December 26, 2024 10:29 pm (IST)
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Buying a home in today’s market is risk free if you are careful
Laxman Jaiswal, Chairman & Managing Director of Ascon Infrastructure India Ltd, a company which has completed several housing projects in Kolkata, including Rajarhat-New Town, gives tips on how to buy a new property during a conversation with Subhojit Roy, co-founder Connections PR.
How to shortlist a real estate project for investment?
When you have multiple builders to choose from and with each builder having several projects, short listing and comparing real estate projects can get difficult and overwhelming. As this is often a lifetime investment, one must be extremely careful and judicious before one acquires a property for living comfort, mental peace and above all return on investment i.e. value of the property.
What are some of the important factors that need to be checked before buying a property?
Location is a very important aspect for any real estate investment. It is important to look around the area where you are going to be eventually residing in.
The amenities, physical infrastructure and reach to all the basic places are important to be analysed. The flat should be in a safe and secure place.
As a buyer you may have a personal preference for a particular location in a city (not purely from cost factor but also the affinity for a location), say North, East or South of the city.
You should weigh in the proximity to the project from the city centre and from your workplace.
If you are married and have a working spouse, check the proximity from spouse’s workplace as well.
If you have kids, check how far schools of your interest from the project are.
Evaluate how far are other important landmarks like a good hospital, metro station, bus stand, railway station and airport.
Also, figure out commuting time to these places from the project.
Check other factors of town planning like livability of the area, water supply, greenery and future expansion for deciding the preferred location.
Compare how is the overall appreciation in the area and specially appreciation of the project you are short-listing for your research.
Appreciation is important for any real estate investment as it leads to a higher rate of return when you decide to sell the unit in future or increasing rental income if you let it out.
Evaluate on the basis of rate/sqft and total cost (not just basic cost) you have to shell out to purchase the property.
The first step in selecting a house or a flat is to fix a budget.
It makes it easier to shortlist a house if you know how much you are willing to spend on it.
Compare the price of the property in question with the ones surrounding it from various builders to get an idea if the builder has offered you a genuine quotation.
There are many ways where you can get a comparative of properties in the area you are looking. Portal listings, brokers of the area or newspaper listings are such sources.
Almost all real estate portals just give you clarity about basic cost and the final cost is unknown until you go to the builder and ask about it.
Don’t go overboard here and spend more than what you can afford in terms of EMI you have to pay.
Calculate future expenses for a minimum period of next three years for short listing projects with affordable EMI. Evaluate the increase in expenses for deciding the affordable EMI and period of loan you can afford.
Factor in the background of the builder in terms of:
-How many projects builders have launched till date, home many completed and how many delivered on time.
-Are there any known pending litigation against the builder in the public domain? Check RERA website link of the project to know more details on this.
-Is the title of projects which builder has been launching clear or there are land disputes in them?
-How transparent is the builder in furnishing details related to property documents for verification?
-What are other Buyers saying about the Builder on public forums?
-Are construction flaws highlighted in any public forum for any project of the builder?
Check if anyone in your network has invested in a property by this builder. Probe set of problems residents are raising in internal community groups.
You get to understand real issues with a project and a builder per se from these internal community groups.
Residents are usually reluctant in letting this info go out in public domain to not affect resale value for home buyers who have invested in the project.
The builder-buyer agreement is also very important.
When you select a flat or house of your choice, you can book the same by giving a token amount, in return of which you get an allotment letter.
Then, a tripartite agreement is entered upon between the buyer, the bank and the builder for the rest of the amount.
This agreement should be read and understood in detail before signing it. All the clauses must be clearly understood and if any doubts, should be raised at this point itself.
Ensure that all the clauses of the documents are read in detail and penalty clauses understood.
The builder is required to pay you a monthly penalty in case you do not receive the flat’s possession within the grace period.
Additional expenses such as GST, stamp duty, home loan processing fee, registration charges and all other charges should also be kept in mind.
Do not forget to compare the Master and Floor plans.
Usually, a property’s area or the super built-up area that is listed is the entire area including shafts, elevator space, stairs, thickness of walls and others.
However, carpet area is the actual area within the walls of the flat. This are can be 30 per cent less than the built-up area or the area used to calculate the price of the property.
In some cases, when a floor is shared between two owners, the prices of the common spaces are shared between the two.
At a high level, analyze the size of the project, number of towers, and floor count and shortlist the project if it suits your preference and liking for a particular building architecture.
Then compare if the project has the unit configuration you are interested in: 2 BHK or 3 BHK Apartment, Row House, Villa, Penthouse etc.
Check if floor plans have the sufficient number of bathrooms, balconies, servant room, study room etc or not basis your preference.
Check what percentage of Super Built-up Area is given as Carpet Area. Higher the percentage better it is.
Make a list of must-have amenities for you and your family.
Also, check the quality of amenity construction.
Amenities should not exist just for the sake of it.
–Families with/without kids: Sports and fitness-related amenities like Gym, Jogging Track, Courts (Badminton, Basketball etc), Toddler Swimming Pool, Kids Play Area, Creche etc can be good ones to watch out for.
–Families with parents: Yoga/Meditation area, Garden and Reading Lounge etc. can be good amenities for the elderly. These are also good for youngsters as well though.
Another important amenity that cannot be overlooked is parking space. A well-planned parking area with adequate parking spots for a good number of 4 wheelers and 2 wheelers is a crucial prerequisite to shortlist your dream project.
Prepare a checklist of banks which have tied up with the project for home loans.
Approval from some PSU banks like State Bank of India (SBI) is good as they carry more rigorous due diligence of a project than private banks before approving a project for the home loan.
Next, check the set of payment schemes offered by the builder.
–Construction linked plan: Payment to be made in phases by the Buyer as per the construction progress of the project.
–Subvention schemes: These are schemes which involve Builder, Buyer and Bank in a tripartite agreement.
Buyer pays some money upfront (say 10% of total price) for booking. Builder bears the interest cost until the subvention period (usually 2-3 years). Buyer starts paying EMI after subvention period ends. Subvention period in some projects is until final possession or for a fixed period. Any delay in possession can be troublesome for the buyer as you have to pay both EMI and rent when subvention period ends.
You should be aware of the banks that are willing or not willing to finance certain builders.
Some banks do not offer loans to some builders. So, it is very important that you check with the banks that are willing to fund the project you are planning to invest on.
Check and obtain the necessary clearances.
The land on which your flat is built is very crucial.
You must research about the soil quality and topography of the land on which the house is constructed.
The plot should also be clear of all dues and be registered.
Before buying a house, the title deed must be verified and checked in detail. The deed gives all details on the rights, ownership and obligations towards the property.
Ensure the property is legally authorized to be constructed on the plot it stands on.
The developer should have approvals and NOCs from Area development authorities, water supply and sewage boards, electricity boards and municipal corporation.
However if you are taking a home loan, the concerned bank will validate your property documents before loan sanction.
Check if the builder is willing to share all legal documents with you for the perusal of a legal expert. Usually, every project has a legal document folder which is updated every time it gets new clearances or other receipts. Some of the important clearances/legal documents are:
Are there any specific areas to look into for under-construction projects?
For under-construction projects, pay attention to
1. Land Registration or Title Deed of the property (in the name of Builder)
2. Plan Sanction Letter (proof of construction plan being approved)
3. Encumbrance Certificate (certifies property is free from legal dues)
4. Agriculture to Non-Agricultural Land Conversion Certificate (given by town planning department as a NOC for using an agricultural land for non-agricultaral purposes)
5. Land Use Certificate (certifies residential use of a land)
6. No Objection Certificate (given to Builder from land seller)
7. Fire Department NOC (to be obtained during pre-construction phase)
8. Environmental clearance (to be obtained from state Pollution Control Boards)
9. Commencement Certificate (certifies commencement of construction)
10. Khata (Account) Certificate/ Extract of the Property (represents the current owner of a property, of prime importance when you go for khata transfer from Builder’s name to yours after the property is purchased)
11. Tax receipts of the property (past 3 years property tax receipts which the Builder should have paid)
12. Insurance premium receipts (proof of property being insured against unwanted events which delay construction or cause financial loss to the Builder)
For completed projects, in addition to above, look for Completion Certificate, Occupancy Certificate and Fire NOC (post-completion).
Do not believe in verbal communication for project completion dates as given by the sales staff of the builder in their sales pitch.
Ask for the exact date of completion which will be given in the sale agreement if you decide to invest.
Check grace period which the builder is going to have in the agreement for project completion. It has become a trend of delayed possessions of flats owing to delay in commercial and residential plans.
As a buyer, you should have a clear estimate of the timeline for possession. Usually, a developer asks for a six-month grace period, however there should be a valid explanation for the same.
What happens if you cancel your investment plans?
You may have to cancel your booking for unforeseen reasons – financial emergency, change of mind, found a better project or deal elsewhere etc.
So make a note of the cancellation policy in case you want to cancel after paying the booking amount.
Make sure you know how much is the penalty, mode of payment and within how many days will you get booking amount back.
Make a note of the interest at which you will be compensated if you do not get the refund in time.
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