How to buy a Property? Land, Home, Flat or a Commercial Building

Things to remember when you’re buying a Land, Home, Flat or a Commercial Building in any metropolitan city in India

how to buy a propertyHow to buy a Property? For most people, buying a property is one of the biggest buys they make in their life. It involves a huge amount of money. When you put in so much money, you want to be sure that you are making the right decisions and not doing anything wrong. That is exactly what this article will help you with.

The actual process of buying a property is not very complicated. Even if you do not understand it, your seller will be more than happy to explain each and every thing to you. The difficult part is, knowing that you are not being “fooled” or “conned” by someone. This guide will give you all the possible tips and tricks you should keep in mind so that you can make your decision wisely. We hope you find it helpful.

Things you “must” check before you buy land!

The most important thing to do before you buy a particular piece of land you are interested in is to see whether the land can be sold by the person who is selling it. So before you even take the first step towards buying the land you are interested in, you got to check a few things.

Check the “Title Deed / Certificate Of Title” of the land: The land developer or the seller should posses a clear title of the land he is selling. Believe me , YOU are not qualified to check it ! Nor your friend who has just introduced you to the seller ! You need a professional lawyer who specialists in scrutinizing Land Titles. Don’t expect a court going criminal lawyer to check the papers. It would be like going to a Dentist when you have stomach pain.

The seller should have purchased the land in his name and should have a sale deed to prove this. If the seller is a broker or a developer , he may not have a sale deed in his name. He may be operating with a “sale agreement” from the actual seller or with a POA (power of attorney). While these are legally valid, they are fraught with risks of fraud and forgery. You need to employ a lawyer of great skill to study these situations.

The land should further have a “Patta” in the name of the owner. Patta is akin to the “katta” in Karnataka and N.India. While the sale deed is a document verified by the SRO (Land office of the Sub Registrar), the Patta is issued by the district Collector’s office, represented by his Taluk administrator.  Your seller may not have the Patta and may give you the excuse that he has the Patta in the PREVIOUS owner’s name etc etc. This is not acceptable. If you buy such a land, you may spend several months or even years working the complex system to get your Patta. There is NO assurance this will happen and you will be open to several risks including claims by the previous Patta holders.

Loan-ability: Ask this question: Will the land qualify for a bank loan? Even if you DON’T need the money to buy the land, asking this question to the seller will come up with all kinds of truths. If the land does not qualify for a bank loan, the papers are probably dodgy. We are using bank loan-ability as a check to see if the land titles are good.

Ask for the “Encumbrance Certificate”: The Sub-Registrar office under whose jurisdiction the proposed land comes, will issue an E.C (Encumbrance Certificate) of the land. It will show previous transactions, buyers and seller names of yester years, whether the land has any lien or loan on it etc. Your lawyer should check the extent of the land to see if it matches the sale deed and the patta. The EC is not a bullet proof document, due to clerical error some entries may be missing or not clear. So it is important to study the same with other parent documents.

Approval to build : There is no wriggling out of this. The land should have any one of these (Applicable only for Chennai) 

CMDA Approval. If the development is within the city limits, it will have a CMDA (Chennai Metro Development     Authority) approval.  If the township has been planned and promoted by the developer he will have a CMDA approval number on his layout drawing.

DTCP Approval : If the plot of land is outside Chennai metro limits, and if your plot is within  a layout, then the development should have a DTCP (District Town & Country Planning Approval). The DTCP approval number will be with the developer. A DTCP approved layout will follow minimum standards when it comes to road width, public spaces like park etc

PANCHAYAT Approval: Every village outside the city comes under some Village Panchayat or other. These bodies have local administrative powers over the organic growth of their villages and have authority to give approvals for houses ranging from 750 SFT upto 2000 SFT depending on the size and facilities in the Panchayat. The Panchayat elected council is supposed to apply the DTCP rules at the local level. For example one of the rules state that no house can be built within 90 meters from a cremation ground. 

Possession certificate:  This is a little known but crucial document which even your lawyer may overlook. In fact if you press him for it, he may murmur that you are paranoid. Remember it is YOUR money and you have to be paranoid when it comes to land dealings. This certificate is issued by the VAO or VO (Village Administrative Officer). The VO is appointed by the Tahsildhar who in turn reports to the District Collector. The VO will demand that the land owner pays up his land taxes, usually a paltry Rupees Three hundred or less, before issuing a possession certificate.

Identity Verification: Now that you have become sufficiently paranoid, you will agree with me that one crucial detail that we overlook in all the bonhomie with the broker, is if the seller indeed is who he claims to be ! There are enough part time actors with forged identities who can be called upon to play the role of the seller on that fateful day. Your Sub registrar office neither has the time nor inclination to checking these frivolous details.

Politely but firmly ask to see the originals of at least 3 different identity papers of the seller. Passport, Pan card, voter’s id, driving license are all good. Make sure you retain a photocopy of the same. It is within your right to check if the property was purchased by the seller using his own funds. If it is a recent purchase and he has paid through cheque or demand draft, you can ask for those bank transaction details. Is this important? Not entirely, but there has been cases of Mr X buying the land with funds being provided by Mr Y’s account, perhaps a friend or relative, who many years later files a case stating that he should have been part of the purchase / sale etc. So if the value of the land is high, ask your lawyer to verify this.

Legal Heirship: Any person who has purchased a land with his OWN funds is at liberty to sell if she/he is in sound mind. However if the property is ancestral or has been devolved through “settlement” between family members or through a divorce settlement your lawyer should demand legal heirship certificate to verify number of claimants and scrutinize court orders on confirmation of WILL etc.

In the case of “Pledged Land”: Some people may have pledged their land previously for taking a loan. In this case, it would be wise to ensure that all the loan payments have been made and that no amount is due. Ask, the seller to produce the “Release Certificate” from the bank that is necessary to release all debts over the land legally.

Measure the land: Get a recognized surveyor to measure the land and see that the dimensions, area, borders etc. are accurate as stated by the seller.

If there is more then one owner: If there is more than one owner, it would be wise to get a “release certificate” from everyone involved before going ahead with the process.

If the owner is an NRI: If the owner of the land is a NRI, then the seller of the land in India should be given “Power Of Attorney” to sell the land on behalf of the NRI. The power of attorney has to be signed by an officer of the Indian embassy in the presence of a witness.

Proof of Payment:  Try and make all your payments by cheque or draft drawn out in favour of the actual seller preferably mentioning their bank a/c number as well. I know it is often tempting to short change the government of the taxes buy paying out substantial amounts in “black” money or as cash. If the seller is motivated, remember, he will find ways to account for the cheque money you give. It is up to you to insist this, after all you always have the choice of buying something else. Assuming you want to be above board, trying to save 10% of the cost by way of registration fee, is not worth the underlying risks.

Your seller may insist he receives the cash component few hours or days ahead of the actual official registration. Even if he were to hand over the original parent documents as a collateral, you are still open to the seller renegading on his promise.

Your seller or broker may unfairly claim that some or all the money you gave was “short” or had “counterfeit notes”.

All large transactions are tracked by our (albeit lackluster) vigilance system. After a large transaction if your seller is found to possess largely unexplained cash, the trail will lead back to you, giving you perpetual headache.

If and when, God forbid, the government wants to acquire your land for some purpose such as road expansion or military purpose, they would be more amenable to paying compensation equal to the amount actually shown in your purchase document.

Finally by paying cash and not disclosing the actual amount, you will be simply postponing the problem. Some day, when you wish to sell the land hopefully the price of land will be high and you will make a handsome profit. But as your luck may have it, if you deal with an honest buyer, who insists on paying everything above board, you will end up paying a large capital gain tax!

After all these initial checks are made you can go about the actual process of buying the land. For now, start worrying but keep buying. Remember when buying land you can never be too paranoid.

Things to Check Before You Buy a House

New homes can be just as problematic as old ones. In fact, because they haven’t been tested by years of use and abuse, they can be filled with problems, especially if the builder used any shoddy practices. Hiring a qualified house inspector before you buy is a major hedge against very expensive surprises.

Here are ten clues for determining a house’s overall quality before you commit to the cost of hiring a house inspector.

  1. The structure. From a reasonably distant vantage point, look at the house. Do the walls appear to be plumb and flat? From inside, are any walls bowed or not square at corners? When you jump in the middle of the living room floor, does it flex or feel solid?

  2. Water control. Does the ground slope away from the base of the house? Will gutters, downspouts and drainage pipes carry excess water away from the house…or into the basement? Is there any evidence of water damage?

  3. The roof. Is the roof new and in good shape? Does it look neat and properly applied?

  4. Details. Do you see signs of quality workmanship in the finish details such as moldings, tile work, hardware and paint?

  5. Kitchen & bath fixtures. Are sinks, toilets and tubs quality fixtures? Do they work properly? Is the water pressure good when you turn on the faucets and flush the toilet?

  6. Electrical system. Are the number and locations of receptacles adequate to the needs of the house? Is the main circuit breaker marked at least “100 amps”?

  7. Water heater, plumbing. Is the water heater gas or electric (gas is much more efficient)? Water supply pipes from the water heater to fixtures should be copper.

  8. Heating. Where is the furnace or heater located and what type is it? Are any rooms not heated? Do registers look adequate for heating the spaces? Is the house air-conditioned?

  9. Insulation. Look in the attic for insulation; R-19 (6 inches of fiberglass, for example) is a minimum in moderate climates; up to R-38 (12 inches of fiberglass) is required in cold climates. Remove a receptacle cover on perimeter wall to check for wall insulation.

  10. Fireplaces. Do they have screens or glass doors (doors are more efficient). What about dampers and log lighters? Is there a combustion vent that draws air from outside and a spark arrestor at the top of the chimney?

How to buy a Flat?

Choosing your flat – Location.

When choosing the location of your flat, you must consider these questions:

Is there a “daily market” from which you can buy fruits and vegetables near-by? 

Is there a doctor’s clinic or hospital nearby? 

If you and your family relies on public transport, is there a bus stop, railway station etc. close-by?

If you have small children, is there a playground, park, garden etc. close-by?

What about post offices, banks etc.?

Does the area have proper drainage, sewage and water supply?

Is there a regular system for garbage disposal in your area?

What about schools, collages, offices? How far are they from the location? 

What will the daily transport cost be?

What is the pollution and noise situation in the area?

How is the neighborhood? Is it a safe place to raise children?

Is the flat designed to suit your needs?

It would be best if you choose a flat that satisfies your needs and also suits your life style. You could use these questions to guide you: What is the age of the people who will be living in the flat? If they are old, you might want to choose a flat that is on the ground floor or first floor?

If the flat is on a high floor, is there a lift service available in the building?

If you choose a flat on the first or ground floor, you must consider the possibility of floods affecting the area!

How are the flats in the society arranged? Is there privacy or can everyone see into your house?

When people are talking in the flat next to yours, can you hear it in your flat? This would mean that your conversations too will not be private!

How are the windows of the flat arranged? Does enough sunlight come into the house?

Is there enough ventilation?

What are the amenities the society is providing?

Are there too many corridors in the apartment? You will be paying on basis of area. Corridors eat up room-area!

Ideally, there should be at lest one common toilet so that the visitors do not have to enter your bedroom to use your bathroom.

The kitchen, dining room and entrance should be close to each other. This ensures easy serving of food to guests etc…

Ideally, the building design should include “curtain walling”. It is required to protect against “seepage” problems!

Check the heights of railings, distance between each railing etc. from the point of view of safety of children.

The builder might tend to design the flat such that the bathroom is close to the kitchen. This is done to reduce plumbing costs. But this tends to clutter up the house and reduces the ventilation of other rooms of the house. Make sure that this is not the case.

Try to draw the furniture on the ground and see how much space is left free. Is the house too cluttered? 

Check the quality of construction!

It would be a good idea to check up on the quality of construction before you go in for a particular project.

Let the following points guide you:

  1. You need to check up on the reputation of the “promoter”, “contractor” and “architect” of the construction. Visit other projects by them. Try to find problems and faults in their construction by talking to people.

  2. One of the most important criteria is the cement being used in the construction. Try to check up often, though surprise visits about the type of cement being used. Ask the builder about this? Ask him to explain why he feels the particular cement being used is the best…

  3. Check up on the thickness of the external walls. If they are 6-inches walls, it is not a very stable construction. A 9-inch wall is always better.

  4. You must ask for a ‘performance guarantee’ clause or at least a ‘structural liability’ clause in the sale agreement. This will insure that the builder remains liable for any defect in the building for at least one to three years from the day he hands over possession to you.

Having used all the above given points, let us assume that you have finally found your dream house. Now, comes the question of paying for it. Most people will go in for a home loan.

  1. Check for legal problems: Before you short-list a particular property, you need to make sure that the land on which the property is being built, is free of any legal problems. If you do not do this, a few years down the line, in a Govt. drive to remove illegal property, your home may be destroyed. So it is better to be safe than sorry.

  2. The first thing you need to check, is the “permitted use of the land” in the government records. Land CANNOT be used for real estate, unless it is “buildable” land as per government records. 

  3. You should ALSO get your lawyer to find out from the land registration office whether the land has been sold or mortgaged to other parties, or whether any other fact has been left undisclosed by the owner of the land.

Any land that is clear from all these issues mentioned above would be an ideal site for building. 

How to Purchase Commercial Real Estate

Buying commercial real estate can be a sound investment for your company, especially if you’re looking to cut costs by using it for your own operations instead of paying a lease to another party. However, before you buy commercial real estate, there are a number of factors to consider, ranging from the financial health of your own company to the viability of the commercial real estate you have in mind. It’s important to understand that these types of investments are made after careful deliberation and analysis of the potential return on investment. Read the following steps to learn how to buy commercial real estate.

Analyze the benefits of buying commercial real estate, as well as the risks.

  1. A benefit of buying commercial real estate could be that if you are buying to maximize your return on investment, it will, in most cases, offer more returns than leasing.

  2. In addition, if your company has substantial profits, you can offset those at tax time by claiming depreciation of your property.

  3. Furthermore, though for tax purposes you can claim depreciation, owning commercial property adds to your asset appreciation over time, which means that your company’s equity grows.

  4. A risk of buying commercial real estate can be that the choice of location doesn’t withstand real estate trends. A location that’s in high demand this year can lose all commercial appeal next year, and that affects the value of the property, as well as the attraction of your business if it operates out of that location.

  5. Another risk of investing in commercial real estate can be loss of liquidity. When an enterprise invests hundreds of thousands of dollars in commercial property, that’s money that isn’t readily available. Though this isn’t likely to be a problem when business is good, in tough economic times it can be hard to sell real estate to release the invested funds

  6. If you’re planning to rent out your commercial real estate, it’s important to understand that leasing is not a secure form of cash flow. Tenants can be late with their payments, or even neglect to pay at all, and if you’re depending on the income it can be a stressful situation.

Assemble a group of experts to advise you. You’ll need an accountant, a lawyer, a commercial realtor, and a mortgage broker on your team

  1. Your accountant can discuss the financial aspects and options of buying commercial real estate.

  2. Your lawyer can help you draw up any contracts pertaining to buying or leasing a property.

  3. A commercial realtor can alert you to viable properties in the area.

  4. A mortgage broker can work with you to obtain the necessary funding for your real estate investment.

Choose a commercial property to buy.

Aspects to consider before buying are location, condition of the property, which business uses are allowed, how accessible it is to clients and suppliers, and what possibilities it offers for leasing and re-selling. In addition, make sure to do a title search so you know the property is not compromised by any pre-existing agreement, and check the zoning laws and development plans to see what types of business are allowed in that location and what types of adjustments to the infrastructure and city planning might affect the property

Secure financing for the commercial real estate.

Make sure before you apply any mortgage, that you have the down payment covered, as well as proven income to cover the monthly payments.

Buy the commercial real estate.

Have your lawyer explain every detail of the sales agreement so you know exactly what your rights and obligations are.

Limbiq.com

Comments

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