra­tion of a

res­i­den­tial flat, apart from the sale deed, will in­clude a let­ter from the so­ci­ety that re­flects the num­ber of floors in the build­ing, the year in which the build­ing was con­structed, the apart­ment’s built-up area of the apart­ment and the num­ber of lifts in the build­ing.

The home­buyer should have a proper check­list in place; this must in­clude the ap­proved us­age of the prop­erty, no­tices of any pend­ing or threat­ened lit­i­ga­tion or gov­ern­men­tal ac­tion re­lat­ing to the real es­tate or seller, any ap­pli­ca­ble con­do­minium doc­u­ments, ser­vice con­tracts, all con­struc­tion-re­lated doc­u­ments in­clud­ing war­ranties, as-built plans and spec­i­fi­ca­tions etc.

Due dili­gence for un­der­con­struc­tion prop­er­ties

If the project is un­der con­struc­tion, get an ac­cu­rate idea of the project’s progress. This is es­pe­cially true if the prop­erty is be­ing bought di­rectly from the de­vel­oper. When no prop­erty ad­vi­sor is in­volved in the trans­ac­tion, the risk of fall­ing prey to a de­cep­tive pro­jec­tion of the project’s de­vel­op­ment progress mul­ti­plies man­i­fold.

The buyer needs to es­tab­lish whether the builder has free and clear own­er­ship of the land on which the project is be­ing built. An agree­ment be­tween builder and the orig­i­nal owner of the land is not suf­fi­cient. The project also needs to have an IOD. This is a set of in­struc­tions that a de­vel­oper needs to com­ply with so that he can legally con­struct the project. The IOD is valid for one year and needs to be reis­sued if the project has not been com­pleted in a year’s time. The project also needs to have a com­mence­ment cer­tifi­cate in place.

While con­sid­er­ing a prelaunch op­tion, it is even more nec­es­sary t o es­tab­lish t he trust­wor­thi­ness of the builder, es­pe­cially in terms of his track record for trans­par­ent deal­ings and com­pli­ance with le­gal for­mal­i­ties.

Due dili­gence for re­de­vel­oped prop­er­ties

What are buy­ers to do if they buy prop­er­ties which are to be de­mol­ished or have al­ready been de­mol­ished. Two sce­nar­ios are made pos­si­ble. In the first, for the build­ing to be de­mol­ished, the buyer moves into the prop­erty, which is va­cated when other so­ci­ety mem­bers leave at the time of ac­tual re­de­vel­op­ment.

How­ever, if the build­ing has al­ready been de­mol­ished, the permission of both the so­ci­ety and de­vel­oper are re­quired since, though money has changed hands, the trans­ac­tion is in­com­plete un­til the prop­erty has been re­con­structed and reg­is­tered in the new owner’s name.

THINKSTOCK

Those want­ing to buy a house should check for the ap­proved us­age of prop­erty and any pend­ing lit­i­ga­tion

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