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Owning a dream home or buying land for the future is the biggest dream of every family. People invest their life’s hard-earned money, retirement funds and even 20 to 30-year home loans to invest in real estate. However, as much as the potential in the Indian real estate market is, the legal and financial risks also run deep. Often buyers get influenced by attractive brochures, sample flats or discount offers from the builder and pay token money or sign the agreement without proper due diligence. Due to incomplete investigation, many times people fall into the trap of illegal colonies, disputed lands, mortgaged properties or flats that have been sold to multiple buyers. These 5 basic and mandatory checks must be done to seal any property deal and safeguard your hard-earned money.
1. Title deed and ownership rights of last 30 years (Chain of Title)
The first and foremost step when purchasing a property is to verify the legal ownership of the property. Ask for the ‘Original Title Deed’ from the seller or builder and ensure that the property is legally registered in the name of the seller. It is not enough to just see the current deed, but the ‘mother deed’ and the entire chain of title of at least the last 30 years should be examined by an experienced property lawyer. It is very important to investigate whether the land is ancestral property of any joint family in which any other heir has outstanding rights. If the seller is selling the property on the basis of ‘Power of Attorney’ (GPA), take special care as the absolute ownership of the property does not transfer through GPA alone as per the clear guidelines of the Supreme Court; Registered sale deed is mandatory for that.
2. Active registration of projects and approvals on State RERA portal
Real Estate (Regulation and Development) Act i.e. ‘RERA’ is the most effective law made to protect the rights of buyers. If you are buying a flat or plot in an under-construction project or a new township, first visit the official RERA portal of that state to verify the unique RERA registration number of the project. Complete details of the last date of possession declared by the developer, current stage of construction, approved layout plan and complaints filed against the project are public on the RERA website. Along with this, match the approved building plan, commencement certificate (CC) issued by the municipal corporation or local development authority (like DDA, BDA, YEIDA, LDA etc.) and occupancy certificate (OC) and completion certificate for the completed projects. In buildings without OC and CC, there is a serious risk of legitimate electricity and water connections being cut and sealed.
3. Encumbrance Certificate and Bank Loan Status
To know whether the property is mortgaged in any bank or there is no litigation pending against it, it is mandatory to get an ‘Encumbrance Certificate’ (EC/Encumbrance Free Certificate) issued from the Sub-Registrar office. EC issued under Form 15 gives official details of all financial and legal transactions, mortgage, sale or attachment that have taken place on the property during the last 15 to 30 years. If there is a bank loan running against the property, obtain the official outstanding status of the loan and ‘No Objection Certificate’ (NOC) from the seller. Additionally, if 3 to 4 major nationalized or leading commercial banks of the country have already approved that project to give home loan, then it is considered a positive primary indication of the legal validity of that property.
4. Ground level matching of land use and master plan
The biggest deception while purchasing a plot or farmhouse is regarding ‘land use’. Many times, developers in rural or outlying areas cut agricultural land into small pieces without official permission and sell it as unauthorized colony. Always ensure that the land being purchased has been duly converted to Non-Agricultural (NA) and a certificate of 143/CLU (CLU – Change of Land Use) has been issued from the concerned Revenue Department. Along with this, review the master plan of the local city to see whether the land is falling within any proposed green belt, flood plain, widening area of the national highway or metro corridor. If the land violates environment or forest department rules, there is always a risk of bulldozers running on construction in future.
5. Mathematics of carpet area, additional hidden costs and track record of the builder
When budgeting a purchase, don’t just consider the Basic Selling Price (BSP) as the total cost. Many builders sell flats by claiming super built-up area, which also includes lift, lobby, swimming pool and stairs area, due to which the actual carpet area is reduced by 25 to 30 percent. As per RERA rules, the developer has the right to charge the price only on the basis of net carpet area. Also, ask for a complete list of hidden charges before signing the agreement, which include Preferential Location Charge (PLC), Internal Development Charge (IDC), Club Membership, Power Backup Charge, Advance Maintenance (IFMS), Parking Charges, 18% GST and 5% to 7% Stamp Duty and Registration Fee. Finally, finalize the biggest deal of your life only after taking into consideration the financial position of the developer and feedback from the buyers of past projects delivered by him/her earlier.