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Factors to consider when buying a property in India

CommonFloor

The real estate market in India is entering a new phase of variety, sophistication and profitability. Buying property in India, whether it is to buy a home, a commercial property or a property for the purpose of investment, is a long and detailed process. While this might wear you down, do understand that these specifications are part and parcel of any land or property purchase anywhere in the world. In India, the purchase of property depends on the state laws and taxes, and in general, ways of identifying property, purchasing it, legal issues, home loans and much more.

Purpose of purchase: investment or buying a home?

It is important to vary your search based on whether your purchase is an investment decision or if you want to live there. In terms of investment decisions, you can be flexible and invest in an upcoming area. India is now replete with new satellite towns and areas like Whitefield and Navi Mumbai that are coming up as townships in their own right. Buying property in these places for very low prices has seen investors enjoy tremendous returns. If you are buying a house to live in, the location matters a great deal, as well as proximity to work, schools and the presence of mass rapid transit systems, malls, hospitals and good physical and social infrastructure. Make sure that the area you are purchasing a property in is a bankable area with good signs of progress and development.

Budget, costing and type of property

It is important to shortlist properties based on what you want out of them. Do you want a compact and affordable apartment with amenities? Would you prefer a villa or gated community house with world-class facilities? Or would you want a regular house or apartment that has minimal amenities? Whatever your choice, it is important to factor in budgetary concerns. Properties located in the central business districts in the major real estate destinations in India (Mumbai, Bengaluru, NCR, Chennai, Pune and Hyderabad) are very expensive and still command a certain value and potential for returns. Having said that, upcoming industrial corridors are boosting real estate in industrial clusters, new satellite townships and communities, and these places are attracting huge investments.

The budget required for a property doesn't merely include the price of the property but also the following costs:

  • Stamp duty charge
  • Registration fees
  • Brokerage fees (if a broker is being solicited)
  • Club house and society charges and maintenance (in buildings with amenities)
  • Interiors, maintenance and renovation

  • In addition to the above, there are also hidden costs. For instance, when constructing a house, a developer may bring in new costs with regard to extra parking, club membership, water connection and much more. It is important to look into all matters of costing before committing to a property.

    Choosing a developer and broker

    There are many advantages and disadvantages of choosing a real estate broker. For one, they know the business inside out and can give you a plethora of options. The disadvantage is that they charge a brokerage fee and they could have loyalty to a particular developer. They may not also give you the complete picture and you would have to investigate into all aspects of the property.

    Since real estate broking firms are not institutionalized or monitored in India, choose your broking agency with extreme caution. Check for defect in title, non-payment of property tax, zoning issues, unsanctioned construction and unsanctioned construction plans.

    Legalese

    Some of the things you must look at include checking if the title is clear. It is important that the lawyer checks the property title. If the title is not clear, then the seller cannot transfer the property to the buyer without hassles. The seller should be listed as the owner of the property and should have all the legal documents pertaining to the same. The title should be free from defects and have no encumbrances.

    Check if there is a no objection certificate (NOC) and if all property taxes have been paid. It is also important to obtain commencement and occupancy certificates. It is important to hire the services of a lawyer to look into every aspect of the sale.

    The reputation of the developer is important. Financial institutions and banks usually give information on developers. It is also a good idea to get an inspection done on construction and compliance. Other things that need to be checked include clarification of the land and whether it is agricultural land, in which case it is illegal land. Other clarifications like setbacks, road widening widths and more should also be checked.

    Payment plans and home loans

    There are different payment options for property. There is the down payment plan, where the buyer will make a payment of 10 per cent of the purchase upfront, followed by a payment of 85 per cent within 30 days of having the booking complete. The remaining 5 per cent is paid during possession. The time linked payment plan is time-bound and can be made every 2 months over a 2-year period. The Flexi plan, on its part, has a combination of both of the above.

    If you are buying a home, then taking a home loan is a good alternative to conventional investments.

    Tax benefits on home loans can be exemptions on principal amount and exemptions on the interest. They are two phases of repayment that are classified under different sections in the Income Tax act and enable tax deductions under different schemes when filing the IT returns.

    Return on Investments

    It is important to gauge a substantial return of investment. Any purchase of property should amount to price appreciation and accruing value of some sort, even if you are not going to resell the property. Real estate prices, despite their ups and downs, never go as volatile as stocks. Choosing the right location, with surrounding infrastructure, makes more sense than buying a house for less in an area that is far away from where you work. Also, keep an eye on the prospects of an emerging micro-market. Watch price trends and what the future may hold for the market, before making your decision.