Greetings Folks.

Quick background: I am looking to purchase an approx 1000 sqft apt for around 40+ lacs in the Khargar area, in the Sep 2010. Purpose of purchase is combination of invst and having a roof over my head in the event of any job issues and return to India.

I stumbled across this forum 3 nights back and for the past couple of days I have immersed myself in the wit and wisdom of such experienced members like wadia, sharpj, geee, wiseman etc. I plan to approach you all in next week or so for guidance once I digest all the nuggets of information and framed my questions on Khargar.

For now i have a general question on the role of banks.

Given my budget, I can pay for the flat without taking a loan. BUT i have been told that the Bank does more than give a loan, it also examines the papers, does the inspection and gives you the peace of mind around the investment. But I hate having to arrange for all wierd documentation like letter from my company HR, paying the 1% processing fee, regular, interest, and all those pre-payment penalties. Because no bank to my knowledge lets you pay off the loan before 3 years.

Question:
a. Are there agencies or people who can do all the due diligience which banks do and if yes how much might they approximately charge..

b. Should I possibly for peace of mind, take a small loan of 1 lac rupees (assuming that is possible), thus minimising my costs and also in this way get the bank in the picture. Still have to get the stupid documentation but if pt. a will not work out then don't have a choice.

Thanks again in advance for all your help and guidance

Regds...Sandeep
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  • Hi Sandeep,

    I am not aware if any agency will do the diligence work but any local real estate lawyer should be able to check the relevant papers for you.

    IMO, you don't necessarily need to obtain loan to achieve your goal. You can shortlist the properties in which you are interested, approach banks (at least 2) if they would give you loan for those properties-pretend that you need loan. If yes, it means the project is already approved by bank and hopefully they would have already done the diligence work. If any of the bank is not willing to issue loan for any specific project, then enquire about the problem.

    Hope this helps.
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  • My personal/professional opinion about banking loan is that
    1) it is the cheapest loan available in the market and you can use it to leverage your position for investing.
    2) So instead of buying a single property with all my money put in, I would buy two properties with either both or a single one financed by the bank and would sell one when required and make some capital gains. (of course some factors need to be considered)
    3. Some good projects which start under construction give you around 25 to 30% annual returns and a bank loan is about 10% so you use someone else's money to make your own money.
    4. Loan nowadays is not a big hassle, they normally require your bank statement, salary slip, form 16 (in case you file returns).

    Most banks will send their person to the developer in case of a good project or will give you a list of docs reqd from a developer (normally these are readily available with developers because to sell their project they need to have these papers.

    Let me know if this helps.

    Cheers
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  • If you are an NRI most banks will stumble upon eachother to give a loan to you for obvious reasons...because u dont need it! And yes first check if the said project has a tie up with any lending insitution. If you ask the builder he will say yes u can get finance from all leading institutions etc etc. Just check any ebrochures etc which will have the bank logo etc.That will mean that the project has been checked and chances of things going wrong are minimised. However pace of construction is something that u are totally at the mercy of ur builder. 40L for a 1000 sq ft in khargar sounds under priced atleast in my interaction with borkers. U may want to re assess ur builder's credentials. Always better to go with an established buider after checking their track record.
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  • Thanks for the response team..

    Highrisemumbai - I like your idea of leverage to multiply my returns but unfortunately i am stuck with a low risk appetite and given the uncertainty in the mkt today would like to deal with owned money as opposed to owed (especially since this is my first ever property purchase)

    Sreekys- Thanks for your advice on due diligence. I do agree that my price expectations might be a bit outdated and might have to bump up the limits. I will separately seek guidance from you all once I have locked on specific constructions.

    In the end I think I will go with Budhha's suggestion of a real estate lawyer and cut out both the bank and the broker. I think that combined with other common sense checks around reputation, bank sponsors etc, it should do the trick

    Thank you all for you help

    Regds..Sandeep
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