Just married, Sudesh is thinking of buying a house. The 28-year-old has shortlisted a couple of under-construction properties. He plans to continue to live on rent till he gets possession of his new home. He has saved some money for the down payment and will take a loan to pay the balance. He has heard that buying an under-construction property is risky when the real estate market is sluggish. How can he mitigate some of this risk?
Sudesh must perform thorough due diligence on the builder's completion track record, reputation on contractual terms and quality of work. Paying rent and a home loan EMI can be tough, especially if there is a delay in construction. The high outgo will put Sudesh under financial stress. However, as quality comes at a price, Sudesh should not mind paying a premium that a well-known builder may charge. It would mean putting his anxieties to rest. He must find out if the land on which the building is coming up has a clear title and the builder has taken all the necessary approvals from the municipal and other authorities for construction.
These typically include commencement certificate, approved building plans and development agreement. Sudesh must inspect the permissions and permits in writing. Any slack will delay possession and put the project at risk.
Sudesh must ensure that all costs are quoted to him in advance. The base rate for an apartment is typically quoted as a per square feet rate. While floor rise, parking, stamp duty and registration charges are discussed and well-known, the builder must be transparent about any additional costs such as the VAT and service tax liability for the buyer, any prepaid maintenance and upkeep charges, extra charges for amenities such as club house and the like. These are substantial costs and there should be no surprises for Sudesh on this aspect.
Sale agreements are typically drafted in detail by lawyers hired by the developers and not many take the trouble of going through all the clauses in detail. But Sudesh must realise that these agreements are aimed at protecting builders from legal troubles while giving very few rights to buyers. It is also important that Sudesh reads the agreement carefully before signing it. He may take the help of an advocate, if required.
The risk associated is far less in case of a ready-to-move-in property. However, it comes at a higher price as the unit is ready. An under-construction property, on the other hand, is obviously cheaper and may fit well into Sudesh's budget. So it might prove a good deal for him only that he must ensure that he has checked for any loopholes, missing paperwork or delays.
Content: Centre for Investment Education and Learning (CIEL).
Sudesh must perform thorough due diligence on the builder's completion track record, reputation on contractual terms and quality of work. Paying rent and a home loan EMI can be tough, especially if there is a delay in construction. The high outgo will put Sudesh under financial stress. However, as quality comes at a price, Sudesh should not mind paying a premium that a well-known builder may charge. It would mean putting his anxieties to rest. He must find out if the land on which the building is coming up has a clear title and the builder has taken all the necessary approvals from the municipal and other authorities for construction.
These typically include commencement certificate, approved building plans and development agreement. Sudesh must inspect the permissions and permits in writing. Any slack will delay possession and put the project at risk.
Sudesh must ensure that all costs are quoted to him in advance. The base rate for an apartment is typically quoted as a per square feet rate. While floor rise, parking, stamp duty and registration charges are discussed and well-known, the builder must be transparent about any additional costs such as the VAT and service tax liability for the buyer, any prepaid maintenance and upkeep charges, extra charges for amenities such as club house and the like. These are substantial costs and there should be no surprises for Sudesh on this aspect.
Sale agreements are typically drafted in detail by lawyers hired by the developers and not many take the trouble of going through all the clauses in detail. But Sudesh must realise that these agreements are aimed at protecting builders from legal troubles while giving very few rights to buyers. It is also important that Sudesh reads the agreement carefully before signing it. He may take the help of an advocate, if required.
The risk associated is far less in case of a ready-to-move-in property. However, it comes at a higher price as the unit is ready. An under-construction property, on the other hand, is obviously cheaper and may fit well into Sudesh's budget. So it might prove a good deal for him only that he must ensure that he has checked for any loopholes, missing paperwork or delays.
Content: Centre for Investment Education and Learning (CIEL).
(Your legal guide on estate planning, inheritance, will and more.)
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