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Budget
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Given the varying property prices that exist within
a city it becomes necessary to ascertain the quantum of funds that one would have
to organize depending on the location and area requirement. Apart from an individual's
savings and assets, given the property prices today, it becomes necessary for almost
everyone to organize additional funds. These funds may come in the form of borrowings
from various sources like Housing Finance Institutions, Provident Fund, Employer,
Relatives or friends, etc.
The obvious question now would be: how does one get to know the prevailing rates
of properties at different locations. It is possible to get a rough estimate of
the rates prevailing through weeklies like the Accommodation times, other real estate
journals.
While arriving at a budget it is necessary to determine the space requirement as
per the individual/family who proposes to occupy it. For this, one would have to
consider factors like size of the family, etc. Flats in the major cities of Maharashtra
are generally sold on the basis of built up area and super built up area. Area is
generally measured in terms of Square Foot (Sq. ft) or Square meters (Sq. Mts.).
1 Sq. Mt. = 10.764 Sq.ft. To assess the area requirement one needs to understand
the following concepts of saleable area:
Carpet Area: Carpet area may be defined as the net useable area.
Until two decades back flats were sold on this basis. Carpet area is the area from
the inner sides of wall to wall. However this concept is rarely used today and as
a result, flats today are generally sold on the basis of Built up area and super
built up area.
Built up Area (BUA): BUA, over and above the carpet area,
would include the space covered by the thickness of the inner and outer walls of
the flat. The BUA thus would generally be around 15% more than the carpet area of
the flat. Thus for a carpet area of 1000 Sq.ft. the BUA could work out to be 1150
Sq.ft approximately.
Super Built up Area: Super BUA, apart from the BUA, is said to
include the proportionate common areas on the floor like the passage, staircase,
etc. This would usually be around 25 to 35% of the Carpet area. However, there is
a tendency of loading even the common areas of the building / project like the garden,
open area, clubhouse and other recreational facilities. It is to be noted that the
above mentioned concepts are for the sake of information only and does not in anyway
convey our concurrence to the practice of selling at the super built up area. Hence
it would be incorrect to assume the above mentioned mark ups as a rule, since the
information provided is solely with the purpose of educating people about these
terms. At this point it would also be imperative to mention that there appears to
be no regulatory control over the % loading of area over the carpet area for the
purposes of sale on the basis of BUA/SBUA.
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IDENTIFICATION OF PROPERTY
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While locating a property, one needs to be clear whether the property is for investment
or for actual use. This is so because if the unit is for actual use, then one has
to consider whether that area has sufficient infrastructure (i.e. access roads,
power, water supply, shopping areas, hospitals, bus stations, recreational facilities,
etc.) to efficiently support that sectorial population.
Identifying a property has many a times been perceived as a major problem by many
people. The wide range of properties that is offered with various attractive offers
made to lure customers often misleads and confuses many people. When one sets out
to identify a property one is obviously on the lookout for a reliable developer.
While assessing the reliability of a particular developer one should check the following:
Details & visits to his past projects. If possible one should try and get information
from the occupants in his previous projects where inquiries regarding timely possession,
quality of construction, compliance with the agreement, providing the amenities
mentioned, etc. could be made.
For this purpose one could also get information from the financial institutions/
banks that the developer has had dealings with. Thus one can get a fair idea of
his financials too. Real Estate Agents could also be an alternative for identifying
a property. However, caution needs to be exercised when it comes to selecting an
agent. In case of a resale property after the budget is ascertained, one could approach
a reliable real estate agent or look for a property through the newspapers. While
identifying a property one should ensure that the building is technically sound
and the title documents mentioned further in this guide are clear and marketable.
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| VALUATION |
Once one has decided to sell a property one would require to ascertain the value
at which one wishes to sell the property. To ascertain the value of the property
there would be two steps involved Self-assessment of the property-
In this one needs to do some initial spadework and ascertain the prevailing market
rate in the locality for similar properties. One would need to find out informally
what the prevailing market values of properties in the vicinity. One would also
have to take into consideration various factors that would affect the value of the
property, which have been detailed further down. Assessment of the property through
an external source - There are various agencies through which one could assess the
value of the property. One method would be to seek the professional services of
a Government registered valuer for a fee as prescribed by the valuers association.
The other method is to approach real estate agencies to seek information on your
property value on a formal/informal basis.
Some of these factors that would affect the valuation of a property are mentioned
below -
Age of the building - As a normal market norm, new buildings would fetch higher
capital values in comparison to older properties at a given location.
Upkeep & maintenance of building -The upkeep and maintenance of the building
would determine the marketability and the prevailing market value of the premises
in which the building is situated. Needless to say, better and fairly well maintained
buildings would fetch a better value and would enhance the marketability of the
premises in comparison to poorer maintained buildings. Upkeep and condition of the
premises - The condition and the internal maintenance of the premises would again
play an important role in determining the marketability and the prevailing market
value of the premises. Layout of premises - The layout of the premises in terms
of optimum space utilisation in an efficient manner helps the premises score points.
The number of attached toilets, availability of servants room and toilet, vehicle
parking spaces available with the premises would also play an important role in
determining the value of the premises.
Ancillary costs of holding the premises - Ancillary recurring costs like society
outgoing for maintenance of the building, municipal taxes, etc would determine the
marketability of the premises.
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LEGALITIES
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(Please note that the legal documents mentioned and described below are generally
used documents. The description of these documents may not be a legally accurate
description as the intention is to merely give an overview of the documents and
hence it is suggested that one should approach a solicitor to verify the legalities.
HDFCRealty undertakes no responsibility of determining the applicability of these
documents in each case)
Prior to a property purchase, it is advisable to satisfy yourself by having your
solicitor inspect the original title documents to that property. If the title were
not clear and marketable, most of the major financial institutions would refrain
from giving a loan to this property. Hence, as an additional measure, one could
approach a financial institution to check if they would provide a loan for that
particular property. They would probably have checked all the documents pertaining
to the property. If a loan is being advanced /granted one can probably assume that
the title of the property may be clear, as the lending institution would have ensured
so, since they would intend to take mortgage of that property, unless of course
they are willing to create a charge on the property without the title of the property
being clear or may be willing to accept a second/equitable charge on the property.
We give below a broad idea of the legal documents that would require perusal.
- LAND DOCUMENTS: Following are some of the essential documents
that one would have to look at pertaining to the land:
Chain of conveyance/sale/partition/gift deed or will, by which land was acquired
Urban Land Ceiling & Regulation Act (ULC) Clearance Certificate, if applicable
7/12 extract (Property card extract), Index II issued by sub-registrar Title Certificate
/ search report by an advocate for the last 30 years Non agricultural permission
(N.A) 37 I clearance under section 269 UL (3) of the Income Tax Act, 1961 Income
Tax clearance of the seller under section 230 A of the Income Tax Act, 1961
- Conveyance / Sale deed is a document by which the title of a
property is conveyed by the seller to the purchaser. Conveyance is the act of transferring
ownership of a property from a seller to the buyer.
- ULC [Urban Land (Ceiling & Regulation) Act] - The ULC Act
is a social legislation vide which the Government has set a limit on the maximum
permissible vacant land holding by a single entity in an urban agglomeration. Depending
on the location and zone classification, this maximum limit varies from 500 sq.
Mts. to 1500 sq. Mts. This excess vacant land is liable for acquisition by the respective
State Government. Any vacant land holding beyond this limit would require an exemption
under various sections from the ULC authorities, which is governed by the Urban
Development (U.D) department. The land may be exempted if the concerned authorities
are convinced that by the acquisition of this vacant land there would be undue hardship
caused to the owner or if the owner manages to convince the concerned authorities
that this vacant land needs to be held in public interest. Other than these reasons,
there may be various other reasons, which the authorities may consider to provide
exemption to this land. When such vacant land is sought to be developed for housing
schemes, the schemes have to be developed as per the norms and guidelines lie down
by the concerned authorities and need to be necessarily sold to beneficiaries who
fall under certain specified sections/categories mentioned in the permission.
- 7/12 extract is a document, which shows the names of the owners
of the property. It contains details such as the Surveynumbers, area, date from
which the current owner's names were registered as owners. The 7/12 extract is issued
by the Tehsildar or the concerned land authorities. Along with this the corresponding
record of rights in Form no.6 for last 30 years needs to be obtained
- Index II - Index II is a document issued by the office of the
Sub- Registrar of Assurances. It mainly mentions the names of the sellers &
purchasers of a property for which the document is registered.
- Search report & Title certificate - A Title certificate is
issued by an advocate after conducting a search of the title of the property, which
is intended to be purchased. The title certificate would state if the property is
unencumbered and has a clear marketable title. This search report and title certificate
can be obtained from one's own advocate or if the search has already been conducted
by the current owner then one can have his/her advocate inspect these reports to
ascertain the title of the property. This search on the title of the property is
taken for a period of the last 30 years. It is mandatory for the developer to annex
a copy of these reports in the "Agreement for Sale" with the intended purchaser
of the flat. These documents would state whether the title to the property is clear,
marketable and free from encumbrance. In other words, it would state whether or
not there is any existing mortgage, litigation, condition or claim, which is likely
to affect the title of the buyer adversely.
- Non Agricultural (N.A) permission -- If the land under consideration
is agricultural land and if one intends to develop the said land for residential/commercial/industrial
use, then such agricultural land has to be converted to non-agricultural land and
an N.A order has to be obtained from the Collector of the District where the property
is located. Along with this, one needs to take the latest receipts evidencing the
payment of N.A. tax. In cases where the conversion from agricultural use to N A
use is not done within the stipulated period then, there should be an order from
the concerned authority extending the period.
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DOCUMENTS OF THE PROJECT/BUILDING:
Apart from the land documents mentioned above it is necessary to check
the following documents pertaining to the project where one intends purchasing the
flat: Development agreement with the landowner if the developer is not the owner
of the property & the Power of Attorney executed by the landowner in favour
of their developer.
- Approved building plans
- Commencement certificate
- Completion /Occupation certificate
Development Agreement is entered into by the builder with the landowner.
It contains details regarding the terms and conditions on which the landowner has
permitted development of his property. This is where the landowner engages a third
party (i.e. the developer) to develop and build on their plot of land. This agreement
is generally accompanied by a Power of Attorney in favour of the developer.
Approved building plans need to be checked necessarily. The plans must be approved
by the Municipal Corporation/ Town Planning authority or other concerned authorities
like CIDCO, MHADA, HUDCO, Gram Panchayat, etc. as applicable depending on the location
of the project.
Commencement certificate is given by the Municipal Corporation permitting the developer
to begin construction. This is done once the plans have been approved. Completion/occupation
certificate is given by the concerned authorities to the developer once the said
building is complete in all respects and fit for occupation.
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DOCUMENTS PERTAINING TO THE PREMISES: Under the Maharashtra
Ownership Flats Act, 1963 a promoter who intends to construct a building of flats
has to enter into a written Agreement for Sale with each of the persons who are
to take or have taken such flats. It is also provided that the agreement should
contain the particulars and also annex to such agreement the prescribed documents
or the copies thereof.
In case of a building, which is yet to be constructed, the agreement has to contain
the particulars regarding the liability of the promoter to construct it according
to the plans and specifications approved by the local authority. The other particulars
which the agreement should contain are possession date, price to be paid by the
purchaser and the intervals at which the instalments for the full payment are to
be made specifying stage of construction, the precise nature of the body to be constituted
of the persons who would take the flats, details regarding the common areas and
facilities specifying the percentage of undivided interest in the common areas and
facilities appertaining to the apartment agreed to be sold, a statement of the use
for which the apartment is intended. The Act also specifies that copies of the title
certificate issued (as specified earlier in this manual) and a copy of the approved
plans and specification a list of fixtures and amenities including provisions for
lifts to be provided/provided for the flat to be sold should be attached to the
agreement. A promoter, while he is in possession, and where he collects from persons
who have taken over flats or are to take over flats, sums for payment of out goings
even thereafter, has to pay all out goings until he transfers the property. The
out goings would include ground rent, municipal and other local taxes, taxes on
income, water charges, electricity charges, revenue assessment and interest on any
mortgage or other encumbrances, if any. One should also ensure that the area of
the apartment has been mentioned in the agreement. It is also mandatory for the
developer/promoter to convey the land in favour of the society/association of flat
owners/condominium/Company within a period of 4 months of completion of the project.
In the sale agreement there should be a declaration /representation by the promoter/seller
that he has not encumbered the property in any manner whatsoever and entered into
any other agreement to sell/lease/license with any other party. It needs to be specified
whether the property is vacant or in possession of any other party other than the
sellerStamp Duty & Registration: Payments of Stamp duty followed
by the registration of the agreement are two important acts when one enters into
an agreement with a developer/seller. Both, the developer/seller and the purchaser
need to be present at the sub-registrars office for registering the agreement.
Stamp Duty: Stamp duty is a State subject and hence would vary
from state to state. The stamp duty in many states is paid as per the True market
value as assessed by the Stamp Office. When an agreement is to be stamped, it needs
to be unsigned and undated and after the Stamp Office affixes stamps on the agreement,
one may execute the agreement. The Stamp Duty payable in various states could be
ascertained from the Stamp Duty Calculator provided. Registration of an agreement:
The agreement should be registered with the Sub-registrar of assurances under the
provisions of the Indian Registration Act. Stamp duty should be paid prior to the
Registration.
- Documents pertaining to a resale flat:
- For premises being purchased in a registered co-operative society:
Share certificate of the society bearing the name of the seller Previous chain of conveyance/sale deeds, Sub - Registrar's receipt 37 (I) clearance if applicable 230 A certificate from the Income Tax authorities (to be obtained by seller) Original stamped receipts of payment made to previous sellers No objection certificate from the society for transfer and sale of flat Last receipt for the out goings bill paid to the society and electricity bill Set of society transfer forms for transfer of ownership Certificate of Title from an advocate
When one sets out to purchase a flat in a registered co-operative society the documents
that need to be checked initially are -
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a. The share certificate issued by that society in favour of the
owner. This would ensure that the owner is recognised by the society.
- b. Previous chain of original conveyance/sale deeds. If the deed has been lodged
for registration, then one should ask for the certified true copies of such conveyance,
sale deeds, etc along with the original receipt of the Sub - Registrar where the
document has been lodged for registration.
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c. Original stamped
receipts for payments made to the previous sellers.
Once these documents are vetted by the purchaser's advocate and the purchaser decides
to go ahead with the transaction then intending purchaser could ask the seller to
apply to the society to issue a no objection certificate indicating that the society
has no objection to transfer the share certificate in favour of the intended purchaser
and admitting the purchaser as a member of that society. The certificate should
also mention that the seller has no default/outstanding payments to be made to the
society as of date. Once such a certificate is obtained one could proceed the Agreement
for sale and filing the 37-I form with the Income Tax (if applicable), preparing
the sale/conveyance deed /agreement. Apart from obtaining the 37 - I clearance,
the buyer should ask for the 230 A tax clearance certificate of the seller which
requires to be obtained by the seller from the concerned tax authority. It is also
necessary to check the latest payment receipt made by the seller to the society
for the out goings to ascertain and ascertain if the seller has paid all the dues
to the society. One also should ask for a copy of the last electricity bill paid
by the seller. There also should be a mention in the agreement that the said property
is not mortgaged to anyone and if there happens to be a mortgage then on or before
the date of execution of the sale/conveyance deed, the seller should ensure that
the mortgage account is clear.
Prior to the execution of the sale/conveyance deed of the property the purchaser
should ask the seller to produce a 230 A certificate issued by
the Income Tax authorities. For this the necessary application has to be filed in
Form no. 34A. This certificate would indicate that the seller has no dues/outstanding
in terms of the income tax payable him. As per the Income Tax Act, 1961, this certificate
is a mandatory requirement for a property transaction where the value of the transaction
is in excess of Rs. 5.00 lacs. Set of society transfer forms, etc
for transfer of ownership needs to be duly filled and signed by the seller and purchaser
and should be submitted to the concerned Society.
In the above mentioned cases the following documents would be required to be checked
Previous chain of agreements with past owners in original with original receipt
of registration (if any)/ Original letter of allotment issued to the first owner
by the development authority. In case the latest agreement is pending registration
the original receipt issued by the sub-registrar acknowledging the pending registration
needs to be taken along with a certified true copy of that agreement. Original stamped
receipts of payments issued to the previous and present owners by the builder/Development
authority/society.
Transfer permission from the respective authority i.e. Development Authority/Society
Copy of Approved Plan & Occupation certificate issued by competent authority
(like the Municipal Corporation)
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PROCEDURE OF PURCHASE
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Once the project is identified and the necessary due diligence is observed,
one would need to identify a particular flat as per one's need and preference. Normally,
in a project, which is under construction, the developer may expect 15% on booking.
An allotment letter is then issued to the purchaser. The developer would then get
the agreement stamped by paying the relevant stamp duty, which is normally borne
by the purchaser. Subsequent to this the agreement would be signed. The developer
would then organise for the registration of this agreement immediately or in a month's
time from signing the agreement. An agreement is registered to give it legal sanctity.
The seller and the purchaser would have to go to the sub-registrar's office to sign
the register and lodge the agreement for registration.
If the building is in an advanced stage of construction the developer may ask for
a proportionate amount to be paid upon signing the agreement. Subsequent to this,
the developer would inform you in writing regarding the stage of construction and
would raise a demand for further amounts as the construction progresses. It would
be advisable for the purchaser to countercheck the stage of construction prior to
making these payments. The various stages have been detailed further in the technical
aspects that follow.
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TECHNICAL ASPECTS PERTAINING TO CONSTRUCTION
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The normal time taken for construction of an average Stilt + 7 storeyed building
would range between 15 to 20 months. It is possible that the construction period
may go upto 30 months if the building has more number of floors. It needs to be
ensured that for buildings under construction the payment schedule should be linked
to the progress in construction and that the payment should not be solely time bound.
Normally a developer would ask for 15 to 20% on booking and the other instalments
would follow as per the progress in construction. Following are some of the technical
terms that one should be familiar with:
Foundation:
This is the portion of the building, which is below
the ground level. Base of foundation spreads the load of the building on the soil/rocks
below, on which the structure would rest.
Plinth:
The ground floor level is normally about 3 feet above the
level of the ground level. This portion of the structure is formed by a network
of beams and filled in with stones, gravel, etc. This portion is called the plinth.
RCC:
This acronym stands for Reinforced Cement Concrete. Normally
most of the buildings being constructed these days would be RCC. The RCC framework
would comprise of the columns, beams, slabs, staircase all of which would be reinforced
with steel. The frames are essentially formed of columns and beams, the columns
are bounded by beams which are connected to each other by cross beams. A framed
structure is better resistant to earthquakes/vibrations. Columns are vertical pillars
made of RCC, which are connected horizontally by beams also of RCC. If any internal
modifications have to be carried out in a flat one needs take the services of an
architect, which would then ascertain the column and beam positions. The columns
and beams have to remain untouched during subsequent internal modifications if any,
because they form and hold the entire structure of the building in place.
Slabs are horizontal RCC platforms, which form the ceiling/floor of the flat. The
payment schedules of the developers are usually connected to the casting of slabs.
Each slab is cast with RCC and the casting of the next slab would usually follow
in a period of 45 to 60 days.
Plumbing & Wiring:
Plumbing and electrical wiring these days is usually concealed i.e. it is covered
by the internal plaster and hence the pipes and wires are not visible from outside
except for the electric points and plumbing outlets. Concealed plumbing and wiring
would normally precede internal plastering. If the plumbing and wiring is not concealed
it would succeed the internal plastering.
Walls:
Walls are either
made of bricks or concrete blocks. In an RCC framed structure the outer walls would
normally be 9 inches or more and inner walls would be four and a half inches or
more. The walls are normally constructed over the beams, which transmit the load
of these walls to the foundation through the columns. The walls would be plastered
externally and internally.
Flooring:
The flooring is usually done subsequent to internal plastering.
Flooring would include lining up the internal side of the walls with 4 to 6 inch
tiles and this process is called skirting. The water closet (W/C) similarly would
usually be lined upto 3 to 4 feet on the sides with ceramic tiles apart from the
flooring.
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POSSESSION
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Taking possession of the flat
would involve ensuring the following:
Developer should have obtained Occupation
Certificate from the Municipal Corporation Inspect the flat thoroughly before taking
possession Take a letter from the seller confirming that the seller is handing over
vacant and peaceful possession of the flat
Ensure that there is municipal water connection and electric supply.
a. Generally the last 10% of the consideration is payable on possession.
b. Ascertain that all the original documents are handed over to you
c. Ensure that
you put your own lock to the flat.
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