You have decided to buy a house.
How do you know which house or apartment to buy?
A checklist helps you choose the best house among the available options.
Here is the first article in the two-article series that lays down a checklist for buying a house.
In this article, we explain the due-diligence checks that you must know about before buying a house.
Your Property Search Begins Here
If you want to buy a ready-to-move apartment or house, you look at cost, location, and various other factors. We’ve explained them here.
If you want to invest in a property that is under construction, then, in addition to the above factors, you might also want to consider the following:
How quickly will you get possession of the property?
Is the construction progressing as per schedule?
Do you notice any delays or lapses in the schedule?
After researching thoroughly, inquire about the progress and visit the site to confirm the progress made in the construction of the house.
Any new construction should not take more than 2-3 years. If there are delays beyond the reasonable time mentioned in the documents, you must watch out and think before buying such a house.
Quality of Construction
Inspecting the construction and checking if the builder is using materials of excellent quality during construction is a must. You can also talk to buyers of older projects to confirm their experience of buying a house from the same builder.
Is the construction as per approved plan or is there any deviation?
Check the building plan documents and layout to find out if there is any deviation from the approved plan.
Builder Track Record
The builder’s historical track record and his completed projects will help you finalise the apartment you want to buy.
A reputed builder delivers whatever is promised to you at the time of negotiating the purchase of the house such as clear title, relevant approval, and value for money.
To check the track record of the builder, find out if the builder delivered his previous projects on time. Is he known for using quality materials? Check with buyers and clear your doubts about the builder’s track record.
You must know what service the builder will provide after the property is handed over to you.
What relationship does he maintain with the buyers after the sale of the house?
Does he take care of the property post-sales?
If it is a gated community, the builder’s support is required till you move into the house.
It is imperative that the builder completes all his work and continues to provide the service he promised till the time of hand over of the house. You can inquire about the builder’s reputation for fulfilling promises with the previous buyers.
Due-Diligence and Document Checklist
It is an important step that you should not miss out when buying any property, whether ready-to-move or under-construction.
You must check and validate the documents given below before you finalise the house you want to buy:
For under-construction properties:
Land title: Does the land belong to the builder? How do you check the ownership of the land on which the property has been constructed?
You can check online land records in every state. This information is publicly available.
Next, you must check if the builder has got all the necessary approvals to commence construction.
Ask for copies of the approved layout and sanctioned plans and specifications such as layout, building, structure, and service plans.
Building Plan Approval from the Builder - This approval confirms that the concerned authority approves the floor plan and the master plan.
Once the building plan is approved, a commencement certificate is given to the builders to start construction of the project.
No objection certificate (NOC) is issued by electricity board, water board, environmental clearance, Airport Authority of India clearance, and so on.
Change in Land Use (CLU) - You need to check if the property is approved to be used for residential purposes. If the land on which the property is constructed is agricultural land, the builder needs to get the change in land use approval before he starts the construction.
Conversion Order is issued when the Government approves residential or commercial construction on agricultural land.
For ready-to-move property:
Documents to check:
Clear title can be confirmed by verifying the ownership documents of the seller such as sale deed, conveyance deed, gift deed, will, and so on.
Next, you must check the exact area of the property. The exact area is found in the layout plan or the property tax receipts.
After this, you must verify the entire chain of title documents from the first sale to the last sale. You must raise a red flag if there are any gaps in the title documents. The discrepancy could be due to mortgage or lease of the property.
Getting an encumbrance certificate from the Sub-Registrar’s office is a must. It is usually issued for a fee, and it is for a period starting from the date of application and goes back 15 years or 30 years in time. The encumbrance certificate tells you if there are any registered claims on the property.
No Objection Certificate from the bank in case the seller has taken a loan on the property. You must also get all the documents related to the property from the seller (if he has not already given it to you).
You must check if the property taxes and utility bills such as electricity, water and gas are paid up to the date of sale.
The seller discharges the society charges like maintenance charges. Society share certificates must be transferred to you.
You must also get a completion certificate, occupancy certificate, and possession certificate from the builder.
There’s one more way to complete the due-diligence check.
Some projects are pre-approved by banks for sanctioning loans. The banks verify the property's legal documents and complete due-diligence for pre-approval. Therefore, you can safely invest in the property that is pre-approved by banks.
The bank issues an Approved Project Financial (APF) Number code for all approved projects. You can ask the builder to give you the APF code and check the status of the project online.
Some of the due diligence checks that bank checks before approving an under-construction project are:
Did the builder get all approvals and clearances from authorities?
Is the property title clear and is free from encumbrances.
Whether the builder meets minimum experience (say min 5-year experience required by the bank) and certification requirements (for example, ISO certification, must be members of CREDAI)
The bank checks the credibility of the buyer and approves the project only when it is convinced that the loan issued will be repaid.
Also, the bank will disburse loans based on the milestone agreed by the builder.
The next article is the last article in this series and covers the financial and tax implications of buying a house.
By: LOTUS TECH
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