Take 4 easy steps to that dream home

Property | admin | February 3, 2011 at 6:51 pm

With the festive season kicking in from mid-October, it’s that time of the year when potential home buyers look to clinch the best deals.

Usually, house sales jump by 20-30% in the Navaratri-Diwali period, as people consider the festive season an auspicious one for buying property.

Builders dole out discounts in the form of free parking slots, put off floor-wise price increase, offer fitted out modular kitchens, air conditioned apartments, free white goods or furnishings or waive off stamp duty apart from giving spot discounts, which are showcased in real estate exhibitions prior to the festive season.

From the buyers’ perspective, these discounts seem attractive as real estate prices have always been on the rise, especially in metros such as Mumbai, Delhi, Bangalore and Chennai. But buying a house, either for investment or self use, is a crucial decision.

Right from scouting for a property or getting a loan sanctioned — the entire exercise involves a certain process. Here, we will chalk out an ideal action plan for all potential home buyers for this festive season.

Step 1: Due diligence of the property

The purchaser needs to ask the developer for the approved drawings of the project, a copy of the intimation of disapproval (IoD) and a commencement certificate if the building is under construction. Without these three documents, a buyer is better off without investing in these projects.

“A bank or a housing finance company (HFC) carries out the relevant paper and legal checks before sanctioning the home loan. They charge a certain processing fee for this service but it’s worth the buck. In fact, the recent trend is that banks/HFCs pre-approve residential projects. In such cases, home buyers can breathe easy as banks/HFCs have carried out the due diligence process by themselves,” says Gulam Zia, director, National Advisory Services, Knight Frank.

The builder should provide a clear land title, which implies that the property is free of litigation and any kind of associated debt. If you are buying an under-construction flat from a builder, do check if it is already mortgaged with a lender.

Insist on NOC if property mortgaged with a lender

“If the property is already mortgaged with a lender, do insist on a no-objection certificate (NOC) from the lender, before entering into a purchase agreement with the builder,” advises Rajesh Narain Gupta, managing partner, SN Gupta & Company.

A default from the builder and the lack of NOC from the lender can lead to the eviction of the buyer. The best way to avoid such an incident is to seek a lawyer’s services to verify the title.

The lawyer can carry out a search from the office of a sub-registrar, society, corporation or other authorities concerned, and ascertain the legitimate ownership of the asset. The buyer should also ensure that the property has a functional water connection and proper power supply with an occupation certificate.

Step 2: Evaluate actual cost & loan eligibility

Owning a flat for Rs 8,000 per square feet for a 1,000 square feet area flat at Juhu or Koramangala may sound irresistible. But don’t forget the stamp duty and registration costs. And then you have to factor in the cost of registering the property with the local electricity board and the one-time expense of fixing an electric meter. And last, but not the least, don’t forget the cost of furnishings, fittings and all other expenses that are involved in customising the property to your needs and tastes.

In the case of a resale standalone property, valuation is a prerequisite. This involves charges by a registered valuation agency. There may also be costs incurred via the transfer of the title of the property, also known as conveyance.

Society charges towards maintenance and an annual property tax are among the other costs that most buyers do not factor in prior to buying a house.

Hidden cost a home buyer will incur is the stamp duty

In a new high-end construction, a number of facilities such as swimming pools, gymnasiums, barbeque corners and landscaped gardens also involve a one-time additional cost.

“In India, the first hidden cost a home buyer will incur is the stamp duty. Since most homes in India are bought through home loans, there is also the cost of an insurance policy to cover the home loan to consider. Also, a strata search of the property’s legal antecedents may add up to quite an amount,” says Mrunal Duggar, vice-president, Homebay Residential, Jones Lang LaSalle Meghraj.

Step 3: Arranging for a home loan

Many banks today offer in-principle sanctioned or pre-approved home loans based on your salary and repayment capacity. But experts suggest it’s futile to fix a home lender without finalising the property. “It is very difficult for borrowers to get a home loan from public sector banks if they choose a resale property as old as 15-25 years which has exchanged 2-3 hands in the past.

They are also shy away from lending for under-construction properties if they are not listed with any of the banks for pre-approved loans,” says Harsh Roongta, CEO, Apnapaisa.com. Even if you buy an under-construction property, often builders with huge projects tie up with banks or HFCs which offer softer rates and can lend up to 85% of the property value to customers. Even if banks sanction a higher loan amount, it’s time for borrowers to lower their loan exposure.

“A borrower shouldn’t increase his loan exposure even if it is a home loan. He should create an additional buffer by borrowing only 50-60% of the house value. A house is the largest asset along with an emotional value created by an individual and he should ensure that he doesn’t lose it for any reason,” says Amar Pandit, a certified financial planner.

Step 4: Payment to the builder

This stage depends upon the stage of construction of the project. For an under-construction property, you have to keep paying money as per the construction schedule and the architect’s certificate.

For example, let us assume that for a 20-storey building you pay a token money of Rs 25,000, or 15%, the of total considerations including the society charges before the plinth level and 3% money with every floor slab.

Further, the tranches of future payments will be in line with the brickwork, flooring and completion of the project as stipulated in the agreement. Smaller the building, the higher will be the contribution in percentage terms. If the agreement is still in the making, you can ask for an interim agreement if you are taking a home loan.

Source: Economic Times