Today, buying residential or commercial property in India is one of the most significant financial decisions an individual can make. It involves deploying years of hard-earned money, which makes every aspect of the process crucial. A single mistake while purchasing property in India could lead to severe financial losses and, worse, entangle the buyer in long and stressful legal battles that may take years to resolve in court.
Key Risks of a Mistake:
- Loss of Money: A wrong decision or investment in a disputed property could wipe out savings built over many years.
- Legal Complications: Real estate in India is often fraught with legal complexities. Failing to verify property documents, ownership, or legal status can result in court cases, which can drag on for years, draining both time and resources.
- Fraudulent Transactions: Unscrupulous builders or sellers may mislead buyers about the property’s legal standing, title, or land use, resulting in ownership disputes or incomplete possession.
- Hidden Liabilities: Buyers who do not carefully scrutinize the legal history of a property risk inheriting debts, outstanding loans, or legal claims from previous owners.
Safeguarding Your Investment
To protect your investment, it is essential to:
- Conduct thorough legal due diligence.
- Verify clear title and ownership.
- Check compliance with regulatory approvals (RERA, land use, etc.).
- Evaluate the builder’s or seller’s reputation.
- Ensure proper documentation and registration procedures are followed.
By taking these precautions, buyers can safeguard their hard-earned money and avoid the financial and legal pitfalls that come with real estate transactions in India.
Points to Consider While Purchasing Property in India:
Purchasing property in India is a significant financial decision and involves numerous legal and financial considerations. Here are key points to keep in mind while making a property purchase:
1. Check Property Title and Ownership
Clear Title: Ensure that the seller has a clear title to the property, free of legal disputes. The title should be in the seller’s name, without any claims from third parties.
Encumbrance Certificate: This document ensures that the property is free from any monetary or legal liabilities such as loans or mortgages.
2. Verify Land Use Permissions
Zoning and Land Use: Confirm that the property is classified for residential use by local authorities. For agricultural land, ensure that it is legally converted for non-agricultural (NA) use, if required.
Master Plan Approval: Check if the project adheres to the city’s master plan and complies with local zoning laws.
3. Legal Due Diligence
Property Documents: Verify all legal documents, such as sale deed, mother deed, agreement for sale, and Power of Attorney (if applicable). It’s recommended to hire a legal expert to assist in due diligence.
RERA Registration: Under the Real Estate (Regulation and Development) Act, 2016 (RERA), all real estate projects must be registered. Ensure that the property or builder is registered under RERA to protect your investment.
4. Builder’s Reputation and Project History
Builder’s Track Record: Research the builder’s past projects, delivery timelines, and quality of construction. Online reviews and RERA ratings can provide insights into the builder’s reputation.
Litigations and Delays: Check for any pending litigations involving the builder and history of project delays.
5. Financing and Loan Eligibility
Home Loan Eligibility: Evaluate your financial eligibility and get pre-approved for a home loan from a reputable bank or financial institution.
Builder’s Tie-up with Banks: Some builders have tie-ups with banks for easier loan disbursement, which can be helpful in securing financing.
6. Carpet Area and Construction Quality
Carpet Area vs. Built-up Area: The carpet area is the actual usable area within the walls, whereas the built-up area includes the thickness of walls and balconies. RERA mandates that builders specify the carpet area.
Quality of Construction: Inspect the construction quality and materials used. Look for signs of dampness, cracks, and poor workmanship, and consider hiring a professional inspector if needed.
7. Location and Connectivity
Proximity to Essentials: Ensure that the property is close to essential facilities like schools, hospitals, markets, and public transport.
Infrastructure Development: Consider ongoing or upcoming infrastructure projects like metro rail, highways, or commercial hubs, as they could significantly impact the property’s future value.
8. Check for Hidden Costs
Stamp Duty and Registration Charges: Factor in the stamp duty (typically between 5-7% of property value) and registration fees.
GST and Maintenance Charges: Be aware of Goods and Services Tax (GST) on under-construction properties, and clarify maintenance charges or other recurring costs.
9. Possession and Completion Timelines
Timely Possession: Verify the timeline for possession, and check whether the builder has adhered to completion schedules in previous projects.
Completion Certificate: For completed properties, ensure the builder provides a Completion Certificate (CC) and Occupancy Certificate (OC), certifying that the property is ready for habitation.
10. Resale Value and Investment Potential
Market Trends: Research the resale value in the area and the potential for property value appreciation. Properties in areas with strong infrastructure development tend to have higher investment returns.
Rental Yield: If purchasing for investment, analyze the rental yield in the area.
11. Litigation and Dispute-Free Property
Legal Status: Ensure the property is free from ongoing litigation. Properties embroiled in legal disputes can delay or nullify possession.
12. NRI (Non-Resident Indian) Considerations
Legal Compliance for NRIs: NRIs can purchase property in India, but it is essential to comply with FEMA (Foreign Exchange Management Act) regulations.
Power of Attorney: If you cannot be physically present during the transaction, ensure you have an appointed Power of Attorney to handle the legal formalities.
13. Post-Purchase Formalities
Mutation of Property: Post-purchase, ensure the property is transferred in your name in municipal records to ensure legal ownership.
Tax Benefits: Keep track of tax benefits available on home loans and the property’s depreciation to maximize financial gains.
Conclusion
Buying property in India requires meticulous attention to legal, financial, and infrastructural factors. By conducting thorough due diligence, understanding legal compliance, and planning your finances wisely, you can make a sound property investment that meets your long-term goals.