Ready to buy a new home?

After securing the amount and finalizing the apartment, there are a number of steps that are still left to be followed.

Usually, we don’t talk about the aspects of buying real estate, that isn’t directly in our sight. Most real estate buyers, when they step out to buy an apartment, are unaware of things like Occupancy Certificate or Property Transfer Forms, because these are the builder’s responsibility.

But as a smart buyer, you must know about the legalities associated with buying a house to protect your interest as the house owner in the best way possible. We hear about real estate scams and developer-resident disputes every day, and by all means, you would want to avoid such a case.

Therefore, we have laid down some of the basic things that every new or first-time house owner must know before-hand. These are not ground rules but checking these things in advance would help you make the best property decision, and enjoy your stay for a long time.

  • Verify the Authenticity of the Real Estate Project

It’s hard to forget the huge property scam of Bangalore where 1500 crore rupees were falsely solicited with the help of a fake real estate project.

Buyers were shown a lucrative residential location where construction had begun and the price on offer was too cheap to miss out on. This resulted in 5000 sign ups from various parts of Bangalore, and people ended up losing lakhs of rupees because of this treachery.

In order to avoid such a thing, following are a few legal documents you can verify before handing over the booking amount to any real estate developer.  

  • Title of the Property

The property title is a legal document that lays down the ownership of the land on which the project resides and the name of the property owner. It is one single important document that you must check before initiating any conversation regarding the property.

The title comes with a few clauses that must also be checked, such as marketability, any encumbrance (if applicable) and the tenure of over 12 years.

Keeping these things in check will allow you to make a safe deal. The marketer, broker, and the builder are obliged to present these documents at any time you ask.   

Title Documents consist of;

  • Succession Certificate
  • Partition Deed
  • Sale Deed
  • Government Grant Order  

Other aspects related to the title

  • Nature of Title – Nature of title describes the type of ownership that the builder has over the land and the property. Not all ownerships are of the same type. There are three main recognizable title types – On Lease, Freehold Property, On Development Rights.

In case the builder is entitled to development rights, the power of attorney and property agreement, are to be rested with the seller of the property.  

  • Registration – The title documents entailed in the set of official documents must contain stamp and registration insignia from the jurisdictional registrar of the locality. If you’re unable to verify this, beware of the property type.
  • Litigations – There should be a well-maintained account of litigations, active or pending, against the developer, that is verifiable from the local court. In case litigations are related to the property in some way, you must watch your step before advancing forward.
  • Original Copy – Original Copy of the title must also be present with the builder at the time of booking the apartment so that you can be sure that the developer is genuine enough to be trusted.    

In case of resale flat in India

If you’re buying a resale flat in India, there is a separate set of documents that you need to take care of. We have briefly mentioned those as well.  

  • Set of Deeds of Sale

The document connects the owner of the property to the seller of the property and tracks the true ownership of the property before it is handed over to you.

  • Share Certificate  

If the flat resides in a cooperative society, the share certificate proves the share of property in the society and acts as the title of ownership in this case.

  • Title Report

The Title report is a report that signifies the authenticity of the title against any defaults in the sales deeds and bank loans, that may affect the transaction.

  1. Verify the Developer/Seller’s Identity

When you search for properties on sale, there is always one person of contact that gets you through to the property. Then there is a person who gives you brokerage advice and then there is the seller of the property himself.

All of these people may not be significant except the seller. It is as important to check the identity of the seller as it is to verify the ownership. In the Bangalore scam we mentioned earlier, the owner of the property was living with a fake identity and didn’t originally belong to the city either.

Here are some measures that can be taken in this regard.

  • Residential Status – It is important to verify the residential status of the person as there is a high degree of NRI property scam in Indiia. People claim to own several properties in India and solicit booking amount with a fake identity.

Later on, it becomes very difficult to press charges against the person and the person faces a deep setback due to the scam.

  • Identification of Partners in Property – The biggest cause of property disputes is the non-cooperation between partners and untimely back-out of one of the partners, which affects everyone including the buyer. Therefore, it is mandatory to check that the owners of the property, in case the property is jointly owned, are identifiable and no court cases are running against them.
  • Authorization – You must also check if the person selling you the property has legal rights to do with verification from a local court. Many a time, the authorization to sell the property is with someone else for arbitrary reasons and the owner scams the sellers without proper authorisation.  
  1. Government Permissions Given to the Property

There are several government checks performed on the property before it is given approval for construction or even sale of apartments. These permissions come in the form of certificates issued by the government as the development of the project advances.

There are umpteen real estate projects that have been constructed without prior permission from government authorities and have been sold to the residents without a worry.

Before RERA came into existence, these laws that overlooked the sale of such properties were not strongly implemented, but now there is a clear process of passing properties. Heavy penalties are imposed on projects who fail to produce such certificates. 

Here are a few you should always take care of;

  • Intimation of Disapproval (IOD)

Wondering what is IOD? It is called the intimation of disapproval but here disapproval refers to an authorization or permit. Matter of fact, it is also called a building permit or IOD in construction.

The IOD provides a clearance to the builder to start the construction process after several checks from local authorities are done.  These checks are carried out during the site inspection process, where it is determined if the land parcel is fit for construction or not. Engineers at the Building Proposal Office determines the eligibility of the project before issuing the IOD.

The IOD certificate usually takes about a month to month and a half to complete as there are 40 different checks made before issuing. Several local authorities sanction permissions such as Fire Clearance, Permission from Traffic and Coordination Department, Environmental Department, Sewerage Department etc.

An IOD is an initial permission given to the builder for the developer and the actual architectural plan is separately checked.

  • Commencement Certificate (CC)

CC full form in construction is Commencement Certificate, which is given by the local authorities to a real estate builder as a sign of commencement of the construction.

In comparison to IOD CC is an official permission for the commencement of construction. The IOD is an approval for the buildable land, where CC is recognized as the letter of approval for the building.

It is handed out after the builder has submitted the architectural plan for the building and various checks have been made for the same.

From the perspective of the buyer, it’s important that you check the commencement certificate before investing in a building project. If the builder doesn’t have this certificate, chances are that the project is being developed illegally.

  • Building Layout Approval  

Building layout approval is used to determine the layout plan of the construction project which is checked for compliances to the existing layout laws. The terms that we used earlier such as FSI and FAR values are checked for the project, in order to approve it.

Usually, the Municipal Corporation is responsible for providing approval to the building layout of the project. The layout approval is the part of building approval procedure where the building plan is checked for compliances.

The building layout approval is mandatory before building anything on the given land. Even if you have IOD, you can’t start construction until you have building layout approval first with you as these both look at different aspects of the same thing.

Building layout approval affects the projects in the later stages as well. For instance, at the time of redevelopment, the Mumbai authorities have certain rules that work in this sector.

Recently, re-development in some parts of Mumbai has taken off as a business and the factors that control the redevelopment directly affect how this is compensated to the owner of the property.

  1. Stamp Duty on Property Documents

Stamp duty is a sum of money deposited with the government for registering your real estate transaction. Once your document is stamped by government officials and local registrar, only then you become the lawful owner of the apartment.

It is often said that even after possession of the property, it is crucial that you obtain the ownership documents by paying the stamp duty.

Stamp duty is one of the most important aspects of the whole real estate transaction that will take place between you and the seller. Each state imposes its own stamp duty and it is considered as a tax for registration of the property.

You can check the same on the various documents presented before you by the selling party. There should be proper mention of the stamp duty and the amount paid to obtain it.

Stamp duty varies from state to state but the general percentage that is followed in most states in about 5% of the total value of the property.

  1. Tax Appropriation

The completion of property tax and timely settlement is another point of concern that often misses the eye of the buyer.

Most real estate developers hide their property tax status from the buyers because the development costs often bootstrap them from paying taxes on time. This leads to penalties later on that are bore by everyone involved in the transaction.

Hence it is very important to check the tax status of the real estate developer and make sure that it is being paid on time. Even if it’s not paid, you should have enough confidence in the real estate developer that they will pay the taxes without further ado.

This can be verified from the office of municipal authorities of the locality and the developer will be highlighted as a defaulter in case taxes aren’t paid before you make the purchase.

In Case of Redevelopment

A lot of properties in Mumbai are being redeveloped in order to make them functional again and make heavy gains on properties that are considered dead.

Over the years, redeveloping properties in suburbs of Mumbai has taken off as a major real estate trend and the implementable laws have seen the light of the day very recently.

For these properties, similar tax laws exist. If you’re buying an apartment or an office flour that has been reconstructed, the tax has to be paid for the new construction.

In many cases, the builder is obliged to pay rent to the original property owner till the reconstruction completes. Therefore, these clauses can also be checked in case you’re interested in investing or buying a reconstructed property in Mumbai.

  1. RERA Compliance

Real Estate Regulatory Authority of India that came into existence in 2016 is an important step forward in clamping down project delays and unfair project deliverability.

Before RERA came into existence, these laws that overlooked the sale of such properties were not strongly implemented, but now there is a clear process of passing properties. Heavy penalties are imposed on projects who fail to produce such certificates. 

In addition to strengthening the developer-buyer relationship, RERA has done a lot of work in making sure that the buyers don’t have to face consequences due to delays in projects.

A number of recent reforms have been made to the marketing of the project and how the possession of an apartment takes place.

Therefore, after the inception of RERA, each project is expected to carry a RERA registration number, which can only be obtained once the project complies to various RERA prerequisites before starting off with sales.

You can check the project’s registration status at official RERA portals of various states. A few of them are given below.

RERA Punjab

RERA Goa

RERA HP

RERA Maharashtra

Conclusion

In conclusion, there is a lot of things that home buyers usually ignore before making the purchase. We have listed a number of such things in this article which will help you make a safe real estate transaction in the future.

Usually, we don’t talk about the aspects of buying real estate, that aren’t directly in our sight. Most real estate buyers, when they step out to buy an apartment, are unaware of things like Occupancy Certificate or Property Transfer Forms, because these are the builder’s responsibility.

If you’re buying a flat or an apartment in a new building project, you’ll need more than a just good reputation for the project. Doing a background check on various things like government permission, identities of the builders and the tax status of the project will help you avoid unnecessary consequences later on.    

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    Thank you for visiting our website. We are currently updating our website towards compliance of the newly introduced housing law for the State of Maharashtra i.e. the Real Estate (Regulation and Development) Act, 2016 and the rules and regulations notified thereunder.

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