Real estate is and has always been one of the safest choices for long-term investments. But buying your first property can be an overwhelming task. However, it doesn’t really have to be so. Read on to know the process for purchasing a property – the things you need to keep in mind, and the documents you need to check for to avoid any legal hassles.
Today urbanisation and industrialisation have penetrated most nooks and crannies of the country. As a result, the demand for better housing and commercial infrastructure has also seen a rise. To cater to this demand head-on, many real estate developers have come up with affordable living solutions and well-planned commercial spaces backed by quality construction and top-rated amenities.
For any property, always know your purpose of purchase. Are you buying for personal use/accommodation or is it an investment? Do you want to buy and rent, buy and sell soon or buy and hold and later sell or gift as an inheritance? Once you know this, it will help shape your decisions while choosing a property. Residential real estate investments take up around 80 per cent of the industry. Let us guide you with all the financial factors to consider, and the legal documents and records you should have to complete the purchase process.
Buying Residential Property
Buying a home for personal accommodation can be a big responsibility and a long-term financial commitment. Therefore, your lifestyle and future plans play a significant role in deciding whether you should buy a house. It makes more sense if you want to settle in a place, and your job does not require you to move to different cities continually.
Things to Consider
The credibility of the Builder: Especially in an under-construction property the asset you invested in stays on paper till you get the possession. Therefore, the trust factor weighs in heavily while choosing where to invest. Don’t forget to take a look at the developer’s records regarding timely delivery. When selecting a builder, research and find out about the number of projects they have built previously, if these were RERA registered, and also the rate of appreciation of these developed projects.
Quality of Construction and Amenities: In both under-construction and finished/ready-to-move-in properties be mindful of the construction quality, amenities provided, location and potential for appreciation of the property because of it, and proximity to markets, institutes and medical facilities.
Can You Afford It?
This should be the first and foremost question before you decide to buy any property, under construction or fully furnished. To answer this, you have to sit down and review you total and accurate income, make a list of expenses, debts and future obligations like childcare or medical care for old parents. When calculating the cost of your dream home, do not count on the actual price only. For purchase of this nature, you have to calculate the closing cost too like registration cost, stamp duty, maintenance charges, and insurance.
What’s Your Payment Plan?
For under-construction properties, you can avail three types of payment procedure – down payment, construction-linked, and flexible plan. A down payment plan is a traditional one; the buyer pays 10-15% of the amount upfront and the rest within a fixed period. In a construction-linked plan, the buyer or the bank that is loaning the buyer needs to pay the builder with pre-decided stages of construction. Every time a segment of the project is completed, a certain amount is paid. A flexible plan is a mix of both construction-linked and down payment plan. The buyer gets discounts on the initial down payment, and the option of paying through EMI, after getting the possession of the property. For ready-to-move-in apartments, a certain percentage is given as down payment and rest in a fixed time.
Are You Eligible for a Loan?
To check if you are eligible for a loan, banks follow a procedure wherein your current income, capacity to repay and your existing investments and expenses are evaluated. One of the most important things that influences such decision is your credit score. The lender checks your credit score to see if you pay your bills on time. Consequently, a high credit score will help get the loan approved quicker. Today many online portals will help you check your credit score for free.
Who Should You Choose For A Loan?
Today, we all get calls for credit cards and personal loans from banks. Conclusion – there are plenty of options to choose from. So, thorough market research is mandatory in selecting not only the perfect property but also the ideal bank.
To select a loan plan that suits best, do your research. You should know how much loan you are eligible for, minimum interest rates offered, if floating or fixed interest rate would be better for you, who charges a minimum loan processing fee, etc.
Have You Saved Enough?
Last but not least, have you saved enough for emergencies? You have made brave decision to invest in real estate and to buckle down and go through the tad-bit-tedious yet very fruitful process of selecting the right property and the right kind of loan. Now, all you need to understand and prepare for are possible emergencies, medical or otherwise. Your salary will arrive on the first of the month and probably be gone by fifth in your monthly expenses and EMIs. It is best if you have other sources of income, savings and other investments that can be relied upon if you are ever in a financial pinch. This planning will help the sudden bumps be just bumps that do not derail you completely.
Legal Documents Required
To complete the purchase process right and proper, make sure you have the following verified documents:
A sale or title deed is proof of the sale and purchase transaction between you and the seller/developer. It transfers the title or ownership to you. It is now your responsibility to now register yourself as the legal owner of the property. If the property/flat has been previously owned, you would also need a parent deed that basically gives the chronological order of different owners. This document helps you decipher if the seller has the absolute right to sell the said property. If it doesn’t, you should not proceed with the purchase and avoid any future disputes.
Approved and Sanctioned Master and Building Plan
Sometimes to make the property more lucrative, developers claim development of markets, malls or tourist spots in the surrounding. Make sure you verify such claims with the appropriate authorities. Another essential legal document you should possess is a ‘Sanctioned Building Plan.’ This states that the local authorities have approved the construction after obtaining appropriate documents and compliances. Verify this document with the issuing body too just to be doubly sure that the property isn’t an illegal construction.
Once the building plan is sanctioned, and the actual site of construction has been inspected, the local authorities give a green signal to go ahead and start the development. This is known as the Commencement Certificate. Without this document, the construction can be considered illegal, and attract penalties or even an eviction notice.
Conversion Certificate and NOC
A teeming population needs to be sheltered, and hence, a vast amount of agricultural land is sought to fulfil this need. In such a case a Conversion Certificate is mandatory. The document sanctions the conversion of agricultural land to non-agricultural one. The appropriate issuing authority further requests the town planning authority to issue a NOC or a No Objection Certificate for the conversion of land for residential reasons.
Once the construction is complete, the developer again needs the authority to issue a Completion or Occupancy Certificate. The document states that all the norms and building bye-laws are followed; the building is now safe for occupancy. This document would help you secure a loan and obtain other government-issued documents such as Khatha / Mutation etc.
Receipts of Property Tax and Encumbrance Certificate
Before selling the developer should have paid all the required property taxes. If not, then you may become liable to pay the same once you become the registered owner of the property. Tax is charged on the land and the building, based on the extent and the built-up area. An Encumbrance Certificate states that there are no pending payments on the property or no ‘encumbrances’ like mortgage and loans. The document can be requested from the Sub-Registrar for a fee. It will provide details of all the legal dues or any transaction affecting the property of the required period.
Khata / Mutation Document:
The jurisdictional municipal corporation issues a Khata / Mutation Document in the name of the current owner. It contains all the details like the name of the owner, size of the building, location, and other important information which helps in filling the property tax.
2019 is a great year to get involved in real estate ventures.
If you are not too keen on buying property in your hometown and wish to make the purchase purely for investment purposes take a look at Tier-II cities like Jaipur, Indore, Lucknow, Ahmedabad, Coimbatore, and Kochi.
Once you have considered all factors and chosen the property you want to buy, it further entails a list of procedures and paperwork. With this guide, we are sure you will be in a position to make an informed decision and strike a great deal on your real estate investment. You can always consult professional services to be sure and transparent through every stage of the purchase. Do not hesitate to ask your consultant and developers all kinds of questions before making decisions; it is after all your hard-earned money that you are investing.