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Thursday, July 19, 2018

Buying right

For most households buying a home is the biggest financial investment of their life. Since the stakes are so high,a mistake can cost dearly.

Written by Praveen K Singh | Published: March 28, 2009 10:10:42 pm

For most households buying a home is the biggest financial investment of their life. Since the stakes are so high,a mistake can cost dearly. So it is important to know what to look for and what to avoid. With proper planning you can minimise the risks.

THE RIGHT LOCATION

Choosing the right location should be your foremost priority. If you intend to live in the property,then distance from your spouse’s and your workplace and children’s schools/colleges should be prime considerations. Choose too distant a place and you pay a heavy price all over your life in terms of commuting hours. “Connectivity is an important aspect that buyers must enquire about,” says Mahavir Naagar,a Delhi-based property consultant. Especially if you are buying a flat in a newly-developed area,you must know the availability of buses,auto-rickshaws and taxis (your children might need them even if you don’t),especially at late hours. The availability of basic facilities in the neighbourhood — a market or shopping centre,hospital,petrol pump,bank,post office,etc — is another factor you should consider before choosing a newly-developed area.

If you are buying a flat primarily to rent out,make sure there are offices and other centres of employment nearby. If such places are around,you will have little difficulty in finding tenants and your flat will remain occupied round the year.

THE RIGHT BUILDER

Since we are today in the middle of a slump ,most developers are facing a cash crunch,which could in turn delay the project you plan to invest in. Only by going with developers who are sound financially can you ensure that you get delivery of the flat in time.

Next,visit the projects developed earlier by the developer you are considering and speak to the residents. Did the developer deliver in time? Now that they have moved into the flats,what do the residents think of the quality of construction and the facilities provided by the developer? And how good is

his maintenance?

A lot of developers charge a very high maintenance rate from residents and don’t offer a commensurate level of service. The cost of electricity back-up could be high. Club membership that was meant exclusively for residents of the society is later given to outsiders for a fee. What was supposed to be a park later gets used for developing more flats. Common areas within the society get sold as parking slots. It is only by visiting older projects and gauging the level of customer satisfaction there that you can assess the true quality of a developer.

Some builders — very few,actually — have also got themselves and some of their projects rated. Visiting the web sites of leading rating agencies such as ICRA will provide you insights into the developer’s strengths and weaknesses.

THE RIGHT FLAT

If you are going to live in the flat for a long time,even minor aspects need to be looked into. Make sure that the flat gets adequate sunlight and breeze. If you believe in Vaastu,consult an expert and ensure that the flat conforms to those norms. Decide along with your spouse and family members which floor you would like to live on. A flat on the ground floor offers advantages such as easy access and is preferable if you have older members in the family. It is also advantageous whenever anything heavy has to be brought in or taken out. With such a flat,you might also get some additional space at the front and the rear. But such a flat also comes with disadvantages of its own: rodents find it easier to invade a ground-floor flat; such flats tend to be cooler in summers but also get colder in winters; and a flat on the upper floors usually offers a better view.

Make sure that you buy a flat or a house in a society or neighbourhood where the other residents also belong to similar socio-economic background. If the gulf between your status and your neighbours’ is too big,it could lead to adjustment problems.

A CLEAR TITLE

After you have identified a property you like,get a lawyer to verify the legal title,the construction plans and their clearance from the local authorities.

“Hiring a lawyer is also mandatory if one is going for a home loan. The bank usually prescribes all the clearances that it requires. Lawyers dealing regularly in such matters have everything on their tips and can submit their findings within 24 hours,” says Vishal Chopra,a chartered accountant and a columnist on real-estate issues.

Anurag Singh,a Supreme Court advocate,explains,“By a clear title one means that there is no material defect in the title of the property and any defect which can be ordinarily ascertained at individual level should be found out. It has to be ensured that there is no pending litigation,no existence encumbrance,the property has not been acquired by any one including government,there is no existence of public right over the property,there is no restrictive covenant attached,there is no third party right by means of any assignment or agreement to sell etc.” He says that the dimension of the property is an important aspect and one should look into the certified copies of the municipal authorities and the tehsildar or the local competent body to ascertain that there is no discrepancy. It is also important that all the public charges,rent liability or any other kind of financial liability pertaining to the property should be clear — it can be electricity,water,or local tax bills. Further,as a matter of abundant caution,the purchaser of the property should insist that the seller should give warranty against not providing any correct information in regard to the property.

The buyers should ordinarily insist on the original documents from the seller and once he reviews them he should consult a legal professional or he should inspect the records where those documents are registered. This can be easily done by filing a simple application alongwith court fees before the competent authority. In no case any property transaction should take place in good faith; it has to have the registered documents alongwith with clear title documents,those regarding the use of the property (commercial or residential) and,most importantly,a non-encumbrance certificate so that a proper due diligence report can be prepared before acquiring the property.

Emphasising the importance of getting the legality of constructions vetted,Chopra says,“After I left a bank and started my own practice,I remember having dealt with many people who could not get a home loan back in 2002-06 for purchasing properties in parts of north Delhi. Despite the bank’s refusal,they made alternate funding arrangements and went ahead with the purchases. They avoided my advice against buying these purchases. Later on,many of these constructions were found to be illegal and were demolished or sealed. Obviously,the bank was cautious but not the buyers.” Lawyers usually look for clear title of the property for the past 13 years.

Societies under construction usually approach the bank on their own for approval. They submit all their construction plans and the clearances they have obtained from the local authorities. This is a one-time process. Once done,the bank intimates them that subject to other conditions,it would fund the construction. This fact is then widely publicised and any person wanting to purchase a flat in that society simply has to satisfy the bank on other criteria for the loan: the ones relating to the legal clearance of the construction are already taken care of.

“Bankers know the job better than you do. If a bank avoids a property,probably you should too. Do note that some banks claimed to provide loans on properties that nobody was willing to fund (lal dora areas,other properties that no bank would finance such as barsatis),but such loans carried a high rate of interest and were more in the nature of personal loans rather than home loans,” says Chopra.

BUY NOW OR WAIT?

With the popular expectation of a fall in real-estate prices,most buyers are biding their time. But in practice,timing the market and catching the bottom is difficult. How will you know that prices have touched rock-bottom and will not fall further? Your wait could turn out to be indefinite.

A more practical approach would be to survey the area where you intend to buy a house,and even target a few properties. If the price of the property is in the range that you can afford,go for the kill. After all,if you are going to own the flat for the next 30 years,a couple of hundreds per square feet more paid now will not matter.

Moreover,with most builders facing a cash crunch,you should be able to bargain hard and get a good deal now,rather than six months or a year later when sentiment may improve.

“The buyer should do his homework,which means zeroing in on the right properties,evaluating facilities,comparing prices,and then he should finalise the best available offer,” says Naagar.

With the R-word terrifying both the salaried class and business people,demand for housing has clearly slackened. If you have the funds,be greedy now,drive a hard bargain,and get yourself the right house. l

praveen.singh@expressindia.com

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