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How to Make an Informed Property Purchase


How to Make an Informed Property Purchase

Last updated: June 14 2020
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  • How to Make an Informed Property Purchase

    Appreciate if Mods make this sticky or moderate/delete if in any violation.

    I have been a home buyer who had invested with one of the best brands (that let me down) and then had to fight uphill legal battle for recovery of my monies.
    So below is my learning of past 6 years in property market.

    Do not rush into an investment decision. Infact, take atleast 3-4 weeks to make an informed decision, by following the below few simple steps if you are buying a new or used property.

    1. Know Thy builder
    1.1 Check reviews of the builder on IREF and other forums.
    1.2 Go to NDRC website - >> Case Status >> Advance Search for past 8 year period >> Select Field Respondent >> Insert Builder Name - and this will give you an idea of how many consumer disputes the builder has.
    1.3 Go to RERA website and search for all ongoing cases against the builder and notices sent out to it.
    1.4 If your project is in Haryana, then visit TCP website and under policy documents look for EDC Outstanding. This is EDC collected/uncollected but not paid to the Authorities.
    1.5 Look for ongoing notifications issued by RERA to the builder on RERA website. If it is not too much then look for any judgments given in the project or vis-a-vis the builder and trust only the allegations raised by the allottees.
    1.6 Check Google Map for the project site and take a print-out

    2. Meet the builder or Explore the Project
    2.1 Obtain an application form for the project in advance. This should have the builder's proposed project plan/layout and other details of the project such as project land, apartments super area and carpet area, project amenities and possession date etc. Or obtain such information in writing and signed/stamped.
    2.2 Ask builder hard hitting questions basis information collected so far and use it to bargain on pricing, while showing no rush to book.
    2.3 End your meeting as if you are dissatisfied but still look forward to hearing from the builder. And get assurance of a call from the sales team with a better offer.
    2.4 While at Project site do inquire about the contractors / sub-contractors and architects involved and make a list of them.
    2.5 It is useful to step aside from the builder's team and check with security guards or onsite project workers or architect's men :
    2.5.1. How do they find working here related to other projects or how different ?
    2.5.2. Do they get paid good ?
    2.5.3. Do they get paid daily, weekly or monthly ?
    2.5.4. Do they get paid on time ?
    2.5.5. Do they work in day only or at night also ?
    2.5.6. How many workers are at site then and at peak construction ?
    2.5.7. Is their job permanent and secure ?
    All of this can given you an idea of the rate of progress, quality of work being performed, and financial situation of builder/contractor/sub-contractor.
    2.6 Do not be shy to subtly click a few project photographs / selfies and if possible alongwith the sales team / project team.

    3. Check for RERA registration of the project and its licences.
    3.1 Go to the Company/Builder website and print every single marketing document or information available about the project you are interested in. (Even if it is the best builder in town save this printed info for future reference / litigation if God forbid).
    3.2 Go to your state's RERA website and check for Project registration and take a print of the Registration document.
    3.3 Sometimes, builders try to pre-sell a tower that is not approved and this could be cause of delay in the project or you maybe informed that the builder is building 400 units while it may have approvals for 300 and instead intends to build 500. All of this could cause multiple litigations and delays in project as well as eventual bankruptcy/financial problems in ongoing project. So file an RTI with the state's RERA Authority to obtain 'certified copy of the project registration/application documents alongwith approved project plan'. This may cost you no more than Rs 50-100 and 2-3 weeks to obtain. And do this exercise once you have created a shortlist of all the projects you are interested in and file independents RTI applications for all of them. Verify / Cross-check the project plan thus obtained with the one you have in the Application Form.
    3.4 Especially check if the builder has provided agreement copy of all the plots of land claimed as part of the project (those in Noida or other such areas with 99 yr lease on property need not be worried since clear land title is govt responsibility) in the above documents obtained through RTI from RERA.
    3.5 Google every licence mentioned in the application form which in case of Haryana would be TCP (Town and Country Planning Deptt) approved construction licence. Download soft copies of all such information in a specific folder on your laptop/computer/mobile for future reference.
    3.6 Sometimes, (as was in our case) builders declare public roads as part of project land. nursery school, shopping complex etc as part of Project Land. However, Project Land is the land on which other amenities, appt buildings, open space, club etc are built and you as an allottee/buyer would have in-alienable and proportionate rights on it..So obtain demarcation plan from TCP or concerned Construction Approving/Licencing Authority in your state by filing RTI Application (this authority or RTI is different from the one filed at RERA) seeking - "Certified/Attested Copies of Project Demarcation Plan alongwith details of Changes if any" and verify it with the stated Project Lands in the Application Form. This is important cause 40-60 years down the land if the apartment/building is brought down for new construction then the only thing of value at that time would be your proportionate/in-alienable share in the land. And need I say that no construction/building lasts forever (especially if faced with a natural calamity such as an earthquake/floods etc).
    3.7 Verify other Project Approvals such as Environment Clearance in the website of State Environment Agency or Ministry of Environment and Forest since this would show if the project would face delays from NGT etc as has happened with multiple projects in NCR in the past.

    4. Once satisfied and price is negotiated do not delay getting the BBA copy from builder for weeks or months rather make following the basis to safeguard your interests:
    4.1 Give only a token amount with application of less than 1% with Application Form, while making sure Earnest Amount mentioned is not more than 5-10% of the BSP (excluding taxes / statutory charges etc). It is illegal and unethical to seek Earnest Amount more than 10%.
    4.2. Make sure Application form has clause for penal payment by the builder apart from interest in the event of default on part of builder. This penal payment could be upto 5% of BSP or in the form of additional Rental Payment for the period of delay apart from the interest payment. If the builder has no reason to default then it should agree to such terms which are fair since builder is seeking 5-10% forfeiture from you in event of your default, apart from enjoying the interest on the amount you have paid. Do note that in some countries builders borrow money from banks, complete the project and then sell. So when you borrow money or pay the builder to construct it builder saves on debt/interest which now is being serviced by you, however forfeiture is in that scenario a penalty on you which is one-sided to bind you to the contract. But builder can hold your money to the ransom while making you sweat to get it back if it defaults/delays in construction or is your bigger loss if it goes bankrupt hence seek penal compensation for yourselves as well to bind the builder to the contract apart from interest in the Application Form or through a separate Affidavit from the builder.
    4.3 Make sure to get your allotment letter within the first week of token amount and provide the balance earnest amount at the time of signing the BBA.
    4.4 While signing the BBA make sure it conforms to the sample BBA in the Act as well as to the terms of the Application Form in toto and it is usually beneficial to go alongwith an Advocate friend or consult him otherwise before signing the BBA. A para-legal or advocate may charge you Rs 10,000 - Rs 30,000 (or free of cost if a friend) for such services. The agreement aking to application form is a legally binding contract with your lakhs/crores of hard-earned money at stake so do not take it lightly and definitely do not sign it without understanding each and every clause and term of the agreement/application form even if takes you long/forever to do so.
    4.5 Make sure to give the first token amount alongwith copy of Application form to builder's employee/agent at your current/permanent residence (where you are likely to stay till the possession of appt is received). And also make sure that in the space in Agreement / Application Form where you have to mention place agreement is being entered into regardless if the project is in some other city / state, only mention your hometown (same as above). This step will help you in any legal fight with the builder since in case of default on part of the builder you may have to fight legally (possibly a police complaint) where jurisdiction is based on place of incident and in this case incident place for booking and signing agreement should both reflect the place it is convenient for you to fight legally from.

    5. Once Agreement is entered into:
    5.1 Frequent project site after every 3-6 months and each time take photographs with evidence of date to record project progress
    5.2 Keep a check on forums for any changes brought about in the project by the builder as also post/share any info you collect from site visits
    5.3 Try to get in touch with other home buyers at the earliest, make your whatsapp/communication group to keep each others abreast of developments.

    Enjoy your booking !!

    If a builder does not accommodate fair terms as above or if you find it hard to do a thorough check before investing then you very well know the risks involved and a property purchase without being an informed buyer is just a toss-of-coin. There are over 370,000 aggrieved home buyers (for one reason or the other) in NCR as of today, many of whom do not go beyond writing an email to the builder and resign to their fate after the purchase.

    The moot question - Is your dream home going to be source of joy ?

    Disclaimer - Above steps do not assure 100% safety of your investment rather help you to be a better informed buyer than otherwise.

    Some tricks / tips:

    1. Often brokers in a city have whatsapp groups where they advertise distress sale amongst themselves which sometimes happen below the purchase price or at par with the old purchase price. So you can keep a broker friend informed of your intent and be ready to buy the property at a short notice of 3-4 days (only if you are full informed about the project before-hand) and this is most suitable if looking for ready to move in apartment or land/independent-house purchase.
    2. Prior to buying a ready to move in property from builder or another owner, apply at the registrar's office for a copy of Registered Agreements of other apartments / properties which have been sold / purchased / registered in its vicinity in the past 6 months. This could potentially be info about 10-20 units and the cost of obtaining such information would be Rs 2000-4000 in total but it can save you lakhs in negotiations. Usually it would be a great way of knowing your neighbours before hand, rather than regretting later. You can also look for registered copies of rental agreements in the vicinity at the registrar's office in a similar manner to understand rent prices.
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