A checklist for buying property
The most important advantage of a ready flat is, of course, that the buyer can move in immediately, end the rental outgo and pay the loan instalments instead
In the current market scenario, apartments that are ready for possession are seeing the highest demand from buyers. This trend is based on two thought processes. One, the sooner one can move into a purchased property, the sooner the monthly rental outgo stops. Two, there is decidedly low confidence for under-construction projects at the moment because many developers have inordinately delayed their projects. Though the residential market has seen quite a bit of revival, buyers are still wary of investing in projects that will be under construction for anything longer than 4-6 months before the handover of completed flats.
The highest demand currently exists for ready-possession, 1- and 2-bedroom-hall-kitchen (BHK) flats.
For and against ready houses
The most important advantage of a ready flat is, of course, that the buyer can move in immediately, end the rental outgo and pay the loan instalments instead. If the flat is purchased for investment, it can be rented right away. Either way, it becomes possible to plan one’s finances in real time and make long-term plans.
The disadvantages, however, include the fact that making structural changes to the house can be a lengthy process as it would need approval by the housing society and the municipal authorities.
Under-construction properties
The big advantage of investing in an under-construction property is that it will invariably be cheaper than a property that is ready for possession. Depending on the stage of construction and the response that the project elicits from other buyers or investors, the rates in a yet-to-be-delivered property can be between 15% and 30% lower.
Also, the value of under-construction projects often appreciates as the completion date draws near. This is because the market would then see lesser risks in the project. This is why they are usually willing to pay a higher cost. At this stage, buyers can request certain structural changes from the developer, who will be happy to oblige if the requests are reasonable and do not compromise the structural integrity of the building.
Obviously, the main disadvantage of an under-construction flat is that it cannot be occupied or rented out immediately. Also, the funds invested in it are locked into a non-performing asset. And as already mentioned, there may be a delay in delivery, or the developer may even default. Such eventualities obviously has serious financial implications for the buyers.
Due diligence for ready properties
Get all details pertaining to the developer’s credibility. Of particular importance is the developer’s delivery track record of past projects.
Many factors directly affect the levels of risk, but they are never revealed to buyers. A lot of this information can be acquired at the local level, preferably from someone who has been residing in the area for a long time.
Ask the developer for the approved plans of the project, a copy of the IOD (intimation of disapproval), completion certificate and a clear land title. Ensure that the property is free of litigation and any kind of associated debt. Also, establish the existence of a proper society.
If one is buying a second-hand property, proper transfer and re-registration should be done before handover. The documents required for registration of a residential flat, apart from the sale deed, include a letter from the society mentioning the number of floors in the building, the year when the building was built, the apartment’s built-up area and number of lifts in the building.
Other things a buyer should check for include: the approved usage of the property, notices of any pending or threatened litigation or governmental action relating to the real estate or property seller, any applicable condominium documents, service contracts, all construction-related documents, including warranties, and as-built plans and specifications.
Assess the under-construction house
Get an reasonable idea of the project’s progress, especially if the property is being bought directly from the developer. When no property adviser is involved in the transaction, the risk of falling prey to a deceptive projection multiplies manifold.
Establish that the builder has free and clear ownership of the land on which the project is being built. An agreement between the builder and the original owner of the land is not sufficient. The project also needs to have an IOD: a set of instructions that a developer needs to comply with, to legally construct the project. The IOD is valid for 1 year and needs to be reissued if the project has not been completed in that time. Also ask for a commencement certificate.
While considering such options, it is also necessary to establish the trustworthiness of the builder, especially in terms of track record for transparent dealings and compliance with legal formalities.
- by Santhosh Kumar
(Chief executive officer, operations and international director, JLL India)
0 comments