Big Story | Buying your dream home? Here’s what you should know

Buying a home is a goal that most of us work towards. However, the ongoing turbulence in the economy following the Covid-19 pandemic should make you re-evaluate your decision to purchase a home immediately.

For it is certain that economic growth is going to suffer — many businesses are witnessing sharp declines in revenues, and there are likely to be wage cuts and lay-offs, too.

Since home purchase involves a large sum of money and repayment of home loans require steady cash flows over many years, you may want to defer the decision by a few months, for clarity to emerge on the impact of the virus on your personal finances.

But if you have already arranged for the cash outlay and look forward to stay under your own roof, there are a few factors you should first keep in mind. The real-estate sector continues to reel under pressure from tight liquidity, and many large developers are under considerable stress. Despite having a regulator in place (Real Estate Regulatory Authority), the sector has a long way to go in protecting buyers’ interest. Therefore, be very careful while choosing your developer. Completed properties (old or new) are a better choice as these help avert risks that come with under-construction properties. In case of new ones, make sure they are RERA-registered.

Here’s a low-down on all that you need to know before purchasing a house property.

Factors to consider

When you decide to buy a house, you should take into consideration a few key factors that will stand you in good stead over the long term.

Price: Houses are available across various price ranges, and fixing a budget makes it easier to shortlist a property. It will also help you compare the prices of the property in the surrounding regions in the same segment. Know the circle rate (rate fixed by the State for a region) to help you understand the degree of premium in a given area. There are factors that could influence price appreciation such as higher presence of office properties in the vicinity, hospitals or educational institutes.

Infrastructure and location: A property in a prime location costs more, while properties in the outskirts of the city are available for lesser price. But better connectivity can help. For instance, operation of metro line in greater Noida regions has made the location favourable and also resulted in property price appreciation.

Age: Age matters along with the condition of the property. For instance, even in a good locality that has best connectivity, a 35- or 40-year-old property might fetch you a lower value. If you go for such property, it may cost you more in renovation and maintenance.

Size: Decide on the size of the property, depending on your requirement (size of the present and future family). Keep in mind to look at the carpet area (actual size of the property) and built-up or super built-up area of the total area of the property to help you make an informed decision.

Amenities: This can be those of the property as well as those in the neighbourhood.

Within the property includes electricity and water supply and other facilities such as lift, car park, swimming pool, gym, sports centres and convention centre (for large apartments).

Ensure that your neighbourhood has services such as public transport, proper sewage and lighting facilities.

How to look for a property

Now that you know how to pick a property, let’s see the sources to look for an ideal home — online portals, newspaper advertisements and agents. But each has its own set of pros and cons.

In the case of online portals such as RoofandFloor, which exclusively lists new properties, buyers can reach out to the seller directly without any middlemen. You can browse through property listings across different regions and localities. You can, free of cost, get basic information about the property such as age, location, size, amenities and price.

Some portals also charge a subscription fee.

Now, if you are going through brokers, , it is better to go for RERA-registered agents as there is recourse in case of any misconduct.

Also, a RERA agent would deal only with RERA-registered properties. You can verify the agent through State RERA websites. However, you may have to pay 1-5 per cent on the value of transaction as brokerage.

You can also search for properties through newspapers. Though this is one of the cheapest methods, you may have to go through a broker, as advertisements might be provided by agents instead of owners.

But irrespective of the source, it is your job to gather complete details of the house so you can bargain convincingly.

Cost to home buyers

Once you have narrowed down on a house within your budget, the next focus should be on the fees/charges associated, over and above, the cost of the property.

Registration and stamp duty

Ownership of a house is transferred when the agreement between the buyer and the seller is registered and signed, and the stamp duty and registrations charges are paid. The value of the property will exclude these charges.

Stamp duty is the tax levied when a property exchanges hands from the buyer to the seller.

Stamp duty is applicable on conveyance deeds, sale deed and power of attorney papers.It is levied by the State government, and varies from State to State (5-8 per cent). The amount paid as stamp duty depends not only on the value of the property but also on its location, age and type (flat or independent house).

It is levied on the market value or the circle rate of the property, whichever is higher. For instance, stamp duty in Maharashtra is around 5 per cent of the value of the property, but in Tamil Nadu, it is around 7 per cent.

Stamp duty is payable on the date of registration. This is a crucial, legally recognised document — it acts as proof of ownership in court, in case of any dispute.

On the other hand, registration fee is charged to record the execution of transaction between the buyer and the seller. This, too, varies with each State. For instance, in Maharashtra, registration charges are around ₹30,000, while in Karnataka, it is 1 per cent on the value of the transaction.

Further, there are other miscellaneous expenses also to be incurred at the time of registration. This includes notary expenses, legal fee and other charges that are specific to each State.

Brokerage

Most brokers charge a fee of 1-2 per cent on the total house cost; however, some may charge a higher fee. While there are websites that don’t involve any middlemen, subscription fees to the website for viewing the properties or contact details of the seller, have to be paid by you.

GST

If you as a home buyer, opt for an under-construction property, you are liable to pay Goods and Services Tax at the rate of 5 per cent (1 per cent in the case of affordable houses) on the value of the property. The payment of GST is made in a phased manner as per the progress of the construction, and usually excluded from the cost of the property.

It is advisable to go for ready-to-move-in properties as they don’t attract any GST and is ready for your occupation.

Maintenance deposits

Maintenance deposits (for new or second-hand flats) are usually excluded from the cost of the property, and home buyers have to pay them separately. Depending on the residents association, the number of houses and amenities available, the maintenance charges can go over ₹20,000 a month.

In case of a new house property, maintenance deposits are collected by the developer initially and later handed over to the flat society or association. It would be utilised for charges including electricity, water, gas and club facilities.

Other charges

Home buyers may be levied other charges, too, which vary with developers.

In newly constructed flats, developers might charge you for providing a parking space.

In some second-hand houses, too, you will have to pay additionally for the garage space. Some developers also charge extra for private terrace, flats with better view, and so on.

Remember, if the house needs furnishing or interior work, that expense should also be taken into account at the time of purchase.

Checklist

Individuals put their life savings in buying a house. So, it is important to verify all the documents before making the final settlement.

Here are some documents you should verify after you shortlist a property.

Parent document

Parent document or mother deed is the most important document to be verified before making the payment for a property.

It traces the ownership of a property as it exchanged hands through the years, either in the form of sale, power of attorney, gift deed, partition or inheritance.

The record should be continuous and in chronological order. Any missing link should be verified with the records at the State registration office.

This is to ensure that the property has free marketable title.

The parent document will contain details of the original buyer and seller, land deed, allotment number or letter, along with details such as location of the property, road, house number, block and ward, consideration paid, and other provisions related to the property. These are recorded on a non-judicial stamp paper of a certain value as prescribed by the State where the property is located.

The document will also state the carpet area, built-up and super built-up.

You need to pay especial attention to UDS (undivided share). UDS is your share in the land (on which the building has been constructed).

Also, some documents would have a clause on parking space — whether it forms part of the property you are about to buy or whether you have to pay for it separately.

Keep in mind that for viewing the parent document, usually a buyer has to pay a minimum token advance to the seller.

Encumbrance certificate

Encumbrance certificate or EC ensures you are dealing with the real owner, and there are no pending loans or litigation against the property. This certificate is the evidence that the property referred to has a free title.

As a buyer, you can apply for an EC at the sub-registrar office. EC is always recommended for documents older than 30 years.

A nil EC will be issued if the property has no pending dues or litigation. This is a very important criterion that helps you proceed with property purchase.

Approvals and permission

At various stages of construction, the builder would have obtained the respective approvals and permissions such as land usage permission, planning permission (for construction of building), layout and building plan approvals, and project and property plan approvals. Make sure to check if these approvals are in place when you read the documents.

For instance, sometimes an agricultural land would have been converted into non-agricultural land for construction purposes. For this, the builder should have obtained permission for such conversion, and the respective approval should be in place from the local authority and State development authority.

Similarly, the master plan (structural and layout of the building plan) should also be approved by the municipality or local authority. If the construction plan is unapproved, the State government will levy penalties on the owners, and facilities including roads, drainage, street lighting may not be provided.

Occupancy or completion certificate (mostly for fresh bookings) states that the house is ready for occupation.

However, for some older properties this certificate may not be available.

Other checks

If the property you are about to buy had a mortgage with a bank, then before handing over, the seller needs to obtain an NOC (no objection certificate) from the bank stating all dues are cleared.

Also, check if the dues with the municipality, such as water tax, road tax, electricity, property taxes and maintenance charges, are paid in full by the seller. If not, you will be liable to pay those.

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